OTC Markets’ Role in Secondary Offerings and Resales

Rule 144 under the Securities Act of 1933 provides a safe harbor for investors to resell restricted or control securities without SEC registration if specific conditions are met. For securities traded on OTC Markets, an issuer’s compliance with Rule 15c2-11 and its current-information status directly affects whether those securities are eligible for resale under Rule 144.

Understanding Rule 144 and the Current Information Requirement

Rule 144 establishes conditions under which restricted or control securities may be resold. For non-reporting issuers, the key condition is that adequate current public information about the issuer is available, as outlined in Rule 144(c)(2). OTC Markets facilitates this disclosure through its OTCID Market platform, which satisfies the Rule 15c2-11 information standard.

OTC Markets and Secondary Offering Eligibility

Maintaining accurate and up-to-date information on OTC Markets is essential for resale and secondary offerings. If an issuer loses its status, restricted stock cannot be resold under Rule 144 until compliance is restored. Companies conducting secondary offerings must ensure all shares sold under Rule 144 meet the current-information condition.

When an Issuer Loses Current-Information Status

If downgraded to Limited or No Information, or moved to the Expert Market, transfer agents and brokers will halt Rule 144 transactions. Restoring eligibility requires updating all delinquent filings through OTCIQ and obtaining a new Attorney Letter with Respect to Current Information.

Resales by Affiliates vs. Non-Affiliates

Affiliates must satisfy holding-period, volume, and manner-of-sale requirements and confirm that current information is available at the time of sale. Non-affiliates may sell freely after the holding period only if the issuer maintains current information status on OTC Markets.

Attorney Letters and Transfer Agent Confirmations

Transfer agents typically require a Rule 144 legal opinion confirming that conditions are met, including verification of current-information status on OTC Markets. Hamilton & Associates assists issuers in preparing these opinions and ensuring all OTCID disclosures are current.

Best Practices for Preserving Resale Eligibility

• Post quarterly and annual reports promptly through OTCIQ.
• File Material Event Reports for significant transactions.
• Maintain transfer agent verification of share structure.
• Engage experienced securities counsel for timely attorney letters.
• Avoid selective or inconsistent disclosures.

Connection Between Rule 144 and Rule 15c2-11

Rule 144(c)(2) and Rule 15c2-11 share a foundation: the public availability of issuer information. For OTC-quoted securities, compliance under Rule 15c2-11 generally satisfies Rule 144(c), meaning loss of compliance under one rule affects eligibility under the other.

Regulatory References and Resources

• OTC Markets Issuer Reporting Guidelines
• OTC Markets Home
• FINRA
• SEC Rule 144
• SEC Rule 15c2-11 Final Rule
• OTC Markets Attorney Letter Guidelines

Conclusion

OTC Markets plays a critical role in enabling secondary offerings and Rule 144 resales. Maintaining current information status ensures liquidity, investor confidence, and continuous quotation eligibility. Hamilton & Associates Law Group, P.A. assists issuers, transfer agents, and shareholders in preparing Rule 144 opinions, updating OTCID Market disclosures, and ensuring compliance with Rule 15c2-11 and OTC Markets requirements.

To speak with a Securities Attorney, please contact Brenda Hamilton at 200 E Palmetto Rd, Suite 103, Boca Raton, Florida, (561) 416-8956, or by email at [email protected].

Hamilton & Associates | Securities Attorneys
Brenda Hamilton, Securities Attorney
200 E Palmetto Rd, Suite 103
Boca Raton, Florida 33432
Telephone: (561) 416-8956
Facsimile: (561) 416-2855
www.SecuritiesLawyer101.com