OTC Markets Direct – Bypassing the Sponsoring Market Maker Under SEC Rule 15c2-11
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In September 2021, the Securities and Exchange Commission (“SEC”) adopted amendments to Exchange Act Rule 15c2-11, reshaping how securities become eligible for public quotation on over-the-counter (“OTC”) markets.
Previously, issuers relied on a sponsoring market maker to file a FINRA Form 211 before quotations could be published. The 2021 amendments authorized qualified inter-dealer quotation systems (“IDQS”)—including OTC Markets Group Inc.—to conduct their own Initial Information Reviews.
This allows issuers to work directly with OTC Markets through its OTCIQ Portal, bypassing the sponsoring market maker while maintaining full compliance under Rule 15c2-11.
Legal Framework: Rule 15c2-11 Amendments
Rule 15c2-11 requires broker-dealers to have access to current, publicly available issuer information before publishing quotations.
The 2021 amendments modernized the process by empowering IDQS platforms like OTC Markets Group to determine whether issuer disclosures meet the rule’s standards. This innovation enhances transparency, standardizes reviews, and reduces dependence on broker-dealer filings.
For the complete text, see SEC Release No. 33-10842 (September 2020). Read More
SEC to Formalize “Innovation Exemption” by Year-End: What It Means for Digital Asset Issuers and Market Participants
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The U.S. Securities and Exchange Commission (SEC) is preparing to formalize a long-discussed “innovation exemption” by the end of 2025, according to recent statements from Chair Mark Atkins. The initiative is designed to provide regulatory flexibility for emerging technologies, including blockchain and tokenized assets, while maintaining investor-protection standards under existing securities laws.
Background: The Push for Regulatory Clarity
For years, startups in the blockchain and digital-asset sectors have argued that the SEC’s rules are overly restrictive and ill-suited for decentralized technologies. Projects often face the difficult choice between delaying innovation and risking enforcement under the Howey Test. Chair Atkins’s remarks suggest that the agency intends to codify a structured exemption similar in spirit to the “Token Safe Harbor” framework proposed in 2021 by then-Commissioner Hester Peirce, but updated to reflect lessons from recent enforcement cases and global regulatory alignment efforts. Read More
The Role of Transfer Agents in OTC Markets Compliance
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In the OTC Markets, transfer agents play a critical — yet often overlooked — role in ensuring compliance, shareholder transparency, and investor confidence. For issuers quoted on the OTCQB, OTCQX, or OTCID market tiers, maintaining a reliable and SEC-registered transfer agent is essential to sustaining market integrity and avoiding compliance downgrades.
For a broader understanding of OTC issuer requirements, see: https://www.securitieslawyer101.com/2024/otc-markets-reporting-requirements/
What Is a Transfer Agent?
A transfer agent is a third-party professional or firm authorized to maintain an issuer’s shareholder records, process share issuances and cancellations, and manage stock transfers between investors. Transfer agents act as the official keepers of the share ledger, ensuring the accuracy of outstanding shares and ownership records. Under Section 17A of the Securities Exchange Act of 1934, transfer agents performing services for registered securities must register with the SEC. Read More
Uplisting from OTC Markets to Nasdaq or NYSE
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Uplisting from the OTC Markets to Nasdaq or NYSE American represents a pivotal transition for emerging companies seeking greater liquidity, institutional visibility, and enhanced credibility. This expanded guide outlines the financial, governance, and regulatory requirements — including SEC registration, FINRA Rule 6490 compliance, PCAOB audit standards, and market readiness — that issuers must meet to successfully uplist.
Why Uplist? Strategic Benefits vs. Real-World Hurdles
Moving from OTCQB, OTCQX, or OTCID to a national exchange expands institutional access, attracts analyst coverage, and can reduce the cost of capital. It also imposes rigorous corporate governance, minimum bid price requirements, and shareholder-distribution standards. National exchanges offer several advantages, including increased credibility, eligibility for inclusion in ETFs, greater liquidity, and access to institutional trading platforms. Read More
When Short Sellers Hit OTC Markets Stocks – Securities Lawyer 101
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The Reality of Short Selling in OTC Markets
Short selling — the sale of borrowed shares with the expectation of repurchasing them later at a lower price — plays a legitimate role in market efficiency. However, in the Over-the-Counter (OTC) Markets, where liquidity and transparency remain limited, short selling can be disruptive and manipulative when misused.
Issuers quoted on the OTCQX, OTCQB, or OTCID (OTC Information Designation) tiers often experience sudden price swings when targeted by aggressive short sellers. The shift from the former Pink Market to the new OTCID system underscores OTC Markets Group’s modernization efforts to enhance transparency and regulatory alignment.
Because OTC securities trade with lower volume and less institutional participation, aggressive short activity can trigger panic selling, liquidity loss, and significant price distortion — particularly in low-float microcap issuers. Read More
OTC Markets Direct: Sponsoring Market Makers Bypassed Under Rule 15c2-11
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The OTC Markets Group has transformed how companies access public quotations after the SEC’s 2021 amendments to Rule 15c2-11. Before the reform, a market maker had to submit FINRA Form 211 to initiate quotation for an issuer’s securities. Today, OTC Markets Group, Inc.—the operator of OTCQX, OTCQB, and OTC Pink—may conduct its own review of issuer information and determine compliance with Rule 15c2-11 without a sponsoring broker-dealer.
The OTC Markets Initial Information Review Process
Issuers seeking to quote securities on the OTC Markets can now approach OTC Markets Group directly through the OTCIQ Issuer Portal to begin an Initial Information Review. The process includes application submission, staff review, and coordination with FINRA, leading to a determination that the issuer’s information is current and publicly available. Read More
The SEC’s Inspector General Calls for Overhaul of CorpFin’s Disclosure Review Process
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The U.S. Securities and Exchange Commission’s Office of Inspector General (OIG) has released a critical audit evaluating how the Division of Corporation Finance (“CorpFin”) conducts its disclosure review program. The report highlights procedural gaps, incomplete guidance, and inadequate documentation practices that could compromise the SEC’s ability to effectively oversee public company filings. For public companies, securities lawyers, and compliance officers, the OIG’s findings are more than bureaucratic housekeeping—they may reshape how the SEC selects and scrutinizes issuers’ filings in 2025 and beyond.
Overview: Why the OIG Report Matters
The Division of Corporation Finance is responsible for reviewing the filings of thousands of issuers to ensure compliance with the Securities Act of 1933 and the Exchange Act of 1934. Its review process influences disclosure quality, investor protection, and overall market integrity. The Inspector General’s audit was designed to determine: (1) whether CorpFin employs a risk-based approach to identify which filings to review; and (2) whether it complies with Section 408 of the Sarbanes-Oxley Act, requiring review of each issuer’s financial statements at least once every three years. The audit’s results were striking—revealing outdated procedures, incomplete documentation, and a lack of transparency in how filings are selected and scoped for review. Read More
Texas Stock Exchange Nears Launch After SEC Approval — A New Challenger to NYSE and Nasdaq
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Published: October 6, 2025
In a landmark decision that could alter the balance of power in U.S. capital markets, the Texas Stock Exchange (TXSE) has received approval from the U.S. Securities and Exchange Commission (SEC) to operate as a national securities exchange. The Dallas-based exchange, backed by major institutional investors and corporate heavyweights, is now one step closer to launching its trading operations in 2026. This development marks the first SEC approval of a new national stock exchange in decades and signals the rise of Texas as a growing financial hub that rivals New York in both capital and confidence.
What Is the Texas Stock Exchange (TXSE)?
The Texas Stock Exchange Group Inc. was formed with a mission to create a more issuer-friendly, pro-business public market. Headquartered in Dallas, TXSE aims to attract companies frustrated by rising listing costs, governance mandates, and complex compliance requirements imposed by incumbents such as Nasdaq and the New York Stock Exchange (NYSE). Backed by over $100 million in private investment, the Texas Stock Exchange represents one of the most well-capitalized new entrants in the history of exchanges. It intends to list equities, ETFs, and potentially IPOs, providing a full alternative to existing U.S. exchanges. Read More
SEC Takes Action to Curb Skyrocketing Costs of Consolidated Audit Trail
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The U.S. Securities and Exchange Commission (SEC) has issued an order providing conditional exemptive relief aimed at trimming the operating expenses of the Consolidated Audit Trail (CAT), a massive database designed to track all equity and options trades in the U.S. markets. Announced on September 30, 2025, this move comes in the wake of ongoing criticisms over the system’s ballooning costs and a recent court ruling that upended its funding structure.
The CAT, mandated by Rule 613 of Regulation NMS following the 2010 Flash Crash, was intended to enhance market surveillance by creating a comprehensive audit trail of trading activity. However, since its inception, the project has been plagued by delays, technical issues, and escalating expenses that have far exceeded initial projections. The 2025 budget approved by the CAT’s Operating Committee initially topped $248 million, but prior adjustments had already reduced forecasts to around $196 million. With the new exemptive relief, the SEC estimates an additional savings of $20 million to $27 million for the year.
Restricted Stock Q&A — 2025 Edition
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Prepared by Hamilton & Associates Law Group, P.A.
www.securitieslawyer101.com
Introduction
Restricted and control securities are common in private placements, employee compensation, and merger transactions. Although these shares are “restricted” at issuance, they may later become eligible for resale under Rule 144 or other exemptions if specific conditions are met.
This Q&A explains the principal rules, SEC guidance, and common questions regarding the resale of restricted and control stock, including the impact of shell-company status, affiliate restrictions, and reporting obligations.
Q1: What are restricted securities?
Restricted securities are shares acquired in unregistered, private transactions, such as private placements under Regulation D, Regulation S, or Section 4(a)(2) of the Securities Act.
These securities carry a restrictive legend and cannot be sold publicly unless the holder complies with Rule 144, registers the shares, or relies on another resale exemption. Read More
Rule 144 Resales of Restricted Securities of Shell Companies and Former Shell Companies
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Under Rule 405 and Rule 12b-2 of the Securities Exchange Act, a ‘shell company’ is defined as a company with no or nominal operations and no or nominal assets other than cash or cash equivalents. This classification is subject to significant resale restrictions under Rule 144(i) of the Securities Act of 1933. This article explains when and how securities of SEC reporting and non-reporting shell companies may be resold, and provides direct links to authoritative SEC sources and related articles on SecuritiesLawyer101.com.
Rule 144(i): The Restriction on Shell Company Resales
Rule 144 is unavailable for securities initially issued by a shell company or a company that has ever been a shell. Resales under Rule 144 may occur only when the issuer: (1) is no longer a shell, (2) is subject to Exchange Act reporting requirements, (3) has filed all required reports (excluding Form 8-K) for 12 consecutive months, and (4) has filed Form 10-type information at least one year earlier. See SEC Release No. 33-8869.
Reporting Shell Companies
While the issuer remains a shell, Rule 144 cannot be used. Shareholders seeking liquidity may pursue resales under Section 4(a)(1), Rule 144A to Qualified Institutional Buyers, Section 4(a)(7) to accredited investors, Regulation S for offshore resales, or through a resale registration statement. Once the issuer meets the four ‘former shell’ conditions of Rule 144(i)(2), resales under Rule 144 become available subject to all other requirements. More details: https://www.securitieslawyer101.com/2023/rule-144-shell-companies/
Non-Reporting Shell Companies
Selling Private Placement Shares on Forge Global, Nasdaq Private Market, or Illiquidx
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Company shareholders, whether employees, founders, or early investors, are increasingly looking to secondary marketplaces like Forge Global, Nasdaq Private Market (NPM), and Illiquidx to sell the shares they purchase in exempt offerings such as Regulation D. We often get asked whether restricted stock acquired in a private placement can be sold on these platforms.
The short answer is: yes, it may be possible—but only if several legal, contractual, and practical requirements are met. Read More
Deep-Sea Mining, Public Market: Capital, Risk, and Regulatory Turbulence
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Deep-Sea Mining and Capital Markets
As demand surges for strategic minerals like nickel, cobalt, manganese, and rare earths, deep-sea mining firms are increasingly turning to public markets as a path to raise the substantial capital needed for exploration, deepwater infrastructure, and subsea recovery systems. Listing on exchanges such as Nasdaq or the New York Stock Exchange (NYSE) provides access to institutional investors, liquidity, and reputational cachet—particularly useful in the capital-intensive and politically sensitive business of mining the ocean floor.
These listings may be executed via an initial public offering (IPO), a SPAC merger, a direct listing, or hybrid financing structures. However, the transition to public markets brings greater regulatory scrutiny, enhanced disclosure obligations, and higher governance expectations than in the private realm. Read More
SEC Trading Suspensions of QMMM, SDM – New SEC Cross-Border Task Force
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On September 29, 2025, the U.S. Securities and Exchange Commission (SEC) issued back-to-back trading suspensions for two foreign issuers listed on the Nasdaq Capital Market, underscoring regulatory concerns about fraudulent, social-media-driven stock manipulation. These are the first SEC trading suspensions since October 2024, making the actions both rare and significant.
Smart Digital Group Limited (SDM) and QMMM Holdings LTD (QMMM) in the SEC’s Crosshairs
- Smart Digital Group Limited (SDM) is a Cayman Islands holding company with principal executive offices in Singapore, listed on the Nasdaq Capital Market on May 1, 2024, at an IPO price of $4.00 per share. By the close of business on September 28, 2025, SDM’s stock had fallen to $1.85 per share—less than half its offering price.
- QMMM Holdings Limited (QMMM) is a Cayman Islands holding company based in Hong Kong, listed on the Nasdaq Capital Market on July 19, 2024, at an IPO price of $4.00 per share. By September 28, 2025, QMMM’s shares had soared to $119.40 per share, an extraordinary rise from its IPO level.
Both trading suspensions took effect at 4:00 a.m. ET on September 29, 2025, and are scheduled to terminate at 11:59 p.m. ET on October 10, 2025. Read More
Bollinger Innovations: The Curious Case of the Disappearing Investor
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Yesterday, Bollinger Innovations Inc. (BINI) (formerly Mullen Automotive, Inc. (MULN)) announced a 1:250 reverse stock split, effective Monday, September 22, 2025, in an effort to regain compliance with the Nasdaq’s minimum bid price rule.
Under this plan, every 250 shares currently held by shareholders will be consolidated into a single share, reducing Bollinger’s approximately 126.2 million shares outstanding to about 505,000 shares (rounding fractional shares up). Read More
Rule 144 and 145: The SEC’s Favorite Party Poopers
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When it comes to the resale of securities, few areas of securities law generate as much scrutiny as those involving shell companies. Investors and issuers alike must navigate complex restrictions under the Securities Act, particularly the interplay of Rule 144 and Rule 145. We’ll walk through the resale restrictions under the Securities Act of 1933 (the “Securities Act”), focusing on Rule 144 and Rule 145. These rules set the stage for how securities of shell companies and former shell companies can be resold. Read More
Trump Says No More Nasty 10-Qs — Make SEC Reporting Great Again
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President Donald Trump has revived an idea he first floated during his earlier administration: doing away with quarterly reporting requirements for U.S. public companies. This move aligns with President Trump’s vision of reducing bureaucratic hurdles and fostering a business environment that prioritizes innovation and growth.
Direct Public Offerings in 2025
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A Direct Public Offering (DPO) is an effective method for going public. Private companies may also raise capital by selling securities directly to the public without intermediaries like underwriters or investment banks. This approach, also known as a direct listing, eliminates many of the costs and complexities associated with traditional Initial Public Offerings (IPOs) or reverse mergers, making it an attractive option for small to mid-sized companies seeking public company status. Below, we explore the key aspects of DPOs, their benefits, regulatory requirements, and practical considerations for issuers in 2025, based on the latest insights from securities law experts.
What is a Direct Public Offering?
A DPO allows a company to offer its securities—such as common shares, preferred shares, or debt securities—directly to investors, bypassing the need for underwriters or broker-dealers. Unlike an IPO, which involves a structured process with investment banks, a DPO enables issuers to self-underwrite and tailor the offering to their specific needs and requirements. This flexibility makes DPOs appealing to companies with established client bases or those unable to secure an underwriter. The process typically involves filing a registration statement, most commonly a Form S-1, with the Securities and Exchange Commission (SEC) under the Securities Act of 1933.
DPOs can be completed in as little as 90 days, compared to a year or more often required for an IPO. They also create unrestricted securities, unlike Form 10 registration statements, which may result in restricted securities. This efficiency and flexibility make DPOs a viable alternative for companies aiming to go public quickly and cost-effectively. Additionally, issuers can seek to raise capital in a variety of Regulation D private offering securities exemptions. It is important that issuers consider state blue sky laws during the securities offering process. Read More
Nasdaq Proposes Tougher Listing Standards
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On September 3, 2025, Nasdaq unveiled proposed updates to its listing standards, designed to strengthen investor protections and enhance market integrity. The changes come amid heightened concerns about market manipulation and liquidity in smaller company securities, and reflect the exchange’s ongoing efforts to adapt to evolving market dynamics.
Key Proposed Changes
Nasdaq’s revisions target both new listings and ongoing listing compliance:
- Higher Public Float Threshold: New listings under the net income standard will now require a minimum market value of publicly held shares (public float) of $15 million. This helps guarantee better liquidity right from the start.
- Faster Suspension and Delisting: Companies with a listing deficiency and a Market Value of Listed Securities below $5 million will face an accelerated suspension and delisting process.
- Stricter Standards for China-Based Companies: New listings from companies principally operating in China must raise at least $25 million in public offering proceeds, reviving a threshold first introduced for “restrictive markets” in 2020.
Navigating Periodic Reporting for U.S. Public Companies
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As a public company in the U.S., staying on top of your SEC reporting obligations under the Securities Exchange Act of 1934 (Exchange Act) is crucial. These requirements ensure transparency, keep investors informed about key developments, and help maintain market integrity. Whether you’re a newly public company or a seasoned issuer, understanding periodic reporting—Form 10-K, Form 10-Q, and current event (Form 8-K) reports—can prevent costly missteps.
What Makes a Company a “Reporting Company”?
A reporting company is one that has triggered ongoing disclosure obligations under the Securities Exchange Act of 1934. This can happen in three common ways:
- Listing on a national exchange (Section 12(b))
If you list securities on the NYSE, Nasdaq, or another national exchange, you must register with the SEC. - Hitting size thresholds (Section 12(g))
Even without a listing, companies with more than 2,000 shareholders (or 500 who are not accredited investors) and over $10 million in assets must register. - Filing a public registration statement (Section 15(d))
Companies that offer securities to the public via a registration statement (e.g., for debt or equity) automatically assume reporting responsibilities once the statement becomes effective.
Once subject to these rules, you’ll need to keep investors informed with ongoing filings. Read More
Hedge Funds Just Won a Key Review of the SEC’s Short-Sale Disclosure Rule. Here’s What It Means.
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A federal appeals court has ordered the Securities and Exchange Commission to take a fresh look at the economic impact of its short-sale transparency regime—a notable win for hedge fund groups that sued to block it. On August 25, 2025, a three-judge panel directed the SEC to reconsider the costs and cumulative economic effects of the rule, while leaving the agency’s underlying authority intact. The challenge was brought by industry associations representing hedge funds and other private funds. Read More
Navigating Audit Committee Requirements
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For public companies in the U.S., the audit committee plays a critical role in maintaining investor confidence and ensuring accountability. Audit committees sit at the intersection of corporate governance, financial integrity, and risk oversight. If you serve on a board—or advise one—understanding the rules that govern audit committees is essential. Read More
Navigating Florida’s Revamped Securities Laws
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In 2023 and 2024, Florida lawmakers overhauled Chapter 517, the Florida Securities and Investor Protection Act, ushering in a new era for businesses and investors. Effective October 1, 2024, these changes make it easier for Florida companies to raise capital locally while strengthening protections against fraud.
The reforms cover three key areas:
- Modernized registration and licensing rules
- New and expanded capital-raising exemptions
- Stronger investor protection and enforcement tools
This blog dives into the new exemptions and rescission rights, offering a clear guide for businesses and investors. Read More
NASDAQ’s 20% Rule – Consideration When Going Public
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When a company goes public on the Nasdaq Stock Market, it must comply with various requirements, including obtaining stockholder approval for certain transactions involving 20% or more of the company’s stock or voting power. This is particularly important for companies planning their initial public offering (IPO).
This IPO Preparation Guide covers:
- Reviews key scenarios requiring stockholder approval during and after the IPO process for Nasdaq-listing compliance.
- Provides pre-IPO companies with practical guidance on calculating ownership thresholds and voting power requirements.
- Describes exceptions to the rule.
- Explores strategic approaches to structuring pre-IPO and post-listing transactions to optimize timing and stockholder approval requirements.
Understanding the SEC’s Concept Release on the Definition of a Foreign Private Issuer
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In a recent move, the U.S. Securities and Exchange Commission (SEC) issued a concept release examining the definition of a Foreign Private Issuer. This step underscores the SEC’s effort to evaluate whether the current framework still makes sense in today’s interconnected global markets.
What is a Foreign Private Issuer?
A foreign private issuer is essentially a non-U.S. public company that meets specific criteria distinguishing it from domestic issuers. These criteria include where its operations are based, the composition of its board and management, and the residency of its shareholders. Being categorized as a Foreign Private Issuer allows companies to benefit from more flexible SEC reporting requirements, making it easier for them to access U.S. capital markets. When going public, Foreign Private Issuers can choose between various listing options, including American Depositary Receipts (ADRs) or direct listings on major U.S. exchanges like NYSE or NASDAQ. Read More
Navigating Corporate Governance: Requirements for Nasdaq and NYSE Companies
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Going public is a thrilling milestone for any company, but it comes with a hefty dose of responsibility. If you’re eyeing a listing on the New York Stock Exchange (NYSE) or Nasdaq Stock Market (Nasdaq), you’ll need to align your board and operations with robust corporate governance standards. These rules, enforced by the exchanges and the Securities and Exchange Commission (SEC), aim to promote accountability, fairness, and investor confidence. In this post, we’ll break down the key requirements, from board setup to committee roles, while highlighting some nuances and recent developments. Think of this as your roadmap to building a compliant—and effective—governance structure. Read More
Navigating SEC Disclosures: Director and Executive Officer Information
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In the securities industry, transparency isn’t just a buzzword—it’s a legal mandate. The U.S. Securities and Exchange Commission (SEC) plays a crucial role in ensuring that investors have the tools to make smart decisions. One key piece of this puzzle is Item 401 of Regulation S-K, which outlines the disclosures companies must make about their directors, executive officers, and nominees. This information helps shareholders evaluate leadership quality, governance practices, and potential risks when voting on board elections or assessing investment opportunities.
Think of it as a resume for the company’s top brass: it covers everything from basic bios to potential red flags. These details appear in key filings like Form S-1 for IPOs, proxy statements for annual meetings, and Form 10-K annual reports. But why does this matter? Strong leadership correlates with better company performance, and hidden conflicts or past issues can spell trouble. In fact, according to a 2023 study by the CFA Institute, investors increasingly prioritize governance factors, with 78% saying board composition influences their decisions.
In this blog post, we’ll break down the core requirements of Item 401, rephrased and expanded for clarity. I’ll also weave in some real-world context, tips for compliance, and recent developments to give you a fuller picture. Let’s dive in. Read More
Navigating SEC Form 6-K
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For foreign private issuers (FPIs) listed in the United States, staying compliant with U.S. Securities and Exchange Commission (SEC) regulations is a critical task. Among the various reporting obligations, Form 6-K stands out as a key mechanism for providing ongoing disclosures about corporate developments. While it may seem straightforward—submit press releases, shareholder reports, and other published materials to the SEC—Form 6-K is layered with complexities that require careful navigation. In this blog, we dive into the essentials of Form 6-K, its requirements, practical considerations, and how it integrates with other SEC filings like Form F-3, drawing on insights from years of market practice. Read More
What Happens at the SEC During a Government Shutdown?
Posted onIn its “Operations Plan Under a Lapse in Appropriations and Government Shutdown,” the SEC lays out with surprising candor the bare-bones framework it must follow when Congress fails to fund it. Here’s a breakdown of what the SEC will and will not do during a funding lapse.
Core Continuities: What Stays Alive
1. EDGAR remains open — for basic filing only
One of the few bright spots for market participants is that the SEC expects EDGAR to continue accepting filings, including registration statements, periodic reports, proxy materials, and amendments. That said:
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