OTC Updates

Summary - OTC Markets Group is offering a virtual panel discussion with the SEC's Office of the Advocate for Small Business Capital Formation on the experience of small, publicly-traded companies.

Key topics included in the discussion are:
Capital raising
Becoming a publicly-traded company
Secondary trading
Reporting & disclosure

Panelists include:
Martha Miller, SEC Advocate for Small Business Capital Formation
Dan Zinn, General Counsel of OTC Markets Group (OTCQX: OTCM)
Steve Bagley, CFO of Sono-Tek Corp. (OTCQX: SOTK)
Robert Schermer, CEO of Meritage Hospitality Group, Inc. (OTCQX: MHGU)
Lauren Ranalli, President & CFO of First Resource Bank (OTCQX: FRSB)

For more information and to access the discussion, please click here.

OTC Markets - Small Cap Compliance Product Now Includes Risk Scoring

Summary - OTC Markets Group Inc. (OTCQX: OTCM), operator of financial markets for 10,000 U.S. and global securities, today announced the addition of 'Risk Scoring' to its Small Cap Listed Compliance Product. This latest enhancement provides broker-dealers and compliance and risk management teams with a quantitative metric to compare over 2,300 sub $500 million market cap U.S. exchange-listed securities.

Individual securities are assigned a total risk score based on 13 factors which provide a comprehensive view of the risk profile. Key risk factors include: promotion, hot sector status, penny stock status, shell status (current and past), price, market cap and trading volatility. The latest data set provides a more in-depth, analytical compliance snapshot to better evaluate small cap securities listed on the NYSE, NYSE American and Nasdaq.

"The ability to quickly assess and compare risk factors for individual small cap listed securities provides broker-dealers, risk management and compliance professionals with enhanced benchmarking and insight into this segment of the market," said Matthew Fuchs, Executive Vice President of Market Data and Strategy at OTC Markets Group. "Providing subscribers with efficient, comprehensive, real-time analytics tools continues to be our focus."

Risk Score Algorithm data also includes elements related to:

Name Changes
Reverse Splits
Price and Volume Change
Shares /Authorized Shares Outstanding

Delivered in pipe-delimited format, twice daily at 5:00 am (ET) and 7:00 pm (ET), the file is licensed at an enterprise level designed for broker-dealers, AML, compliance and risk management professionals looking to more effectively right-size small cap listed equity compliance.

For more information, please click here.

OTC Markets White Paper: What Does It Take to Have A Winning IR Strategy?

Summary - OTC Markets Group has released its newest white paper, which offers case studies for best practice tips from the winners and nominees of IR Magazine Awards - Small Cap. The white paper includes insights from portfolio managers about what they're looking for from an IR strategy in companies they invest.

According to the OTC Markets website, "the success of the nominees and winners reflects on a range of IR best practices, including:

A successful rebranding campaign by Safehold
Industry-leading investor targeting by RMS Medical Products
Enhanced investor communication by NAPCO Security Technologies"

For more information and to access the white paper, click here.

OTC Markets 2019 Mid Year Review

Summary - According to its website, the mission of OTC Markets to is "to provide companies with more efficient solutions to better engage and inform investors." In this mid year review, OTC Markets highlights that it welcomed nearly 200 companies to its OTCQX and OTCQB Markets and launched its Virtual Conference platform. It also moved into new office space in New York and London. These highlights and many more are reviewed in the report along with other key milestones.

For more information, please click here.

OTC Markets Whitepaper: Small-Cap Company Guide - Navigating Mergers & Acquisitions

In December 2018, OTC Markets Group issues a guide for small-cap companies that focuses on M&A.

According to OTC Markets Group, “this report looks at M&A for small caps, including six reasons why a merger may be appealing for small cap companies, from driving faster growth, to exploring new avenues to increase shareholder value and returns, and more. It also examines strategies to ensure a successful merger, with tips for the two key phases: analysis and implementation, covering cash and non-cash considerations, calculating the purchase price, conducting due diligence and much more.”

To access the guide, please click here.

Source: OTC Markets

Choosing the Right Path: How to Maximize Your Market Strategy

Companies that trade on OTC Markets often face the decision of whether to move to an exchange listing. This recent study provides evidence that U.S. issuers that move to an exchange prematurely often see a decline in value rather than value creation.

For more information, click here.

Source: OTC Markets

OTC Markets Group Participates in SEC Roundtable Sponsored by the Division of Trading and Markets

Summary - On September 26, OTC Markets Group was pleased to take part in the SEC's Roundtable on Regulatory Approaches to Combating Retail Investor Fraud, hosted by the Division of Trading and Markets. OTC Markets Group CEO Cromwell Coulson participated in a panel discussion on Trading Halts and General Counsel Dan Zinn spoke on a panel focused on Rule 15c2-11 and enhancing public disclosure requirements.

“Fraudulent and manipulative promotion schemes corrupt the efficient market pricing process, hinder small company capital formation, and harm retail investors,” said Cromwell Coulson, CEO. “Because regulation alone cannot address all sources of fraud, we must empower individuals with the information they need to make better-informed investment decisions. Shining the electric light of data-driven markets that incentivize corporate disclosure, combined with common-sense regulation, are the most effective investor protection tools.”

In conjunction with their participation in the Roundtable, OTC Markets Group submitted a list of targeted Regulatory Recommendations that would help to combat retail investor fraud, improve market efficiency and bring greater transparency to our public markets.

For more information, click here.

Source: OTC Markets

New Compliance Product Helps Improve Analysis of 1800+ Small Cap Securities Listed on U.S. Stock Exchanges

The Small Cap Listed Compliance Product allows firms to enhance their due diligence and establish a standardized framework to analyze securities across the listed and OTC equity small cap market.

The new product extends OTC Markets Group's compliance coverage in order to help AML and risk management teams holistically cover the US small cap market, which will benefit investors, market participants and small-cap issuers. The file, created twice daily, provides key compliance data for over 1,800 sub $500 million market cap equities listed on a national stock exchange, including:

Active and Historical Stock Promotion Data
Penny Stock Status
OTC Graduate Data

Additional fields include Micro Cap Status; Security Name Change History; Current and Former Shell Status; and Stock Split History.

For more information, click here.

Source: OTC Markets

Transfer Agent Verified Shares Program Expands; Rule Updates for OTCQX and OTCQB Companies Beginning in 2019

In August, OTC Markets Group announced that Action Stock Transfer, Manhattan Transfer Registrar Co., Mountain Share Transfer, Pacific Stock Transfer and Securities Transfer Corporation joined OTC Markets' Transfer Agent Verified Shares Program. Twenty-five transfer agents, representing 91% of US companies trading on our OTCQX and OTCQB, are now included among a distinguished roster of leading transfer agents that are working with OTC Markets Group to create better informed and more efficient financial markets.

Effective January 1, 2019, OTC Markets Group plans to require all US companies trading on the OTCQX and OTCQB Markets to provide verified share data through a transfer agent who participates in the Transfer Agent Verified Share Program.

OTCQX Rules Release for U.S. Companies and for U.S. Banks

OTCQB Rules Release

For more information, click here.

Source: OTC Markets

New Capital Markets Study: International Public Companies Get Home Market and US Boost From Cross-Trading on OTCQX

International companies, with a primary listing outside the US, experienced a 28% increase in trading volume by number of shares within their home market after joining the OTCQX® Best Market, according to a new study released today by OTC Markets Group Inc. (OTCQX: OTCM). In addition, companies saw a 7-fold increase in US ownership.

For more information, click here.

Source: OTC Markets

OTC Markets Mid-Year Review

Curious to see what has happened on the OTCQX and OTCQB Markets so far in 2018? Check out OTC's progress towards national Blue Sky status, new initiatives for 2018, events and more. Click here to view the OTC Mid-Year Review.

Source: OTC Markets

Small-Cap Company Guide - Best Practices for Being Public and Raising Capital

Summary - OTC Markets has recently published a comprehensive guide with IR Magazine for small-cap companies looking to raise capital and grow their business. The guide includes tips and checklists for IPO alternatives, capital raising, targeting the right investor and much more.

Click here for more information and to download the guide.

Source: IR Magazine

Key Legislation Includes Expansion of Regulation A+ for SEC Reporting Companies

Summary - OTC Markets Group applauds the May 24, 2018 enactment of the Economic Growth, Regulatory Relief, and Consumer Protection Act (S.2155), which includes key legislation expanding Regulation A+ to SEC reporting companies. Regulation A+ allows small companies to raise up to $50 million online, transparently and directly from the public without the extensive cost burden.

For more information, please click here.

Source: OTC Markets Group

New Capital Raising Alternative Now Available for SEC Reporting Companies

Summary - OTC Markets Group is pleased to share an exciting development in their ongoing campaign to enhance the capital raising opportunities for Small-Cap companies. Last week, the Economic Growth, Regulatory Relief, and Consumer Protection Act (S. 2155) was enacted into law and included key legislation expanding Regulation A+ to SEC reporting companies.

Regulation A+ allows small companies to raise up to $50 million online, transparently and directly from the public without the extensive cost burden of a full SEC public offering. However, the SEC initially did not allow SEC reporting companies to raise capital through Regulation A+.

The passage of The Economic Growth, Regulatory Relief, and Consumer Protection Act (S.2155) marks a pivotal milestone for OTC Markets Group's smaller companies and issuers. Section 508 of the bill incorporates the Improving Access to Capital Act, based in large part upon OTC Markets Group’s 2016 SEC Petition for Rulemaking. The Improving Access to Capital Act, which amends Regulation A+ to allow SEC reporting companies to use this innovative capital raising tool, was originally passed by the House of Representatives in September 2017 in a bipartisan, 404-3 vote.

OTC Markets Group believes this legislation will be instrumental to improving the capital raising process and increasing the number of public companies that can efficiently access their capital markets. They thank the members of the House and Senate who voted to pass S.2155, recognizing the work of Congresswoman Kyrsten Sinema (D-AZ) and Congressman Trey Hollingsworth (R-IN), lead sponsors of the Improving Access to Capital Act in the House, and collective efforts of Representatives Sinema and Hollingsworth, and cosponsors Rep. Roger Williams (R-TX), Rep. French Hill (R-AR), Rep. Luke Messer (R-IN), and Rep. Brad Sherman (D-CA), whose contributions led to this important initiative becoming law.

For more information on this important legislation, please review the press release here.

Source: OTC Markets Group

OTC Markets Group Announces Launch of Stock Promotion Flag

This flag, shaped like a megaphone, will soon appear on the promoted company's quote page on otcmarkets.com. This easily identifiable designation will alert investors, regulators, and market participants to the presence of promotional activity.

Manipulative and misleading stock promotion is an industry-wide concern that harms investors, impedes capital formation and disrupts efficient pricing mechanisms of national exchanges and the OTC markets. OTC believes it is their responsibility to provide transparency to investors and encourage public companies to disclose and correct misinformation that can harm the efficient market pricing process and damage the integrity of their markets. Anonymous, paid promotion should have no place in the public markets.

OTC Markets Group issuer compliance team actively monitors a variety of sources and collects input from their strong network of market participants to determine if a security is being promoted and performs research prior to publishing the information on otcmarkets.com. The promotion flag will remain on the company's quote page until 15 days after the last promotional material is distributed.

Over the past few months, OTC Markets Group has published a Policy on Stock Promotion, issued Best Practices Guidelines for Issuers and launched their Compliance Statistics Page. They continue to work with regulators to advocate for the modernization of promotion regulations, including requiring additional disclosure around paid stock promotion and identifying the people associated with these campaigns.

OTC Markets Group encourages all their companies to educate themselves on the manipulative practices stock promoters use. They will continue to monitor the market to identify adverse behavior and publicly identify securities that have become a target of bad actors.

In addition to the new stock promotion flag, OTC Markets Group has also added a shell risk flag. The shell risk designation indicates that a company may be a Shell Company, as defined by SEC rules. This designation is made at OTC Markets' discretion based on an analysis of company's key financial data.

OTC Markets Group welcomes your feedback and looks forward to working with you to further enhance their thriving OTC equity markets.

Source: OTC Markets Group

OTC Markets Annual Review

Summary - OTC Markets is pleased to share their latest Annual Review.

The document highlights the milestones and events from the past year as OTC Markets continued to champion access to efficient public trading markets for innovative and entrepreneurial companies.

Please take a moment to review the key developments on the OTCQX Best Market and the OTCQB Venture Market.

OTC Markets Comment Letter on FINRA Rule 6432

Summary - OTC Market Group recently submitted a comment letter on FINRA Rule 6432 to the Financial Industry Regulatory Authority, Inc. (FINRA) in response to the request for comments on FINRA Rules Impacting Capital Formation.

In the letter, OTC Markets Group recommends that FINRA work with the SEC to make Rule 6432 more efficient and regulatorily relevant by adopting a disclosure-based approach and promoting the public availability of information. Their letter recommends the following simple modifications to the administration of Rule 6432 that would provide immense benefits to smaller companies looking to access well-regulated secondary markets:

Making the Form 211 review process more efficient by adopting an objective review standard and implementing a three-day turnaround;
Requiring that Form 211 materials be made public and issuers (not broker-dealers) be liable for any misrepresentations;
Outsourcing certain Form 211 functions to IDQSs, including allowing an IDQS to file a Form 211 directly with FINRA and to review Form 211 filings submitted by other broker-dealers;
Allowing IDQSs the authority to develop disclosure regimes and initiate trading halts;
Amending FINRA Rule 5250 to allow broker-dealer compensation for information gathering and Form 211 filing, provided that all such payments are fully disclosed; and
Allowing multiple market makers to quote a security immediately after a Form 211 is cleared.

Please click here to read the full comment letter.

OTM Markets Group Releases New Stock Promotion Policy

Summary - OTC Markets Group has released a new stock promotion policy, in conjunction with best practices for issuers, to improve overall market transparency for investors and better address the problems of fraudulent stock promotion.

Fraudulent stock promotion is an industry-wide concern that can mislead investors and disrupt the efficient pricing mechanisms of national exchanges and OTC markets. Solving this issue requires a collective effort among industry participants and regulators to proactively share information and drive greater transparency.

The new policy and best practices codify a core principle of OTC Markets Group's disclosure-based philosophy and the OTCQX and OTCQB Rules. It clarifies the responsibility of reputable public companies to make adequate current information available and provide timely disclosure of any news or information that might reasonably be expected to materially affect the market for its securities. This responsibility also requires public companies to quickly correct any false statements or materially misleading information spread by promoters so that public markets are not disrupted.

The enclosed policy discusses:

Publicly Identify Securities Being Promoted
Identifying Fraudulent Promotional Campaigns
Responsibilities of Companies with Promoted Securities
Impact on OTCQX or OTCQB Designation
Caveat Emptor Policy and Stock Promotion
Regulatory Referrals

Recognizing the need to advance the dialogue surrounding this critical issue, OTC Markets Group continues to actively engage with regulators to improve capital formation and create more transparency for investors when there is stock promotion paid for by third-parties. They believe the SEC should modernize its promotion regulations to ban anonymous, paid stock promotion and require clear disclosure when there is promotion paid for by third-parties, allowing for markets to better identify market manipulators.

OTC Markets Group encourages a more thoughtful approach by regulators that lowers barriers to small company public offerings, utilizes the vast amounts of data available today to identify bad actors hiding among the private financing markets, and accelerates real-time enforcement, regulatory intervention and change.

For more information, click here.

OTC Markets Group Proposes Amendments to the OTCQB Standards

Summary - OTC Markets Group has published proposed amendments to the OTCQB Standards. The proposal includes:

A notification of a change in Annual Fees to $12,000;
A modification to the procedures for new applicants to request exemption from the requirement to meet the bid test for 30 days prior to approval for OTCQB. This will allow certain Companies that have no prior public market in the U.S. to begin trading on OTCQB more quickly; and
Additions of definitions for Public Float, Affiliate, and Immediate Family Member to improve the quality and standardize the share data that OTCQB Companies make publicly available to their investors.

The entirety of the proposed Rules can be found here: OTCQB Standards

Below is a further description of each of these items:

Annual Fee
The Annual Fee is $12,000 (U.S.) for each twelve-month period, if paid in advance. In the alternative, the Company may opt to pay two semi-annual installments of $6,500 (U.S.).

Bid Price of $0.01 Eligibility Standard
Have proprietary priced quotations published by a Market Maker in OTC Link ATS with a closing bid price of at least $0.01 a) for each of the 30 calendar days immediately preceding the Company's application for OTCQB and b) as of the date OTC Markets Group approves its application to join the OTCQB market.

If there has been no prior public market for the Company's securities in the U.S. and FINRA has recently approved a Form 211 relating to the Company's securities with a bid price equal or greater to $0.01 or the Company's securities are traded on a Qualified Foreign Exchange at a price equal to or greater than $0.01, then the Company may apply in writing to OTC Markets Group for an exemption from Section 1.1(3)(a) of these OTCQB Standards, which exemption may be granted by OTC Markets Group in its sole and absolute discretion and subject to FINRA approval of the Form 211.

Any such exemption will be conditioned upon the bid price for such Company's securities remaining over $0.01 for each of the 30 calendar days immediately subsequent to the Company being first quoted on the OTCQB market.

Definitions
"Public Float" shall mean the total number of unrestricted shares not held directly or indirectly by an officer, director, any person who is the beneficial owner of more than 10 percent of the total shares outstanding, or any Affiliates thereof, or any Immediate Family Members of officers, directors and control persons.

"Affiliate" is a person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, an officer, a director, or a shareholder beneficially-owning 10 percent or more of the Company's outstanding shares.

"Immediate Family Member" shall mean any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law of such director, executive officer or nominee for director, and any person (other than a tenant or employee) sharing the household of such officer, director, or control person.

Comment Period of 30 days:
OTC Markets Group welcomes your feedback about the proposed changes. Send comments and questions to Mike Vasilios, Vice President of Issuer Compliance at mike@otcmarkets.com by November 15, 2017.

Effective Date of Proposed Changes:
The proposed rules are scheduled to become effective January 1, 2018

Source: OTC Markets Group

OTC Markets Group Shares Update on Improving Access to Capital Act Passed in the House

OTC Markets Group recently shared exciting news regarding their ongoing efforts to expand Regulation A+ to allow SEC reporting companies the opportunity to take part in this important form of online capital raising.

This week the bipartisan bill, Improving Access to Capital Act (H.R. 2864), sponsored by Representative Krysten Sinema and Representative Trey Hollingsworth, passed in the House of Representatives with an overwhelming majority vote of 403 to 3.

"We are excited to see the House of Representatives pass HR 2864, Improving Access to Capital Act, and we commend Representatives Sinema and Hollingsworth for sponsoring this bipartisan legislation that will give all SEC reporting companies the ability to raise capital online under Regulation A+. This effort is vital to lowering the cost of capital formation and fostering economic growth for US companies," said Cromwell Coulson, Chief Executive Officer and President of OTC Markets Group.

This milestone is one step closer to improving the capital raising process for small companies and easing the burdens of entry to the public markets.

"Expanding the scope of eligible issuers under Regulation A+ to include fully SEC reporting companies enhances the opportunity for capital formation for these job-creating companies. Seeing this bipartisan bill, sponsored by Representatives Sinema and Hollingsworth, pass in the House of Representatives is a significant step forward for US companies," said Dan Zinn, OTC Markets General Counsel.

Source: OTC Markets Group September 2017 Newsletter