Securities Lawyer 101 l Brenda Hamilton

Securities Lawyer 101 l Brenda Hamilton

Tuesday, December 10, 2013

OTCMarkets OTCQB

Many issuers seeking to go public are opting to list on the OTCMarkets OTCQB.   The OTCMarkets Group operates an electronic inter-dealer quotation system called OTC Link. OTCMarkets ranks issuers in tiers; each issuer’s rank depends upon the amount of disclosure provided.
Companies using registration statements followed by Rule 15c2-11 applications to go public qualify for the “OTCQB” tier. The QTCQB tier is only available to issuers who file reports with the SEC. These issuers are not required to provide additional disclosures to the OTCMarkets.
In order for an issuer to go public on the OTCQB, it must become an SEC reporting company.  Once the company is reporting, it can then obtain its ticker symbol assignment from the Financial Industry Regulatory Authority (“FINRA”) if it meets certain requirements.
SEC Reporting l OTCQB Going Public Transactions
A private company seeking to go public can voluntarily become reporting either by filing a Form 10 registration statement to register a class of securities under the Securities Exchange Act of 1934, as amended (the “1934 Act”) or by registering securities on a registration statement under the Securities Act of 1933, as amended (the “1933 Act”), typically on Form S-1. All companies qualify to file a registration statement on Form S-1.
Once a private company’s registration statement becomes effective, the company is an SEC reporting issuer, but its stock cannot yet be publicly traded. First it must comply with Rule 15c2-11 (“SEC Rule 15c2-11”) of the 1934 Act.
15c2-11 Requirements for OTCQB  Going Public Transactions
In order to use 15c2-11 to go public and have its shares publicly traded, the private company must locate a sponsoring market maker who is a FINRA member to file an application on its behalf.
The FINRA Comment Process in OTCQB Going Public Transactions
FINRA may render comments to the Form 211 application; the sponsoring market maker and company must respond to the satisfaction of FINRA. Once FINRA is satisfied that the disclosures satisfy the requirements of SEC Rule 15c2-11, a trading symbol will be assigned and the company will have completed its going public transaction. The market maker can quote the company’s securities on the OTCMarkets OTCQB tier.
The sponsoring market maker has the exclusive right to publish quotations for the security of the company going public for the initial 30 day period after the Form 211 is approved. After that, other market makers can “piggyback” on his Form 211, and publish their own quotations.
A list of market makers who file 15c-211 applications can be obtained from the OTCMarkets website at www.otcmarkets.com.
15c2-11 Disclosure Requirements in OTCQB Going Public Transactions
The disclosures required by Rule 15c2-11 are provided on the Form 211 submitted by the sponsoring market maker. FINRA requires specific disclosures in the Form 211 and in the Information and Disclosure Statement, which includes much of the same information found in an SEC Registration Statement.
FINRA Rules Applicable to the Going Public Process
SEC Rule 15c2-11 requires that current public information be made available to investors. This information is initially provided on Form 211 and in the 15c2-11 application to FINRA. The sponsoring market maker must review basic issuer information prior to publishing quotations of an issuer’s securities. FINRA also requires that market makers have a reasonable basis for believing the information provided by the company is accurate and from reliable sources. A private company that goes public and becomes an SEC reporting issuer satisfies the ongoing current public information requirement by filing its forms and reports with the SEC.
Qualifying for OTCMarkets’ OTCQB provides transparency to investors and is a straightforward method for small companies to go public, and to enjoy the benefits that status confers.
More information about going public using SEC registration can be found on our blog post at:
For further information about this article, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton Florida, (561) 416-8956, by email at bhamilton@securitieslawyer101.com. This memorandum is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute, legal and compliance advice on any specific matter, nor does this message create an attorney-client relationship. For more information concerning the rules and regulations affecting the use of Rule 144, Form 8K, FINRA Rule 6490, Rule 506 private placement offerings, Regulation A, Rule 504 offerings, Rule 144, SEC reporting requirements, SEC registration on Form S-1 and Form 10, Pink Sheet listing, OTCBB and OTC Markets disclosure requirements, DTC Chills, Global Locks, reverse mergers, public shells, go public direct transactions and direct public offerings please contact Hamilton and Associates or visit http://www.gopublic101.com.
Hamilton & Associates | Securities Lawyers
Brenda Hamilton, Securities Attorney
101 Plaza Real South, Suite 202
Boca Raton, Florida 33432
Telephone: (561) 416-8956
Facsimile: (561) 416-2855
www.GoPublic101.com

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