OTC Markets Raises the Flag for Increased Transparency

OTC Markets Group has implemented additional Compliance Flags to their existing suite of marketplace designations and informational flags. OTC Markets maintains these designations and flags to help investors and market participants identify opportunity and quantify risks.This information is made publicly available for free on the company’s quotepage. More information on OTC Market’s Compliance Flags can be found on the Company’s website.

OTCMarket’s Promotion Flag

The Promotion Flag identifies securities that are the subject of current promotional activity. OTC Market’s “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. Thepromotion flag will remain on the company's quote page until 15 days after the last promotional material is distributed.” 

R. Cromwell Coulson, President and Chief Executive Officer, OTC Markets Group commented,

“[a]nonymous, paid stock promotion should have no place in the public markets…We are taking responsibility to provide transparency to investors and encourage public companies to disclose and correct misinformation that can harm the efficient market pricing process. We 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."

To learn more about OTC Market’s policy on stock promotion you can visit OTC Market’s website.

OTCMarket’s Shell Risk Flag

According to OTC Markets, the “shell risks 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 the company's key .”

OTC Markets will make this determination based on an analysis of Rules 405 of the Securities Act of 1933 and 12b-2 of the Exchange Act of 1934.

A“shell company” as defined in Rule 405 of the Securities Act of 1933 means a registrant,  “other than an asset-backed issuer as defined in Item 1101(b) of Regulation AB(§229.1101(b) of this chapter), that has:

1. No or nominal operations; and
2. Either:
3.   (i) No or nominal assets;

(ii) Assets consisting solely of cash and cash equivalents;or

(iii)Assets consisting of any amount of cash and cash equivalents and nominal other assets.

12b-2 of the Exchange Act of 1934, defines a Shell company as,

a registrant, other than an asset-backed issuer as defined in Item 1101(b) of Regulation AB (§ 229.1101(b) of this chapter), thathas:

No or nominal operations; and

Either:

No or nominal assets;

Assets consisting solely of cash and cash equivalents; or

Assets consisting of any amount of cash and cash equivalents and nominal other assets.

The new stock promotion and shell risk flags are featured on the individual quote pages of securities that have been flagged by OTC Markets which will help market participants to quickly identify possible areasof concern when they are first viewing company information.