OTCQX Listing, Eligibility & Quotation – OTC Markets Lawyers

OTC Markets Group organizes securities into the OTCQX®, OTCQB® and OTC Pink® categories based on the level of disclosure provided and the listing fees paid by the issuer.  OTCQX Quotation of a company is considered to be the highest tier offered by the OTC Markets and the most prestigious in going public transactions.  OTCQX eligibility is tailored for both domestic and international companies seeking to go public.

OTCQX International is a fully electronic interdealer quotation system affording investors and broker-dealers access through online and full-service broker-dealers in the U.S.  Trades of OTC Markets OTCQX International securities are settled and cleared in US time zones using US currency like any US-based exchange-listed security.

OTCQX International Quotation & Disclosure

OTCQX International is a disclosure tier for issuers already listed on an international stock exchange.  According to the OTC Markets, the OTCQX International includes over 300 issuers, $1.7 Trillion in market capitalization and $29.5 Billion in annual dollar volume.

The OTCQX International offers many benefits to Foreign Issuers including:

• OTCQX accepts the foreign issuer’s reporting in lieu of SEC reporting.
• The tier is a cost-effective alternative to NYSE or NASDAQ for publicly traded companies.
• OTCQX reaches a larger group of U.S. institutional investors who can buy OTCQX securities through the broker of their choice.
• Disclosures on the OTCQX are available to U.S. and other investors.
• Using the OTC Link® ATS, foreign issuers quoted on the OTCQX increase liquidity in their shares.

OTCQX International allows companies to establish a secondary market for their securities and increase liquidity by attracting U.S. investors without the duplicative regulatory requirements of a U.S. stock exchange listing.  Companies on OTCQX International may use the disclosure required in their home jurisdiction instead of SEC reporting.

All companies appoint a qualified, third-party investment bank or securities attorney to help with the admission process, post disclosure in English, and act as a trusted resource for all their investor information needs and U.S. market protocols.

 OTCQX International Listing

The OTC Markets recognizes the following foreign exchanges in determining whether an issuer qualifies for an OTCQX International listing.

The OTC Markets offers two tiers to U.S. companies seeking to list on the OTCQX.  These are OTCQX U.S. and OTCQX U.S. Premier.  Both domestic and foreign issuers must meet ongoing disclosure requirements to maintain their listing.

OTCQX Listing Requirements – OTCQX U.S.

• Must have proprietary priced quotations published by a FINRA member and SEC regulated broker-dealer on OTC Link® ATS, our SEC-registered Alternative Trading System
• No shells or blank check companies. May not be subject to any bankruptcy or reorganization proceedings
• Meet one of the following exemptions, consistent with the definition of a “Penny Stock” under Rule 3a51-1 under the Securities Exchange Act of 1934:

1. Have a bid price of $5 or more; or
2. Have net tangible assets of $2,000,000, if the issuer has been in continuous operation for at least three years, or $5,000,000, if the issuer has been in continuous operation for less than three years; or
3. Have average revenue of at least $6,000,000 for the last three years.

• A minimum bid price of $0.10 (for preceding 30 consecutive calendar days)
• At least 50 beneficial shareholders, each owning at least 100 shares of the company’s common stock
• Two years of audited annual financial reports available
• Issuers of SEC-registered securities must be current in required reporting. Non-SEC registered companies must be compliant with the Alternative Reporting Standards (ARS). Click here to learn more about Reporting Requirements
• Non-SEC Reporting Companies must be published in the S&P or Mergent Manual for Blue Sky compliance, allowing broker-dealers to recommend the security in up to 38 states
• DAD Letter of Introduction upon application process completion, and annually thereafter, confirming that the company has made adequate current information publicly available and meets the marketplace inclusion requirements

OTCQX U.S. Premier – OTCQX Quotation Requirements

• A minimum bid price of $1(for preceding 30 consecutive calendar days)
• At least 100 beneficial shareholders, each owning at least 100 shares of the company’s common stock
• The company meets the financial qualification standards for OTCQX U.S. Premier
• The company conducts Annual shareholders’ meetings
• The company meets all of the requirements of the OTCQX U.S. above

 OTCQX Continued Eligibility & Listing

The OTCQX Rules prescribe the following listing, eligibility and quotation requirements for ongoing the OTCQX tier.

 OTCQX Ongoing Quotation and Eligibility

Officers and directors of an OTCQX listed company are responsible for compliance with the OTCQX Rules and are solely responsible for the information provided through the OTC Disclosure and News Service.

Securities Law Compliance Both foreign and domestic OTCQX listed companies must comply with applicable securities laws.  OTCQX listed companies must respond to requests from any securities regulator or self-regulatory organization in its country of domicile, any U.S. federal or state securities regulator and any U.S. self-regulatory organization.

State Blue Sky Manual Exemption A company’s securities must at all times be available for secondary transactions under the laws of each state and territory of the United States that recognizes the Blue Sky Manual Exemption by any person who can engage in such transactions pursuant to an exemption from federal registration of such securities and the Blue Sky Manual Exemption.

Retention and Advice of PAL A company must continue to retain a PAL at all times and must seek advice from its PAL in relation to a company’s obligations under the OTCQX Rules whenever appropriate and give such advice proper consideration.

Responding to OTC Markets’ Requests Issuers with the assistance of its PAL must respond to inquiries and requests from OTC Markets from time to time.

Ongoing Disclosure Obligations for Reporting Companies If a company is subject to the reporting obligations of Section 13 of the Exchange Act because such company has a class of securities registered pursuant to Section 12(g) of the Exchange Act, the company must continue to file, on an ongoing basis, all annual, quarterly and other interim reports required to be filed under the Exchange Act.

Ongoing Disclosure Obligations for Non-Reporting Companies A company, so long as it is not subject to the reporting obligations of Section 13 of the Exchange Act, must ensure that the information required to be made publicly available pursuant to Rule 12g3-2(b) shall be posted in English through the OTC Disclosure and News Service on an ongoing basis as required by the OTC Markets.

Issuer Compliance Statement A company must provide a letter to its PAL, at least once a year and not later than 210 days after its fiscal year end, that makes the following affirmations: (1) the company continues to satisfy the requirements for listing on the applicable OTCQX tier; and (2) either (a) the company is current and fully compliant in its obligations under Rule 12g3-2(b) and the information required to be made publicly available pursuant to Rule 12g3-2(b) is posted in English through the OTC Disclosure and News Service or (b) if a class of the company’s securities are registered under Section 12(g) of the Exchange Act, the company is current and fully compliant in its SEC reporting obligations or (c) if the company is not eligible to rely on the exemption from registration provided by Exchange Act Rule 12g3-2(b) because it does not (i) meet the definition of “foreign private issuer” or (ii) maintain a primary trading market in a foreign jurisdiction as set forth in Exchange Act Rule 12g3-2(b)(ii), and is not otherwise required to register under Section 12(g), that it is otherwise current and fully compliant with the obligations of a company relying on the exemption from registration provided by Exchange Act Rule 12g3-2(b).

Within 225 days after the company’s fiscal year end, it must submit  to OTC Markets Group a letter from the company’s PAL containing certain information as required by the OTC Markets.

Annual Listing Fees A company must pay an annual listing fee to the OTC Markets for its OTCQX listing.

This securities law blog post 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 advice on any specific matter, nor does this message create an attorney-client relationship.  For more information about going public and the rules and regulations affecting the use of Rule 144, Form 8K, FINRA Rule 6490, Rule 506 private placement offerings and memorandums, Regulation A, Rule 504 offerings, SEC reporting requirements, SEC registration statements on Form S-1 , IPO’s, OTC Pink Sheet listings, Form 10, OTC Markets disclosure requirements, DTC Chills, Global Locks, reverse mergers, public shells, direct public offerings and direct public offerings please contact Hamilton and Associates at (561) 416-8956 or [email protected].  Please note that the prior results discussed herein do not guarantee similar outcomes.

Hamilton & Associates | Securities Lawyers
Brenda Hamilton, Securities Attorney
101 Plaza Real South, Suite 202 North
Boca Raton, Florida 33432
Telephone: (561) 416-8956
Facsimile: (561) 416-2855
www.SecuritiesLawyer101.com