OTCQX Listing and Eligibility – OTC Markets Lawyer
OTC Markets Group Inc. operates the OTCQX® Best Market, the OTCQB® Venture Market, and the Pink® Open Market for 11,606 U.S. and global securities. Securities are placed into one of these three tiers based on the level of disclosure provided and the listing fees paid by the issuer.
The OTCQX, OTCQB, and Pink markets represent a wide spectrum of securities:
- ADRs and foreign ordinaries
- Dividend-paying companies
- SEC reporting companies
- Community banks
- Small and micro-cap companies
- Large and mid-cap companies
Industries range across Telecommunications, Pharma & Bio-Tech, Utilities, Finance, Media, Resources, and many more.
Regardless of which tier an Issuer wishes to be listed, the company’s securities must be the subject of broker-dealer quotes on OTC Link® ATS. OTC Link® ATS is an SEC-registered Alternative Trading System (ATS), operated by OTC Link LLC. OTC Link LLC is a FINRA member broker-dealer wholly owned by OTC Markets Group.
Unlike on stock exchanges, companies with securities quoted on OTC Link ATS do not list their own stock for trading. Rather, broker-dealers begin quoting new securities by submitting a Form 211 with the Financial Industry Regulatory Authority (FINRA) and getting FINRA approval. In some cases, there may be an exemption available that permits a broker-dealer to begin quoting a stock without filing a Form 211. Generally, this happens when the broker-dealer is already quoting the stock on another platform or if the broker-dealer is only representing an unsolicited customer order.
Current financial information must be submitted with Form 211. FINRA rules do not require that financial statements are audited, but they should be prepared in accordance with GAAP or, for international companies, in accordance with their home country’s accounting standards.
The OTCQX® Best Market is considered the highest tier offered by the OTC Markets and the most prestigious in going public transactions.
To qualify for the OTCQX market, companies must meet high financial standards, follow best practice corporate governance, demonstrate compliance with U.S. securities laws, be current in their disclosure, and have a professional third-party sponsor introduction.
Penny stocks, shells, and companies in bankruptcy cannot qualify for OTCQX. The aim is that companies found on the OTCQX market are distinguished by the integrity of their operations and diligence with which they convey their qualifications.
As of September 30, 2020, OTC Markets reported 490 securities trading on the OTCQX® Best Market, generating $17,020,511,000 in dollar volume and $37,736,000 in dollar volume per security during the third quarter.
Eligibility standards vary slightly based on which of the following three categories the Issuer falls:
- International Companies
- U.S. Companies
- U.S. Community Banks
OTCQX International
Eligibility Standards
- Maintain a listing on a Qualified Foreign Exchange or be an SEC Reporting Company
- Be incorporated outside the U.S.
- Not a Shell Company or Blank-Check Company
- Not subject to any bankruptcy or reorganization proceedings
- Not a Penny Stock
- Have Priced Quotes by a market maker on OTC Link
- Submit a Letter of Introduction from an OTCQX Sponsor
Disclosure Standards
One of the following Reporting Standards must be met:
- International Reporting Standard
- SEC Reporting Standard
- Regulation A Reporting Standard
Audited annual financials
Timely disclosure of material news and other information required to be made publicly available pursuant to the Exchange Act Rule 12g3-2(b) published in English, through the OTC Disclosure & News Service or an Integrated Newswire service.
Financial Standards
Applying for OTCQX
OTCQX International Application Guide
Fees (effective January 1, 2021)
- Annual Fee: $23,000
- Application Fee: $5,000
According to an October 22, 2020 report by OTC Market Group, hundreds of companies with primary listings on 26 foreign exchanges and markets cross-trade on the OTCQX Market.
Furthermore, OTC Markets states that “foreign issuers are joining our markets in greater numbers today. While in 2019, nearly 60% of the companies that joined the OTCQX market were foreign issuers, thus far in 2020, foreign issuers represent more than three-quarters of the new companies now trading on OTCQX. We’ve seen 45 companies join OTCQX in the third quarter, with 36 of those companies having primary listings overseas.”
OTCQX U.S.
Eligibility Standards
- Not be a Shell Company or Blank-Check Company
- Not be subject to any bankruptcy or reorganization proceedings
- Not a Penny Stock
- Have Priced Quotes by a market maker on OTC Link
- Submit a Letter of Introduction from an OTCQX Sponsor
- Have a transfer agent that participates in the Transfer Agent Verified Share Program
Disclosure Standards
One of the following Reporting Standards must be met:
- SEC Reporting Standard
- Regulation A Reporting Standard
- Alternative Reporting Standard
Audited annual financials by a Public Company Accounting Oversight Board (PCAOB) auditor and unaudited interim financial reports, prepared in accordance with U.S. GAAP
Timely disclosure of material news
Corporate Governance Standards
- Have a board of directors that includes at least 2 Independent Directors;
- Have an Audit Committee, a majority of the members of which are Independent Directors; and
- Conduct annual shareholders’ meetings and make annual financial reports available to its shareholders at least 15 calendar days prior to such meetings.
Financial Standards
Applying for OTCQX
Fees (effective January 1, 2021)
- Annual Fee: $23,000
- Application Fee: $5,000
OTCQX Community Banks
Eligibility Standards
- Must be a U.S. bank, U.S. bank holding company, U.S. thrift, U.S. thrift holding company, or U.S. financial institution that is regulated by a U.S. Bank Regulator
- Not be a Shell Company or Blank-Check Company
- Not be subject to any bankruptcy or reorganization proceedings
- Have Priced Quotes by a market maker on OTC Link
- Submit a Letter of Introduction from an OTCQX Sponsor
- Have a transfer agent that participates in the Transfer Agent Verified Share Program
Disclosure Standards
One of the following Reporting Standards must be met:
- U.S. Bank Reporting Standard
- SEC Reporting Standard
Audited annual financials by a Public Company Accounting Oversight Board (PCAOB) auditor and unaudited interim financial reports
Timely disclosure of material news
Corporate Governance Standards
- Have a board of directors that includes at least 2 Independent Directors;
- Have an Audit Committee, a majority of the members of which are Independent Directors; and
- Conduct annual shareholders’ meetings and make annual financial reports available to its shareholders at least 15 calendar days prior to such meetings.
Financial Standards
Learn more about the structure and function of the OTC market tiers at the following links:
For further information about this securities law blog post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton, Florida, (561) 416-8956, by email at [email protected] or visit www.securitieslawyer101.com. 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. 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
