OTC Markets Group

OTC Markets


Announcing Changes to the OTCQB Marketplace
New Bid Price Test and Company Compliance Process
Rollout to Begin May 1, 2014

Beginning this year, OTC Markets Group will roll out new eligibility standards for the OTCQB® Venture Stage Marketplace. To be eligible to trade on OTCQB, companies will be required to meet a new bid price test, provide additional information, and submit an annual OTCQB Certification signed by the company CEO or CFO.

Companies will also be required to submit an initial application and pay an annual fee for OTCQB, which will now include Level 2 Quotes and the OTC Disclosure & News Service. We expect that companies that do not either meet the new OTCQB standards or qualify for OTCQX® will continue to be traded by broker-dealers on the OTC Pink® marketplace. This letter is to inform you of these changes and explain why we are creating new requirements on OTCQB. Please take a moment to read this important update.

Evolution of Our Marketplaces
OTC Markets Group (OTCQX: OTCM), operates three public marketplaces for 10,000 U.S. and global securities. OTCQX is our best marketplace for established global and growth companies that can meet high financial standards, OTCQB is our venture stage marketplace for early and developmental companies, and OTC Pink is an open marketplace for brokers to trade in all types of securities without requiring involvement of the company.

Seven years ago this month we launched OTCQX. We created the OTCQX qualification process to provide a public market for established companies to provide their shareholders with informed and efficient trading and demonstrate their trusted reputations. OTCQX has delivered tremendous value for hundreds of global and growth companies and has also been used as a successful springboard for companies to achieve an exchange listing. Recently, we published new OTCQX rules that we hope will work even better for SEC Reporting and Bank Reporting companies. They require more timely information for investors, and a streamlining of the third-party sponsorship process.

Our middle marketplace, OTCQB, has replaced the OTC Bulletin Board (OTCBB) as the preferred marketplace for broker-dealers to electronically trade in SEC and Bank reporting companies that have not qualified for OTCQX. There are now over 3,000 securities traded on OTCQB with an average of 10 market makers per security. But while OTCQB has improved the broker-dealer experience in trading these securities, we have heard from company executives and investors who would like us to improve OTCQB for them – to make it a better venture stage marketplace.

To do that, we must create standards to improve transparency and exclude companies that are most likely to be associated with stock promoters and other nefarious operators. We also need to improve the information and level of engagement companies have with their marketplace.

A Venture Stage Marketplace
Our goal is to make OTCQB a real venture stage marketplace here in the U.S., similar to the entry level markets of the TSX Venture in Canada and the AIM market in London. These international markets serve a group of early and developing companies that are not yet ready to qualify for the higher financial standards of a top tier marketplace, yet still benefit from a well regulated market with information and verification standards. Our top marketplace, OTCQX, will still be the best choice for companies that are not penny stocks, can meet high financial standards, and undergo a qualitative review.

In a recent survey, we polled corporate executives who run companies traded on OTCQB to ask what they would like to see improved on their marketplace. Those survey results are available here.

Overwhelmingly, CEOs and CFOs of OTCQB traded companies believe that low priced shells and stock promoters make OTCQB a less attractive marketplace for investors and hinder their ability to attract a wider group of potential shareholders. Nearly every CEO respondent agreed that a marketplace with moderately high standards is ideal compared to a marketplace with either no standards (OTC Pink) or very high and costly standards (NYSE or NASDAQ). A majority also indicated that it would be worth paying a reasonable fee for an improved marketplace with better standards and added services.

When we asked what new requirements would make OTCQB a better marketplace, the top five most popular responses were: (1) timely disclosure of material information, (2) verification of reporting status, (3) verification of shares outstanding, (4) disclosure of promoters, and (5) disclosure of shareholders. Company officers also indicated that Real-Time Level 2 Quotes and detailed trade data would be useful upgrades to the marketplace.

In response to these requests and our survey, we will implement new requirements with higher standards and more reliable information for investors.

New OTCQB Eligibility Standards
We will be implementing a one penny ($0.01) bid price requirement which is intended to remove companies that are most likely to be the subject of dilutive stock fraud schemes and promotions. Any company that has traded below a penny for any length of time is not creating value for its shareholders and is therefore more appropriate for the open OTC Pink marketplace. This new requirement will become effective on May 1, 2014.

We are requiring that each company verify via an annual OTCQB Certification, signed by the company CEO or CFO, that their company information is current. This will include information about a company’s reporting status, company profile, information on management and boards, major shareholders, law firms, transfer agents, and IR / PR firms. Investor confidence improves when there is more information about a company’s ownership structure, professional advisors and service providers. This certification will be required for any security newly qualified to be publicly quoted by a broker-dealer under SEC Rule 15c2-11, or when an OTC Pink traded company becomes a current SEC reporting company, beginning May 1, 2014.

For companies already traded on OTCQB, we will roll out the annual management certification requirement throughout 2014 and 2015 based on a company’s Fiscal Year End ("FYE"). The first set of certifications will be due by July 31, 2014 for companies that have a FYE of March 31, 2014.

Also beginning May 1, 2014, we will permit International Reporting companies to upgrade from OTC Pink to OTCQB if they publish their 12g3-2(b) compliant disclosure on our website and verify their company profile. This will give international venture stage companies that cannot meet OTCQX financial standards the ability to join OTCQB and provide their home-market regulated disclosure to U.S. investors.

There will be an annual fee for the OTCQB marketplace of $10,000 per year and a one-time $2,500 application fee. These fees are discounted for current OTCQB companies that apply in 2014 to $7,500 per year for the first two years, and the application fee will be waived. Companies that are not currently OTCQB companies will be required to pay the standard annual fee and application fee. 

The OTCQB Fact Sheet includes more details on the new requirements and the timing of the rollout.

We are confident that the improved OTCQB marketplace will be a much better option for engaged and investor-focused venture stage companies. The added transparency and minimum standards will be a welcomed improvement for investors, broker-dealers, company advisers, regulators, company executives, and shareholders.

For companies that do not wish to be fully transparent or engaged with their public market, we will continue to operate a marketplace for brokers to trade in these securities on OTC Pink.

Please make note of our upcoming events where we will be discussing changes to the OTCQB marketplace:


OTCQB Changes: Educational Events

OTCQB Changes | Breakfast Forum 
April 16, 2014

8:00AM-10:00AM (7:30AM registration)
OTCQX Market Center
304 Hudson Street // New York, NY 10013
RSVP here

OTCQB Changes | Breakfast Forum 
May 2014 - Date to be determined. 
8:00AM-10:00AM (7:30AM registration)
The Palomar LA - Westwood
10740 Wilshire Boulevard // Los Angeles, CA 90024

RSVP here

OTCQB Changes Webinar
 April 29, 2014
 10:00AM-11:00AM (EST)
Register here


Our dedicated Issuer Service support team is available to help answer any questions. Contact issuers@otcmarkets.com or 212.896.4420 with any questions.



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OTC Markets Group
304 Hudson Street
3rd Floor
New York, New York 10013

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