Friday, June 10, 2016 4:49:14 AM
In any analysis of the Over the Counter Market, it is essential to break out the individual tiers. According to a US Securities and Exchange Commission publication entitled Microcap Stock: A Guide for Investors, these three tiers are:
* OTCQB - includes the securities of companies that are current in their reporting to the SEC or a U.S. bank, thrift or insurance regulator;
* OTCQX - reserved for the securities of companies that are current in their reporting to the SEC or a U.S. bank, thrift or insurance regulator, or, in the case of companies that are not required to report to the SEC, meet and remain current in their reporting obligations to OTC Link under its proprietary Alternative Reporting Standard; meet certain eligibility requirements; have audited financial statements; and partner with a third-party securities attorney or investment bank that reviews disclosure and acts as a professional advisor; and
* OTC Pink - an open marketplace for a broad spectrum of equity securities, with no financial standards or reporting requirements.
There is, however, much more to it than that. OTCMarkets has individualized tiers both within and alongside of the Pick Sheets classification. By way of example, they provide those stocks that are current in their reporting obligations under one or another approved method with a notice to that effect in order to better inform potential investors. In those instances in which a particular stock remains listed with the company having filed for bankruptcy, a "Q" is appened to the stock's ticker, and a notice is clearly posted with the stock's quote, cautioning investors about the potential dangers of trading in companies facing bankruptcy.
They also identify such things as "grey market" and "Caveat Emptor" securities, warning potential investors that little - if anything - is known about the current operations of the companies behind the tickers. And, when the SEC orders a halt to trading and the providing of quotations for a specific stock, OTCMarkets fully complies, and posts a notice to that effect,
If a company submits information that is both audited and signed by legal counsel, the exchanges have no alternative but to act on that information as being true. No stock exchange - whether it be the OCT, NYSE, or the NASDAQ - is obligated to vigorously investigate the claims set forth by accountants in the reports that companies file. That job falls on the SEC, FINRA, and other watchdogs.
Neither Enron nor Arthur Andersen, nor any exchange can be held to account for the loss of any person's life savings. Sadly, there are many would-be investors out there of the opinion that even after a particular stock goes parabolic, with its RSI screaming "get out while you can," they can still hop on board at the very pinnacle of the run, believing that the stock will continue to rise in such an way in perpetuity.
History tells us that this is not true.
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