The Transparent Flamingo

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Pink Sheets - Stop Signs, Skulls, Crossbones and New Directions
Investor Information
November 7 2006

Labels can be tricky. We abhor labels when they unfairly pigeonhole people or ideas, or perpetuate unacceptable stereotypes. On the hand, we applaud them when they alert the public to questionable conduct or outright impropriety.



With that in mind, let us have a round of applause for Pink Sheets. Earlier this week, Pink Sheets announced the introduction of new, user-friendly categories for companies traded on its Electronic Interdealer Quotation and Trading System. The new system aims to reward transparency – the ability of investors to obtain timely, material information about public companies. So, beginning in May 2007, Pink Sheets will group companies based upon their substance and their level of public disclosure.



Top ranking will be awarded to those public companies that provide the clearest picture to the public. Companies that have substantial operating businesses and provide credible disclosure will be rewarded with a place on the highest tier - OTCQX, which will commence trading in January 2007. OTCQX companies will publish quarterly and annual reports, provide audited annual financial statements, provide information on management, and disclose material events. Management will be required to certify company reports. See, The Pink Sheets - A New Sheriff in Town.



Those companies that do not qualify for OTCQX status, or that choose not to comply with the requisite standards, will be placed in one of the following categories – listed in descending order:



Emerging Equities List. These companies provide credible disclosure, including GAAP audited financials, but may not have sufficient business operations to qualify for OTCQX. A company seeking to be included on the Emerging Equities List must provide a letter from an attorney concerning the quality of its disclosure. An Emerging Equity List logo will be placed next to the stock symbol of a qualifying company.


SEC Current. Companies qualify for this tier if they file current reports, including financial statements, with the Securities and Exchange Commission. Delinquent filers will likely lose this status. Pink Sheets plans to track filings made through the SEC's EDGAR system and automatically categorize a company based on its filing status.


Adequate Current Information. Companies in this category provide a decidedly lesser degree of disclosure. These companies will not be required to file current audited financial statements, but they will need to provide a letter from an attorney regarding the completeness of their disclosure. Federal or state regulated banks, insurance companies and companies listed on non-U.S. stock exchanges will only need to supply the information they file with their primary regulator in English and will not be required to provide an attorney letter.


Limited Information Available. This label will be applied to companies that have posted "some" information with Pink Sheets or the SEC's EDGAR System in the past six months – even if it is not current. Pink Sheets will post a yield sign next to the stock symbols of these companies – a warning to investors to proceed with caution.


Public Interest Concern. Pink Sheets takes a dim view of companies that are touted through unsolicited spam or questionable promotions. Those companies, and others that raise public interest concerns, probably would welcome a yield sign. Instead, they will have a "skull and crossbones" icon displayed by their stock symbol. If there is no current information available for a company that is the subject of unsolicited spam, quotes for the stock will also be blocked on pinksheets.com.


No Information. The last, and lowest tier, is reserved for all other Pink Sheets stocks. A stop sign will be displayed next to the symbols of these companies.
With almost 5,000 companies quoted on Pink Sheets, investors can use all of the guidance they can get. The new multi-tiered system promises to provide guideposts that even a novice can follow: think twice, and then again, before sipping from the bottle with a skull & crossbones label; proceed with caution when a yield sign appears; and simply stop when no information warrants an investment.



Investors should be able to read the signs clearly now.