Read this and you will Understand why CCTL is C.E. > What are the most significant changes to Rule 15c2-11? Fully Effective SEP. 26, 2021
The SEC’s amendments are focused on improving the information available to investors, deterring fraud and reducing burdens for broker-dealers quoting OTC securities. While the final Rule contains many changes, the overarching framework aims to modernize the OTC market in the following ways:
Companies will now be required to publish current information in order to be publicly quoted on OTC Link ATS. The rule will now require that current information about an issuer be publicly available in order for a security to become quoted initially, and remain quoted, under the amended “piggyback exemption.” Quotations submitted on an “unsolicited” basis will still be permitted under the amended Rule, subject to additional requirements.
OTC Markets Group will play a greater role in bringing companies onto our markets. Under the amended rule, our OTC Link ATS trading platform will function as a “qualified interdealer quotation system” and brokers will be able to rely on our current information designations in lieu of submitting a Form 211 with FINRA. This new regulatory status will streamline the pathway to the public markets for companies that are current in their disclosure obligations.
Companies that do not provide current information, or meet the requirements for ongoing quoting, may be eligible to be quoted on our ‘Expert Market.’ We are seeking exemptive relief for our Expert Market, where brokers will be able to publish proprietary quotations in securities that are no longer eligible for public quoting under the amended Rule. This includes those securities that fail to meet the current information, frequency of quotation and restrictions on shell companies, as required under the amended “piggyback exception.” Quotations in Expert Market securities are limited to qualified investors, such as broker-dealers, institutions, and accredited investors. By limiting quote distribution to sophisticated market participants, retail investors and the general public will be better protected.
How will the SEC’s amendments to Rule 15c2-11 change the OTC market?
These changes are poised to bring greater transparency and efficiency to the OTC market. The modernized Rule formally recognizes our existing information review and compliance processes that issuers use to efficiently disclose information and that brokers and investors rely on to price risk and make informed investment decisions. By requiring current information and shifting the information review obligations to the operator of the trading system, issuers will be encouraged to make disclosure available and brokers can more easily rely upon our current information designations to quote and trade OTC securities.
The amended rule also improves market efficiency and capital formation by introducing several new exemptions to facilitate the development of public markets in stocks that are less susceptible to fraud. Securities of large, liquid companies that meet minimum financial standards, and those issued in underwritten offerings, will have a streamlined pathway to a public market under the new Rule.
On the heels of the SEC’s amendments to Rule 15c2-11, FINRA filed a proposal seeking to cease operation of its OTC Bulletin Board (OTCBB), the legacy quotation system for OTC securities. The shuttering of the OTCBB, along with the final amendments to Rule 15c2-11, marks the beginning of a new era in the capital markets.
How will the requirements for companies currently quoted on the OTCQX, OTCQB and Pink markets change as a result of the Amended Rule?
The Rule recognizes current disclosure provided by companies on the OTCQX, OTCQB and Pink Current markets, whether under an SEC Reporting standard, Alternative Reporting Standard, Regulation A, Regulation Crowdfunding or pursuant to Rule 12g3-2(b). While the disclosure rules for companies on these markets are not expected to change materially, the new rule introduces certain restrictions on public quoting, including those for shells and other non-operational companies that may apply to certain companies currently quoted on the OTCQB or Pink markets.
Companies that are designated as “Pink No Information” or otherwise fail to provide current information as required by the Rule will no longer be eligible for public quoting, subject to certain limited exceptions (for example, certain quotations submitted on an “unsolicited” basis). If these companies do not take proactive steps to make disclosure available before the September 2021 compliance date, they will move to the Expert or Grey market.
When does the new rule go into effect?
OTC Link LLC, our broker-dealer subscribers, and companies quoted on our markets, must comply with the new, amended rule before the September 26, 2021 compliance date. We continue to actively engage with the Commission and our market participants to ensure a smooth transition to the amended Rule, including seeking exemptive relief for certain categories of issuers on our markets.
