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When can a company be "delisted" or removed from the OTCBB?
OTCBB issuers that become delinquent in their required regulatory filings will have their securities removed from the OTC Bulletin Board. Further, all OTCBB issues must maintain at least one registered Market Maker to remain on the OTCBB. When the last Market Maker in a security withdraws from the stock, the issue is removed from the OTCBB after 4 days pursuant to Rule 15c2-11. An issuer cannot voluntarily withdraw from the OTCBB; only a market maker can voluntarily withdraw its quote from the OTCBB. If an OTCBB security becomes listed on NASDAQ or another exchange, it will no longer be eligible and will be removed from the OTCBB.
How does the three strikes ineligibility rule work in practice? Pursuant to NASD Rule 6530(e), any OTCBB issuer that is delinquent in its reporting obligations three times in a 24-month period and/or is actually removed from the OTCBB for failure to file two times in a 24-month period is ineligible for quotation on the OTCBB for a period of one year. For a security to be eligible for quotation on the OTCBB, NASD Rule 6530 requires, in part, that the issuer of the security is required to file reports with the Commission or that the issuer of the security is a bank or savings associations (or holding company for such entities) that is not required to file reports with the Commission and, instead, makes filings with its applicable regulator. In addition to the foregoing, the issuer of the security must be current in its reporting obligations, subject to a 30 or 60 day grace period, as applicable. An OTCBB issuer will be deemed delinquent in its reporting obligations if the issuer fails to make a required filing when due or has filed an incomplete filing. In order for a filing to be complete, it must contain all required certifications and have been reviewed or audited as applicable, by an accountant registered with the Public Company Accounting Oversight Board.
How does FINRA determine whether an OTCBB issuer’s periodic financial report was filed timely?
For the purpose of determining the extent to which an issuer has filed its periodic financial reports in a timely fashion or has filed its periodic financial reports within the applicable grace period (in the case of an issuer that did not meet the initial filing deadline), the periodic financial report in question must have been received and time stamped by the Commission’s EDGAR system no later than 5:30 p.m. EST on the day the report was due or the last day of the applicable grace period. For the purpose of determining an issuer’s eligibility for quotation on the OTCBB, no exceptions to the 5:30 p.m. EST cut off will be made absent the existence of extraordinary circumstances in the sole discretion of SEC staff.
Initial Filing Deadline Delinquency Example: An OTCBB issuer that fails to file a periodic financial report on the day it is due by 5:30 p.m. EST receives a “strike,” even if the filing is made on the following day. If such a “strike” is the issuer’s third, the issuer will be removed form the OTCBB. A hearing request will stay the removal of the issuer’s securities from the OTCBB, pending the Hearing Officer’s decision, but only if it is accompanied by evidence / receipt of a wire transfer in the amount of $4,000. The stay of removal pending the Hearing Officer’s decision will not provide the issuer with additional time in which to cure ineligibility, if the issuer was, in fact, delinquent at the time that the filing was due.
Grace Period Filing Deadline Delinquency Example: An OTCBB issuer that fails to file a periodic financial report on the day it is due and then subsequently fails to file the periodic financial report by 5:30 p.m. EST on the last day of the applicable grace period (in the case of a first or second “strike”) will be removed from the OTCBB. A hearing request will stay the removal of the issuer’s securities from the OTCBB, pending the Hearing Officer’s decision, but only if it is accompanied by evidence / receipt of a wire transfer in the amount of $4,000. The stay of removal pending the Hearing Officer’s decision will not provide the issuer with additional time in which to cure ineligibility, if the issuer was, in fact, delinquent at the end of the applicable grace period.
Can a company appeal the removal of its securities from the OTCBB?
The issuer of a security quoted on the OTCBB may appeal the removal of its securities to a Hearing Officer appointed by the FINRA Office of Hearing Officers pursuant to the NASD Rule 9700 Series. The request for an appeal hearing must be received by the Office of Hearing Officers at least two days prior to the scheduled removal of the security, together with evidence that the issuer has paid a $4,000 hearing fee. A hearing request will stay the removal of the issuer’s securities from the OTCBB, pending the Hearing Officer’s decision. . Unless otherwise ordered by the Hearing Officer, hearings will be conducted via telephone. The Office of Hearing Officers will provide the issuer at least 5 business days notice of the hearing unless the issuer waives such notice.
At a brief telephonic hearing, the Hearing Officer will determine whether the Company’s securities are eligible for quotation on the OTCBB under NASD Rules 6530 and 6540. The Hearing Officer will consider only the issues of whether the issuer’s security is then eligible for quotation on the OTCBB and/or whether the issuer filed a complete report by the applicable due date taking into account any extensions pursuant to SEC Rule 12b-25. The Hearing Officer does not have discretion to grant any extensions of time for ineligible securities to become eligible.
May a company appeal the Hearing Officer’s decision?
The issuer may not appeal the decision within FINRA, but before a Hearing Officer’s decision is issued, it is considered and may be called for review by the National Adjudicatory Committee (NAC). If the decision is called for review, the NAC will issue a decision, which will constitute the final FINRA action. Otherwise, the Hearing Officer’s decision will be issued, and will constitute the final FINRA action. The issuer may appeal the final FINRA action (either the Hearing Officer’s decision or the NAC decision, as applicable) to the SEC.
AI
