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The OTC market operates on a decentralized, inter- dealer basis and does not require a direct relationship with the companies whose shares are traded. General- ly, in order for a company’s stock to trade in the OTC market, a market maker (a firm that stands ready to buy and sell a particular stock on a regular and con- tinuous basis at a publicly quoted price) must first file a Form 211 with the Financial Industry Regulatory
Authority (FINRA) and demonstrate that the com- pany meets the requirements of Rule 15c2-11 under the Securities Exchange Act of 1934 (Exchange Act) as well as FINRA’s rules.3
However, if a company being acquired in a reverse merger was continuously quoted OTC before the takeover, the post-merger company may be able to rely on that status to permit its shares to continue to be quoted without going through the Form 211 review process. Unless a company that is quoted OTC is reporting under the Exchange Act, which is not always required in the OTC market, investors may find it difficult to discern whether a particular company is a reverse merger entity. Investors may also have trouble obtaining information about the management, op- erations, financials, and other important aspects of a company .
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