Understanding <> about 15 c2-11 process - WHAT IT IS & HOW IT GOES: i think this a must
right now, if a company wishes to trade as an OTC issuer, it must first find a sponsoring market maker willing to review the company’s information and file a Form 211 with FINRA. FINRA will then open discourse with the market maker, asking for clarification of what was submitted or additional information. This process can be quite time-consuming. Eventually, any remaining questions will have been resolved, and the company’s stock will begin to trade. After a month, additional market makers can piggyback on the original Form 211.
After September 28, it will still be possible for a company to take that route. But there’s a catch. FINRA Rule 5250 prohibits market makers from accepting remuneration for filing a Form 211: “No member or person associated with a member shall accept any payment or other consideration, directly or indirectly, from an issuer of a security, or any affiliate or promoter thereof, for publishing a quotation, acting as a market maker in a security, or submitting an application in connection therewith.” For that reason, many market makers are reluctant to file Forms 211 for companies uninterested in paying them for services for which they may legally be compensated.
There will soon be an alternative to trying to persuade a market maker to help. The company can now ask OTC Markets to perform what it calls an Initial Information Review. Once OTCM has completed its review, it will announce the fact and that it believes the company complies with Rule 15c2-11. According to Dan Zinn, OTC Markets’ general counsel:
Then any broker can begin quoting that security; no guarantee that a broker will, but any broker can come in and start quoting that security. And then we have compliance obligations on the back end, as between us and FINRA, but those … don’t involve whether a company can start to be quoted. Once we make that determination, the quote will open up.
As we shall see, the process may, in the end, not be quite that simple, but it will still be much easier. Our own experience indicates that right now, it can be extremely difficult for a new issuer to find a sponsoring market maker. These companies will have to deal with OTC Markets in any case; with the new rule requiring current information, they’ll need to post-disclosure using OTCM’s News and Disclosure Service. As described by Zinn, becoming the quoted should be quick and seamless.
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