OTC Markets has published proposed new rules and standards for companies seeking to use newly adopted “Regulation A+,” or Title IV of the JOBS Act. The objective is to have companies using this new exemption to list their securities on OTCQX Best or OTCQB Venture marketplaces.
The newly proposed OTCQX and OTCQB rules are described as supporting an “informed and efficient secondary trading for Regulation A+ securities”. The OTC rules seek to define the “initial and ongoing financial reporting obligations for U.S. companies raising capital under Regulation A+ to have their securities publicly traded on OTCQX and OTCQB”. OTC has opened up for comment their proposed rules. They have seta 30 day timeline for potential issuers, advisors and others to provide their perspective.
Cromwell Coulson, President and CEO of OTC Markets Group, has been a staunch proponent of allowing ATS’s to participate in venture type marketplaces. Recently a group of companies who had “graduated” from the OTC to Nasdaq and the NYSE, released a letter addressed to Congress sharing their experience on OTC and advising policy makers on not creating a monopoly exchange structure.
Coulson believes his platform is perfect for new types of securities geared more towards SMEs;
“Our premium OTCQX Best and OTCQB Venture marketplaces provide an ideal platform for Reg. A+ companies as they offer the trading, transparency and trust of a well-regulated public market with a broker-driven, electronic network-based model that is more suited to the needs of smaller issuers and their investors,” said Coulson. “Companies that raise capital under Reg. A+ will benefit from our SEC regulated ATS trading platform to build visibility for their companies, provide liquidity to their investors, broaden their shareholder base and build a robust, transparent public market for their investors as they grow and mature their businesses.”
Under the proposed new OTCQX rules, a company may use its required disclosure under Regulation A+ Tier 2 to help meet its initial and ongoing disclosure requirements. In addition to required Regulation A+ disclosure, an OTCQX company must file quarterly financial reports, make timely disclosures of material news events and meet a PCAOB audit standard on an ongoing basis. Canadian companies raising capital under Regulation A+ must be listed on a qualified foreign stock exchange such as the Toronto Stock Exchange to qualify for OTCQX.
The OTCQB Venture Marketplace is designed to offer a transparent trading for entrepreneurial and development stage U.S. and international companies. Under the proposed new OTCQB standards, a company that meets the existing OTCQB eligibility criteria can use its required Regulation A+ Tier 2 reporting to fully meet its initial and ongoing OTCQB disclosure requirements. Canadian companies raising capital under Regulation A+ must be listed on a qualified foreign stock exchange such as the TSX Venture Exchange to qualify for OTCQB.
“We look forward to welcoming more new companies to our markets under Reg. A+, which will further expand the universe of opportunities available to investors,” said Coulson.
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