15c2-11 Application

The Over the Counter Market, including OTCQB, OTCQX and OTCBB for reporting issuers and Pink Sheets for non-reporting issuers, is a quotation medium for subscribing members. The over the counter market is not a listing service for Issuer’s such as a national exchange (for example the NASDAQ Stock Market, AMEX, NYSE, etc.). Accordingly, Issuer’s do not apply for listing. Rather a Market Maker applies to FINRA for the right to quote a particular security and make a market for a particular security on the Over the Counter market (OTCQB, OTCQX and OTCBB). The application is referred to as a 15c2-11 application, named for Securities Exchange Commission C.

The basis of a 15C2-11 application is intended to ensure that a market maker has adequate information and has completed adequate due diligence on an Issuer before it quotes its securities. In addition, Rule 15C2-11 requires that a market maker make such information available to the public, upon request.
There are exemptions to the 15C2-11 application. One such common exemption is where another market maker has completed the 15C2-11 application process and quotes a security for 30 consecutive days. Such issuer’s securities are considered “piggyback qualified” and as such, a new market maker wising to quote the securities, may “piggyback” on a previously filed 15C2-11 application.

The 15C2-11 application process is similar to a registration process, in that the Issuer provides disclosure information to a market maker who in turns files such information with FINRA who in turn comments on the information and asks additional questions. When FINRA is satisfied that the market maker has adequate disclosure (as provided by the Issuer) and that the Issuer has answered all questions the market maker may have (which have usually been posed by the FINRA), FINRA will clear the 15C2-11 application and the Issuer’s securities can be quoted and traded.

The same 15C2-11 application is used to apply to quote securities on the Pink Sheets OTCQB, OTCQX and OTCBB and absent an exemption, to move a quotation from the Pink Sheets to the over the counter market.

Although the market maker submits the application, it is based on information provided by the Issuer and accordingly, it is incumbent upon the Issuer to put together sufficient information and disclosure and to respond to comments. An Issuer needs qualified securities counsel to assist in this process.