Specialized Support in the OTC Market
ANTHONY, LINDER & CACOMANOLIS, PLLC is a premium service provider in the OTC market and a registered sponsor of OTCQB and OTCQX.
The OTC market classifies issuers into three tiers: OTCQX, OTCQB, and OTC Pink Open Market. The riskiest and most speculative OTC pink open market is further divided into three tiers: up-to-date, limited, and uninformed.
Companies trading at each tier of the OTC market have the option to report directly to the OTC market based on alternative reporting standards. Alternative reporting standards are stricter than OTCQB and OTCQX, comply with U.S. GAAP, and require audited financial statements by PCAOB-certified auditors.
Companies reporting under Rule A to the SEC, or foreign companies exempt under Securities Exchange Act Rule 12g3-2(b), may also qualify for the OTCQX, OTCQB, or OTC Pink “current information layer” if they meet the listing requirements.
Rule 15c2-11, amended on September 28, 2021, requires broker-dealers to have up-to-date public information when starting or continuing quotes on securities, reducing reliance on specific rule exceptions and adding new exceptions for low-risk securities.
OTCQB and OTCQX Listing Requirements
The OTC market has both qualitative and quantitative listing standards. Criteria vary depending on the tier and reporting format (SEC filing or OTC filing). OTCQX Premier is subject to even stricter standards.
| Standard | OTCQB USA | OTCQB International | OTCQX USA | OTCQX International |
|---|---|---|---|---|
| Audit Requirements | Audited financial statements in compliance with U.S. GAAP by PCAOB auditors | Audited based on eligible foreign exchange requirements (IFRS, domestic GAAP, or US GAAP) | Audited financial statements in compliance with U.S. GAAP by PCAOB auditors | Audited based on eligible foreign exchange requirements (IFRS, domestic GAAP, or US GAAP) |
| Reporting and Disclosure | SEC Reporting, Regulation A Report, Bank Report, or Alternative Reporting | Foreign exchanges listed on qualified foreign exchanges that comply with Securities Exchange Act Rule 12G3-2(b) or report to the SEC must publish reports on the OTC market through the OTCIQ system. | SEC Reporting, Regulation A Report, Bank Report, or Alternative Reporting | Foreign exchanges listed on qualified foreign exchanges that comply with Securities Exchange Act Rule 12G3-2(b) or report to the SEC must publish reports on the OTC market through the OTCIQ system. |
| Minimum bid price* | $0.01 | $0.01 | $25 | $25 |
| Round lot shareholders | 50 | 50 | 50 | 50 |
| Freely tradable public offerings** | 10% of the total amount of issued and circulating securities | 10% of the total amount of issued and circulating securities | 10% of the total amount of issued and circulating securities | 10% of the total amount of issued and circulating securities |
| Transfer agent | Transfer Agent Verified You need to join a corporation | Must be registered with the SEC | Transfer Agent Verified You need to join a corporation | Must be registered with the SEC |
| OTC Sponsors | No applicable | A referral letter from a qualified OTC market sponsor is required. | A referral letter from a qualified OTC market sponsor is required. | A referral letter from a qualified OTC market sponsor is required. |
| Company Overview | Submit verified company profiles through OTCIQ | Submit verified company profiles through OTCIQ | Submit verified company profiles through OTCIQ | Submit verified company profiles through OTCIQ |
| Authentication | A signed certificate certifying the CEO/CFO as officers, directors, affiliates, and advisors. | A signed certificate certifying the CEO/CFO as officers, directors, affiliates, and advisors. | A signed certificate certifying the CEO/CFO as officers, directors, affiliates, and advisors. | A signed certificate certifying the CEO/CFO as officers, directors, affiliates, and advisors. |
| Penny Stock Rules*** | No applicable | No applicable | Not a penny stock | Not a penny stock |
| Market capitalization | No applicable | No applicable | 10 million dollars | 10 million dollars |
| Market Maker | No applicable | No applicable | No applicable | 1 |
| Dilution risk | See https://securities-law-blog.com/2021/06/08/otc-markets-rule-144-the-spcc/ for details. | |||
| Key Considerations in the Application Process | Key Considerations in the Application Process | Key Considerations in the Application Process | Key Considerations in the Application Process | Key Considerations in the Application Process |
| Listing Fee | Application fee: $5,000, $14,220 per year | Application fee: $5,000, $14,220 per year | Application fee: $5,000, annual $23,400 | Application fee: $5,000, annual $23,400 |
| IPO Fees**** | Approximately 400,000 dollars | About $60,000 | Approximately 400,000 dollars | Approximately $75,000 |
* The company must meet the minimum closing bid price for every consecutive 30 days immediately prior to the application. If listed simultaneously with an IPO, OTC markets may be exempt from this requirement, but the company must have market makers submit a minimum closing bid price quote within three days after verifying eligibility for quotation under Rule 15c2-11.
** OTC markets may grant exemptions from this requirement if (i) at least 5% of the publicly offered shares are freely tradable and have a market value of $2 million or more, or (ii) the company holds another class of securities traded on domestic exchanges.
Based on audited financial statements issued within 15 months of listing, the pennystock exemption requirement must be met. You must meet one of the following penny stock exemption conditions. (i) Net tangible assets: $5 million or more if established less than 3 years ago, or $2 million or more if established for more than 3 years. (ii) Revenue: An average of $6 million over the past three years, or (iii) bid prices of $5 or more and meeting one of the following: (a) Net income of $500,000, (b) Net tangible assets of $1 million, (c) Revenue of $2 million, or (d) Total assets of $10 million.
Includes legal, accounting, audit, underwriting fees, SEC filing fees, roadshow costs, EDGAR fees, listing fees, FINRA filing fees, and DTC qualification acquisition costs. Underwriting fees/discounts are not included. For international companies, it is assumed that simultaneous fundraising will not be conducted.
OTC Qualitative and Governance Standards
| Requirement | OTCQB USA | OTCQB International | OTCQX USA | OTCQX International |
|---|---|---|---|---|
| Bankruptcy or Rehabilitation Procedures | The company is not qualified. | The company is not qualified. | The company is not qualified. | The company is not qualified. |
| Independent Director | When alternative reporting requires at least two independent directors | No applicable | 2 independent directors | No applicable |
| Audit Committee | When an audit committee with a majority of independent directors is required for alternative reporting | No applicable | Audit Committee with a Majority of Independent Directors | No applicable |
| Shell companies or blank check companies | No applicable | No applicable | The company is not qualified. | No applicable |
| General Meeting of Shareholders | No applicable | No applicable | Hold an annual general meeting of shareholders and disclose the financial report to shareholders at least 15 days before the meeting. | No applicable |
OTC申請プロセス
Applications for listing on over-the-counter markets or domestic stock exchanges generally involve similar review processes.
- Background checks of officers, directors, and major shareholders
- Thorough Due Diligence
- Opinion Expression Process
On Nasdaq and NYSE, factors such as asset status, cash flow, burn rate, and shareholder equity are considered to assess the likelihood of maintaining future listings.
Typically, the review period is 18 months (6 quarters).
Technical inquiries are always welcome.
The attorneys at ANTHONY, LINDER & CACOMANOLIS, PLLC handle all legal needs related to the OTC market.
Contact us now by email or phone 877-541-3263.