Blue Sky Recognition Continues to Gain Traction

OTC Markets Group Garners Blue Sky Exemptions in 35 States

Since May 2016, we have fostered an active dialogue with constituents at the North American Securities Administrators Association (NASAA) and individual state regulators with the goal of providing investors, companies, brokers and other market participants with a defined regulatory structure that recognizes the transparent current disclosure provided by OTCQX and OTCQB companies.  We appreciate the hard work and diligence of NASAA members as we work to achieve important exemptions for our OTCQX and OTCQB markets under state Blue Sky laws governing secondary trading.

With the latest addition of Kentucky, we are pleased to have achieved secondary trading exemptions in 35 states. This milestone involved working closely with each of the states on a tailored approach to granting exemptions, under states’ Manual Exemptions, no-action letters, administrative orders and formal rule changes.

OTC Markets Group has sought these secondary trading exemptions for OTCQX and OTCQB companies because we believe that these markets, in many ways, provide better disclosure and investor protection measures than traditional manuals, where information is often only updated on an annual basis.

The OTCQX and OTCQB exemptions are based on the breadth of information that these companies make available on the www.otcmarkets.com website.  Similarly, the SEC has recognized the OTCQX and OTCQB markets as “Established Public Markets” for public pricing, based upon public availability of information provided to investors.

As of June 2019, the OTCQX market has achieved exempt status in 35 states and the OTCQB market in 32 states:

A Differentiated Model:  Driving Public Transparency and Disclosure Standards

Our OTCQX and OTCQB markets are widely used by investors, broker-dealers and regulators as a trusted source of bona fide, readily accessible issuer financial information, which distinguishes these markets from legacy manual providers and other respective online repositories of company information.

The OTCQX and OTCQB markets require a higher standard of disclosure, provide greater transparency and distribution of information, and have a recognized history of supporting regulatory enforcement efforts.

Key factors that differentiate OTCQX and OTCQB company disclosure from traditional securities manuals and online information sources:

• Established and Transparent Rules:  OTC Markets Group publicly posts the OTCQX Rules and OTCQB Standards, giving the public transparency into exactly what is required of an OTCQX or OTCQB company.  Similarly, we also publish Rule Amendments and maintain the entire history of changes to the Rules and Standards since the inception of each market.

• Recognized Disclosure Standards:  OTC Markets Group publishes the Reporting Standards applicable to each market, clearly outlining the type of disclosure required from each company.

• Wide Distribution to Investors, Broker-Dealers and Regulators: All OTCQX and OTCQB company information is available for free on the www.otcmarkets.com website, which receives over 320,000 unique visitors and over 5 million page views per month.  Our market data is distributed to over 35,000 professional and non-professional users, through data providers such as Bloomberg, FactSet and Refinitiv (formerly Thomson Reuters).

• Surveillance and Compliance Processes:  OTC Markets Group’s Issuer Compliance team oversees each company’s initial and ongoing compliance with the OTCQX Rules and OTCQB Standards.  In addition, this team designates certain securities as “Caveat Emptor”—placing a skull and crossbones icon next to the stock symbol when we become aware of a public interest concern.  Our issuer compliance team works closely with state and federal regulators, providing information in response to subpoenas and referring suspicious activities to the appropriate authorities.

As we get closer to achieving national Blue Sky recognition of the OTCQX and OTCQB markets, we remain committed to educating constituents and stakeholders on the importance of the quality of disclosure standards on our OTCQX and OTCQB premium trading markets.

To learn more about Blue Sky compliance and how you can engage in the discussion of regulatory modernizations related to Blue Sky, please contact our General Counsel, Dan Zinn, at dan@otcmarkets.com or (212) 896-4413.