Advocating for National Blue Sky Recognition: Secondary Trading Exemptions reach 41 States

As of July 1, 2025, the OTCQX Best Market has reached blue sky exemptions in 41 U.S. states and jurisdictions, and OTCQB Venture Market in 37. It’s a major milestone – but we aren’t done.  Our goal is to achieve national recognition for qualified companies traded on the OTCQX® and OTCQB® markets to expand the number of broker-dealers, investment advisors and investors that can research, recommend and hold these securities. In pursuit of this objective, we’ve gained valuable exemptions and explored ways for OTC traded companies to maximize their state ‘Blue Sky’ compliance in an efficient manner.

Recognition Through the Manual Exemption

The ‘manual exemption’ is one path to Blue Sky compliance.  It allows broker-dealers and investment advisors to publish research or solicit investments in a company’s securities, so long as that company makes current financial disclosure available in a recognized securities manual, or its electronic equivalent. This mechanism is critical for enabling broader secondary trading in OTC securities while ensuring investors have access to essential information.

Today, forty-four states and jurisdictions maintain some form of manual exemption. Each state decides which manuals meet its criteria.

Blue Sky Compliance was a Core Feature of OTCQX from Day One

When we launched OTCQX nearly twenty years ago, our goal was to provide investor-focused companies with foundational services to share investor information, ensure regulatory compliance and improve market quality.  The founding OTCQX companies wanted a digital platform to connect with U.S. broker-dealers and provide an investor experience comparable a National Securities Exchange listing.

At the time, publication in a recognized securities manual (either Standard and Poor’s or Mergent (formerly Moody’s)) was an industry standard. As a result, OTCQX companies were required to publish in one of these manuals. After S&P discontinued its manual in 2016, Mergent remains the sole publisher of traditional printed manuals and still plays a role in nationwide blue sky coverage. Depending on the issuer’s profile, Mergent can supplement blue sky compliance for OTCQX companies by providing coverage in three jurisdictions (MA, DC, NH) where our markets are not yet recognized. In 2022, we acquired Blue-Sky Data Corp., the leading blue sky compliance data source for broker-dealers.  We integrated their data and created an improved offering that better informs issuers and allows broker-dealers to automate compliance checks.

Recognizing Market Standards

OTC Markets Group has worked closely with state regulators and the North American Securities Administrators Association (NASAA) to ensure that the robust, real-time disclosure available through OTCQX and OTCQB is recognized as the modern, digital equivalent of a traditional securities manual. As a result, both the OTCQX and OTCQB Markets qualify today as “Recognized Securities Manuals” in the majority of U.S. states with disclosures freely available online, distributed to major market data vendors, and continuously updated to provide timely in-depth insights for investors and regulators.  

OTC Markets Group Gaining Blue Sky Recognition in New Ways

Recognition through 15c2-11

Over the past few years, our markets have also gained recognition under newer state regulations, Florida being the latest. The state adopted rules[1] enabling secondary trading through an SEC-registered Alternative Trading System (ATS), provided the issuer meets the disclosure standards of Securities Exchange Act Rule 15c2-11.

Because OTCQX and OTCQB issuers are required to meet Rule 15c2-11 standards, companies trading on these markets now qualify under Florida’s new framework. This marks a significant development: Florida is aligning its Blue-Sky laws with SEC standards, setting a clear, investor-focused model that we believe other states should consider.

The SEC’s designation of OTC Markets Group’s system as a Qualified Interdealer Quotation System (QIDQS) further underscores our commitment to investor protection. As a QIDQS, we monitor compliance with Rule 15c2-11 disclosure requirements, ensuring that only companies providing timely, publicly available information may be quoted by market makers. In doing so, we support more informed, efficient, and transparent markets.

The future is digital, and investors benefit when information is dynamically updated.  We believe enhancements to the manual exemption process could benefit from following this model, prioritizing the availability and quality of disclosure rather than relying on analog, outdated, less accessible formats.

[1] Section 517.061 (18)(e)(2) of the Florida Securities Act

Maximizing Blue Sky Compliance

As we work towards full national recognition, we continue to support OTCQX and OTCQB issuers in achieving maximum Blue-Sky compliance across the country. In addition to the manual exemption, certain states and jurisdictions also offer self-executing exemptions or registration mechanisms that enable secondary trading of OTC securities. In some cases, multiple exemptions can be used in a single state.

However, because state Blue Sky laws are not uniform, navigating them remains complex. State registrations may require formal filings and disclosures with regulators. Secondary filings often demand ongoing reporting to maintain compliance. Each path carries its own set of requirements.  As a market operator and provider of comprehensive Blue-Sky data, we are planning to add functionality that will help untangle many of the exemptions and filings that can be used to gain compliance in each jurisdiction.

We encourage OTC-traded companies to assess their compliance status and strategies carefully.  Please reach out to OTC Markets Group (212-220-2166) for support in understanding their Blue-Sky status.

New Pathways to Blue Sky Compliance

With a clear majority of U.S. states now recognizing the value of the compliant, publicly-accessible disclosure from OTCQX and OTCQB companies, we believe the time has come to consider a federal solution. The SEC should explore preemption of state Blue Sky laws for secondary trading.

A national standard would simplify compliance, lower costs, and eliminate unnecessary regulatory friction for companies and broker-dealers. It would provide clarity across jurisdictions while preserving the important enforcement role of state regulators and NASAA in detecting and preventing fraud.

The current patchwork of exemptions leaves too many companies unable to achieve full compliance, even when they meet modern disclosure standards. It’s a capital markets inefficiency that federal policy can and should address.

By expanding federal preemption and aligning with robust disclosure rules like Rule 15c2-11, we can ensure greater access, stronger investor protections, and a more cohesive regulatory landscape for secondary trading in the OTC markets.