Rule 6530 and Edgar review, acceptance...information
Special NASD Notice to Members 98-14
NASD Requests Comment On Limiting Quotations On Over-The-Counter Bulletin Board (OTCBB) To Securities Of Reporting Issuers; Comment Period
Expires February 16, 1998
Executive Summary
On December 11, 1997, the National Association of Securities Dealers, Inc.
(NASD©) Board of Governors approved the solicitation of comment on a proposed rule that would amend Rule 6530 to limit quotations on the OTC Bulletin Board© (OTCBB) to the securities of issuers that are current in their reports filed with the Securities and Exchange Commission (SEC) or other regulatory authority, and on a proposed rule that would amend Rule 6540 to prohibit a member from quoting a security on the OTCBB unless the issuer has made current filings.
Questions regarding this rule change should be directed to Sara Nelson Bloom, Associate General Counsel, Office of General Counsel, The Nasdaq Stock Market, Inc., at (202) 728-8294 or David Spotts, Senior Attorney, Office of
General Counsel, NASD Regulation, Inc., at (202) 728-8071.
Request For Comment
The NASD encourages all members and interested parties to respond to the issues raised in this Notice. Comments should be mailed to:
Joan Conley
Office of the Corporate Secretary
National Association of Securities Dealers, Inc.
1735 K Street, N.W.
Washington, D.C. 20006-1500;
or e-mailed to:
pubcom@nasd.com
To be able to conclude the NASD?s review within a reasonable period of time, comments must be received by February 16, 1998.
NASD Request for Comment 98-14
Executive Summary
On December 11, 1997, the National Association of Securities Dealers, Inc. (NASD©) Board of Governors approved the solicitation of comment on a proposed rule that would amend Rule 6530 to limit quotations on the OTC
Bulletin Board© (OTCBB) to the securities of issuers that are current in their reports filed with the Securities and Exchange Commission (SEC) or other regulatory authority, and on a proposed rule that would amend Rule 6540 to prohibit a member from quoting a security on the OTCBB unless the issuer has made current filings.
Questions regarding this rule change should be directed to Sara Nelson Bloom,
Associate General Counsel, Office of General Counsel, The
Nasdaq Stock Market, Inc., at (202) 728-8294 or David Spotts, Senior Attorney,
Office of General Counsel, NASD Regulation, Inc., at (202) 728-8071.
Background And Summary
The OTC Bulletin Board is a quotation service that displays real-time quotes, last sale prices, and volume information in domestic securities. Eligible securities include national, regional, and foreign equity issues, warrants, units, and American Depositary Receipts (ADRs) not listed on any other U.S. national securities market or exchange. Unlike The Nasdaq Stock MarketSM (Nasdaq©) or registered exchanges where individual companies apply for listing on the market?and must meet and maintain strict listing standards?individual brokerage firms, or market makers, enter quotations for specific securities on their own behalf through the OTCBB.
The NASD has actively studied the over-the-counter market in an effort to address abuses in the trading and sales of thinly traded, thinly capitalized (microcap) securities. These securities are not listed on The Nasdaq Stock Market or any exchange. Rather, they trade on the OTCBB, in the ?pink sheets? published by the National Quotation Bureau, Inc., and in other quotation media where there are no listing requirements. The staff is concerned with the potential for fraud in this market, given the lack of reliable and current financial information about the
issuers, and the perception by the public that the OTCBB is similar to a highly regulated market, such as the registered exchanges or The Nasdaq Stock Market.
These proposals were developed in an effort to balance the benefits that transparency provides with the need for public information about the issuers.
While the OTCBB provides real-time quotations for these securities, and other quotation media for OTC securities do not, transactions in OTC securities are nonetheless subject to real-time last sale trade reporting. These trade reports are publicly disseminated through market data vendors on a real-time basis.
In light of the above, the NASD Board approved the solicitation of comment on rules that would:
(i) limit quotations on the OTCBB to the securities of issuers that make current filings pursuant to the Securities Exchange Act of 1934 (Exchange Act), including depository institutions that report to their appropriate regulatory agencies pursuant to section 12(i) of the Exchange Act, registered closed-end investment companies, and insurance companies that are exempt from registration under section
12(g)(2)(G) (Eligibility Rule); and
(ii) prohibit member firms from quoting an issuer?s security if the issuer has not made current reports with the SEC or the appropriate insurance or bank regulatory
authority, and for those issuers that do not file with the SEC?s Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system, require a member to provide such reports to the NASD (Ineligible Quotation Rule).
Under these rules, members will be permitted to enter quotations only for issuers that are current in their reporting obligations. With regard to most of these
issuers, the filings would be made through EDGAR.1 With regard to non-EDGAR filers, such as foreign issuers, insurance companies and depository institutions, members must provide the reports to the NASD, but the reports may
be provided to the NASD by any market maker in the security.
1 EDGAR (Electronic Data Gathering, Analysis, and Retrieval) is the SEC system for the receipt, acceptance, review and dissemination of documents submitted in electronic format. |
