To ALL: NASD Board Approves Microcap Rule Proposals
Washington, D.C.-The National Association of Securities Dealers, Inc. (NASDr) today
announced that its Board of Governors has approved a series of proposed rule changes
for the OTC Bulletin Board and the OTC market.
These rules, which will now be sent to the Securities and Exchange Commission (SEC)
for
approval, will enhance investor protection by ensuring that current financial information
about
the companies that are quoted on the OTC Bulletin Board is publicly available. The
rules also
include sales practice initiatives that will require brokers to take additional steps before
they
recommend a transaction in any OTC security, and provide investors in all OTC
transactions
with increased disclosure. The rules approved today will:
OTC Bulletin Board Eligibility Rule - Permit only those companies that report their
current financial information to the SEC, banking, or insurance regulators to be quoted
on the OTC Bulletin Board. Companies whose securities are quoted on the OTC
Bulletin Board, when the rule becomes effective, will have 6-12 months to comply with
the new requirements.
Recommendation Rule - Require brokerage firms to review current financial statements
before they recommend a transaction in any OTC security (a security that is not listed
on Nasdaqr or any registered national securities exchange).
Disclosure Rule - Require brokerage firms to provide investors with written disclosure
of
the differences between OTC securities and those that trade on a listed market. The
disclosure statement will be provided on each customer's confirmation following any
trade in an OTC security.
Under the new OTC Bulletin Board Eligibility Rule, any company that does not make
current
filings with the SEC, bank, or insurance regulators will be eliminated from the OTC
Bulletin
Board after the phase-in period. By encouraging companies to provide information to
regulators, this rule significantly increases the amount of current public information
available to
investors. Companies that are not eligible to be quoted on the OTC Bulletin Board
would be
eligible to be quoted in other quotation mediums, such as the Pink Sheets. Beginning in
April
1998, the SEC required foreign securities to be fully registered with the SEC to remain
quoted
on the OTC Bulletin Board.
The proposed Recommendation and Disclosure rules would not apply to transactions in
securities of banks and insurance companies, and to companies with more than $100
million
in assets and $10 million in shareholder equity. Transactions with institutional investors
will
also be exempt.
"Effectively eliminating non-reporting companies from the OTC Bulletin Board, coupled
with the
required pre-recommendation review of current financial information and the additional
investor
disclosure, will help address microcap market abuses," said Frank G. Zarb, NASD
Chairman
and Chief Executive Officer.
In December 1997, the NASD Board agreed on the importance of the reform
proposals and
sought public comment on them. During more than two months of public comment, the
NASD
received a total of more than 60 comment letters, all of which were reviewed prior to
developing
these final rules
The OTC Bulletin Board is a quotation service that displays real-time quotes, last sale
prices,
and volume information in domestic and certain foreign securities. Eligible securities
include
national, regional, and foreign equity issues; and warrants, units, and American
Depositary
Receipts (ADRs) not listed on any other U.S. national securities market or exchange.
Unlike
The Nasdaq Stock Market or other listed markets-where individual companies apply
for
listing and must meet and maintain strict listing standards-individual brokerage firms, or
market makers initiate quotations for specific securities on the OTC Bulletin Board.
Currently,
approximately 6,400 securities are quoted on the OTC Bulletin Board.
The National Association of Securities Dealers is the largest securities-industry
self-regulatory
organization in the United States. Through its subsidiaries, NASD Regulation, Inc., and
The
Nasdaq Stock Market, Inc., the NASD develops rules and regulations; provides a
dispute
resolution forum; conducts regulatory reviews of members' activities; and designs,
operates,
and regulates securities markets all for the benefit and protection of investors.
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I copied this from John's post on the (LGOV) thread and thought some here might want to read this. |
