Here is an interesting article I lifted from the KENS thread. It was news to me, and should be a must-read for all BB investors.
By: Keith Anderson
Date: Jan 6 1999 7:15PM ET
Press Release: NASD Announces SEC Approval of OTC Bulletin
Board Eligibility Rule
Washington, D.C. -The National Association of Securities Dealers,
Inc. (NASD®), today announced that the Securities and Exchange
Commission (SEC) has approved the NASD's proposed OTC
Bulletin Board Eligibility Rule. This rule permits only those
companies that report their current financial information to the SEC, banking, or insurance regulators to be quoted on the OTC Bulletin Board® (OTCBB), offering investors more and better information about OTCBB stocks.
Under the new rule, Market Makers will not be permitted to quote
OTCBB-traded securities unless the issuer has filed periodic reports
with the appropriate regulatory agency. The filing requirement
protects investors by ensuring that they have access to companies'
current financial information when considering investments in
OTCBB-traded securities.
"Thorough and accurate information is the foundation of sound
investment decisions," said Frank G. Zarb, NASD Chairman and
Chief Executive Officer. "By requiring the half of all OTCBB
companies that currently do not provide publicly-available financial
reports to join the half that do, we will take a major step toward
improving the quality of the microcap market. We are pleased that the SEC has approved our proposal to effectively eliminate
non-reporting companies from the OTC Bulletin Board."
Under the new rule, any domestic company that does not file periodic
financial reports with the SEC, or with banking or insurance
regulators, will be eliminated from the OTCBB after a phase-in
period. In April 1998, the SEC required all foreign securities on the OTCBB to be fully registered with the SEC in order to remain quoted.
The new requirement applies immediately to any company first
quoted on the OTCBB after January 4, 1999. Securities already
quoted on the OTCBB as of January 4, 1999, will have until at least
July 1999 to comply with the new requirements. The rule will be
phased in over a 12 month period beginning in July 1999 and
continuing through June 2000 in alphabetical increments based upon
the company's name as of January 4, 1999. In June 2000, the rule will apply to all companies on the OTCBB.
The filing requirement also means that these companies are subject to greater regulatory oversight by the SEC and other regulatory
authorities. 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. Although the OTCBB is operated by the NASD, it is 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 6,500 securities are quoted on the OTCBB.
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