On January 3, 2013, OTC Markets revised its disclosure requirements for issuers quoted on OTC Markets’ “OTC Pink Current Information” tier. As set forth in our January 4, 2013 blog post, these revisions reduced the filing deadline for reporting a laundry list of corporate events but eliminated the obligations of issuers to provide quarterly legal opinion letters from their securities attorneys.
OTC Markets Group operates an electronic inter-dealer quotation system used by broker-dealers to trade securities not listed on a national securities exchange such as NASDAQ, NYSE or AMEX.
The OTC Markets Group assigns issuers to tiers depending upon the amount of disclosure provided.
The “Pink Current Information” tier is available to issuers that do not file reports with the Securities and Exchange Commission (“SEC”), but voluntarily provide specific disclosures required by the OTC Markets.
This mandatory disclosure must be made using forms supplied by OTC Markets as a guide. In addition, until January 3, 2013, issuers were required to provide three quarterly legal opinions and one annual opinion from a securities attorney.
As discussed below, the January 3, 2013 revisions modify the OTC Markets requirements pertaining to attorney opinion letters.
(6) whether any 5% holder or counsel is currently under investigation by any federal or state regulatory authority for any violation of federal or state securities laws.
The elimination of the attorney opinion letter for quarterlies will significantly reduce reporting and compliance costs for issuers seeking the OTC Markets Pink Current tier.
As demonstrated by a string of recent SEC enforcement cases involving penny stock lawyers, many fail miserably in their role as gatekeepers for OTC Markets disclosures. The recent cases demonstrate that a significant number of penny stock and/or securities lawyers not only fail to comply with securities laws when rendering OTC Markets legal opinions, but also fail to comply with OTC Markets Disclosure Guidelines and state bar rules. These SEC actions reveal securities lawyers writing baseless legal opinions, engaging in forgery, lying about meeting with management of the issuer, and much more.
Any issuer quoted on the OTC Markets should consult with qualified legal counsel concerning the disclosures required by federal and state securities laws and proceed with caution before engaging a securities attorney who is listed on the OTC Markets banned attorney list, as well as any attorney who has been the subject of an SEC enforcement action.