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This article describes a concept which could impact a variety of companies, countries or industries. To see what companies and articles reference this concept page, click here. |
The term '"Pink Sheets"' refers to an electronic quotation system operated by Pink OTC Markets. It displays quotes from broker-dealers for many OTC securities. The electronic system replaced the older system using pink sheets of paper, thus the term "pink sheets."
The Pink Sheets is not a stock exchange. In order for an issuer to be quoted on the Pink Sheets, it must not fulfill any financial reporting requirements.
The companies quoted in the Pink Sheets tend to be closely held, extremely small, or thinly traded. It is among these reasons that the SEC views companies listed on the Pink Sheets as "among the most risky investments" and advises potential investors to heavily research the companies in which they plan to invest.
OTCQX Market Tier
OTCQX is a premium market tier offered by Pink OTC Markets. It aims to increase the transparency of OTC companies that have operating businesses and provide financial disclosure, but are not traded on an official stock exchange. Similar to companies quoted on the Pink Sheets, OTCQX companies are not required to be fully SEC reporting companies (i.e. current with all SEC filings). Despite this, OTCQX companies must provide audited financials and certain disclosures to Pink OTC Markets.
The requirements for listing on the OTCQX are:[1]
- Market maker priced quotes on Pink Quote (98% of all OTCBB securities are already quoted on Pink Quote);
- Ongoing business operations (no shell, bankruptcy, blank-check or development stage companies);
- Minimum $0.25 Bid price;
- Inclusion in S&P or Mergent Manual;
- 50 round lot shareholders;
- Retain a Designated Advisor for Disclosure (DAD);
- Companies listed on the higher PremierQX tier must also have 100 round lot shareholders, a $1 Bid price, hold annual shareholder meetings and meet the financial standards for continued listing on the NASDAQ Capital Market;
- Provide disclosure to the marketplace via the SEC's EDGAR system or pursuant to otcQX guidelines (a more tailored approach to shareholder reporting that does not require SOX 404 internal control audits among other items);
- Annual U.S. GAAP financials audited by a PCAOB registered audit firm;
Pink Sheets Market Tier
Effective August 1, 2007, all Pink Sheets traded companies that are not able or willing to meet the listing requirements of OTCQX will be placed in one of the four disclosure categories below. The disclosure categories do not signify issuer quality or merit of any security.[2]
Current Information
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1. Current SEC Filers
Pink OTC Markets will monitor the SEC's EDGAR system and automatically designate companies that are registered with the SEC pursuant to 12(g) of the Exchange Act and are current in their required filings as Current Information providers. Pink OTC Markets will remove any security from this category if the issuer does not maintain timely filings.
2. Banks, Insurance Companies and Certain Foreign Companies
Pink OTC Markets will automatically identify Non-SEC reporting federal or state regulated banks, insurance companies, and non-U.S. companies that are listed on a qualified foreign stock exchange as providing Current Information unless we determine that the company is not current in its reporting obligations to its primary regulator or is delisted from the foreign exchange.
Pink OTC Markets recommends that these companies publish their financial and other disclosure information, through the OTC Disclosure and News Service, to www.pinksheets.com for easy access by U.S. investors.
3. Non-reporting Companies with Current Information Available on pinksheets.com
Non-SEC registered companies that meet the following requirements will be identified as providing Current Information:
- Subscribe to the OTC Disclosure and News Service;
- Publish disclosure that complies with Pink OTC Markets' Guidelines for Providing Adequate Current Information (PDF) through the OTC Disclosure and News Service;
- Attorney Letter - The company must publish a quarterly letter from an attorney stating that the issuer's disclosure (i)constitutes "adequate current public information" concerning the Securities and the Issuer and "is available" within the meaning of Rule 144(c)(2) under the Securities Act, (ii) includes all of the information that a broker-dealer would be required to obtain from the Issuer to publish a quotation for the Securities under Rule 15c2-11 under the Securities Exchange Act of 1934 (the "Exchange Act"), and (iii) complies as to form with Pink OTC Markets' Guidelines for Providing Adequate Current Information. The letter must also identify the person responsible for the preparation of the financial statements.
- Transfer Agent - The company must have an SEC registered transfer agent.
Companies must post the required disclosure on pinksheets.com. Pink OTC Markets will verify that a quarterly or annual report, in addition to an Attorney Letter regarding completeness of disclosure, has been posted within 75 days after each quarter ended and within 120 days after each fiscal year ended. If such disclosure has not been posted at that time, companies will be placed into the "Limited Information" or "No Information" categories (see below).
Limited Information
Limited information dated within the last 6 months is available to investors, but that information is either not compliant with Pink OTC Markets' Guidelines for Providing Adequate Current Information (PDF) or, if the company is an SEC filer, the information is not current.[3]
No Information
Defunct or Dark Pink Sheets Companies that have not posted any information with a period ending within the previous six months, either through the SEC's EDGAR system or through the OTC Disclosure and News Service.[4]
Caveat Emptor- Buyer Beware
Identifies stocks that are the subject of unsolicited spam, questionable promotion, regulatory suspensions, disruptive corporate actions (including reverse mergers), or other public-interest concerns.
Generally, Pink OTC Markets will remove the Caveat Emptor designation once the security meets the qualifications for Current Information (see above) and Pink OTC Markets is satisfied that there is no longer a public interest concern, typically no sooner than 30 days. In the case of reverse mergers, Pink OTC Markets will remove the Caveat Emptor designation upon qualification for Current Information or, for SEC filers, with the submission of a super 8-K, with no 30 day minimum.[5]
Stocks listed on Pink Sheets
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