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OTC Markets Group, Inc. (OTCQX: OTCM), is a private company that provides services to the U.S. over-the-counter (OTC) securities market including electronic quotations, trading, messaging, and information platforms. According to the U.S. Securities and Exchange Commission (SEC), OTC Markets Group, Inc. is not a stock exchange. The company facilitates the exchange of securities between qualified independent brokers.

History[link]

The company was first established in 1913 as The National Quotation Bureau (NQB). For decades, the NQB reported quotations for both stocks and bonds, publishing the quotations in the paper-based Pink Sheets and Yellow Sheets respectively. The publications got their names from the color of paper they were printed on.

Regulatory status[link]

Pink Sheets is not a stock exchange. To be quoted via Pink Sheets, companies do not need to fulfill any requirements (e.g. filing financial statements with the SEC). With the exception of foreign issuers, mostly represented by American Depositary Receipts (ADRs), the companies quoted in the Pink Sheets tend to be closely held, extremely small, thinly traded, or bankrupt. Most do not meet the minimum U.S. listing requirements for trading on a stock exchange such as the New York Stock Exchange. Many of these companies do not file periodic reports or audited financial statements with the SEC, making it very difficult for investors to find reliable, unbiased information about those companies.

For these reasons the SEC views companies listed on Pink Sheets as "among the most risky investments"^[1] and advises potential investors to heavily research the companies in which they plan to invest.

Market tiers[link]

Pink Sheets established a categorization system to indicate the level of financial and corporate disclosure provided by the companies using its quotation system. The disclosure categories do not signify issuer quality or merit of any security. Categorization is based on the level and timeliness of a company's disclosure and any category can include speculative, distressed, or questionable companies. Investors are encouraged to use caution when considering these companies for investment.^[2]

OTCQX[link]

This tier is for companies that meet financial standards and undergo a qualitative review by OTC Markets Group. Companies are not required to be registered with or reporting to the Securities and Exchange Commission (SEC).

OTCQB[link]

OTCQB companies must be registered with and reporting to the SEC or a U.S. banking regulator. There are no financial or qualitative standards to be in this tier.

OTC Pink[link]

OTC Pink is a speculative trading marketplace that has no financial standards or reporting requirements. The stock of companies in the OTC Pink tier is not required to be registered with the SEC. Companies in this category are further categorized by the level and timeliness of information they provide to investors and may have current, limited or no public disclosure.

OTC Pink Current Information[link]

Companies that have submitted information no older than six months to the Pink Sheets News Service or have made a filing on the SEC's EDGAR system in the previous six months are rated as having current information. This category includes shell companies or development stage companies with little or no operations as well as companies without audited financial statements.

OTC Pink Limited Information[link]

Companies that are unwilling or unable to meet Pink Sheets' Guidelines for Providing Adequate Current Information but have have submitted some but not all of current information required are rated as having limited information. These are often companies with financial reporting problems, economic distress, or in bankruptcy.

OTC Pink No Information[link]

This tier indicates companies that are unwilling or unable to provide disclosure to the public markets. Companies in this category do not make current information available via Pink Sheets News Service, or if they do, the available information is older than six months. This category includes defunct companies that have ceased operations as well as 'dark' companies with questionable management and market disclosure practices. Securities of publicly traded companies that are not willing to provide information to investors are considered highly risky.

Caveat emptor - buyer beware[link]

There is a public interest concern associated with the company. This may include a spam campaign, stock promotion or known investigation of fraudulent activity committed by the company or insiders. During a spam campaign, any stock that is not in the Current Information category will also have its quotes blocked on pinksheets.com.

Other OTC markets[link]

OTCBB[link]

The OTC Bulletin Board (OTCBB) is a listing of securities that are also traded "over the counter" similar to the Pink Sheets, but unlike Pink Sheet companies, OTCBB companies are required to file timely reports with the SEC. Many OTCBB companies are also quoted via Pink Sheets' electronic quotation system.

Grey Market[link]

Securities that are not listed on any stock exchange nor formally quoted via the OTCBB or Pink Sheets are considered to be in the Grey Market. Unsolicited transactions are processed independently and not centrally listed or quoted. Trades are reported to a self-regulatory organization (SRO), which then passes the data on to market data companies.

References[link]

External links[link]

• Official website
• SEC information about the Pink Sheets
• SEC Listing and Delisting Requirements