The OTC Bulletin Board has afforded companies an air of legitimacy that
they have not always deserved. Some have used that listing to imply a
relationship with the NASD (as in, “we are now listed on the NASD
Bulletin Board,” while others have gone a step further and,
inaccurately, claimed to be listed on the Nasdaq Bulletin Board.
Of course, the OTC Bulletin Board is not part of Nasdaq and its listing standards are minimal. Companies need only file regular reports with the Securities and Exchange Commission. Unlike Nasdaq listed companies, they do not have to meet any minimal financial thresholds or pass a “public interest” test. Some of that is about to change.
A year from now the OTC Bulletin Board is likely to be nothing more than a memory. Plans call for it to be phased out, beginning in early 2003, to be replaced by a new trading venue, the Bulletin Board Exchange (BBX). The BBX will facilitate trading; an electronic trading system will allow order negotiation and execution. That marks a dramatic departure from the OTC Bulletin Board, where orders are placed by telephone.
Many of the current OTC Bulletin Board companies will be listed on the BBX, but a large number are likely to be excluded. The BBX will not require companies to maintain a minimum share price, income or assets, but it will impose qualitative listing standards as a firewall against possible scams and abuses.
What will happen to those companies that do not meet the new BBX standards? Most of them are likely to wind up trading on the Pink Sheets, a privately-owned stock quotation service that already provides price information for over-the-counter securities that are not listed on any national securities exchange, or on the OTC Bulletin Board. (See In The Pink). Since the Pink Sheets are privately owned, they do not enjoy the same degree of regulatory oversight as the trading systems run by Nasdaq and the NASD.
Exiling companies to the Pink Sheets could have negative repercussions for investors. Some of those companies currently file regular financial reports with the SEC solely so that they can retain their OTC Bulletin Board listing. Companies banished to the Pink Sheets may stop filing those reports, making it that much harder for investors to obtain credible information.
Of course, the OTC Bulletin Board is not part of Nasdaq and its listing standards are minimal. Companies need only file regular reports with the Securities and Exchange Commission. Unlike Nasdaq listed companies, they do not have to meet any minimal financial thresholds or pass a “public interest” test. Some of that is about to change.
A year from now the OTC Bulletin Board is likely to be nothing more than a memory. Plans call for it to be phased out, beginning in early 2003, to be replaced by a new trading venue, the Bulletin Board Exchange (BBX). The BBX will facilitate trading; an electronic trading system will allow order negotiation and execution. That marks a dramatic departure from the OTC Bulletin Board, where orders are placed by telephone.
Many of the current OTC Bulletin Board companies will be listed on the BBX, but a large number are likely to be excluded. The BBX will not require companies to maintain a minimum share price, income or assets, but it will impose qualitative listing standards as a firewall against possible scams and abuses.
What will happen to those companies that do not meet the new BBX standards? Most of them are likely to wind up trading on the Pink Sheets, a privately-owned stock quotation service that already provides price information for over-the-counter securities that are not listed on any national securities exchange, or on the OTC Bulletin Board. (See In The Pink). Since the Pink Sheets are privately owned, they do not enjoy the same degree of regulatory oversight as the trading systems run by Nasdaq and the NASD.
Exiling companies to the Pink Sheets could have negative repercussions for investors. Some of those companies currently file regular financial reports with the SEC solely so that they can retain their OTC Bulletin Board listing. Companies banished to the Pink Sheets may stop filing those reports, making it that much harder for investors to obtain credible information.
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