OTC Markets Group Inc. has amended its rules for U.S. companies wishing to be listed on the OTCQX Best Market effective Jan. 1. The revisions help align their eligibility requirements with industry best practices.
Penny stocks will continue to be excluded from the OTCQX. Participating U.S. companies must meet respective initial and ongoing bid prices of $0.25 and $0.10 and have respective initial and ongoing capitalization of $10 million and $5 million. OTCQX International companies will have to meet the same standards. Both will also need a minimum of two market makers with priced quotes on OTC Link (r) ATS within 90 days of joining.
OTC has also formalized a series of corporate government standards already employed by a majority of U.S. OTCQX companies. They include:
- A minimum of two independent directors on the board of directors;
- An audit committee composed of a majority of independent directors;
- Conduct annual shareholders’ meetings and submit annual financial reports to shareholders at least 15 calendar days before such meetings.
OTCQX U.S. Premier tier standards have also been aligned with the financial standards of markets recognized by many U.S. states for issuer exemptions from state Blue Sky laws. They include:
- $4 bid price requirement for initial qualification and $1 ongoing;
- Market capitalizations of $10 million for initial qualification and $5 million ongoing for companies with a public float of at least $15 million, or $50 million initially and $35 million ongoing for companies with a public float of at least $1 million and $750,000 in net income as of the most recent fiscal year end (banks will be required to have a public float of 500,000 to qualify for OTCQX U.S. Premier);
- Three-year operating history.
The OTCQX U.S. Premier tier mandates a stockholders’ equity requirement of $4 million for initial qualification and $1 million ongoing, along with a requirement of at least four market makers with priced quotes on OTC Link ATS within 90 days of the company joining OTCQX.
OTCQX International Premier standards are now more costly aligned with Fed and SEC margin eligibility standards. Highlights are:
- Global market capitalization of $1 billion for initial qualification and $500 million ongoing;
- Five-year operating history;
- Average weekly share volume of 200,000 or dollar volume of $1 million for initial qualification, and 100,000 shares or $500,000 ongoing.
OTCQX International Premier tier companies must also have minimum four market makers with priced quotes on OTC Link ATS within 90 days of joining.
The moves should further increase investor confidence and security, OTC Markets Group CEO and President R. Cromwell Coulson said.
“The introduction of strengthened OTCQX eligibility requirements combined with new common sense, best practice corporate governance standards for U.S. companies and banks further distinguishes OTCQX as a trusted public market that is efficiently linked by technology and transparency. Our goal with these changes is not only to improve the quality of OTCQX, but to enhance regulatory recognition of OTCQX as an investable market and make it easier for investors and our network of broker-dealers to analyze, value and trade these securities.”
The annual OTCQX fee for traded companies has risen to $20,000. Companies joining after January 1 must comply with the new regulations. Current companies have until January 1, 2017 to meet the revised standards or they will be transitioned to the OTCQB® Venture Market.