This article is nine years in the making. The concept is so simple but 99% of the clients I consult with have made identical errors in their effort to raise capital. They will have a business plan and they will have a Private Placement Memorandum and after one read of these two documents I have to deliver the bad news, “Sorry, but your business plan and PPM are completely worthless”.

They will then proceed to give me a story where the one consistent theme usually goes like this, “That can’t be…there was a guy…..he gave us a great deal on our business plan besides he wrote the business plans for my brothers sock sewing company and my friends underwater basket weaving video business and he really seemed to know what he was doing and then we bought a template online and just took the content from the business plan and used it to fill out the PPM template…blah..blah..blah…”.

Look, before you have a business plan written, test the author’s knowledge on your specific industry genre. There is no such thing as a one stop shop for business plans, the good consultants will cater to certain industries. Find an author with a solid comprehension of your goals and can translate your ideas into the fickle, skeptical language of the investors reading it.

Your business plan should include, at a minimum, financial projections/assumptions, growth and development analysis, market analysis, research analysis and implementation, competition analysis, management summary, marketing plan, risk analysis, capitalization analysis, market penetration analysis and SWOT analysis. Without these crucial elements your business plan is dead in the water and so is your future in fundraising.

Next, never… and I mean never buy a PPM template on the internet. There are certain aspects to your offering circular that can trigger the invest button or snooze button in the mind of investors. Your business plan’s job is to ‘sell’ while the PPM is meant to spell out risk and other technical information that isn’t present in the business plan. The last thing you want to do is simply cut and paste information from the business plan over to the Offering Memorandum; it’s unprofessional and immediately loses legitimacy in the eyes of credible investors. Find a professional consultant, accountant or attorney who specializes in Regulation D to write your Offering Memorandum for you. A poorly written Private Placement Memo can destroy your ability to raise capital so fast it will shock you but a well written, professional PPM will make raising capital fast and easy.

If you’re trying to raise capital there are regulations set forth by the SEC to make sure everyone is conducting business ethically and in a way that can keep one accountable for their actions if fraud takes place. Regulation D Rule exemptions 504, 505 and 506 offer solid fundraising capabilities that can handle most investment needs. Companies typically hire a consulting firm to author these documents and within 30 days you’re off and running and talking to investors; that is, of course talking to investors while staying within the boundaries of Rule 502c which dictates the guidelines for solicitation which means no active promotion of the issuance of your securities.

This basically means that unless you have a bunch of millionaire friends, you’re no better off now than you were before the PPM was created. So, how does one raise capital in an environment which limits the promotion of your offering with such limitations? Easy, corporate publicity! You must have your timing right in order for this to work but here is basically what we do with our clients as we are writing their PPM and what you should do if you already have an Offering Memorandum written. First we make sure that they have a solid presence online, within their industry genre by getting them massive exposure virally using video, social and news bookmarks, press releases, unique article submission, image/photo marketing etc. This exposure is just for basic branding purposes and not advertising the investment opportunity.

This process will draw massive amounts of attention to their company while we use specifically researched tags that will cater to the internet user who is researching their industry and/or looking for this specific company’s position in the marketplace. The next thing that you’ll want to do is promote your company using traditional means such as radio, TV and articles written about your company and executives within the company. Now, these promotions are not ads, instead they are interviews and/or expert conversations where you’re being brought in to talk about your industry as a whole. This passive promotional technique will allow for multiple ‘plugs’ during the conversation that lead potential clients and investors to your doorstep.

If you don’t have a publicist you will need one and during your initial ramp up you’ll want to have a targeted, localized and national audience using a minimum of 5 promotional combinations, this is crucial! Lastly, you are going to want to start blogging like a maniac. Blog and respond to any and every industry specific blog you can find. It is crucial that you carve out your position as an authority in the marketplace to tower like a beacon to future customers and investors.

Now you are ready to start talking to investors. The publicity used above will usually deliver a powerful enough promotion that will yield a steady flow of clients and potential investors and once word gets out that you’re company is solid and that you are offering equity investment opportunities…well the fundraising trail get’s easier and easier. You may also want to consider using an ‘investor finder’ at this point. An ‘investor finder’ is an individual or company that has substantial accredited investor contacts and will introduce you to those contacts for a flat fee. They are not a market maker nor are they a broker dealer. They are typically a broker of sorts that holds minimal securities licenses yet packs a punch with their ability to set you up with active investing contacts.

Raising capital is actually extremely easy if you set your company up in a way that is conducive to investment.

Also known as an Offering Memorandum or “PPM”. A document that outlines the terms of securities to be offered in a private placement. Resembles a business plan in content and structure. A formal description of an investment opportunity written to comply with various federal securities regulations. A properly prepared PPM is designed to provide specific information to the buyers in order to protect sellers from liabilities related to selling unregistered securities. Typically PPMs contain: a complete description of the security offered for sale, the terms of the sales, and fees; capital structure and historical financial statements; a description of the business; summary biographies of the management team; and the numerous risk factors associated with the investment. In practice, the PPM is not generally used in angel or venture capital deals, since most sophisticated investors perform thorough due diligence on their own and do not rely on the summary information provided by a typical PPM.
source: vcexperts

Entrepreneurs are being turned onto Regulation D in droves. Regulation D Rule 504, 505 and 506 allow companies a more lenient fund raising process than those who choose to go public by other means. In the past year I’ve seen more PPM consultants pop up on the internet than ever before and I have to admit I’m concerned. As a veteran in this field I’ve seen it all, now we have a legion of self proclaimed Reg. D gurus who buy templates, add some text and tell their clients that they are delivering a customized offering memorandum; here’s where things go bad and a difficult situation gets even worse. You have this worthless document, now what?

You need to gain the confidence and capital of accredited investors without soliciting as dictated in Regulation D Rule 502c. Now you have a worthless document that you can’t solicit investment capital for (which your guru consultant never told you but took your cash anyway) so how are you suppose to raise funds for your company? First, you’ll find that you’ll eventually need to make your way to an actual PPM author, not a broker so that you can get a PPM that protects you from lawsuits and gives the investor a real breakdown of the upside and downside of your business.

Next you’ll need to find a “Investor Finder”, yes this is an actual term for an individual or corporate entity that is completely submerged in the accredited investor realm and is able to match your opportunity with friends that he/she has in their database of real, accredited investors. This is the second half of the PPM equation.

Don’t kid yourself and don’t allow yourself to be lied to; you’re going to need a seasoned professional to help introduce you to investors that have the capital to help you get to where you need to be. Friends, family and employees will commit to investing in your company until your PPM is completed and it’s time to make good on their commitment; all of a sudden little Johnny needs braces and Sally is in the hospital with pneumonia, this happens all the time. Now what? With a real Private Placement Memorandum and a solid Investor Finder you’re problems are basically over. Investigate where the author and I.F. stand in the Internet public domain and after you find a company that meets your needs, get moving and start raising capital.

The internet tells all when it comes to reputations, you’ll be able to tell the difference between a seasoned veteran and a startup consultant after on Google Search and a phone call. A PPM can make raising capital quick and easy if you have the right firm in your corner.

CAPITAL FORMATION VIA PRIVATE PLACEMENTS

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Solicitation for Capital

Rule 502(c) of Regulation D (“Rule 502(c)”) prohibits issuers from general solicitation and general advertising in private placements. Given those limitations, many issuers find it difficult to attract investors.

One method of demonstrating that the sale of a security through a private placement is not the result of general advertising or general solicitation is for there to be a documented substantial and pre-existing relationship between the issuer and the prospective investor.[1] To be “substantial” the relationship should involve a discussion of the prospective investor’s financial goals and objectives, and one should examine the nature and quality of the relationship. To be pre-existing, a relationship should be in place before the terms of the offering are developed and before the offering commences.[2]

It is not necessary that the issuer have the substantial and pre-existing relationship between itself and the prospective investor. In lieu of such a relationship, the issuer can also demonstrate a substantial and pre-existing relationship with a prospective investor through a “finder” that is acting on behalf of the issuer. A finder may be a company, service or individual such as a broker-dealer who may receive a fee in connection with the solicitation of potential investors. Finding such finders may prove difficult in itself. As in the case with the prohibition against general solicitation to attract investors in the course of a private placement offering, it appears that a firm cannot engage in a general solicitation to find finders. It is quite likely that the SEC would find that a cold mass mailing of a brochure or executive summary summarizing a private placement memorandum, which was made to finders would be a general solicitation, regardless of whether the recipients were viewed as investors or merely conduits to investors.[3]

An issuer may take advantage of a substantial and pre-existing relationship between a finder and a prospective investor depending on the nature and quality of that relationship. According to the Commission: the types of relationships with offerees that may be important in establishing that a general solicitation has not taken place are those that would enable the issuer (or a person acting on its behalf) to be aware of the financial circumstances or sophistication of the persons with whom the relationship exists or that otherwise are of some substance and duration. [4]

Even though an issuer may rely on an agent or affiliate’s substantial and pre-existing relationship with a prospective offeree, the issuer should make its own assessment of the offeree’s accreditation and suitability rather than relying on that of the agent or affiliate. Because the issue is, whether the issuer “reasonably believes” that the potential investor has enough knowledge and sophistication to properly evaluate the investment opportunity, the issuer should have some basis beyond the finder’s certification for assessing the investor.

Having a substantial and pre-existing relationship is not the exclusive means of demonstrating the absence of general advertising or solicitation. Where an investor, unsolicited, expresses interest in the sale of a certain security by an issuer, and the issuer has not engaged in general advertising or general solicitation that is related to the security in question, the issuer may sell the security to the prospective investor without violating Rule 502(c).

The realities, however, suggest caution in the absence of a substantial and pre-existing relationship. Depending on the circumstances under which an offer is made, there may well be varying levels of risk. For instance, if a friend of an issuer’s existing investor asks the issuer about the purchase of a security, there should be no reason that the issuer could not sell the security to the friend, especially if the issuer has not encouraged the existing investor to make referrals; however, doing so may raise questions regarding the absence of a general solicitation.

The use of electronic media to offer securities, however, has already loosened the reigns placed on general solicitation. In response to the growing interest on the part of issuers to offer and sell securities via the internet, the SEC and many states have sought ways to permit solicitations over the internet without deeming such actions to be general solicitations. For example, in IPONET (July 23, 1996), the SEC permitted electronic solicitation of investors where the prospective investors were pre-qualified through the use of questionnaires and then permitted to participate in current offerings. In effect, the electronic solicitation process in IPONET collapses the previously required two-step process of establishing a prospective investor’s qualifications, and then offering securities to that investor only in offerings not existent at the time of the original solicitation.

The limitation on advertising underscores the importance of careful attention to, and review of, all of an issuer’s promotional materials and reports. An issuer and its affiliates and agents may not engage in advertising designed to attract investors to a private placement offering. However, the issuer may continue generic advertisements and reports wholly unrelated to the offering. [5]

A question is raised as to whether or not a finder has to be registered as a broker-dealer. Generally speaking, a finder does not have to be registered as a broker-dealer if a finder’s activities are limited. A “broker” under the Securities Exchange Act is “any person engaged in the business of effecting transactions in securities for the account of others.” The Commission has found activities such as (a) participating in presentations or negotiations, (b) making any recommendations concerning securities, (c) receiving transaction-based compensation, (d) structuring a transaction or making recommendations regarding the nature of the securities, whether to issue securities or the assessed value of securities sold, and (e) continuing involvement in sales of securities to trigger broker-dealer registration obligations.[6]

Finders and consultants may avoid registration by limiting their activities to introducing prospective investors to an issuer and basing their compensation on either a flat fee or a percentage commission rather than on the outcome of the issuance or the amount of money raised by the offering.[7] While a commission is not a definite indication that the finder should be registered, it serves as a red flag, especially if the finder in question has been engaged in other private placements wherein he received commissions as a finder or broker.[8]

Rule 3a4-1 provides a non-exclusive safe harbor from the definition of a broker for persons associated with an issuer who are engaged in securities related activities incident to their duties on behalf of the issuer. [9] Employees and possibly individual affiliates of an issuer who are not registered representatives of broker-dealers may be considered “associated persons” for purposes of Rule 3a4-1, in which case they may be exempt from registration and will be permitted to engage in limited sales activities pursuant to the Rule’s safe harbor.

A finder may provide market and financial analyses, prepare feasibility studies, hold meetings with registered broker-dealers, prepare or supervise preparation of private placement memoranda, and otherwise assist the issuer in structuring the offering. However, participation in detailed discussions or recommendations regarding the nature of the securities, whether to issue securities or the assessed value of securities sold is inappropriate. [10]

Payment of Finders Fees

If the finder hopes to avoid broker-dealer registration, a flat fee is more appropriate than a commission that is based on the outcome of the issuance.[11] Commission compensation demonstrates success in effecting transactions for the account of others and is a factor of paramount importance; a hallmark of brokerage activity is the collection of a commission for one’s services. While a commission is not a definite indication that the finder should be registered, it serves as a red flag, especially if the finder in question had been engaged in other private placements wherein he received commissions as a finder or broker.[12] Regardless of the method of compensation, any financial relationship with a finder must be disclosed to the investor.

However, the less involved a business consultant is in the negotiation and structuring of a transaction, the less likely it will be that the SEC staff will require the business consultant to register as a broker-dealer despite the fact that it receives transaction based commission. The SEC staff has recognized that “individuals who do nothing more than bring merger or acquisition-minded persons or entities together and do not participate in negotiations or settlements probably do not fit the definition of a “broker” or a “dealer” and would not be required to register. On the other hand, individuals who play an integral role in negotiating and effecting mergers and acquisitions, particularly those persons who receive a commission for their efforts based on the cost of the exchange of securities, …are required to register with the Commission.” [13]

For example, in Corporate Forum, Inc., SEC No-Action Letter dated December 10, 1972, a financial consultant represented that it would locate merger and acquisition candidates for its clients and make a financial analysis of such candidates, but would allow the clients to negotiate and consummate the transaction found for it by the financial consultant. The SEC staff predicated its no-action relief on the premise that the financial consultant would not participate in the negotiation of any transaction involving its client.[14] And in at least one instance, the SEC staff was willing to take a no-action position in regard to the non-registration of a finder who proposed to “upon occasion, as part of the consultative, advisory and negotiating process articulate, explain or defend negotiating proposals or positions that have been adopted by its client or that the finder had recommended for its clients.”

However, the SEC recently found a person to be a broker while engaging in activities similar to those a finder may engage in.[15] In 1991, Michael Milken was barred from associating with a securities broker pursuant to an SEC order.[16] Milken was found to have violated the 1991 order in connection with two transactions where he was acting as a business consultant: (1) a transaction between MCI Communications Corporation (“MCI”) and The News Corporation (“News Corp.”) and (2) a transaction between New World Communications Group, Inc. (“New World”) and News Corp. in which New World agreed to transfer network affiliation of nine of its television stations in exchange for a $500 million investment by News Corp. in New World. In finding that Milken acted as a broker in the transactions and ordering Milken to disgorge the $42 million fee he earned, the SEC found Milken’s contact with the opposing party a critical factor. The SEC cited that he “introduced companies, proposed business arrangements that involved the purchase, sale or exchange of securities, and participated in negotiations regarding the structure of the transactions and securities to be issued in connection with those transactions.” The SEC also noted that Milken received transaction based compensation.

The SEC failed to take action in another transaction between Turner Broadcasting System (“Turner”) and Time Warner Inc. (“Time Warner”) for which Milken acted as a business consultant. In this instance, the SEC did not find a violation where an agreement in principle to merge the two organizations was reached without his involvement and Milken’s role was to articulate the strategic benefits of the transaction to both parties and to keep the parties focused on those benefits.

To request further information on the subject matter of this release call Securities Law Institute at: Toll Free (888)546-6454 or (702) 866-5800 or

E-mail securities@securitieslawinstitute.com

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[1] Woodtrails-Seattle, Ltd., SEC No-Action Letter dated August 9, 1982.

[2] Ovation Cosmetics, Inc., SEC No-Action Letter dated February 6, 1976.

[3] Pennsylvania Securities Commission , SEC No-Action Letter dated January 16, 1990.

[4] Mineral Lands Research & Marketing Corp. SEC No-Action Letter dated December 4, 1985.

[5] Hill York Corp. v. American International Franchises, Inc., 448 F.2d 680, 688 (5th Cir. 1971;ENI Corporation dated December 3, 1975; Oil and Gas Investor (September 9, 1983; and Econative Corp./Geller, Barry (February 27, 1978.

[6] John R. Wirthlin, SEC No-Action Letter dated January 19, 1999; Paul Anka, SEC No-Action Letter dated July 24, 1991; Caplin & Drysdale, Chartered, SEC No-Action Letter dated April 8, 1982; John DiMeno, SEC No-Action Letter dated October 11, 1978; and David A. Lipton, Broker-Dealer Regulation, §1.03, at 1-10 (15 Securities Law Series 1988).

[7] Richard S. Appel, SEC No-Action Letter dated February 14, 1983.

[8] Carl L. Feinstock, SEC No-Action Letter dated April 1, 1978.

[9] Securities Exchange Act Re.No. 22172 dated June 27,1985.

[10] Victoria Bancroft, SEC No-Action Letter dated August 9, 1987; Miller & Co., Inc., SEC No-Action Letter dated August 15, 1977.

[11] John R. Wirthlin, SEC No-Action Letter dated January 19, 1999; Richard S. Appel, supra.

[12] Carl L. Feinstock, supra.

[13] Gary L. Pleger, Esq., SEC No-Action Letter dated October 11, 1977; IMF Corp., SEC No-Action Letter dated May 15, 1978

[14] Miller & Co., Inc., SEC No-Action Letter dated August 15, 1977.

[15] SEC v. Michael R. Milken, Litigation Release No. 15654 dated February 26, 1998.

[16] In the Matter of Michael R. Milken, Exchange Act Release No. 28951 dated March 11, 1991.

Are you trying to raise capital for your start-up or corporation in expansion? Have you exhausted your traditional institutional sources and hedge fund contacts? Don’t lose hope just yet! First of all, take all those pamphlets and brochures from banks and other traditional lenders that are lying all over your desk and toss them in the trash…they are absolutely useless.

Banks don’t have your company’s best interest in mind as they are hardly even staying afloat in this economy. Today’s institutional financier isn’t qualified to run a bath let alone a bank. Don’t put your future in the untested hands of a 20 something knucklehead. After you’ve tossed all that useless info in the trash, clear your head and then look at your company and ask yourself a few tough questions: Is your company investable? Do you and your executive staff have a pedigree that investors deem as seasoned enough to take their money and make affective use of it and not lose it? What proprietary concepts/technology/patents do you have that give you a larger market share with the proper cash infusion? What is your current capital/debt situation?

If, after pondering these questions you’ve come to the conclusion you honestly, truly have something worth pursuing then the next step is to look at the reality that your company is worthy of a public offering. Stay away from Pink Sheets and be weary of reverse mergers and in reality your company won’t qualify for the NASDAQ so the quickest way to raise public capital is the OTCBB (over the counter bulletin boards).

OTCBB is an SEC regulated platform that has a solid investor following and market makers that can effectively promote your stock to rapidly raise capital. Don’t let these difficult economic times steal your dreams of corporate prosperity and personal growth.

If you have a solid business concept, there is a way to fund it. Look into the OTCBB, it’s your best bet for an inexpensive public offering with a direct path to long term funding.

I get calls everyday asking me the same questions over and over again so here is some information taken from the official otcbb.com website…Enjoy!

General Questions

How do I buy or sell stock in a company that is quoted on the OTC Bulletin Board® (OTCBB)?
The process of buying or selling OTCBB stock is the same as buying or selling any other stock. You must open an account with a broker (a party that executes buy and sell orders). You cannot buy OTCBB stock directly from the OTCBB or the OTCBB.com.

Can a security be traded on the OTCBB and NASDAQ® at the same time?
No. The OTCBB is a quotation service for securities which are not listed or traded on NASDAQ or a national securities exchange.

What are some of the differences between companies quoted by an OTC quotation service and companies listed on a stock market?
Stock markets (including NASDAQ and the registered exchanges, such as NYSE or AMEX) have specific quantitative and qualitative listing and maintenance standards, which are stringently monitored and enforced. Companies listed on a stock market have reporting obligations to the market, and an on-going regulatory relationship exists between the market and its listed companies. OTC quotation services (OTCBB, Pink Sheets) facilitate quotation of unlisted securities. As such, any regulatory relationship between an OTC quotation service and the issuers may be relatively limited or non-existent.

What is the difference between OTC, other-OTC and OTC Bulletin Board (OTCBB)? And where do the Pink Sheets fit in?
An over-the-counter (OTC) security is generally considered to be any equity security that is not listed on NASDAQ, NYSE or Amex. The OTCBB and the Pink Sheets are both quotation services for OTC securities. NASDAQ operates the OTCBB service and permits FINRA members to quote any OTC security that is current in certain required regulatory filings (see Listing Requirements). The Pink Sheets is a privately owned company that permits FINRA members to quote any OTC security and does not maintain regulatory filing requirements. An OTC security can be dually quoted on both the OTCBB and the Pink Sheets. As well, there are many OTC securities that are not quoted on either the OTCBB or the Pink Sheets; however, they have trading symbols assigned to them so FINRA members can comply with trade reporting obligations and report transactions in these securities. These securities are sometimes said to be on the “gray market”.
Other-OTC/NBB. Any OTC security that is not quoted on the OTCBB but is eligible for trade reporting to the Trade Reporting Facility, is categorized as “other-OTC” or non-Bulletin Board (NBB). You will see both of these terms throughout the OTCBB.com website. This includes, but is not limited to, securities quoted on the Pink Sheets. Because other-OTC securities are not quoted on the OTCBB, you will not be able to access quotes on these stocks through the OTCBB.com website, the NASDAQ Workstation, or any other NASDAQ product. If they are quoted on the Pink Sheets, you may be able to obtain quotes for other-OTC securities on the Pink Sheets website at www.pinksheets.com.

What is the correct way to refer to the OTCBB or securities quoted on the OTCBB?
Correct and accurate terminology when referencing the OTC Bulletin Board are as follows:
OTC Bulletin Board
quoted on the OTC Bulletin Board
Any reference to the OTC Bulletin Board should never include the word “NASDAQ®”. OTC Bulletin Board, should you wish, may be abbreviated OTCBB.

Where can I get a list of the Market Makers?
The symbol directory on OTCBB.com will allow you to:
Search for a particular market maker using the Search feature in the blue box on the Symbol Directory page;
View a list of all market makers; or
Download an ASCII file containing all market makers.

Where can I get a list of all the securities currently quoted on the OTCBB?
The symbol directory on OTCBB.com will allow you to:
Search for a particular security using the Search feature in the blue box on the Symbol Directory page;
View a list of all OTCBB securities; or
Download an ASCII file containing all OTCBB securities.

How do I stop receiving email spam, unwanted faxes and pop-up ads promoting OTCBB securities?
Please see the Help Section of OTCBB.com for prevention tips and reporting these incidents to the proper authorities.
OTCBB Company Contact/Profile Information

Where can I get phone and address information for an OTCBB issuer?
OTCBB issuers are not required to maintain current address and phone information with The NASDAQ Stock Market, Inc. or FINRA. This information is available, however, for many OTCBB issuers. Contact information for individual OTCBB issuers is accessible through the Symbol Directory area of this Web site. You can purchase the OTCBB Company Directory, a file containing the available address and phone information for all OTCBB issuers, from the Trading Activity Reports section of OTCBB.com.

How do I update an OTCBB company’s address, phone or other profile information?

You may email updated address, phone and company website information to the OTCBB at OTCBBFeedback@finra.org.
All other information, including management, outstanding shares, business summary, industry and transfer agent, is provided to OTCBB.com by a data vendor. To update this information, please go to the Contact Page and see OTCBB Company Profile Update.
Listing and Eligibility Requirements

What are the “listing” requirements for the OTCBB?
Because the OTCBB is a quotation service for FINRA Market Makers, not an issuer listing service or securities market, there are no listing requirements that must be met by an OTCBB issuer. Accordingly, there are no financial requirements and there is no minimum bid price requirement.

Are OTCBB companies considered to be “listed”?
No, the OTCBB is not an issuer listing service, and there is no listing agreement between either the OTCBB or NASDAQ and the issuer. There are, however, certain requirements an issuer must meet in order for its securities to be eligible for a market maker to enter a quotation on the OTCBB.

What are the eligibility requirements for the OTCBB?
In order for a security to be eligible for quotation by a market maker on the OTCBB, the security must be registered with the Securities and Exchange Commission (SEC) or other federal regulatory authority that has proper jurisdiction (see below) and the issuer must be current in its required filings with such federal authority.
Domestic issues quoted on the OTCBB are limited to the following securities:

securities of issuers that make current filings pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (“Act”);
securities of depository institutions that are not required to make filings under the Act, but file publicly available reports with their appropriate regulatory authorities;
securities of registered closed-end investment companies; and
securities of insurance companies that are exempt from registration under Section 12(g)(2)(G) of the Act.
Foreign issues and ADRs must be registered with the Securities & Exchange Commission (SEC) pursuant to Section 12 of the Securities Exchange Act of 1934.

See Filing Information for more information on filing requirements and how FINRA processes OTCBB issuers’ filings.

How many market makers are required for a security to be on the OTCBB?
A minimum of one market maker is needed. Instructions on how to get a list of market makers are above.

What are the listing fees for the OTCBB?
There are no listing fees for the OTCBB. Market makers do pay a fee for participating in the OTCBB of $6 per security per month.

Does the OTCBB have shareholder approval rules?
No. The OTCBB does not have shareholder approval rules.

Is an OTCBB issuer required to have an audit committee?
OTCBB issuers may choose to have an audit committee, and certain OTCBB issuers may be required to have an audit committee by virtue of an applicable law or rule. However, the OTCBB rules do not separately require OTCBB issuers to establish or maintain an audit committee.

How does a company get on the OTCBB?
An issuer may not submit an application directly to be quoted on the OTCBB. A market maker must sponsor the security and demonstrate compliance with SEC Rule 15c2-11 before it can initiate a quote in a specific security on the OTCBB. Please visit our How To Quote Securities page in Market Maker Services for detailed information on quoting a security on the OTCBB.

How does a security delisted from NASDAQ or another exchange get on the OTCBB?
For a security being delisted from NASDAQ, NYSE, or AMEX, a Market Maker must file a Form 211.

When can a company be “delisted” or removed from the OTCBB?
OTCBB issuers that become delinquent in their required regulatory filings will have their securities removed from the OTC Bulletin Board. Further, all OTCBB issues must maintain at least one registered Market Maker to remain on the OTCBB. When the last Market Maker in a security withdraws from the stock, the issue is removed from the OTCBB after 4 days pursuant to Rule 15c2-11. An issuer cannot voluntarily withdraw from the OTCBB; only a market maker can voluntarily withdraw its quote from the OTCBB. If an OTCBB security becomes listed on NASDAQ or another exchange, it will no longer be eligible and will be removed from the OTCBB.

How does the three strikes ineligibility rule work in practice? Pursuant to NASD Rule 6530(e), any OTCBB issuer that is delinquent in its reporting obligations three times in a 24-month period and/or is actually removed from the OTCBB for failure to file two times in a 24-month period is ineligible for quotation on the OTCBB for a period of one year. For a security to be eligible for quotation on the OTCBB, NASD Rule 6530 requires, in part, that the issuer of the security is required to file reports with the Commission or that the issuer of the security is a bank or savings associations (or holding company for such entities) that is not required to file reports with the Commission and, instead, makes filings with its applicable regulator. In addition to the foregoing, the issuer of the security must be current in its reporting obligations, subject to a 30 or 60 day grace period, as applicable. An OTCBB issuer will be deemed delinquent in its reporting obligations if the issuer fails to make a required filing when due or has filed an incomplete filing. In order for a filing to be complete, it must contain all required certifications and have been reviewed or audited as applicable, by an accountant registered with the Public Company Accounting Oversight Board.

How does FINRA determine whether an OTCBB issuer’s periodic financial report was filed timely?
For the purpose of determining the extent to which an issuer has filed its periodic financial reports in a timely fashion or has filed its periodic financial reports within the applicable grace period (in the case of an issuer that did not meet the initial filing deadline), the periodic financial report in question must have been received and time stamped by the Commission’s EDGAR system no later than 5:30 p.m. EST on the day the report was due or the last day of the applicable grace period. For the purpose of determining an issuer’s eligibility for quotation on the OTCBB, no exceptions to the 5:30 p.m. EST cut off will be made absent the existence of extraordinary circumstances in the sole discretion of SEC staff.

Initial Filing Deadline Delinquency Example: An OTCBB issuer that fails to file a periodic financial report on the day it is due by 5:30 p.m. EST receives a “strike,” even if the filing is made on the following day. If such a “strike” is the issuer’s third, the issuer will be removed form the OTCBB. A hearing request will stay the removal of the issuer’s securities from the OTCBB, pending the Hearing Officer’s decision, but only if it is accompanied by evidence / receipt of a wire transfer in the amount of $4,000. The stay of removal pending the Hearing Officer’s decision will not provide the issuer with additional time in which to cure ineligibility, if the issuer was, in fact, delinquent at the time that the filing was due.
Grace Period Filing Deadline Delinquency Example: An OTCBB issuer that fails to file a periodic financial report on the day it is due and then subsequently fails to file the periodic financial report by 5:30 p.m. EST on the last day of the applicable grace period (in the case of a first or second “strike”) will be removed from the OTCBB. A hearing request will stay the removal of the issuer’s securities from the OTCBB, pending the Hearing Officer’s decision, but only if it is accompanied by evidence / receipt of a wire transfer in the amount of $4,000. The stay of removal pending the Hearing Officer’s decision will not provide the issuer with additional time in which to cure ineligibility, if the issuer was, in fact, delinquent at the end of the applicable grace period.

Can a company appeal the removal of its securities from the OTCBB?
The issuer of a security quoted on the OTCBB may appeal the removal of its securities to a Hearing Officer appointed by the FINRA Office of Hearing Officers pursuant to the NASD Rule 9700 Series. The request for an appeal hearing must be received by the Office of Hearing Officers at least two days prior to the scheduled removal of the security, together with evidence that the issuer has paid a $4,000 hearing fee. A hearing request will stay the removal of the issuer’s securities from the OTCBB, pending the Hearing Officer’s decision. . Unless otherwise ordered by the Hearing Officer, hearings will be conducted via telephone. The Office of Hearing Officers will provide the issuer at least 5 business days notice of the hearing unless the issuer waives such notice.
At a brief telephonic hearing, the Hearing Officer will determine whether the Company’s securities are eligible for quotation on the OTCBB under NASD Rules 6530 and 6540. The Hearing Officer will consider only the issues of whether the issuer’s security is then eligible for quotation on the OTCBB and/or whether the issuer filed a complete report by the applicable due date taking into account any extensions pursuant to SEC Rule 12b-25. The Hearing Officer does not have discretion to grant any extensions of time for ineligible securities to become eligible.

May a company appeal the Hearing Officer’s decision?
The issuer may not appeal the decision within FINRA, but before a Hearing Officer’s decision is issued, it is considered and may be called for review by the National Adjudicatory Committee (NAC). If the decision is called for review, the NAC will issue a decision, which will constitute the final FINRA action. Otherwise, the Hearing Officer’s decision will be issued, and will constitute the final FINRA action. The issuer may appeal the final FINRA action (either the Hearing Officer’s decision or the NAC decision, as applicable) to the SEC.
Filing Information

What are the filing requirements for being on the OTCBB?
Issuers of all securities quoted on the OTCBB are subject to periodic reporting of financial information to the SEC, banking, or insurance regulators. Issuers who file with the SEC via EDGAR are not required to submit hard copy filings with the OTCBB or FINRA. However, the OTCBB must receive hard copy filings for issuers which do not file via EDGAR or those which file with other regulatory agencies. For information on how to submit hardcopy filings to the OTCBB, click here.

Are OTCBB company auditors required to be registered with the Public Company Accounting Oversight Board (PCAOB)?
Effective October 22, 2003, auditors of all domestic public companies must be registered with PCAOB. As specified in Section 102 of the Sarbanes-Oxley Act, it is unlawful for an auditor of a public company to issue an audit opinion if they are not registered with PCAOB. Filings with audit opinions of an unregistered PCAOB auditor are considered to be incomplete and not in compliance with Rule 6530.

What can my company do to make sure our filings are processed in a timely manner by FINRA?
Issuers should verify that the data included on filing tag headers is correct, including the filing type, fiscal year end and period end dates. In addition, please notify FINRA of any change in your company’s fiscal year end. You may notify FINRA via email OTCBBFeedback@finra.org.

If Section 302 certifications are not included in, for example, a Form 10-K or 10-Q filing, and an amendment will be filed to include the certifications, must the entire document be re-filed or can the amendment include only the signature pages?
Because the certification relates to the entire Form 10-K or 10-Q filing, the amendment should include the entire filing, not just the signature pages.

Why is it important to notify FINRA when my company changes its fiscal year end?
FINRA may incorrectly identify an issuer as delinquent and append an “E” to the issuer’s trading symbol if it does not have record of a company’s current fiscal year end. Please notify FINRA immediately upon filing your Form 8K to record a change in fiscal year end. You may notify FINRA via email at OTCBBFeedback@finra.org.

Why is it important to notify FINRA when my company first obtains or changes its Central Index Key or CIK Code?
Because our compliance program uses this code to link to filings made with the SEC, FINRA may incorrectly identify an issuer as delinquent and append an “E” to the issuer’s trading symbol if it does not have record of a company’s current CIK code. Please notify FINRA immediately upon first obtaining or changing an existing CIK code. You may notify FINRA via email at OTCBBFeedback@finra.org.

Why is it important to file a Notification of Late Filing (Form 12b-25)?
To ensure our compliance system does not identify a company as delinquent in error, it is important that companies file a Notification of Late Filing on or before the filing due date. If a Notification of Late Filing is filed after the filing due date, the company’s symbol may be appended with a “E”.
Trading Symbols

What does a fifth character “E” indicate for an OTCBB security?
The fifth character “E” on an OTCBB trading symbol indicates that FINRA does not have information which demonstrates that the issuer of the security is compliant with the filing requirements of Rule 6530, either because the issuer is delinquent in the required filings, has filed an incomplete filing, or, for non-EDGAR filers, because FINRA has not been provided a copy of the most recent filing.
The purpose of appending an “E” to the security symbol is to alert all interested parties that the security will be removed from the OTCBB unless evidence of compliance is provided prior to the end of the applicable grace period (30 days for EDGAR filers, 60 days for non-EDGAR filers). Anyone possessing evidence of compliance with Rule 6530 may provide that information by contacting the OTCBB Issuer Filings Department.

My company filed on time, why was an “E” added to our trading symbol?
Other possible explanations for an “E” on the trading symbol include:
The audit opinion is qualified or was not provided
No SAS-100 review was performed (quarterly filings only)
The required 302 Certification was not included in the submission to the SEC
The required 906 Certification was not included in the submission to the SEC
The auditor was not registered with the Public Company Accounting Oversight Board
The 404 opinion was not provided
The filing header was incorrect. It is essential that the filing type, fiscal year end and period end dates are recorded correctly on both the cover page and the document tags.
If the certifications are missing from your filing, FINRA will not consider the report to be complete. You must amend your filing to include the certifications. Because the certification relates to the entire Form 10-K or 10-Q filing, the amendment should include the entire filing, not just the signature pages. You should also notify the OTCBB Issuer Filings Department to get the “E” removed. Please see the next FAQ for further instructions.

How do I get the “E” removed from my trading symbol now that my company filings are current?
In order to demonstrate compliance with Rule 6530 and get the “E” removed from an issuer’s trading symbol, please call the OTCBB Hotline in the OTCBB Issuer Filings Department. Please leave the following information on the voicemail: your name and phone number, the company name and trading symbol, and filng type and date submitted. It is important to note that you will not receive a return call if your filing compliance is confirmed. Instead, you should check the Daily List for confirmation that your trading symbol will be changed to remove the “E” on the following business date. If compliance is not demonstrated before the publication time of the Daily List, approximately 2:00 PM, then it may not be possible to remove the “E” in time for the next trading day. In that case, you should check the Daily List the day after you call the hotline for notification that the symbol will be changed at the opening of the market on the second day after you made the call to demonstrate compliance.

How long does it take to get an “E” removed from my trading symbol?
Generally, it takes one business day after compliance is verified. However, depending on timing of the company’s filing and verification by FINRA. it may take two business days.

Can an issuer reserve a symbol?
No, symbols may not be reserved for OTC securities, nor can we honor requests for specific issue symbols.
Form 211 (SEC Rule 15c2-11)

What is a Form 211?
The Form 211 is the form which must be completed and submitted to FINRA OTC Compliance Unit to initiate or resume quotations in the OTCBB, the “Pink Sheets”, or any other comparable quotation medium pursuant to SEC Rule 15c2-11. To view or print the Form 211, please visit our Forms Page. A 211 Addendum Form must be submitted in addition to the Form 211 for the OTCBB.

After a Form 211 is filed, how long until the security can begin quotation on the OTCBB?
There is no standard time to process a 211 and clear the market maker to begin quoting a security on the OTCBB. The time it takes to review a 211 may vary significantly depending on many factors including whether or not FINRA has to request additional information from the market maker that submitted the form and upon how long it takes the market maker to respond to requests for additional information.

How do I check the status of a Form 211 filing?
Contact the FINRA OTC Compliance Unit. Please note that the Form 211 review process is proprietary and, thus, FINRA will only discuss details of the filing or review directly with the firm that submitted the Form 211.

Do financials submitted with the Form 211 have to be audited?
Yes, the periodic reporting requirements under NASD Rule 6530 require annual audits of an OTCBB issuer’s financial statements. However, current FiNRA rules do not require the financial statements of Pink Sheet issuers to be audited, but they should be prepared in accordance with GAAP or, for foreign issuers, in accordance with their home country’s accounting standards.

Do I have to file a Form 211 for a security delisted from NASDAQ?
A delisted NASDAQ Issuer that wishes to be quoted on the OTCBB should contact their market makers to request that they complete a Form 211 for review and processing. See Delisting From NASDAQ for more information.

Do I have to file a Form 211 for a New York Stock Exchange or American Stock Exchange delisted security?
Yes. Prior listing on NYSE or AMEX does not exempt a Market Maker from the Form 211 filing requirement.
Trade Halts

Are there trade halts in OTCBB securities?
Pursuant to NASD Rule 6545, in circumstances in which it is necessary to protect investors and the public interest, NASDAQ may halt trading and quotation in securities or American Depository Receipts (“ADRs”) included in the OTCBB if (subject to certain important exceptions specified in the Rule):
The OTCBB security (or the security underlying the OTCBB ADR) is listed on a foreign market or registered with a foreign regulatory authority, and the foreign market or regulatory authority halts trading in the security for regulatory or public interest reasons;
The OTCBB security (or the security underlying the OTCBB ADR) is a derivative or component of a NASDAQ-listed or an exchange-listed security, and NASDAQ or the exchange halts trading in the underlying security; and
The OTCBB issuer (or the issuer of the security underlying the OTCBB ADR) does not provide, in a timely manner, the Financial Industry Regulatory Association, (FINRA) with information required by SEC Rule 10b-17.
Additionally, trading and quotation in OTCBB may be halted if ordered by the SEC or pursuant to any other lawful government order.

Notification of all trade and quote halts and resumptions will be posted to the Trade Halt section of this website.

If you would like to subscribe to automatically receive notification of trade halts and resumptions via email, login and create an Email Profile (or modify your existing profile) and then select “Trade Halts” under Subscription types.

How do I halt trading in my stock?
NASDAQ does not have the authority to halt trading in OTCBB securities for the dissemination of news. Trading in OTCBB securities can only be halted pursuant to NASD Rule 6545.
Press Releases

Why isn’t my company’s press release on OTCBB.com?
OTCBB.com does not provide a facility for issuers to post press releases directly to the site. Our news stories come from a market data vendor. To get your company’s story displayed on OTCBB.com, please go to the Contact Page and see Press Release for information on who to contact.

Where at FINRA do I need to send my company’s press releases?
OTCBB issuers are not required to submit press releases to FINRA or the OTCBB. Because there is no trade halt authority for the dissemination of material news, FINRA does not review OTCBB issuers’ press releases.
Quotes

How can I get trade and quote data for OTCBB securities?
Delayed quotes for OTCBB securities are available on the OTC Bulletin Board Web site. For each security, site users are able to obtain, on a 15-20 minute delayed basis, the inside bid and ask prices, the current day’s high, low, and last sale values, cumulative share volume for the current trading day, the previous day’s closing price, percentage change from that price, etc. To access quote information, enter a trading symbol in the Symbol box on the OTCBB Home Page and click on the “Get Info” button. Individual market maker quotes are also available by entering the trading symbol and selecting “Level II”.
Current and delayed trade and quote information are available for OTCBB securities from some market data vendors. Please visit our Vendor Page for information on contacting these data vendors.

Why don’t I get Inside Quote (Best Bid and Best Ask) Information for all OTCBB securities?
There must be at least two bid and two ask quotations to calculate the inside market for a security. Because only one Market Maker is required on the OTCBB and Market Makers are permitted to post one-sided quotes and unpriced indications of interest, there may be securities for which inside quotes can not be calculated.

My order hasn’t been executed yet, but I don’t see it in the quotes. Why not?
OTCBB securities are not subject to the Limit Order Display requirements. A market maker is not required to reflect a customer’s order in its published quotation. Limit Order Display is not the same as Limit Order Protection (Manning) which does apply to the OTCBB. NASD Rule 6541 prohibits member firms from “trading ahead” of customer limit orders that a member accepts.

Why can’t I get a quote on an other-OTC security?
Because other-OTC securities are not quoted on the OTCBB, you will not be able to access quotes on these stocks through the OTCBB.com website, the NASDAQ Workstation, or any other NASDAQ product. If they are quoted on the Pink Sheets, you may be able to obtain quotes for other-OTC securities on the Pink Sheets website at www.pinksheets.com.

I have to admit, I’ve seen enough. I am sick and tired of being ticked off and taking it personal every time I hear about a client with lack of funds getting ripped of.  I see fly-by-night organizations come into existence capitalizing off of the sweat, agonizing hours in concept creation of organizations that are actual facilitators, not brokers.

I’m sure there are some good brokers out there but where are they? I have yet to find a broker that is able to take a company through the ridiculously time consuming process of a corporate structuring process, IPO facilitation, investor relations strategies and service negotiation, as well as real pr and expansion via merger and acquisition identification. There are simply too many pieces that are far to important to leave out. Leave one small element from above out of the process and your deal comes to a screeching halt. When you are considering a consulting firm for one or all or any of the above services, don’t go off of the names they drop, it’s meaningless, stay away from fast talking salesmen (a real strategies consultant would never in a million years try to sell you on their services because if they have to convince you that they are the right partner it is sure to be a nightmare process).

Every full service consultant that facilitates the above in house (accept for legal, PCAOB and IR which you have to outsource to best serve the client and stay within compliance as not to jeopardize the client companies success.

What you should do is research the industry so that you can come up with the right questions to ask the consultant. Ask them empirical based questions (don’t ask for trading symbols, any legit consultant will protect the confidentiality of their client base because if they did it properly they are still working with the client on back end processes such as M and A and globalization), ask them how many journals or industry blogs pick up their articles and get some titles. They should be able to email you a boat load of titles.

Ask them about their pre public structuring process. Are they a broker dealer or do they have a securities license (they don’t need them, actually like us, the most experienced consultants I know get most of their work from licensed entities so it’s counterproductive to compete with your referral sources), do they create and distribute ‘how to’ videos?

Are they a high volume consultant (we are considered incredibly high volume for our industry and guess how many transactions we do a year? I mean corporate structuring, IPO facilitation and complete post public solutions. We will only do around 10 of these full service transactions this year and we do more volume than any other full service firm in the market place) this is not a volume game. Quality firms will invest in your company because for the good strategists, the money is on the back end when the company is public so the consultant will pay for the expensive parts of the process such as the SEC comments and S1 filing, market maker research and attachment and investor relations market creation partnering. The average industry retainer is  around $25k to $50k plus your PCAOB audit and transfer agent fees also don’t forget about Edgarizing during the s1.

Did you answer an advertisement? If so, walk away now because the best consultants will never, EVER advertise because when the client is ready, they will find the consultant and the best client is one who is educated on the process. Clients will read the blog, articles, press releases and other free information material and that will help them decide whether to use the consultant or not. There are so many regulations in this industry one can hardly advertise at all unless they want the Feds knocking on their door for non compliance.

Do they have an investor base of insiders to make introductions so you don’t have to beg borrow and steel in order to get the 35 investors needed to qualify to go public? I’m not saying that they should blindly solicit or break the law but the best consultants have a solid following of investors that invest in practically every transaction they do because there is such an ungodly amount of money in pre IPO investing if the consulting agent has a track record of success. Stay away from the goofballs that say they have a list of investors they will email an introduction to in order to raise capital for you as in 2010 this method is absolutely, 100% impossible with all the latest solicitation legislation in place, they would be shut down in a heartbeat. Another thing, if you have to borrow the money to go public, you shouldn’t go public. If you can’t cut a check for the retainer and the PCAOB audit they you should just stay private and work on stabilizing revenues. Ask the consultant if they have an office, if they are working out of a cheap condo in Texas you can be quite sure that they are talking to you from their living room couch, flipping through the sports channels and sipping a spot of whisky while lounging in their underwear when they talk to you and by all means if they admit to working out of their house, don’t go for the lie that they do so by choice. This is a cream of the crop professional business genre and an office is mandatory for maintaining a corporate image and respectability.

Clients, partner companies, lawyers, auditors, market makers and investor relations firms will always drop in for strategies meetings and who is going to have a meeting with one of those groups in their kitchen? Get real! If you are trying to get a refund from a consultant and they are not issuing one then it’s for one of two reasons: first, you received the services stated in the contract and you are not being realistic or second, they spent the money trying to survive as a start up broker. There is no in between. In this industry, consultants automatically take a solid equity position in the clients company and after a very short time the consultant will have a secondary corporation also referred to as a holdings company with tens of millions of dollars in stock holdings that they can monetize six ways to Sunday by using it for collateral without even having to actually sell their shares into the marketplace. If you got ripped off you should find out where the consultant is located and trace them back five years.

If they are a conman they will have moved from the north east to the southwest or south. I can’t tell you how many, so called, IPO consultants fled NYC the financial center of the world or Boston, the microcap center of the globe for places like Florida and Texas and chances are they owe a lot of money to a lot of people.

Lastly if you contact them for a refund and it’s because they didn’t deliver on services listen closely for a response. Do they try to justify their failure by blaming a third party? Do they say things like, “this guy screwed us and we’re going to sue him” don’t fall for this deception, it’s blatant maneuver to get you off track so that they can step out of the loop of responsibility.

If they say anything like this they know they are caught, the jig is up. Now you send them a cease and desist, contact their state attorney general (also, contact the AG in the other states they’ve lived in over the past five or six years, chances are they already have a file). Next contact the securities watchdog organizations in those states and give them all the info you have collected about the partners in the firm and the company itself.

In order for a security to be eligible for quotation by a market maker on the OTCBB, the security must be registered with the Securities and Exchange Commission (SEC) or other federal regulatory authority that has proper jurisdiction (see below) and the issuer must be current in its required filings with such federal authority.
Domestic issues quoted on the OTCBB are limited to the following securities:

securities of issuers that make current filings pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (“Act”);
securities of depository institutions that are not required to make filings under the Act, but file publicly available reports with their appropriate regulatory authorities;
securities of registered closed-end investment companies; and
securities of insurance companies that are exempt from registration under Section 12(g)(2)(G) of the Act.
Foreign issues and ADRs must be registered with the Securities & Exchange Commission (SEC) pursuant to Section 12 of the Securities Exchange Act of 1934
source: otcbb.com

Listing and Eligibility Requirements

What are the “listing” requirements for the OTCBB?
Because the OTCBB is a quotation service for FINRA Market Makers, not an issuer listing service or securities market, there are no listing requirements that must be met by an OTCBB issuer. Accordingly, there are no financial requirements and there is no minimum bid price requirement.

Are OTCBB companies considered to be “listed”?
No, the OTCBB is not an issuer listing service, and there is no listing agreement between either the OTCBB or NASDAQ and the issuer. There are, however, certain requirements an issuer must meet in order for its securities to be eligible for a market maker to enter a quotation on the OTCBB.

What are the eligibility requirements for the OTCBB?
In order for a security to be eligible for quotation by a market maker on the OTCBB, the security must be registered with the Securities and Exchange Commission (SEC) or other federal regulatory authority that has proper jurisdiction (see below) and the issuer must be current in its required filings with such federal authority.
Domestic issues quoted on the OTCBB are limited to the following securities:

securities of issuers that make current filings pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (“Act”);
securities of depository institutions that are not required to make filings under the Act, but file publicly available reports with their appropriate regulatory authorities;
securities of registered closed-end investment companies; and
securities of insurance companies that are exempt from registration under Section 12(g)(2)(G) of the Act.
Foreign issues and ADRs must be registered with the Securities & Exchange Commission (SEC) pursuant to Section 12 of the Securities Exchange Act of 1934.

See Filing Information for more information on filing requirements and how FINRA processes OTCBB issuers’ filings.

How many market makers are required for a security to be on the OTCBB?
A minimum of one market maker is needed. Instructions on how to get a list of market makers are above.

What are the listing fees for the OTCBB?
There are no listing fees for the OTCBB. Market makers do pay a fee for participating in the OTCBB of $6 per security per month.

Does the OTCBB have shareholder approval rules?
No. The OTCBB does not have shareholder approval rules.

Is an OTCBB issuer required to have an audit committee?
OTCBB issuers may choose to have an audit committee, and certain OTCBB issuers may be required to have an audit committee by virtue of an applicable law or rule. However, the OTCBB rules do not separately require OTCBB issuers to establish or maintain an audit committee.

How does a company get on the OTCBB?
An issuer may not submit an application directly to be quoted on the OTCBB. A market maker must sponsor the security and demonstrate compliance with SEC Rule 15c2-11 before it can initiate a quote in a specific security on the OTCBB. Please visit our How To Quote Securities page in Market Maker Services for detailed information on quoting a security on the OTCBB.

How does a security delisted from NASDAQ or another exchange get on the OTCBB?
For a security being delisted from NASDAQ, NYSE, or AMEX, a Market Maker must file a Form 211.

When can a company be “delisted” or removed from the OTCBB?
OTCBB issuers that become delinquent in their required regulatory filings will have their securities removed from the OTC Bulletin Board. Further, all OTCBB issues must maintain at least one registered Market Maker to remain on the OTCBB. When the last Market Maker in a security withdraws from the stock, the issue is removed from the OTCBB after 4 days pursuant to Rule 15c2-11. An issuer cannot voluntarily withdraw from the OTCBB; only a market maker can voluntarily withdraw its quote from the OTCBB. If an OTCBB security becomes listed on NASDAQ or another exchange, it will no longer be eligible and will be removed from the OTCBB.

How does the three strikes ineligibility rule work in practice? Pursuant to NASD Rule 6530(e), any OTCBB issuer that is delinquent in its reporting obligations three times in a 24-month period and/or is actually removed from the OTCBB for failure to file two times in a 24-month period is ineligible for quotation on the OTCBB for a period of one year. For a security to be eligible for quotation on the OTCBB, NASD Rule 6530 requires, in part, that the issuer of the security is required to file reports with the Commission or that the issuer of the security is a bank or savings associations (or holding company for such entities) that is not required to file reports with the Commission and, instead, makes filings with its applicable regulator. In addition to the foregoing, the issuer of the security must be current in its reporting obligations, subject to a 30 or 60 day grace period, as applicable. An OTCBB issuer will be deemed delinquent in its reporting obligations if the issuer fails to make a required filing when due or has filed an incomplete filing. In order for a filing to be complete, it must contain all required certifications and have been reviewed or audited as applicable, by an accountant registered with the Public Company Accounting Oversight Board.

How does FINRA determine whether an OTCBB issuer’s periodic financial report was filed timely?
For the purpose of determining the extent to which an issuer has filed its periodic financial reports in a timely fashion or has filed its periodic financial reports within the applicable grace period (in the case of an issuer that did not meet the initial filing deadline), the periodic financial report in question must have been received and time stamped by the Commission’s EDGAR system no later than 5:30 p.m. EST on the day the report was due or the last day of the applicable grace period. For the purpose of determining an issuer’s eligibility for quotation on the OTCBB, no exceptions to the 5:30 p.m. EST cut off will be made absent the existence of extraordinary circumstances in the sole discretion of SEC staff.

Initial Filing Deadline Delinquency Example: An OTCBB issuer that fails to file a periodic financial report on the day it is due by 5:30 p.m. EST receives a “strike,” even if the filing is made on the following day. If such a “strike” is the issuer’s third, the issuer will be removed form the OTCBB. A hearing request will stay the removal of the issuer’s securities from the OTCBB, pending the Hearing Officer’s decision, but only if it is accompanied by evidence / receipt of a wire transfer in the amount of $4,000. The stay of removal pending the Hearing Officer’s decision will not provide the issuer with additional time in which to cure ineligibility, if the issuer was, in fact, delinquent at the time that the filing was due.
Grace Period Filing Deadline Delinquency Example: An OTCBB issuer that fails to file a periodic financial report on the day it is due and then subsequently fails to file the periodic financial report by 5:30 p.m. EST on the last day of the applicable grace period (in the case of a first or second “strike”) will be removed from the OTCBB. A hearing request will stay the removal of the issuer’s securities from the OTCBB, pending the Hearing Officer’s decision, but only if it is accompanied by evidence / receipt of a wire transfer in the amount of $4,000. The stay of removal pending the Hearing Officer’s decision will not provide the issuer with additional time in which to cure ineligibility, if the issuer was, in fact, delinquent at the end of the applicable grace period.

Can a company appeal the removal of its securities from the OTCBB?
The issuer of a security quoted on the OTCBB may appeal the removal of its securities to a Hearing Officer appointed by the FINRA Office of Hearing Officers pursuant to the NASD Rule 9700 Series. The request for an appeal hearing must be received by the Office of Hearing Officers at least two days prior to the scheduled removal of the security, together with evidence that the issuer has paid a $4,000 hearing fee. A hearing request will stay the removal of the issuer’s securities from the OTCBB, pending the Hearing Officer’s decision. . Unless otherwise ordered by the Hearing Officer, hearings will be conducted via telephone. The Office of Hearing Officers will provide the issuer at least 5 business days notice of the hearing unless the issuer waives such notice.
At a brief telephonic hearing, the Hearing Officer will determine whether the Company’s securities are eligible for quotation on the OTCBB under NASD Rules 6530 and 6540. The Hearing Officer will consider only the issues of whether the issuer’s security is then eligible for quotation on the OTCBB and/or whether the issuer filed a complete report by the applicable due date taking into account any extensions pursuant to SEC Rule 12b-25. The Hearing Officer does not have discretion to grant any extensions of time for ineligible securities to become eligible.

May a company appeal the Hearing Officer’s decision?
The issuer may not appeal the decision within FINRA, but before a Hearing Officer’s decision is issued, it is considered and may be called for review by the National Adjudicatory Committee (NAC). If the decision is called for review, the NAC will issue a decision, which will constitute the final FINRA action. Otherwise, the Hearing Officer’s decision will be issued, and will constitute the final FINRA action. The issuer may appeal the final FINRA action (either the Hearing Officer’s decision or the NAC decision, as applicable) to the SEC.

Source: otcbb