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OTCQB Proposed Standard Changes Allow Regulation A Listing

Proposed Amendments Would Allow Regulation A Tier 2 Offerings for Listing on OTCQB

The SEC's amendments to Regulation A of the Securities Exchange Act became effective on 6-19-2015. If all requirements are met, Regulation A allows for smaller companies to offer and sell up to $50 million in equity in a one-year period while relying on the Regulation A exemption under the registration requirements mandated by the Securities Act. Click here to learn more about the amendments to the Regulation A rule.

In light of the amendments to Regulation A, OTC Markets has proposed changes to their standards. These changes would better conform their standards to Tier 2 offerings of Regulation A which would allow issuers to become eligible for listing on the OTCQB Venture Marketplace. The changes to the standards conform the disclosure requirements of the OTCQB with that of Regulation A.

Summary of Proposed Changes

The proposed standard changes will require OTCQB companies that rely on Regulation A to meet the following requirements and obligations:

  • Initial Disclosure: File all reports via EDGAR. Annual financial reports must be prepared and audited pursuant to Regulation A.
  • OTCQB Certification: Submit periodic reports to the SEC under Tier 2 of the regulation.
  • Ongoing Disclosure: Continually file all required annual, semi-annual, and additional interim reports via EDGAR. Annual financial reports must be prepared and audited pursuant to Regulation A.

In addition to the changes in relation to Regulation A, the proposed amendments provide the following guidelines, requirements, and clarifications for reporting companies:

  • The bid price test must be completed at the time the application is approved in addition to the date the application is submitted.
  • To be considered for readmission to the OTCQB Marketplace after removal for non-compliance under Section 4.1 of the OTCQB standards, companies must meeting one of the following conditions:
    • Re-establish compliance within 30 days of the date of removal while not partaking in any corporate action during the period.
    • If a corporate action is announced or completed during the 30 days from removal, the Company must submit a new OTCQB Certification for assessment by the OTC Markets Group.
    • If compliance is re-established more than 30 days and less than six months after the date of removal, the company must submit a new OTCQB Certification for assessment by the OTC Markets Group.
    • If compliance is re-established more than six months after the date of removal, the Company must submit a new OTCQB Application. The application will be assessed pursuant to Section 1.4 of the OTCQB Standards. An additional application fee is due upon the submission of the application.
  • Section 4.5 of the OTCQB standards have been revised to convey that companies are removed, suspended, or withdrawn from the OTCQB marketplace may continue to participate in certain OTC Market Group services. Participation is contingent upon the terms and conditions listed in the OTCQB Application and Agreement.

The effective date of the proposed changes is Friday, July 10, 2015.

Colonial can assist your company with its securities offerings and transfer agent compliance needs.

Published: June 22, 2015

Author: Dan Carter