There is talk within the industry that the OTC Bulletin Board as we know it may be coming to an end. Why? Let’s look at the facts. For starters, the OTCBB was created twenty years ago as a result of the Penny Stock Reform Act of 1990 as a way of differentiating and promoting small businesses in the United States. The OTCBB is currently owned by the Financial Industry Regulatory Authority, better known as FINRA. Certainly there is a conflict of interest in both owning and regulating at the same time, but that’s not what’s really important. What is relevant is that the system has received little upgrades in those twenty years and the platform is now what many consider archaic as FINRA has done little to promote the OTCBB and even less to keep it up to date with technology. Also factual, FINRA has had the OTCBB up for sale since last September.
So what will become of things if the OTCBB disappears? There are several options. The OTCBB could be purchased and undergo a major overhaul to update the technologies. A more viable answer, however, is the possible incorporation with a platform such as the emerging Pink OTC Markets. The Pink OTC Markets purchased the nearly 100 year old Pink Sheets and has been growing and transforming the quotation platform consistently over the last few years. What started as a quotation system for only small, non-exchanged listed companies has now grown into a three-tier ranking system that includes about 99% of all OTC listed companies. In fact, there are less than 60 companies that are currently only quoted on the Bulletin Board.
Pink OTC is a logical choice for many reasons, but its three-tier system is especially enticing for investors to differentiate the quality of a corporation. The process is along the same lines as being a publicly traded company. Each exchange carries regulations and a hierarchy (i.e. NYSE, NASDAQ, AMEX). The same would run true for the OTCBB. In order to not try and have to re-write every ticker for every OTC listed company, the Bulletin Board exchange would have sub-listings. Presently, Pink OTC’s three tiers are:
• Pink Sheets: for companies that undertake minimal reporting and disclosure
• OTCQB: for registered and SEC reporting companies
• OTCQX: for companies that submit themselves to further scrutiny and meet specific minimum thresholds
The OTCQX is designed to be the final step as companies look to move to larger exchanges.
A key component to the Pink OTC Markets is the desire to provide protection to investors, putting an end to scam corporations and legitimizing the OTC industry. In a world that has become wrought with inconsistencies and its reputation damaged virtually beyond repair, Pink OTC is stepping forth to correct years of damage. “We are sending the message that this is not the old OTC,” said Tim Ryan, the head of business development at Pink OTC Markets.
Pink OTC has invested considerable time and finances in developing their quotation platform to the state-of-the-art technological level that it now is. It would seem logical that they may be interested in advancing their business strategy to the next level by purchasing the OTCBB. Rumor has it that the two organizations (FINRA and Pink OTC) are in negotiations, but no official press has been released regarding offers being submitted or accepted.
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