Jul 13, 2018

Are You Compliant With The New OTCQB Listing Standards Implemented In Q2 2018?

Going Public By Lahdan Rahmati

The OTC Markets Group implemented new standards for companies planning to list on the OTCQB® Venture Market (OTCQB®) effective May 20, 2018 in order to improve the information and trading experience for investors. The OTCQB® is for early-stage and developing companies while the OTCQX® Best Market is for established, investor-focused companies.

Requirements for Admission to OTCQB®

A company must meet all of the following conditions to be considered for admission to OTCQB®:

1) Audited Financials: Audited annual financial statements must be prepared in accordance with U.S. GAAP or IFRS containing an audit opinion that is not adverse, disclaimed, or qualified. Audits must be conducted by an auditor registered with the Public Company Accounting Oversight Board (PCAOB).

2) Current Disclosure: Current disclosure must be made available and conform to one of the following reporting standards: a) SEC Reporting Standard; b) Regulation A Reporting Standard; c) Bank Reporting Standard; d) International Reporting Standard; or e) Alternative Reporting Standard.

3) Bid Price of $0.01: Proprietary priced quotations must be published by a Market Maker in OTC Link ATS with a closing bid price of at least $0.01 a) for each of the 30 calendar days immediately preceding the Company’s application for OTCQB®; and b) as of the date OTC Markets Group approves its application to join the OTCQB® market.

4) 50 Beneficial Shareholders: A company must have at least 50 Beneficial Shareholders, each owning at least 100 shares.

5) Freely Traded Public Float: A company must have a freely traded Public Float of at least 10% of the total shares issued and outstanding of the class of security to be traded on OTCQB®.

6) Bankruptcy or Reorganization Proceedings: A company must not be subject to any bankruptcy or reorganization proceedings.

7) Corporate Governance: This requirement applies only to Alternative Reporting Companies and mandates a company to have a board of directors that includes at least two Independent Directors and an Audit Committee, a majority of the members of which are Independent Directors.

Initial and Ongoing Disclosure Requirements

After a company’s OTCQB® Application, Agreement and Fees have been received, the company will be granted access to the OTC Disclosure and News Service to file initial disclosure documents in compliance with the new standards. There are some nuances with respect to the initial and ongoing disclosure OTCQB® companies must provide to the investing public. For example, companies on OTCQB® as of May 20, 2018 will not be subject to the ongoing beneficial shareholder requirements or the ongoing public float requirements until May 20, 2020. In addition, a company applying to OTCQB® may submit a written request to qualify for certain exemptions to the OTCQB® Standards which may be granted by OTC Markets Group in its sole and absolute discretion.

If you are interested in learning more about the new OTCQB® Standards, please contact me at (202) 869-0888 (ext. 107) or Lou Bevilacqua at (202) 869-0888 (ext. 100). You can also contact our general business lawyers email at