- A new “promotion risk flag” designation will be introduced on websites in the first quarter of 2018 to warn market participants of potential risks of trading a security during a promotion campaign
- Best practices are codified, listing the obligations of public companies to create transparency for investors
- The goal is also to identify ‘bad actors’ who mislead investors, disrupt pricing mechanisms of OTC markets and fraudulently promote campaigns that harm the integrity of public markets
OTC Markets Group Inc. (OTCQX: OTCM) has released a new stock promotion policy in conjunction with proposed established best practices for public companies (http://dtn.fm/X6meG). The goal is to ensure transparency for investors and better address the problem of fraudulent stock promotion. The new policy and best practices codify core principles of OTC Markets’ disclosure-based philosophy.
OTC Markets Group Inc. operates the U.S. and global securities that trade on the OTCQX® Best Market, the OTC® Venture Market and the Pink® Open Market. Its Issuer Compliance team is Washington, D.C.-based. It is responsible for compliance with OTCQX and OTCQB qualifications and ensuring transparency among the 10,000 U.S. and global securities that trade on its exchanges.
It also works to allow issuers to provide adequate current information to the marketplace. Issuer Compliance is engaged in continuous information sharing with the Financial Industry Regulatory Authority (FINRA), the SEC, other regulators and the exchanges.
Fraudulent stock promotion is an industry-wide concern that can mislead investors and disrupt the pricing mechanisms of OTC markets and national exchanges. Anonymous market manipulators can abuse today’s technology-driven environment, fraudulently promoting campaigns that harm the integrity of public markets. These practices can also impede the capital formation process with the potential of harming the reputation of small companies.
The goal of the new policy and list of best practices is to drive greater transparency while educating investors and mitigating the damage caused by manipulative stock promotion. A new “promotion risk flag” designation on OTC Markets Group websites is designed to alert market participants of potential risks associated with trading a security during a promotion campaign. The “promotion risk flag” designation will be introduced in the first quarter of 2018.
“We believe the SEC should modernize its promotion regulations to ban anonymous, paid stock promotion and require clear disclosure when there is promotion paid for by third-parties, allowing for markets to better identify market manipulators,” R. Cromwell Coulson, president and CEO, OTC Markets Group, noted in a news release.
The concept is to identify bad actors hiding among the private financing markets and accelerate real-time enforcement. OTC Markets Group outlines the obligations of issuers. These include publicly identifying securities being promoted, singling out fraudulent promotion campaigns and conforming to Best Practices for Issuers.
Liz Heese, OTC Markets Group Executive Vice President of Issuer and Information Services, explained that “investor transparency” is important for reputable public companies, and they need to proactively address and dispel unfounded rumors and correct that misinformation. “Our goal is to provide the framework of best practices that will foster better informed and more efficient public markets,” she said.
For more information, visit the company’s website at www.OTCMarkets.com
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