Can Brokers Recommend OTC Stocks?


A common question of microcap management teams looking to increase their shareholder base is; “Can Brokers Recommend OTC Stocks?

The short answer is: YES!

The long answer is a little more complex. Mathew Fuchs, EVP of Market Data at OTC Markets Group shed some light on this topic in a recent post on the OTC’s blog (yes, the OTC Markets has a blog!). 

According to Fuchs, FINRA Rule 2114 (Recommendations to Customers in OTC Equity Securities (The OTC Rec Rule)) reads as follows: 

“No member or person associated with a member shall recommend that a customer purchase or sell short any OTC Equity Security, unless the member has reviewed the current financial statements of the issuer, current material business information about the issuer, and made a determination that such information, and any other information available, provides a reasonable basis under the circumstances for making the recommendation.”

So, it looks like brokers can recommend OTC stocks if they have reviewed a companies public informationand determine that the information provides “a reasonable basis under the circumstances for making the recommendation.”  

While FINRA Rule 2114 is a great example of a grey area, there are a number of exemptions that allow brokers to recommend OTC stocks without entering a grey area.

3 important exemptions to the OTC Rec Rule are:

1. Price Exemption: 603 Securities

2. Asset & Shareholder Equity Exemption: 631 Securities

3. Bank/Insurance Company Exemption: 711 Securities

For more answers to the question – “Can Brokers Recommend OTC Stocks?” – check out THIS POST on the OTC Market’s blog




OTC Stocks






OTC Markets

OTC Markets Group


FINRA Rule 2114

OTC Rec Rule

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