OTC Markets Working on Potential Solutions to Stock Promotions & Toxic Financing


In the OTC Markets’ most recent blog, Matt Fuchs (EVP of Market Data at OTC Markets Group) explored “Stock Promotion – Context, Concerns & Potential Solutions“. 

Fuchs discusses the negative effect ‘stock promotions’ and ‘toxic financing’ can have on small public companies. According to the post, the 2016 dollar volume trading for promoted securities (466 securities) was only 2.04% of total dollar volume in the OTC market but, unfortunately, those few bad apples cast a shadow on microcaps and the OTC Markets as a whole.

As part of OTC Markets Group’s ongoing effort to increase the quality of their platform, Fuchs outlines the following as potential (partial) fixes to promotion and toxic financing. 

1. Use technology and data to identify and limit the effectiveness of promotional campaigns. OTC Markets is developing a promotional monitoring program which will aggregate promotional information and assign an ‘Active Promotion’ status to the applicable securities so brokers can identify potentially problematic customers selling these securities and warn all investors of the clear risks of investing in promoted securities.

2. Improving our market standards so companies take greater responsibility for quickly warning investors about any fraudulent or misleading promotion in their securities from anonymous third parties. OTC Markets will be publishing a revised OTC Markets Promotion Policy in the second quarter of 2017. The policy will outline best practices and requirements for OTC issuers, including promotion disclosure requirements and guidance on what is expected of issuers when their security is actively promoted.

3. OTC Markets Group is also working with broker-dealer compliance departments to build better risk metrics in Compliance products and studying how they can improve their Service Provider data analytics to highlight the relationships between the providers and third party promotions.

4. On the regulatory front, OTC Markets Group is advocating for more efficient public financing options for small/micro-cap companies such as making Reg. A offerings available to SEC Reporting companies and amending Reg A to permit ‘At the Market’ offerings. Expanding public market financing options will make the market more competitive and hopefully decrease the leverage toxic financing firms have with small/micro-cap issuers.

All of these concepts are still in the planning stages and OTC Markets wants you to help improve the OTC market by emailing marketdata[at]otcmarkets.com with your feedback.

Learn more HERE


Leave a Reply