The New Pink Sheet Categories Will Help Clean Up The OTC Market

The new Pink Sheets Trading Categories are a toolmet the requirements for Pink Sheets Guidelines for
to help investors gather the information they needproviding adequate current information, which means
on publicly traded companies quoted on the Pinkthey must post a quarterly letter from an attorney
Sheets. Since Pink Sheets is a trading venue that isregarding the completeness and adequacy of their
driven by OTC market trading demand, it is hopedcompany's disclosure. They must support a
that categorizing securities by their level of disclosuremanagement certified annual audit as well.
will greatly enhance the capital formation process,Adequate Current Information for Banks and
and help prevent Micro cap fraud.International Issuers
The following Pink Sheets categories are a tool toCompanies in this category are non-SEC-reporting
help investors make better informed, educatedfederal or state regulated banks, insurance companies
decisions, and are meant to improve transparencyand non-U.S. companies listed on an international
and provide adequate public disclosure in a crediblestock exchange. For banks and insurance companies,
and timely manner. Starting in May of 2007, everythey must post to Pink Sheets the same information
security that Pink Sheet quotes will be put into onethey provide to their regulators. Foreign issuers must
of the categories described below.post the same disclosures required in their home
Emerging Equities List:country exchange. Disclosures in a non-U.S. currency
The Emerging Equities List is appropriate for issuersmust be clearly labeled, in English and posted in a
that are in development stage and are actively raisingtimely manner.
capital or companies that wish to distinguishLimited Information Available
themselves as issuers with reputable managementsEconomically distressed or bankrupt companies that
and audited disclosure.get quoted on Pink Sheets that have posted some
To qualify for this category, companies must be SECinformation in the last six months, either through the
reporting and current in their SEC requirements andSEC or on the OTCIQ system, but whose disclosure
meet the Pink Sheets Guidelines for currentis not current or complete. This category is also used
information, including GAAP audited financial reports.for companies that have not yet met the
Interim reports must be posted within 45 days andrequirements for the Adequate Current Information
annual reports must be posted within 90 days afterlisting.
each fiscal year ends. The company must alsoNo Information:
provide detailed information on their financial officersCompanies in this category have not posted any
annually to Pink Sheets.information in over six months through the venues
SEC Currentdescribed above. In many cases, this is because the
The SEC Current category is for companies that arecompany is in financial distress or otherwise on shaky
SEC registered and current in their SEC financialground.
reporting requirements. Companies must post theirPublic Interest Concern:
disclosure by the SEC's EDGAR system, be current inFor stocks with unsolicited spam, questionable
their filings, file quarterly reports within 45 days andpromotion or other public interest concerns will be
annual reports within 90 days. This level of listinglisted in this category. Companies in this category are
requires a quarterly letter from the attorneyon the verge of having their stock symbols blocked
vouching for the completeness of their quarterlyby the Pink Sheets.
reports and disclosures.Only time will tell, as Micro cap fraudsters have
Adequate Current Informationcontinually found ways to get around the rules, but
Non-SEC-reporting companies that are quoted on Pinkthis author believes this move by the Pink Sheets
Sheets that do not have GAAP audits are listed inshould go a long way towards cleaning up the quality
this category. Pink Sheets confirms that they haveof the OTC companies quoted by the Pink Sheets.