Wednesday, November 08, 2017 07.29AM / OTC Markets
purpose of this policy, in conjunction with proposed best practices for public
companies, is to improve overall market transparency for investors and better
address the problem of fraudulent stock promotion.
stock promotion is an industry-wide concern that can mislead investors and
disrupt the efficient pricing mechanisms of national exchanges and OTC markets.
evolution of digital platforms and the proliferation of social media have
increased the ways public companies and investor relations professionals may
engage with potential investors. However, today's technology-driven environment
can also be abused by anonymous market manipulators. Allowing fraudulent
promotion campaigns to mislead investors harms the integrity of public markets,
impedes the capital formation process and tarnishes the reputation of small
this issue requires a collective effort among industry participants and
regulators to proactively share information and drive greater transparency. OTC
Markets Group recognizes its important role in establishing market standards,
improving investor information and driving efforts to educate investors and
mitigate damage created by manipulative stock promotion.
new policy and best practices codify a core principle of OTC Markets Group's
disclosure-based philosophy and the OTCQX and OTCQB Rules.
clarifies the responsibility of reputable public companies to make adequate
current information available and provide timely disclosure of any news or
information that might reasonably be expected to materially affect the market
for its securities. This responsibility also requires public companies to
quickly correct any false statements or materially misleading information
spread by promoters so that public markets are not disrupted. These initiatives
reinforce OTC Markets Group's ongoing market surveillance programs to provide
better information, create additional investor protections and ensure a fair
market pricing process.
investor transparency and setting market standards with clear expectations for
how reputable public companies should respond to misleading and manipulative
promotion encourages management teams to more proactively address and dispel
unfounded rumors and correct misinformation that can lead to unusual market
activity," said Liz Heese, OTC
Markets Group Executive Vice President of Issuer and Information Services.
"Our goal is to provide the framework of best practices that will foster
better informed and more efficient public markets."
OTC Markets Group policy provides a comprehensive outline of common
characteristics of misleading and manipulative promotion and further reinforces
the obligations of our issuers:
Identify Securities Being Promoted
Fraudulent Promotional Campaigns
of Companies with Promoted Securities
on OTCQX or OTCQB Designation
Emptor Policy and Stock Promotion
Best Practices for Issuers
Markets Group continues to support investor transparency with disclosure-based
market standards to indicate which issuers make adequate current information
available to the public. To expand these data-driven efforts, a new designation
will be implemented to publicly identify securities that are the subject of
stock promotion using a "promotion risk flag" designation
on the OTC Markets Group websites, including otcmarkets.com, as well as
respective market data feeds.
promotion flag is designed to alert market participants and investors of the
potential risks associated with trading a security during a promotion campaign
and will be introduced in the first quarter, 2018. It builds upon OTC
Markets Group's Caveat Emptor risk flag, which indicates public interest
concerns including fraudulent stock promotion.
the need to advance the dialogue surrounding this critical issue, OTC Markets
Group continues to actively engage with regulators to improve capital formation
and create more transparency for investors when there is stock promotion paid
for by third-parties," said R. Cromwell
Coulson, President and Chief Executive Officer, OTC Markets Group.
"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. OTC Markets Group encourages a more thoughtful approach by
regulators that lowers barriers to small company public offerings, utilizes the
vast amounts of data available today to identify bad actors hiding among the private
financing markets, and accelerates real-time enforcement, regulatory
intervention and change."