The OTC is trying to weed out shell companies that are engaging in ‘pump and dump’ activities. Recently, they have created a new megaphone program warning investors about companies they see as suspicious. A blockchain firm, a battery-metal explorer along with a marijuana grower are one of 13 Canadian firms being flagged by OTC Markets Group. Since promoters are usually based outside the U.S. and promotions have been printed online or delivered to investors by text or email, they are difficult to regulate.
The OTC exchange said it will start putting a megaphone icon with businesses which are the subject of promotions in a bid to protect shareholders. Companies display the advertising warning as of now.
Paid promotions are not against the law in Canada or the U.S., provided that they’re appropriately disclosed to investors and also do not include false information. However, disclaimers are usually difficult to spot, particularly when intermediaries are involved which can make things difficult to regulate. Promotions typically mimic legitimate news posts.
OTC Markets will also be putting a shell icon with securities it considers can be shell companies, according to SEC rules.
The 13 Canadian firms that obtained these OTC warnings are:
- International Battery Metals Ltd.
- Lexington Biosciences Inc.
- WestKam Gold Corp.
- Jericho Oil Corp.
- Affinor Growers Inc.
- Abattis Bioceuticals Corp.
- International Battery Metals Ltd.
- Matica Enterprises Inc.
- Global Blockchain Technologies Corp.
- Block One Capital Inc.
- Tower One Wireless Corp.
- New Age Farm Inc.
- Petroteq Energy Inc.
- StartMonday Technology Corp.
From the OTC Markets Group:
NEW YORK, March 28, 2018 /PRNewswire/ — OTC Markets Group Inc. (OTCQX: OTCM), operator of financial markets for 10,000 U.S. and global securities, today released a new stock promotion flag that will enable investors to easily identify securities that are the subject of current promotional activity. This new flag, which is shaped like a megaphone, will appear on the promoted company’s quote page on otcmarkets.com.
Manipulative and misleading stock promotion continues to be an industry-wide concern that affects trading on both national exchanges and in the OTC markets. Promotion is not only a problem associated with the smallest companies, as our historical stock promotion data shows 70% of the dollar volume impact is in securities listed on a national exchange. Stock promotion harms investors, impedes capital formation and disrupts efficient pricing mechanisms. Our new promotion flag will serve to alert investors to the presence of promotional activity and help broker-dealers enhance compliance and AML processes.
“Anonymous, paid stock promotion should have no place in the public markets,” said R. Cromwell Coulson, President and Chief Executive Officer, OTC Markets Group. “We are taking responsibility to provide transparency to investors and encourage public companies to disclose and correct misinformation that can harm the efficient market pricing process. We continue to work with regulators to advocate for the modernization of promotion regulations, including requiring additional disclosure around paid stock promotion and identifying the people associated with these campaigns.”
OTC Markets Group’s compliance team actively monitors a variety of sources and collects input from our strong network of market participants to determine if a security is being promoted and performs research prior to publishing the information on otcmarkets.com. The promotion flag will remain on the company’s quote page until 15 days after the last promotional material is distributed.
The promotion flag follows the release of our Policy on Stock Promotion and Best Practices for Issuers, designed to improve market transparency and better address the problem of manipulative and misleading stock promotion. The promotion flag builds upon OTC Markets Group’s Caveat Emptor risk flag, which indicates public interest concerns including stock promotion.
In addition to the new stock promotion flag, we have also added a shell risk flag. The shell risk designation indicates that a company may be a Shell Company, as defined by SEC rules. This designation is made at OTC Markets’ discretion based on an analysis of the company’s key financial data.
The new stock promotion and shell risk flags, which will be featured on the individual quote pages of those categorized securities, can be found on our website www.otcmarkets.com. In addition, the most recent aggregate compliance-related data can be found on our Compliance Statistics page. This compliance-related data will soon be available for broker-dealers, clearing firms and custody banks in our compliance analytics file and other market data products.
These new initiatives reinforce OTC Markets Group’s commitment to market surveillance programs that encourage better disclosure, provide timely information and create additional investor protections to ensure a fair market pricing process.
About OTC Markets Group Issuer Compliance
OTC Markets Group’s Washington D.C.-based Issuer Compliance team is responsible for evaluating company compliance with OTCQX and OTCQB qualifications, monitoring stock promotion and other potential public interest concerns, and working to allow issuers to provide adequate current information to the marketplace. Through data driven disclosure processes and market activity analysis, the Issuer Compliance team promotes transparency among the 10,000 U.S. and global securities that trade on the OTCQX® Best Market, the OTCQB® Venture Market, and the Pink® Open Market.
Issuer Compliance is actively engaged in continuous information sharing with FINRA, the SEC, other regulators, and the exchanges.
About OTC Markets Group Inc.
OTC Markets Group Inc. (OTCQX: OTCM) operates the OTCQX® Best Market, the OTCQB® Venture Market and the Pink® Open Market for 10,000 U.S. and global securities. Through OTC Link® ATS and OTC Link ECN, we connect a diverse network of broker-dealers that provide liquidity and execution services. We enable investors to easily trade through the broker of their choice and empower companies to improve the quality of information available for investors.
To learn more about how we create better informed and more efficient markets, visit www.otcmarkets.com.
OTC Link ATS and OTC Link ECN are operated by OTC Link LLC, member FINRA/SIPC and SEC regulated ATS.
OTC Markets Group Inc., +1 (212) 896-4428, firstname.lastname@example.org
SOURCE OTC Markets Group Inc.