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Tim Quast
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December 1, 2000

Nasdaq Raises the Bulletin Board Bar

By Peter Chapman

Nasdaq is planning to transform its OTC Bulletin Board into a market where companies that quote their stock prices will have to meet higher standards.

Adena Friedman, a Nasdaq vice president with responsibility for the OTCBB, says the plan will be ready by the end of the year and will be filed with the Securities and Exchange Commission for approval.

The goal, she says, is to elevate the quality of stocks traded on the OTCBB and further safeguard investors from the fraud they often encounter there.

The OTCBB is a quotation network used by market makers to trade the approximately 3,500 securities of 3,100 companies that do not qualify for listing on Nasdaq. To be quoted, issuers need only to file periodic statements with regulators. They do not have to file anything with Nasdaq nor do they have to meet any minimum financial standards.

In contrast, companies quoted in the Nasdaq market pay Nasdaq for the privilege, file reports with it, and are required to meet certain financial standards.

Friedman stresses any standards imposed on issuers in the OTCBB would be qualitative rather than quantitative. Companies would have to demonstrate to Nasdaq a clean legal record as well as proof of independent oversight. They would not be required to maintain a certain level of assets, for example, or meet other financial standards.

While she acknowledges some companies will be forced to drop off the system, she does not have an estimate.