OTC Markets Group Launches New Stock Promotion Flag

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.