Symbols That Help Indicate Transparency On OTC Markets

Earlier this year we wrote about the various investor protection symbols meant to educate investors on potential risk indicators for securities traded on the OTC Markets.

Those symbols can warn against anything from a potential bankruptcy to a company that may be disseminating misleading promotional information. And with over 10,000 securities trading on the OTC Markets, many of which are in foreign countries, the more information that’s available, the better.

But there are also ways to see if a company is being transparent with investors. These transparency symbols are a shorthand way of letting investors know that a company is fulfilling certain disclosure requirements.

Penny Stock Exempt

This badge indicates that a security is exempt from being considered a penny stock. Under SEC rules, a security is not classified as a penny stock if any of the following requirements are met: 1) it trades over $5 per share, 2) it has average annual revenue of at least $6 million over the last three years, or 3) it has net tangible assets of at least $5 million (or $2 million if it’s been in continuous operation for at least three years).

This designation is significant because it may make the security eligible to be held in certain funds that would otherwise forbid owning penny stocks. Broker-dealers must also go through additional disclosure and compliance checks for customers who wish to purchase penny stocks.

Transfer Agent Verified

This indicates a company’s transfer agent has provided verified share information directly to OTC Markets. Transfer agents are hired by a company to maintain its investor records.

In other words, this badge means that investors are receiving reliable share data, such as authorized and outstanding shares, from a trusted source.

Beginning this year, OTC Markets required all U.S. companies trading on the OTCQX and OTCQB Markets to provide verified share data through a transfer agent who participates in the Transfer Agent Verified Share Program. As of March 1, there were 38 verified transfer agents in the program.

Verified Profile

This badge tells investors that the company’s profile data, such as executive leadership information and service providers, was verified by the company within the previous six months. The badge is accompanied by the date it was verified.

OTCQX and OTCQB companies are required to maintain a Verified Profile.  Pink companies may choose to do so

These badges are meant to highlight which OTC Markets-traded companies are being the most transparent with investors and are the result of continued efforts by OTC Markets to bring more transparency to its public markets. And while they can only show whether a company is currently being transparent—and not, for example, whether it’s been transparent in the past or if it will make a good investment—they are a helpful place for investors interested in OTC Markets-traded securities to start.

OTC Markets is a content partner of Benzinga