Cass Sanford from OTC Markets Feedback on SEC Amendments that Could Remove Public Quoting in Securities that Don’t Make Present Data Publicly Accessible

Cass Sanford, an Affiliate Normal Counsel who helps regulatory and policy-making initiatives at OTC Markets Group, notes that the US Securities and Change Fee’s (SEC) amendments to Rule 15c2-11 might get rid of public quoting in securities of issuers that don’t make present data “publicly accessible.”

Sanford, who focuses on fairness market construction, on-line capital formation, and the most recent Fintech and Regtech developments, explains that because of this with out having an alternate strategy, these securities on the Pink Market “will fall to the Gray Market.” She provides that the Gray Market is “an opaque market the place broker-dealers will not be keen or in a position to publicly quote OTC securities given the dearth of investor curiosity, firm data or regulatory compliance.”

Sanford, who represents the OTC Markets Group on public panels and earlier than regulatory and legislative teams, factors out that the corporate has filed a proposal paperwork with the SEC so as “to function an Skilled Market as a substitute for the Gray Market.”

Sanford goes on to say that the OTC Markets Group already runs an Skilled Market inside OTC Hyperlink for a comparatively small variety of companies. However the instructed Skilled Market might function in a different way, Sanford clarifies whereas including that after the deliberate or upcoming modifications to Rule 15c2-11, the Skilled Market tier will “embody the broader group of corporations that may now not be eligible for public quoting underneath the rule and can serve the pricing and greatest execution wants of certified traders.”

She additional famous that broker-dealers will then have the choice to cite and commerce Skilled Market securities on OTC Hyperlink, however quotes in Skilled Market securities “will solely be accessible to sure subtle traders, often called ‘Certified Consultants,’” Sanford famous.

Sanford, who has expertise representing issuers, broker-dealers and people in securities litigation, financing, and company and regulatory points, provides that the Skilled Market might present a substitute for the Gray Market: “a regulated buying and selling venue the place Certified Consultants can worth these securities, entry clear worth discovery and obtain greatest execution by means of their FINRA member broker-dealer.”

She additionally talked about that with out an digital or digital platform to supply liquidity, brokers might expertise challenges “satisfying their best-execution necessities in Gray Market securities.” She additionally famous that it offers regulators “beneficial perception into citation exercise that will in any other case be hidden within the opaque Gray Market.”

She went on to verify that Certified Consultants might embody broker-dealers, establishments and accredited traders.

Whereas commenting on whether or not companies will likely be impacted by these modifications, Sanford famous:

“The reply to this relies in the marketplace on which your securities commerce. For corporations that commerce on the Pink Market, the rules and procedures will change to make sure that the present data required underneath the Rule is obtainable on an ongoing foundation. In case your safety trades on the Pink Market, you danger being shifted to the Skilled Market except you are taking the mandatory steps to make present disclosure accessible. Go to the Data for Pink Corporations part of our web site for additional particulars.”

She additionally talked about that the vital dates for the Implementation of Rule 15c2-11 needs to be famous.  She added that companies “might want to present the required disclosure to OTC Markets by June 30th.” She identified that this “will be sure that our Issuer Compliance Group has enough time to overview and replace market standing for a corporation’s securities previous to the rule’s compliance date on September 28th.”

Sanford additionally famous that securities that “fail to conform will likely be faraway from Pink as of the September deadline.”