From an SEC attorney website: As part of its on
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Posted On: 04/11/2024 9:27:42 AM
From an SEC attorney website:
As part of its ongoing review, OTC Markets may label a company with a shell risk flag, indicating a potential risk of shell company characteristics. The designation does not necessarily mean that the company has self-identified as a shell (that would result in a firm shell flag, not a “shell risk” one). The shell risk review evaluates factors like asset composition, operational expenditures, and income-related metrics. When a company receives a shell risk flag, in order to successfully regain the piggyback exception, the onus is on the company to prove that they are no longer a shell company and meet the criteria required by OTC Markets or a broker-dealer. Of course, this means the company must take necessary actions to move beyond their shell status, such as merging with a company that's fully operational or initiating their own business operations.
As part of its ongoing review, OTC Markets may label a company with a shell risk flag, indicating a potential risk of shell company characteristics. The designation does not necessarily mean that the company has self-identified as a shell (that would result in a firm shell flag, not a “shell risk” one). The shell risk review evaluates factors like asset composition, operational expenditures, and income-related metrics. When a company receives a shell risk flag, in order to successfully regain the piggyback exception, the onus is on the company to prove that they are no longer a shell company and meet the criteria required by OTC Markets or a broker-dealer. Of course, this means the company must take necessary actions to move beyond their shell status, such as merging with a company that's fully operational or initiating their own business operations.
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