The OTC market is made up of many different types of companies, ranging from OTCQX companies worthy of investor consideration to economically distressed companies to speculative shell companies.
Due to the wide range of OTC companies, OTC Markets Group developed the OTC Market Tiers to help bring increased clarity, transparency and disclosure to the OTC Market. All non-OTCQX OTC securities are assigned a Market Tier based on their reporting method (SEC Reporting, Alternative Reporting Standard) and disclosure category – Current, Limited or No Information.
Securities listed on OTCQX, the highest OTC Market Tier, are required to have Current disclosure in addition to the QX listing requirements. Securities within OTCQB Market Tier must be SEC, Bank or Insurance reporting and must be Current in their disclosure. The OTC Market Tiers, ranked from highest to lowest, include:
OTCQX ® - The Intelligent Marketplace
OTCQX is the intelligent marketplace for the best OTC companies with the highest financial standards and superior information availability.
OTCQB ® - The Venture Marketplace
OTCQB is the venture marketplace for companies that are current in their reporting with a U.S. regulator. There are no financial or qualitative standards to be in this tier.
OTC Pink ® Current Information
Companies that follow the International Reporting Standard or the Alternative Reporting Standard by making filings publicly available through the OTC Disclosure & News Service pursuant to OTC Markets Group Guidelines for Providing Adequate Current Information (pdf) are designated as OTC Pink Current Information. The Current Information category is based on the level of disclosure and is not a designation of quality or investment risk. This category includes shell or development stage companies with little or no operations as well as companies without audited financials and as such should be considered extremely speculative by investors.
OTC Pink Limited Information
Designed for companies with financial reporting problems, economic distress, or in bankruptcy to make the limited information they have publicly available. The Limited Information category also includes companies that may not be troubled, but are unwilling to meet OTC Markets' Guidelines for Providing Adequate Current Information. Companies in this category have limited financial information not older than six months available on the OTC Disclosure & News Service or have made a filing on the SEC's EDGAR system in the previous six months.
OTC Pink No Information
Indicates companies that are not able or willing to provide disclosure to the public markets - either to a regulator, an exchange or OTC Markets Group. Companies in this category do not make Current Information available via OTC Markets Group's News Service, or if they do, the available information is older than six months. This category includes defunct companies that have ceased operations as well as 'dark' companies with questionable management and market disclosure practices. Publicly traded companies that are not willing to provide information to investors should be treated with suspicion and their securities should be considered highly risky.
FINRA ® OTCBB
This security is one of approximately 30 OTC securities that are quoted solely on FINRA's BB quotation system so market makers must use the telephone to make any trades.
Grey Market
There are no market makers in this security. It is not listed, traded or quoted on any U.S. stock exchange or the OTC Markets. Trades in grey market stocks are reported by broker-dealers to their Self Regulatory Organization (SRO) and the SRO distributes the trade data to market data vendors and financial websites so investors can track price and volume. Since grey market securities are not traded or quoted on an exchange or interdealer quotation system, investor's bids and offers are not collected in a central spot so market transparency is diminished and Best Execution of orders is difficult.
Caveat Emptor
Buyer Beware. There is a public interest concern associated with the company, which may include a spam campaign, questionable stock promotion, known investigation of fraudulent activity committed by the company or insiders, regulatory suspensions, or disruptive corporate actions. During the time it is labeled Caveat Emptor, any stock that is not in the Current Information category will also have its quotes blocked on www.otcmarkets.com .
