OTC Markets Shares New Stock Promotion Policy


OTC Markets Group Inc. (OTCQX: OTCM), operator of financial markets for 10,000 U.S. and global securities, released a new stock promotion policy. The purpose of this policy, in conjunction with proposed best practices for public companies, is to improve overall market transparency for investors and better address the problem of fraudulent stock promotion.

Fraudulent stock promotion is an industry-wide concern that can mislead investors and disrupt the efficient pricing mechanisms of national exchanges and OTC markets. The evolution of digital platforms and the proliferation of social media have increased the ways public companies and investor relations professionals may engage with potential investors. However, today’s technology-driven environment can also be abused by anonymous market manipulators.  Allowing fraudulent promotion campaigns to mislead investors harms the integrity of public markets, impedes the capital formation process and tarnishes the reputation of small companies.

Solving this issue requires a collective effort among industry participants and regulators to proactively share information and drive greater transparency. OTC Markets Group recognizes its important role in establishing market standards, improving investor information and driving efforts to educate investors and mitigate damage created by manipulative stock promotion.

The new policy and best practices codify a core principle of OTC Markets Group’s disclosure-based philosophy and the OTCQX and OTCQB Rules.  It clarifies the responsibility of reputable public companies to make adequate current information available and provide timely disclosure of any news or information that might reasonably be expected to materially affect the market for its securities. This responsibility also requires public companies to quickly correct any false statements or materially misleading information spread by promoters so that public markets are not disrupted. These initiatives reinforce OTC Markets Group’s ongoing market surveillance programs to provide better information, create additional investor protections and ensure a fair market pricing process.

“Improving investor transparency and setting market standards with clear expectations for how reputable public companies should respond to misleading and manipulative promotion encourages management teams to more proactively address and dispel unfounded rumors and correct misinformation that can lead to unusual market activity,” said Liz Heese, OTC Markets Group Executive Vice President of Issuer and Information Services. “Our goal is to provide the framework of best practices that will foster better informed and more efficient public markets.”

The OTC Markets Group policy provides a comprehensive outline of common characteristics of misleading and manipulative promotion and further reinforces the obligations of our issuers:

  • Publicly Identify Securities Being Promoted
  • Identifying Fraudulent Promotional Campaigns
  • Responsibilities of Companies with Promoted Securities
  • Impact on OTCQX or OTCQB Designation
  • Caveat Emptor Policy and Stock Promotion
  • Regulatory Referrals
  • Best Practices for Issuers

OTC Markets Group continues to support investor transparency with disclosure-based market standards to indicate which issuers make adequate current information available to the public. To expand these data-driven efforts, a new designation will be implemented to publicly identify securities that are the subject of stock promotion using a “promotion risk flag” designation on the OTC Markets Group websites, including otcmarkets.com, as well as respective market data feeds. This promotion flag is designed to alert market participants and investors of the potential risks associated with trading a security during a promotion campaign and will be introduced in the first quarter, 2018.  It builds upon OTC Markets Group’s Caveat Emptor risk flag, which indicates public interest concerns including fraudulent stock promotion.

“Recognizing the need to advance the dialogue surrounding this critical issue, OTC Markets Group continues to actively engage with regulators to improve capital formation and create more transparency for investors when there is stock promotion paid for by third-parties,” said R. Cromwell Coulson, President and Chief Executive Officer, OTC Markets Group. “We believe the SEC should modernize its promotion regulations to ban anonymous, paid stock promotion and require clear disclosure when there is promotion paid for by third-parties, allowing for markets to better identify market manipulators. OTC Markets Group encourages a more thoughtful approach by regulators that lowers barriers to small company public offerings, utilizes the vast amounts of data available today to identify bad actors hiding among the private financing markets, and accelerates real-time enforcement, regulatory intervention and change.”

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