SEC Rule 15c211 was planned to allow non-reporting public company’s securities to be quoted on The Financial Industry Regulatory Authority (“FINRA”) Over-the-Counter Bulletin Board (“OTCBB”) by filing some simple disclosures.
Companies, which seek to get a quote on the FINRA OTCBB, must be necessitated to file reports with the Securities and Stock Exchange Commission (SEC). A company, which has filed a registered offering with the SEC, like an S-1 registration statement, needs to file reports for one year as per the rule of Section 15.
Any company filing a Form 10 or Form 10-12G becomes a reporting company as per section 12g of the Act, and the company is required to file reports. The market maker of the company must file a Form 211 with the FINRA in order to be qualified for quotation of its securities. The company must have enough free trading stock in its public float to allow Rule 15c2-11.
In general, a private company can go public using a 15c2-11 application with FINRA if it meets the following requirements:
- · The private company must have at least 30 or more non-affiliates that have paid cash consideration for their shares for at least 12 months;
- · The private company must have at least 1 million shares outstanding, of which at least 250,000 are free trading shares; and
- · The private company must never have been a shell company.
15c2-11 Market Maker Obligations in Going Public Transactions
The review of basic issuer information is needed by the market maker before publishing quotations for that issuer’s securities as per SEC Rule 15c211. The market makers should give a valid reason for believing the authenticity of the information and reliability of the sources. The kind of information that must be reviewed by the broker-dealer is detailed in SEC Rule 15c211.
15c2-11 Disclosure Requirements in Going Public Transactions
There is certain information required by FINRA in the Form 211. Few of them are as follows.
- ·There should be a detailed disclosure of the business, product/service, asset and sources of revenue of the issuer;
- ·Narration of the facilities of the company;
- ·Identification of officers, directors and holders of more than 5 percent of the company’s securities;
- ·Certificate of Incorporation and bylaws including any amendments;
- ·A list of shareholders generated by the current transfer agent, detailing name and address of each shareholder, date of share ownership, whether its restricted, control or free trading.
- ·Description of the company’s free-trading shareholder base, along with depiction of exemptions from registration under the Securities Act;
- ·Agreements creating restrictions, liens or encumbrance on, or relating to, the transfer or voting of shares;
- ·Agreements of stock rights, warrants or options;
- ·All stock purchase or asset purchase agreements for last five (5) years;
- ·If company had any discussion or negotiation regarding merger or acquisition candidate.
- ·Merger and/or consolidation agreements;
- ·Partnership and/or joint venture agreements;
- ·Unaudited financial statements for the last 2 fiscal years and interim periods;
- ·Description of all private offerings;
- ·One full copy of the subscription executed by each investor and copies of all checks by the subscribers or proof of payment;
- ·Copies of Form D’s filed with the SEC;
- ·Description of the relationships among and between every shareholder and the issuer, its officers and directors, and other shareholders;
The initial purpose behind designing the Rule 15c211 was to give, fully reporting public companies, a smooth way to have their securities quoted on National association of Securities Dealers’ Over-the-Counter Bulletin Board (NASD OTC/BB). The company, which wants to obtain a quotation for, its securities need to file simple disclosures through Form 15c211 also known as 211, with NASD.
The public company, which is recently formed from a private, company also, needs to have a symbol. The company should make an application to the NASD which necessitates filing of Form 15c211 in order to obtain a symbol. The market maker also who is a member of NASD can fill Form 15c211.
Though there are no strict financial requirements to get listed on the OTC/BB, but NASD makes sure that the company’s operations are in order. There should be at least 40 to 50 shareholders and also enough capital before giving approval to Form 15c211. The whole process of this approval takes around three to six months. After the NASD approves Form 15c211, the company can have its securities quoted on the NASD OTC/BB.
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