In order to reduce the likelihood of fraud, OTC Markets Group recommends that investors become knowledgeable about the OTCQX, OTCQB and Pink markets, your rights as an investor, and the companies in which you are investing.
Investor Alert: Marijuana-Related Securities - November 2016
In light of recent trading activity and promotion of marijuana-related stocks, we are providing this alert as a reminder to investors to consider the bulletins and information published by the SEC and FINRA regarding securities issued by companies with operations in the marijuana industry. Links to those materials may be found below:
Who is Protecting You?
The Financial Industry Regulatory Authority and the U.S. Securities and Exchange Commission regulate OTC Link® ATS, the trading platform operated by OTC Markets Group’s wholly owned subsidiary, OTC Link LLC. OTC Link LLC is a member of FINRA and SIPC, and an SEC-registered Alternative Trading System.
OTC Markets Group Inc. does not regulate the OTCQX, OTCQB and Pink markets. The company is neither a stock exchange nor self-regulatory organization (SRO) and is not itself regulated by the FINRA or the SEC. All broker-dealer subscribers to OTC Link ATS are FINRA member broker-dealers and are registered as broker-dealers with the SEC. Broker-dealer activities are also regulated by various state securities regulators. In addition, companies with SEC-registered securities are regulated by the SEC.
OTC Markets Group organizes and disseminates price and company information, making the marketplaces more transparent, efficient and investor-friendly. Securities are categorized into three markets – OTCQX, OTCQB and Pink – based on the quantity and quality of information a company provides. OTC Markets Group also provides companies with services to engage and inform their investors.
It is important that all investors make informed investment decisions based on thorough research, which includes evaluating a company's disclosure and material news as well as the price and market for the company’s security.
Many securities are relatively illiquid, or "thinly traded," which tends to increase price volatility. Illiquid securities are often difficult for investors to buy or sell without dramatically affecting the quoted price. In some cases, the liquidation of a position in an off-exchange traded security may not be possible within a reasonable period of time.
Many equities are Penny Stocks. Penny stocks can be very risky, and investors should be aware of what type of security they are trading before making any investment decision. Due to the high level of risk involved in investing in penny stocks, a broker-dealer cannot sell them to a client unless it has approved that client’s account for penny stock transactions, and the broker-dealer has received agreement to the transaction in writing from the client. See: Penny Stock Definition, Schedule 15g. Penny Stocks are not permitted to join the OTCQX market.
Before You Invest - Do Your Research, We Can Help
Investors should gain a thorough understanding of their rights and investigate the background of the issuing company, individual broker, and brokerage firm before making trading decisions. Introductory investor rights & education resources, include:
- Market 101 – OTC Markets Group's overview of the market structure, participants and processes
- SEC Investor Information – SEC office of investor education and advocacy
- FINRA Investor Information – FINRA investor education site
- Microcap Fraud – Information about microcap fraud from the SEC
- FINRA BrokerCheck® – Check the background of your investment professional
- How to avoid problems with your broker – Prevent potential problems and resolve disputes
- Invest wisely – FINRA's tools to better understand the markets and basic principles of saving and investing
- NASAA Investor Education -- Primer on the most common types of schemes, scams, and fraud which investors and entrepreneurs need to know about
Obtaining Financial Information on OTCQX, OTCQB and Pink Companies
Investors should always carefully review the financial information of all companies before making investments. Many off-exchange traded equities are issued by small companies with limited histories or that are in economic distress.
- SEC Reporting Companies - SEC filings are available on www.otcmarkets.com under a company's "Financials" tab on its quote page, as well as on the SEC's website. Some companies do not have filing or reporting requirements with the SEC. For a detailed explanation of registration and reporting requirements and the exemptions available through those requirements, please see the SEC's Small Business Question and Answer Page
- Non-SEC Reporting Companies - Although they may not be required to make financial information available to the public, many companies do so voluntarily. Financial Reports can be searched in order to obtain the reports of any company that has voluntarily provided their financials and other disclosure to investors via the OTC Disclosure & News Service. Investors should be aware that the accuracy or completeness of such information has not been verified by OTC Markets Group or reviewed by any U.S. regulatory body. Investors should regard such information as merely a starting point for their own research in evaluating the investment potential of these securities
Make a Complaint
If you believe that you have been defrauded by a publicly traded company, please visit:
- The SEC Center for Complaints and Enforcement Tips
- North American Securities Administrators Association (NASAA) will help you find Your State Securities Regulator. Investors can report suspected Internet fraud to the NASAA by email: firstname.lastname@example.org. When sending a complaint, investors should forward the suspect message, give the website address, if appropriate, and include the name of the state in which they live
If you believe that you have been defrauded by a broker, securities firm, investment advisor, or other securities market participant, please contact: FINRA Investor Protection