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Policy on Stock Promotion
Timely disclosure of material information is fundamental to efficient trading markets.
Public availability of adequate current information is a core principal of OTC Markets Group’s disclosure-based philosophy and the OTCQX®, OTCQB® and OTCIDTM Rules. Reputable public companies are expected to release quickly to the public any news or information which might reasonably be expected to materially affect the market for its securities.
Management of a public company also has the responsibility to dispel unfounded rumors, misinformation or false statements which result in unusual market activity. Misleading and manipulative promotion clearly fall into this area of concern and must be immediately addressed.
Social networks and online media sites have created new ways for public companies to interact and connect with potential investors. Digital marketing has made it easier for investor relations professionals to reach millions of investors, but technology can also be abused by anonymous market manipulators for fraudulent promotional campaigns that harm the integrity of public markets and defraud investors.
This policy describes how OTC Markets Group is working to establish best practices, improve market transparency and better address the problem of stock promotion that is misleading and manipulative.
We believe stock promotion is misleading and manipulative when information is publicly disseminated to disrupt the efficient market pricing of a security. Misleading promotional materials often employ false or baseless claims, omit material information, exaggerate an issuer’s future potential, or predict unrealistic price targets. Fraudulent promotional campaigns disseminate misleading information in a variety of manners, including e-mails, newsletters, social media outlets, press releases, videos, telephone calls, and/or hard mailers.
Common characteristics of misleading and manipulative promotion:
Fail to clearly identify the sponsor of the promotion, and/or the promotion is sponsored or paid for by anonymous, unidentifiable 3rd parties
Typically focus on a company’s stock rather than its underlying business
Use highly speculative language. Materials often rely on grandiose numbers and figures related to the target company’s industry, business model, financial results, or business developments
Tout performance or profit potential of an issuer’s security with unsupported or exaggerated statements about the stock price or its anticipated trajectory
Make unreasonable claims pertaining to an issuer’s operations
Suggest a promise of a specific future performance of the stock or profit to investors
Provide little or no factual information about the company, omit material information
Urge the investor to take action immediately as not to miss out on a great opportunity
Fail to provide details or disclosures about the risk associated with the issuers security
Anonymous paid promotion is often associated with unregulated parties or “financiers” that have acquired securities in private market transactions and wish to generate demand so they can sell their shares in the public markets at inflated prices.
OTC Markets Group monitors for potential promotional activity relating to securities trading on our markets. We review for anonymous paid promotions, possible connections to bad actors, and evaluate the promotion’s potential impact on trading.
A company whose security is being promoted may not be directly involved or even aware of a promotion campaign for their securities, however all public companies have an obligation to provide accurate disclosure to investors and quickly address any misleading information that could affect the trading market for their securities.
Identify Securities Being Promoted with “Stock Promotion” Designation
We publicly identify securities that are the subject of stock promotion by placing a “stock promotion” flag next to the stock symbol and company information on our websites, including otcmarkets.com, and our market data feeds. This promotion flag is designed to provide an alert regarding the potential risks associated with trading the security and enhance broker-dealer compliance processes. The promotion flag remains on the security for 15 days after the last promotional material is distributed.
Information Request
OTC Markets Group may request that a company that is the subject of stock promotion issue a press release to notify the markets about the promotion, either confirm the information in the promotion or identify it as misleading and make corrections to the claims made in the promotional materials, and disclose any recent transactions by insiders and affiliates. OTC Markets Group may request records from the issuer’s transfer agent and require additional disclosure about share issuances and financing agreements, as well the identity of the people and advisors associated with such transactions.
Companies can learn more about best practices to help deter fraudulent stock promotion as well as recommendations for disclosure of ongoing promotion here: [Stock Promotion: Best Practices for Issuers Stock Promotion].
Impact on OTCQX, OTCQB or OTCID Designation
OTC Markets Group may not approve a company for trading on OTCQX, OTCQB or OTCID if it is the subject of an active promotion campaign or if the security has a significant history of misleading and manipulative promotion.
A company may be removed from OTCQX, OTCQB or OTCID if it is the subject of a misleading and manipulative stock promotion that has, in OTC Markets Group’s sole determination, a potentially negative impact on the integrity of the market.
Misleading and manipulative promotion of companies with little or no assets or business activity is of concern to OTC Markets. Anonymous paid promotion of these companies may raise red flags with regulators. When OTC Markets identifies promotion of shell companies it will result in their immediate removal from the OTCQB market (note: shells are precluded from qualifying for the OTCQX market).
Caveat Emptor Policy and Stock Promotion
OTC Markets Group designates certain securities with “Caveat Emptor” and places a skull and crossbones icon next to the stock’s ticker symbol as it appears on OTC Markets Group’s websites, data feeds and social media, as notice of a potential public interest concern associated with the security, and to caution investors to exercise additional care and perform thorough due diligence before making any investment decision.
OTC Markets Group may designate a security undergoing promotion as Caveat Emptor, if, in OTC Markets Group’s determination, the stock promotion presents a public interest concern or if the company has not made adequate current information available to investors. For more information, see: OTC Markets Group's Policy Regarding Caveat Emptor.
Regulatory Referrals
We make referrals to the SEC, FINRA or other regulatory agencies when we have concerns relating to stock promotion.
Stock Promotion: Best Practices for Issuers
OTC Markets Group Policy on Stock Promotion
Petition for Commission Action to Protect the Investing Public from Unlawful and Deceptive Securities Promotion. We have filed a petition with the SEC to create more transparency for investors when there is promotion paid for by third parties, and allow markets to better identify bad actors. The SEC Regulations regarding promotion were written in the time of financial information and advice being delivered in print and over the radio. Rule 17b needs to be updated to reflect the anonymity allowed by the internet and other modern media channels.
