Will the new rule disrupt the Penny Stock Market this fall?

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On September 16, 2020, the SEC amended its Exchange Act Rule 15c2-11. The new changes came into effect on September 28. Ultimately, the new rule means mainstream retailers will no longer be able to buy information over-the-counter (OTC) Pink stock.

OTC Markets Group is the largest U.S. marketplace for OTC securities with 12,871 securities listed as of August 31, 2021. The securities are listed in three tiers based on the quality and quantity of the information and disclosures of the listed companies.

OTCQX is the highest level of the three levels with only 595 effects. Shares traded on this forum must meet stricter eligibility criteria compared to the other tiers.

OTCQB, also known as “The Venture Market”, consists of US and international early-stage and developing companies and has 1,095 securities.

OTC Pink is the lowest level and most speculative level of the three marketplaces for over-the-counter stock trading with 11,181 securities.

This layered structure provides varying levels of transparency so that investors know what type of information is available for each company they wish to trade and allows investors and traders to buy stocks in companies that are not listed on national exchanges such as the New York Stock Exchange or the NASDAQ.

The OTC Pink magazines had more than 11,000 securities as of Aug. 31 that could be affected by the change and potentially pushed to the gray market if they don’t become current with their filings.

What is pink No information?

To see how these new rules will affect traders, we need to understand how the new change aims to modernize Pink No information Securities. This will be done by:

• Require information about the issuer and its securities to be current and publicly available before a broker-dealer can begin quoting that security

• Limit broker-dealers’ reliance on certain exceptions to the rule when information about the issuer is not current and publicly available

• Provide exceptions to reduce unnecessary burden on broker-dealers to list certain OTC securities that can be subject to fraud and manipulation

How will the new regulations affect that market?

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The SEC says this change improves disclosure and investor protection in the OTC market by ensuring that broker-dealers, in their role as professional gatekeepers of this market, do not publish quotes for an issuer’s security when current information about the issuer is not publicly available, subject to certain exceptions.

The main concern among traders is that this new rule will create fewer trading opportunities. The new regulations will push securities currently traded on the pink market and not disclosing financial information to the gray market, where securities are suspended from official trading. OTC market expects ahead of the change that: 2800 companies of the more than 11,000 OTC pink securities could disappear from OTC Pink and be pushed to the gray market. With ~20% fewer stocks to look at, penny stock investors will focus on the remaining 80%. This means that the stocks that hold up will see a rise in interest rates.

Where should traders look?

Rather than looking at the remaining OTC Pink securities, it might be more interesting to look at early-stage OTCQB tech companies that recently updated over the summer in search of the next rising star. If OTC market trading remains the same, a dollar volume of YTD $0.5 trillion* (annualized $0.75 billion).

To qualify for OTCQB, companies must be current in their reporting, undergo annual verification and certification, pass a $0.01 bid test, not be bankrupt, have at least 50 beneficial shareholders, each holding at least 100 shares, and a public IPO more than 10% of the total number of outstanding shares. Companies listed on OTCQB report to a US regulator such as the SEC and must follow the standards to improve transparency.

Wikisoft Corp. – Potential rising stars

Wikisoft Corp. (OTCQB: WSFT) has had an explosive journey. After new management took over a little over a year ago, Wikisoft has succeeded in launching an investor site (wikisoft.com), have their flagship platform (wikiprofile.com), $20 million in funding and listed to OTCQB in August.

Wikisoft’s vision is to create global opportunities for business professionals and companies to make informed career and hiring decisions. This is achieved on Wikiprofile.com platform that provides relevant and valid information to make informed career and hiring decisions for business professionals worldwide with a database that now includes more than 175 million company profiles. The platform offers a free and easy signup process with an automatic database lookup to make it easy to join the platform.

Wikisoft Corp. has entered into a Common Stock Purchase Agreement with: White Lion Capital LLC a Los Angeles-based millennial-managed fund that aims to invest in growing public companies aspiring to become industry leaders. The Purchase Agreement provides that the Company has the right, but not the obligation, to induce White Lion Capital to purchase up to $20,000,000 of the Company’s common stock. Is the tech-savvy millennial fund on to something?

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