The OTC (Over-The-Counter) Bulletin Board or OTCBB is a United States
quotation medium operated by the Financial Industry Regulatory
Authority (FINRA) for its subscribing members.
The board was used for many over-the-counter (OTC) equity securities
that are not listed on the
NASDAQ or a national stock exchange, it has
shrunk significantly as stock have migrated to the trading facilities
of the OTC Markets Group. Broker-dealers who subscribe to the system,
which is not electronic, can use the OTCBB to enter orders for OTC
securities that qualify to be quoted. According to the U.S. Securities
and Exchange Commission (SEC), "fraudsters often claim or imply that
an OTCBB company is a Nasdaq company to mislead investors into
thinking that the company is bigger than it is".
FINRA, an "independent, not-for-profit organization authorized by
Congress", runs and provides regulatory services to the OTCBB by
"writing and enforcing rules governing the activities of more than
4,100 securities firms with approximately 639,780 brokers". The
OTCBB formerly collected 100% of quotes, but that number has declined
with the rise of its competitor OTC Markets Group, which uses an
electronic quotation system. In September 2009, FINRA announced that
it would be selling the OTCBB.
OTC Markets Group was the leading
contender for purchasing the OTCBB, but terms could not be reached.
In September 2010, FINRA announced that it had reached terms for the
sale of the OTCBB with Rodman & Renshaw, an investment bank. Along
with the sale of the OTCBB and, in an effort to provide uniform
regulation to all OTC issues and, subsequently, transparency to the
OTC market, FINRA has proposed a "quotation consolidation system".
Under the quotation consolidation system, FINRA would require dealers
to report all of their quotes to the quotation consolidation system,
regardless of the market upon which they were originally quoted. This
would enable FINRA to have access to all quotes in OTC issues and
regulate the OTC market in its entirety. Pink OTC argues this is
anti-competitive and an abuse of FINRA's authority.
Companies quoted on the OTCBB must fully report (i.e., current with
all required SEC filings) but there are no market capitalization,
minimum share price, corporate governance or other requirements to be
quoted. Companies which have been "de-listed" from stock exchanges for
falling below minimum capitalization, minimum share price or other
requirements often end up being quoted on the OTCBB.
An E after the ticker symbol means the company was late in its SEC
Stock of non-reporting companies (those without current SEC filings)
may be quoted on one of the markets operated by OTC Markets Group.
Most OTCBB companies are dually quoted, meaning they are quoted on
both the OTCBB and the one of those
OTC Markets Group markets. Stocks
traded on these markets are usually thinly traded microcap or penny
stocks, and both retail and institutional investors generally avoid
them, because of fears that share prices are easily manipulated and
there exists a potential for fraud. The SEC issues stern warnings to
investors to beware of common fraud and manipulation schemes. As such,
most companies choose to list on more established exchanges such as
the NYSE MKT, New York
Stock Exchange, or
NASDAQ once eligible. FINRA
believes that the proposed "quotation consolidation system" would
enhance transparency, thereby decreasing the potential for price
manipulation or fraud.
The suffix ".OB" in a stock-ticker listing signifies "over-the-counter
Microcap stock fraud
^ SEC warning
^ "About FINRA". FINRA. Retrieved 9 December 2014.
^ Over-the-Counter Bulletin Board (OTCBB) Sale Announcement. OTCBB.com
^ FINRA Proposal Riles OTC Market. Traders Magazine.
^ "My Dumbest Investment". The Motley Fool. 15 June 2017. Retrieved 16
February 2018 – via Naples Florida Weekly.
"Microcap Stock: A Guide for Investors"