Red Alert for Dark OTC Stocks

The SEC has proposed rules changes that would effectively shut down all trading in non-reporting OTC-traded companies. I am strongly opposed to these rule changes. As proposed, the new rules would eliminate the ability of holders of non-reporting OTC company shares to transact in the marketplace. Holders would only be able to sell their holdings by identifying a willing buyer without the benefit of market makers or electronic trading. The resulting prices and valuations for these trades would surely be punitive in the extreme.

I urge the SEC not to preside over the destruction of hundreds of millions in shareholder wealth by implementing these misguided changes. The goal of protecting investors from fraud and manipulation is laudable, but the collateral damage in this instance would be extreme.

I have submitted a comment to the SEC explaining my views. My comment can be found here. (I will change the link once the SEC has processed my comment and it appears on their public site.) Many other investors in dark OTC companies have taken the time to submit their thoughtful comments.

If you are an investor in non-reporting OTC-traded companies and would like to ensure continued quotation for your holdings, I ask that you also submit a comment to the SEC expressing your dissatisfaction with the proposed rules changes. Please take steps to protect the value of your investments, otherwise you may find yourself holding virtually untradable shares in effectively private companies.

The SEC’s public comment portal is accessible here. Please submit your comments for the September 25 entry titled “Publication or Submission of Quotations Without Specified Information” File number S7-14-19. Previously submitted comments can be read here. Thank you for reading!

4 thoughts on “Red Alert for Dark OTC Stocks”

  1. Oh my. Seems like this will strand my investment in BWEL forever, eh?

    I’ve always wondered: What is the procedure to force a company to become a reporting company?

    I wonder about BWEL. I’m sure it has more than 500 shareholders. The problem I believe is that the SEC counts the wrong way. I believe they count the stock brokers who hold the shares for us, rather than the individual shareholders. If one could force a company to disclose the list of shareholders, as is done during hostile takeovers, then one could show the SEC the true number. Has anyone ever done something like this?

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