October 22, 2014
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211 Exemption Granted to Securities Removed from OTCBB Due to Eligibility Rule

On June 3, 1999, the SEC granted an exemption from SEC Rule 15c2-11 for securities that were quoted on the Over-the-Counter Bulletin Board ("OTCBB") on or before January 4, 1999 that will no longer be eligible to be quoted on the OTCBB due to the phase-in implementation of NASD Rule 6530 (the Eligibility Rule). View the SEC's Letter of Approval in PDF format.

On January 4, 1999, the Securities and Exchange Commission (SEC) approved amendments to NASD Rules 6530 and 6540 (Rules) to limit quotations on the OTCBB to the securities of companies that report their current financial information to the SEC, banking, or insurance regulators.1 The new Rules are intended to ensure that investors in OTCBB securities have access to reliable and current information about the issuers of these securities.

The new Eligibility Rule was effective immediately for securities not quoted on the OTCBB on January 4, 1999. Issuers whose securities were quoted on the OTCBB as of January 4, 1999 and have continued to be quoted will be required to comply with the Eligibility Rule according to a phase-in schedule starting in July 1999 and continuing through June 2000. The delayed effectiveness of the Rule is designed to enable broker-dealers, investors, and issuers to take appropriate action.

The Eligibility Rule provides that, in order for a security to continue being quoted on the OTCBB, the issuer must be required to make periodic filings with the SEC, or with banking or insurance regulators, and be current with those filings. The NASD will affix a modifier "E" on the security symbol of any securities issuer that does not meet the requirements of the Eligibility Rule. The addition of the modifier will be publicly reported on the OTCBB Daily List, which is available on the OTCBB Web site at www.otcbb.com. The "E" also will be evident to the quoting broker-dealers when they access the security on the Nasdaq Workstation. Once an issuer is deemed not to be in compliance with the Eligibility Rule, the security may continue to be quoted on the OTCBB for a 30 or 60 calendar day grace period from the date that the "E" modifier was appended on the security symbol, depending on the type of issuer.2 After the grace period, quotations in non-compliant securities will not be permitted on the OTCBB, and member firms will be prohibited from quoting the issuer’s security on the OTCBB. The NASD announced approval of the OTCBB Eligibility Rule in Notice to Members 99-15.

The exemption granted by the SEC from Rule 15c2-11 will permit broker-dealers to publish or submit quotations in other quotation mediums, including the National Quotation Bureau’s Pink Sheets, for securities being removed from the OTCBB pursuant to NASD Rule 6530 subject to the following conditions:

  1. A broker or dealer must have in its records information specified in paragraphs (a)(5)(i), (a)(5)(ii), and (a)(5)(viii) of Rule 15c2-11;
  2. The security was quoted in the OTCBB from January 4, 1999 until the date of its removal3;
  3. The NASD has appended the covered security’s symbol to indicate that it is not compliant with Rule 6530; and,
  4. A broker or dealer must have published quotations in the covered security in the OTCBB on at least 12 business days during the preceding 30 calendar days, with no more than four consecutive business days without quotations.
This exemption will expire when the implementation of the Eligibility Rule is complete.4

To publish or submit quotations for a security, pursuant to this exemption, that is being removed from the OTCBB pursuant to Rule 6530 a broker-dealer, pursuant to NASD Rule 6740, must, during the 30 or 60 day period that the security’s symbol reflected on the OTCBB is appended with the "E" modifier, complete and mail the Exemption Form to the OTC Compliance Unit, NASD Regulation, Inc., 9513 Key West Avenue, Rockville, MD 20850, or fax it to (301) 208-2806.

This form must be received by the OTC Compliance Unit during the 30 or 60 calendar day grace period commencing after the "E" is appended on the security symbol.
15c2-11 Exemption Request Form - Eligibility Rule

The information that must be provided on this form includes:

  • The issuer’s name and the issuer’s predecessor in the event of a merger or reorganization within the previous 12 months
  • The issuer’s address
  • Issuer contact and telephone number
  • The nature of the issuer’s business
  • The symbol(s) for the security(ies)
  • The security’s CUSIP number (if applicable)
  • If a broker-dealer is initiating a quotation with a priced entry, the firm must specify the basis for determining the price and the factors considered in making that determination
  • If the broker-dealer’s initial quotation does not include a priced entry, the firm must supplement its filing before inserting a priced entry
  • The form must be signed by a principal of the member firm
If you have any questions relating to this exemption please call the OTC Compliance Unit at (301) 208-2802.

1 See Release No. 34-40878 (January 4, 1999), 64 FR 1255 (January 8, 1999) (File No. SR-NASD-98-51).

2 Issuers that file with the SEC will have a 30-day grace period before they can no longer be quoted on the OTCBB; issuers that file with other regulators will have a 60-day period.

3 Therefore, if the Commission suspends trading in the covered security pursuant to Section 12(k) under the Exchange Act, this exemption does not apply to that security.

4 After that time, broker or dealers that wish to publish a quotation in another quotation medium in an OTCBB security that becomes ineligible for the OTCBB system will be required to comply with Rule 15c2-11. The Commission has recently reproposed amendments to Rule 15c2-11. See Securities Exchange Act Release No. 34-41110 (March 8, 1999). Broker-dealers would be required to comply with any new provisions of Rule 15c2-11, and this exemption may be modified or revoked upon adoption of any amendments.  

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