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Eligibility Rule Q & A

Q1 Must an issuer file a Form 10 or a Form 10SB or can it just "voluntarily" file financial reports to satisfy the new eligibility requirements?
A1 The Eligibility Rule provides that no issuer may be quoted on the OTCBB unless it is required to make current filings pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 ("Act"), is an investment company registered under the Investment Company Act, is an insurance company described in Section 12(g)(2)(G) of the Act, or is a bank or savings association that is not required to file reports with the SEC. In order to be required to make filings pursuant to Section 13 or 15(d) of the Act, an issuer must register its class of securities under the Securities Act of 1933 or the Securities Exchange Act of 1934.

Q2 How do I register to comply with this new requirement?
A2 The following information should be used as a guideline only; you should check with a securities attorney or the SEC regarding registration procedures. If your company fits the SECís definition of a Small Business (less than $25 million in revenue and less than $25 million in public float) you may register by filing a Form 10SB. For more information on this topic, please see the SECís Small Business Q&A. If you donít have access to the internet, call the SECís Publications Department at (202) 942-4040 and ask for a Small Business Package. For further questions, please call the SECís Office of Small Business at (202) 942-2950. If your company does not qualify as a small business, check the SECís Web site or contact the SECís Office of Chief Counsel of the Division of Corporation Finance at (202) 942-2900.

Q3 Is any exemption available for Rule 504 filers?
A3 No. Rule 504 provides an exemption from registration under the federal securities laws. Going forward, these issuers will no longer be allowed to be quoted on the OTCBB.

Q4 Is an issue eligible for quotation on the OTCBB once the companyís Form 10 or Form 10SB is effective (which by rule occurs after 60 days)?
A4 No. As stated in the proposing and adopting release "all SEC comments, if any, must be cleared with the SEC before securities can be quoted on the OTCBB." In addition, the Form 10 or Form 10SB must be effective in order for the issuer to comply with the substantive requirements of Rule 6530.

Q5 Will a pending Form 211 which was submitted for entry onto the OTCBB prior to January 4, 1999 be subject to the new requirements?
A5 Yes. If you have a Form 211 that is pending, it will not be cleared for quotation unless the issuer is already subject to the periodic reporting requirements of Section 13 or 15(d) of the Act, or is an investment company registered under the Investment Company Act, an insurance company described in Section 12(g)(2)(G) of the Act, or a bank or savings association that is not required to file reports with the SEC. If the issuer does not meet the requirements, you may withdraw the application or amend it for quotation on another quotation medium such as the Pink Sheets.

Q6 How will the phase-in be implemented?
A6 Securities quoted on the OTCBB as of January 4, 1999 will be phased into compliance with the new Eligibility Requirement based upon the Phase-in Schedule. Please be advised that we will use the issue symbol as it appeared in the OTCBB quotation system on January 4, 1999 to determine where a particular issue falls in the schedule. Subsequent symbol changes will not be considered in determining an issuerís phase-in date. This schedule is subject to change at the discretion of the NASD. The most recent copy of the phase-in schedule is always available on this Web site.

Q7 How can I be sure that the NASD has properly identified OTCBB issuers which are registered and file periodic reports with the appropriate regulatory authority so that these issues will not be removed from the OTCBB service?
A7 A list of each OTCBB security (as of January 4, 1999) and what the NASD has been able to determine as to its eligibility status will soon be posted to this Web site. We ask that Market Makers check each issue that they quote, and if we have incorrectly identified an issue as not current in its required filings, please inform us by e-mail at otcbbfeedback@nasd.com. Include "OTCBB Eligibility status correction" on the subject line of the e-mail and be sure to provide the CIK number if the issuer is an EDGAR filer.

Q8 Which securities get a 30 day grace period for filing delinquency and which securities get a 60 day grace period?
A8 Exchange Act filers are granted a grace period of 30 days after a filing delinquency before the security is removed from the OTCBB service. Securities of issuers who make periodic filings with other regulatory agencies such as banks, thrifts and insurance companies are permitted a 60 calendar day grace period. The difference in allowed grace periods is due to the lack of an automated method for obtaining the filing status of issuers who file with agencies other than the SEC.

Q9 Can an issuer get an extension or exception to the Eligibility Rule if it has filed a Form 10 or Form 10SB but the SEC has not yet come to a position of no further comment?
A9 No. There are no exceptions to this rule or the final eligibility determination date assigned to each issuer based on it's trading symbol as of January 4, 1999. In order to meet the Eligibility Rule requirements, the SEC must have declared the Form 10/Form 10SB (or other registration statement) effective, and the SEC staff must have reached a position of no further comment on the filing.

Q10 What happens to an issuer when it is removed from the OTCBB for failure to comply with Eligibility Rule requirements? How can it get back on the OTCBB?
A10 The SEC has granted an exemption from SEC Rule 15c2-11 for securities that were quoted on the 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. The exemption will permit broker-dealers to publish or submit quotations in other quotation mediums, including the National Quotation Bureauís Pink Sheets, subject to certain conditions. For further information on this exemption, click here.

When an issuer is removed from the OTCBB and subsequently comes into compliance with the Eligibility Rule, it can come back onto the OTCBB after a Market Maker submits a Form 211 to the OTC Compliance Unit of NASD Regulation and the OTC Compliance Unit has cleared that issuer for quotation.

*While the NASD believes this information is accurate, all final determinations with respect to the Eligibility Rule will be made by the NASD. Please consult the SEC with regard to questions concerning their procedures.


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