October 8, 2019
Hello, I recently came across the SEC’s proposed rule change affecting the OTC market and wanted to leave a few comments. The OTC market is a gateway to investing. Without it, myself and many of my friends, would never have been able to get started investing and our lives would be much different for sure. The OTC market, with its low priced securities, allows young investors to dabble in the market without getting eaten alive by HUGE algorithmic traders on the NYSE, NASDAQ or AMEX. I understand where the SEC is coming from, but the OTC market contains MANY EXTREMELY SMALL companies or companies in distress that may not have funding to file with the SEC, hence why they trade in the pennies to sub-penny range. Your own proposal even states on pg.21: “... this market(OTC) can offer a starting point for smaller issuers, as it may be difficult for a company just starting out to meet exchange listing requirements or pay listing fees.” So with that being said, why should an investor, who may have purchased shares based off of a company’s past filings/financial info, be punished by having his shares taken away or halted? That investor did the research, was comfortable with the fact the company was smaller and couldn’t afford to file, and still decided to purchase shares. We can’t act like all other markets are the gold standard, because we have seen in the past with Madoff and friends, there is just as much fraud(if not more) going on in the NYSE, NASDAQ, AMEX. And it goes unnoticed because they get a rubber stamp from unsuspecting/unscrupulous accounting firms. Here is my proposal for dealing with the problem. Before any OTC/Pink Sheet stock can be purchased, a warning screen flashes up on the person’s screen(very similar to the warning given when an investor is about to make a purchase with unsettled cash), a general warning to the investor. For example: “Before this order is executed, please be aware your are about to purchase an OTC stock. OTC companies are generally small and can’t afford to file so any information may be outdated. Please contact the company personally and review any available filings and/or financial statements before proceeding. Would you like to continue with your order?” I think a quick disclaimer about the OTC would do wonders for many people. You could do many other things too other than just suspending/halting a stock and causing everyone to lose 100% of their investment, guaranteed. Because isn’t that the fate the SEC is trying to avoid for small investors, a 100% loss?? I understand the SEC has to be a watchdog here, but please reconsider these proposals to change the OTC. Without it, many smaller investors who get started on the “ground floor” will never be able to participate in the market or investing. Thank you for your time, please let me know if you have any questions or replies. Look forward to hearing from you. -Kevin Ward OTC trader for 13 years+