October 8, 2019
As a longtime investor in public stocks including microcaps and OTC stocks (pink, grey, and dark) I am writing to offer CONDITIONAL support for the proposed changes to Rule 15c2-12.
There is an understandable tension between preserving opportunities for an astute group of dark stock OTC investors and increasing protections for unsophisticated retail investors who fall prey to scams and deceptions.
Phrases like Caveat Emptor and Buyer Beware do not restore the lost fortunes of scam victims. However, the SEC should be sensitive to potential unexpected negative consequences to existing investors in dark stocks if this proposed regulation is enforced as currently written.
A comment from Michael Hess on September 27 on this same topic offers a good compromise which is similar to my suggestion: require annual unaudited financials (or audited financials every 3 years and unaudited annual financials for the remainder something of the sort.)
Unlike some other comment submissions, I think companies which produce financials should publish them publicly so all market participants can easily review them. Enough of this "contact management and hope for a response" nonsense.
Also, given the illiquidity of these stocks and the limited resources of these companies, there should be an extended transition period for whatever new regulations (if any) are enacted. The archaic shareholder of record rules beg for reform too. It's too easy to go dark and shed reporting responsibilities but also too expensive for struggling small public firms to maintain Rolls Royce SEC filings on Hyundai budgets.
What I hope the SEC will do is look the United Kingdom's AIM sub-market of the London Stock Exchange as a model. There is an opportunity here to reinvigorate the US OTC/microcap through effective but "light touch" regulations. A microcap market which offered "listed private equity" risks and returns would add choice to the investment spectrum for both investors and entrepreneurs.