Guide to the Pink Sheets

What are the Pink Sheets?


• The Pink Sheets, which are formally known as the OTC Markets Group, is a private company that provides services to the United States over-the-counter securities market. More specifically, the Pink Sheets will offer the OTC market electronic Quotations, information, messaging and trading platforms to help streamline the exchange of smaller or more speculative securities.

• The Pink Sheets, to simplify their service, simply facilitates the exchange of securities between independent broker dealers. The United States Securities and Exchange Commission does not regard the Pink Sheets as a formal stock exchange; as a result of this designation the Pink Sheets are held separate from tangible marketplaces, such as the New York Stock Exchange.


Characteristics of the Pink Sheets:


• The Pink Sheets, as stated above, is not a stock exchange. For a company to be quoted via the Pink Sheets, the institution does not need to fulfill any listing requirements or submit any information to the SEC. The majority of companies listed or traded via the Pink Sheets are small, lightly-held companies that are speculative in nature and possess extremely low volume. A number of companies would not come close to meeting the minimum listing requirements for companies to be traded on a stock exchange.

• Furthermore, a number of these companies are not required to file periodic reports or audited financial statements with regulatory bodies such as SEC. As a result of the limited regulation, investors are typically speculative regarding investment with the Pink Sheets; there is simply a dearth of reliable, unbiased information concerning companies on the Pink Sheets. For this reason, the SEC views and interprets companies listed on the Pink Sheets among the most risky investments in the United States and advises potential investors to research the companies they plan to invest in.



Categorization System:


• The Pink Sheets utilizes a categorization system to denote the level of financial and corporate disclosure provided by the companies who utilize the quotation system. The disclosure categories; however, will not signify the quality of the security, only the amount information submitted to regulatory institutions or the level of transparency associated with the company. The categories are based on the level and the timeliness for which a company offers such information.