OTC Markets Introduces OTCID: A New Era for U.S. Venture Marketplaces

Author: Destiny Aigbe

November 28, 2024

OTC Markets has announced a significant update with the launch of a new market tier, OTCID, set to replace the Pink Current tier in July 2025. The OTCID will require companies to meet basic reporting obligations, including minimal disclosure standards and management certifications. This move aims to enhance transparency and bolster confidence in OTC-listed securities while maintaining the Pink Limited and Expert Market tiers for companies that do not meet OTCID standards.

Understanding OTCID
The OTCID builds upon the current Pink Current tier, with companies required to submit quarterly and annual disclosures in accordance with GAAP. The addition of management certifications represents a step toward greater accountability. OTC Markets CEO Cromwell Coulson emphasized the importance of the "OTC" prefix in signaling investor trust through disclosures and corporate governance.

Companies unable to meet OTCID standards will remain in the Pink Limited or Expert Market, marking a clearer distinction between compliant and non-compliant issuers.

Revitalizing the OTC Marketplace
OTC Markets has faced challenges in recent years, particularly a decline in institutional financing for OTC-traded companies. However, the launch of OTCID offers a unique opportunity to revitalize the market as a viable platform for U.S. micro-cap companies.

Factors Driving Change
Increased Micro-Cap Activity: As Nasdaq and NYSE tighten listing requirements, many small-cap companies are migrating to OTC Markets.
Regulation A Growth: Regulation A offers smaller companies access to capital while providing liquidity through OTC listings.
Institutional Investor Concerns: Regulatory uncertainty and enforcement actions have deterred institutional investors. However, recent judicial decisions, including the Supreme Court’s rejection of the Chevron doctrine, signal potential changes in the SEC’s enforcement approach.
Institutional Confidence on the Horizon
Key developments could pave the way for institutional investors to return to the OTC Markets:

SEC Enforcement Challenges: SEC Commissioner Mark Uyeda’s opposition to unlicensed dealer litigation highlights a shift in regulatory attitudes.
Rule 144 Amendments: The stalled proposal to eliminate the tacking period on certain securities suggests that overly restrictive regulatory changes may not materialize.
The Road Ahead
The launch of OTCID represents a promising step toward addressing the need for a robust U.S. venture marketplace. By emphasizing transparency and compliance while distinguishing compliant issuers, OTC Markets is poised to reclaim its status as a platform for growth-stage companies.

With the potential return of institutional investors and a steady increase in Regulation A activity, the future of OTC Markets looks promising. As the industry adapts to these changes, companies seeking to raise capital and achieve liquidity will find a renewed ally in OTC Markets.

About the Author

Destiny Aigbe

Managing Partner

Aigbe Law PLLC | Dark Alpha Capital

A Corporate and Securities Law Firm

With a robust foundation in law and finance, Destiny Aigbe has carved a distinguished career, underpinned by his pivotal role in orchestrating and managing complex transactions that have propelled companies to significant growth and market prominence. As a seasoned attorney and strategic advisor, Destiny has been instrumental in facilitating over $75 million in capital raises, demonstrating a keen acumen for securing funding and fostering investor confidence.

Destiny's leadership in the execution of six successful public listings, through meticulously structured reverse mergers and registration statements, showcases his adeptness in navigating the intricacies of the public markets and his capacity to guide companies through transformative growth phases. His involvement in five mergers as an operator further illustrates his versatile skill set, extending beyond legal expertise to include hands-on management and operational strategy, though these ventures did not involve funding.

Destiny's professional journey is marked by a commitment to excellence and a diverse range of experiences, from representing a wide spectrum of clients including public and private companies, and investment firms, to holding significant roles within the US government. His tenure with the US Department of State and the National Institutes of Health highlights his adaptability and his contribution to the advancement of entrepreneurial ventures in sectors like biotechnology and nanotechnology through strategic funding initiatives.

An alumnus of Vanderbilt University Law School, Destiny focused on Finance and Mergers & Acquisitions, further honing his expertise with a certificate in Law and Business. His foundational education in Finance was obtained with honors from the University of Maryland's Robert H. Smith School of Business, which laid the groundwork for his subsequent achievements in investment banking and legal practice.

Residing in the Washington, D.C. area, Destiny Aigbe continues to leverage his extensive experience and insightful leadership to drive innovation, growth, and success for his clients and the ventures he is involved with.

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