Preparing For Rule 15c-211 and Form 211
Securities Lawyer 101
Preparing For Rule 15c2-11 & Form 211
Direct Public Offerings remain a popular option for companies seeking to be quoted by the OTC Markets due to the increased costs and more stringent regulations associated with Securities and Exchange Commission (“SEC”) reporting. Both reporting and non-reporting companies should familiarize themselves with Rule 15c2-11 (“SEC Rule 15c2-11”) of the Securities Exchange Act of 1934 (the “Exchange Act”) before a going public transaction.
Without proper preparation it can difficult for the Company to locate a sponsoring market maker who will submit its Form 211 with the Financial Industry Regulatory Authority (“FINRA”).
Proper planning will ensure that the Company meets FINRA’s requirements for assignment of a ticker symbol.
What Is The OTC Markets Quotation System?
The OTC Markets Group operates an electronic inter-dealer quotation system called OTC Link.
This allows Broker-dealers to trade securities that are not listed on a national securities-related exchange.
OTC Markets categorizes issuers in tiers based upon the level of disclosure the Company provides.
Companies who go public using Form 211 qualify for quotation by the OTC Markets.
Companies filing registration statements with the SEC have several listing options on the OTC Markets.
What Does Form 211 Require For a Stock Ticker Symbol Assignment?
Form 211 will allow the In general, a private Company can get a stock ticker symbol if:
● The Company has at least 25 non-affiliate shareholders who paid cash consideration for their shares at least 12 months prior to the filing of the Form 211 ; ● The Company must have at least 1 million shares outstanding, and at least 250,000 must be trading shares; ● The Company must never have been a shell Company; and ● The Company must provide adequate information to the public.
How Is Form 211 Submitted to FINRA?
Rule 15c-211 requires a market maker to sponsor the Company’s Form 211 application. Once a Company locates a sponsoring market maker, the market maker submits the Form 211 to FINRA on the Company’s behalf.
FINRA may render comments to the Form 211 which the sponsoring market maker and private Company must respond to.
Once FINRA is satisfied that the Form 211 complies with the requirements of Rule 15c2-11, it will assign a stock trading symbol and the Market Maker can quote the Company’s securities.
The securities of the private Company are then quoted by the OTC Markets and the Company is a public Company.
Once the sponsoring market maker has published quotations for at least 30 days, additional market makers can publish quotations for the security.
What Other Requirments Apply to Form 211 ?
The market maker chosen by the Company to sponsor the Form 211 application is prohibited from being compensated for its services.
Rule 15c-211 requires the Company have current public information available prior to publishing quotes for the security. The information required in the Form 211 satisfies the adequate information requirements of Rule 15c-211. Form 211 requires, among other things, the following disclosures:
● Current transfer agent generated shareholder list, indicating name and address of each shareholder, the shares owned, date of share ownership, and whether the shares are restricted, control, or free trading;
number of
● Detailed description of the issuer’s business, products/services offered, assets and sources of revenue; ● Description of the Company’s facilities including the location, square footage and whether owned or
leased;
● Identification of officers, directors and holders of more than 5% of the Company’s securities; ● Certificate of Incorporation and bylaws including any amendments; ● Description of the Company’s free-trading shareholder base, including a description of exemptions from registration under the Securities Act;
Form 211 in Going Public Transactions (cont.) ● Agreements creating restrictions, liens or encumbrances on, or relating to, the transfer or voting of
shares;
● Agreements evidencing stock rights, warrants or options; ● All stock purchase or asset purchase agreements for last five (5) years;
● Disclosure of whether the Company has entered into any discussions or negotiations concerning a potential merger or acquisition candidate; ●Merger and/or consolidation agreements; ● Partnership and/or joint venture agreements; ● Unaudited financial statements for the last 2 fiscal years and interim periods; ● Details of all private offerings including who solicited investors, how they were known to the solicitor, how many individuals were solicited, and whom did not purchase;
and
● One full copy of the subscription agreement executed by each investor and copies of all checks from the subscribers or other proof of payment; ● Copies of Form D filed with the SEC; ● Description of all relationships among and between every shareholder and the issuer, its officers and directors, and other shareholders;
Form 211 in Going Public Transactions (cont.) ● A statement indicating whether any person or entity has control, written or otherwise, of the sale, transfer, disposition, voting or any other aspect of the shares listed on the shareholders list other than the shareholder; ● Whether any officer or director of the issuer had any regulatory action taken against him/her by the SEC, NASDAQ, NYSE or other securities-related regulatory agency and whether any officer or director of the issuer has been convicted of any felony charges within the last 5 years; ● A detailed business plan, which includes a detailed chronological account of each and every step issuer has taken in furtherance of its stated objective since inception;
the
● A description of the steps the Company plans to take during the next year in furtherance of its business plan, including the activities in which the Company plans to engage, the names of the persons who will conduct these activities, and the expected dates of these activities; ● A description of any future financing plan; ● Any material agreements or letters of intent entered into by the Company; ● Schedule of all material patents, trademarks, trade names, service marks, and copyrights; and ● Legal opinion from Company‘s securities lawyer as to tradability of the free trading shares.
Conclusion ď ľ
Planning ahead will ensure that the Company qualifies for its ticker symbol when submitted its Form 211.
For further information about this securities law blog post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton, Florida, (561) 416-8956, by email at info@securitieslawyer101.com. This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute, legal and compliance advice on any specific matter, nor does this message create an attorney-client relationship. For more information about going public and the rules and regulations affecting the use of Rule 144, Form 8K, crowdfunding, FINRA Rule 6490, Rule 506 private placement offerings and memorandums, Regulation A, Rule 504 offerings, SEC reporting requirements, SEC registration statements on Form S-1 , IPO’s, OTC Pink Sheet listings, Form 10 OTCBB and OTC Markets disclosure requirements, DTC Chills, Global Locks, reverse mergers, public shells, direct public offerings and direct public offerings please contact Hamilton and Associates at (561) 416-8956 or info@securitieslawyer101.com. Please note that the prior results discussed herein do not guarantee similar outcomes.
Hamilton & Associates | Securities Lawyers Brenda Hamilton, Securities Attorney 101 Plaza Real South, Suite 202 North Boca Raton, Florida 33432 Telephone: (561) 416-8956 Facsimile: (561) 416-2855 www.SecuritiesLawyer101.com
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