OTC Market Group recently submitted a comment letter on FINRA Rule 6432 to the Financial Industry Regulatory Authority, Inc. (FINRA) in response to the request for comments on FINRA Rules Impacting Capital Formation.
In the letter, we recommend that FINRA work with the SEC to make Rule 6432 more efficient and regulatorily relevant by adopting a disclosure-based approach and promoting the public availability of information. Our letter recommends the following simple modifications to the administration of Rule 6432 that would provide immense benefits to smaller companies looking to access well-regulated secondary markets:
Making the Form 211 review process more efficient by adopting an objective review standard and implementing a three-day turnaround;
Requiring that Form 211 materials be made public and issuers (not broker-dealers) be liable for any misrepresentations;
Outsourcing certain Form 211 functions to IDQSs, including allowing an IDQS to file a Form 211 directly with FINRA and to review Form 211 filings submitted by other broker-dealers;
Allowing IDQSs the authority to develop disclosure regimes and initiate trading halts;
Amending FINRA Rule 5250 to allow broker-dealer compensation for information gathering and Form 211 filing, provided that all such payments are fully disclosed; and
Allowing multiple market makers to quote a security immediately after a Form 211 is cleared.
Read Full Comment Letter: https://www.finra.org/sites/default/files/notice_comment_file_ref/17-14_OTCmarkets_comment.pdf