For investors who don't know about pink slips and why investors may not invest while the company is in pink slips.
Pink Current Information
Current Information is the highest Pink tier.By definition, Pinks are not registered with the SEC, and have no filing obligations, to the Commission or to anyone else.OTCMarkets encourages these issuers to make disclosure, however, in accordance with what they call the “alternative reporting standard.”This standard is their own invention.It is loosely based on SEC reporting standards, but much less rigorous.
In order to qualify as Pink Current, an issuer must file one (unaudited) annual report each year, three quarterly reports, and must also disclose a variety of material corporate events.A letter from an attorney who has met “face-to-face” with the company's officers and a majority of the board of directors must accompany the annual report.Until early this year, when OTCMarkets revised its requirements, attorney letters had to be provided with interim financial reports as well.
That may mean lower attorney fees for some, but the list of material events that must be disclosed has grown.Companies are now expected to give prompt notice—within four days—of entry into or termination of material agreements, acquisition or disposition of assets, creation of a financial obligation, or a change in an existing obligation, material impairments, sales of stock, non-reliance on previous financial statements, changes in control, and departures or appointment of new board members or officers, among other things.
The addition of stock sales to the list is particularly interesting.It means that Pink Current issuers should now inform OTCMarkets every time the outstanding is raised.That information is extremely valuable to anyone playing the stock.Historically, Pinks tend not to be upfront about it.It remains to be seen if most will now bite the bullet and report.
The fact that shares traded on Pink Sheets are unregulated makes some investors wary. And many Broker-Dealers steer unsophisticated investors away from them. In fact, under SEC regulations, brokers are not allowed to solicit the sale of the shares if they are under $5; they can only respond if asked about them.
