Definition Affiliate Rule 144
Why Do You Need A Pink Sheet Listing When You Take Your Company Public
If you want to take your company public, there are two things required to get a Pink Sheet Listing:
* Free trading stock is required.
* A Ticker Symbol has to be issued by FINRA. (The SEC is NOT who issues Ticker Symbols.)
Free trading stock is the biggest obstacle to overcome in order to get a Pink Sheet Listing. You don’t automatically have free trading stock, because you are not filing a registration statement with the SEC. Stock that belongs to existing shareholders, or previously sold stock needs to be free trading and this does not happen overnight. Under SEC Rule 144, your shareholders must have held their stock for a full year in order to be considered free trading. You do not qualify for a Pink Sheet Listing, unless this is the case.
Unfortunately, free trading stock is not the only obstacle you will encounter, when it comes to your Pink Sheet Listing.
There are other FINRA requirements for a Pink Sheet Listing, even if you have cleared the free trading stock hurdle. They include:
* A sufficient number of free trading shares
* The adequate proportion of non-affiliated shareholders
* Market diversification
If you make it through this scrutiny of FINRA for a Pink Sheet Listing application, there are additional requirements that make it more difficult than the obstacles you encounter with the application process necessary for the OTCBB or a higher exchange. Other scrutiny you can expect to encounter with FINRA will include:
* The process of your initial stock offering and whether those stock sales were SEC compliant as it applies to statutes, rules and regulations.
* Determination of the company structure and whether shell company status exists under SEC definitions.
As you can see, you need to be diligent in the initial phases of your company, if you are seeking a Pink Sheet Listing because you will need to furnish FINRA with the following documentation and proof:
* Initial securities offering documents, including copies of checks and subscription agreement.
* Proof your company is not a shell company and is presently engaged in a valid business activity and that the company plans to stay engaged in those activities in the future.
* Clear proof of free trading stock in the form of a Transfer Agent-generated shareholder list.
* A statement by SEC counsel validating the opinion of the free trading stock based on the Transfer Agent’s shareholder list.
While disclosure items are similar to the requirements for SEC registration statements, Form 211 for a Pink Sheet Listing application is lengthy in comparison to an OTCBB or higher exchange application.
Un-audited financial statements are acceptable for a Pink Sheet Listing- however, they can’t just be an internally-generated balance sheet with income statements. Accounting firms that prepare financial statements to send the PCAOB auditors for SEC registration statements are equally qualified to prepare Pink Sheet Listing financials statements, since they are identical in appearance to those required in an SEC filing.
About the Author
Michael Williams operates the leading Williams Securities Law Firm .Their top notch consultation and expertise can help you if you are Going Public Direct or in middle of Reverse Mergers.
