Thursday, November 16, 2006
Shades of Pink
Trading is driven by OTC market demand rather than the traditional exchange listing process. Therefore, categorizing securities by their level of disclosure will greatly enhance the capital formation process. The categories are based on the level, quality and timeliness of a company's disclosure. The initiative is similar to the various markets that NASDAQ uses to classify companies as well as the identifiers that NASDAQ and NYSE use to label companies that are late or delinquent in disclosure. Pink Sheets will implement the new categories on May 1, 2007.
OTCQX: Top of the line listing, reserved for substantial operations with proper credible disclosure. About 20% of the stocks should have this classification. This requires filing an application to agree to follow reporting standards.
Emerging Equities List: credible disclosure, audited GAAP financials, although they might not have full qualifications for the other exchanges. This requires filing an application to agree to follow reporting standards.
SEC Current: Up to date with SEC filings.
Adequate Current Information: An audit is not needed, but a letter from an attorney regarding completeness of disclosure is needed. Also, formal regulatory filings with entities like presumably FDIC and such are good enough.
Limited Information Available: Some information is posted in the last 6 months, but might not be current or complete.
Public Interest Concern: "stocks with unsolicited spam, questionable promotion or other public-interest concerns. A Skull and Crossbones icon will be displayed next to the symbol." Quotes can be blocked if there's not current info available.
No Information: Everything else. A "stop sign" is used for these.
I believe this is an outstanding move by Pink Sheets and is exactly what is needed: SEC-Lite.
"Companies are known by the company they keep, and we hope that in providing these new categories, companies that provide disclosure to the public will clearly stand apart from those companies that are of lesser quality," concluded Mr. Coulson.
UPDATE Nov 19, 2006:
I'd like to answer the [first] comment to this post about why I add the seemingly weird comments (and presumably the off-topic videos/pictures/links) like the one below about Milton Friedman.
Very often I will mention things that I consider to be important--to me at least--or else just weird interesting stuff that I find, such as a tiger staring at an ice cream cone, which to me is interesting for a number of intellectual reasons such as how it relates to the book Thinking in Pictures. Sometimes, I just post something funny or silly. Sometimes, it's one of those things that just profoundly messes up my mental model of how things work. Most people don't click on the off-topic links and I don't expect most of them to. But I know for myself, I've discovered a lot of interesting things from casual links I've found on other website and blogs. I tend to be one of those people that will do a huge amount of web crawling around a particular topic. I've found this often results in finding other interesting things that I had never known about. I've spent a good part of my life learning about all sorts of useless things such as the history of the paperclip, which is actually an interesting example of market evolution. I typically find these off-the-beaten-path areas of knowledge in side notes, off-topic links, or just a mysterious mention somewhere without any further explanation.
I consider Milton Friedman to be one of the greatest economists since Adam Smith. Friedman was a great champion for economic freedom. He was arguably a major contributor to why the US economy has been run so well in the past 25 years. During that time, we've had two opportunities to dive into a Great Depression or a 1970s style stagflation tar pit and we've passed through them surprisingly well.
just a question, what is the purpose of the seemingly weird comments like "rest in peace, milton friedman" supposed to accomplish? just curious.