OTC Markets Launches Enhanced Compliance Analytics to Facilitate Risk Management

The solution helps broker-dealers to more efficiently manage risk when trading OTCQX, OTCQB, Pink and Grey Market securities.

OTC Markets Group, an operator of financial markets for US and global securities, has introduced an enhanced compliance analytics product designed to provide broker-dealers and investment managers with an automated tool that will more efficiently analyse and manage risk when trading OTCQX, OTCQB, Pink and Grey Market securities.

Compliance Analytics

The new OTC Compliance Analytics Product comprises an Enhanced Compliance Data File and an Issuer Analytics File. These provide important current and historical compliance data points for OTCQX, OTCQB, Pink and Grey Market securities, as well as an overall ranking based on 16 factors, including Penny Stock status, Caveat Emptor status, name changes, price/volume changes and changes to shares outstanding.

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Delivered twice daily in pipe-delimited format, the product is designed to help financial institutions more efficiently analyse and quantify risk in trading OTCQX, OTCQB, Pink and Grey Market securities, as well as expand the breadth of securities that broker-dealers can recommend to investors.

Trading in OTC equity securities is subject to an array of rules designed to protect investors from fraud and ensure they have all the information available to make a wise investment decision.  

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These include the SEC’s Penny Stock Rules, which require that broker-dealers conduct additional due diligence and provide disclosure to a client before effecting a transaction in a ‘penny stock’, and FINRA Rule 2114 which requires broker-dealers to review current financial statements and business materials before recommending certain securities.

Reduces Risk Exposure

Until now, broker-dealers have lacked the appropriate tools to identify which securities are exempt from these rules as well as to efficiently analyse and monitor the ongoing compliance process across the 10,000 OTCQX, OTCQB, and Pink securities. What has resulted is an onerous compliance process, potential risk exposure for financial firms, and missed opportunities for investors.

The OTC Compliance Analytics Product will now alleviate these issues by providing broker-dealers and investment professionals with timely compliance data for these securities.

 

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