Leave it to the U.S. Regulators to Create More Confusion and Uncertainty

Many of us had thought that the sale of “certain assets” of the OTC BB owned by the U.S. reguator, FINRA (Financial Industry Regulatory Authority) to the financial services firm, Rodman & Renshaw, would have been completed months ag0, and we couldn’t figure out what was holding things up.

Many of us believed that for the OTC BB to viable as an alternative to its upstart competitor, OTC Markets (otcmarkets.com), the operator of the OTC QB, required new technology in the form of an electronic trading platform.  it was generally thought that under Rodman & Renshaw’s control and operation that this new technology would be implemented.  Today virtually all of the trades taking place for OTC BB traded companies are in fact being executed on the OTC QB.

As indicated below, in a posting by DealFlow Media’s Reverse Merger Wire, one phrase, “FINRA asked the SEC in a filing May 4 for permission to change the name of the OTCBB to the “Non-NMS Quotation Service” or the NNQS. This would allow FINRA to continue to operate what has been known as the Bulletin Board while selling certain assets to Rodman” is very disquieting. Essentially what it appears is happening is that while FINRA would be selling “certain assets” to Rodman & Renshaw, that FINRA is trying to maintain a role of “gatekeeper” over the OTC BB as well as OTC QB, probably through maintaining control over the Form 211 listing process, that would require companies to go through the cumbersome and bureacratic 211 process with FINRA for the OTC BB, OTC QB as well as the proposed new NNQS.

Many of us had seen the acquisition of “certain assets” of the OTC BB by Rodman & Renshaw, as well the success OTC Markets has had with the operation and level of trading activity of the OTC QB as good moves that would prove beneficial for capital creaton, and Entrepreneurship.  If my assumption is correct, it appears that the covnerse will be true, that if FINRA remains in control of the 211 process, it will be bad for American capital creation, entrepreneurship and most importantly job creation by entrepreneurial companies who have traditionallly been able to access the capital markets by having their shares traded on the OTC BB.  on.

Here is the full posting by DealFlow Media’s Reverse Merger Wire, (reversemerger.dealflowmedia.com):

Roth, OTC Markets Raise Concerns about OTCBB Sale

Posted June 16, 2011 4:45PM PST – Both Roth Capital Partners and attorneys for OTC Markets raised concerns about the Financial Industry Regulatory Authority’s (FINRA) sale of the Over the Counter Bulletin Board (OTCBB) trademark and other assets to Rodman & Renshaw in letters sent to the Securities and Exchange Commission last month.

FINRA asked the SEC in a filing May 4 for permission to change the name of the OTCBB to the “Non-NMS Quotation Service” or the NNQS. This would allow FINRA to continue to operate what has been known as the Bulletin Board while selling certain assets to Rodman.

Byron Roth, chief executive at Roth Capital, and an attorney for OTC Markets submitted letters to the SEC on May 31 protesting the name change because it may confuse investors and consumers into thinking that the OTCBB, long associated with FINRA, was somehow still tied to the regulator.

“It is not at all clear what benefit to investors and the market would result from the proposed renaming of FINRA’s quotation system, and there certainly has been no showing that any such benefit would outweigh the potential harm of such investor confusion,” wrote Michael Trocchio, with the law firm Bingham McCutchen, who represents the OTC Markets. “The threat of unnecessary risk without a clear benefit to investors makes the Proposal controversial, and should lead the Commission to require public comment and further analysis prior to deciding whether to approve the Proposal.”

The letters also expressed concerns that the sale could give Rodman an unfair competitive advantage.

“Roth believes that permitting Rodman, a member of FINRA, to acquire and use the highly-regarded and well known OTCBB brand name and the OTCBB.com website will bestow a significant competitive advantage upon Rodman to the detriment of Rodman’s competitors, including Roth and other investment banking firms and market makers,” Roth said in the letter. “We believe the Rule Filing imposes a significant burden on competition, or at least the possibility of such a burden, and that this matter should be more fully considered.”

It is unclear when the SEC might render a decision regarding the name change.

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