NASD Announces SEC Approval of OTC Bulletin Board Eligibility Rule

Washington, D.C. -The National Association of Securities Dealers, Inc. (NASD), today announced that the Securities and Exchange Commission (SEC) has approved the NASD's proposed OTC Bulletin Board Eligibility Rule. This rule permits only those companies that report their current financial information to the SEC, banking, or insurance regulators to be quoted on the OTC Bulletin Board (OTCBB), offering investors more and better information about OTCBB stocks.

Under the new rule, Market Makers will not be permitted to quote OTCBB-traded securities unless the issuer has filed periodic reports with the appropriate regulatory agency. The filing requirement protects investors by ensuring that they have access to companies' current financial information when considering investments in OTCBB-traded securities.

"Thorough and accurate information is the foundation of sound investment decisions," said Frank G. Zarb, NASD Chairman and Chief Executive Officer. "By requiring the half of all OTCBB companies that currently do not provide publicly-available financial reports to join the half that do, we will take a major step toward improving the quality of the microcap market. We are pleased hat the SEC has approved our proposal to effectively eliminate non-reporting companies from the OTC Bulletin Board."

Under the new rule, any domestic company that does not file periodic financial reports with the SEC, or with banking or insurance regulators, will be eliminated from the OTCBB after a phase-in period. In April 1998, the SEC required all foreign securities on the OTCBB to be fully registered with the SEC in order to remain quoted.

The new requirement applies immediately to any company first quoted on the OTCBB after January 4, 1999. Securities already quoted on the OTCBB as of January 4, 1999, will have until at least July 1999 to comply with the new requirements. The rule will be phased in over a 12 month period beginning in July 1999 and continuing through June 2000 in alphabetical increments based upon the company's name as of January 4, 1999. In June 2000, the rule will apply to all companies on the OTCBB.

The filing requirement also means that these companies are subject to greater regulatory oversight by the SEC and other regulatory authorities. The OTC Bulletin Board is a quotation service that displays real-time quotes, last-sale prices, and volume information in domestic and certain foreign securities. Eligible securities include national, regional, and foreign equity issues; and warrants, units, and American Depositary Receipts (ADRs) not listed on any other U.S. national securities market or exchange. Although the OTCBB is operated by the NASD, it is unlike The Nasdaq Stock Market(R) or other listed markets where individual companies apply for listing and must meet and maintain strict listing standards; individual brokerage firms, or Market Makers initiate quotations for specific securities on the OTC Bulletin Board. Currently, approximately 6,500 securities are quoted on the OTCBB.

  News & Interpretation of the Requirements Affecting Small Business Corporations

Each OTCBB corporation must now become a reporting company and register their stock by filing Form 10-SB. They must then file Form 10-KSB and Form 10-QSB reports in a timely manner. These utilize the Edgar system of electronic filing. The new rule requires unlisted corporations that fund their "Regulation 'A' or other exempt offering", to file a Form 10-SB and have it qualified by the SEC to get listed on the OTCBB. Until their stock is registered, the corporation utilizing Regulation 'A' can get listed in the pink sheets by having a market maker file and secure approval of the Form 15c2-11 for a trading symbol from the NASD. The pink sheets are expected to be shown electronically in April of 1999. However, the publisher, National Quotation Bureau is not part of NASDAQ.

The SEC has passed an amendment to Rule 504, effective April 7, 1999, which prohibits general solicitation and general advertising unless the specified conditions for a public Rule 504 offering are met.

The recommended method of raising money by issuing freely tradeable stock, is to file an SB-2. The new Form SB-2 became effective on February 28, 1999.