As of August 1, 2007, Pink Sheets (PS) created a new categorization system to alert investors about the ability and willingness of individual OTC (Over-the-Counter) issuers to provide adequate public disclosure in a timely manner. “We believe categorizing securities by their level of disclosure will improve investor access to information and greatly enhance the capital formation process,” says the PS website. By placing a colored marker on each company's quote page and wherever its trading symbol appears on the site, “investors will be able to quickly determine the level of information a company provides to the marketplace, or if it there is spam or other questionable activities.” The color-key includes: a pink “PS” icon for those companies that keep current with regulators, a yellow “yield sign” for those that file limited information, a red stop sign for those “not able or willing” to disclose information, and a black skull and crossbones for those that raise public interest concerns.
How’s the system working so far? Nearly 100 companies have started providing information that they weren’t providing before the introduction of the categories, according to Pink Sheets’ CEO, Cromwell Coulson. Nearly 75% of PS’ August trading volume involved companies that were current on their disclosures, while 5% of trading took place in companies that provided no information. If companies don’t provide information, “[they’re] going to look questionable,” Coulson recently told PIPEWire™ (published by DealFlow Media.) Starting next year, the category markers will start appearing on the service’s data feeds.
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