NASD OTC platform gets traction over SEC rules on unlisted securities

There has been a significant increase in interest from unregistered segment of the stockbroking community with many brokers now said to be enquiring about registration with NASD, a prerequisite of eligibility to trade on that platform.

INVESTOR also learnt that there is renewed interest in the OTC platform by the board and management of some unlisted companies who are anxious to comply with the new rule in trading their securities.

Early this month, the Securities and Exchange Commission (SEC) released rule on trading in unlisted securities – a move that will ensure all securities of unlisted public companies are traded within securities exchanges that are registered with the Commission.

Analysts say the above trend cause spike in both volume and value of the trades to be executed on the NASD OTC market in the months ahead.

According to the NASD plc, “we have also observed a commendable desire by Registrar companies to avert contravention of the rule in their transfer of securities of unlisted public companies and the resultant sanctions from SEC as many of them have sought clarification of the rule and its implications from NASD.”

The SEC rule on trading in unlisted securities provides that “all securities of unlisted public companies shall be bought, sold or transferred only by means of a system approved by the Commission and under such terms and conditions as the Commission may prescribe from time to time.”

Also, it provides that “no person shall buy, sell or otherwise transfer securities of an unlisted public company except through the platform of a registered securities exchange established for the purpose of facilitating over-the-counter trading of securities.

“Any unlisted public company, director, company secretary, registrar, broker/dealer or such other persons who facilitate the buying, selling or transfers of the securities of an unlisted public company otherwise than through the platform of a duly registered securities exchange, shall be liable to a penalty of not less than N100,000 in the first instance and not more than N5,000 for every day of default,” the SEC further noted in the new rule.