An Explanation Of The Different Warning Symbols On OTC Markets

There are over 10,000 securities that trade on the OTC Markets, which is segmented into multiple tiers: the OTCQX Best Market, the OTCQB Venture Market, and the Pink Market.

A wide spectrum of companies trade on the Pink Market, including foreign companies that limit their disclosure in the U.S., penny stocks and shell companies, as well as distressed, delinquent, and dark companies not willing or able to provide information to investors. The amount of available public information can vary from company to company.

To help investors better understand the risks associated with these securities, and to provide more transparency, OTC Markets has created investor protection symbols to warn against companies that may carry more risk than others.

There are several such icons as that may appear on a company quote page on otcmarkets.com. Here’s what each of them means.

Bankruptcy

This icon indicates the company has either filed, or has stated its intention to file, for bankruptcy. Doing so would make a security ineligible for trading on the OTCQX and OTCQB markets.

Caveat Emptor

Literally “Buyer Beware,” this warning lets investors know that there is a public interest concern associated with the company. A spam campaign, questionable stock promotion, known investigation of fraudulent activity committed by the company or insiders, regulatory suspension, or disruptive corporate action may have occurred to prompt a caveat emptor warning, can all result in the Caveat Emptor flag.

Control Dispute

A Control Dispute occurs when multiple parties claim control of a company. Control disputes typically precede turmoil in a company’s leadership structure, which could have an impact on its stock.

Promotion Risk

This symbol indicates OTC Markets has reason to believe a security is currently undergoing questionable public stock promotion. In other words, misleading information is being disseminated via some channel (social media, newsletter, etc.) that is meant to manipulate the price in some way.

Shell Risk

The Shell Risk designation warns that a company displays characteristics common to shell companies based on an analysis of the company’s key annual financial data. Shell companies have no or minimal assets and operations.

Prohibited Services Provider

This flag indicates a company has an active link to a service provider who is marked as prohibited by the OTC Markets Group.

Dark Or Defunct

The company is not able to provide disclosure to the public markets, meaning it is likely there is little to no information available to investors.

Delinquent

The company is not current in its reporting obligations under Section 13 or 15(d) of the SEC Exchange Act.

Unable to Contact

This badge indicates OTC Markets Group hasn’t been able to verify contact information for this company.

Because there is no such thing as an investment without risk, the best we can do is be aware of those risks before making a decision to trade. All of the aforementioned symbols account for serious potential risk factors that may help inform your decision making—but they are only one tool in your due diligence. Ultimately, it’s up to you to decide for yourself whether an investment makes sense.

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