OTC

In April 1997 the Securities and Exchange Commission approved the operation of the OTCBB on a permanent basis with some modifications. Even up to that point OTC quoted companies were not responsible to file quarterly and yearly financial reports. Due to the lack of the reporting requirement it became increasingly difficult to research a company. Many companies traded without having to file any financial information. An investor would have to rely on press releases and communication with the company for all information. It became very difficult to verify a press release since the releases were vague and left allot to the imagination. A company could issue a release saying that they grossed $15 million dollars in the third quarter. Now that number sounds exciting but we do not know what their expenses were for the quarter. We also do not know the size of the company’s debt, or even when the debt needs to be paid off. Many investors would see the release and jump to conclusions only to find that the company sent out another release later on announcing that they had a severe cash flow problem and were looking for to raise funds. The flip side also took place where many investors stayed away from what could have been a lifetime opportunity due to the lack of information. Many companies issued positive releases but were ignored by investors who could not find the financials they were looking for.