The NASD Over-the-Counter (OTC) Exchange has urged public limited companies to adhere to the Securities and Exchange Commission’s (SEC) regulation mandating that the securities of public unlisted companies be traded exclusively on SEC-registered OTC platforms.
Under this rule, the purchase, sale, and transfer of securities for unlisted companies are prohibited outside of a registered stock exchange, to ensure greater transparency in trading.
The SEC requires that the securities of public companies be registered with the commission immediately upon creation, and their trading must occur through an SEC-approved OTC Exchange platform.
The rule specifies that all securities of unlisted public companies must be bought, sold, or transferred only through a system approved by the Commission, with terms set by the SEC.
Any individual or entity—whether a director, company secretary, registrar, broker, or other facilitators—found engaging in the buying, selling, or transfer of these securities outside of a registered platform will face penalties.
The fines range from N100,000 for an initial offence to as much as N5 million for each subsequent day of non-compliance.
Currently, many unlisted public companies’ securities are not traded on SEC-registered OTC exchanges, a situation which hampers the SEC’s ability to monitor these companies as part of its investor protection initiatives. NASD emphasised that enforcing this rule will make unlisted public companies’ securities more accessible to investors through a regulated platform.
The benefits of compliance, according to NASD, include increased liquidity for the issuers’ shares, reduced potential for underhand dealings, and a decrease in fraudulent activities.
The SEC-registered OTC platform would facilitate price discovery, allowing market forces to determine the value of shares. It would also offer equity investors the opportunity to diversify their portfolios more easily, with access to securities across various sectors of the economy.
NASD reiterated that ensuring all unlisted public companies comply with the SEC’s rule will improve investor confidence, enhance market transparency, and foster a more secure capital market environment.
