OTCBB: WHAT THE "E" IS IT ALL ABOUT?

During the last few months a number of stocks on the Over-The-Counter (OTC) Bulletin Board (OTCBB) have suddenly been quoted with a new fifth character at the end of the regular four-letter symbol: the letter "E". I've heard from both public investors and registered personnel all sorts of fanciful theories as to what this new character indicates. Given the confusion caused by this one letter, this might just be a good time to revisit some of the basics of the OTCBB.

The OTCBB is a quotation service that displays real-time quotes, last-sale prices, and volume information in approximately 6,500 domestic and certain foreign securities. Eligible securities include national, regional, and foreign equity issues; and warrants, units, and American Depositary Receipts (ADRs) not listed on any other U.S. national securities market or exchange. Although the OTCBB is operated by the National Association of Securities Dealers, Inc. (NASD) , it is unlike NASDAQ or other listed markets where individual companies apply for listing and must meet and maintain strict listing standards; instead, individual brokerage firms or Market Makers initiate quotations for specific securities on the OTCBB.

On January 4, 1999, the Securities and Exchange Commission (SEC) approved amendments to NASD Rules 6530 and 6540 to limit quotations on the OTCBB to the securities of companies that report their current financial information to the SEC, banking, or insurance regulators. The amendments were dramatic in that they marked significant efforts to tame this heretofore "Wild West."

NASD Rule 6530 now provides that a domestic issuer must make periodic filings with the SEC, or with banking or insurance regulators and be current with those filings. The NASD will affix a modifier on the security’s symbol if the NASD has not received information that the report was timely filed. Issuers who file with the SEC will be granted a 30-day grace period before they can no longer be quoted on the OTCBB; issuers who file with other regulators will be granted a 60-day grace period. After the grace period, quotations in the security of the delinquent issuer will not be permitted on the OTCBB.

NASD Rule 6540 now prohibits NASD member firms from quoting an issuer’s security if the issuer does not comply with the Rule 6530 eligibility requirements. Furthermore, with respect to those issuers that do not file with the SEC’s Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system, the amendments require a member to alert the NASD to the issuer’s reporting schedule and to provide the periodic reports to the NASD, or to ensure that the required information is provided. Note, the obligation is upon the NASD member, not the issuer!

The Phase-In Schedule

To continue to be quoted after the first trading day of the scheduled month (the "Eligibility Determination Date") the issuer must meet the requirements of the Eligibility Rule. Because of some apparently unanticipated problems concerning the timely implementation of the Eligibility Rule, the NASD decided to divide each month's scheduled issuers into two groups: one assigned an Eligibility Determination Date on the first Monday of the applicable month; the second assigned to the third Monday of the applicable month. NASD evaluations of an SEC-filing issuer's compliance status begins 30 calendar days prior to the Eligibility Determination Date. Non-SEC-filing banks and insurance companies' evaluations begin 60 calendar days prior.

If the NASD has no information that an issuer is compliant, a fifth character "E" is appended to the company's trading symbol four days after the date the notice appears on the OTCBB Daily List. Absent receipt of notification of eligibility for continued quotation, the issuer will be removed from the system after the market close on the Eligibility Determination Date. Alternatively, two business days following publication of the OTCBB Daily List, deletions of the "E" for compliant issuers will be completed. The addition of the modifier to the symbol, as well as any changes to the symbol necessary to accommodate the modifier, are publicly reported on the OTCBB Daily List at www.otcbb.com.

All OTCBB security symbols are either four or five letters long. A fifth letter means the security is something other than an issue of common or capital stock. Listed below are the fifth letter identifiers and a description of what each represents: