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Federal Register / Vol. 86, No. 7 / Tuesday, January 12, 2021 / Proposed Rules
qualified purchaser, as defined in Section 2a51A of the Investment Company Act of 1940 the Investment Company Act and the rules thereunder.16 Qualified Experts may receive quotations published or submitted on the Expert Market directly from OTC Markets Group, from any market data distributor or Subscriber that has entered into the MDDA with OTC Markets Group, or from both.17
OTC Markets Group would also distribute quotations for an issuers security published or submitted on the Expert Market to the issuer of any such security if the issuer contractually agrees not to distribute such quotations, directly or indirectly, to any person that is not a current officer, director, or employee of the issuer.18

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3. Categories of Expert Market Securities The subject of Subscribers proprietary quotations that can be published or submitted on the Expert Market would be restricted to the following categories of securities: 1
Any security that is quoted in reliance on the piggyback exception prior to the Compliance Date and loses such eligibility upon the Compliance Date due to a lack of current and publicly available information about the issuer of the security; 19 2 any security that is quoted in reliance on the piggyback exception following the Compliance Date and subsequently loses such eligibility due to a lack of current and publicly available information about the issuer of the security, the issuers status registered pursuant to Section 15 of the Exchange Act, investment adviser registered pursuant to Section 203 of the Investment Advisers Act of 1940, and investment company registered under the Investment Company Act of 1940. See Rule 501a1 of Regulation D. The term accredited investor also includes any entity of a type not listed in Rule 501a1, that is not formed for the specific purpose of acquiring the securities offered, that own investments in excess of $5,000,000, which could include a foreign bank or other nonU.S. financial institution. See Rule 501a9 of Regulation D.
16 OTC Link LLC has requested that foreign broker-dealers, as defined in Exchange Act Rule 15a6b3, be included in the list of Qualified Experts. The Commission is seeking comment, below, regarding whether foreign broker-dealers, as defined in Exchange Act Rule 15a6b3, should be included in the list of Qualified Experts.
17 Qualified Experts that receive Expert Market data directly from OTC Markets Group would be subject to a subscriber agreement that contractually limits any further distribution.
18 As described above in Part I.B.1, market data distributors, including Subscribers, would be contractually required to ensure that the recipients of quotations published or submitted on the Expert Market meet the definition of a Qualified Expert.
19 A quoted market on the Expert Market for such security would have to commence within the first four business days from the date on which it loses eligibility to be quoted in reliance on the piggyback exception.

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as a shell company, or a failure to meet the frequency-of-quotation requirement; 20 and 3 any security that is issued in conjunction with a Chapter 11 bankruptcy plan confirmed pursuant to Section 1129 of the U.S. Bankruptcy Code the Code 21 and is exempt from registration in accordance with Section 1145 of the Code.22
In addition, OTC Link LLC would remove from the Expert Market quotations for any security that fits within the following two categories: 1
Any security of an issuer that is the subject of a registration revocation or trading suspension order issued by the Commission pursuant to Section 12j or 12k of the Exchange Act, respectively;
and 2 any security of an issuer that OTC Link LLC has identified as defunct i.e., it has ceased operations, ceased to exist, or has failed to respond to inquiries by OTC Link LLC. Once the applicable Section 12k trading suspension order terminates or the subject security is re-registered with the Commission following an applicable Section 12j revocation order, in order to be quoted on the Expert Market, the subject security must either 1 gain and then lose eligibility to be quoted in reliance on the piggyback exception or 2 be issued in conjunction with a Chapter 11 bankruptcy plan and be quoted on the Expert Market in accordance with the timing requirements discussed above.23
In addition, OTC Link LLC would flag on its website any formerly suspended security for such period of time as set forth in OTC Link LLCs policies and procedures, which OTC
Link LLC represents would be for two years following the applicable trading suspension.24
II. Discussion of Proposed Relief As a result of the amendments to Rule 15c211, after the Compliance Date, broker-dealers must withdraw from publishing or submitting quotations in a quotation medium for securities of issuers for which information is not 20 A quoted market on the Expert Market for such security would have to commence within the first four business days from the date on which it loses eligibility to be quoted in reliance on the piggyback exception.
21 The issuers of such securities would be subject to oversight of the bankruptcy court. After confirmation of the bankruptcy plan, the bankruptcy courts may direct the company and others to carry out the plan. See 28 U.S.C. 1142.
22 A quoted market on the Expert Market for such security must commence within 90 calendar days from the date on which it is issued.
23 See supra notes 19 and 20.
24 OTC Link LLC would remove any such flag if it becomes aware of a Commission or court order finding for the successful challenge of the applicable trading suspension.

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current and publicly available, and such securities may migrate to the grey market, where no quoted prices are published in a quotation medium for buyers and sellers to access and transact. As the Commission stated in the Adopting Release, this may impose costs on potential and existing investors by reducing liquidity for these securities and potentially resulting in less efficient pricing. Further, the loss of a quoted market and the information embedded in share prices may adversely impact an issuers ability to raise capital through stock issuances or through other channels of finance, such as debt. The Commission also noted that investors in securities in the grey market may be more susceptible to fraud.25
As described above, the Commission also stated in the Adopting Release that it could be beneficial to establish an expert market that would enhance liquidity for sophisticated or professional investors and promote growth opportunities for certain small companies, although the comments received on the proposal provided insufficient detail as to how that market would function, safeguard retail investors from fraud and manipulation, and facilitate regulatory oversight.26 In its December 21, 2020 request, OTC
Link LLC made certain representations regarding how the Expert Market would function with safeguards to reduce the potential for certain retail investors to be harmed by fraud and manipulation, as well as representations regarding how OTC Link LLC would establish, maintain, and enforce written policies and procedures reasonably designed to facilitate the integrity and Commission oversight of the Expert Market. Based on these and other facts and representations made in OTC Link LLCs December 21, 2020 request, the Commission preliminarily believes that it is necessary or appropriate in the public interest, and is consistent with the protection of investors, to grant, subject to the conditions described below, exemptive relief pursuant to Section 36a1 of the Exchange Act and Rule 15c211 to permit Subscribers to publish or submit proprietary quotations on the Expert Market, on a continuous basis, without complying with the requirements of Amended Rule 15c211a1i and d1iA. The Commission notes that OTC Link LLC
may implement additional conditions, criteria, or noticing mechanisms for certain quotations on its platform by Subscribers as it may find appropriate, including as to whether additional 25 See 26 Id.

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Adopting Release at 68145, 68198.
at 68145.

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