OTC Market Group recently submitted a comment letter to the Financial Industry Regulatory Authority, Inc. (FINRA) in response to the request for comments on the Effectiveness and Efficiency of its Payments for Market Making Rule 5250.
In the letter, we recommend amendments to Rule 5250 that would allow issuers to compensate broker-dealers for the reasonable out-of-pocket expenses involved in preparing and submitting a Form 211. Finding a broker-dealer to file a Form 211 presents a daunting initial hurdle for companies looking to access the public markets in an efficient and orderly manner. From the broker-dealer perspective, filing a Form 211 involves collecting, reviewing and analyzing the issuer’s disclosures, as well as responding to FINRA’s comments and questions. The process presents a significant cost and time commitment, with no possibility of remuneration.
Rather than banning payments all together, FINRA can more effectively facilitate small company access to public markets and deter market manipulation by requiring more disclosure of the financial relationship between the company and the broker-dealer filing its Form 211.
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