15c2-11: Going Public by 15c2-11
Filing a Form 15c2-11 to Receive a Trading Symbol
A Company can go public by the submission of a 15c2-11 application to FINRA once it has established a free-trading, non-affiliated shareholder base consisting of approximately 35 shareholders or more.
The private Company going public establishes a relationship with a Market Maker who is a FINRA member. The Market Maker then submits a 15c2-11 application to FINRA so that the Company may receive a trading symbol and subsequently the Market Maker can quote their securities on the open market. Upon receipt of the trading symbol and clearance of the 15c2-11 application, the Company’s shares can then trade on the Over the Counter Pink Sheets market.
Market Makers and FINRA
The 15c2-11 application that is filed with FINRA by the Market Maker provides current information on the Company going public, as set forth in SEC Rule 15c2-11. This current information includes the Company’s unaudited financial statements. Once FINRA is satisfied that the Company’s disclosures satisfy SEC Rule 15c2-11, a trading symbol will be assigned and the Market Maker can quote the Company’s securities.
Once the Market Maker has continuously quoted the Company’s securities for 30 days, other market makers become eligible to quote the securities as well without having to file a separate application. The ability for other Market Makers to quote the Company’s shares based on the quote and due diligence of the original Market Maker means that the Company’s stock is piggyback qualified.
Going Public Without a Registration Statement
There are numerous ways that a Company may establish a free-trading shareholder base without filing a Registration Statement. The first, and most common, is through a private placement of its securities followed by a one year holding period. Following the one year holding period, the securities become free trading in accordance with Rule 144 of the Securities Act of 1933.
Companies may also go public by completing a registered state offering under Regulation D, Rule 504; completing a Regulation A offering; or completing an intrastate offering under Rule 3(a)(11) followed by a nine month holding period.
Going Public and Rule 144
Shareholders of companies that go public via the filing of a 15c2-11 rely on the use of Rule 144 to sell their shares. Rule 144 is not available for shell companies or entities that were ever shell companies, accordingly, such companies would not be eligible to go public by the filing of a Form 15c2-11. In terms of reverse mergers and going public, this condition is known as the Evergreen Requirement.
Rule 144 requires that current public information be available before an affiliate of an entity can sell securities. The Pink Sheets new service allows companies to file and maintain current public information that complies with this rule and therefore meets the standard necessary under Rule 144. Entities that quote on the Pink Sheets are encouraged to utilize this service and maintain such current public information for many reasons, including, so that its affiliates may sell securities.
Going Public, Rule 15c2-11 and FINRA
SEC Rule 15c2-11 ensures that current public information be made available to investors, hence Company’s going public must provide such information to a Market Maker who then files the 15c2-11 application with FINRA. The Over the Counter or OTC PinkSheets does not require that a Company file or maintain reports with the Securities and Exchange Commission. However, the Over the Counter Bulletin Board or OTCBB does require such reporting.
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