Pink Sheets (Defined)
What are Pink Sheets
Very few may know what pink sheets are but pink sheets is such a common word when it comes to people working at Wall Street or the financial world. Pink sheets refer to the electronic quotation system that displays quotes coming from broker-dealers for a lot of over-the-counter securities. Market makers would use the pink sheets in order to let everyone know about their bid and ask quotation prices. These sheets are called pink sheets because it is the color of the paper where the quotes are printed prior to the electronic system. These are now published by Pink Sheets LLC, which is a privately owned company.
The Pink Sheets LLC is not known as a NASD broker-dealer or is it registered with the US Securities and Exchange Commission. Pink Sheets is also not a stock exchange. To have a chance of being quoted in the Pink Sheets, companies need not fulfill any requirements like filing financial statements with the SEC and the like. Companies that are usually quoted in the Pink Sheets tend to be extremely small and thinly traded. Some do not even meet the
Because this is normally what happens, SEC views the companies listed on Pink Sheet as risky investments. They would normally advise investors to rely heavily on research about the companies so as to not have any mistakes when they have decided to invest in a particular company.
The interesting question now is how to buy pink sheets shares. Buying Pink Sheets shares is known to be difficult. Some broker-dealers would prevent other unsophisticated investors who may get a tip about a small stock. Because of this, a lot of Pink Sheets stocks are registered for sale on only one state so that the only way to purchase the stock is to make a sophisticated form of investment. A lot would not even know in the Pink Sheets shares can be sold.
Last August 1, 2007, all Pink Sheets traded companies who are not able to meet the standards of OTCQX, a premium market tier offered by Pink Sheets LLC will be placed in one of the following disclosure categories. The categorization would be based on the level and timeliness of a company’s disclosure and any category can include labels suck as speculative, distressed, or questionable companies. Investors would then have to be extra careful in deciding to invest in some of these companies.
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