Getting a Ticker Symbol

Getting a Ticker Symbol

Getting a Ticker Symbol on the OTCBB, NASDAQ, AMEX or NYSE requires three things:

  • You have to have free trading stock.
  • You have to become an SEC reporting company, meaning a company that is required to file reports under the 1934 “Filing Reports” Act, as described under the Button “SEC Reporting and Compliance.”
  • You have to have the Financial Institution Regulatory Authority, called FINRA, issue you a Ticker Symbol. The SEC does not issue ticker symbols.

The SEC Process

The filing of an SEC registration statement accomplishes the first two bullet points above in that it gives you free trading stock and makes you a mandatory SEC Reporting Company.

The first step in the process is to prepare the SEC filing

To write the filing, your SEC attorney will ask you to complete a “due diligence” questionnaire to obtain the information necessary to prepare the disclosure part of the filing. These questionnaires come in a wide variety of formats. Some SEC attorneys have found that using a shorter form questionnaire facilitates this step of the process. They ask their clients to:

  • Complete a background questionnaire on all officers and directors.
  • Provide copies of all material contracts and agreements.
  • Provide a business plan or other information they have regarding their business.
  • Provide the internet address of their website.

They will then prepare a draft of the actual Form S-1 that will be filed with the SEC. They ask all of our unanswered questions directly in the draft S-1 they send back to you. They will ask you to type the answers directly into the draft S-1. You and they repeat this process until the entire disclosure part of the S-1 is completed.

The accounting part of the filing is more difficult. The days of your being able to send your Quickbooks files to your PCAOB audit firm and ask them to prepare your financial statement is long over. So first, you have to prepare on your own financial statements, including all footnotes. The financial statement must conform to all SEC requirements. You may not know or may not have anyone on your staff who knows how to do this. If this is the case, you must hire a second accounting firm that is probably not a PCAOB member firm but that has experience drafting financial statement for SEC filings. Eventually, you, your accounting firm if you have to hire one, and your PCAOB audit firm will finish the financial statements required for the filing.

The final step in preparing the filing is integrating the numbers in the financial statements and the information in the footnotes into the filing draft, including preparing a section of the draft called “Management’s Discussion and Analysis of Financial Condition and Results of Operation,” which explains the numbers and variations in the numbers between financial reporting periods in words rather than numbers.

The second step in the process is to file your Registration Statement. This however is not as easy as it seems as the SEC won’t accept filings in paper format or in Word. They will only accept them in a specified electronic format that requires special software for conversion of Word documents to filing documents.

The SEC’s filing system is called the Electronic Data Gathering, Analysis, and Retrieval System, or EDGAR. A whole cottage industry has sprung up to convert your documents into SEC filing format in a process called EDGARization.

The third step in the process is the SEC review of your filing after you file.

The SEC process focuses on your disclosure and the financial statements. The SEC disclosure review staff reviews you filing to assure that you have disclosed everything that is required by the Form and Regulation S-K. The SEC accounting staff reviews your filing to assure that your financial statements meet all the requirements of GAAP and Regulation S-X.

Many people do not understand and some actually fear the SEC review process. So here are the facts.

  • The SEC is not like the FTC.
  • The FTC reviews mergers, examines and makes subjective decisions the merits of the mergers and sometimes blocks the mergers from going through.
  • The SEC reviews registration statement but does not make any subjective on the merits of your filing. They review to assure that all of the information required by the rules and regulations is included. The SEC does not block registration statements.

There are many things the SEC does not care about in the process. You may have many “Will the SEC care if …” questions, such as:

Will the SEC care if:

  • Your company is a start-up, early development stage company?
    • NO. The SEC doesn’t care about your stage of development as long as it’s fully and accurately disclosed.
  • Your company has no or little revenues?
    • NO. The SEC doesn’t care about your revenues or other aspects of your financial condition as long as it’s fully and accurately disclosed.
  • Your company does not have the money on hand to implement your business plan?
    • NO. The SEC doesn’t care about your financial ability to implement your business plan as long as it’s fully and accurately disclosed and you actually intend to implement the business plan described in your filing.
  • Either you or one of your officers or directors has had a personal or business bankruptcy?
    • NO. But it must be disclosed.
  • Your stock is priced at $.01 or $10.00 per share?
    • NO. But offerings at $.01 cause the SEC staff to pay more attention to your filing.
  • You have a big firm or small firm advising me or auditing?
    • NO. The SEC does not grant favors based upon the size of the firm representing you in the filing. As long as the auditor is a PCAOB member, the SEC doesn’t grant any favors to large vs. small audit firms.

Your filing will clear the SEC, but to facilitate the process it will greatly help you to:

  • Hire an experienced professional with a proven track record to write the disclosure part of your filing.
  • Respond to all requests from your professional advisor completely and timely.
  • Hire experienced professionals with a proven track record to prepare your financial statements and audit your financial statements.
    • Remember, you must prepare your own financial statements. The auditor cannot do that for you. If you don’t have a CFO experienced in preparing SEC quality financial statements, ask your auditor or professional advisor to recommend an outside accounting firm to do this for you.
  • Respond to all requests from your accountant and PCAOB member auditor completely and timely.

If everyone in the process works hard, the filing can be completed and ready to file in 30 days or less. If you do all of the above, your filing will clear the SEC.

The mechanics of the process are as follows:

  • Thirty days after your initial filing, the SEC staff will issue a deficiency letter, called a Comment Letter.
  • You respond to the comments by filing an amendment addressing all of the issues raised by the SEC staff
  • The SEC then has another 30 days to comment on the amendment. Generally you will have 50% or fewer number of comments on the initial filing
  • This process repeats itself one or two more times
  • Your filing clears.

As you can see, SEC review periods of 30 days on each filing slow the process down. Generally filings will clear the SEC in 90 -110 days, again if everyone in the process works hard and responses are made timely to SEC Comment Letters.

Or you could get lucky, and in effect hit the SEC review lottery, have the SEC elect not to review your filing and clear in 15 days or less. But this is not the norm. And there is no way to predict how, when or why the SEC will choose not to review your filing. So don’t count on it.

What do you want to be careful of or avoid if you are using Public Sale of Free Trading Stock Form S-1?

Quiet Period Restrictions

The SEC does not want you to pre-condition the market for your public offering. So they impose restrictions on what you can say publicly in advance of filing your registration statement and during the period of time that they are reviewing your registration statement.

As to what you can or can’t say during the quiet period, note however that there’s a difference between being quiet and being gagged. You can respond to unsolicited questions from the press; however, the key word is unsolicited. But be careful, what you think is unsolicited may not be. For example, a CEO of a company was interviewed by a major business publication and featured in an article about the brightest 25 young entrepreneurs. The article appeared during the quiet period of his company’s IPO. Unfortunately, someone else in his company had solicited the article.

What happened? What happens is the SEC just stops the review process for however long they want. And there’s not a darn thing you can do about it.

Although you also can continue to issue press releases about your business, this area is also a little tricky. Continue is the key word, but that’s not the end of the story. To avoid violating quiet period restrictions, you have to show a long history of issuing similar releases starting well before your filing. But you can still be penalized if you promote your filing in the releases.

Just one more thing. If you do engage in “legal talking” during the quiet period, make sure you don’t say anything that isn’t in you filing. Now you don’t have to read it verbatim. But if you paraphrase, paraphrase very closely. Or once again, you’ll end up in violation.

Raising Money after You File Your Registration Statement

SEC rules prohibit you from raising money in the U.S. during the portion of the quiet period after you file your registration statement. So you need enough money to carry you through the SEC review process, at least. The reason cited by the SEC is that the filing of your Registration Statement constitutes general advertising an solicitation and that private placements during the time your filing is pending are integrated with your public offering, making Regulation D placements – and thus raising money – off limits during the time the SEC is reviewing your filing.

Interestingly enough, these SEC rules do not prohibit you from raising money offshore in a Regulation S offering, as discussed below.

Internet Sales of Stock in your Public Offering

It would be nice if you could sell your stock in a publicly registered offering on the internet. Unfortunately, a combination of SEC statutes and Rules make this virtually impossible.

We start with Section 5(b) of the Selling Stock Act, which provides that you must deliver a prospectus prior to or at the time you make a sale.

How long does the Prospectus delivery obligation last?

If you file the actual Prospectus as a separate filing with the SEC immediately after they have cleared your Form S-1 filing under SEC Rule 424(b), and update the Rule 424(b) prospectus every quarter thereafter, under SEC Rules 171 and 172, you only have to deliver the physical Prospectus for no more than the first 90 days of the offering.

The actual offering document that is given to investors is contained in the Registration Statement and is called a Prospectus. The Prospectus is contained in Part I of the Form S-1, which is most of the Form. SEC required cover pages and certain types of information which appear in Part II such as exhibit lists, undertakings and signatures is omitted from the Prospectus given to investors.

This may seem simple enough to do, but the SEC doesn’t recognize the mere link to your Prospectus on your website as acceptable delivery. They still believe in paper at the SEC. So they have set forth in a Concept Release how you comply with this requirement if you are delivering your prospectus electronically on your website. The procedures are complex and easy to violate.

Even more important and problematic is the SEC’s restriction on using any other information in connection with the public offering of your securities. There is a limited exception in SEC Rule 134 for communications after you have filed your registration station statement. Even then, remember that no offer to buy the securities can be accepted and no part of the purchase price can be received until the registration statement has become effective. This communication may contain limited information about your name, address, business, amount of stock being offered, use of proceeds and the like.

BUT WAIT: Does your website have more information on it than this very limited amount of information? If it does, you cannot use your website to locate investors or sell your stock even if your offering is registered and the SEC has cleared your filing.

All of these rules and regulations concerning prospectus delivery requirements make it virtually impossible for you to locate investors or sell your public offering on the internet. In fact, the SEC generally will require you to state in your registration statement that you will not offer or sell your stock on the internet.

Paying Money to Others to Help You Sell Your Stock

This issue comes up so often and is so misunderstood, we have included an entire section analyzing this issue. See the Button “Paying Others to Sell Your Stock” for a detailed discussion.

The basic rule is: You can only pay others to help you raise money through a FINRA registered broker/dealer. This restriction applies not only to people outside your company but also to you, your insiders and your employees.

Including Any Significant Amount of Your Shares or Shares of Your Insiders in the Offering

If you are selling stock from the company treasury that you haven’t already sold to someone in an IPO or DPO, the selling price of the stock in the offering is fixed and cannot be changed after your registration statement is declared effective.

Selling Stockholder Registration statements, on the other hand, do not have to be fixed-priced. Assuming there is a trading market, Selling Stockholders can sell their stock at the market price or any other price they want.

Remember that your stock and the stock of other insiders is never fully free trading. So you may think one solution is to make you and other insiders Selling Stockholders along with other independent, non-affiliated investors to whom you have sold your stock. This doesn’t work, for several reasons:

If you include any significant portion of your stock in the registration statement, the SEC will say you are doing an indirect public offering and you and other insiders are acting as a conduit for the company to sell its treasury stock. So you and the other insiders can only sell your stock at a fixed price, not at the market price. This won’t work.

This indirect public offering position is what tripped up PIPE and Equity Line financings a few years ago. Out of the blue, even though the PIPE and Equity Line investors were not insiders, the SEC said that if they are selling a large enough amount of stock [ultimately the SEC defined as approximately 30% or more of the non-affiliated float, i.e. free trading shares not owned by insiders], the offering was an indirect public offering and had to be fixed priced. This didn’t work and caused severe disruption of the PIPE financing market.

If you sell any large portion of your stock or other insiders sell any large portion of their stock, investors may worry that you insiders are bailing out, creating significant selling pressure on your stock price, driving it down.

The FINRA Process


The Financial Industry Regulatory Authority, or FINRA, is the largest non-governmental regulator for all securities firms doing business in the United States. All told, FINRA oversees nearly 5,000 brokerage firms, about 173,000 branch offices and approximately 656,000 registered securities representatives.

Created in July 2007 through the consolidation of NASD and the member regulation, enforcement and arbitration functions of the New York Stock Exchange, FINRA is dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services.

FINRA touches virtually every aspect of the securities business—from registering and educating industry participants to examining securities firms; writing rules; enforcing those rules and the federal securities laws; informing and educating the investing public; providing trade reporting and other industry utilities; and administering the largest dispute resolution forum for investors and registered firms. It also performs market regulation under contract for The NASDAQ Stock Market, the American Stock Exchange, the International Securities Exchange and the Chicago Climate Exchange.

Preparation and Review of Form 211

The form submitted to FINRA to obtain a Ticker Symbol is called Form 211 after the SEC Rule 15(c)-211 upon which the Form is based.

Much of the same information that appears in your SEC filing also goes into the Form 211.

However, FINRA focuses on different information that the SEC. FINRA does not focus so much on the disclosure and the financial statements in your SEC filing. Instead, FINRA’s primary focus is on:

  • How you offered and sold all of your stock and whether that process was done in full compliance with SEC statutes, rules and regulations.
  • Whether or not your company is a shell company as defined by the SEC.
  • Thus, in connection with filing of the Form 211 you will be required to submit:
  • All documents related to the offering of your securities from the inception of your company, including copies of checks and subscription agreement
  • Proof that your company is engaged and in the future continues to engage in a valid business activity and is not a shell company.
  • A shareholder list generated by a Transfer Agent.

FINRA also focuses on whether there will be a viable trading market for you stock, In this connection, FINRA wants to know:

  • Whether you have enough free trading shares to create a viable market.
  • Whether you have enough non-affiliated shareholders to create a viable market.
  • Whether your share ownership is concentrated in a few individuals, even if you have enough shareholders to create a viable market.

Unlike the SEC, which through Regulation S-K tells you with some specificity what you need to disclose, FINRA doesn’t tell you anything. But practitioners will tell you that in general, FINRA will accept the following:

  • Enough free trading shares: Estimates range from approximately 300,000 to 500,000, minimum.
  • Number of non-affiliated shareholders: Estimates range from approximately 30 to 50, minimum.
  • Market concentration: Estimates are that if 10% or less of your non-affiliated shareholders own approximately 90% of the free trading shares, you have unacceptable market concentration, but this is even more subjective than the first two points above.

Filing the Form 211: The Role of the Market Maker

Only a Market Maker can file the Form 211. Only the market maker can communicate with FINRA concerning the Form 211 filing.

One of the most commonly misunderstood players in a going public transaction is a Market Maker.

A “market maker” is a firm that stands ready to buy and sell a particular stock on a regular and continuous basis at a publicly quoted price. You’ll most often hear about market makers in the context of the Nasdaq OTC markets. Many OTC stocks have more than one market-maker. Market-makers generally must be ready to buy and sell at least 100 shares of a stock they make a market in. As a result, a large order from an investor may have to be filled by a number of market-makers at potentially different prices.

Market makers also file Form 211 with FINRA to obtain a ticker symbol.  There are many things Market Makers do not do, the primary of which are:

  • They do not promote your stock.
  • They do not raise money for you.

Transfer Agents

Companies are required to have a stockholder list certified by a Transfer Agent for the FINRA 211 listing application.
Here’s what Transfer Agents do:

  • Keep a current list of all your stockholders.
  • Process the paperwork when people buy or sell your stock.

Transfer Agents are regulated by the SEC and must comply with numerous regulations.

Losing your stock certificates

This is a very important tip for you and your stockholders.

When your Transfer Agent sends out your stock certificates, make sure you warn your shareholders not to lose the certificates. And you take good care of yours, too.

If you lose a stock certificate, you can only get it replaced by purchasing a bond in favor of the Transfer Agent if they issue a new certificate and the old one shows up and somehow gets sold. The cost is a non-refundable fee of approximately 3% of the market value of your stock. If your stock is trading at $1.00 per share and you own 10,000,000 shares, it will cost you $300,000 to bond your lost certificate and get a new one. Ouch!

Other Forms for Registering Securities under the Selling Stock Act

Other Registration Statement Forms are:

  • Form S-3 – This Form is only available to large companies that have been SEC reporting companies for more than a year, are traded on a national securities exchange and for which the value of voting and non-voting common stock held by non-affiliates is $75,000,000 or more.
  • Form S-4 – This Form is only available for registering shares issued in a merger or similar business combination.
  • Form S-8 – This Form is only for registering shares issued under an employee benefit plan.


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