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The Importance of Compliance for SBIs
The impact of non-compliance is profound. While many small issuers can operate with inconsistent compliance processes, problems eventually arise. Instead of focusing on the regulatory and punitive aspects of incomplete or ineffective compliance, this white paper will examine the functional impact of not remaining compliant with SEC regulations. Compliance can impact liquidity, which can affect your ability to raise funds for growth. The difficult aspect of compliance is knowing everything you have to do . . . and when . . . and how. Ongoing compliance requires an investment – for the same reasons as the initial compliance work you did when going public. The liquidity opportunities that initially attracted your company to the publicly traded arena are the same reasons for remaining compliant. This article provides simple steps to help you comply – bringing liquidity back to the table. For small business issuers (SBIs), compliance remains a daunting task. Most SBIs perceive compliance as the initial hurdle to the liquidity enabled by over-the-counter bulletin board (OCTBB) trading. Compliance, it seems, is what you do when you want to recognize the benefits of being publicly traded. But, compliance is not just a one-time event; it is an ongoing challenge. When focusing on the benefits of being publicly traded and considering the cost of compliance, small issuers may overlook the fact that compliance requirements continue as they remain on the OTCBB. Many SBIs are unsuccessful at remaining compliant. In fact, 20% of OTCBB SBIs do not file their 10-KSBs. Clearly, there is a gap between issuer knowledge and the SEC’s filing requirements. Complying can be overwhelming. The impact of non-compliance is profound. While many small issuers can operate with inconsistent compliance processes, problems eventually arise. Instead of focusing on the regulatory and punitive aspects of incomplete or ineffective compliance, this white paper will examine the functional impact of not remaining compliant with SEC regulations. There is not just a legal consequence involved in compliance; there is a real business impact as well. Compliance can impact liquidity, which can affect your ability to raise funds for growth. One of the basic reasons for issuing is to access capital in structured exchanges, and non-compliance can limit this access. Being compliant does not affect your ability to issue so much as the brokers’ ability to trade; losing brokers restricts your access to brokers – and therefore your access to capital. The difficult aspect of compliance is knowing everything you have to do . . . and when . . . and how. In larger companies, people make their living managing the compliance process, both preliminarily and on an ongoing basis. A large compliance team is a luxury OTCBB small caps simply cannot afford. Ongoing compliance requires an investment – for the same reasons as the initial compliance work you did when going public. The liquidity opportunities that initially attracted your company to the publicly traded arena are the same reasons for remaining compliant. This article provides simple steps to help you comply – bringing liquidity back to the table. Key Compliance Considerations When planning to go public OTC, companies focus on the near-term opportunities that await them. Typically, these opportunities – such as increased liquidity, more accurate valuation, and more effective exit strategies for company equity-holders – make the investment required for compliance worthwhile. The benefits of listing represent the return on their compliance investment. The ongoing returns associated with a publicly traded stock, though, must be measured against the ongoing costs of compliance. [continued...] Want to know more? Download the White Paper "The Importance of Compliance for SBIs" for just $29.95. |
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