Advocating for National Blue Sky Recognition: Secondary Trading Exemptions reach 41 States

As of July 1, 2025, the OTCQX Best Market has reached blue sky exemptions in 41 U.S. states and jurisdictions, and OTCQB Venture Market in 37. It's a major milestone - but we aren't done. Our goal is to achieve national recognition for the OTCQX® and OTCQB® markets. In pursuit of this objective, we've gained valuable exemptions and explored ways for OTC traded companies to maximize their state 'Blue Sky' compliance.

Recognition Through the Manual Exemption

Many U.S. states provide a 'manual exemption' that allows broker-dealers to publish research or solicit investments in a company's securities, so long as that company makes current financial disclosure available in a recognized securities manual, or its electronic equivalent. This mechanism is critical for enabling secondary trading in OTC securities while ensuring investors have access to essential information.

Forty-four states and jurisdictions maintain some form of manual exemption. Each state decides which manuals meet their criteria. OTC Markets Group has worked closely with state regulators and the North American Securities Administrators Association (NASAA) to ensure that the robust, real-time disclosure available through OTCQX and OTCQB is recognized as the modern, digital equivalent of a traditional securities manual. As a result, both the OTCQX and OTCQB Markets qualify today as "Recognized Securities Manuals" in the majority of U.S. states, standing alongside Mergent, the last publisher of traditional printed manuals. Unlike Mergent's subscription-based publications, our disclosure is freely accessible online, continuously updated, and offers deeper, more timely insights for investors and regulators alike.

OTC Markets Group Gaining Blue Sky Recognition in New Ways

Recognition through 15c2-11

Over the past few years, our markets have also gained recognition under newer state regulations, Florida being the latest. The state adopted rules¹ enabling secondary trading through an SEC-registered Alternative Trading System (ATS), provided the issuer meets the disclosure standards of Securities Exchange Act Rule 15c2-11.

Because OTCQX and OTCQB issuers are required to meet Rule 15c2-11 standards, companies trading on these markets now qualify under Florida's new framework. This marks a significant development: Florida is aligning its Blue Sky laws with SEC standards, setting a clear, investor-focused model that we believe other states should consider.

The SEC's designation of OTC Markets Group's system as a Qualified Interdealer Quotation System (QIDQS) further underscores our commitment to investor protection. As a QIDQS, we monitor compliance with Rule 15c2-11 disclosure requirements, ensuring that only companies providing timely, publicly available information may be quoted by market makers. In doing so, we support more informed, efficient, and transparent markets.

We believe enhancements to the manual exemption process should follow this model, prioritizing the availability and quality of disclosure over outdated, inaccessible formats.

Maximizing Blue Sky Compliance

As we work towards full national recognition, we continue to support OTCQX and OTCQB issuers in achieving maximum Blue Sky compliance across the country. In addition to the manual exemption, certain states and jurisdictions also offer self-executing exemptions or registration mechanisms that enable secondary trading of OTC securities. In some cases, multiple exemptions can be used in a single state.

However, because state Blue Sky laws are not uniform, navigating them remains complex. State registrations may require formal filings and disclosures with regulators. Secondary filings often demand ongoing reporting to maintain compliance. Each path carries its own set of requirements.

We encourage OTC-traded companies to assess their compliance strategies carefully and reach out to OTC Markets Group for support in understanding their Blue Sky status.

New Pathways to Blue Sky Compliance

With a clear majority of U.S. states now recognizing the value of the compliant, publicly-accessible disclosure from OTCQX and OTCQB companies, we believe the time has come to consider a federal solution. The SEC should explore preemption of state Blue Sky laws for secondary trading.

A national standard would simplify compliance, lower costs, and eliminate unnecessary regulatory friction for companies and broker-dealers. It would provide clarity across jurisdictions while preserving the important enforcement role of state regulators and NASAA in detecting and preventing fraud.

The current patchwork of exemptions leaves too many companies unable to achieve full compliance, even when they meet modern disclosure standards. It's a capital markets inefficiency that federal policy can and should address.

By expanding federal preemption and aligning with robust disclosure rules like Rule 15c2-11, we can ensure greater access, stronger investor protections, and a more cohesive regulatory landscape for secondary trading in the OTC markets.

Dan Zinn

Dan Zinn is General Counsel, Chief of Staff and Corporate Secretary of OTC Markets Group. He leads the Company's regulatory and policy making efforts and is a frequent speaker on over-the-counter equity markets. As Chief of Staff, Mr. Zinn also oversees the Company's Human Resources and Administrative functions. Prior to joining OTC Markets Group in 2010, he served as outside counsel to OTC Markets Group beginning in 2007, as a partner at The Nelson Law Firm LLC. Previously, Mr. Zinn worked in the corporate office of AIG. He received his J.D. from the Benjamin N. Cardozo School of Law, where he served as Associate Editor of the Cardozo Law Review and received his B.S. from Pennsylvania State University. He is a member of the American Bar Association and was named a 2024 Notable General Counsel by Crain's New York.

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