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Shell Risk Designation

 


The OTC Market launches this new Promotion Risk flag that should assist investors in recognizing stocks that are now part of a stock promotion strategy.  

OTC Markets with their team keeps a close eye on a number of sources to assess whether a stock is being pushed, so their main assignment is to gather information from a massive number of market players and analyze all collected data before putting the Promotion Risk flag on their website. 

A “Shell Risk” flag has been added to these new designations, signifying that a corporation exhibits features related to shell corporations, based on a review of the firm’s major yearly financial data, which are connected to limited activities. Shell corporations have few or no assets and operations.

All that OTC Markets try to do with all these activities is to demonstrate their dedication to a market compliance monitoring system that promotes more transparency, prompt info, and at last greater security of investors so to be achieved fair market price. 

Those types of data elements, taken together, give investors a signal of the existence of some kind of promotional activities, whilst assisting the broker-dealer profession in improving its compliance and anti-money laundering procedures.   

Although there are evident compliance risks related to shell companies and dealing with their associates, there are various challenges to overcome when attempting to develop a screening procedure.

We can begin with the question: what is the definition of a shell corporation? So correspondingly- A shell corporation is one that meets the following criteria, as stated by Rule 405 of the Securities Act: assets that are either non-existent or nominal; cash and cash equivalents are the only assets in the portfolio; any proportion of cash and cash equivalents are considered assets as well as nominal other assets 

Finally, all of this subject-shell info can be accessed in SEC financial statements and is released publicly by data suppliers. 

On the other hand, determining shell structure for non-reporting corporations with SEC and international private issuers will be more difficult. To determine the ’proxy shell status’ the suggested practice technique is to conduct an examination of the financial statements of the essential data points mentioned in rule 405.  

While there’s some gray place when it comes to shells, the marketplace has sufficient data to implement appropriate regulation. On the otc markets website, financial records concerning SEC reporting, international and alternative reporting are presented.

Skilled corporations are using information regulatory systems to better help their customers, address risks, and remove problematic consumers from their records.  

Mina Mar Group is one of those companies that have solutions on how to avoid shell risk designations. We are here to protect investors and to deal in their best interest.




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