Canada: Trading Your Company In Canada And The U.S.

Last Updated: June 23 2014
Article by David Danziger


Having a listing on a recognized, regulated stock exchange is the first step in showcasing the quality of your company and its shares. Then it becomes a matter of providing a market for your shares on other markets in other jurisdictions.

A good starting point is the Canadian Securities Exchange ("CSE"), the "Exchange for Entrepreneurs". CSE is a designated stock exchange by the Canadian Department of Finance. This means that all securities on the exchange are both RRSP and TFSA eligible. It is a recognized stock exchange by the securities commissions in Canada and is also a Designated Offshore Securities Market with the Securities & Exchange Commission ("SEC") in the United States. CSE is also now a qualified non-U.S. stock exchange with OTC Markets, where international companies are quoted on the OTCQX as well as the OTCQB.

This article discusses the benefits of and the requirements for having your company trade on OTC Markets.

OTC Markets Group Inc.

OTC Markets is a New York City based operator of marketplaces which was founded in 1913 as the National Quotation Bureau. It operates three marketplaces: the OTCQX, OTCQB and the OTC Pink. The OTCQX is the premier broker-dealer trading platform operated by OTC Markets Inc., and where the majority of Canadian companies choose to list when considering OTC Markets.

OTC Markets currently has 9,917 securities quoted on its platform. Companies such as BASF, BNP Paribas, Volkswagen, Allianz, Deutsche Telekom and Zurich Insurance Group have their common shares or ADR's (American Depository Receipts) traded on the OTCQX.

The OTCQX and OTCQB offers Canadian companies an alternative to traditional stock exchange listings in the United States. Foreign issuers that (i) qualify for an exemption from the registration and reporting requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act") pursuant to Rule 12g3-2(b) ("Rule 12g3-2(b)") thereunder, and (ii) have their securities listed on a qualified foreign exchange, such as the CSE, can have their securities quoted on the OTCQX without need for registration or reporting with the Securities and Exchange Commission ("SEC") or compliance with Sarbanes-Oxley.

The OTC Markets is a broker-dealer trading platform with its own rules and listing standards. More and more Canadian companies are considering an additional listing on the OTCQX to provide investors in the United States with access to investment opportunities in their equity securities. An OTCQX listing can provide an effective alternative to listing on the New York Stock Exchange ("NYSE"), the NYSE MKT or Nasdaq and provide liquidity for investors in both Canadian and U.S. marketplaces. In addition, Canadian companies can continue to report under Canadian GAAP or IFRS without any requirement to change or reconcile financials to U.S. GAAP.

There are two tiers and standards available to international companies on the OTCQX: the OTCQX International Premier and the OTCQX International. Each is designed to meet the needs of international public companies by providing a trading platform in the United States that offers many of the benefits of traditional U.S. stock exchanges with regulatory and reporting costs substantially less than a traditional stock exchange listing.

Accessing OTCQX International and the OTCQB through CSE-Canadian Securities Exchange

As a qualified non-U.S. stock exchange, CSE is your path in Canada to a cost-effective U.S. platform for U.S. investors to trade your company. CSE is the most cost-effective stock exchange in Canada with listing fees of just $12,500 and monthly maintenance fees of $500 per month or $6,000 per year. Once you are listed on CSE you already have your shares publicly traded and your required disclosure completed and the process for continuing it.

Now let's look at how your company adds an additional market in the U.S. through the OTCQX International or the OTCQB.

OTCQX International Requirements

All companies must:

  • Be listed on a qualified non-U.S. stock exchange, such as the CSE.
  • As of the most recent annual or fiscal quarterly period end, have $2 million in total assets.
  • As of the most recent fiscal year end have either (i) $2 million in revenue; (ii) $1 million in net tangible assets; (iii) $500,000 in net income or (iv) $5 million in global market capitalization.
  • Appoint a Principal American Liaison (PAL). A PAL is a qualified ADR Bank, third-party investment bank or law firm, such as Dorsey & Whitney LLP.
  • Maintain current status with 12g3-2b requirements and disclosure must be in English.
  • Ensure publication of proprietary priced quotations through a broker-dealer on OTC Link ATS.
  • All non-SEC Reporting Companies must be published in the S&P or Mergent Manual for Blue Sky Compliance.
  • Meet one of the exemptions consistent with the definition of a "Penny Stock" under Rule 3a51-1 under the Securities Exchange Act of 1934.

OTCQX International Premier

All companies must have:

  • $100 million in revenue, global market capitalization of $500 million, 3 year aggregate cash flow of $100 million and minimum cash flow in each of the 2 past years of $25 million or;
  • $75 million in Revenue and $750 million in Global Market Capitalization.

Regarding fees, the application fee for the OTCQX International is $5,000 and the annual fee is $15,000.


The initial requirements for an international reporting company are as follows:

  • The company must meet an initial minimum bid price test of $0.01 as of close of business for each of the previous 30 calendar days.
  • Complete and submit OTCQB application and fees.
  • Be compliant with SEC Rule 12g3-2(b) and be listed on a Qualified Foreign Exchange such as CSE.
  • Submit a "Letter of Introduction" from a qualified PAL, which states the PAL has a reasonable belief the Company is in compliance with 12g3-2(b) and is listed on a Qualified Foreign Exchange and has posted required disclosure on the OTC Markets website.
  • The Company must also post on the OTC Markets website; previous two years of disclosure required under 12g3-2(b) in English except for press releases and the OTCQB initial Certification.

The fees for the OTCQB consist of an application fee of $2,500 and an annual fee of $10,000. Please note that currently the application fee is waived for International Reporting companies that apply by September 30, 2014 and the annual fee will be discounted to $7,500 for the first two years for companies that apply and are trading in 2014.

2,000/500 Shareholder Registration Requirement

Canadian companies listed on CSE can have their securities traded on the OTCQX and OTCQB without becoming a reporting issuer in the U.S. until such company has at least $10 million in assets and has had within 120 days after its fiscal year end either (i) 2,000 holders of record (worldwide) or (ii) 500 holders of record (worldwide) that are not "accredited investors", as defined in Rule 501(a) of the Securities Act.

If a company reaches this level it usually means they have attracted sufficient investor attention in the market because of the right investor communications and performance of the company, so becoming an SEC reporting issuer can make sense for many companies at this point. Having said this most foreign issuers qualify for the 12g3-2(b) exemption so despite the number of shareholders, no registration would be required. Also Canadian companies who do become US reporting issuers because of the shareholder and asset triggers can still file their financial statements in IFRS.


We hope that this article has been informative and provides a general overview for you on having your company trade on both the CSE and OTC Markets. If you'd like to learn more about listing on CSE please contact Peter Traynor at ITB Solutions. On having your company trade on OTC Markets please contact Daniel Nauth at Dorsey & Whitney LLP and for any auditing or financial requirement issues please contact David Danziger at MNP LLP.

This article originally appeared on and was co-authored by MNP's David Danziger and Peter Traynor of ITB solutions.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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