"pink sheet" investments

[Belgarath]

A client is thinking about investing in "pink sheet" stocks, which as far as I can tell are certain over-the-counter stocks that don't have to file with the SEC. Other than the normal Fiduciary prudence rules, etc., etc., is there any regulatory prohibition against a plan investing in these? I don't believe there is, but I never heard of them until today...

[MoJo]

A client is thinking about investing in "pink sheet" stocks, which as far as I can tell are certain over-the-counter stocks that don't have to file with the SEC. Other than the normal Fiduciary prudence rules, etc., etc., is there any regulatory prohibition against a plan investing in these? I don't believe there is, but I never heard of them until today...

I know of no restrictions on investments, save for the "subject to the jurisdiction of the U.S. courts" - which pink sheet securities are; not prohibited by the prohibited transaction rules - which pink sheet securities aren't (generally); and are "prudent" - which is a fiduciary call....

[MWeddell]

There are enough liquidity concerns with pink sheet traded securities that you really need to press the plan fiduciary to consider seriously whether this should be permitted.

[BG5150]

Pardon my ignorance on the matter, but what are the liquidity concerns of OTC offerings?

[MoJo]

Pardon my ignorance on the matter, but what are the liquidity concerns of OTC offerings?

There are no "market makers" for pink sheet traded securities, as there are for securities "listed" on an exchange. Market makers MUST buy or sell in order to create a market which creates liquidity. Without market makers, a pink sheet security holder / seller must wait (sometimes for years) until a buyer emerges to consumate a trade.

[Belgarath]

Thanks - we had basically given them a sternly worded warning/caveat to consider all the appropriate Fiduciary aspects, seek appropriate ERISA counsel, etc., etc., etc. - I don't expect that they will end up doing it, but that's up to them!