Tiger Brokers (AU) Pty Limited
Risk Disclosure Statement for OTC Securities
(ACN: 007268386 AFSL: 300767)
12 June 2022
Before you invest in OTC Securities, you should read the Risk Disclosure Statement for OTC Securities (“Risk Disclosure Statement”) provided by Tiger Brokers (AU) Pty Limited (“TBAU” or “Tiger Brokers”) carefully.
TBAU accepts and orders your trades for certain over-the-counter securities from OTC Markets (“OTC Securities”). The purpose of this Risk Disclosure Statement is to provide the necessary information concerning OTC Securities trading and assist you in making an informed assessment of the risks and uncertainties associated. In light of these risks, you should undertake such transactions only if you understand the trading nature and the extent of your risk exposure. Not all clients are suitable for OTC Securities trading. You should carefully read this Risk Disclosure Statement, relevant terms and conditions, rules associated with OTC Securities and obligations before you decide to invest. If in any doubt, you should consider seeking professional advice. It is recommended you also read the other risk disclosure statements concerning securities trading.
i. About OTC Securities
TBAU enables its clients to trade certain OTC Securities only, and not all OTC Securities are available to trade. Before you invest, you should determine whether a symbol is available as it may influence your investment objectives.
An investment in an OTC security is speculative and involves a high degree of risk. This is because some OTC Securities are not subject to the financial reporting stands or disclosure requirements. Additionally, reliable information regarding issuers of OTC Securities, their prospectus, and risks associated with the business of any particular issuer or an investment in the issuer’s stocks may not be available. As a result, it may not be easy to value an investment in OTC Securities properly.
OTC Securities are for investors with a high risk-tolerance for trading stocks with limited information available and limited regulatory oversight. Some OTC Securities are typically penny stocks, low-priced shares of small companies or shell companies, shares of distressed companies not willing or not able to disclose information, delisted symbols, or foreign equity issues unqualified to list on New York Stock Exchange or Nasdaq.
By trading in OTC Securities, you accept the risk that you may lose all or part of your initial investment amount. Given that OTC Securities disclosure requirements are less stringent, OTC Securities are frequent targets of market manipulation. Dealers may dominate the market and set prices that are not based on competitive forces. Individuals or groups may create fraudulent markets and control the sudden sharp increase or collapse in share price.
ii. Your Risk Appetite
OTC Securities trading is highly risky and it may not be suitable for all investors. You should consider the suitability of trading OTC Securities based on your financial position, investment objectives and needs, and you may want to seek professional advice before making an investment decision on OTC securities trading.
TBAU does not take into consideration your risk appetite (or personal circumstances) and only acts in its capacity as a broker of OTC securities.
iii. Market Liquidity
Many OTC Securities are relatively illiquid. Illiquid stocks are often difficult for investors to buy or sell without dramatically affecting the quoted price. Fewer market participants can lead to less liquidity and more volatile price fluctuations. In some cases, the liquidation of a position in OTC Securities may not be possible within a reasonable period of time. You may find it hard selling OTC Securities with little or no value in the open market.
iv. Counterparty Risk
The presence of counterparty risk should be considered when assessing transactions of OTC Securities. OTC Securities are unlike exchange traded securities, to the extent that the market participants in such markets are typically not subject to the same level of credit requirements and regulatory oversight as members of the regular “exchange based” markets, such as Nasdaq. This may expose you to the risk of a counterparty not fulfilling a relevant settlement obligation in accordance with the agreed upon terms and conditions of the transaction. Possible reasons for such failures may include, but are not limited to, a dispute over the terms of the transaction or a credit/liquidity problem of the counterparty. Counterparty risk may be accentuated for transactions where the settlement date is further away from the execution date or upon any event that may incentivise the counterparty to default or jeopardise its ability to fulfill a relevant settlement obligation.
v. Trading Commission
As a financial service firm providing trading services, TBAU does not solicit or recommend OTC Securities transactions.. Your trading accounts with TBAU are self-directed. Please perform your own due diligence before investing in any security. For all OTC Securities transactions, the commission charged is published on TBAU’s official website.
vi. Fraud
OTC Securities are frequent targets of fraud or market manipulation, not only because of their generally low price, but also because the reporting requirements for these securities are less stringent than (such as Nasdaq listed or traded securities), and no exchange requirements are imposed. Dealers may dominate the market and set prices that are not based on competitive forces. Individuals or groups may create fraudulent markets and control the sudden, sharp increase of price and trading volume and the equally sudden collapse of the market price for a security. You should carefully review all information regarding the company you intend to invest in, prior to trading OTC securities, or any other investment. Please report any suspected occurrences of fraud to your state securities administrator, the NASD, or the SEC.
vii. Trading Hours and Trading Unit
You can only trade OTC Securities during regular trading hours (between 9:30am and 16:00pm US Eastern Standard Time.) Pre-market and extended trading are not available. On half trading day, the trading hours will last from 9:30am to 14:00pm US Eastern Standard Time.
The minimum trading unit of OTC Securities is 1 share. You may place at tick size of US$0.01. Margin trading and short selling are not available for OTC Securities, and such availability may be modified by TBAU from time to time without prior notice.
viii. Available Order Types and Limitation
You should note that due to volatile nature of OTC Securities, currently you may only place limit price orders and stop-loss limit orders when trading OTC Securities, and the available order types may be updated from time to time without prior notice to you. You must understand that your order may be delayed due to large order volume.
ix. Market Quotation and Additional Fees
You must understand and accept that real-time quotations for OTC Securities is not available. The market price displayed is the market price 15 minutes before. For some OTC Securities, additional fees may be charged to your account due to transfer and custody issues.
This Risk Disclosure Statement is neither an offer nor a solicitation to purchase or sell any financial product or service. None of the information provided in this Risk Disclosure Statement constitutes a recommendation that any product or service is suitable for any person. This Risk Disclosure Statement does not purport to disclose or discuss all risks and other significant aspects of any transaction. In light of the risks, you should undertake such transactions only if you understand the nature of the above financial products and the contracts which you are entering into and the extent of your exposure to risk. You should therefore consider consulting with your own legal, tax and financial advisers before entering into any particular transaction.