They say it takes a confident man to wear pink. What does it take to decorate your entire office suite in bubble-gum hues, right down to the M&Ms at the reception desk? Meet Cromwell Coulson, whose unusual décor stems from his position as CEO of Pink Sheets, and whose confidence is equally on display as he tries to take the reputationally challenged business upmarket.

Pink Sheets provides trading information and systems for thousands of thinly traded, unregistered companies — a market niche notoriously riddled with fraud. If Mr. Coulson has his way, the scam-infested corners of the market will be illuminated and sanitized, saving investors from losing millions each year.

To be sure, there are plenty of fine, small companies whose stocks trade through the Pink Sheets system. There are also numerous foreign firms that choose to trade over the Pink Sheets network for regulatory reasons, as well as some large domestic companies that have been de-listed from major exchanges while going through bankruptcy. Some of the better known names traded on the Pink Sheets are Volkswagen, Heineken, Dana Corp. and Delta Air Lines. There are currently 4,741 companies listed exclusively in the Pink Sheets. Most of the top 100 are foreign or “economically distressed”; they account for about 90% of trading volume.

Mr. Coulson bought the Pink Sheets in 1997, expecting a quick turnaround, and equally quick profit. Instead, the revitalization of the century-old firm has become something of a mission. Pink Sheets had long published quotes for companies traded over-the-counter that didn’t meet the listing criteria of the major exchanges or of NASDAQ. Originally such information was printed on pink paper, giving rise to the name.

The first challenge, and opportunity, was to make the flow of information available online, and then to facilitate trading by putting dealers in touch with each other electronically. As a longtime trader of Pink Sheets stocks, Mr. Coulson had inside information about what the company needed. At Carr Securities he had bought and sold the stocks of bankrupt and closely held companies, and came to recognize that Pink Sheets “needed to be fixed.”

Over time, he began to see greater potential for the business. When he bought the company, it was publishing information on about 1,300 companies reporting exclusively through his organization. They also carried quotes for several hundred NASDAQ Bulletin Board companies. As it happened, about the time he got involved, NASDAQ decided to cut off many companies that fell below certain standards, and ultimately hundreds of these moved to the Pink Sheets. Included in this group were foreign companies and companies that do not report financial information to the SEC. This proved a windfall for Mr. Coulson.

As the business has grown so have Mr. Coulson’s aspirations. He is changing his business model, and trying to improve the respectability of Pink Sheets trading. These ambitions go hand-in-hand. Currently, Pink Sheets receives fees only from the market-makers and broker-dealers who trade the stocks listed in the Pink Sheets. The issuer, or underlying company, is not a client of Pink Sheets, which can be something of a blessing. If a company turns out to be a fraud, Pink Sheets is not held accountable.That’s about to change.

Mr. Coulson is working to set up different tiers of Pink Sheets stocks, differentiated in part by how much information is made available by the companies. He hopes that legitimate managements will want to distinguish themselves from the gamier Pink Sheets participants by paying, in effect, a registration fee. Ultimately there will be several tiers, and investors will be able to see how companies stack up in terms of disclosure and various other criteria.

The first step along this path is Pink Sheets’ introduction of a premium listing service called OTCQX. The company announced this new program in March, pitching it at companies willing to provide a certain threshold amount of disclosure. Among other criteria, to qualify for OTCQX, companies must achieve a specified size and quality, must hold annual shareholder meetings, and have a bid price of more than $1.

They must also have a sponsor, or “Designated Advisor for Disclosure” (DAD), who will advise the company on how to meet the standards, and who will, in effect, vouch for the company. This could be an investment bank, or legal firm. This approach is modeled on a successful program at the London Stock Exchange’s AIM market.

Mr. Coulson estimates that about 20% of Bulletin Board and Pink Sheets companies might qualify for OTCQX. This might include foreign companies that report financials in their home countries, or small companies that are thinly traded but legitimate businesses. In return for the increased information gathering and recognition, Pink Sheets is aiming for the first time to develop a significant revenue stream from issuers.

Progress has been slow. Issuers who trade on Pink Sheets have been spoiled, and are not sure they need to participate in the new program. Mr. Coulson is in the midst of an aggressive marketing campaign, but since the companies traded via Pink Sheets are all over the globe, the effort is taxing. He has yet to take the concept abroad, to some of the well-known foreign companies that trade through the Pink Sheets, but is confident of a more positive response from the likes of Nestle, Nintendo and Lukoil.

Ultimately, Mr. Coulson expects to categorize Pink Sheets stocks into several tiers. This will allow him to warn investors off those that are patently fraudulent — something almost impossible to do with today’s business model. The simultaneous rise of the Internet and of electronic low-cost brokers combined to open up enormous opportunities for mischief. Daily there are so-called pump and dump schemes being promulgated over the Internet. As Mr. Coulson says, “People spend more time choosing their washer and dryer than trying to research some of the stocks they buy.”

Though he and his staff watch for companies being touted by known scammers, they cannot prevent such outfits from being quoted in Pink Sheets. These are the activities that give the Pink Sheets an unsavory reputation. Mr. Coulson estimates that as many as 20% of Bulletin Board companies and 5% of Pink Sheets companies may be frauds. He suggests with some irony that many scammers have moved to the Bulletin Board because investors are so wary of names listed in the Pink Sheets.

Mr. Coulson has set his sights high, and so far has seen his venture prosper. In 2000 the dollar value of Pink Sheets trading totaled $29 billion; the figure for last year was $56.6 billion.He will not divulge his financials, but he agrees that revenues have probably risen five-fold or more since he bought the firm.He is hoping that the new program to seek issuer fees will further boost business, by perhaps another 30% to 40% by next year. He hopes that will be just the beginning.