December 27, 2013
Well this is a great start, but where this all falls short is the lack of public disclosure as to what has DTC Eligibility currently and or has had certain DTC services restricted. The end group of common shareholders is completely left in the dark as to the current DTC Eligibility or if certain services have been restricted. The public notices provided on the DTCC website are not easily accessible and only deal with Global Locks. Certain service restrictions like DWAC for example may impede trading and or require Pass Through fees of up to $700 per transaction upon sale of existing shares. There exists no centralized list of these securities that have been restricted or locked.
The DTC often points the common shareholder to the Issuer, this unfortunately is often an exercise that results in further frustration or intentional omission. The issuer is either non accessible or has acted as if they have no clue what is going on, which furthers the confusion surrounding such potential trading restrictions. One could go to the broker (participant) for such information, but most do not recognize such service restrictions when asked at the local brokerage office level. This often results in more misinformation over the security. As we know some clearing firms will not clear transactions with ANY type of DTC Deposit Chill in place, and will require a manual process of the physical security.
I submit a proposal for some form of publicly accessible centralized data as to current DTC service restrictions. The DTC has currently undergone a new website format change which has now made it even more difficult to locate Notices. The DTC should provide a complete section of OTC securities that have been Chilled or Locked so common shareholders have a primary source to go to for DTC service restrictions. A good alternate for providing such information would be OTC Markets.com, they claim to be the best source of information concerning such OTC securities for common shareholders. They have a Company Info tab for each security, in that company info area, DTC Eligibility or service restrictions could easily be displayed for such common shareholders to access DTC information concerning their issuer. Of course this information should NOT be provided by the issuer, only by the DTC in a report/Notice to OTC Markets to ensure accuracy and integrity of the DTC information.
I am certain that the DTC has gotten tired of the phone calls from rabid common shareholders wanting information concerning the restrictions on their security, this would be eliminated completely if there was full public disclosure in a centralized place. The Issuer is not such a source, commonly many do not have real offices, and use a common aggregated answering service and or no longer available. If one does get through to the Issuer they are often lied to about such service restriction put in place, this leaves the shareholder trying to figure out who to believe. Further many pump and dumps have been predicated on Lifting or Resumption of DTC Services that were in fact not, a press release or public statement issued to create volume for further dumping of shares.
I for one support the DTC Service Restrictions recently released in their Whitepaper posted September, 2013.
I however believe further assistance could be provided by other Gatekeepers, primarily the Transfer Agents. Since 6500 OTC securities are NON SEC FILERS, there exist no real disclosure as to share issuances and conversions to free trading, which is the primary concern for such DTC restrictions. Each Transfer Agent should provide at a minimum a weekly share issuance report and any conversions to free trading, publicly acessible via website, obviously daily reports would be preferred. Also attorney opinion letters should be publicly available, these alone would reduce significantly the number of DTC restriction put in place and potentially lessen the impact on the market.
A more informed shareholder could avoid such pump and dumps when the information is provided publicly, avoiding what one commenter stated as innocent shareholders who have been victimized by such service restrictions. Are they victims of the DTC Service Restrictions? Or are they victims of Issuers that do not properly disclose or purposely omit such share issuances and conversions and their related documents? Obviously they are the victims of the Issuer which is solely responsible for these issuances and conversions to free trading. Further this lack of "new" liquidity does not hurt the market if there is an actual business in place that is performing as outlined in their business strategy and objectives. As we all know all too well, these are typically empty shells and or consistent paychecks for titled individuals for essentially printing worthless paper.
Unaware shareholders are the target for these sales of worthless securities, the less transparent the issuer, the larger the rake in of ill-gotten gains. Let us provide more information to hopefully reduce the number of unaware shareholders to limit the impact of such service restrictions.