Oct. 12, 2018
To Whom it may Concern, I would like to address the comments made in the attached article by Brett Redfearn. Specifically this suggestion, "If a company is a dark company and listed in the OTC market and hasn’t put out financials for six months, maybe it shouldn’t be quoted or offered to retail investors,” Redfearn said Monday at the Securities Industry and Financial Markets Association’s annual meeting in Washington." https://www.bloomberg.com/news/articles/2018-10-01/sec-spots-a-way-to-starve-the-most-suspicious-penny-stocks I applaud efforts to get rid of fraud but if implemented this rule would destroy the market value of many legitimate businesses and along with it the savings of many retail investors. This idea casts far too wide a net. You are trying to protect retail investors when in fact this rule would hurt primarily retail investors. The companies toeing this line between filing and non-filing are often so small in market cap and their stocks so illiquid funds cannot participate. I invest primarily in companies in this area and blog about it at www.nonamestocks.com. My page views and contact with fellow investors tells me there are many others out there like me. Do not punish us for seeking an area of the market where we have less competition. Stopping quotes or trading in these securities would send their stock prices to nothing. One example for you is Moro Corporation. They de-registered from the SEC with the intent to continue communicating but they have few employees and those in charge were old. The main shareholder had the title of president, CEO, and chairman of the board. Money was tight so the CEO stopped taking a salary. The CFO had health problems and had to take time off so the over-worked CEO added CFO duties to his workload. As you can imagine they slipped behind in their reporting. Now do you think they, and their shareholders, deserve to be punished? Another is Addmaster. This company has been around for decades. They hold an annual meeting and send an annual report to shareholders. Any questions you have they are happy to answer. But they de-registered from the SEC and don't file reports in the public domain. Do you think their shareholders deserve to see the share price drop to nothing? Should my savings be erased? I could go on. A better solution would be to change the SEC rule 12G that allows companies to file form 15, de-register, and disappear. This rule should be aligned with the many state laws that require annual reporting and an annual meeting. Attack the problem at its source. I have talked to a number of companies that de-registered from the SEC and they all did it to save money. I have heard estimates from several hundred thousand dollars to a million and a half. That is a giant cost for tiny companies that may only have a few million in revenue. The cost to stay SEC reporting is the number one reason companies de-register and disappear, leading to the exact situation you are trying to resolve! The SEC should provide and enforce a lower tier of reporting standards that is more affordable. This will enable companies to save money while helping investors stay informed. As per current SEC rules once a company de-registers they are free to stop communicating all together. Put an end to this rule and require companies to file annual financial statements. Align with state law. Many state laws require businesses to keep annual financial numbers and provide them to shareholders upon request. Delaware state Corporation Law Title 8, Chapter 1, §220 Inspection of books and records states that shareholders must be allowed to inspect the company books. §211 requires an annual shareholder meeting. New York’s Business Corporation Law §624 states a company must produce for inspection an annual balance sheet and profit and loss statement. §602 requires an annual shareholder meeting. There are other states with similar laws. I urge you to consider the legitimate businesses that would be swept up in your idea. Do not suspend quotes or block out stocks just because they have not filed a report in 6 months. Thank you, Dan Schum individual investor micro-cap and nano-cap stock blogger www.nonamestocks.com