November 25, 2019
The proposed amendment to 17 CFR 240, 15c2-11 would cause devastating losses to the public at large with investments in these affected companies. The commission's intent with the amendments is undoubtedly in good faith, but the efforts appear to be heedless of the consequences to the innocent parties at hand.
In the commission's new video posted to YouTube titled, "Modernizing the Rule Governing Quotations for Over-the-Counter Securities (Rule 15c2-11)", there was an emphasis made that unsolicited quotations placed on behalf of clients by brokers would still allow the securities in question to continue trading. In fairness, these companies' valuations would be decimated as a result of this rule change, with billions of dollars in mostly retail investing money lost. Furthermore, eliminating "lit" market depth damages transparency, deteriorates investors' confidence and ultimately reduces liquidity in the market. This dangerous commitment only adds a layer of shadiness to a marketplace riddled with fraud.
For many years, "dark" companies have operated with an understanding that it is not an obligation of theirs to file reports with the commission or an alternate reporting method. It is a costly and likely impossible endeavor for most small firms to immediately begin the process of preparing the necessary filings for this new rule. Forcing these companies to change their longstanding practice makes little sense. Many legitimate operations choose to file at their own pace to preserve resources and build their businesses. The rule change demands large expenditures to be in compliance which may not be possible to pay or could be better spent on business growth. Grouping all dark companies together will kill the overwhelming majority of their chances of any kind of success in the public capital markets. It is incredibly unfair to put a sudden, large burden on small entities that have operated under the assumption of not being required to report for numerous years.
The proposal also does not take into account the present difficulty of companies who have been delisted to the grey sheets to return to their previous trading venue. The process to file a form 211 to re-list is too time consuming, costly and difficult. Very few grey sheet companies ever come back to trading in lit markets despite many not being moved there due to fraudulent activities. The cost and requirements of going public are very steep, and the amount of new publicly traded companies is on the decline. The proposed rule changes will only exacerbate this downward trend and effectively eliminate hundreds of existing publicly-held issuers.
I implore the commission to please reconsider implementing the amendments to 17 CFR 240, 15c2-11 as they will cause extreme harm to hundreds of innocent companies and catastrophic financial damage to thousands of individual investors.
Respectfully submitted,
Tyler Black