May. 04, 2023
Hello SEC comment reader! This proposed rule will surely help reduce the blatant cess pooling of re-hypothecated shares. A shares that is borrowed, sold into the market and re sold into the market lines the pockets of the seller with cash and without accountability of who had the share, an IOU can turn into a FTD and the FTD can be closed with another new FTD. In principle, the whole DTCC broker racket is a Ponzi scheme. If one were to open the cess pool door and peek inside the stinky black box, it would sure be overflowing with counterfeit dingleberry trust me bro IOU’s. To give evidence of this, I copy a letter word for word sent from a broker employee to a CEO in response to the CEO company doing a spin-off with accountability among brokers. Enjoy the read and keep up the good honest work and make these criminals on wallstreet pay back what they have stolen from retail traders over the decades: From: "Lesowitz, Brad" [REDACTED] Date: September 28, 2014 at 4:43:49 PM EDT To: Kirsten Bartholome [REDACTED] Cc: [REDACTED] Subject: RE: TNI Biotech ***URGENT*** Hi Kirsten, I hope you're doing well. Once again I want to thank you for making the change for DTCC Participants from physical surrender in client name to providing Guardian Transfer a list of our beneficial holders along with share amounts, address & TINs. It is certainly a much more cost effective and far more efficient way to go. Please know I'm appreciative of your willingness to listen and your kind patience. However, I'm compelled to raise two concerns I have. First, if you intend to set October 1st as the expiration date for providing the beneficial holders list, as I previously brought to your attention, with the recent change, it will be likely some DTCC Participants will not have time to get this done. Since this spin-off has been categorized by TNI as a mandatory event, I don't see why an expiration date is required at all (nor should there be one for shareholders who are holding certs in their name). As DTCC Participants submit their list, then you register the spin-off shares in the client's name. It should not matter to you when you get the names as long as they are Record Date holders. If you for whatever reason want to set a deadline, I suggest pushing it back a few weeks at a minimum to be fair to all DTCC Participants. But herein lies the much bigger, related concern. Because TNI has elected to conduct a spin-off in a way that is the antithesis of how normal spin-offs operate, you will be creating an unintended consequence to the financial market that I think you may not have thought of. Regardless of any manner you make the requirement of DTCC Participants to hand over their beneficial holder names – whether via transfer and surrender or providing a list, the impact to trading is significant. Let me explain and give you a for instance. If a DTCC Participant presents to your transfer agent a list for an amount of shares that exceeds their DTCC record date position, what will you do? If for example, the transfer agent goes back to the DTCC Participant and asks where are the remaining shares, the DTCC Participant's likely response will be they are owed to them by another DTCC Participant who has failed to deliver by the record date. Therefore, the client bought the shares for settlement through the record date and is a legitimate and rightful record date holder, but the client's broker-dealer or custodian does not have the shares in their DTCC account because the Seller of the shares have failed to make delivery by record date. Fails are common occurrence in our industry. Another circumstance may be that the DTCC Participant who presents you with the list has previously Loaned shares to another Participant and the Borrower cannot return the shares. In either of these scenarios, it may be very problematic to say who has the shares in their DTCC account because the shares are owed to them by let's say Merrill Lynch, Merrill may be owed the shares by UBS who are owed the shares by JP Morgan and so on and so on. You don't know how far down the rabbit hole goes. As I said above, this spin-off is completely out of the normal industry practice. Spin-offs are treated like dividend events. They have a record date, an ex-date (set by the stock exchange) and a payable date. On payable date, the Issuer pays DTCC (shares are in name of Cede & Co.) and DTCC allocates to each of its Participants according to the rate of the dividend distribution. Because of TNI's insistence on requiring beneficial holder information and the fact the spin-off shares will be initially unregistered, you may not have thought of another alternative which I'm about to propose. I propose it now because you still have time to think this through by extending the record date as you have once before. Let me begin by saying I've not discussed this with DTCC and I certainly do not speak for them. I'm giving you my personal opinion, which may be shared by my industry colleagues. The way you can avoid any TNI shareholder from being potentially disenfranchised by your process, is to announce this like any other spin-off by getting an ex-date, new record date and setting a payable date. On payable date, distribute the unregistered shares in name of Cede & Co. and hold that at the transfer agent and send DTCC a statement of holding. DTCC does create DTCC User CUSIPs for unregistered shares. Fairly common occurrence. Upon receiving the holding statement from the transfer agent, DTCC can allocate the spin-off to its Participants under the unregistered user CUSIP. Each DTCC Participant then allocates the spin-off shares to its clients. If a Participant has a Fail to Receive or Loan, they would set up that FTR or Loan on the spin-off shares which denotes the entitlement is owed. When TNI gets a registration statement for Cytocom thus making it a freely tradable security, you inform DTCC of this and you get an assigned legitimate CUSIP for the registered shares, DTCC will then treat it as a mandatory and swing all Participant positions from the unregistered to the registered shares. Again, this is a common occurrence by DTCC. There are lots of instances where DTCC holds unregistered shares and once registered, they do this swing. DTCC Participants then would swing their unregistered positons to the registered and the FTRs & Loans can be either delivered, recalled or we can do Buy-Ins. Bottom line: it's now on us, the Participants, you are totally out of it. The above proposal solves many problems & headaches and makes this a very simple process for you & Guardian. No transfers. No surrender & return of certificates. No lists. No shareholders and broker-dealers complaining they didn't get their spin-off shares. Lastly, this is how spin-offs work in the financial world. There are literally hundreds of spin-offs announced every year and every one works the way I described above. It does not need to be different just because the spin-off shares will be initially unregistered. I copied in DTCC and some of my industry colleagues. I recommend you discuss with your TNI associates but also discuss with FINRA & SIFMA (Steve Dapcic is the President of the Corporate Actions Section of SIFMA and is also copied on this email). Believe me when say I'm looking out for everyone's best interests in bringing this to your attention. You still have time. All of this is totally within your control. All I ask is you give what I'm saying consideration. Thank you again for being patient with me and for allowing me to give you my opinions and thoughts. Warm regards, End of email Link to sauce https://www.prnewswire.com/news-releases/tni-biotech-inc-corporations-ceo-issues-letter-to-shareholders-discussing-cytocom-dividend-277484861.html Best Regards, Richard Kershaw