The Real DTCC Discussion

[BigBake1]

Reorganization

Does this process get around the Chill?

There seems to be a bit of truth to this process, but before you get on the phone calling your favorite CEO telling them to file for a name/symbol change and get a new CUSIP notice I said a “bit” of truth..lol. So Tuesday I was doing an Internet Radio Show on STT and it was asked does this work. I stated yes it does work and has worked and I will get to that in a minute. But lets review where this all stems from… literally

So the primary source claiming the effectiveness of a reorganization as a measure to remove the chill was CBAI. We talked about this a couple of days ago, it was not a “chill” in the sense as we know it, they were simply shut out from DWAC and were not removed from CNS and T4T. So anyways this CEO held a conference call and during this call he made a claim that he performed the reorganization as a preventative measure to avoid the DTCC Chill. Like I said there is some truth to this and at first I certainly did not believe it as it made no sense.

I always keep an eye out for Notices and well December 9th was a day in which this particular ticker popped on the DTCC:

CNUV China Nuvo Solar Energy it was chilled on the 9th of December:

http://www.dtcc.com/downloads/legal/imp_notices/2011/nscc/A7336.pdf

It went under a reorganization on the 27th of January:

http://www.dtcc.com/downloads/legal/imp_notices/2012/nscc/otc/OTC-018.pdf

It is now SGLN, and when you look for any Notices for Surgline.. well you see none:

http://search2.dtcc.com/?q=surgline+international&sp_k=imp_notices&sp_p=all&sp_f=ISO-8859-1&x=0&y=0

Here we have a ticker that clearly pulled it off, now that “bit” of truth. What happened is that CNUV had already filed to FINRA some time before this chill notice came out, so they were in the process. The DTCC however failed to check these symbols to see if they were in the hopper for reorganization, so they would issue the notice to exit the old CUSIP and in this case almost 50 days later the new CUSIP was put into CNS because it was vetted by FINRA.

Pretty slick, just a simple non communication between organizations allowed this to occur. So CBAI was pretty correct in the fact that if one felt they were about to be slammed why not file and wait and hope that FINRA approves it and they essentially get amnesty until the reorganization goes through. This “hole” in the fence however is now closed, last week was the first evidence that the DTCC knows about this and has closed this for good.

So here we have the Notice showing Radient Pharmaceuticals, Corp, RXPCD as being chilled but notice it is listed twice with two CUSIPs.


Complete Notice:
http://www.dtcc.com/downloads/legal/imp_notices/2012/nscc/a7381.pdf

Well a week earlier they were approved for a Reorganization:



Complete Notice:
http://www.dtcc.com/downloads/legal/imp_notices/2012/nscc/otc/OTC-028.pdf

So as you can see the DTCC has solved this “work around”, they have clearly identified these “loopholes” and are shutting them down. I am certain someone is going to state that this was done at the request of the company because of the reorganization, I am here to tell you “NO!” In a chill process for a reorganization it is not “announced” and it certainly would not be exited from CNS, and it would only pertain to the “old” CUSIP for accounting reasons. This here has preemptively “chilled” the new CUSIP as it goes into effect… Briliant!