Mindpix Corp. (fka MPIX)

[Emax Man]

Here's some great information. What a DTCC action really impacts:

Seems to be a lot of confusion as to what exactly a DTCC action is and what it directly impacts. The DTCC has many different actions it can take against a security they have found to have suspicious or credible actions of potential market compromise. Some are announced through the DTCC Notice system as these notices pertain to the 6000+ participants that use DTC services. While others are not posted due to no impact to those 6000+ participants. A common myth is that a DTC action impacts trading directly, that will be dispelled.

What are some of the common DTC actions take:

1. DWAC denial service, electronic transfer of funds. (Chill)
2. Exiting from CNS and designation of Trade For Trade (CHILL)
3. Suspension of all DTC services with exception to Custody Service (CS) (Global Lock)
4. Suspension of all services including Custody Service (Global Lock)

DWAC

All of these different actions are focused on one particular security, NEWLY ISSUED securities. That is shares being issued by the Transfer Agent and electronically transferred to the corresponding broker account of the debt, note or warrant holder. The denial of DWAC service is an undisclosed chill, which prevents the issuer from electronically transfer shares from the TA to a broker. These are not notified to participants due to no impact of DTC services for those participants, it is strictly an inconvenience for the issuer.

These are typically found out through company filings as a common complaint of unable to transfer new shares on time and at greater costs involved. They do in fact cost a company a greater amount of money as brokers charge higher fees for such manual transfers. Without FAST a company also pays late fees due to the longer period of time involved in the manual process, so they company gets hit with two fees. One for the manual process and the other for late fees by the debt holder. These DWAC denials can cause a separate action of trading restrictions through certain brokers, TDA is notorious for placing trading restrictions on such securities on their own accord.

DTC Chill

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

The next action is a DTC Chill, the common designation of Trade for Trade. By exiting the CUSIP from Continuous Net Services a security no longer can use any of the DTC services with exception to Custody Service. An issuer can no longer deposit new shares or use transfer services for new shares through the DTC. Each trade also must be for actual shares for actual cash on hand, there are no more market making opportunities to short volume the security to complete a trade through “locate”.

This action also has no trading restrictions involved, it is strictly a DTC action and impact. This however does not stop the company from depositing new shares in certain brokers and using them to manual transfer shares to the corresponding broker. These really increases costs and take even more time due to broker to broker transactions involved. A separate trading restriction is applied by certain clearing firms, Penson and TDA have such restrictions, also non self clearing brokers who depend on the DTC.

Penson clearing, depending on the trading platform used may deny trading or allow trading with steep pass through fees attached. These fees occur on the sale of the security and can take up anywhere from 3-4 weeks to show up in a customers account, and can be up to $700. Most Penson trading platforms restrict trading period of non DTC eligible securities, but some like Zecco for example will allow you to trade at your own peril. They provide an inaccurate list of non DTC eligible securities and even go as far as to tell their customers the list is not accurate and yet the customer is still responsible for their own trade.

https://www.zecco.com/forms/penny-stock-disclosure/DownloadForm.aspx


TDA restricts trading by allowing sells only, no buying of non DTC eligible securities. TDA has their own process and prevents online users from purchasing non DTC eligible securities, although at times the restrictions have been spotty, they for the most part have most non DTC eligible securities identified.

Global Lock

http://www.dtcc.com/downloads/legal/imp_notices/2011/dtc/ope/1856-11.pdf

The “Global Lock” is the next step up and typically states the following securities have been suspended of all DTC services with exception of Custody Service. This action prevents any NEWLY ISSUED shares from being deposited anywhere, no broker can accept a deposit of these securities. A security with such an action placed on it no longer has access to capital growth through share issuance as there is no means to deposit shares.

This action steps up separate trading restriction from various brokers, instead of the usual two of Penson Clearing and TDA. Most of the big online traders drop these and it does not immediately happen for some of them, Scottrade, Fidelity and E-Trade for example apply trading restrictions. While Schwab, Sharebuilder and Options Express continue full trading of such securities.

The Actual Impact

None of these DTC actions directly place trading restrictions on EXISTING shares in the Float, what they do however is they either restrict or prevent NEWLY ISSUED shares from entering the market. The chill is just a means of denying DTC service, but it does not stop the company from using manual transfer services with certain brokers. A suspension denies any deposit of newly issued shares period. Both of these are designed to either restrict liquidity or deny it completely. Neither action creates a trading restriction on existing shares of a security, these are separate actions by clearing firms whose Risk Assessment departments have deemed them as a liability.

Liquidity is the only means in which these securities survive here in the OTC and without it they eventually dry up over time as the bagholders can only buy so much before they finally cannot buy anymore. Without new shares entering the market, there is no new interest to buy shares up at cheaper prices, bagholders need ridiculous PPS to get out and the new interest wants only the cheapest shares available which the bagholders do not want to sell at. Sure trading happens, but it is such low volume it matters very little as nobody can make money from such long and painful transactions that take months for some to complete a trade.

The company increases rate of burn in shares in paying even higher transaction fees and late fees, and less finance is available due to the inconvenience of getting shares. Suspended companies no longer have access to cash and cannot continue to operate, they use up remaining funds and are out of business. So the direct impact of a DTC action is restricting the money flow or completely taking it away. Without finance these companies fail to exist over time. As of this time there are 10,202 securities traded on the OTC and yet only 325 CUSIPS are designated trade for trade, that is a little over 3% having such DTC actions on them.

There are in fact some securities in the past that have gotten around the DTC actions by using corporate actions to essentially “renew” their DTC eligibility by having FINRA approval. So the actual number of chilled securities is actually less, but the CUSIP is in fact still chilled form the previous corporate Name. The DTC and FINRA have recently got together and have addressed this workaround and shut off this avenue in the recent months. FINRA no longer approves corporate actions for non DTC eligible securities. If a DTC eligible security is currently under review by FINRA for corporate change and has passed basic overview, the DTC will await final approval and chill both CUSIPS upon approval.

To date only one security on record has had the Trade for Trade designation removed and 5 securities have had all services resumed after a Global Lock. Temporary chills and locks can be placed on securities due Transfer Agent issues, these will in fact state the reason for such a chill or lock, these do not remain as the security is allowed a specific time to find a new TA.

http://www.dtcc.com/downloads/legal/imp_notices/2011/dtc/ope/0177-11.pdf


Common misconceptions:

1. A chill means the security is restricted from being traded.
2. A chill means the company requested the security to be on Trade for Trade due to shorting.
3. A Global Lock means no shares can be traded period.
4. A Chill means nothing
5. Almost all OTC securities are chilled or locked.
6. This is simply a CUSIP fee not being paid this month.
7. This will be resolved shortly
8. The SEC does not approve of such actions
9. I can still trade so that means nothing has happened.