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Not in the OTC.
Thanks a lot Janice
Exactly what i thought
Read that sometimes they do that prior of a merger or when an institional buyer has many shares
They're tradable shares; shares held in street name and deposited at CEDE.
Question for a DTC specialist here:
Would like to know the meaning of the number of shares HELD AT DTC, that we see pretty often when we check the OTC website to know what that SS of a ticker is....
Are those shares NOT tradable due to a kind of holding by the DTC????
That's what I thought, as that's what I've been seeing. Thanks.
Since March 2012 the "chill" has very little impact other than a few brokers restricting purchase of shares of those tickers. Only the Global Lock carries real trading restrictions that completely stop them from trading.
Hi Big. Can you explain the problem companies face when their stock gets chilled? I see that GCRU was chilled back in February but it doesn't seem to have affected trading any.
Is $50 Billion the Price of Repo Safety?
A firm at the center of the U.S. financial plumbing is seeking $50 billion in commitments from banks and trading firms to shore up a crucial but increasingly illiquid short-term lending market, according to people familiar with the market discussions.
Depository Trust & Clearing Corp. wants its members to support the multibillion-dollar credit line to bolster the finances of a unit called Fixed Income Clearing Corp. , which facilitates trades in the $2.6 trillion repo market, the people said.
Repos, or repurchase agreements, are short-term loans secured by U.S. Treasurys and other bonds. They play a critical role in the financial system by keeping cash and securities circulating among hedge funds, investment banks and other financial firms.
Regulators at the Federal Reserve and the Securities and Exchange Commission are pushing DTCC, which operates the U.S. repo market's only clearinghouse, to bolster the unit's credit backstop, said people familiar with the matter. Some said the regulators believe the DTCC unit's resources aren't enough to cover a large default that would threaten to cause repo lending to seize up.
Regulators have pushed to expand the use of clearinghouses since the 2008 financial crisis in a bid to prevent a recurrence of the panic that followed the failure of Lehman Brothers Holdings Inc. Clearinghouses pool capital from their members and assume the risk of a default, potentially limiting damaging "fire sales" of collateral in the event a major participant becomes insolvent.
"DTCC is currently working with its regulators and our clients" on a proposal that aims to ensure its unit "has sufficient backstop liquidity resources," Timothy Cuddihy , managing director in enterprise risk management at DTCC, said in an e-mailed statement. He said the plan seeks to be "aligned with U.S. and international regulatory standards and will protect the clearinghouse and its membership from future defaults."
The DTCC unit's proposal is the latest twist in a yearslong struggle to reduce risks in the repo market. Analysts warn that vulnerable repo markets could make it harder to buy and sell securities underlying the trades, a key concern at a time when the Fed is preparing to raise short-term interest rates for the first time since 2006.
Liquidity in the market is declining in part because trading requires banks to tie up a lot of capital, hurting their overall returns. Morgan Stanley's repo books contracted 47% last year, The Wall Street Journal reported in April. Goldman Sachs Group Inc.'s shrank by 46% last year to their lowest levels since November 2008 , regulatory filings show.
Traders said such declines are contributing to unusual swings in government-bond prices and raising concerns about the sorts of disruptions that haven't been felt since 2008. Some of them warn changes in the repo markets are already making it harder to buy and sell U.S. Treasurys at a time when U.S. regulatory agencies are paying increasing attention to such gyrations.
While the credit facility at the clearinghouse would add new costs, it would take risks away from the banks and let them reduce their capital charges, traders said.
"Expanded repo clearing could potentially bring a range of benefits," said Fed governor Jerome Powell at a conference last month in New York .
The amount and terms of the DTCC's proposal are confidential and could yet change, said people familiar with it. The plan already has fueled a clash between the largest banks that historically dominated repo trading and the smaller securities dealers that also are members of the DTCC unit.
Smaller members have balked at sharing the costs of the new credit facility, and some have warned they may have to drop out of the clearinghouse. Traders said such an exodus could concentrate risk among the remaining members and threaten the clearinghouse's ability to make good on a defaulter's financial obligations.
"To force a facility of that size on all dealers, banks and otherwise, could force some dealers to leave DTCC, reducing liquidity in the bond market," said James Tabacchi , president at South Street Securities LLC , an independent broker dealer and member of the DTCC unit.
DTCC has been planning to expand its U.S. repo clearing services, and the talks foreshadow its plans to seek SEC approval for the credit facility early next year, said people familiar with the company's plans.
Member firms are haggling over how much of the facility they will cover, said people familiar with the talks. The DTCC repo clearinghouse has more than 100 members, and the proposed allocation of the costs has changed at least three times, some of the people said. The latest plan would have banks and broker-dealers affiliated with banks shoulder more of the burden.
DTCC isn't asking for the cash upfront. Rather, firms would incorporate the funds into their planning for stressed market scenarios.
Officials at the clearer have told members they may not need such a large amount if dealers change some practices, for example by lending for shorter periods.
"The proposed facility will certainly create additional costs, but we feel these are far outweighed by the broad benefits of maintaining a stable and robust repo clearinghouse and, by extension, a healthier repo market," said Joe Noto , a managing director in the treasury department at $25 billion hedge fund firm Citadel LLC , whose securities arm is a DTCC member.
(END) Dow Jones Newswires
12-09-15 1916ET
Copyright (c) 2015 Dow Jones & Company, Inc.
It is a little premature to say how this CRGP story will end Goodnight.
The only entity that "helped" was the Transfer Agent and that is it. It is over as far as who perpetuated it, it was all CRGP. That message was loud and clear when FINRA placed a "HALT" on the stock, that was the definitive moment that placed 100% certainty it was a scam.
As to not playing an active role as gatekeeper, surely you can add FINRA and the Brokers to the list. Marginally COR Clearing for assuming that brokers did their job, but by law they can do so as their business depends on good faith of their customers that have established history, SEC makes that abundantly clear.
Anything outside of that is pure conspiracy bullshit and not based on reality or the law for that matter.
This CRGP story is far from over and time will tell who help perpetuate this scam.
Based on what negligence? They only entities that were clearly negligent were the Transfer Agent and to some degree Nobilis and the other two brokerage firms. The TA is easy to prove negligent and then what?
The DTCC has no part in any of it, thus why the clearing firms are trying to get a court ruling for receivership, without that the DTCC isnt going to do squat for them.
The mere thought of suing the DTCC over what happened in CRGP is laughable, it is the equivalent to saying you are taking the Federal Reserve to court over what happened at your local bank.. good luck.
I would not be a bit surprised to see the DTCC and CORS Clearing get SUED in a CLASS ACTION for perpetuating the CRGP SCAM. IMO.
STOA 1:1000 RS / one of asher toxic funder
Correction,J.S. i do appreciate this/////\\\\\
i get caught in asher's play's
from some recommendations.
i don't know if paid or not.
i have 15-k loser in just one halted trading.
but it is my fault not being aware.
because of this i am posting to stop scenario by about 4
SIRG
at one asked DTCC right or wrong.
stoa
zlus
and more.
anything asher recommendation was out.
sincerly
mick,
p.s. i thank you for quick response.
re;
No, it isn't fishy.
The company's bankruptcy petitions was dismissed, which will create new problems for it
again thank you lots,
No, it isn't fishy. The company's bankruptcy petitions was dismissed, which will create new problems for it.
hi my friend, little chat time if no mind.
what does SIRG SHOW FOR DTC FILINGS IF HAVE THEM
OR SYMBOL SIRGQ
Q REMOVED FRIDAY.
first filed for the Q then asked Q to be removed.
fishy ??????
MOU still pending
thank you for hearing me.
Nothing prevents trading, the problem is clearing, without DTCC services no clearing house will clear the transaction. Thus no trades occur, the brokers will not execute because the trade will not be cleared. So what volume is being recorded? It is from shareholders writing off the loss, FINRA requires the transaction be recorded to the tape. The broker executes the transaction and the shares are cleared through ex-clearing.
How can a stock that's locked have volume two days in a row? RCCH is what I'm specifically talking about.
The real question is, when was it chilled in the first place, as it is not on my list nor does it show on the July chill list.
http://www.clearstream.com/blob/65974/924471e5643b631fe0b28056250c0f29/dtcc-deposit-chills-pdf-data.pdf
Either way I would take a company PR with a grain of salt, most are really proud of their DTCC Letter and post it up on OTC Markets for bragging rights. Not that it makes a difference getting it lifted if it were just a simple DWAC Chill. That is my experience on the matter, it is likely a DWAC Chill slapped on this in the last 3 years thus why it doesnt show on any list.
Those are not like the old CNS Exit chills issued up to March 2012.
Would you please check to see if MNGG has been removed from the DTCC chill list. Thank you.
Daily Short Volume lol
No, only if they register a class of shares for sale are they required to then file financials. Once a class is registered they then must continue to file unless they request on a Form 15 to no longer file under Rule 12 or 15.
The only 33 Act companies not required to file are those who only began filing under 34 requirements because they exceeded the $10 million in assets and or 500 shareholders. They may at anytime stop filing once they no longer have either $10 million in assets or 500 shareholders of record.
There are further requirements as to when they may just stop filing, they also do not have to file a Form 15 in doing so, although most legit companies do so to avoid non disclosure to their shareholders as to why they will no longer be providing financials.
Quick question. Are securities registered under the 1933 act subject to the same audited financial filing requirements as those registered under the 1934 act?
Thanks for your thoughts.
SEC officials demand new rules for stock transfer agents
http://www.reuters.com/article/2015/06/11/us-sec-transferagent-rules-idUSKBN0OR28O20150611
Thu Jun 11, 2015 12:12pm EDT
WASHINGTON | By Sarah N. Lynch
Two top officials at the U.S. Securities and Exchange Commission called on the regulator on Thursday to update stale rules governing back-office businesses that keep track of stocks as they change hands and of the issuance of shares.
The commission had not significantly revised the rules for the operations known as transfer agents in almost 30 years, SEC Democratic member Luis Aguilar and Republican member Daniel Gallagher said in a joint statement.
"As a result, the Commission’s anachronistic transfer agent rules and the services that the nation’s roughly 450 transfer agents provide today are out of sync," the statement said.
Transfer agents such as those operated by Computershare and Wells Fargo are hired by companies to keep track of shareholder records and changes in ownership.
To date, the industry has been lightly regulated, despite its critical role.
The SEC's enforcement division in recent years has placed a renewed focus on smaller transfer agents because of their so-called gatekeeper role that can help protect the market from microcap stock fraudsters.
Transfer agents are able to remove restrictions on private stock so that they can be freely tradable in public markets.
Those planning on committing stock fraud can lie to or mislead transfer agents so they can get restrictions on the shares illegally removed and sold publicly.
Once the stock is freely tradable, the fraudsters pump up the price with promotional material, including phony claims about the company's prospects, to dupe unsuspecting investors, and then they dump it before the price tanks.
The SEC has been working on updating the rules and it wants to release a high-level document discussing the industry to solicit feedback on what new rules might be appropriate.
But Aguilar and Gallagher said such a step falls short, and enough is known about transfer agents to write new rules now.
Aguilar and Gallagher called for rules that would safeguard investor assets, require transfer agents to have clear written agreements with their corporate clients, impose disaster recovery standards, and be designed to manage conflicts and prevent fraud, among other areas.
(Reporting by Sarah N. Lynch; Editing by Grant McCool)
Re: Objection to the Imposition of the Deposit Lock on CUSIP No. 45684G508
Ingen Technologies, Inc., a Georgia corporation
http://www.sec.gov/Archives/edgar/data/861058/000101968715002376/0001019687-15-002376-index.htm
FURTHER EXPLANATION FOR THE NOTICE SECURITIES
With the exception of the transactions listed below, all of the transactions listed on the attached Appendix 1 were issuances of free trading common stock in exchange for debt or preferred shares that had been held for over a year and sufficiently aged under Rule 144. One year or more after the nonpublic issuance of debt in individual transactions (exempt under §4(a)(2)), free trading securities were issued in exchange for those debt or preferred shares based on Rule 144(b)(1)(ii) and Rule 144(d)(1)(ii).
The Notice Securities are comprised of those listed on Exhibits 2 and 3 to the notice letter. Those listed in Exhibit 2 were issued to Watson Investment Enterprises, and many were identified in a FINRA order as having been sold and resold without registration under the Securities Act. This statement, while correct on its face, is incorrect in that it omits to state all relevant facts, which include the fact that ostensibly the shares did not require registration because they were issued to an accredited investor in non public issuances that were exempt under §4(a)(2). These shares were purchased from the original holder thereof who held $275,000 debt of the Company since March 20, 2004. Tacking the holding period of original holder to that of Watson resulted in shares being issued without restrictive legend pursuant to Rule 144(b)(1)(ii) and Rule 144(d)(1)(ii). An opinion of counsel was provided by Watson's attorney to support this issuance. I have determined this opinion was incorrect and the shares were improperly issued. Nevertheless, with the passage of time since this transaction, it would appear no benefit could be achieved through any further restriction on these shares. The DTC’s recent position paper ("DTC Service Restrictions On Certain Book-Entry Securities - Procedures For Affected Issuers" September 2013) and the SEC's current rulemaking (Release No. 34-71745; March 19, 2014) indicate that this would be the correct position for DTC to take.
Regarding the issuances listed on Exhibit 3 to the notice letter, these shares were issued pursuant to a Settlement and Forbearance Agreement of August 24, 2009 (the "SFA"). The SFA settled claims that had arisen at or before June 16, 2008. An appropriate opinion of counsel supported these issuances as well.
In Lehman's last days, Merrill may have allowed illegal bets against firm
By Steve Goldstein , MarketWatch
It looks like former Lehman Brothers CEO Dick Fuld is at least partly right -- that at least one Wall Street bank illegally allowed short sales against the now-bankrupt firm in its waning days.
That's derived from a Securities and Exchange Commission suit against Merrill Lynch released Monday, and an analysis by Eric Hunsader , the founder of trading analysis firm Nanex.
The SEC order against Merrill Lynch, now owned by Bank of America (BAC), describes how the firm allowed short sales even when there wasn't available stock to be lent out.
One particular paragraph in the SEC order has drawn attention: "On September 8, 2008 , during the heart of the financial crisis, Merrill lending-desk traders determined that a security could no longer reasonably be considered [easy to borrow] and placed the stock in question on the Watch List. Midday, Merrill traders recognized with respect to that security, 'Up to this point banks and brokers still aren't willing to lend any stock.' Nevertheless, Merrill's execution platforms executed short sales totaling 1,358,036 shares of the security, absent reasonable grounds to do so, in reliance on the ... list."
Hunsader says the stock fits the description of Lehman, which dropped 14% that day on heavy volume of 109 million shares.
A week later, Lehman declared bankruptcy.
Fuld has frequently taken aim at illegal short sellers. "History has already shown how wrong and ill-advised it is to allow naked short selling," he said at a 2008 hearing.
Minus the illegal short sales -- and had Lehman been granted the lifeline of a Federal Reserve banking license that Goldman Sachs and Morgan Stanley received -- the firm could well be alive, Fuld has argued.
Also read:Dick Fuld still can't fess up to his role in Lehman's demise (http://www.marketwatch.com/story/dick-fuld-still-cant-fess-up-to-his-part-in-lehmans-collapse-2015-06-02)
That's not to discount Fuld's own role, however, in levering up Lehman, aggressively securitizing subprime mortgages, keeping mortgage-backed paper on the company's books and performing dubious accounting maneuvers.
Merrill Lynch admitted the short-selling violations and agreed to pay an $11 million fine. Press officials at Merrill didn't return a message about whether the stock in question was Lehman.
- Steve Goldstein ; 415-439-6400; AskNewswires@dowjones.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
06-02-15 1353ET
SEC charges Merrill, fines $11M short sales tricks
SEC charges Merrill Lynch, fines firm $11 million for short sales violations
Today 3:01 PM ET (MarketWatch)
The Securities and Exchange Commission announced charges Monday against Bank of America's (BAC) Merrill Lynch subsidiary for using bad data since 2012 to "locate" stock for short sales, violating Rule 203(b) of Regulation SHO. That rule prevents "naked" short sales, shorting shares that are not "easy to borrow." The firm admitted the wrongdoing and will pay a $9 million penalty plus interest and give up $1.6 million in profits. Merrill Lynch must also submit to a compliance review by an independent consultant.
-Francine McKenna; 415-439-6400; AskNewswires@dowjones.com
(END) Dow Jones Newswires
June 01, 2015 15:01 ET (19:01 GMT)
Article on OTC definitions & changes
http://promotionstocksecrets.com/understanding-pennystocks-and-otcmarkets-group/#comment-166495
(The addition of stock sales to the list is particularly interesting. It means that Pink Current issuers should now inform OTCMarkets every time the outstanding is raised.)
06 May
Understanding pennystocks and OTCMarkets Group
Posted at 13:41h in General Information, Open by Janice Shell
Understanding pennystocks and OTCMarkets Group
Penny stocks are defined—for purposes of marginability—as non-exchange listed stocks trading under $5. They may file periodic financial reports and other materials with the Securities and Exchange Commission (SEC) or not. In the former case, they're generally called “OTCBB” stocks, for “Over-the-Counter Bulletin Board.” In the latter, they're Pink Sheet issues. Originally, OTCBB stocks were traded on a platform developed and operated by the Financial Industry Regulatory Authority (FINRA; formerly known as NASD). Both are considered to be “OTC” securities, because they do not trade on national exchanges.
In 1997, Cromwell Coulson, who began his career as a broker, bought the National Quotation Bureau (NQB), which oversaw trading in Pinks. He officially changed its name to Pink Sheets, LLC. At that time, Pink Sheet stocks were much scorned. Very thinly traded, information and quotes were generally only available on flimsy sheaves of pink paper that was circulated to brokers and other interested parties. But Coulson saw potential. There was no electronic trading on the OTCBB platform. Once the internet and discount brokerages were up and running, players could enter trades on their computers, but MMs could only complete these transactions by telephone. Coulson got to work designing an electronic platform, which when finished would be called Pink Link (now OTC Link).
In the early 2000s, Coulson got lucky. The SEC decided to crack down on OTCBB stocks that were technically SEC filers, but in reality were delinquent. They set dates by which groups of stocks had to become compliant, or suffer delisting. The deadlines were assigned according to alphabetical order. Comically, one ghastly little company whose name began with “A” sued the SEC, complaining of discrimination and general unfairness. The suit did not last long in court. As a result of the SEC crackdown, thousands of former OTCBBs became Pinks.
Coulson worked hard to make the Pink Sheets website use-friendly, and to present the information contained therein in a clear and understandable way. To that end, he conceived the idea of ranking stocks in tiers, dependent on the amount of disclosure each was willing to make. In the meanwhile, FINRA had tired of operating the OTCBB platform, and attempted to sell it. Initially, Rodman & Renshaw showed interest, and a deal seemed close at hand. In the end, though, it was never consummated. Perhaps that had to do with the fact that OTCBB still did not allow for electronic trading, and continued to charge market makers fees to use its platform. It costs nothing for MMs to use the OTCMarkets platform. The choice was obvious, and MMs left OTCBB in droves. Today, only a handful of stocks still trade there.
Coulson, moving forward, changed the name of his company once again, to OTCMarkets Group.
OTCMarkets tiers
Two kinds of stocks trade on OTCMarkets: fully-reporting issues, and stocks that do not report to the SEC at all. There are two tiers for reporting stocks; five for non-reporting stocks.
OTCQX
The OTCQX is the most prestigious tier; it's called the “Intelligent Marketplace.” To qualify, companies must be “credible;” even OTCMarkets notes that they're unlike the “large number of economically distressed and questionable companies that trade OTC.” They're divided into several sub-categories: OTCQX U.S., OTCQX U.S. Premier, OTCQX International, and OTCQX International.
There are qualifying standards. Premier U.S. must have assets greater than $2 million, and must keep stock price above $1. Certain revenue targets must be met as well. Ordinary U.S. must have the same $2 million in assets, but its share price may be as low as $0.10. OTCQX International is similar, though designed for companies that have foreign exchanges as their principal trading venues. Criteria for International are similar to those for OTCQX U.S., but International Premier demands a higher market cap and significant revenues, and incorporates a portion of the NYSE Worldwide Financial Listing Standards.
OTCQB
OTCQB stocks must be fully-reporting issuers. There are no asset, revenue, or stock price qualifications. They can be entirely worthless, and trade at no bid by $0.0001, but as long as they don't fall behind with their filings, they'll continue as OTCQB stocks. If they become delinquent, they'll be dropped to the Pinks, but will still be considered to be SEC filers. That will be noted on their company info page at OTCMarkets, under “reporting status.” Delinquent filers run the risk of having their registration revoked by the SEC. That means, effectively, that in worst case their tickers will be killed and the stocks will never trade again.
Pink Current Information
Current Information is the highest Pink tier. By definition, Pinks are not registered with the SEC, and have no filing obligations, to the Commission or to anyone else. OTCMarkets encourages these issuers to make disclosure, however, in accordance with what they call the “alternative reporting standard.” This standard is their own invention. It is loosely based on SEC reporting standards, but much less rigorous.
In order to qualify as Pink Current, an issuer must file one (unaudited) annual report each year, three quarterly reports, and must also disclose a variety of material corporate events. A letter from an attorney who has met “face-to-face” with the company's officers and a majority of the board of directors must accompany the annual report. Until early this year, when OTCMarkets revised its requirements, attorney letters had to be provided with interim financial reports as well.
That may mean lower attorney fees for some, but the list of material events that must be disclosed has grown. Companies are now expected to give prompt notice—within four days—of entry into or termination of material agreements, acquisition or disposition of assets, creation of a financial obligation, or a change in an existing obligation, material impairments, sales of stock, non-reliance on previous financial statements, changes in control, and departures or appointment of new board members or officers, among other things.
The addition of stock sales to the list is particularly interesting. It means that Pink Current issuers should now inform OTCMarkets every time the outstanding is raised. That information is extremely valuable to anyone playing the stock. Historically, Pinks tend not to be upfront about it. It remains to be seen if most will now bite the bullet and report.
Pink Limited Information
The Pink Limited Information tier is, as OTCMarkets notes, for “companies with financial reporting problems, economic distress, or in bankruptcy.” Companies may post whatever information they have available, or wish to share. In order to maintain Limited Information status, an issuer must have posted an annual or interim report within the preceding six months. Failure to do so will result in a demotion to Pink No Information.
The financials offered by Limited Information companies is often sketchy at best; it can rarely be relied upon for accuracy or completeness.
Pink No Information
These companies either cannot or will not make any information available to anyone. They are sometimes defunct. Many continue to trade because they never had registered stock in the first place, and so their registration cannot be revoked; they are often referred to as “zombie tickers.” OTCMarkets warns that they “should be treated with suspicion and their securities should be considered highly risky.”
Grey Market
The Grey Market isn't really an OTCMarkets tier. It comprehends several types of stocks. Many promising issues spend a few weeks or months on the Greys before they move on to a listing on a national exchange, or at least to the OTCQB or Pinks. That is because first they need to become compliant with SEC Rule 15c2-11, which requires that they locate a market maker willing to sponsor them and file a Form 211. The Form 211 must be approved by FINRA. The approval process normally proceeds quickly, though occasionally FINRA has questions that need to be answered. Normally these stocks don't trade until their reach their final destination.
A second category of Greys consists of stocks so unexciting that they've been deserted by their MMs because of a general lack of interest. If an issue is not publicly quoted for four consecutive trading sessions, the MMs will be deemed to be gone, and the stock will lose Rule 15c2-11 compliance. To return to the Pinks, it will have to go through the Form 211 process once again.
The most notorious Greys are the stocks that were dumped there as a result of an SEC trading suspension. Since these are invariably suspended for two weeks, they, too, must once again become compliant with Rule 15c2-11 in order to trade normally. But since they're generally considered to be under SEC investigation, or are likely to have registration revoked in the very near future, market makers rarely agree to sponsor them. Those whose registration is not revoked trade on in limbo, with no bid or ask, subsiding stock price, and dwindling volume.
Caveat Emptor
Caveat Emptor, like the Grey Market, is not a tier. Any OTC stock may find itself slapped with OTCMarkets' nasty skull and crossbones icon. A CE is intended as a strong warning, and will be applied when OTCMarkets decides that a spam campaign, questionable stock promotion, investigation of fraudulent or other criminal activity, regulatory suspension, or disruptive corporate actions are a problem.
OTCMarkets has put time and effort into persuading its client companies to make more and better disclosure. Along the way, of course, it's made more money for itself, adding new requirements here and “helpful” bells and whistles there. But at the end of the day, OTCMarkets is not a regulator. It can encourage, but not enforce. If issuers misrepresent material facts in their submissions, by omission or commission, it can't sue them for civil fraud; it can only demote them to a lower tier.
As OTCMarkets itself would say... Caveat emptor.
article on Apex robo advisors & clearing
http://www.riabiz.com/a/4977738934910976/with-robo-advisors-on-the-rise-robo-custodian-apex-is-rising-them-a-diamond-mined-from-the-rubble-of-the-penson-worldwide-debacle
Very long article.
With robo-advisors on the rise, robo custodian Apex is rising with them, a diamond mined from the rubble of the Penson Worldwide debacle
by Lisa Shidler
A dark horse has taken an early lead in the race for the custody of rapidly accumulating robo assets — an unorthodox custodian with a troubled past due to its previous incarnation as a unit of scandal-scarred Penson Worldwide.
Apex Clearing Corp. was pitching and signing on leading robo-advisors like Wealthfront Inc., Betterment Inc., Robinhood and Personal Capital Advisors Corp. while custody giants like Schwab Advisor Services and Fidelity Institutional Wealth Services were just ramping up their online features a few years back. The Dallas-based firm enticed the robos with discount pricing combined with the paperless features they were seeking.
“The bottom line is Apex was willing to be aggressive on pricing and flexibility. Anytime someone is rolling out with new technology, firms that are established are typically less flexible,” says Steve Lockshin, founder of B+ Institutional Services LLC of Leawood, Kan.; New York-based Convergent Wealth Advisors; and Los Angeles-based AdvicePeriod. See: Fidelity and Betterment sign a deal with Steve Lockshin and Marty Bicknell as groomsmen at the altar.
And custodians that adapt most quickly to this thriving new business model stand to gain big time, says Rob Foregger, co-founder of robo-advisor NextCapital Management LLC of New York and founder of “phono” advisor Personal Capital in Redwood City, Calif. See What exactly are robo-advisors and why did they steal the 2014 show and what will a 2015 repeat take?.
“In digital advice, Apex is clearly in the lead position but as the market evolves and digital advice becomes assimilated into the entire industry it’s hard to imagine these other players like Schwab, Fidelity, TD Ameritrade and Pershing won’t follow suit in what they’re doing.”
Not cheap
Rob Foregger: More and more custodians are waking up to the reality that for the digital advice players there are specific cost issues and API issues.
Rob Foregger: More and more custodians are waking up to the reality that for the digital advice players there are specific cost issues and API issues.
Apex is not a custodian per se but a clearing firm and broker-dealer. Industry leaders say Apex appealed to robo firms whose razor-thin margins make every penny count. See: Thoughts on 'robo-advisors’ served cold, compliments of Kitces and Waymire.
The firm declines to spell out how its prices compare to the de facto 20 basis points RIAs pay traditional custodians, but Peter Lawler, director of client development at Apex, takes issue with the perception that its defining feature is its low prices.
“We do not view ourselves as the low-cost provider. We have actually raised prices substantially since 2012,” he says. “Our model is quite sustainable. We can never compete from a dollar standpoint against Schwab. We are a small independently owned clearing firm. We react fairly quickly and make decisions very quickly. We’re very tech driven and have our ear to the ground. We’ll continue to be on the cutting edge of where this business is growing.”
Apex has about 750,000 accounts and does not release its assets in custody.
Second wave of robos
While the Apex brand is fairly new to the industry, its predecessor, Penson Worldwide, is all too well known due to an epic disaster in 2011 when it disclosed it held millions of dollars worth of potentially illiquid bonds issued by a horse-racing track operator tied to one of its directors. In summer 2012, the firm began rapidly selling off assets. Chicago-based investment firm Peak6 Investments LLC snapped up most of those assets, including its clearing house/broker-dealer unit, which it christened Apex. Penson filed for bankruptcy in 2013.
Lost in the headline buzz was the fact that Penson had made a name for itself among early online brokers such as TradeKing and Zecco back in 2010 and 2011. While Penson’s assets sold at bankruptcy, new management at Apex was in position to start wooing over the second wave of robo firms by offering its low cost and effective technology.
Will Trout, senior analyst with research and consulting firm Celent’s wealth management practice, says the defunct Penson had a knack for packaging its technology to online firms such as CyberTrader and thinkorswim.
“In fact, Penson pioneered automated clearing and custody, and was an early mover in terms of automating account-opening and the ability to manage fractional shares. Apex has built on the legacy of the bankrupt Penson, becoming one of the first fintech custodians — or rather the custodian of choice, for Betterment, Wealthfront, Personal Capital, and providing a soup-to-nuts range of services for the robos including automated account opening, authentication, trading capabilities.” See: Online RIAs will mostly fail — and here are 10 reasons why.
Direction unknown
Now, Apex must maintain its low cost and its technology edge as Schwab, Fidelity and TD Ameritrade, with their enormous resources, play catch-up.
Trout suspects that Apex’s future could be dependent on how robo advice changes in the future. If it breaks in the direction of blended models created recently by Orion Advisor Services, LLC partnering with Jemstep Inc. or Envestnet Inc. and Upside joining forces then, he thinks Apex may struggle. See: Envestnet buys baby robo-advisor to add 'last mile’ to its grown-up platform.
“Apex may be out of luck. Apex’s value proposition is less oriented towards an 'out of the box’ solution for small RIAs, which a firm like Schwab is ideally positioned to provide for its RIA network, ditto for Fidelity via Betterment. Apex is more geared toward working directly with robos to provide a full digital offering that includes automated account opening but also options trading and other more sophisticated functionality. Here, Apex also has advantages related to its size. It is more nimble and able to customize for the robo client and can compete effectively on price.”
API ready
Will Trout: Apex's value proposition is less oriented towards an 'out of the box' solution for small RIAs, which a firm like Schwab is ideally positioned to provide.
Will Trout: Apex’s value proposition is less oriented towards an 'out of the box’ solution for small RIAs, which a firm like Schwab is ideally positioned to provide.
Foregger is more sanguine about the future of Apex.
“In addition to Apex’s low-trading costs, critical to cost management, Apex is also known for its API-based web services to allow digital RIA’s to be able to fully consume online account opening and funding, as well as ongoing money movement and account functionalities. While the traditional larger custodians are becoming more API-based, Apex is one of the pioneers in this area—allowing the digital RIA to control the user experience, streamline operational activities and reduce servicing costs.”
The bottom line is the robo-advisors are looking for different features in a custodian than conventional RIAs, Foregger says.
Still, he acknowledges that a traditional custodian might put RIAs and clients at ease. “If all else was equal, the consumer and digital advice players would rather select a traditional custodian, but cost issues plus the lack of API capabilities is restricting the digital advice from being able to use the traditional custodian.”
Now, the question is whether traditional custodians are fully ready to embrace the robo-firm model.
“I think more and more custodians are waking up to the reality that for the digital advice players there are specific cost issues and API issues and some are trying to roll-out a more custodial construct with these features,” Foregger says. “The general custodians aren’t saying we won’t take your business. What they’re saying is we’ve got to operate at a different cost structure and be able to consume all of the custodial movements and do straight-through on-line account opening and straight through on-line funding. These walls are being broken down. The traditional custodians are starting to get there but it’s been a slog to get there.” See: RIAs in the catbird seat to leverage straight through processing in 2012.
Big guys in the game
Clearly, the more traditional custodians aren’t sitting still and are, in fact, jumping into the robo fray. TD Ameritrade Institutional works with a number of robo-advisors including Balance Financial, Blueleaf Advisor, Jemstep, Modestspark LLC, NestEgg Wealth, Oranj, Orion Advisor, Trizic, Upside Advisor, and Wealth Access Inc.
TD also provides custody to firms that have developed their own online advisory services, including Edelman Online, eSavant, Financial Engines, Financial Guard LLC, FutureAdvisor and SigFig.
Providing online services and open-API is nothing new to TD Ameritrade, says Jon Patullo, managing director of technology solutions.
“From our perspective, we’ve been able to do this forever. When we built our open API in 2011, we really positioned everything open architecture and for advisors to have the choice to work with the system that best fits their needs. Advisors really appreciate the choice and flexibility and that’s where we’re seeing a lot of success.” See: Third-party vendors vouch for TD Ameritrade’s API at first general session.
Patullo says his firm offers competitive pricing.
Meanwhile at Charles Schwab, spokesman Greg Gable hinted that his firm will be revealing details about robo custody this quarter when it launches its own Institutional Intelligent Portfolios for advisors. See: Trade publication critiques the inhumanity of Schwab’s robo advertising.
Jon Patullo: From our perspective, we've been able to do this forever.
Fidelity spokeswoman Nicole Abbott says her firm is active in the robo arena as well: “Fidelity currently custodies assets for several digital advisors and we’ve been in discussions with a number of others to provide both clearing and custody services.”
B-to-C edge
Tradier Inc., a broker-dealer based in Charlotte, N.C., is working closely with Apex by helping create tech-in-a-box capabilities for RIAs ready to jump into a robo effort, says Dan Raju, chief executive officer and co-founder of Tradier.
Raju is partnering with Apex because he knows he won’t be competing with the firm as is the case with some of the other traditional custodians.
“At the end of the day, the Fidelitys and Schwabs of the world are all B-to-B players. If you’re launching a new product, competing with them may not be the best choice and not the best destination for your assets. The reason Apex is the best choice is they’ve done a quite a lot with technology and it makes it a great choice for someone launching a robo.”
Raju is excited about helping RIAs create quicker and easier-to-use digital advice options.
“We’ve taken away all of the heavy lifting and we’re offering products for advisors to create the next generation electronic advisor. For the first time in the industry, you can launch a product without having to do heavy lifting that people spent years doing,” Raju says.
Working with Tradier
For his part, Lawler sees the Apex-Tradier partnership as a way to move his firm further into the RIA arena.
“They have very good ideas. They’re forward-thinking and make us a better clearing firm. I’m impressed with Dan’s vision and the energy he brings to the business and they are forward thinking on a technology. The RIA space was one of the areas we saw as growing fast and having Tradier as a client is a big step in direction.”
Apex will continue to bolster its technology, Lawler says.
“We cater to fintech firms coming into the marketplace. Mostly self-directed broker-dealers who provide websites and options. We’ve invested a lot of money in our technology platform and have multiple APIs, which cater to those firms. Those firms don’t like paper.”
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FT: headline about DTCC raising $400m
Tonight. Don't have access to paywall at FT but get the idea.
DTCC prepares $400m capital raising
US clearing house in closing stages of plan to bolster liquid net assets and meet tougher new regulations.
Excellent, thanks.
Yes the DTTC sends the company a formal letter declaring the restriction has been removed. Many tickers have actually PRed and provided their DTCC letter in OTC disclosures and or news feed at OTC Markets. Any such company would boast such a restriction removal with such evidence for public consumption.
BigBake I have a final followup question if I may. When a Chill is lifted, does the DTCC provide the company in question with any type of formal notification? A letter or memo or email of some type? In other words, does the DTCC notify the company formally that the chill on them has been lifted? Or is the notice they publish the only record?
Thanks for all your help.
Couple reminders from a board
Just refresher info from another iHub board. Adds to the old saying of "Buying a Pink in a poke".
OTC issuers are not required to maintain current address or contact information with OTC Markets Group. With the exception of OTCQX companies, OTC Markets does not maintain listing agreements with OTC traded companies and has no other means of compelling companies to provide this information. Many investor-focused issuers do voluntarily provide their contact information and keep it current.
OTC Markets Group and the FINRA OTCBB distribute their market data to broker-dealers, investment professionals, market data re-distributors, and financial websites, including OTCMarkets.com.
The only way you are going to lift that type of chill is by filing audited Form 10 and the SEC allowing it to become effective. So he is full of shit, of course that guy has been full of shit since his involvement with that ticker, just a huge worthless paper mill of scam.
Perfect, thanks for the help, appreciate it much. I have spent several days looking for the "lift" of the chill. Kind of hard to find something that didn't exist in the first place, despite the CEO saying it had been lifted.
No it was never removed, it is an old CNS Exit and is still in place. There hasnt been a "lift" notice for BBDA, nor would I expect one for a security with an old CNS Exit type chill in place. They are not under the same conditions as the current "Deposit' Chill issued by the DTCC.
Here is the latest list from February which clearly shows it is in fact still chilled:
http://www.clearstream.com/blob/65974/41841a9f660b30f724615730f53d8915/dtcc-deposit-chills-pdf-data.pdf
You can find these notices here:
http://www.clearstream.com/clearstream-en/products-and-services/market-coverage/americas/united-states-of-america/dtcc-deposit-chills-and-global-locks---u-s-a-/65790
BigBake, can you help me out here. In January BBDA claimed that the DTCC had lifted the chill on them and deposit services were reinstated. They (BBDA) then claimed that a stock dividend would now be given to shareholders. Just this past week the company CEO wrote in a letter to shareholders and disclosed that just a week after removing the original chill, the DTCC reinstated the chill.
I can find a list from 2013 with BBDA definitely on it, but I can not find any notice about the lifting of the chill in January or the reinstatement of the chill. Where might I look further?
IGNT
The fee for this matter will be based upon an hourly rate of Three Hundred Fifty and 00/100 Dollars ($350/00) (the “Fee”). The Fee shall be payable in shares of the Client’s common stock. For purposes herein, each share of common stock shall be valued at fifty (50%) percent of the trailing thirty day average bid price as quoted on OTC Link as of the date hereof. The Fee shall only become due upon the successful removal of the Global Lock/Chill on the Client’s securities. All reasonable costs related to this engagement, if any, shall be borne by Client.
http://www.sec.gov/Archives/edgar/data/861058/000101968715001106/ingen_8k-1001.htm
http://www.sec.gov/Archives/edgar/data/861058/000101968715001106/0001019687-15-001106-index.htm
https://twitter.com/tracyfirm
Thanks for the expl!
§
Yeah, but I noticed FINRA has changed their rules again recently as to reporting, much has to do with the new reporting facility for OTC. I will be curious to see if they go back and pull the trades that werent properly marked. Very rare but it seems it was a large enough issue that it should be "fixed" to accurately report volume for the day.
and the way they handled it skewed the volume...
Agree, there was a reporting problem, out of sequence just simply means they couldn't report it at the exact time the transaction occurred or at least within 10 seconds of execution. They probably failed to place the proper trade modifier on to the transaction early in the trading and then reported them with the correct trade modifier.
I noticed today that numerous OTC stocks have a lot of out of sequence trades in succession, sometimes dozens and both buys and sells. Did some new FINRA rules go into effect today, because I've never noticed this before to such a great extent? Thanks
Just posting a new link for the Global Locks and Chills list, they changed their website so the old link is no longer correct. Here is the new link, I expect an update at the end of this month and or the beginning of April.
http://www.clearstream.com/clearstream-en/products-and-services/market-coverage/americas/united-states-of-america/dtcc-deposit-chills-and-global-locks---u-s-a-/65790
27-Yr-Old Made Millions Riding Death Spirals of Penny Stocks
http://www.bloomberg.com/news/articles/2015-03-12/josh-sason-made-millions-from-penny-stock-financing
If the share price goes lower before Magna can unload its investment, the companies have to give up even more stock, all but eliminating the risk for Sason. Critics call it “death-spiral financing” because it drives stocks into the ground. Others in the field say they sometimes make double, triple, or even 10 times their investment in just a few months.
The financing technique is legal as long as the debts that are being paid off are real and the financier doesn’t kick any of the money from the stock sale back to the company, according to Mark Lefkowitz, another penny-stock financier who pleaded guilty in 2012 to breaking those rules. “The bottom line is, it’s supposed to be used for bona fide conversions of debt to equity,” says Lefkowitz, who’s cooperating with the FBI. He cut an interview off quickly, saying he was due to be sentenced soon and needed to check with his FBI handler before talking.
The financing may have saved Newlead as a company—it avoided bankruptcy and bought new tankers—but it ruined it as a stock. The company has been so thoroughly pillaged that if you’d bought $3 million of shares in March 2013, just before Magna invested, you’d be left with a dime. Adjusted for reverse splits, the shares trade for 20 billionths of a penny—$0.0000000002. Newlead did not respond to a request for comment.
RBDC is showing a bid and ask. Has the lock been lifted?
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