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raptor, SFIO purchased under the DTC system cannot be undone by another broker, the freeze will remain. It's possible these on-line brokers trading SFIO are simply looking for business, but their do not use the DTC system.
You can transfer your shares but not SFIO, they will remain with etrade until further guidance from DTC.
I hope they don't. The explaination I receive from etrade, via their alert system, is that they are waiting further guidance from DTC and that SFIO shares would remain in my account.
Well, we'll know if there's a big problem if Etrade and the other 2 on-line brokers pull SFIO off our accounts. Let's hope that doesn't happen, but it could.
The good news is the pps his holding very well considering the DTC freeze.
#:
B1017-11
Date:
July 1, 2011
To:
All Participants, Depository Facilities and Pledgee Banks
Category:
Operations
From:
Operations Regulatory Compliance
Attention:
Managing Partners, Officers and Cashiers
Subject:
Suspension of DTC Services: Smokefree Innotec, Inc.
DTC has suspended all services, except Custody Services, for the below referenced issue. The suspension is effective July 1, 2011.
CUSIP SECURITY NAME
832673107 Smokefree Innotec, Inc.
Questions regarding DTC’s Important Notice should be directed to the Operations Regulatory Compliance Hotline (212) 855-1780.
yep, same with entrade. The rep there checked and could not see a freeze or lock down, then tried to put a trade in for me by over riding the system. It didn't work as the trade was rejected.
Stock will probably bleed down as 3 of the most popular on-line brokers have put a freeze on the stock.
If you check you'll the trade was rejected.
yep, you are right, Etrade has the stock on DTC, can't buy or sell.
Just got off the phone with Etrade, not much they can do until the ban is lifted.
I don't know if it will affect SFIO, but it will affect many penny stocks trading under 10 cents a share. I'm sure many here hold other pennys trading under 10 cents that it may affect. Probably best to call your broker for clarification if in doubt.
Everyone should read this:
Saturday, July 02, 2011 7:28:40 PM
Securus Law Group, P.A. Public Company News June 26, 2011
Information in this newsletter is of a general nature and is not intended to answer any individual's legal questions. Do not rely on information presented herein to
address your individual legal concerns or state laws. Your receipt of information from this newsletter does not create an attorney-client relationship and the legal
privileges inherent therein. If you have a legal question, you should consult an attorney experienced in that area of the law. Moreover, the hiring of an attorney
is an important decision that should not be based solely upon advertisements. Before you hire an attorney, you should request information about the attorney's
qualifications and experiences. Phone (888) 914-4144 email: Craig@Securuslawgroup.com 1 | Page
Securus News: Penson Crack Down on Stock Prices Accepted Cause Companies Upheaval
Penson Implements a $.10 Rule for
Stock Clearing; Evaporates Public
Company Stock Movements and Sales
By Craig A. Huffman, Esquire,
Managing Partner,
Securus Law Group, P.A.
Craig@Securuslawgroup.com
The Ten Cent Problem
Companies whose stock trades below $.10 per
share may quickly find themselves in an illiquid
position, unable to raise capital, for
shareholders to sell shares, or in any way
deposit shares through many brokerages.
Penson Financial Services, Inc. (PSFI) made a
significant policy change that public companies
should be, or may already be aware of in
regards to the pricing of securities for deposit
through their clearing system. PSFI is the third
largest clearing firm in the United States
(Pershing and Fidelity are #1 and #2
respectively). PSFI’s clearing actions of stocks
being deposited to brokerages has a significant
effect on penny stock companies. Their actions
just became devastating to micro priced
stocks. On June 1, 2011, Penson released a
new policy whereby they will be restricting
deposits of shares of any kind, whether they
are made by physical certificate, DWAC, DRS
(Direct Registration System) or ACAT. Penson
will no longer accept deposits of equity
securities traded on the Pink Sheet or OTC
Bulletin Board markets priced below $0.10.
The amount of companies affected could be
staggering. This also affects a great deal of the
284 brokerage firms that clear through Penson,
but not all since some will be able to clear
depending upon status of accounts with
Penson. Penson reasoned that somehow
stocks at these low prices were more suspect
to fraudulent activity than higher priced stocks.
Penson related their reasoning as:
“Also, the regulatory community has recently
become more focused on the deposits of
physical certificates, particularly those that
trade on the Pink Sheets or OTC Bulletin
Board. The securities industry has experienced
a significant spike in fraudulent transactions
related to reduced valuations or non-existent or
fraudulent transfer agent services for sub-
penny securities. In addition, the potential for
the use of these types of securities for money
laundering or investor fraud are also of serious
concern. As a result, the regulators have
increased their scrutiny of transactions in these
types of securities.”
Interestingly, Penson does not name any of the
supposed “Regulators” who have these
concerns. None the less, Companies below, or
even near this price point now find themselves
at ultimate risk. Having a public trading market
that many of their shareholders can not utilize.
They can not sell or even deposit their
legitimate shares of companies they invested
in. While they can try to “broker shop” the
solution very well is at the Company level.
The Dreaded R Word Solution
While no one wants to contemplate being
forced into a reverse division of their
outstanding shares, the actions of the market,
and in this case the actions of a clearing firm,
can force this solution on a company. Reverse
divisions (splits) should be done when there
are strategic reasons to do so. The actions like
Penson took as to stock prices just made that
decision a lot easier for companies to make.
Expansion of your business operation on a
national level is a good reason. There are
others reasons and movements of some of
your subsidiary businesses or new business
relations that I am sure exist, would be
adequate and solid reasons to declare a
reverse.
A stock reverse is a function of state law. In
some states (Delaware for instance) it takes a
shareholder approval which could necessitate
an expensive and untimely shareholder
meeting. For these companies control of the
share voting power is therefore essential.
While in other States it is a matter of board
resolution (Florida, Nevada). Articles of
incorporation or bylaws also have to allow for
reverse divisions. There are numerous matters
that have to be completed during this process.
The process should take 30 to 45 days on the
outside to complete all matters. The most
important factors are a law firm who works
through the list of to dos and a clearing agent
with a good relationship and responsiveness.
FINRA is responsible for the action of the
shares being reflected on the market to show
the reverse. They are also in charge of
approval of all of the paperwork which they
issue for this, and for the giving of a new stock
symbol as applicable. Working closely with
FINRA is essential by the transfer agent and to
make sure that all documents going to them
are correctly done, and supplied in a timely
fashion.
The numerous items that have to be completed
include: 1) getting a new Cusip for the new
post-reverse shares 2) having the transfer
agent involved to do the transfer agent
notification form, and other documents to
FINRA, 3) having a cover letter completed with
a complete corporations history 4) having the
transfer agent make sure there are sufficient
stock available, 5) supplying FINRA with the
issuer form, along with notarized copies of the
corporations standing documents from the
State, notarized articles of incorporation from
the State, notarized resolution by the board of
directors for the reverse, and notarized
shareholder approval document if required.
The matter must be announced by a press
release and/or an 8-k, which would be positive
in message stating why the strategic reason
was made for the reverse. In this instance, it is
to allow shareholders to trade the stock. And
just how many stocks really should be below
$.10 per share anyway. The timing for
completion should be within 30 days. Under
FINRA rules you have to give them at least ten
days notice before execution. The execution
date will actually be dictated by FINRA when
they choose to effect it. Usually they only give
one day’s notice, usually at about 2-3:00 EST
that the reverse will be effective the next day at
the start of trading, so you should have a
canned press release ready to issue at a
moment’s notice the afternoon you get the
word on the effective date for the next day’s
trading.
Securus attorneys have completed
many reverses for companies and
may be able to help yours.
Everyone should read this:
Saturday, July 02, 2011 7:28:40 PM
Securus Law Group, P.A. Public Company News June 26, 2011
Information in this newsletter is of a general nature and is not intended to answer any individual's legal questions. Do not rely on information presented herein to
address your individual legal concerns or state laws. Your receipt of information from this newsletter does not create an attorney-client relationship and the legal
privileges inherent therein. If you have a legal question, you should consult an attorney experienced in that area of the law. Moreover, the hiring of an attorney
is an important decision that should not be based solely upon advertisements. Before you hire an attorney, you should request information about the attorney's
qualifications and experiences. Phone (888) 914-4144 email: Craig@Securuslawgroup.com 1 | Page
Securus News: Penson Crack Down on Stock Prices Accepted Cause Companies Upheaval
Penson Implements a $.10 Rule for
Stock Clearing; Evaporates Public
Company Stock Movements and Sales
By Craig A. Huffman, Esquire,
Managing Partner,
Securus Law Group, P.A.
Craig@Securuslawgroup.com
The Ten Cent Problem
Companies whose stock trades below $.10 per
share may quickly find themselves in an illiquid
position, unable to raise capital, for
shareholders to sell shares, or in any way
deposit shares through many brokerages.
Penson Financial Services, Inc. (PSFI) made a
significant policy change that public companies
should be, or may already be aware of in
regards to the pricing of securities for deposit
through their clearing system. PSFI is the third
largest clearing firm in the United States
(Pershing and Fidelity are #1 and #2
respectively). PSFI’s clearing actions of stocks
being deposited to brokerages has a significant
effect on penny stock companies. Their actions
just became devastating to micro priced
stocks. On June 1, 2011, Penson released a
new policy whereby they will be restricting
deposits of shares of any kind, whether they
are made by physical certificate, DWAC, DRS
(Direct Registration System) or ACAT. Penson
will no longer accept deposits of equity
securities traded on the Pink Sheet or OTC
Bulletin Board markets priced below $0.10.
The amount of companies affected could be
staggering. This also affects a great deal of the
284 brokerage firms that clear through Penson,
but not all since some will be able to clear
depending upon status of accounts with
Penson. Penson reasoned that somehow
stocks at these low prices were more suspect
to fraudulent activity than higher priced stocks.
Penson related their reasoning as:
“Also, the regulatory community has recently
become more focused on the deposits of
physical certificates, particularly those that
trade on the Pink Sheets or OTC Bulletin
Board. The securities industry has experienced
a significant spike in fraudulent transactions
related to reduced valuations or non-existent or
fraudulent transfer agent services for sub-
penny securities. In addition, the potential for
the use of these types of securities for money
laundering or investor fraud are also of serious
concern. As a result, the regulators have
increased their scrutiny of transactions in these
types of securities.”
Interestingly, Penson does not name any of the
supposed “Regulators” who have these
concerns. None the less, Companies below, or
even near this price point now find themselves
at ultimate risk. Having a public trading market
that many of their shareholders can not utilize.
They can not sell or even deposit their
legitimate shares of companies they invested
in. While they can try to “broker shop” the
solution very well is at the Company level.
The Dreaded R Word Solution
While no one wants to contemplate being
forced into a reverse division of their
outstanding shares, the actions of the market,
and in this case the actions of a clearing firm,
can force this solution on a company. Reverse
divisions (splits) should be done when there
are strategic reasons to do so. The actions like
Penson took as to stock prices just made that
decision a lot easier for companies to make.
Expansion of your business operation on a
national level is a good reason. There are
others reasons and movements of some of
your subsidiary businesses or new business
relations that I am sure exist, would be
adequate and solid reasons to declare a
reverse.
A stock reverse is a function of state law. In
some states (Delaware for instance) it takes a
shareholder approval which could necessitate
an expensive and untimely shareholder
meeting. For these companies control of the
share voting power is therefore essential.
While in other States it is a matter of board
resolution (Florida, Nevada). Articles of
incorporation or bylaws also have to allow for
reverse divisions. There are numerous matters
that have to be completed during this process.
The process should take 30 to 45 days on the
outside to complete all matters. The most
important factors are a law firm who works
through the list of to dos and a clearing agent
with a good relationship and responsiveness.
FINRA is responsible for the action of the
shares being reflected on the market to show
the reverse. They are also in charge of
approval of all of the paperwork which they
issue for this, and for the giving of a new stock
symbol as applicable. Working closely with
FINRA is essential by the transfer agent and to
make sure that all documents going to them
are correctly done, and supplied in a timely
fashion.
The numerous items that have to be completed
include: 1) getting a new Cusip for the new
post-reverse shares 2) having the transfer
agent involved to do the transfer agent
notification form, and other documents to
FINRA, 3) having a cover letter completed with
a complete corporations history 4) having the
transfer agent make sure there are sufficient
stock available, 5) supplying FINRA with the
issuer form, along with notarized copies of the
corporations standing documents from the
State, notarized articles of incorporation from
the State, notarized resolution by the board of
directors for the reverse, and notarized
shareholder approval document if required.
The matter must be announced by a press
release and/or an 8-k, which would be positive
in message stating why the strategic reason
was made for the reverse. In this instance, it is
to allow shareholders to trade the stock. And
just how many stocks really should be below
$.10 per share anyway. The timing for
completion should be within 30 days. Under
FINRA rules you have to give them at least ten
days notice before execution. The execution
date will actually be dictated by FINRA when
they choose to effect it. Usually they only give
one day’s notice, usually at about 2-3:00 EST
that the reverse will be effective the next day at
the start of trading, so you should have a
canned press release ready to issue at a
moment’s notice the afternoon you get the
word on the effective date for the next day’s
trading.
Securus attorneys have completed
many reverses for companies and
may be able to help yours.
If we see the ask pps increasing to 6 or 7, maybe higher, they're getting ready to r/s once they find an acceptable r/s level. If they continue pounding the bid then, as I said before, it's back to the drawing board.
Probably a r/s to bring their pps to over 10 cents. As I stated before regarding the change in their trading action. The ask size has decreased significantly and the bid size has increased significantly since the article came into play. Coincidence? Maybe. A r/s would probably be their only option if they were unable to find a brokerage to convert the restricted paper. A r/s may be sooner than we thought.
I'm posting this again because of the present situation where we may see a r/s sooner than expected. I ask varok it he thought LFBG would do a 1:200 or higher r/s. In the following post he thought 1:50 but then changed that to 1:20: This is his reply:
No!!
I have seen R/S in 1:2,500 or even 1:10,000
I believe in LFBG case the R/S will be in the range of 1:50 there abouts if the total 10b is exhausted.
The reason why I say this is strictly for liquidity purposes.
Anything higher would bring down the O/S post-split to unreaonable O/S levels and would restrict the trading on a daily bases. Meaning it would be difficult to sell shares and restrict high volume buyers from getting in.
Have a good day
varok
Wow. If I read the restricted shares reg correctly the company can give others restricted shares providing the receiving company agrees. The receiving company cannot cash in their stocks until the agreed timeframe is fulfilled (the stock becomes vested at that time allowing that company to sell the stock). If LFBG has been paying everyone with restricted shares this new restricted shares regulation could lead to big problems for those holding the restricted shares unless they can find a broker to purchase them as most of those shares are under 10 cents. I can't say I'm absolutely correct, wish there was someone who definitely knows if this would be a problem for LFBG.
We'll have a pretty good idea come Tuesday if the ask size continues to decline. If the bid is hit hard though and the ask increases, well then it's back to the drawing board. However the down part is although the ask price goes up that doesn't necessary mean the bid has to go up. If the bid stays at 4 then investors would not be able to take advantage of selling their shares even though the ask price increases.
I don't know, this may seem a little wild. As I mentioned before, the trading on 0.0005 didn't really start until noquit mentioned the restricted shares change. Now the ask is down to a total size of about 13M, from over 65M just a couple of days ago. The question is are they intending on taking the ask to 6 or 7 followed by the r/s which would free up their restricted shares as the pps would be over .10 per share. Just a wild thought.
noquit, maybe that's where the r/s comes into play. The r/s split would have to be enough to equal .10 a share or more.
It's strange to me that any funding is in play at all at this point. If a company is taking out funding or a loan there's usually a stipulation that the company cannot dilute or r/s for a period of time. The reasoning is this company is practically worthless on paper. Why would a company or indivuals set up a $10M funding program for this company, very risky I would think. Then again, if LFBG sold them shares at 0.0001-0.0002 I guess the risk wouldn't be so great. I'm not, however, familiar with this type of transaction and the guidelines governing them. What will bring this stock back? IMO, a miracle. Hate to say that, but I simply cannot foresee anything positive to stop the downtrend. I guess it's always possible the company has a plan, at some point, to bring the pps back up. There's just not enough information available to predict any upward movement anytime soon.
Scott, he probably stopped issuing PRs because he really had nothing worthwhile to report. It's possible he also realized his previous fluff PR's drove the pps further down. When was the last time a PR was issued with substantial info that drove the stock up?
Need to also ask yourself why the sudden bid size increase to 80+M. Next week may be some heavy trading on the bid side unless someone is waiting for the bid size to get larger before dumping shares.
Scott, I honestly hope you're right for the benefit of investors.
Even very good news wouldn't help the pps rise quickly as investors would be flipping the stock taking it back down. It's going to be very interesting to see how the company can recover from this tailspin. Also, don't forget, we still have to contend with a r/s and the affect that will have on the pps.
"Treat it like a pink". Problem with that is when is the last time an investor was able to flip the stock for a profit?
Good questions noquit, problem is with the information blackout no one could possible have the answers. Since when does a company holdback positive company news as it becomes available? The late 10Q is blamed on someone else, the lack of information is blamed on the attorney's advice, the stock decrease is blamed on market manipulation etc etc. The trading Friday was again mostly dilution tactics, very few of the trades were conventional traders. I think most of the investors are not buying or selling the stock, but instead waiting for indications of the final outcome. IMO, if there is a 10Q it will be horrible with fluff added in consisting of forward looking statements. I'll admit I do not understand all the large trading Friday at 0.0005, but I can't believe most those trades were from conventional investors.
The accountant was dismissed 6 months ago. How long does it take to do a small company's financial report(s)?
yep, and most traded on the ask side.
Someone chipping away at the ask. 700000M just traded a couple of minutes ago.
Total size bid is now 87M.
Total sizes are now: bid/59.3M, ask/52.3M.
It's also interesting to note that since noquit announced the new reg regarding restricted shares the volume has droppped off considerably. Maybe just a coincidence, I dont know.
Don't know PNK. This is the second day in a row where volume has been unusually low. Without the large ask trade early this morning the total volume would have been about 3M. If low activity continues tomorrow I would suspect something is happening, exactly what I could only guess.
noquit, when did this new rule go into effect?
Currently we have 26M total bid size, and not much trading.
Nesorb, don't know if you're joking or serious. :)
Yes Wild Bill, someone did speak with Troy about a week ago. Troy sez he has to follow his attorney's advise and not answer questions from investors.
Well, guess he decided to dilute his stock instead of buying back.
Believe he'll put in for a 2-week extention, taking us to 15 Jul. What happens after that I have no idea.