NASD Special Notice to Members
05-60 NASD NTM SEPTEMBER 2005 1
GUIDANCE
KEY TOPICS
Important Information Regarding the
Suspension of Trading in the Securities
of Bancorp International Group, Inc.
(BCIT.PK)
Executive Summary
NASD is issuing this Special Notice to Members (Special NTM) to
advise member firms and other interested parties of certain
actions and issues relating to the trading of securities of Bancorp
International Group, Inc. This Special NTM also is intended to remind
members of their responsibilities with respect to Securities and
Exchange Commission (SEC) Rule 15c2-11 and NASD Rule 6740.
Questions/Further Information
Questions regarding this Special NTM may be directed to Susan
DeMando, Associate Vice President, Financial Operations, Member
Regulation, at (202) 728-8411.
Discussion
On August 31, 2005, the SEC temporarily suspended trading in
the securities of Bancorp International Group, Inc. (Pink Sheets–
Symbol: BCIT) pursuant to Section 12(k) of the Securities Exchange
Act of 1934. In its Release, the SEC stated that it temporarily
suspended trading in the securities of BCIT because it appears that
all of the securities currently trading in the name of Bancorp
International Group, Inc. and purportedly signed by Thomas Megas
as President and M. Puig as Secretary are counterfeit. The SEC
trading suspension began on August 31, 2005, at 9:30 a.m. E.T., and
terminates on September 14, 2005, at 11:59 p.m. E.T.1 Furthermore,
The Depository Trust Company (DTC) issued a special alert regarding
BCIT on August 16, 2005, which included a notice that DTC had
discontinued all services relating to BCIT, other than custody services,
as of August 11, 2005.
Internal Audit
Legal & Compliance
Operations
Registered Representatives
Senior Management
Systems
Trading
Training
Rule 6740
SEC Rule 15c2-11
SEC Rule 15c3-3
Notice to Members
05-60 NASD NTM SEPTEMBER 2005 1
Special
Although trading will no longer be suspended, members should exercise great caution
when executing customer or proprietary trades, including member-to-member
transactions for the purposes of resolving open fails, until such time as members can be
assured that the shares in circulation were part of a bona-fide issuance by the issuer.
Members are reminded that, pursuant to SEC Rule 15c2-11 and NASD Rule 6740, no
quotation may be entered unless and until a member has complied with all of the
requirements of the rules, including SEC Rule 15c2-11(a)(5). SEC Rule 15c2-11(a)
requires, among other things, that based on a member’s review of the issuer
information specified therein, a member must have a reasonable basis under the
circumstances to believe that the issuer information is accurate in all material respects
and the sources of such information are reliable. Until the questions surrounding the
information and documents of Bancorp International Group, Inc. are resolved, member
firms should be aware that, in the context of Form 211 filings, NASD has significant
concerns as to whether a member would have a reasonable basis to believe the
accuracy or reliability of information relating to Bancorp International Group, Inc.
Based on the SEC Release and other information released by the company, member
firms should consider the following with regard to BCIT shares:
1) Deposit of physical shares by a customer should be scrutinized for authenticity
and, at a minimum, should be checked against the outstanding shares recognized
by the transfer agent. Firms are reminded of their obligation to “know your
customer” under NASD Rules 2110 and 2310 and Section 326 of the USA PATRIOT
Act.
2) Any purchases should be undertaken with the knowledge that settlement is
uncertain given the fact that the National Securities Clearing Corporation (NSCC)
will not net obligations through the Continuous Net Settlement (CNS) system and
that such trades will need to be settled broker-to-broker.
3) Any sales should be completed only to the extent that delivery can be made.
4) Member firms are reminded of their responsibilities to comply with the sales
practices requirements under SEC Rules 15g-1 through 15g-9.
05-60 NASD NTM SEPTEMBER 2005 2
NASD NTM SEPTEMBER 2005 3
©2005. NASD. All rights reserved. Notices to Members attempt to present information to readers in a format that is
easily understandable. However, please be aware that, in case of any misunderstanding, the rule language prevails.
1 See Securities Exchange Act Release No. 52363
(August 31, 2005).
05-60
Endnote
Additionally, NASD has confirmed the position of the SEC staff relative to the
application of SEC Rule 15c3-3(m) Completion of Sell Orders on Behalf of Customers
and SEC Rule 15c3-3(d)(2) Requirement to Reduce Securities to Possession or Control.
SEC Rule 15c3-3 requires member organizations to take prompt steps to buy-in
securities to obtain physical possession or control under paragraph (d) (2) and to
complete customer sell orders under paragraph (m). Such buy-in requirements related
to BCIT are temporarily suspended until further notice.
Similarly, the NYSE has issued Information Memorandum 05-67 stating that buy-in
requirements pursuant to NYSE Rules 282 Mandatory Buy-In and 284 Procedures for
Defaulted contracts, if applicable, are also suspended until further notice.
Endnote
1 See Securities Exchange Act Release No. 52363
(August 31, 2005).
