The Real DTCC Discussion

[BigBake1]

Well you have certainly hit on some key points there, the main reason for these chills are about the type of financing involved. If you and I were to start a business and lets say we both use some of our savings, maybe talk some family and friends into investing but we are still short of cash to properly set up our business. We would approach a bank and have to present our business plan, marketing plan and how we intend to finance this all.

Here in the OTC you do none of that, you merge your “private” business into the public shell and start selling shares using the Reg D exemptions that were strictly designed to enhance traditional financing. So the abuse the exemptions and issue and issue until they cannot any longer and then RS the whole thing and start it all over again. Meanwhile they are risking no money of their own, pocketing cash, do not have to present a business plan, marketing plan or finance plan to anyone. The worst part is this, the “company” folds under they walk away from the wrecked carcass with nothing following them out the door. The carnage stays with the toxic shell.

If our business fails we are stuck with paying the accumulated debt, the long term debt we negotiated with the bank and then of course upset family and friends who may never see their money again. There is an actual consequence to us for not running an actual business, there is none for these Pinksheet CEO’s, it is like watching credit card fraud. Run everything up and leave the mess with the shell, nothing follows them out the door with their accumulated monies from selling the story.

Some of this revolves around the criminal element here, most of these people behind these scammy pinks could not get a loan in the first place and likely owe taxes to the IRS. They issue shares in the name of family members and friends, or launder it through private business to hide their true identity. Some are actual disbarred SEC lawyers that know the game very well and have become CEO’s of these toxic shells. There are so many bad lawyers attached to these that every opinion letter generated for removing restricted legends is toilet paper and they have rolls of it.

So poor backgrounds, credit histories, criminals, IRS avoidance and a whole host of other things make it impossible for some of these to even approach a traditional loan. That is why they just use the Reg D exemption into the ground, and when the DTC chills them they are not able to do this very effectively any longer.

I just think the OTC needs to step up and provide some clarity in this, they should be displaying DTC Eligibility on all of their tickers they represent on their marketplace. If they want to act like they are the one stop source for Due Diligence on a security in the marketplace, then where is this important piece of information? This can cost people $500-$700 in clearing and settlement fees per transaction.