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Wednesday, December 05, 2012 4:32:56 AM
http://www.stockhouse.com/Bullboards/MessageDetailThread.aspx?p=0&m=23494620&r=0&s=FSRT&t=LIST
So, "Would a company name change (and the accompanying CUSIP # change) make NSS have to cover?"
The mechanics of a company name change would effectively prevent trading shares of the old CUSIP # and would create an entirely new set of shares through the DTC. By doing this, the DTC is forced to account for ALL of the old shares exchanged for new shares. Any broker who sold NSS would be responsible for making good on the transaction and covering perhaps forcing a “short squeeze” (price spike) in the NEW CUSIP # shares.
In a conversation with the CUSIP Service Bureau, the rep stated that a CUSIP # change "usually" comes with a name change but not always; however, a name change will "always" come with a CUSIP # change.
A name change starts with the company's Transfer Agent (TA) coordinating electronically with the CUSIP Service Bureau by linking the company's name and address. Then the CUSIP Service Bureau Coordinates with the Depository Trust Company (DTC).
The DTC will serve as the overseer to coordinate with the regulatory authorities and/or agencies, as necessary. The DTC makes sure there is an accurate share accountability for the proper dissemination into brokerage accounts, and this is all done electronically.
After the company (proper/TA/legal team) receives their new CUSIP # from the CUSIP Service Bureau, the company:
• coordinates with the NASDAQ and SEC for the already-coordinated quantity of shares as the new inventory, and
• coordinates with the DTC to confirm the amount of shares and other key info.
After accountability is confirmed by the DTC, the DTC then authorizes the brokerage companies to change all old CUSIP #s to the new CUSIP #s electronically within brokerage accounts.
The CUSIP Service Bureau further explained it as when company 1234 changes its name to company 5678, the shares of company 5678 are given to them electronically by the TA to replace company 1234. This is the key transaction. The name change matching the address of the company is what actually forces an exchange of the "old inventory" of shares to the "new inventory" of shares. Without the name change, there is NOT a "movement of shares." This is a simple misunderstanding by many companies, but, if not considered, it could be the difference for any type of forced covering of NSS positions.
If there is NO DILUTION, a covering of NSS positions should take place due to what is revealed during the accountability process by the DTC after getting the "new inventory" of shares.
This may also explain the recent TA change, too.
Very, very long AMBS
"Out of adversity comes opportunity." Ben Franklin
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