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Potential Implications of Elective De-Registration by Companies from US Venues.

Location: BlogsBud Burrell - Front and Center
Posted by: bburrell 1/20/2006 2:18 PM
Dave,

There is one ominous implication for the numerous de-registration actions of the SEC against small public companies that you and I have discussed.

Thousands of companies have been wiped out from the Pink Sheets and Bulletin Board over the past six years. The lost income for the States in which these companies were registered is simply staggering, at a licensing fee income level alone. The numbers when all things such as lost income tax, jobs, and related State expenses for unemployment, health care, and other benefits for those left without an employer is absolutely mind boggling.

So what does the SEC do if these companies and many more simply choose to de-register their shares here, and take them elsewhere, like the big companies that have gone to Bermuda and elsewhere?

I am personally aware of venues that would take US Company listings, and convert them to wherever, besides providing them with draconian protection against manipulation.

What if a person like Rod Young were to make this his mission in life, to take every company he could find away from the filthy toilet our markets are now characterized as? What do the States do with the SEC if the SEC causes or allows this to happen?

No one understands how real a threat this is, now and not years away.

I am reminded of the NASD head of Market Regulation Cameron Funkhouser’s staggering statement at the NASAA Forum wherein he stated that any market should have the right to trade US Securities, whether or not they have to comply with US law.

Has no one else seen this risk to US venues? I haven’t seen a word of it on the Web.

I will put this up and out for comment.

Best, Bud.

Copyright ©2006 Bud Burrell

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Comments (12) Add Comment
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Re: Potential Implications of Elective De-Registration by Companies from US Venues. By bobo on 1/20/2006 6:19 PM
What a remarkable thought - de-list companies here, re-list them in a more favorable clime with better anti-manipulation statutes. I for one would celebrate that - I wonder what the effect would be on companies that had a ton of fails here? Simply indicate that there will be a one for one exchange for the new shares to registered owners?

Thus, the FTD holders go ballistic when they cannot get their shares?

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Re: Potential Implications of Elective De-Registration by Companies from US Venues. By ron jordon on 1/20/2006 7:29 PM
I know you say this hypothetically, but maybe we can make some money?

Just because a company isn't traded, doesn't mean it stops existing.

A public company is any company with more than 50 shareholders. The SEC stuff is about whether there is a market to trade the shares.

If we keep these companies alive, there is no reason why we couldn't force them to cover even when they aren't trading.

Could we start our own mutual fund with the goal of forcing shorted companies to be covered?

I know I would write a check - the upside is enticing.

Whether the company is a piece of crap or not is irrelevant. All we would do is ensure that people that own shares get shares. We would force IOU's to be honored.
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Re: Potential Implications of Elective De-Registration by Companies from US Venues. By ron jordon on 1/20/2006 7:33 PM
People bitch more than they thank, but Bud, you have a lot of fans and a lot of supporters.

It's people like you that make us proud to be American.
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Re: Potential Implications of Elective De-Registration by Companies from US Venues. By x. trapnell on 1/21/2006 5:10 AM
Yes, there's a real opportunity for a country such as Norway to create a global "clean" securities market, with total transparency, with impeccable oversight. With contemporary technology it might well be possible.

NASDAQ and the NYSE would be shown up to be the lumbering, sleazy institutions they have become.

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Re: Potential Implications of Elective De-Registration by Companies from US Venues. By sj on 1/21/2006 6:33 AM
This is an amazing thought. An SEC delisting that doesn't let the bad guys off the hook.

Is there anyone here with a legal background? Is this possible?
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Re: Potential Implications of Elective De-Registration by Companies from US Venues. By Pervilis Nosthumus on 1/21/2006 8:29 AM
I think the SEC registration requirement is written with some hysteresis in it. I believe the requirement is for US domiciled companies: for 500+ shareholders, the company must register. If the number of shareholders falls below 300 the comany may deregister (file form 15). I know of know requirement that prohibits a SEC registered US company from listing say on the London AIM and not on a US exchange although, at a minimum, if the company is registered with the SEC, it will likely trade on the pinks.

Incidentally, this is what makes the Berlin listing such a complicated matter for US companies. My understanding is that it is Europe's equivalent of the pink sheets. On the pink sheets there is a "program" to trade foreign stocks in that venue. It is called an "unsponsored ADR", meaning that the company nor an underwriter sponsor the company to list in that venue. The only requirement is that a market maker is willing to make a market in the stock. The foreign company may not even be aware that their stock is trading in the US. I therefore believe that the berlin listing program is similar to the "unsponsored ADR" format on the pinks. It should be perfectly legit although I can definately see that is used as a "cause" for FTD.

I understand that I have previously rehashed already dicussed topics so let me know if I am still two steps behind.

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Re: Potential Implications of Elective De-Registration by Companies from US Venues. By bburrell on 1/21/2006 9:43 AM
Companies de-registering themselves from the US to go elsewhere is nothing new. Their motivations have been to relieve themselves of unreasonable Government interference with business issues not germane to their authority. Do a Google seach, and you will see the long list of companies that have gone to Bermuda and elsewhere.

Of more interest is the huge number of International Business Corporations owned by Offshore Trusts (a principal tax evasion and money laundering structure), and also thousands of Hedge Funds not registered in the US but who trade here, but who are also similarly structured. Literally thousands of such entities involved with bank clearing organizations such as Citco in the Caymans and others have had their names produced in discovery particularly in connection with toxic convertibles, PIPES deals that have been shorted, and straight in your face naked shorting manipulations.

This isn't exactly Quantum Physics, but it is also not trivial technically.

Coincidentally, most of the original Berlin listings of US companies were put their at the expense of backers of Ladenberg Thalman, through a German broker dealer, Berlinfreiverkehr. Sedona Corporation found this in its research in 1999 by one of its directors, after doing a PIPE deal with Ladenberg that very nearly destroyed it, involving none other than the notorious Rhino Advisors, run by the Badian brothers, and linked to Dr. Dr. Herbert Batliner of Lichtenstein, surely one of the most visible and notorious money launderers in the World, the former ML for Pablo Escobar, Mark Rich, and other drug cartels. DOJ has had all this information for years (since 2001), but there has been no action yet, other than getting one Badian brother, Andreas, after his older brother Thomas fled his indictment (after being warned it was headed his way by someone who should most certainly be charged, tried and sent to prison). He was later released for cooperation. Thomas was served with a civil subpoena after his home in Vienna was located, but the Austrians don't extradict for financial crimes. Austria is now attempting to assume the mantel as the top money laundering venue in Europe.

I call this kind of information "Road Dirt".

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Re: Potential Implications of Elective De-Registration by Companies from US Venues. By Pervilis Nosthumus on 1/21/2006 10:43 AM
Ok, I think I see what you mean. Companies would and have cancelled their articles of incorporation in whatever state and then incorporated elswhere, in bermuda, etc. Or they create a foreign holding company that has a US sibsidiary. I was a little confused by the term "de-registering". Fair enough. Then, they could avoid the SEC by listing on a foreign exchange and probably trade in the US on the pinks (illiquid as it may be).

Re: the "road dirt" comment: I'm sure there is some humour intented (perhaps at my expense) but it's over my head.

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Re: Potential Implications of Elective De-Registration by Companies from US Venues. By bburrell on 1/21/2006 11:01 AM
I was a heavy traveler domestical and international, and on the Road (as I called it) I would regularly pick up gem quality snippets of information, some of value and some about trivial matters. Among my peers, we would call such information "Road Dirt".

An Example of Road Dirt is as follows: Chirac was the Mayor of Paris before he became France's Prime Minister (saving him from criminal charges for wholesale corruption for his conduct in that post). His extraordinarily arrogant UN Ambassador was Villepin at the time of the Iraq UN Security Counsel hearings), now France's President (or close). He ordered Villepin to oppose UN sanctions against Iraq, since he had received millions of dollars in campaign contributions from Saddam Hussein in his run for the PM position, quite illegally. He knew if he could get elected twice, he would have immunity for his criminal corruption as Mayor of Paris.

Villepin and Chirac had an apparent falling out leading to Villepin being recalled. The reported cause was a canard. Villepin was having an affair with / doing Chirac's daughter, and when it broke up in a rather ugly manner, the daughter went to Dad and said you take care of it. Chirac fired Villepin. Later he would re-hire Mr. Slick (as he is not so affectionately known by my peers), needing his support to insure his second campaign would be successful.

In 2002 and 2003, that was "Road Dirt", not regularly available from conventional sources.

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Re: Potential Implications of Elective De-Registration by Companies from US Venues. By Pervilis Nosthumus on 1/21/2006 11:28 AM
Got it. So, there's no need to ask if you purchased Mr. Slick's poetry book. ☺

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Re: Potential Implications of Elective De-Registration by Companies from US Venues. By piddly_sum on 1/23/2006 7:42 AM
Bud,

Do you have a list of companies that have been victimized by this over the years that can be sorted by geography?

I have been in contact with a reporter at a big city newspaper whose angle is the companies in their coverage area that have delisted because of NSS. I am sure this would be useful in selling to many others as well, to put some faces to the victims.

Thanks!

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Re: Potential Implications of Elective De-Registration by Companies from US Venues. By bburrell on 1/23/2006 7:47 AM
I will query Wes Christian. Best, Bud.

(Link: http://www.thesanitycheck.com/Blogs/BudBurrellsBlog/tabid/84/EntryID/36/Default.aspx )