In a way yes. It also means that if this is the way the company has been raising funds to survive it will have a tough time doing that.
Short version is preferred shares need to be held for six months unless they were exempted. The denial of the rubber stamp exemption process, means that "investors" have to hold these assets for six months. "Investors" will not put millions of assets to risk for sixths months in the OTC...would you?
It basically closed the loophole this toxic lenders work through. Everyone has been winning but the investor in this scenario. Was nice to see toxic investor stuck holding a bag for change.