I agree in principle that its best to stay away from stocks that are DTC ineligible. However, it is not always an indicator of a bad stock and is not always avoidable. In some cases, it may actually help protect your stock.
- Not always avoidable. Your stock may get hit with DTC ineligibility after you bought it. You cannot predict in advance which ones will get hit.
- The Penson problem is not a DTC problem. The Penson problem not limited to DTC-ineligible stocks. MMTE is DTC eligible and is on the Penson list. This is a Penson decision, not DTCC.
- DTC ineligibility is not always an indicator of bad stocks. It is also imposed in the cases of impending mergers, uplistings, or other positive events. In effect, shares must suddenly be accounted for prior to public announcement of a big corporate event.
- DTC ineligibility can be initiated by the company as a defensive strategy. A company can notify DTC of an intended merger, acquisition, inconsequential dividend or other eligible "corporate event" to force accounting of all shares, uncovering fake or missing shares. EIGH and BCIT both tried this.
- DTC ineligibility may help stabilize a stock under attack. CWRN was mercilessly attacked twice in the past few months by coordinated bear raids and a fake buyout offer. The stock was then made DTC-ineligible, for unknown reasons, making SP much more stable. Current shareholders have reported no problems trading it, even in Penson -cleared accounts.
As more companies discover that they can actually protect their stock by getting them on the DTCC list, I believe they will proactively seek this status to avoid some ff the more egregious manipulation. JMHO of course.
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