For a reverse split to occur, a Company’s legal Counsel needs the following:
1.A corporate resolution authorizing the reverse stock split and the terms.
2.The completion of the 2 page verification form (see attachment).
3.A copy of the CUSIP number (note your legal counsel will need Points 1, 2 and 5 before they can apply)
4.The completion of a letter for NASD stating the terms of the split and
5.Confirmation of the State of Incorporation, the par value and the shares authorized after the split.
General Note: Upon receiving the above, a Company’s Legal Counsel then will notify the NASD / FINRA / NASDAQ of the reverse split with the TA Verification Resolution. They request (note this is not a requirement at this time just a request) for 10 business days notice of any corporate action before this takes effect but often this can do this within a week if you prefer.
The following is a list of steps required to effect the reverse split. Most of these steps will be effected by your Legal Counsel and will not require the Company’s involvement. There are a few forms that Legal Counsel will be forwarding to the Company for execution.
1.Obtain new CUSIP number.
2.Deliver corporate resolution authorizing the reverse stock split and the terms to Transfer Agent.
3.The completion of the Transfer Agent Verification Form.
4.Deliver new CUSIP number to Transfer Agent.
5.Confirm state of incorporation, the par value and the shares authorized after the split to Transfer Agent.
6.Deliver Transfer Agent Verification Form to OTCBB.
7.Deliver old and new CUSIP number to OTCBB.
8.Obtain new symbol from OTCBB.
9.Effect split on - - -- (Date) 2008. To confirm with OTCBB whether trading must halt.
10.File amendment to Certificate of Incorporation with the respective State on ------- (Date) 2008 and
11.Deliver instruction letter to Transfer Agent regarding issuance of shares.
FINRA Rules For Corporate Actions
Effective September 27, 2010, the SEC has approved new FINRA Rule 6490 (Processing of Company Related Actions). Rule 6490 requires that corporations whose securities are trading on the over the counter market (OTCQX, OTCQB, OTCBB or PinkSheets) timely notify FINRA of certain corporate actions, such as dividends, forward or reverse splits, rights or subscription offerings, and name changes. The Rule grants FINRA discretionary power when processing documents related to the announcements, and implements fees for these services.
FINRA and the OTCBB
FINRA (the Financial Industry National Regulatory Authority) operates the OTC Bulletin Board and processes corporate actions for changes such as splits and name changes. FINRA also issues trading symbols to over the counter (non-exchange) traded issuers and maintains a symbols database for issuers. When processing by FINRA of a corporate action is complete, FINRA notifies the OTC marketplace of such changes and actions, such as repricing securities following a forward or reverse split, or issuing a new trading symbol following a name change or merger.
Historically, FINRA’s role has been largely ministerial with limited jurisdiction to impose informational or other requirements, and no power to reject requested changes. However, the SEC began to express concern that certain parties were using FINRA to assist in fraudulent activities, such as usurping the corporate identity of publicly traded entities by either reinstating an entity with no authority or creating new entities with the same name as the public entity. Accordingly, Rule 6490 was created.
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FINRA Rule, 6490, recently enacted in September 2010, requires issuers of equities and debt securities not listed on exchanges to provide timely notice to FINRA of certain corporate actions. These corporate actions include name changes, forward stock splits, reverse stock splits, distributions of cash or securities such as dividends, stock splits and other actions, and rights and subscription offerings. The new Rule codifies the Securities Exchange Act Rule 10b-17. The Rule requires issuers to complete and file a document with FINRA at least 10 business days prior to the record date of the corporate action. FINRA approval must be received prior to the corporate action becoming effective. In addition, FINRA may request additional documents, conduct detailed and selective reviews of the issuer submissions and cause the issuer to delay the announcement of its corporate action. A FINRA review will be triggered if any of the five factors set forth in Rule 6490 are thought to be present:
Enforcement of FINRA Rule 6490 has resulted in significant fees for issuers with securities traded on the OTC Markets, OTCQB, Pink Sheets and OTCBB. FINRA Rule 6490 requires issuers to provide notice to FINRA of certain company-related actions most of which are common in connection with companies who go public in reverse mergers with public shell companies. These actions include corporate name changes and other actions requiring amendments to the issuer's articles of incorporation, dividends and stock splits. Issuers who fail to provide the required notice to FINRA could be subject to a $5,000 fine.
FINRA's ability to charge issuers started in 2010. FINRA primarily oversees broker-dealer member firms, but it also performs certain functions for issuers of over-the-counter securities including those quoted on the OTC Markets OTCQB, Pink Sheets and OOTCBB.
Issuers may be subject to the jurisdiction of FINRA or SEC Rule 10b-17, which requires publicly traded companies to notify FINRA in advance of certain corporate actions including:
i) dividends or other distributions in cash or kind; ii) stock splits or reverse stock splits, dividends, or rights or other subscription offerings; iii) name change; iv) mergers, acquisitions, dissolutions or other company control transactions; and v) bankruptcy or liquidations.
Issuers with securities quoted on the OTCBB, OTC Markets OTCQB or Pink Sheets should determine whether FINRA notice is required before taking these corporate actions. Issuers that pay dividends must ensure notice is provided to FINRA at least 10 days before the dividend record date.
No formal announcement, no PR and in default on their NV incorp status ...what a RIP job lol
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