Since Rhodes Holdings LLC does work out (when they get into dire situations, we are engaged to help work out of the situation, bringing everyone to the table and putting a plan together that gets everyone to the goal) on public companies and provides ongoing support for public companies who are SEC reporting (1934 Act registered), we cover processes that aren’t necessarily covered by “Being Public 101“. This is a class that we provide to new clients to ensure that they understand all of the intricate details and interactions of the public disclosure process.
If you are interested in retaining us (Rhodes Holdings LLC) for work out services, interested in the “Being Public 101″ class for your company, or just working with us to walk through the reporting process with your SEC professionals, please contact us either from our Contact Us Page, e-mailing email@example.com, or calling 281-435-3917. Here are a few miscellaneous topics that have come up recently for a few clients…
Most public companies have only one registered security that is traded in the public markets – most frequently their Common Stock shares. Of course, there could be multiple classes of Common Stock (not a common practice, but we have seen it, most notably with Colorado Goldfields Corp, website, who has two different classes of Common Stock, Class A and B) and multiple classes of Preferred Stock as well. Some large capitalization stocks not only have Common Stock but also have multiple Preferred Stock shares and bonds. If these are traded in the public markets, each class of stock or bond will have its own unique identifier – in this case its CUSIP number, which stands for Committee on Uniform Securities Identification Procedures (see the SEC.gov definition below).
“A CUSIP number identifies most securities, including: stocks of all registered U.S. and Canadian companies, and U.S. government and municipal bonds. The CUSIP system—owned by the American Bankers Association and operated by Standard & Poor’s—facilitates the clearing and settlement process of securities…”
How do I get a CUSIP for a new security?
Your SEC counsel will most likely do this for you, but they will go through CUSIP.com to receive one.
How do I find out what the CUSIP is for my shares?
The quick answer is look on the face of your paper certificate if you have one. Most certificates come with the CUSIP on its face as do most bonds. Transfer agents usually subscribe to a service that provides all this information and they will probably be happy to help you find out the CUSIP number. If you’re looking for the online equivalent, we haven’t found one lately – if you know of one, please post it here.
NOBO and OBO Lists
Building upon our knowledge of securities at this point, the next step will be doing due diligence on who your shareholder base is. This will come in three forms:
- Paper certificate holders
- Non objecting beneficial shareholders (‘NOBO’)
- Objecting beneficial shareholders (‘OBO’)
If you have every opened a brokerage account, you will have filled out countless forms and one of them asked, “Do you object to the brokerage releasing your name to the company?” If you replied in the affirmative, you became an OBO for all the stocks held in your brokerage account. If you replied in the negative, you became a NOBO.
To understand more about this, all the brokerage houses subscribe to a service called the Depository Trust & Clearing Corporation or DTCC for short (sometimes people still use DTC for short). Basically all the brokerage houses deposit their stock certificates and shares with the DTCC and their holdings become a book entry in the DTCC accounts. Each brokerage account holder at the brokerage is held in “street name”, or more precisely only the brokerage’s name is held at the DTCC. The DTCC then takes the certificate and holds this in its vaults (interesting aside – their vault is in lower Manhatten Island and was flooded out during the last hurricane that swept through. Many of the paper certificates were lost, and the public markets are still coming to grips with what that means).
So, when an officer or professional associated with a public company wants to get a list of the shareholders of the company, they would ask a company called Broadridge Financial Solutions, Inc. to provide a NOBO list. This NOBO list ties all the DTCC street name entries to the brokerage account holders that have not objected. You can find more information on receiving these lists at Broadridge’s website page for Corporate Issuer Solutions.
Remember though, it requires two days at least to receive so you have to plan ahead (it always takes me about a week though).
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