Tag Archives: Depository Trust & Clearing Corporation

Public companies, who are your shareholders…

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, 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 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 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.

Common stock issued in 1967

Common stock issued in 1967 (Photo credit: Wikipedia)

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:

  1. Paper certificate holders
  2. Non objecting beneficial shareholders (‘NOBO’)
  3. 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).

© 2014 by Rhodes Holdings LLC, all rights reserved.

Leave a comment

Posted by on September 30, 2014 in BLOG, Business, Public markets


Tags: , , , , , , , , , ,

Public company information…

Here are two articles that Seth Farbman’s VStock LinkedIn group:

Seth, thanks for the great resources and keeping all of us in the know.  Also, if you are involved in the public markets and understand what the DTC (or DTCC as they put it into initials) is dealing with right now?  Their vault in lower Manhattan was under water and all the certificates that are in “Cede & Co.” which would be the complete public float for all companies that are DTC eligible, may be destroyed.

To understand what this may mean for DTCC, if a certificate is destroyed, the rest of us holders of paper certificates have to post a bond that says that we will not try to use the certificate that was lost or destroyed.  This costs about 10% of the face of the certificate itself.  Will they be required to post such a bond?  If not, why should all of us..

© 2012 by Rhodes Holdings LLC, all rights reserved.

Leave a comment

Posted by on November 3, 2012 in BLOG, Business, Public markets


Tags: , , , , , ,

PUBLIC COMPANIES: Are you DTC eligible?

This article, written by Lisa Loew, VP of Sales for VStock Tansfer, LLC, was re-published here with permission.


What does it take to get DTC eligibile and what does DTC eligibility mean? The Depository Trust Company or DTC was established in 1973, as a result of the “Back Office Crisis” or “Paper Crunch” caused by the over 400% increase in daily volume of the New York Stock Exchangefrom 1960 to 1968. During 1969 the inability for some brokerage firms to settle transactions created enormous backups in deliveries, so that underperformed obligations could range from 70% to over 200% of a firm’s total assets. As

English: New York Stock Exchange on Wall Stree...

English: New York Stock Exchange on Wall Street, New York City, United States. (Photo credit: Wikipedia)

the market turned downward in 1970 over 100 brokerage firms went bankrupt or were acquired by stronger competitors due to their inability to maintain sufficient working capital. Basically, brokers could not process the paperwork connected with the settlement of the growing number of exchange transactions. Several memorable changes came out of this era. Most notably are the Securities ACT of 1975 and the SIPC, (Securities Investor Protection Corporation). The most important changes may be the least remembered: the formation of the DTC, the concept of net settlement and the ability for electronic settlement of trades.


For some companies listed on the Over the Counter Bulletin Board or the Pinksheets the process of gaining DTC Eligibility can be difficult if not impossible, especially for a company that went public on its own, without an underwriter or DTC Member Clearing Firm. In these situations, management usually relies on the corporate attorney, accountants or transfer agent for advice and help. Perhaps the management team has a relationship with a local brokerage firm, but that is not sufficient. The answer lies in having a relationship, specifically with a DTC Member Clearing firm.. Becoming DTC eligible allows for trades conducted in the company’s stock to be settled continuously and electronically.

Potential investors in small cap companies often require that the shares of common stock of the Issuer be available for electronic transfer via the DWAC system (Deposit/Withdrawal at Custodian). In order for an OTCBB Issuer’s shares of common stock to be available for DWAC (electronic issuance or electronic transfer), the Issuer must be DTC eligible. In fact, some PIPE investors may inquire about an Issuer’s DTC eligibility status even before they inquire about future revenue projections.

The insistence by shareholders and potential investors on the need for electronic transfer has become even more apparent since a recent announcement by a leading clearing firm with regard to securities that trade under $.10 per share. Due to inherent volatility in low priced securities and the concern of illiquidity in such securities coupled with the fact that regulations are more focused on the deposits of physical certificates of Pink Sheets or OTC Bulletin Board companies have prompted some clearing firms to no longer accepts deposits of equity securities priced below $0.10.


DTCC has experienced an increase in the number of customer queries regarding transaction restrictions, generally referred to as “chills” that DTC places on a relatively small number of eligible securities. A chill is a special restriction that can be placed on a given security by the Depository Trust Company. Chill restrictions are intended to limit the potential for problems within the financial marketplace, and can be placed on a security for various reasons. An issuer will often need to engage an attorney or work with various consultants who have significant experience in working with DTC. At times, the solution for having a chill removed may be providing certain documentation and requested items to DTC while at other times the solution may lie in obtaining legal opinions regarding the eligibility of certain shares of common stock.. In conclusion, as a private company with hopes of going public, or as a public company looking to trade on the OTCBB, DTC eligibility will be a critical part of your existence and add value to your company. If you are a company that has just completed the going public process and have obtained a symbol from FINRA, then it is likely that time for you to consider the next steps towards obtaining DTC eligibility.

Lisa Loew is VP of Business Development for Vstock Transfer, a NY based stock transfer firm that offers Issuers online capabilities, cost savings and has assisted numerous public companies ( Vstock Transfer ( was founded and is managed by securities attorneys who, for the last decade, have also provided SEC EDGAR filing services, XBRL services, financial print and general corporate guidance to public companies and to private companies looking to go public.

For more information please email or call 212 828-8436.  To call Lisa Loew directly, call 917-742-7939.

© 2012 by VStock Transfer LLC, all rights reserved. Reprinted here with permission from Lisa Loew.

Leave a comment

Posted by on August 17, 2012 in BLOG, Business, Public markets


Tags: , , , , , ,

DTC Chills and a solution

Depository Trust & Clearing Corporation

Since April 23, 2012, we at Rhodes Holdings LLC have spent time speaking with Randy Goulding, an Illinois securities lawyer, tackling how the DTC has precipitously put “chills” on issuers without an issuers’ ability to appeal such chills.  With two clients with chills and 20+ issuer backlog who have contacted me concerning DTC chills, I was very interested in what he has accomplished and his plans.  Instead of paraphrasing it, I have permission to re-print the letter sent to publicly traded company / issuers.

As of today, we are speaking to a number of litigation specialists for the second step, which is to bring suit by a number of issuers at the same time that will benefit the issuer and their shareholders.  A class action lawsuit would most likely only benefit the class action lawyers and not bring conjunctive relief to the issuers and their shareholders so that the DTC will provide some ability, as the SEC as prescribed recently, for the issuer to request a review of the chill.  Summary – we are still interviewing litigators to determine who would be the best to bring this forward, getting maybe 20+ issuers with this issue to participate.

Dear Professional:

Legal Services to Stop and to Reverse the Illegal DTC “Chill”

The March 15, 2012 SEC ruling in the matter of the Application of International Power Group, Ltd.
(Securities and Exchange Act of 1934 Rel. No. 66611 / March 15, 2012, Admin. Proc. File No. 3-
13687) prompts this letter to address and relieve ongoing and accumulated losses sustained by
aggrieved issuers.

Recently, several small publicly traded companies have retained this law firm to represent it in
connection with an inappropriate imposition of a DTC “chill”, without a hearing and without notice to
the issuer, and thus without constitutional due process. This Depository Trust Company (DTC)
practice appears to be a pattern, to the substantial detriment of such companies. Our fees to each
company are $375 to write up to two letters, including what we refer to as the “soft letter”, which is the
preliminary demand and thus less controversial by nature, and, if necessary, to have one additional,
more pointed and more detailed letter, to DTC, on behalf of the company.

The SEC Ruled That DTC Violated the Public Company’s Rights to a Fair Hearing.

In the matter of International Power Group, Ltd. (IPG), the SEC reviewed DTC’s 2010 suspension of
the electronic trading of IPG. DTC initiated the suspension simply because the SEC started a case
alleging, among other things, sales of unregistered securities by IPG (but neither IPG nor its officers or
directors were named.)
The SEC ruled that IPG, a public company which was subjected to a DTC “chill”, without notice and
without being afforded an opportunity for hearing, is a “legal person”, entitled to a fair and orderly
procedure, including a fair hearing and the opportunity to appeal the matter to the SEC. With respect to
the suspension, the SEC ruled that DTC “did not provide IPG with fair procedure in connection with
the suspension.” DTC argued that since IPG is not a broker-dealer “participant,” it was not a “person.”
In addition to determining that IPG is a “person”, and thus entitled to fairly applied procedures,
another equally important determination by the SEC was that DTC, as a registered clearing agency,
falls within the definition of a self-regulatory organization (“SRO”). 15 U.S.C. § 78c(a)(26). These
determinations open the door to the prospect that DTC is a quasi governmental organization (see note 1) and thus obligated to afford such corporate entities, or “persons”, to “due process” considerations, required by
the United States Constitution. For details see:
66611.pdf . We feel that this notion is exacerbated by DTC’s voluntary assumption of the role of a
self-proclaimed regulator, autocratically dealing deleterious consequences of its own volition.
Moreover, as a regulator, DTC takes punitive action, restricting a person’s right to access to its
critically important monopolistic services, its electronic securities credit system, which is not available
to issuers through any other means. And perhaps somewhat insidious is that DTC actually profits from
such action, through its Obligation Warehouse.

Consistent with this theory of DTC being a quasi government organization, although not specifically
mentioning the Due Process clause of the Fifth and Fourteenth Amendments to the United States
Constitution, the Commission also directed DTC to “adopt procedures that accord with the fairness
requirements of [the Securities Exchange Act], which may be applied uniformly in any future such
issuer cases.”

This ruling and its implications are good news for issuers facing a so-called DTC eligibility commonly
referred to as DTC “chill.” It is now clear that such issuers have standing to insist on a proper and fair
hearing, and the chance to appeal to the SEC if they are not satisfied. More importantly, for issuers that
have already been aggrieved by DTC’s non-compliant conduct, this law firm is actively pursuing

Our approach to reversing the DTC “Chill.”

Our approach, for the $375, will specifically include eliciting a communication with DTC in an effort
to remedy the consequences of DTC’s action, or to at least to obtain a hearing. Anything more, if
necessary, would be at the firm’s normal hourly rate of $350 per hour, and only should the aggrieved
company, at that time, agree.

Obviously, there is no guarantee. Nor is there any guarantee that this will be resolved with the two
letters and/or the one additional communication.

However, we are optimistic about success given the potential due process considerations, which we
believe implicate significant constitutional rights, coupled with the SEC oversight and concern over
this issue. Additionally, the magnitude of the losses sustained by what we feel is an illegal act and
actionable conduct by DTC, with a potential constitutional dimension, opens the prospect of a class
action, or perhaps a joint action of many aggrieved parties, if we are not successful in our initial
resolution pursuits on behalf of such companies. Additionally, even if we are successful, the losses
were sustained as a consequence of improper and arguably actionable conduct. Accordingly, we still
make room for the prospect of a class action for such damages, notwithstanding this instant pursuit of
addressing and eliminating the ongoing losses.

Icon of Law Firm--owned by user.

Icon of Law Firm--owned by user. (Photo credit: Wikipedia)

What We Would Need to Pursue the DTC “Chill” Reversal.

What we would need from an aggrieved public company, is complete contact information, and basic information such as: complete corporate name and address, telephone and e-mail contact information), when and how the Corporation first learned of the DTC “chill”, when, to the best of the Corporation’s knowledge the DTC “chill” occurred, its stock transfer agent, contact information for corporate counsel, CUSIP number and any other information one might find pertinent.



The Corporation should mail a check for $375 to the below address, made payable to:

the “Law Offices of Randall S. Goulding and Associates”
1333 Sprucewood Deerfield, IL 60015
Fax: 484-450-5130 Phone: 847.948.5431

Very truly yours,
/s/ Randall S. Goulding

Law Offices of Randall S. Goulding and Associates
1333 Sprucewood, Deerfield, IL 60015
Office telephone number: 847-948-5431
Facsimile: 484-450-5130

Note 1 – Established in 1973, DTC was created to reduce costs and provide efficiencies to the system of handling securities transactions and accounting therefore by creating an electronic “book-entry” system of handling securities. DTC moves securities for National Securities Clearing Corporation (NSCC)’s net settlements, and settlement for institutional trades (which typically involve money and securities transfers between custodian banks and broker-dealers), as well as money market instruments. In addition to settlement services, DTC retains custody of almost 3.7 million securities, worth about $40 trillion, including securities issued in the US and 121 other countries. DTC issues credits for such securities. Its depository provides custody and asset servicing for securities issues from the United States and countries and territories, valued at US$39.5 trillion. In 2011, DTC settled nearly US$1.7 quadrillion in securities transactions. DTC is a member of the U.S. Federal Reserve System, and a registered clearing agency with the Securities and Exchange Commission.

© 2012 contents (letter) by Randy Goulding and (comments) Rhodes Holdings LLC, all rights reserved.  Original letter available here at 2012-04-12 Randy Gould letter.

1 Comment

Posted by on April 26, 2012 in BLOG, Business, Public markets


Tags: , , , , , , , , , ,