As I indicated in an earlier blog, newly proposed DTC rules designed to create a system based on fair procedures for issuers affected by a DTC deposit chill or global lock will still leave many smaller issuers gasping for air, especially those issuers whose securities have been subjected to a deposit chill or a global lock that predates the SEC;'s opinion in In the Matter of the Application of International Power Group, Ltd., SEC Rel. 66611, March 15, 2012 .
The attempted DTC rewrite of the rule proposal unfortunately does nothing to address the issues raised in my comment letter to the SEC. The idea is simple: issuers and the markets need a written rule that addresses the predicament of issuers affected by pre-International Power DTC sanctions while at the same time acknowledging that these issuers have been punished enough by the length of time the DTC sanctions have been in place. DTC refuses to characterize service interruptions as penalties or sanctions. The unfortunate reality is however, that these DTC actions have major consequences for the relevant issuers in terms of their inability to raise additional capital. In many cases it will lead to a slow corporate death.
The rules should provide considerations of fairness that weigh the perceived benefits of a continuing DTC service interruption, whether in the form of a deposit chill or a global lock, against the often irreparable harm done to the issuer. This is especially true when the service interruption has been in effect for extended periods of time. To slap another one year or six month global lock, as the case may, on an issuer that has already been in the penalty box for years as the DTC seems to imply in its response letter to commenters here is just unconscionable. Read my comment letter here for a more detailed analysis as to what is wrong with the rewritten draft rule.
The attempted DTC rewrite of the rule proposal unfortunately does nothing to address the issues raised in my comment letter to the SEC. The idea is simple: issuers and the markets need a written rule that addresses the predicament of issuers affected by pre-International Power DTC sanctions while at the same time acknowledging that these issuers have been punished enough by the length of time the DTC sanctions have been in place. DTC refuses to characterize service interruptions as penalties or sanctions. The unfortunate reality is however, that these DTC actions have major consequences for the relevant issuers in terms of their inability to raise additional capital. In many cases it will lead to a slow corporate death.
The rules should provide considerations of fairness that weigh the perceived benefits of a continuing DTC service interruption, whether in the form of a deposit chill or a global lock, against the often irreparable harm done to the issuer. This is especially true when the service interruption has been in effect for extended periods of time. To slap another one year or six month global lock, as the case may, on an issuer that has already been in the penalty box for years as the DTC seems to imply in its response letter to commenters here is just unconscionable. Read my comment letter here for a more detailed analysis as to what is wrong with the rewritten draft rule.
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