Newsletter December 2013

As this year comes to a close, we’ve seen a roller coaster of events.  The economy is coming back but the government shut down.  The Middle East conflicts slowed down but North Korea became more threatening.  HIPAA and confidentiality is being honored on a personal and doctor’s office basis but the NSA greatly overstepped boundaries of spying among countries not to mention violating personal privacy issues. I won’t even speak about Obamacare.   I truly hope your company has not been faced with such rocky occurrences this year.

Our year has been smoother than last year and we are thankful.  We are also quite tickled that many of our companies have become strong enough in their progress to make it onto the NASDAQ and NYSE MKT exchanges.  Kudos to all of you who have been able to do this!

FATCA:  The Foreign Account Tax Compliance Act 

In 2010, Congress passed a new law aimed at the disclosure of U.S. persons with offshore accounts and investments.  The goal is to improve the reporting and collection of taxes on income received by Americans on assets held in foreign banks and other institutions.  The Treasury Department is charged with implementing the law, and the IRS has issued new regulations.  Not to be confused with FACTA, the Fair and Accurate Credit Transactions Act, it is called the Foreign Account Tax Compliance Act, or FATCA.

These new FATCA regulations affect the transfer agent industry.  Transfer agents will now be classified by the IRS as “withholding agents” and will be required by the IRS to withhold payments made to certain foreign entity shareholder accounts opened, or onboard, after January 1, 2014.  Transfer agents, when paying U.S. source income to foreign entities, will be required to perform “due diligence” by soliciting and validating forms W-8 – using a new version of the form soon to be provided by the IRS.

There are a number of different determinations for withholding based upon the designation of the institution. These designations are:  FFI) Foreign Financial Institution; PFFI) Participating Foreign Financial Institution; DCFFI) Deemed-Compliant Foreign Financial Institution; NFFE) Non-Foreign Financial Institution; and NRA) Non-Resident Alien.  Some designations allow the foreign entity to withhold tax on behalf of the American citizen and some do not. Withholding by withholding agents under FATCA is at a flat 30% on income (dividends, sales proceeds, and certain other types of payments by US issuer corporations). The transfer agent must know the difference between these designations and respond appropriately according to the regulations. 

The JOBS Act, Crowdfunding and the need for a Transfer Agent

The JOBS ACT was intended to help alleviate the funding gap and accompanying regulatory concerns faced by startups and small business in connection with raising capital in relatively low dollar amounts. Title III of the JOBS Act added new Securities Act Section 4(a)(6), which provides an exemption from the registration requirements of Securities Act Section 5 for certain Crowdfunding transactions. Crowdfunding is a new method of raising money using the internet. Crowdfunding services as an alternative source of capital to support a wide range of ideas and ventures. An entity or individual raising funds through Crowdfunding typically seeks small individual contributions from a large number of people. Securities Act Section 4(a)(6)(C) requires a Crowdfunding transaction to be conducted through a broker or funding portal that complies with the requirements of Securities Act Section 4A(a).

As a part of the proposed rules, the commission may require the use of a registered transfer agent. This concept is still in debate at the SEC.  We urge you to support this issue and write letters of your own to Elizabeth Murphy of the SEC.  A transfer agent is needed because we are already subject to the SEC regulations governing shareholder records. An issuer may not have the resources to properly execute the routine services that we provide. Our purpose would be to maintain records of share ownership and transfers in connection with Crowdfunding transactions, providing “trading trees” to FINRA when the company is large enough to enter the normal marketplaces, completing lost shareholder searches., reporting lost certificates to the SIC in Washington, and escheating shares to the states etc.


After the first of the year, First American Stock Transfer has decided to advertise within the OTC Markets Newsletter.  Please look for our logo the next time you are reading this online.  There is a wealth of information about markets, in general, and smaller companies, specifically.  In addition, R. Cromwell Coulsen, the President and CEO of OTC Markets, regularly meets with Capitol Hill members to offer logical and well-thought-out resolutions to current problems effecting all issuers in his marketplace.  His meetings and discussions are posted online in this newsletter, too.

We have also filmed a segment for PBS television through Martin Sheen’s Impact Media.  This segment discusses the role of transfer agents to protect shareholder records, direct dividend payments, and safeguard shareholder investments on the registered side.  (This is the side you see when you ask us for a shareholder list.  It is not the NOBO list which is the beneficial side).  Please look for this segment.  It will be embedded in 30-minute to one-hour programs on financial matters.  The individual video will also be available in a few weeks through our website.


For a long time we have kept our fees the same.  We are now under the industry norm and need to minimally raise our fees.  We are not raising the fees that our issuers pay directly to us, however.  We have experienced a number of brokerage transactions that have not been accompanied by proper due diligence and this has caused more time and energy to track what is submitted and what we can do.  Therefore, for any brokerage transactions, we are charging the submitting brokerage a $70.00 transfer fee, a cancellation fee, per certificate, of $5.00 and a reject fee (for an incorrect submission) of $150 charged directly to the broker.  This reject fee is one that the brokerage firm should pay themselves and should not pass through to your holders! If you have any holders that complain their fees with their brokerage firms are more than $70.00, please try to explain they should not be paying any more than this.  You can also refer them to us and we will clarify the situation for them.


Arizona Business Council

If you are in the Arizona area you know that the resources Arizona has typically had to offer smaller companies has not been very robust in recent years.  In the past year or two many small company incubator and accelerator groups have arisen to provide guidance and financial resources to help them start in a successful direction.  But as companies grow and are bringing in revenues between $3MM to $8MM, they sometimes lose focus and falter or they want to know what to do to reach the next level.  This level of revenue is difficult for financial firms to address successfully. There are no resources of a diverse nature to help these companies as they reach this level. 

First American Stock Transfer and Salli Marinov have been instrumental in forming an independent council bringing together local attorneys, accountants, banking and alternative funding sources, as well as business persons experienced in growing companies from small or medium size to large level private or Fortune 500 public companies.  This collaboration among industries has never before been accomplished.  These industry professionals come together to form a panel, the Defining Directions Panel, before which a growing company can present their business and hear possible options for their next moves.  The company retains control and can make their own decisions about what they may want to do next.  Whatever decision is made, the Arizona Business Council can then provide professional support in the form of referrals to local professionals who have the appropriate level or niche of expertise.  There is no longer a need to go out of the area to receive experienced professional support for legal securities and accounting services, underwriting, mergers, acquisitions, divestitures, private equity and public offerings.  We want our resources to stay local and our industries are willing to collaborate to make it happen.

Look for the first Defining Directions Panel to be offered in early summer of 2014.  If you know of anyone who needs services now, please refer them (for now, only) to Salli Marinov at First American Stock Transfer.  The website for Arizona Business Council is under construction but the professionals stand ready and can see people on an individual basis until the panel and the council is live next year.

New Year’s Wish

Walk with the dreamers, the believers, the courageous, the cheerful, the planners, the doers, the successful people with their heads in the clouds and their feet on the ground.  Let their spirit ignite a fire within you to leave this world better than when you found it.  May 2014 be your best year yet!

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