There has been so much happening this last six months it is difficult to know where to start. But the most important information should be first. WE ARE NOT RAISING OUR FEES! The Depository Trust Company has, at long last, consented to pay the fees for their own presentment transfers that they had previously wanted all issuers to pay. This one situation held back many of our issuers from going into the DWAC/FAST system of paperless transfers until now. If you were one of the issuers in this category and you now want to enter the FAST environment, now is the time to go forward. You can, however, still wait if you are currently a bulletin board or pink sheet company. If you are a fully trading company in the NASD OTC, AMEX or NYSE markets you must be in the FAST system by January 1, 2008 or your trading ability will abruptly stop. All of our companies who must meet this deadline have already done so, however.
In order to achieve resolution for this payment-for-presentment situation with DTC we had to take the issue all the way to Washington. First American Stock Transfer joined with Computershare, Bank of New York Mellon and Continental Stock Transfer requesting an appointment with Securities and Exchange Commission Chairman Christopher Cox. The appointment proceeded better than expected and will have positive repercussions for many small cap issuers nationwide. First American Stock Transfer was very pleased to be included in this meeting.
For those of you deciding whether or not to become FAST at this time, part of the process to become a FAST issue is making a decision whether or not to offer DRS participation to your shareholders. DRS Profile (Direct Registration System Profile) is a service for your shareholders in which they are able to request their shares be held in book entry form on the books of the issuer as long as they have a brokerage account. You can choose to be eligible and not-participating or eligible and participating. If you choose to participate, this type of stock ownership, versus certificate form, will facilitate the transfer of shares into and out of the clearing system on a more timely and less risky basis. If shares are held in this manner, they are not part of the balance held at the Depository Trust in the “fungible mass”. But there also is no certificate to evidence the ownership of shares. Instead there is a statement produced by the transfer agent each time there is activity and another statement produced at the end of the year. There will be charges to the shareholder for this DRS service at brokerage firms. In addition, when a request for activity is received, we will charge the presenter of the request. For required year-end statements, however, we will be charging our client, the issuer. After the initial set-up ($250.00) this is the only part of the process for which you, the issuer, will be responsible.
Here is a small but very important legal piece of securities industry trivia that can help all issuers understand both the benefits and the liabilities of stock held by shareholders when it is held in street name, certificate or electronic. Once shares are placed in “street name” either at the brokerage or the Depository Trust Company, the shares are no longer considered owned by the shareholder. They are considered assigned to the shareholder only and they are owned by the Depository Trust. Among all the brokerage firms these shares can be traded (bought, sold or loaned) back and forth but the issuer can never recall back into treasury, or in any way, even through Court Order, cause these shares to be cancelled. Please do not issue shares until they have actually been paid for or the services completely provided.
First American Stock Transfer is now able to process cash dividends. In years past we would do the mathematical breakdown for our issuers but did not actually issue checks. We referred the breakdown back to the issuer and the checks were issued from company offices. Now we are able to distribute the monies also. One drawback that continues to exist, though, is that many of our issuers or their shareholders have not provided Social Security Numbers. So, if you believe you will be choosing to issue dividends in the future, please ensure we first have these tax identification numbers as it will delay the processing by the amount of time it takes to first receive these numbers from the shareholder on a Form W-9. If we do not have the SSNs when we issue the cash dividends, we must withhold the maximum allowed by IRS. If we have the SSNs we can issue the dividends in full because the shareholders will file according to their tax bracket. The SSNs are considered private and, as such, if the numbers have not already been provided and the holder does not wish to give you the number we must send out notices to the holders with a blank W-9 (or W-8, if the holder is foreign) and request they return the form directly to us. A shareholder’s social security number is never reported to any other entity except the IRS. We are accountable under privacy and confidentiality laws. There are charges for sending requests for W-9s and for the 1099 forms we must send at years’ end, as well. Please check the fee schedule for these fees.
We are also back in the proxy business. Late in 2005 we temporarily stopped processing proxies for our companies and referred them instead to The Altman Group. The Altman Group did a wonderful job for our issuers and anyone who would like to continue that relationship is still able to do so. But we are now able to resume processing proxies and, in addition, we are able to offer electronic voting. The issuer must be on the LinkStar system in order to offer the electronic voting to their shareholders. But once on the system, each shareholder can access his/her own account with a pin number and vote the proposals according to the number of shares held on record date. All of the supporting documents, annual meeting and prospectus materials, etc., are also available to the shareholder via their pin number on the website. If the company elects electronic voting, the notice summary, number of shares to be voted, and pin number will be all that is sent through the mail to the shareholder. We can also still send out printed materials and paper proxies if the issuer requests these be sent.
Many of our issuers have shareholders in foreign countries. The U.S. securities industry requires medallion guaranteed stock powers in order to transfer shares of stock and, for the foreign investor, it is sometimes very difficult to obtain this medallion guarantee. There is now a new program for the foreign investor that is, basically, an insurance policy for the shareholder’s signature. This program, called First Global Program, can be accessed worldwide through a website and an 800 number. The website to access is www.firstglobalprogram.com and their 800 number is 1.845.620.4495. This will help resolve many of the issues for your foreign shareholders.
Throughout this year, with NASD and FINRA placing more restrictions and requirements on the small cap issuers and their pink sheet or bulletin board companies, many of our companies have been faced with financial challenges in order to satisfy these new requirements. If you find yourself in a precarious situation and are considering selling or merging your company, please let us know. Interested entities contact us constantly asking about either shell companies or companies interested in selling or merging. We can refer you, as we refer these entities, to well-known and respected attorneys who can help arrange for capital infusion or other avenues to help resolve your issues. Please keep us informed. We are, as always, here for you.
We are also here for the community! On a more personal note, the employees at First American Stock Transfer decided this year to adopt a family for Christmas. The family recently found refuge here from Africa, a widower and his three children. The father is working two jobs to keep food on the table and he is also taking classes to learn English. All three children are already speaking English very well and the oldest boy is making straight A’s in school. We are so proud of the efforts they are making to try and make their lives better here without all of the violence that surrounded their home in Africa. And the employees have had a field day buying staples for them as well as food and presents for the holiday. Giving to others is truly its own reward!
And with that, we, at First American Stock Transfer, wish you and yours a VERY HAPPY HOLIDAY AND A BOUNTIFUL NEW YEAR in 2008!!!!