Becoming a publicly traded company should be a positive experience that is beneficial to both the Issuer and its shareholders. Oftentimes we find that Issuers are not fully aware of the process, costs and time commitment with being a publicly traded company. Most Issuers end up spending over 50% of their time dealing with being public when they should be focused on growing their business
It has become a big concern for Over-the-Counter (OTC) issuers, which includes companies that trade on the pink sheets, OTCQB and OTCBB, to obtain and maintain DTC eligibility for their shareholders.
First and foremost, DTC eligible shares are traded electronically which eliminates the need for brokers to produce the physical stock certificate in order to settle the trade. This allows the shares to trade quickly, with less expense and can help increase an Issuer’s trading volume (float) in the secondary market.
In fact, many brokers will not trade shares that are not DTC eligible and the cost and delayed time-factor is prohibitive. To attract investors, a pre-requisite is for an Issuers shares to be DTC eligible.
2. What is the process of obtaining DTC Eligibility?
An Issuer’s application must be sponsored by a DTC Participant, which means the Issuer cannot apply directly to DTC for eligibility.
Similar to filing a 15c-211, an Issuer must file through a market maker and cannot go directly to FINRA.
To understand who a DTC Participant is remember one thing, all DTC Participants are broker/dealer clearing firms, however not all broker/dealer clearing firms are DTC Participants. The increased liability with sponsoring DTC eligibility applications for Issuers has caused many DTC Participants to eliminate this service.
Issuer Solutions maintains strong DTC Participant relationships and can efficiently assist with the DTC application process, which allows the Issuer to focus on building and growing their business.
Here is the step-by-step DTC Eligibility process for companies who have issued and outstanding securities:
- Issuer obtains Transfer Agent
- Issuer gets sponsored by a DTC Participant
- Issuer completes the “DTC Eligibility Package*
- Issuer verifies accuracy of application
- Issuer awaits notification of legal opinion requirement from DTC
3. How Long Does It Take To Obtain DTC Eligibility?
We have found that the DTC Participant who is sponsoring the application determines whether the process is quick and efficient.
Some Participants have substantial requirements that an Issuer must adhere to in order to receive approval for submission to DTC. Creating these roadblocks can make the process very difficult for Issuers.
This is a major reason why we have selected two Participants who work with us exclusively and only require what DTC has set as requirements to obtain eligibility. Most Issuers who meet the qualifications find the process generally takes between (2) two to (6) six weeks.
For Questions Regarding This Article or Assistance with DTC Eligibility, Please Contact:
Mark Mahaffie | 303.960.2858 | firstname.lastname@example.org | www.issuereligibility.com
* Application, Transfer Agent Attestation, Specimen Certificate Copy and Offering Documentation