December 21, 2007

Direct Registration: Trap for the Unwary

From Lorelei Cisne of Arnall Golden Gregory: DTC has been telling issuers that in order for their securities to be considered “DRS eligible,” the transfer agent for the issue must send DTC a letter requesting that the securities be added to their list of eligible securities. What has not been so clear perhaps, is that if that is all the transfer agent does, the issue will not only be marked as eligible – but it will be actually enrolled into the program (i.e., from brokers’ point of view, they can use the system to request uncertificated shares). If an issuer wishes to be eligible but not participate – as allowed by the NYSE – the transfer agent must specifically say so in its letter to the DTC.

Now, that’s not the whole story because there still will not be any uncertificated issuances unless the transfer agent actually honors the request and establishes direct registration accounts. However, if the transfer agent bounces the request, my understanding is that the requester is going to incur a charge without receiving their securities. But at least there won’t be any unauthorized issuances.

However, I am aware of at least one instance in which due to confusion over this terminology, a transfer agent enrolled a company in DRS when it was not supposed to. I am still not sure whether any direct registration accounts were established – i.e., whether any uncertificated shares were issued – but I suspect that they were.

It’s hard to believe that a transfer agent would go to such lengths without more formal documentation, etc., from the issuer, but it’s beginning to look like that may have happened, in which case — this is a real trap for the unwary!

What’s Happening in Asia

Thanks to Liza Mark of Dorsey & Whitney, we just posted 20 pages of notes from the recent “Asia Capital Markets Forum 2007” in our “Conference Notes” Practice Area.

10 Effective Ways to Remember Names

As I get older, its become challenging to remember names, particularly since I don’t get out much these days. has this list of “10 Effective ways to remember names” – but I’m not sure it will do me much good…here’s to good karma over the holidays:


– Broc Romanek