SEC Orders DTC to Adopt Fairness Procedures on Suspensions 4

Last Thursday, the SEC ruled In the Matter of the Application of International Power Group, Ltd. for review of action taken by Depository Trust Company or DTC. When the SEC started a case alleging, among other things, sales of unregistered securities by IPG (but neither IPG nor its officers or directors were named), the DTC suspended its electronic trading capability. Two years later the SEC has now ruled.

Essentially, the SEC ruled that IPG is a “person” entitled to a fair and orderly procedure, including a hearing and the opportunity to appeal the matter to the SEC, with respect to the suspension. DTC tried to argue that IPG, since it is not a broker-dealer “participant,” was not a “person.” They also ruled that DTC “did not provide IPG with adequate fair procedure in connection with the suspension.”

More importantly, the Commission also directed DTC to “adopt procedures that accord with the fairness requirements of [the Securities Exchange Act] , which may be applied uniformly in any future such issuer cases.”

This ruling is good news for issuers facing a so-called DTC “chill.” It is now clear they have standing to insist on a proper and fair hearing, and the chance to appeal to the SEC if they are not satisfied.

4 thoughts on “SEC Orders DTC to Adopt Fairness Procedures on Suspensions

  1. Reply Michael Fearnow Mar 19, 2012 11:53 am

    Great news should take some of the uncertainty of dealing with DTC

  2. Reply Richard Surber Mar 20, 2012 10:33 pm

    This is a long time in the making. DTCC is responsible for mishandling and destroying some small companies. But, better than never!

  3. Reply Don Dover Mar 21, 2012 11:00 am

    That is good news, now make the DTC go back a few years and treat MGLG better. And the SEC could let us shareholders of MGLG know something new and stop keeping us in the dark about MGLG???? Over 2 years and no real info on MGLG by anyone??? I have 16m shares of MGLG and they seem to be WORTHLESS ??

  4. Reply Susan Bond May 1, 2012 7:01 pm

    If this is the ruling then why isn’t the DTC complying? It has been a month and a half and the DTC is still non compliant. So what happens next? Shouldn’t the brokers and clearing houses and other financial institutions in accord with the ruling of the SEC allow trading of these stocks if the DTC can not and will not provide specific evidence to support the chill?

Leave a Reply