DTC Hearings and Rule 22 Upon learning of the

DTC Hearings and Rule 22

Upon learning of the DTC chill, this issuer requested that DTC provide a hearing in accordance with its Rule 22, the only DTC rule that allows for some sort of hearing process. Rule 22 provides an opportunity for Interest Persons to be heard on any determination by DTC that an Issuer's security is no longer an eligible security. DTC denied IPWG's request for a hearing stating that this issuers securities were still eligible and that it would lift the chill "once the matter of the unregistered issuers shares is resolved with the SEC." DTC suggested the Company take the matter up with the SEC.

The issuer was in a quandary.

There was no action pending with the SEC within which the issuer was a party and the SEC action related to issuers shares had been settled, without addressing the "matter of the unregistered issuers shares."

No Clear Way Out

There was no clear way to take the matter up with the SEC. In addition, there was no clear way to take the matter up with DTC. DTC works through Participants - i.e. licensed broker-dealers not Issuers. Moreover, the shares it actually holds and trades are already issued and belong to shareholders, not the Issuer. So, although the issuer was clearly and undeniably greatly impacted by the DTC chill, DTC took the position that it didn't have any particular obligation to the Company for its actions.

The Company filed an administrative appeal with the SEC looking for assistance. A discussion of jurisdiction and the rules vis a vie getting this matter in front of the SEC is beyond the scope of this newsletter but suffice it to say, after much legal wrangling and a realization by all involved that there was no precedent to look upon, the SEC agreed to take the matter on.