News from Microcap Strategies

OTC Markets: OTCQX Community Banks Virtual Investor Conference — republished by Ronald Woessner

Invitation to webcast by OTC Markets Group appears below:


OTC Markets Group invites you to join us Thursday, March 14, 2019 at for a series of live webcast presentations featuring CEOs and senior executives of OTCQX Community Banks.

Register now to hear from some of our 2019 OTCQX® Best 50 OTCQX regional and community Banks. Tune in as these OTCQX banks speak to their future growth plans and engage with industry leaders during a live Q&A session.

Presentation Agenda:
March 14, 2019 (EST)

Register Here

Not able to Attend?

The event, including presentations, will be available for on-demand replay following the conclusion of the conference.

About Virtual Investor Conferences 
Virtual Investor Conferences is the leading proprietary investor conference series that provides an interactive forum for publicly-traded companies to meet and present directly with investors.

A real-time solution for investor engagement, Virtual Investor Conferences is part of OTC Market Group’s suite of investor relations services specifically designed for more efficient Investor Access.  Replicating the look and feel of on-site investor conferences, Virtual Investor Conferences combine leading-edge conferencing and investor communications capabilities with a comprehensive global investor audience network.

Questions, please contact:   

John M. Viglotti
SVP | Investor Access
T +1 (212) 220-2221


OTC Markets: Community Bank Regulations Should Foster Main Street Growth — republished by Ronald Woessner

See below for an article of OTC Markets that appeared at this link.

Banking regulation tends to be a partisan issue, but there’s one thing lawmakers are certain to agree on: America’s community banks are the backbone of the country’s economy.

Community banks serve a unique purpose. These institutions make over half of all U.S. small business loans, providing capital to entrepreneurs seeking to start businesses, and the financing needed for local businesses to grow. They provide jobs, help families buy homes and serve as the financial core for communities nationwide.

Policymakers and regulators should consider a tailored approach to capital requirements, data reporting and other requirements to keep community banks alive and thriving as the economic engines of U.S. communities. More dramatic changes to regulatory structures would fall harder on small banks, as they don’t have the compliance teams that can rapidly implement changes the way large banks can.

According to a recent survey by the Federal Reserve and Conference of State Bank Supervisors, community bank compliance costs have increased by nearly $1 billion in the past two years to roughly $5.4 billion, or 24% of community bank net income.

The banking industry is thriving and we hope that any regulatory changes considered will take into account a community banks most important customer — Main Street.

The remainder of the article appears  here.

Mr. Woessner’s Linked In bio appears here


David Weild: The Collapse of the Small IPO is Undermining Entrepreneurship, Tokenization May Help Fix the Problem | Crowdfund Insider

The article below was originally published by Crowdfund Insider on February 26, 2019, at this link.

This article discusses a recent speech by David Weild, Father of JOBS Act 1.0.  Several other of my published articles discuss the themes of  he disappearing US public companies, lack of capital for smaller-cap companies, the dying of US entrepreneurship, and the consequent loss of upward mobility that appear in Mr. Weild’s published work.


Last week Crowdfund Insider attended the KoreSummit in Miami – a security token focused event. The opening presentation was delivered by David Weild, a former Vice Chairman of NASDAQ and now CEO of his own firm Weild & Co.

Weild, a staunch proponent of the JOBS Act, has long championed the benefits of entrepreneurship and the smaller initial public offering (IPO) market – a sector that has dramatically declined in recent years. He believes that misguided policy decisions have crushed the small to mid-market IPO and thus undermined access to capital and wealth creation in the US.

Today in the US, much of the innovative entrepreneurship takes place in hotbeds of creativity like Silicon Valley or Silicon Alley – to the exclusion of most of the country. Weild believes this is a shortcoming that must be addressed and the loss of small-cap IPOs have accelerated the decline in entrepreneurship.

Additionally, part of the economic impact due to this concentration of innovation is that the concept of upward mobility has been undermined. For much of the country, it is harder to get ahead. The wealthier get more wealthy while the poor and middle class struggle to make ends meet.  Opportunity and access to capital, is not being equally disseminated across the country. Now, Weild is no social democrat. As he explains:

“I do not begrudge the rich getting rich. I begrudge the people getting left behind.”

Weild is on a mission. He believes that education, access to capital, company formation, and “exitability” are all essential for upward mobility. Fostering a robust entrepreneurial ecosystem is vital.

He has advocated on behalf of the concept of creating a venture exchange: a marketplace for smaller firms to raise capital, provide liquidity, and create an exit opportunity.

Currently, Weild believes that blockchain technology and tokenization may be the best path forward to take friction out of the innovation ecosystem, lower costs, and reinvigorate entrepreneurship in the US. The technology may streamline primary issuance as well as secondary transactions.

“Instead of us having a one size fits all stock market that is really geared towards trading … and ignores the needs of the companies and intermediaries this would be one that really balances all of the interests.”

Weild believes the problem with the current market structure is that interests are out of balance. He is critical of the existing options. Weild calls OTC Markets efforts to be the US venture market “lunacy” and says we need a complete remake:

“OTC Markets is a stock held exchange. I seriously doubt that any model will work unless it is a member owned exchange.”

He believes the tick size pilot, an experiment launched by the SEC to boost liquidity for smaller cap firms, was flawed due to the participation of the exchanges as they were incentivized by their own profitability. Weild believes that small investment banks and those who make markets and commit capital must be part of the equation.

“You don’t get that optimization, that balancing of interests. Investment banks have to worry about being on the right side of the investors and the right side of the companies they serve and they have to get it right.”

NASDAQ and NYSE just care about their quarterly earnings as public firms, according to Wield. He also believes that the SEC set up the tick pilot to fail from the beginning. In fact, Weild sent a letter to SEC Chair Jay Clayton telling him just that.

Bullish on Entrepreneurs

Weild notes that jobs are created by small businesses – a statement that has been born out in multiple reports. Most innovation takes place in startups and early-stage firms as well. It is vital that policy and regulation support these types of firms – even if many of them inevitably fail.

“You gotta get that right or you don’t have a future,” says Weild.

So what about private markets? Today, there is an ocean of private money looking for great deals. As public markets have declined in relevance and viability, private money has stepped in to fill the void.

Weild believes private markets are not that efficient. He asks the question as to how many entrepreneurs do you run into that are struggling to raise money. This point is buttressed by a slide from his presentation that shows the decline in entrepreneurship that has hit fly-over country.

“They don’t know who to talk to, they can’t find it. It’s a chronic disease of US public markets … there is a have and have not world and the vast majority of the United States is have not … we are in the lowest startup rate in 40 years…”

In effect, venture capital has become a substitute for public markets.

Policymakers need to get ahead of the curve. They need to figure out how to get the heartland back to creating jobs and you cannot do it if you have to be a $500 million company before it is reasonable to take it public.

So where does tokenization fit into all of this? And is the hype getting ahead of reality?

Weild says yes, the hype always gets ahead of the story. But the technological shifts are always overestimated over the short term, or the hype phase, and underestimated in the long term. Weild draws a parallel to the rapid rise of the internet and the first market entrants that largely failed. Inevitably hugely successful companies will arise from the “primordial ooze.”

“Security tokens technologically are really interesting because they can take a lot of cost out of the system. It is not just a token, it is not just a block and general ledger, its this integrated system that includes this software layer that can do whatever, ultimately, they are programmed to do.”

Weild sees a system that is amazingly efficient where you can take out intermediaries – like a bank.

“Look at what JP Morgan just did announcing their own stablecoin.”

Sure. There are plenty of Luddites and naysayers that don’t believe in blockchain tech but in Weild’s experience, we are in the trial and error phase where we are going to work out the kinks. He would be surprised if, at some point in the future, we are not holding securities very differently.

Even DTCC is working on a blockchain project.

Weild says that a lot of the transactional costs will be stripped out of the system.

Securities on blockchain will create a level of innovation we have yet to experience in the past, says Weild. It will transform securities but there will be an interim step where traditional and digital will be interchangeable but eventually, it will all be tokenized.

Weild acknowledges there are still many issues that need to be worked through such as custody. But eventually, major Wall Street firms will be compelled to change and adapt.

Of course, the change is not going to be instantaneous. Weild sees it shifting over the next five years at best.

JUMP Coalition: Jobs Upward Mobility and Making Markets Perform

One of Weild’s newer projects is the Jump Coalition that will be a bi-partisan lobbying group/think tank. The goal is to advocate politically for creating incentives that work for most people. He mentioned both Representative Maxine Waters and former Representative Jeb Hensarling as pursuing supportive legislation in Congress. Representative Waters, now the Chair of the powerful House Financial Services Committee, is on the record supporting the JOBS Act 3.0 – an entrepreneur/small business friendly act of legislation.

Ultimately, Weild wants to see everyone on a path to a better future – not just the lucky few.


Mr. Woessner  mentors, advises, and helps companies in the start-up and smaller-cap company ecosphere raise capital via Regulation Crowdfunding (CF) and otherwise.  He also advocates in Washington DC for policies that create a more hospitable public company environment for smaller-cap companies, enhance capital formation, support small business, promote entrepreneurship, and increase upward mobility for all Americans, particularly minorities. See here for more information on Mr. Woessner’s background.



OTC Updated Pink Basic Disclosure Guidelines & Attorney Letter Guidelines — republished by Ronald Woessner

OTC Markets has updated the Pink Basic Disclosure Guidelines and the Attorney Letter Guidelines for companies and their attorneys that publish disclosure and financial information to the market through See here for the information on the OTC website.

Federal securities laws, such as Rules 10b-5 and 15c2-11 of the Securities Exchange Act of 1934 (“Exchange Act”) as well as Rule 144 of the Securities Act of 1933 (“Securities Act”), and state Blue Sky laws, require issuers to provide adequate current information to the public markets. With a view to encouraging compliance with these laws, OTC Markets Group has created these Pink Basic Disclosure Guidelines (“Guidelines”).[1] These Guidelines set forth the disclosure obligations that make up the “Alternative Reporting Standard” for Pink companies. These Guidelines have not been reviewed by the U.S. Securities and Exchange Commission or any state securities regulator, although OTC Markets Group as a matter of policy welcomes comments from these and other regulators. We use information provided by companies under these Guidelines to designate the appropriate tier in the Pink Market: Current Information, Limited Information or No Information.[2] The information provided by companies under these Guidelines is subject to our Privacy Policy.

These Guidelines may be amended from time to time, in the sole and absolute discretion of OTC Markets Group, with or without notice.

Qualifications for the Pink Current Information Tier

Companies that make the information described below publicly available on a timely basis (90 days after fiscal year end for Annual Reports; 45 days after each fiscal quarter end for Quarterly Reports) may qualify for the Current Information Tier. Financial reports must be prepared according to U.S. GAAP or International Financial Reporting Standards (IFRS) but are not required to be audited.

Initial Qualification:

  1. Subscribe to the OTC Disclosure & News Service by submitting an OTCIQ Order Form.
  2. Create the following documents, save them in PDF format and upload them via (note financial statements may be included within a disclosure statement or included by reference):
  • Disclosure Statements: Disclosure information pursuant to these Guidelines for the company’s latest fiscal year end and each subsequent quarter for which reports are due. Disclosure statements should include all information in accordance with these Pink Basic Disclosure Guidelines (see the fillable form staring on Page 4).
  • Financial Statements: Annual and quarterly financial statements (including a balance sheet, income statement, statement of cash flows, and notes to financial statements) for the previous two completed fiscal years and each subsequent quarter. If the annual financial statements are audited, please attach the audit letter from the audit firm. Financial statements may be included within the disclosure statement for corresponding periods or posted separately and incorporated in the disclosure statement by reference.
  1. If financial statements are not audited by a PCAOB registered firm:
  • Attorney Letter Agreement: Submit a signed Attorney Letter Agreement (first two pages of the Attorney Letter Guidelines) to OTC Markets Group via email to or fax (212-652-5920).
  • Attorney Letter: After following the appropriate procedures with a qualified attorney, submit an Attorney Letter in accordance with the Attorney Letter Guidelines through OTCIQ.
  1. Allow OTC Markets Group to process the posted documents (typically three to five business days) and provide any comments.

Ongoing Qualification for the Pink Current Information Tier:

  1. For each Fiscal Quarter End, file a Quarterly Report through OTCIQ within 45 days of the quarter end. (A separate Quarterly Report is not required for the 4th) The Quarterly Report should include:
  • Disclosure Statement: Disclosure information pursuant to these Guidelines. Use the fillable form beginning on page 4.
  • Financial Statements: Quarterly financial statements (including a balance sheet, income statement, statement of cash flows, and notes to financial statements). 
  1. For each Fiscal Year End, file an Annual Report through OTCIQ within 90 days of the fiscal year end. The Annual Report should include:

 Disclosure Statement: Disclosure information pursuant to these Guidelines. Use the fillable form beginning on page 4.

  • Financial Statements: Annual financial statements (including a balance sheet, income statement, statement of cash flows, and notes to financial statements).
  • Attorney Letter: If the annual financial statements are not audited by a PCAOB registered firm, submit an Attorney Letter in accordance with the Attorney Letter Guidelines through OTCIQ within 120 days of the fiscal year end.

Qualifications for the Pink Limited Information Tier

Companies that make the information described below publicly available within the prior 6 months may qualify for the Limited Information Tier.

  1. Subscribe to the OTC Disclosure & News Service by submitting an OTCIQ Order Form.
  2. Create a Quarterly Report or Annual Report for a fiscal period ended within the previous 6 months, save it in PDF format and file through OTCIQ. The Quarterly Report or Annual Report must include:
  • Financial Statements: A balance sheet and income statement for a period within the previous 6 months. The financial statements must be prepared in accordance with US GAAP or IFRS but are not required to be audited.[3]
  • Outstanding Shares: The current number of outstanding shares from a period no later than the financial statements above.
  • A company in the Pink Limited Information tier may, but is not required to, include information in accordance with these Pink Basic Disclosure Guidelines using the fillable form beginning on page 4.

Current Reporting of Material Corporate Events

Companies are expected to release quickly to the public any news or information regarding corporate events that may be material to the issuer and its securities.  Persons with knowledge of such events would be considered to be in possession of material nonpublic information and may not buy or sell the issuer’s securities until or unless such information is made public. If not included in the issuer’s previous public disclosure documents or if any of the following events occur after the publication of such disclosure documents, the issuer shall publicly disclose such events by disseminating a news release within 4 business days following their occurrence and posting such news release through an Integrated Newswire or OTCIQ.[4]

Material corporate events include:

    • Entry into or termination of a material definitive agreement
    • Completion of an acquisition or disposition of assets, including but not limited to merger transactions
    • Creation of a direct financial obligation or an obligation under an off-balance sheet arrangement of an issuer
    • Triggering events that accelerate or increase a direct financial obligation or an obligation under an off-balance sheet arrangement
    • Costs associated with exit or disposal activities
    • Material impairments
    • Sales of equity securities
    • Material modification to rights of security holders
    • Changes in issuer’s certifying accountant
    • Non-reliance on previously issued financial statements or a related audit report or completed interim review
  • Changes in control of issuer
  • Departure of directors or principal officers; election of directors; appointment of principal officers
  • Amendments to articles of incorporation or bylaws; change in fiscal year
  • Amendments to the issuer’s code of ethics, or waiver of a provision of the code of ethics
  • Any changes to litigation the issuer may be involved in, or any new litigation surrounding the issuer
  • Officer, director, or insider transactions in the issuer’s securities
  • Disclosure regarding stock promotion campaigns deemed material by the issuer
  • Other events the issuer considers to be of importance



Tribute to the Late John Dingell — republished by Ronald Woessner

February 8, 2019 |Washington, D.C. – House Republican Leader Kevin McCarthy (CA-23) honored John Dingell, the longest serving member of the House in history, and his dedication to public service.

“I also rise to commemorate the incredible life and career of John Dingell – the former Dean of this House.

“Few individuals have amassed a record of public service that could rival John’s, and I will bet no one will ever match it – 59 years as an elected representative.

“In fact, his interest in politics began during his time as a Congressional Page, where he personally witnessed FDR’s “A Day That Will Live in Infamy” Speech from this very podium.

“Take one moment to think of the life that this man had witnessed on this floor.

“John taught us that public service is not a sprint, but a marathon. There are many lessons in his life that we can learn from, but I hope we take that lesson every day when we come to work here.

“Another lesson I hope we learn is the one of how I first met John.

“He was an icon before I got here. But I watched the respect, not from his own colleagues in his own party, but the respect from across the aisle.

“They went to John for advice.

“When he walked on the floor, there was many on our side that stood around him – they’d question him where we thought we could go. He believed in this House. He believed in this country.

“He had great passions – passions for his constituents, passion for his committee; energy and commerce. He loved this committee so much he thought there needed no other committee in this House. It wasn’t until his retirement that we got jurisdiction back in other places.

“But he understood an ever-changing world, if you can only imagine serving that long.

“He was able to adapt – which we should learn from too. Yes, the new world of social media, many would think would pass him by because of his age. But he was one of the first I would follow on Twitter.

“This is a lesson this House, in a bipartisan manner, should take. It’s one of my favorite tweets from John.

“It came on the day of July of 2017. He wrote, ‘I’ve been trying to repeal and replace the United States Senate since 1955 […] No luck.’

“Yes we are sad today, but he lived a life we can admire.

“I may have difference in opinion and philosophy with him but I admired his will to fight for what he believed in. I admired the way he treated people who had different beliefs and I admired the way he believed all sides should be heard.

“I speak for everyone on this side of the aisle to convey our deepest sympathies – and to Debbie.

And I ask that we lift up in our prayers to God for his soul to rest peacefully and to remember what he truly believed:

“Public service matters. This country matters – and the ability to work together so all Americans will have a better tomorrow.”

An IPO Without The SEC — Laura Anthony Esq. article republished by Ronald Woessner

On January 23, 2019, biotechnology company Gossamer Bio, Inc., filed an amended S-1 pricing its $230 million initial public offering, taking advantage of a rarely used SEC Rule that will allow the S-1 to go effective, and the IPO to be completed, 20 days from filing, without action by the SEC.  Since the government shutdown, several companies have opted to proceed with the effectiveness of a registration statement for a follow-on offering without SEC review or approval, but this marks the first full IPO, and certainly the first of any significant size. The Gossamer IPO is being underwritten by Bank of America Merrill Lynch, SVB Leerink, Barclays and Evercore ISI. On January 24, 2019, Nasdaq issued five FAQ addressing their position on listing companies utilizing Section 8(a).  Although the SEC has recommenced full operations as of today, there has non-the-less been a transformation in the methods used to access capital markets, and the use of 8(a) is just another small step in a new direction.

Section 8(a) of the Securities Act

Section 8(a) of the Securities Act of 1933 (“Securities Act”) provides for the effectiveness of registration statements and amendments.  In particular, the statute provides that a registration statement shall automatically go effective on the 20th day after its filing or such earlier date as the SEC may determine.  Section 8(b) gives the SEC the power to issue a stop order to prevent a registration statement from going effective in accordance under Section 8(a) if the registration statement is “on its face incomplete or inaccurate in any material respect.”

In practice, companies avoid the Section 8(a) effectiveness by adding language to their registration statements known as the “delaying amendment.”  The typical language for a delaying amendment is similar to the following:

The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state or other jurisdiction where the offer or sale is not permitted.

… and with that provision, Section 8(a) is avoided.  A company then goes through a comment, review and amendment process with the SEC which ultimately results in the SEC informing the company that it has cleared comments.  A company then files a letter with the SEC, relying on another rule (Rule 461) requesting that the registration statement become effective.  Technically the request is that the SEC accelerate the effectiveness of the registration statement so that a company does not have to file a final amendment removing the “delaying amendment” language and adding Section 8(a) language and then waiting 20 days for the registration statement to go effective.

The reasons that Section 8(a) is not used in practice are twofold. The first is that a company and its attorneys, auditors and underwriters believe that there is too much risk of litigation associated with forgoing SEC review. If the registration statement disclosures are later shown to have shortcomings, the unusual lack of SEC review adds fuel to the plaintiff’s lawyer’s claims. However, the SEC does not conduct a merit review, but rather just reviews to determine if the disclosures comply with the rules and regulations. Not only does the SEC not pass on whether a deal is good or bad, but making a statement to the contrary is a criminal offense and Item 501 of Regulation S-K specifically requires a disclaimer on the subject with suggested language, to wit:

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

It seems that if a company has competent counsel and the underwriter has competent counsel, they can together review the disclosures to determine if they are accurate and complete. Moreover, the fact is that if the stock price goes way down, the company is likely to face an investor lawsuit anyway, regardless of what the SEC reviews or doesn’t review. Besides, risk factors are designed to warn investors of potential issues, and Gossamer did so with its newest SEC filing adding the following risk factor:

As a result of the shutdown of the federal government, we have determined to rely on Section 8(a) of the Securities Act to cause the registration statement of which this prospectus forms a part to become effective automatically. Our reliance on Section 8(a) could result in a number of adverse consequences, including the potential for a need for us to file a post-effective amendment and distribute an updated prospectus to investors, or a stop order issued preventing use of the registration statement, and a corresponding substantial stock price decline, litigation, reputational harm or other negative results.

The registration statement of which this prospectus forms a part is expected to become automatically effective by operation of Section 8(a) of the Securities Act on the 20th calendar day after the most recent amendment of the registration statement filed with the SEC, in lieu of the SEC declaring the registration statement effective following the completion of its review. Although our reliance on Section 8(a) does not relieve us and other parties from the responsibility for the adequacy and accuracy of the disclosure set forth in the registration statement and for ensuring that the registration statement complies with applicable requirements, use of Section 8(a) poses a risk that, after the date of this prospectus, we may be required to file a post-effective amendment to the registration statement and distribute an updated prospectus to investors, or otherwise abandon this offering, if changes to the information in this prospectus are required, or if a stop order under Section 8(d) of the Securities Act prevents continued use of the registration statement. These or similar events could cause the trading price of our common stock to decline substantially, result in securities class action or other litigation, and subject us to significant monetary damages, reputational harm and other negative results.

The second is that the S-1, which will go effective after 20 days, must be totally complete, including pricing information.  In a traditional IPO or follow-on offering, the company does not file the final amendment with pricing information until the day it goes effective.  This allows a company to judge the market at the moment of sale to choose the best price, which is especially important in a firm commitment underwritten deal where the underwriter buys all the company’s registered stock in the IPO and immediately resells it to customers and syndicated broker-dealers.  A company also may get feedback during its roadshow, which typically occurs in the 10-15 days prior to effectiveness that affects pricing decisions.

Interestingly, Gossamer has decided to ignore these market factors and let the world know its believed value up front.  I’m actually not surprised at all.  This is just another way that capital markets are shifting.  There has been a recent rise in different methods of going public including direct public listings without an IPO (see HERE).

Nasdaq FAQ

On January 24, 2019, Nasdaq issued five FAQ addressing the listing of new companies during the government shutdown and the impact on already listed companies.  Nasdaq will list companies that had cleared comments, but whose registration statement had not yet been declared effective at the time of the shutdown.  Likewise if a company has substantially cleared comments, Nasdaq is willing to proceed with the listing under certain circumstances.  In particular, the company will have had to clearly address the outstanding comments and Nasdaq will require a representation from the company’s counsel and auditor that they believe all disclosure and accounting comments have been fully addressed.  Nasdaq will not list a company that has not yet received SEC comments or that first filed for its IPO during the shutdown.  Gossamer announced that it has applied for the Nasdaq Global Select Market and so it will likely amend its S-1 to allow SEC review.

Nasdaq will also allow certain up-listings from the OTC Markets to proceed as long as the company satisfies the listing requirement.  In particular, if the company only needs to file a registration statement under the Securities Exchange Act of 1934 (“Exchange Act”), such as a Form 10 or Form 8-A, Nasdaq will allow it to continue. Keep in mind a registration statement under the Exchange Act does not involve the offer or sale of any securities.  However, if the up-listing involves an offering and the filing of a registration statement under the Securities Act, Nasdaq will review the application the same as a new IPO. That is, if the company has already cleared or substantially cleared comments, they may continue, if not, they will need to complete the SEC review process.

If a company is already listed on Nasdaq, they may proceed with a follow-on offering without SEC review.

Although the SEC is again operational, they will be backlogged, so presumably Nasdaq is still willing to proceed with certain companies without SEC action.  Companies that have already filed a registration statement without the delaying amendment and with the appropriate Section 8(a) amendment will likely proceed.  For those that had one or two unsubstantial comments left, they will need to assess which route will be the quickest, wait for the SEC to review the final comments or file a new fully completed registration using Section 8(a).  Of course, Nasdaq may issue updated FAQ altering their position on accepting these applications.

Continued Shifting Capital Markets

The rise of decentralized platforms and imminent change in how the capital markets function as a whole and the role of intermediaries in the process has opened the market’s view to relying less on the SEC’s input in their disclosures.  tZero is scheduled to launch its security token platform this week, introducing a new way in which securities, or fractional ownership interests in a company, can be bought and sold.  tZero is starting with launching its own securities tokens on the platform but will soon open up to third-party companies and reportedly already has applications from over 60 companies. tZero may be the first to launch, but it will not be the only and soon we will have independent markets competing with Nasdaq and the NYSE.  Moreover, the securities token markets will have sectors for private company markets and public company markets, blurring the current private equity silo with public trading.

Much more significantly, though, is that this is the first step in a retooling and complete change in how the clearing and settlement of securities functions (for more on the current clearing and settlement, see HERE and HERE).  The new blockchain technology will allow for instantaneous clearing and settlement, a big change from the current t+2 and sometimes t+3 settlement of today (thus the name tZero).  Notably, blockchain eliminates the need for a trusted intermediary, thus opening up the question as to the future role of DTC and its custodial arm, Cede & Co.

No regulator, the SEC or FINRA included, is ready for a complete disruption of the capital markets system, but they have been thinking about it for a while.  FINRA published a report on the implications of blockchain for the securities industry back in January 2017 (see HERE).  Furthermore, the SEC has reportedly told tZero, and presumably others following in their lead, that they will allow incremental changes in the market system.

This is a small concession considering that they will have no choice as the proverbial train has left the station.  tZero is launching a joint venture with Boston Options Exchange, which is one of 12 SEC-listed security exchanges which together comprise the National Market System network. The joint venture seeks to launch a marketplace able to deal in both public securities and digital tokens.  Nasdaq Financial Framework, a software company owned by the exchange, just closed a $20 million Series B funding round into Symbiont which is working to “give Nasdaq the ability to originate a financial instrument and the smart contract to custody it on a blockchain, to allow trading to occur with their matching engine, to allow surveillance to occur across the network using Nasdaq technology and then to perform settlement on a blockchain.”

Meanwhile, the SEC is clearly not against forgoing the comment and review process and relying on Section 8(a).  As it was shutting down, the SEC posted an FAQ on its website reminding companies that they can proceed to rely on Section 8(a) to effectuate their registration statements, and even providing the exact language that needs to be included in order to accomplish this.  In particular: “This registration statement shall hereafter become effective in accordance with the provisions of Section 8(a) of the Securities Act of 1933.”   Even with the re-opening of the SEC, CorpFin will be exponentially backlogged compared to the time it was shutdown.  It will be interesting to see how the SEC handles the workload – perhaps in addition to simply foregoing comments on many filings, the SEC will continue to support the use of 8(a) on others, especially follow-on offerings completed for a company that has had a full review in the last few years.

The Author
Laura Anthony, Esq.
Founding Partner
Anthony L.G., PLLC
A Corporate Law Firm


Mr. Woessner of Dallas, Texas is former Senior Counsel to the US House Financial Services Committee where he served as special advisor to former Committee Chairman  Jeb Hensarling on capital formation and fintech issues. He currently mentors, advises, and helps start-up and smaller-cap companies raise capital through Regulation Crowdfunding (CF) and other means. He also advocates in Washington DC for policies that create a more hospitable public company environment for smaller-cap companies, enhance capital formation, support small business, promote entrepreneurship, and increase upward mobility for all Americans, particularly minorities. Mr. Woessner, a certified Toastmaster, speaks and writes about US public and private capital markets topics and his articles are published by and elsewhere. You may contact him about a speaking engagement at Linked In here.



Who is Ronald Woessner?

Mr. Woessner of Dallas, Texas has worked in the smaller-cap company ecosphere for 25+ years in the capacity as general counsel to two NASDAQ-listed companies, CEO of an OTC Markets issuer that he uplisted to NASDAQ, and advisor to others.  Mr. Woessner, a certified Toastmaster, speaks and writes about US public and private capital markets topics and his articles are published by and elsewhere. He also advocates in Washington DC for policies that create a more hospitable public company environment for smaller-cap companies, enhance capital formation, support small business, promote entrepreneurship, and increase upward mobility for all Americans, particularly minorities.

SEC Updates CDI Related to Smaller Reporting Company Definition — Laura Anthony, Esq. article republished by Ronald Woessner

See article below of Laura Anthony, Esq. which originally  appeared at this link.  Information about Ms. Anthony and her law firm appears below following the article.


SEC Updates CDI Related to Smaller Reporting Company Definition

On June 28, 2018, the SEC adopted the much-anticipated amendments to the definition of a “smaller reporting company” as contained in Securities Act Rule 405, Exchange Act Rule 12b-2 and Item 10(f) of Regulation S-K.  For more information on the new rules, see HERE

Among other benefits, it is hoped that the change will help encourage smaller companies to access US public markets. The amendment expands the number of companies that qualify as a smaller reporting company (SRC) and thus qualify for the scaled disclosure requirements in Regulation S-K and Regulation S-X. The SEC estimates that an additional 966 companies will be eligible for SRC status in the first year under the new definition.

As proposed, and as recommended by various market participants, the new definition of a SRC will now include companies with less than a $250 million public float as compared to the $75 million threshold in the prior definition. In addition, if a company does not have an ascertainable public float or has a public float of less than $700 million, a SRC will be one with less than $100 million in annual revenues during its most recently completed fiscal year. The prior revenue threshold was $50 million and only included companies with no ascertainable public float. Once considered a SRC, a company would maintain that status unless its float drops below $200 million if it previously had a public float of $250 million or more. The revenue thresholds have been increased for requalification such that a company can requalify if it has less than $80 million of annual revenues if it previously had $100 million or more, and less than $560 million of public float if it previously had $700 million or more.

The SEC also made related rule changes to flow through the increased threshold concept. In particular, Rule 3-05 of Regulation S-X has been amended to increase the net revenue threshold in the rule from $50 million to $100 million. As a result, companies may omit financial statements of businesses acquired or to be acquired for the earliest of the three fiscal years otherwise required by Rule 3-05 if the net revenues of that business are less than $100 million.

The new rules did not change the definitions of either “accelerated filer” or “large accelerated filer.” As a result, companies with $75 million or more of public float that qualify as SRCs will remain subject to the requirements that apply to accelerated filers, including the accelerated timing of the filing of periodic reports and the requirement that accelerated filers provide the auditor’s attestation of management’s assessment of internal control over financial reporting required by Section 404(b) of the Sarbanes-Oxley Act. However, Chair Clayton has directed the SEC staff to make recommendations for additional changes to the definitions to reduce the number of companies that would qualify as accelerated filers.

Furthermore, the conforming changes include changes to the cover page for most SEC registration statements and reports including, but not limited to, Forms S-1, S-3, S-4, S-11, 10-Q and 10-K.  On November 7, 2018, the SEC made conforming changes to its Compliance and Disclosure Interpretations (C&DI).

In particular, the SEC issued four new C&DI to reflect the impact of the larger size threshold for SRC status and withdrew four C&DI addressing transition issues for SRCs and two additional obsolete C&DI which still referred to the old Regulation S-B.

New C&DI 102.01 illustrates that, under the new amendments, companies can now be both accelerated filers and SRCs, which means that, as SRCs, they can use the scaled disclosure rules but, as accelerated filers, their periodic reports are due under the time frames for accelerated filers and they must provide Sarbanes-Oxley Section 404(b) auditor attestation reports in their 10-Ks. In an example, a company was an accelerated filer with respect to filings due in 2018 and had a public float of $80 million on the last business day of its second fiscal quarter of 2018. Because its public float at that measurement date was below $250 million, the company would qualify as an SRC for filings due in 2019; however, it would also need to file its 10-K within 75 days as an accelerated filer and would need to comply with Section 404(b).  Since the company was an accelerated filer with respect to filings due in 2018, it would be required to have less than $50 million in public float on the last business day of its second fiscal quarter in 2018 to exit accelerated filer status for filings due in 2019.

New C&DI 102.02 recaps the circumstances under which a reporting company that fails to qualify as an SRC can later re-qualify if its revenues or public float decreases. Once a reporting company determines that it does not qualify as a smaller reporting company, it will remain unqualified unless, when making a subsequent annual determination, either:

  • It determines that its public float is less than $200 million; or
  • It determines that:

(i) for any threshold that it previously exceeded, it is below the subsequent annual determination threshold (public float of less than $560 million and annual revenues of less than $80 million); and

(ii) for any threshold that it previously met, it remains below the initial determination threshold (public float of less than $700 million or no public float and annual revenues of less than $100 million).

The C&DI provides an example where the company had exceeded one of the caps, but not the other: “A company has a December 31 fiscal year end. Its public float as of June 28, 2019 was $710 million and its annual revenues for the fiscal year ended December 31, 2018 were $90 million. It therefore does not qualify as a smaller reporting company. At the next determination date, June 30, 2020, it will remain unqualified unless it determines that its public float as of June 30, 2020 was less than $560 million and its annual revenues for the fiscal year ended December 31, 2019 remained less than $100 million.”

New C&DI 202.01 provides that in calculating annual revenues to determine whether a company qualifies as a SRC as defined in Regulation S-K, the company should include all annual revenues on a consolidated basis.  As such, a holding company with no public float as of the last business day of its second fiscal quarter would qualify as a smaller reporting company only if it had less than $100 million in consolidated annual revenues in the most recently completed fiscal year for which audited financial statements are available.

New C&DI 104.13 confirms that a company that is transitioning from an SRC (in the example, the company qualifies as an SRC in 2019 but will no longer qualify in 2020 based on its public float on the last day of its 2019 second quarter) may still rely on General Instruction G(3) to incorporate by reference executive compensation and other disclosure required by Part III of Form 10-K into the 2019 Form 10-K from its definitive proxy statement to be filed not later than 120 days after its 2019 fiscal year-end.

The Author
Laura Anthony, Esq.
Founding Partner
Anthony L.G., PLLC
A Corporate Law Firm


Mr. Woessner  mentors, advises, and helps companies in the start-up and smaller-cap company ecosphere raise capital.  He also advocates in Washington DC for policies that create a more hospitable public company environment for smaller-cap companies, enhance capital formation, support small business, promote entrepreneurship, and increase upward mobility for all Americans, particularly minorities. See here for more information on Mr. Woessner’s background.



The SEC’s Strategic Hub For Innovation And Financial Technology — republished by Ronald Woessner

See article below of Laura Anthony, Esq. which originally  appeared at this link.  Information about Ms. Anthony and her law firm appears below following the article.


Responding to the growing necessity, in mid-October the SEC launched a Strategic Hub for Innovation and Financial Technology (FinHub). The FinHub will serve as a resource for public engagement on the SEC’s FinTech-related issues and initiatives, such as distributed ledger technology (including digital assets), automated investment advice, digital marketplace financing, and artificial intelligence/machine learning. The FinHub also replaces and consolidates several SEC internal working groups that have been working on these matters.

According to the SEC press release on the matter, the FinHub will:

  • Provide a portal for the industry and the public to engage directly with SEC staff on innovative ideas and technological developments;
  • Publicize information regarding the SEC’s activities and initiatives involving FinTech on the FinHub web page;
  • Engage with the public through publications and events, including a FinTech Forum focusing on distributed ledger technology and digital assets planned for 2019;
  • Act as a platform and clearinghouse for SEC staff to acquire and disseminate information and FinTech-related knowledge within the agency; and
  • Serve as a liaison to other domestic and international regulators regarding emerging technologies in financial, regulatory, and supervisory systems.

Although I’m sure FinHub supports engagement in all FinTech areas, the website itself is broken into four categories: (i) blockchain/distributed ledger; (ii) digital marketplace financing; (iii) automated investment advice; and (iv) artificial intelligence/machine learning. Under each category the SEC has tabs with information such as regulations, speeches and presentations, opportunities for public input and empirical information.

                Blockchain/Distributed Ledger 

Blockchain and distributed ledger generally refer to databases that maintain information across a network of computers in a decentralized or distributed manner.  Blockchains are often used to issue and transfer ownership of digital assets that may be securities, depending on the facts and circumstances.

Clearly illustrating the need for regulatory initiatives, the “regulation, registration and related matters” tab under blockchain/distributed ledger is limited to public speeches, testimony and pronouncements, and enforcement actions, and not regulation (as none exists). Although certainly we in the community give public statements weight, they actually have no binding legal authority. The speeches, testimony and pronouncements that the SEC lists in this tab, and as such the ones that the SEC gives the most weight to, include (i) Chair Clayton’s testimony on virtual currencies to the Senate banking committee (see HERE); (ii) William Hinman’s speech on digital asset transactions (see HERE); (iii) statement on potentially unlawful online platforms for trading digital assets (see HERE); and (iv) remarks before the AICPA National Conference of Banks & Savings institutions (see HERE and HERE).

Providing more legal guidance are the enforcement proceedings. The SEC has provided a running list of all cyber enforcement actions broken down by category including digital asset/initial coin offerings; account intrusions; hacking/insider trading; market manipulation; safeguarding customer information; public company disclosure and controls; and trading suspensions.

Digital Marketplace Financing

Digital marketplace financing refers to fundraising using mass-marketed digital media – i.e., crowdfunding. In this category, the SEC includes traditional Title III Crowdfunding under Regulation CF and platforms for the marketing of Regulation D, Rule 506(c) offerings for the offering of debt or equity financing. Under the Regulation tab the SEC includes Regulation CF and the SEC’s Regulation CF homepage, including investor bulletins.

The SEC does not include a link to Rule 506(c) or Section 4(c) of the Securities Act, which provide an exemption for advertised offerings where all purchasers are accredited investors, and the platforms or web intermediaries that host such offerings, respectively. However, many securities token offerings are being completed relying on these exemptions from the registration provisions – in fact, more so than Regulation CF which is limited to $1,070,000 in any twelve-month period. In my opinion, this is a miss on the site layout.

This area of the FinHub website also provides a link to one of the first published SEC investor bulletins on initial coin offerings, including some high-level considerations to avoid a scam. Finally, this area provides a link to a Regulation CF empirical information page published by the SEC. Unfortunately I do not find the data to be user-friendly and could not determine how many, if any, Regulation CF offerings have included digitized assets or FinTech-related issuers.

Automated Investment Advice

Automated investment advisers or robo-advisers are investment advisers that typically provide asset management services through online algorithmic-based programs. Since their introduction, the SEC has been involved with regulating these market participants. Under this section, the SEC provides links to guidance related to robo-advisors.

Robo-advisers, like all registered investment advisers, are subject to the substantive and fiduciary obligations of the Advisers Act. However, since robo-advisers rely on algorithms, provide advisory services over the internet, and may offer limited, if any, direct human interaction to their clients, their unique business models may raise certain considerations when seeking to comply with the Advisers Act. In particular, the Advisors Act requires that a client receive information that is critical to his or her ability to make informed decisions about engaging, and then managing the relationship with, the investment adviser. As a fiduciary, an investment adviser has a duty to make full and fair disclosure of all material facts to, and to employ reasonable care to avoid misleading, clients. The information provided must be sufficiently specific so that a client is able to understand the investment adviser’s business practices and conflicts of interests. Such information must be presented in a manner that clients are likely to read (if in writing) and understand.

Since robo-advisors provide information and disclosure over the internet without human interaction and the benefit of back-and-forth discussions, the disclosures must be extra robust and provide thorough material on the use of an algorithm. The SEC’s guidance on the subject contains a fairly thorough list of matters that should be included in the client information.

Artificial Intelligence/Machine Learning

Machine learning and artificial intelligence refer to methods of using computers to mine and analyze large data sets. The SEC includes links to a few speeches and presentations under this tab. The SEC uses machine learning and AI in numerous ways, including market risk assessment and helping identify risks that could result in enforcement proceedings such as the detection of potential investment adviser misconduct.

Further Reading on DLT/Blockchain and ICOs

For a review of the 2014 case against BTC Trading Corp. for acting as an unlicensed broker-dealer for operating a bitcoin trading platform, see HERE.

For an introduction on distributed ledger technology, including a summary of FINRA’s Report on Distributed Ledger Technology and Implication of Blockchain for the Securities Industry, see HERE.

For a discussion on the Section 21(a) Report on the DAO investigation, statements by the Divisions of Corporation Finance and Enforcement related to the investigative report and the SEC’s Investor Bulletin on ICOs, see HERE.

For a summary of SEC Chief Accountant Wesley R. Bricker’s statements on ICOs and accounting implications, see HERE.

For an update on state-distributed ledger technology and blockchain regulations, see HERE.

For a summary of the SEC and NASAA statements on ICOs and updates on enforcement proceedings as of January 2018, see HERE.

For a summary of the SEC and CFTC joint statements on cryptocurrencies, including The Wall Street Journal op-ed article and information on the International Organization of Securities Commissions statement and warning on ICOs, see HERE.

For a summary of the SEC and CFTC testimony to the United States Senate Committee on Banking Housing and Urban Affairs hearing on “Virtual Currencies: The Oversight Role of the U.S. Securities and Exchange Commission and the U.S. Commodity Futures Trading Commission,” see HERE.

To learn about SAFTs and the issues with the SAFT investment structure, see HERE.

To learn about the SEC’s position and concerns with crypto-related funds and ETFs, see HERE.

For more information on the SEC’s statements on online trading platforms for cryptocurrencies and more thoughts on the uncertainty and the need for even further guidance in this space, see HERE.

For a discussion of William Hinman’s speech related to ether and bitcoin and guidance in cryptocurrencies in general, see HERE.

For a review of FinCEN’s role in cryptocurrency offerings and money transmitter businesses, see HERE.

For a review of Wyoming’s blockchain legislation, see HERE.

For a review of FINRA’s request for public comment on FinTech in general and blockchain, see HERE.

For my three-part case study on securities tokens, including a discussion of bounty programs and dividend or airdrop offerings, see HERE; HERE; and HERE.

For a summary of three recent speeches by SEC Commissioner Hester Peirce, including her views on crypto and blockchain, and the SEC’s denial of a crypto-related fund or ETF, see HERE.

The Author
Laura Anthony, Esq.
Founding Partner
Anthony L.G., PLLC
A Corporate Law Firm


Mr. Woessner  mentors, advises, and raises capital for companies in the start-up and smaller-cap company ecosphere.  He also advocates in Washington DC for policies that create a more hospitable public company environment for smaller-cap companies, enhance capital formation, support small business, promote entrepreneurship, and increase upward mobility for all Americans, particularly minorities. See here for more information on Mr. Woessner’s background.

Understanding Short Sale Activity by Cromwell Coulson OTC Markets Group — republished by Ronald Woessner

See below for an article by Cromwell Coulson, President, CEO and Director of OTC Markets Group, regarding “Understanding Short Sale Activity.”

Quality data is essential to well-functioning markets. Improving the availability, relevance and usefulness of data aligns with OTC Market Group’s mission to create better informed, more efficient financial markets.  In our experience, short selling remains one of the most highly-debated topics among academics, companies, investors, market makers and broker-dealers. As a market operator and company CEO, I believe it’s critical to address the misconceptions that still exist around short sale data and the correlation to a stock’s fundamental value.

Short selling, the sale of a security that the seller does not own, has long been a controversial practice in public markets.  Advocates for short selling believe it builds price efficiency, enhances liquidity and helps improve the public markets, while critics are concerned that it can facilitate illegal market manipulation and is detrimental to investors and public companies.  Given the diverse range of opinions and opposing views, we believe the first step is to take a deeper dive into the data and help separate out the noise.

“The Reliable” – FINRA Equity Short Interest Data

The most accurate measure of short selling is the data reported by all broker-dealers to FINRA on a bi-weekly basis.   These numbers reflect the total number of shares in the security sold short, i.e. the sum of all firm and customer accounts that have short positions.

This information is available on on the company quote pages.  As an example, OTC Markets Group has a few hundred shares sold short on average, which represents a fraction of our daily trading volume and shares outstanding.


9/28/2018 97 11.49 5,551 1 No No
9/14/2018 87 8.75 4,423 1 No No
8/31/2018 80 100.00 6,818 1 No No
7/31/2018 103 -48.24 3,197 1 No No
7/13/2018 199 -27.64 2,124 1 No No
6/29/2018 275 166.99 3,239 1 No No
6/15/2018 103 24.10 2,739 1 No No
5/31/2018 83 -72.33 3,925 1 No No
5/15/2018 300 1.69 3,944 1 No No
4/30/2018 295 100.00 4,278 1 No No

FINRA Rule 4560 requires FINRA member firms to report their total short positions in all over-the-counter (“OTC”) equity securities that are reflected as short as of the settlement date. In 2012 FINRA clarified that firms must report short positions in each individual firm or customer account on a gross basis under FINRA Rule 4560. Therefore, firms that maintain positions in master/sub-accounts or parent/child accounts must calculate and report short interest based on the short position in each sub- or child account.

Since this data is part of a clearing firm’s books and records, it is of high quality and FINRA regularly inspects broker-dealer compliance with the rule.  Of course, it would be great if this data was collected and published daily (with an appropriate delay).

“The Misleading” – Daily Short Volume

In contrast, the most frequently misinterpreted data is the Daily Short Volume, sometimes referred to as Naked Short Interest.  This data shows the percentage of published trade reports (called media transactions in FINRA Rules) that were marked short.   As an example, the recent data for OTC Markets Group shows that up to 90% of the trading volume comes from short

selling on some days.   If we did not carefully track our bi-weekly Short Interest, we could easily be led to believe that short selling is rampant in our stock.

Historical Short Volume Data for OTC Markets Group (OTCQX: OTCM)

Oct 18 3,341 1,399 41.87
Oct 17 5,989 3,198 53.40
Oct 16 16,120 7,509 46.58
Oct 15 24,155 12,991 53.78
Oct 12 6,297 4,914 78.04
Oct 11 4,059 1,553 38.26
Oct 10 2,185 999 45.72
Oct 9 7,473 4,556 60.97
Oct 5 880 525 59.66
Oct 4 492 200 40.65
Oct 3 2,041 801 39.25
Oct 2 4,786 1,560 32.60
Oct 1 3,973 2,607 65.62
Sep 28 244 23 9.43
Sep 27 882 805 91.27
Sep 26 259 189 72.97
Sep 25 3,085 2,250 72.93
Sep 24 967 571 59.05
Sep 21 2,350 825 35.11
Sep 20 7,164 6,453 90.08
Sep 19 297 202 68.01


Seeing the above data can be alarming for public companies and their investors, until they understand the inner workings of how dealer markets function and broker trades are reported—which render the data virtually meaningless.

Since this data also comes from FINRA, what gives?  The daily short selling volume is misleading because market makers and principal trading firms report a large number of trades as short sales in positions that they quickly cover. For market makers with a customer order to sell, they will temporarily sell short (which gets published to the tape as a media transaction for public dissemination) and then immediately buy from their customer in a non-media transaction that is not publicly disseminated to avoid double counting share volumes.  SEC guidance also mandates that almost all principal trading firms that provide liquidity at multiple price levels, or arbitrage international securities, must mark orders they enter as short, even though those firms might also have strategies that tend to flatten by end of day. Since the trade reporting process for market makers and principal trades makes the Daily Short Volume easily misleading, we do not display it on

Making daily short reporting data easily-digestible and relevant is not hard. On the contrary, it should be easy to aggregate all of the short selling that is reported as agency trades, as well as all of the net sum of buying and selling by each market maker and principal trading firm.  This would paint a clear picture for investors of overall daily short selling activity. Fixing the misleading daily short selling data would bring greater transparency and trust to the market.

 “The Missing Piece”– Short Position Reporting by Large Investors

There is ample evidence that short selling contributes to efficient price formation, enhances liquidity and facilitates risk management.  Experience shows that short sellers provide benefits to the overall market and investors in other important ways which include identifying and ferreting out instances of fraud and other misconduct taking place at public companies.  That said, we agree with the New York Stock Exchange and National Investor Relations Institute that there is a serious gap in the regulation of short sellers related to their disclosure obligations.   We understand that well-functioning markets rely on powerful players who cannot be allowed to hide in the shadows.  Since we require large investors, who accumulate long positions, to publicly disclose their holdings, why aren’t there disclosure obligations for large short sellers?   This asymmetry deprives companies of insights into their trading activity and limits their ability to engage with investors.  It also harms market functions and blocks investors from making meaningful investment decisions.

One point is clear, we all need to continue to work collaboratively with regulators to improve transparency, modernize regulations and provide investors with straightforward, understandable information about short selling activity.  We want good public data sources that bring greater transparency to legal short selling activity as well as shine a light on manipulative activities.  All while not restricting bona fide market makers from providing short-term trading liquidity that reduces volatility.