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(2). The shareholder base: In order for a company be listed on
NASDAQ Small-Cap market or
OTC Bulletin Board it must have a specified number of shareholders to qualify for listing.
(2A). Improper due diligence: Prior to purchasing a shell
private company along with
consultant that they retain to assist them in
Reverse merger should do a complete review of
shareholder list. some of those shareholder may have excessive number of shares and
true beneficial owner may be
shell owner or
consultant himself, there are a lot of smooth talking wolves posing as consultant who are operating in conjunction with
shell owner.
Solution: First run
consultant’s named and his previous employer through google and see if he has been convicted of any securities related crimes and has been barred from participating in any stock related transactions. Second write
regulator and request that consultants be required to have a website with their name on it, most of this unscrupulous character operate in a stealth manner so that regulators can’t detect their activities.
Petition
Securities and Exchange commission requesting a reduction in
number of shareholders require for listing, and if a shell has too many shares outstanding don’t buy it!
(3), Market Makers: Market makers in OTC Bulletin Board Securities are permitted to maintain a short position in securities that they are acting as market makers, but what some trader do is they register for a stock and go out sell stock on
bid (the price other market makers are willing to pay) and immediately cease to make a market in
stock and keep
short position.
Technically when a trader does this, he is circumventing
intent of
rule which allows market makers to short a stock in his role as a market maker.
Solution: Require traders to remain acting as market makers until they purchase
stock back, also regulators must make clearing agent to enforce
rules concerning
delivery of
securities on settlement or execute a buy in (buy
stock back and charge
seller) if
seller fails to deliver
stock within
prescribed period of time.
I believe that these reforms will go a long way in altering
climate for participant in Reverse merger, and in removing
vultures
prey on unsophisticated business owner from
market place.
But until
regulators act
responsibility is on
business owner to perform
proper research, if I sound like a crusader maybe that is because
industry has been good to me and I hate to see
vultures taking it over.
If you are thinking about doing a reverse merger and have questions contact us at: www.genesiscorporateadvisors.com
Email: josephquinones@genesiscorporateadvisors.com
