Update TAR-S7-27-15.md - #25
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Variety of slight spelling or grammatical updates. Some comments noted --like so--. Realizing as I type these notes that GitHub automatically highlights changed lines so there was no need to label my own changes. Hah! In any case, I will go through again soon - plenty of time this weekend.
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Love it, and all good! No worries on exact semantics1 tbh, awesome stuff to work with here. This will be a great merge with your improvements! 🧠 Footnotes
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Hah, I remember you mentioning about the typos now. I will keep that in mind and not worry about them as much in future. If you're set to merge then go for it! I had requested review. I'll go through again soon. |
| Statute citation is note 114. | ||
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| Plainly, there were no FTDs before the 1994 amendments to the UCC. | ||
| Plainly, there were no FTDs before the 1994 amendments to the UCC. --I wonder if SEC comm staff aware of this? I would expect that they would be, it's a pretty major part of the infrastructure history-- |
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Yeah, I mean, honestly, it's an inference because obviously none of this is public. But I've read just about every piece of literature on these things. The most telling signs for me came from autobiographies of industry participants who lament the early days of trading before "computerization" took its toll, with the masses gaining access via eTrades and such.
But the deeper I read into their woes, the more I realized it was actually FTDs causing subtle shifts in the market. That said, this is an inference based on an exhaustive search finding no ulterior historic evidence.
I think it's a reasonable proof by contradiction given the Trimbath quote from 1993. That's right around when the very small instances would start popping up, so we can presume the industry spun together the law commission to make the changes keeping all the music playing.
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If we're lucky, perhaps Dr. T can get validation info from here per:
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In further discussion with @jackofspades71 on Discord, we can definitively place the first known (to us) documented (authoritative) citing from NASD in 1986, with a strong citation at note 6.
💜💜
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Dentzer in The Depository Trust Company writes about how "The depository confronted its first failure to settle in 1973 when Weiss Securities failed to pay for securities delivered to its account... On May 18th, 1982, Drysdale Securities Corporation posted a similar problem, unable to pay us its $4.5 million debit... On a few other occasions, we reversed several deliveries to a Participant that was unable to pay at settlement obligations."
So perhaps we'll need to draw a line between FTDs and naked shorts
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It might be good to get into settlement vs clearing, but it also opens this up to getting a bit more complex at times. FTDs have to do with settlement where naked shorting does not. Naked shorting could result with an FTD, but it could be settled too.
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Yes, this is just what I was thinking would help. Recently, it came to my attention that few commenters have made this distinction previously. Namely, your point on the FTDs from settlement segmenting from naked shorting isn't super well-known public knowledge as I understand it.1
How would you outline a section like this?
Footnotes
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I think a dissertation highlighting this "pain point" of the incumbent system would really help make the case for a TAD ↩
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@bobmahalo has found FINRA sources back to 1984 with direct failure references, which means in my mind that there was a lot going on to facilitate a new industry recognition. Without Heritage outreach, making progress on Pollock.
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there is a little thread here. foods and I were chatting about recaps and started a little rabbit hole. https://discord.com/channels/1042985282531766353/1398696645796823060/1398696871114965012
See also https://discord.com/channels/1102309240145707049/1262090967381577759/1402674162190913537
| Indeed, we've produced a mountain of pioneering research, actively clarifying meaningful ownership concepts[^heat-lamp] alongside the Commission's helpful stewardship. Remarkably, as someone new to the community these last couple of years (canonically), all this action took place with no central coordinator, no compensation mechanism, and no legal offices. We live in a very different time than the days past when our current systems originated.[^diff-time] Given the burgeoning environment... does the Commission believe XYZ is more masculine... now is the time for a new and tested system? | ||
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| [^heat-lamp]: _See, e.g.,_ comments referencing a "due diligence library" with hundreds of original research pieces discussing meaningful operational nuances not known to the markets; _available at_ https://www.sec.gov/comments/s7-14-22/s71422-279105.htm, https://www.sec.gov/comments/s7-08-22/s70822-272484.htm, https://www.sec.gov/comments/s7-18-21/s71821-20111377-264966.pdf, _inter alia_. _See also relevantly_ one particular piece documenting the operational efficiency custodianship practices of certain agent share purchase plans, expanding operative trust past the bounds specified in concept release § VII.E.2, _available at_ https://wooten.link/heat. Namely, we have confirmed through discussions, conversations, and by definitive website "Q&A section" updates certain operations by a leading transfer agent that allow shares held in a directly-registered investor's name to be swept into agent nominee custodianship without due notice or consent should such an investor enroll in an issuer plan, be it directly shelfed on an S-3 or not voluntarily perpetuated by issuers themselves. While the release does mention this option as a possibility for known brokered holdings, I find it materially worrisome given the declared holding of plan-custodian nominee shares in a DTCC/Cede account at a market broker for the sake of accessing trading liquidity. | ||
| [^heat-lamp]: _See, e.g.,_ comments referencing a "due diligence library" with hundreds of original research pieces discussing meaningful operational nuances not known to the markets; _available at_ https://www.sec.gov/comments/s7-14-22/s71422-279105.htm, https://www.sec.gov/comments/s7-08-22/s70822-272484.htm, https://www.sec.gov/comments/s7-18-21/s71821-20111377-264966.pdf, _inter alia_. _See also relevantly_ one particular piece documenting the operational efficiency custodianship practices of certain agent share purchase plans, expanding operative trust past the bounds specified in concept release § VII.E.2, _available at_ https://wooten.link/heat. Namely, we have confirmed through discussions, conversations, and by definitive website "Q&A section" updates certain operations by a leading transfer agent that allow shares held in a directly-registered investor's name to be swept into agent nominee custodianship without due notice or consent should such an investor enroll in an issuer plan, be it directly shelved on an S-3 or not voluntarily perpetuated by issuers themselves. While the release does mention this option as a possibility for known brokered holdings, I find it materially worrisome given the declared holding of plan-custodian nominee shares in a DTCC/Cede account at a market broker for the sake of accessing trading liquidity. --I might temper this section a bit, I think we can be very clear about what's been admitted to but also be clear about what we don't know regarding the Dingo nominee holdings and the subsection held with Cede-- |
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Are you suggesting citing the Q&A sections or something else?
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Yes, I think we should (if referring to them), and through an archive.org link because they have been changed without announcement at times.
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Do you happen to have some of those archives off the cuff? I don't know exactly which dates to look for
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I plan to keep the references to CS (or any other agent) to a very minimal. I also plan to gloss over the agents we chatted with in re nonprofit with a broad stroke so as to not explicitly bring anyone into the fold too early on. I'm sure they would be best represented through their own updated comments on a new rule proposal. Thus, we can place these under the fn with the overvoting doc or, at worst, the next one, starting with an Id..
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Makes sense to me to limit it. Referring in general to the shared perspectives or disinterest is probably plenty, and if we are successful in instigating ongoing conversation and new proposals are but through we can absolutely expect a lot of public feedback from these other players.
As for some of those archives ...
This is the main page: https://www.computershare.com/us/becoming-a-registered-shareholder-in-us-listed-companies
Archive directory at wayback: https://web.archive.org/web/20221101000000*/https://www.computershare.com/us/becoming-a-registered-shareholder-in-us-listed-companies
Earliest archive - 2021-10-01: https://web.archive.org/web/20211001150919/https://www.computershare.com/us/becoming-a-registered-shareholder-in-us-listed-companies
Questions have continually been added over time. Ten more questions were added in the first month- https://web.archive.org/web/20211008144344/https://www.computershare.com/us/becoming-a-registered-shareholder-in-us-listed-companies
Specific companies like Overstock and GameStop began to be referenced in the questions, this is after 3 months - https://web.archive.org/web/20220223200242/https://www.computershare.com/us/becoming-a-registered-shareholder-in-us-listed-companies
The page got a major overhaul later on, and questions were recategorized - https://web.archive.org/web/20240511094401/https://www.computershare.com/us/becoming-a-registered-shareholder-in-us-listed-companies
Then lastly, under 'other questions', Computershare responded to a variety of other questions which were gathered by the WhyDRS community and other interested communities in mid 2024 - https://web.archive.org/web/20241119030528/https://www.computershare.com/us/becoming-a-registered-shareholder-in-us-listed-companies
That was the last major update.
| [^heat-lamp]: _See, e.g.,_ comments referencing a "due diligence library" with hundreds of original research pieces discussing meaningful operational nuances not known to the markets; _available at_ https://www.sec.gov/comments/s7-14-22/s71422-279105.htm, https://www.sec.gov/comments/s7-08-22/s70822-272484.htm, https://www.sec.gov/comments/s7-18-21/s71821-20111377-264966.pdf, _inter alia_. _See also relevantly_ one particular piece documenting the operational efficiency custodianship practices of certain agent share purchase plans, expanding operative trust past the bounds specified in concept release § VII.E.2, _available at_ https://wooten.link/heat. Namely, we have confirmed through discussions, conversations, and by definitive website "Q&A section" updates certain operations by a leading transfer agent that allow shares held in a directly-registered investor's name to be swept into agent nominee custodianship without due notice or consent should such an investor enroll in an issuer plan, be it directly shelved on an S-3 or not voluntarily perpetuated by issuers themselves. While the release does mention this option as a possibility for known brokered holdings, I find it materially worrisome given the declared holding of plan-custodian nominee shares in a DTCC/Cede account at a market broker for the sake of accessing trading liquidity. --I might temper this section a bit, I think we can be very clear about what's been admitted to but also be clear about what we don't know regarding the Dingo nominee holdings and the subsection held with Cede-- | ||
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| Regardless of the risk surrounding SROs, millions of American investors risk the insolvency of transfer agent nominees (or third-party administrators, as the case may be). Given the frequent complex relationships between such custodians and broker-dealers, any mishandling of securities lending practices could place the most direct form of employer-sponsored retirement savings in risky hands. Given Wall Street has been known for decades to mismark short positions as long,[^recently] do staff believe that nominee administrators' model of grabbing investor services "at no charge or for a modest fee"[^free-quote] can sustain the bookkeeping prudence costs associated with largely state-overseen holding compliance? | ||
| Regardless of the risk surrounding SROs, millions of American investors risk the insolvency of transfer agent nominees --do you think it's worth expanding here on the idea that in UK there is a forced legal disclosure from TAs stating plainly that in case of nominee insolvency they are responsible to make investors whole, but for US TA operations there is no similar requirement?-- (or third-party administrators, as the case may be). Given the frequent complex relationships between such custodians and broker-dealers, any mishandling of securities lending practices could place the most direct form of employer-sponsored retirement savings in risky hands. Given Wall Street has been known for decades to mismark short positions as long,[^recently] do staff believe that nominee administrators' model of grabbing investor services "at no charge or for a modest fee"[^free-quote] can sustain the bookkeeping prudence costs associated with largely state-overseen holding compliance? |
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This is news to me. 🧠 I think it's an excellent idea. 🚀
Something you would know the sources on to introduce and back up here?
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Yes, I could provide that - just need to find it in the ol saved sources bin. Getting organized directory of shared sources up on here will be helpful for everyone!
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Here's some source info from Computershare:
https://www.computershare.com/uk/individuals/im-a-shareholder/company-nominee-service
https://content-assets.computershare.com/eh96rkuu9740/6sUEYj87UbMxnu3SzboED1/bfa755583cc74967ad5449e2439fd216/UK-CSDR-38-6-Disclosure.pdf
Relevantly make sure to check out section 3 for Insolvencies and section 4 for shortfalls.
Other examples from Citigroup and from Barclays - there will be similar files for many such companies who segregate client accounts in various ways
Refers back to Article 38(6) of UK CSD regulation -
https://www.legislation.gov.uk/uksi/2017/1064/2023-07-11
Weirdly I'm having a hard time getting to the other side of that citation. I looked for a while but there wasn't an expanded Article 38 that I could find with 6 sections, unless I'm misreading that. I believe from previously looking into this that I was able to find it and that the takeaway for me was that additional disclosures were required regarding how settlement and finalization of transaction would occur in cases where the custodian or nominee was unable to perform duties or had financial trouble.
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Awesome cleanups and some wise ideas buried inbetween. Nice job Chives~!
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Also big thanks to @LastResortFriend, @bobmahalo, and @JamesAlfonse for comments here pending implementation. 💜 |
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Implemented LRF, waiting for § 3 for James. |
* Jack from #25 (comment) * reorg * procedural metadata * alternative (migration) formats
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Variety of slight spelling or grammatical updates. Some comments noted --like so--. Realizing as I type these notes that GitHub automatically highlights changed lines so there was no need to label my own changes. Hah! In any case, I will go through again soon - plenty of time this weekend.