The SEC’s August 27th Release institutes a Cease and Desist Order on a virtual kitchen-sink of violations, including failure to transfer and turn securities around within required time frames, failure to report their failures to do so, failures to properly safeguard securities and funds, to maintain master securities records and transfer agent/registrar journals - and lastly, for violations of the “first commandment” in the T-A world - failure to maintain the “control book.” **
Founded in 2009, VStock has become one of the larger and more successful of the ‘smaller transfer agents’ by focusing on small and newly public companies, promising “best in class service with a cost savings situation.” As of year-end 2019 they had an impressive 1,009 client companies on their books. And with only 140,000 shareholder records on the books, and a mere 7500 items received for transfer each year - and with only 10 dividend payers - there really is not much heavy-lifting to be done there. VStock’s 25-33 employees produced $6 million in income in 2019, according to the 2019 TA-2 form filed with the SEC …for a pretty respectable return of somewhere between $181,818 and $240,000 per employee. But with almost of the employees in the $35k - $55k/yr. salary range, we’d guess, the net to the owners is considerably higher -probably around $5 million a year.
The SEC fined VStock a mere $65,000 for the big list of failures. But, as the headline notes, they accepted VStock’s offer to engage a disinterested Compliance Consultant to audit their systems and procedures from top to bottom, make recommendations for improvements and see that they were implemented - all within fairly tight deadlines.
** For the uninitiated, the control book is the key part of a ‘double-entry bookkeeping” system that has been used from time immemorial, long before the SEC came on the scene, to assure that the shares shown as outstanding in the control book jibe with the shares on the master records, and with any and all properly authorized “reserves” of cash and securities. But, truth to tell, failures to observe this commandment have been breached with regularity in the industry - and by some of the major players - and they were at the root of both of the most recent departures from the scene of mid-sized transfer agents Illinois Stock Transfer Company (shut down by the SEC) and Registrar and Transfer Company, where a shotgun wedding with a big T-A saved the day for clients and their shareholders…and for the SEC too.
Readers, we fully expect VStock to ride this out and to get back on track just fine…But we urge you to read our article on Transfer Agent Liabilities on our website if you are searching for a Transfer Agent - and the article below on the tombstones for M&A activities and Cash Repurchases of stock before selecting an Information Agent, Paying Agent or Depository Cash Buyback Programs.
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