Dear Shareholders of GEIN.
This is an attempt towards making a technical assessment. Management is not considered an expert of any kind and the below is truly an informed opinion and status update.
By now you must be wondering what is taking so long, and why is the stock not trading? After all the company has a Stock Symbol: GEIN, active and fully reporting so why the delay?
A set of new and challenging regulatory hurdles have entered the picture. Specifically, clearing firm gate keeper enforcement and anti-money laundering (AML) regulations, and threat of enforcement as it pertains to those regulations, have created scrutiny for the clearing and broker dealer industries. As a direct result, significant problems have arisen that are adversely affecting many issuers and their shareholders immensely. I will attempt to describe some of these issues below.
So as it pertains to Genesys Industries $GEIN, the company has progressed to what we would consider the final step in the going public process which is having a two sided market. This final step is having a clearing firm accept a deposit from the introducing market maker or any market maker if the company is piggy back qualified. In the case of Genesys Industries (GEIN) the company is piggyback qualified and therefore more than one market maker can make a market in the stock. Once shares are deposited and accepted, a two sided market is established.
So the road blocker now is the clearing firm(s) and the introducing market makers supporting non exchange listed securities such as ours that are listed on the OTC Markets or OTC-BB. These clearing firms and broker dealers are under intense scrutiny by regulatory agencies to curb microcap fraud. The scrutiny by regulators, FINRA and the Securities & Exchange Commission (SEC), as it solely pertains to dealings in non-exchange listed issuer securities, includes continuous and unceasing reviews and document requests, which requires a significant amount of brokerage firms’ staff time and money; battles with regulators whose understanding of the application or interpretation of the regulations are, many times, limited or inaccurate requiring significant staff time and legal costs; threats of enforcement actions when there are a difference of opinions pertaining to subjective rules and regulations; time spent attending to non-exchange listed issuer shareholder clients necessary to explain the egregious requirements associated with depositing and trading these shares; exorbitant fees associated with clearing, transferring and transaction settlement of non-exchange listed securities.
Regulatory rules require broker dealers to “reasonably inquire” into the background of the issuer, depositor, and the securities being deposited. Rules associated with this requirement can be seen in FINRA Notice to Members 09-05 and SEC Release 34-4445. In that regard, depositors are asked to provide copies of previous purchase agreements, broker dealers must gather information as to who previously owned shares, dealers must discern whether any owner was an affiliate and whether any exemption is available to the shareholder to resell shares, and a multitude of other requirements. The cost, time and regulatory risk associated with accepting deposits and/or allowing transactions in these types of securities is so burdensome that such broker dealers and clearing firms have started to pass down the intense costs of regulation downright to the issuer disguised as Legal Review Fees or Deposit Fees. This has never been the case but the red tape never ceases and regulation after regulations are introduced. Therefore most brokerage firms have no choice and only incentive is if they can continue to pass down the costs of such regulations right down to the issuer and the shareholder.
Over the last few years, investors in non-exchange listed securities have demanded answers from brokerage firms, FINRA (Financial Regulatory Authority), DTCC (Depository Trust Clearing Corporation)/NSCC and the SEC as to why they cannot liquidate their securities, why they cannot find a brokerage firm to accept their securities for deposit without exorbitant fees, and why the fees are so large to transact in these low priced securities. Unfortunately, the brokerage firms cannot completely explain why the fee is so large, or even how it is derived, and the SEC and NSCC have avoided directly dealing with the problem. Due to the inaction of the regulatory bodies to rectify the problem, the integrity of the current markets in non-exchange listed securities has arguably diminished and the formation of new markets has declined. There is no incentive for innovative companies to go public on such markets.
Another problem associated with the inability for these micro-cap companies to have access to the FAST system, is the egregious fees associated with the physical transfers of securities, which are significantly higher than that of electronic transfers, paid by the shareholders of these issuers. Dealing solely in physical certificates exacerbates the potential for certificates being lost and/or stolen thereby increasing the potential for fraud, as cited by DTCC and the SEC, which can be all but eliminated when securities are maintained in an electronic format.
DTCC has not provided any rationale to their not allowing non-exchange listed securities to be part of the FAST program; however has stated in some forums that they use a non-public cost-benefit approach to determine whether they allow access. It appears that the analysis has led DTCC to reject a vast majority of the micro-cap issuers’ requests to be included into the program. My assumption is that is probably because they may have suspected shell fraud or other kind of risk associated with nominal operation companies. In that regard, many large brokerage firms only accept deposits in electronic format, which simply is not available to most microcap issuers.
We believe this is just another hurdle in our quest to go public and access the broader capital markets. Management will continue to execute its going public strategy and more importantly building the business operations as to where there is no further doubt by the clearing firms or broker dealers regarding the company’s status as an emerging growth company.
Nobody said going public direct was easy and inexpensive, we understand and believe it will be well worth all the efforts in the long run. We are very thankful to all our shareholders for their patience. We look forward to the near future and getting past this last regulatory hurdle to commence trading shortly.
About Genesys Industries
Genesys Industries is a diversified multi-industry advanced manufacturer of complex components and products. The company is a vertically integrated precision cnc manufacturing and fabrication company with core emphasis on product design, engineering and precision manufacturing of complex components and products. Some of the industries served include Aerospace, Automotive, Building Materials, Food Processing, Industrial, Maritime, Medical, Railroad, Oil and Gas, Packaging, Telecom, Textiles, Pulp Paper, Transportation and many more. Follow us on twitter @genesysind or $GEIN
For more information on Genesys Industries, please visit www.genesysindustries.com
Genesys Industries, Inc
Safe Harbor Statement
This press release contains forward-looking statements. Actual results could differ materially from those projected in the forward-looking statements as a result of a number of risks and uncertainties. Statements made herein are as of the date of this press release and should not be relied upon as of any subsequent date. Statements contained in this press release regarding the company intentions, hopes, beliefs, expectations, or predictions of the future are “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based upon the Company’s current expectations, forecasts, and assumptions that are subject to risks, uncertainties, and other factors that could cause actual outcomes and results to differ materially from those indicated by these forward-looking statements. These risks, uncertainties, and other factors include, but are not limited to, the risks and uncertainties discussed under the heading “Risk Factors” in the Company’s Financial Reports. This press release does not form any part of a prospectus or offering. The Company undertakes no obligation to update any of the information included in this release, except as otherwise required by law.