Post by sandi66 on Mar 7, 2011 20:33:18 GMT -5
Please find attached the March update. The update covers thew issues of non-delivery of certificates and failure to deliver.
We would ask all shareholders who have requested certificates to contact their broker-dealer and pointy out their obligations under SEC rule 15c3-3.
8000inc
8000 Inc. (EIGH.PK) Statement to Shareholders ¡V March 7, 2011
Applicable regulatory rules (SEC Rule 15c3-3 under the Securities Exchange Act of
1934 and FINRA Rule 4320) require broker-dealers to close out all short positions
immediately due to elapsed time and non-compliance, the details of which (including
timing) are addressed below. 8000 Inc. asks our shareholders to contact their
broker-dealers and inform them of their obligations under the cited authority.
Failure To Deliver Summary
(for details see below)
¡§Whenever a trade is made, both parties in the transaction have to transfer the cash
and assets before the settlement date. Subsequently, if the transaction is not settled,
one side of the transaction has failed to deliver. Failure to deliver also can occur if
there is a technical problem in the settlement process carried out by the respective
clearing house.
Failure to deliver is also important when discussing naked short selling. When
naked short selling occurs, an individual agrees to sell a stock that they neither
own nor have borrowed. Subsequently, the failure to deliver creates what are called
"phantom shares" in the market which may dilute the price of the underlying
stock¡¨- Investopedia on- line library 2011.
As previously announced, 8000 Inc. (EIGH.pk) has uncovered evidence
suggesting manipulation of its stock, including a significant naked short position and
multiple examples of broker-dealers and clearing firms failing to honor or otherwise
act upon shareholder requests for delivery of their certificates, having allowed
reasonable time to undertake this request pursuant to SEC Rules 17a-3 and 17a-4,
respectively. The underlying factual information has been volunteered to the SEC
with the hope the Staff would/will take action.
EIGH understands that, since the time permitted under applicable rules re
shorts (especially naked shorts) has now elapsed, the failure to deliver rules
apply and the short positions must be closed immediately pursuant to SEC Rule
13c3-3.
Moreover, EIGH understands that, as more than 0.5% of the shares in certificate form
have failed to be delivered by certain broker-dealers to shareholders, the ¡§threshold
limit¡¨ (see standard cited below) is also exceeded pursuant to the SEC¡¦s RegSHO
regulations as well as FINRA Rule 4320. Consequently, EIGH believes applicable
1 0 4 3 2 B a l l s F o r d R o a d S u i t e 3 0 0 M a n a s s a s V i r g i n i a 2 0 1 0 9
standards regarding short positions are being and have been ignored, those short
positions are being and have not been recorded and, in our opinion, the
¡§threshold rules¡¨ (see cited authority below) are being and have been ignored
and therefore all short positions in EIGH stock must be closed out immediately
by those broker-dealers and clearing firms carrying short EIGH positions. So
far, EIGH has been advised by its shareholders that not less than 1.3MM shares have
been requested from broker-dealers and not delivered, an amount twice the allowable
limit according to RegSHO and associated FINRA Rule 4320. Again, as the time
allocated for adherence to this FINRA Rule, and the number of shares permitted to
avoid the threshold list, have been exceeded (unless the SEC or FINRA were to tell us
differently), the Rule requires those EIGH short positions to be closed out
immediately.
As previously relayed, the following has been identified though shareholder and
certified record confirmation:
„h 146 shareholders (one sixth of the total) own 148.8MM shares. This is greater
than the total issued and outstanding EIGH stock.
„h Shareholder stock purchases have not been recorded on the certified
transaction or shareholder lists.
„h Shares were exchanged, traded or transferred by several brokerage firms
during the period of the Company¡¦s trading suspension, November 4, 2010 to
November 18, 2010.
„h Brokerage firms transacted to themselves, the sale and purchase stock,
converting old certificates into new multiple certificates on the same day.
These transactions were not recorded in the trading day volume.
„h Over defined periods, the number of shares purchased and recorded by
brokerage firms were greater than the recorded trading volume.
„h Brokerage firms are advising that the delivery time for certificates will be up
to 8 weeks, cannot be delivered, cannot find the certificates or assert that not
needed (since can transfer EIGH stock electronically even though it is a
physical certificate only traded stock and is not DTCC eligible).
„h The contemplated merger is on-going but cannot be fairly concluded for
shareholders and investors alike until all certificates are received.
„h Trading volume has been significantly less than the transactional volume in
over 60% of the trading days over the periods August 22, 2010 to September
30, 2010, and October 1, 2010 to December 31, 2010.
The market, public and regulatory authorities have now been presented with evidence
of shareholders who have demanded that their brokers issue certificates for their
holdings, evidence of non-recorded transactions, missing certificates and, in our
1 0 4 3 2 B a l l s F o r d R o a d S u i t e 3 0 0 M a n a s s a s V i r g i n i a 2 0 1 0 9
opinion, documented practices that evade the applicable market rules and regulations.
EIGH believes the situation and activities presented violate Nevada state law as well
due to the non delivery of shareholder certificates (NRS 78.235 cited below) and the
spirit, if not the letter, of federal law and regulations. We call on all authorities to
begin an investigation into what we are convinced is an injustice and ask that all
shareholders who have requested certificates which have not be delivered to contact
their broker-dealers to inform them of their obligations under Rule 15c3-3 (as well as
FINRA Rule 4320) and insist they close out their naked short position and deliver the
requested certificates immediately as applicable Rules require.
We submit that the use of Rule 15c3-3 and non-delivery of shareholder certificates
associated with naked short positions, and the applicable law has legal precedent, the
most well known of these being the case of CMKX (May 2010) resulting in a
settlement of nearly $4B USD. (See link below.)
Summary
Under Nevada state law 78.235, quoted below, every shareholder has the right to request
delivery of their rightfully owned certificates in a corporation. Under SEC Rule 13c3-
3 as well, every shareholder is entitled to delivery of their requested certificates. As
the number of certificates requested and not delivered account for more than
1,214,000 shares and have been requested more than 30 days ago, EIGH believes the
broker-dealers and or clearing firms must provide the certificates or close out all
associated short positions immediately. As the number of shares not delivered is
greater than 0.5% of the total issued¡Xand for more than 35 days--the short position
held in EIGH stock by the broker-dealers and clearing firms must be recorded and the
stock listed on the ¡§threshold securities¡¨ list as described below. Very specifically, in
our opinion, the broker-dealers and clearing firms must comply with FINRA Rule
4320, whereby all failures to deliver must be closed out and covered immediately.
Said another way, we believe the request for delivery of these certificates has been
greater than the time allowed and thus failure to deliver by the broker-dealers shorting
EIGH stock has been demonstrated, the short positions must be closed out
immediately. Furthermore, this situation has been on-going for over 12 months and, in
our view, is considerably outside all allowable time frames for acceptable delivery of
requested certificates. Rules 17a-3 and 17a-4 allows for a reasonable time to permit
delivery of certificates to the rightful owner. Reasonable time, in our opinion, has
been exceeded by all broker-dealers and clearing firms currently holding naked short
positions in shares of EIGH. Furthermore, we submit that (i) non-delivery of
certificates has been proven and, thus, (ii) failure to deliver has been demonstrated,
and thus SEC Rule 15c3-3 applies immediately.
1 0 4 3 2 B a l l s F o r d R o a d S u i t e 3 0 0 M a n a s s a s V i r g i n i a 2 0 1 0 9
Very simply, more than 1,214,000 shares have been requested for delivery and
not delivered for over 30 settlement days, in contravention of SEC Rule 15c3-3
and FINRA Rule 4320. We believe that more than 0.5% of the total issued stock has
been naked shorted, not recorded or reported for over 35 days, as proven through
shareholder documented non-delivery by broker dealers of physical certificates. All
broker-dealers and clearing firms who have not delivered the certificates are required
(see cited authority, not just our opinion), under applicable SEC Rules and
Regulations, at minimum Rule 15c3-3, to close out the position and to provide the
requested certificates. As the number of shares requested exceeds 0.5% of the total
issued shares of EIGH, the broker-dealers have to conform to RegSHO as well as
FINRA Rule 4320 for OTC stock, EIGH publicly placed on the threshold list and, as
the failure to deliver exceeds 35 days according to the associated Rules, the short
EIGH positions must be immediately closed out.
The Rules Contravened by Broker-Dealers Trading EIGH Shares
8000 Inc. was incorporated in Nevada in 2007. Nevada law NRS 78.235 mandates
that each shareholder has the right to request and receive certificates of ownership
from the company for their stock, especially critical for issuers whose shares are not
DTC (electronically transferrable) at this time. The statute states specifically that
¡§¡Kevery stockholder is entitled to have a certificate, signed by officers or agents
designated by the corporation for the purpose, certifying the number of shares owned
by him in the corporation¡K¡¨
Consequently, EIGH has documented complaints from a significant number of
shareholders who have been attempting to obtain physical certificates from their
brokers since January 2011 but have been unable to do so. The litany of excuses being
given by various broker-dealers for the refusal to honor their customers¡¦ request for
certificates continues ad nauseum. All stock transfer problems which exist at this
time are, we believe, between the broker-dealers and the shareholders. (See
shareholder statements below and the multiple reasons given by broker¡Vdealers which
are not conforming to this simple and legal request.) Accordingly, we are convinced
that, due to the time taken, this is clearly failure to deliver on EIGH stock by the
broker-dealers.
In our opinion, the most alarming problems are represented by those shareholders
who have been requesting certificates from their brokers since EIGH¡¦s first
announcement of a proposed merger nearly 3 months ago. The non-delivery and nonrecording
of certificate transactions by broker-dealers can be traced back through
shareholders account records and the Transfer Agent¡¦s reports, to 2009. Here is a
1 0 4 3 2 B a l l s F o r d R o a d S u i t e 3 0 0 M a n a s s a s V i r g i n i a 2 0 1 0 9
sampling of excuses being given to shareholders as reasons for the broker-dealers¡¦
purported inability to obtain a physical cert:
¡§EIGH is traded electronically and thus no paper certificates can be
issued.¡¨
¡§It will take us another 6 to 8 weeks to obtain.¡¨
¡§This stock purchase was a book entry only and no certificate is
available.¡¨
¡§I have been instructed we are no longer pulling certificates for any
security and there is nothing I can do. You need to contact the company.¡¨
¡§We can¡¦t locate your EIGH certificates.¡¨
¡§You will have to contact the Company as they are resp0onsible for
issuing certificates.¡¨
¡§We will not issue your certificates until we hear from the Transfer Agent
or the Company.¡¨
¡§We do not need to issue certificates; we can undertake the share
exchange electronically in-house for you.¡¨
Each quoted statement above is taken verbatim from a shareholder¡¦s letter or from a
broker¡¦s written response to a shareholder¡¦s request for a certificate.
Please note, EIGH is a paper (i.e., a certificate-traded) stock. It is not DTC-eligible for
electronic trading between brokers, the consequence of which is that all transactions
under applicable standards must be recorded and booked by date and by certificate
number on the affected broker-dealer¡¦s transactional records. Therefore, we believe
categorically that ALL EIGH share transactions must be conducted by physical
certificate form and, thus, non-delivery of a shareholder¡¦s duly-owned certificate is
not possible, unless naked short positions are in place.
The following quotes are direct quotes taken from both the SEC website and The
Securities Lawyer Desk Book, 2011.
SEC Rule 15c3-3
a. ¡§¡KPhysical possession or control of securities.
A broker or dealer shall promptly obtain and shall thereafter maintain the physical
possession or control of all fully-paid securities and excess margin securities carried
by a broker or dealer for the account of customers.
1 0 4 3 2 B a l l s F o r d R o a d S u i t e 3 0 0 M a n a s s a s V i r g i n i a 2 0 1 0 9
A broker or dealer shall not be deemed to be in violation of the provisions of
paragraph (b)(1) of this section regarding physical possession or control of
customers' securities if, solely as the result of normal business operations, temporary
lags occur between the time when a security is required to be in the possession or
control of the broker or dealer and the time that it is placed in his physical possession
or under his control, provided that the broker or dealer takes timely steps in good
faith to establish prompt physical possession or control. The burden of proof shall be
on the broker or dealer to establish that the failure to obtain physical possession or
control of securities carried for the account of customers as required by paragraph
(b)(1) of this section is merely temporary and solely the result of normal business
operations including same day receipt and redelivery (turnaround), and to establish
that he has taken timely steps in good faith to place them in his physical possession
or control.
Delivery of securities. Nothing stated in this section shall be construed as affecting
the absolute right of a customer of a broker or dealer to receive in the course of
normal business operations following demand made on the broker or dealer, the
physical delivery of certificates for:
Fully-paid securities to which he is entitled¡K¡¨
FINRA Rule 4320
¡§¡K4320. Short Sale Delivery Requirements [Please check to make sure this is a
direct quote and indicated by ¡K..s any deletions between quoted passages.]
(a) If a participant of a registered clearing agency has a fail to deliver position at a registered clearing
agency in a non-reporting threshold security for 13 consecutive settlement days, the participant shall
immediately thereafter close out the fail to deliver position by purchasing securities of like kind and
quantity.
(1) Provided, however, if a participant of a registered clearing agency has a fail to deliver position at a
registered clearing agency for thirty-five consecutive settlement days in a non-reporting threshold
security that was sold pursuant to SEC Rule 144, the participant shall immediately thereafter close out
the fail to deliver position in the security by purchasing securities of like kind and quantity. The
requirements in paragraph (b) shall apply to all such fails to deliver that are not closed out in
conformance with this paragraph (a)(1).
(b) If a participant of a registered clearing agency has a fail to deliver position at a registered clearing
agency in a non-reporting threshold security for 13 consecutive settlement days (or 35 consecutive
1 0 4 3 2 B a l l s F o r d R o a d S u i t e 3 0 0 M a n a s s a s V i r g i n i a 2 0 1 0 9
settlement days if entitled to rely on paragraph (a)(1)), the participant and any broker or dealer for which
it clears transactions, including any market maker that would otherwise be entitled to rely on the
exception provided in paragraph (b)(2)(iii) of Rule 203 of SEC Regulation SHO, may not accept a short
sale order in the non-reporting threshold security from another person, or effect a short sale in the nonreporting
threshold security for its own account, without borrowing the security or entering into a bonafide
arrangement to borrow the security, until the participant closes out the fail to deliver position by
purchasing securities of like kind and quantity and that purchase has cleared and settled at a registered
clearing agency.
(c) If a participant of a registered clearing agency reasonably allocates a portion of a fail to deliver
position to another registered broker or dealer for which it clears trades or for which it is responsible for
settlement, based on such broker or dealer's short position, then the provisions of this Rule relating to
such fail to deliver position shall apply to the portion of the fail to deliver position allocated to such
registered broker or dealer, and not to the participant.
(d) A participant of a registered clearing agency shall not be deemed to have fulfilled the requirements of
this Rule where the participant enters into an arrangement with another person to purchase securities as
required by this Rule, and the participant knows or has reason to know that the other person will not
deliver securities in settlement of the purchase.
(e) For the purposes of this Rule, the following terms shall have the meanings below:
(1) the term ¡§market maker¡¨ has the same meaning as in Section 3(a)(38) of the Exchange Act.
(2) the term ¡§non-reporting threshold security¡¨ means any equity security of an issuer that is not
registered pursuant to Section 12 of the Exchange Act and for which the issuer is not required to file
reports pursuant to Section 15(d) of the Exchange Act:
(A) for which there is an aggregate fail to deliver position for five consecutive settlement days at a
registered clearing agency of 10,000 shares or more and for which on each settlement day during the
five consecutive settlement day period, the reported last sale during normal market hours for the
security on that settlement day that would value the aggregate fail to deliver position at $50,000 or more,
provided that if there is no reported last sale on a particular settlement day, then the price used to value
the position on such settlement day would be the previously reported last sale; and
(B) is included on a list published by FINRA.
A security shall cease to be a non-reporting threshold security if the aggregate fail to deliver position at a
registered clearing agency does not meet or exceed either of the threshold tests specified in paragraph
(e)(2)(A) of this Rule for five consecutive settlement days.
(3) the term ¡§participant¡¨ means a participant as defined in Section 3(a)(24) of the Exchange Act, that is
a FINRA member.
(4) the term ¡§registered clearing agency¡¨ means a clearing agency, as defined in Section 3(a)(23)(A) of
the Exchange Act, that is registered with the SEC pursuant to Section 17A of the Exchange Act.
(5) the term ¡§settlement day¡¨ means any business day on which deliveries of securities and payments of
money may be made through the facilities of a registered clearing agency.
(f) Pursuant to the Rule 9600 Series, the staff, for good cause shown after taking into consideration all
relevant factors, may grant an exemption from the provisions of this Rule, either unconditionally or on
specified terms and conditions, to any transaction or class of transactions, or to any security or class of
1 0 4 3 2 B a l l s F o r d R o a d S u i t e 3 0 0 M a n a s s a s V i r g i n i a 2 0 1 0 9
securities, or to any person or class of persons, if such exemption is consistent with the protection of
investors and the public interest...¡¨
A number of EIGH shareholders have recently requested physical delivery of their
fully paid stock, requests to date neither honored nor delivered. We submit, as
outlined above, that SEC Rule 15c3-3 requires the physical EIGH certs be delivered
and any short positions must be closed out immediately. Due to the number of
shares involved, so far not less than 1,214,000, EIGH should be, and should have
been, in our opinion, placed on the RegSHO ¡§threshold list¡¨ (see below) under the
terms of FINRA Rule 4320. This listing and regulated recording of short positions
in EIGH has, in our opinion, been avoided through already identified trading
practices pursuant to which broker-dealers neither recorded nor addressed naked
short positions as per the applicable rules herein outlined.
RegSHO Summary (See especially Asset Manager references below)
Generally, a broker-dealer must mark all sales of equity securities as ¡§short,¡¨ ¡§long¡¨
or ¡§short exempt¡¨
„h Generally, a sale is ¡§short¡¨ if the seller does not ¡§own¡¨ the securities or will
settle the trade with borrowed securities.
Rules regarding ownership, aggregation, etc.
„h A sale may be marked ¡§long¡¨ only if the seller is deemed to ¡§own¡¨ the
security and either:
„h The security is in the Broker Dealer¡¦s physical possession or control; or
„h It is reasonably expected that the security will be in the physical possession or
control of the broker-dealer no later than the settlement of the transaction¡K¡¨
A broker-dealer may not effect a short sale in an equity security unless the brokerdealer
has:
„h Borrowed the security, or entered into a bona fide arrangement to borrow the
security (e.g., a pre-borrow); or
„h ¡§Reasonable grounds¡¨ to believe that the security can be borrowed so that it
can be delivered on the date delivery is due¡K¡¨
¡§Reasonable grounds¡¨ to believe a security can be borrowed may include:
1 0 4 3 2 B a l l s F o r d R o a d S u i t e 3 0 0 M a n a s s a s V i r g i n i a 2 0 1 0 9
„h Security is on ¡§easy to borrow¡¨ lists (but not ¡§hard to borrow¡¨ lists) ¡V if the
information is less than 24 hours old and securities on the list are so readily
available that it would be unlikely that a fail would occur; and
„h Customer provides assurances that it can obtain the security from an
identified source in time to settle the trade ¡V unless the customer¡¦s prior
assurances resulted in fails¡K
All broker-dealers are subject to a ¡§locate¡¨ requirement, subject to these limited
exceptions:
„h For example, does not apply to certain sales of securities the seller owns if
the broker-dealer has been reasonably informed the seller intends to deliver
as soon as all restrictions on delivery have been removed (e.g., restricted
stock, stock to be received in connection with an exercised warrant or option)
„h If the securities are not received within 35 days after trade date, broker-dealer
must borrow the securities or close out the transaction by purchasing the
securities
Additional delivery requirements apply for ¡§threshold securities,¡¨ namely equities of
certain reporting issuers where, for 5 consecutive settlement days there are aggregate
fails to deliver at a registered clearing agency of (i) at least 10,000 shares and (ii) at
least 0.5% of the issuer¡¦s shares outstanding, and the security is on a list
disseminated by an SRO (a self-regulatory organization).
Finally, while securities of non-reporting issuers (such as EIGH) are not ¡§threshold
securities,¡¨ the securities of such issuers are subject to similar requirements under
NASD Rule 4320.
EIGH believes its stock has been traded short for over 12 months and those shorts
have failed to deliver for more than 30 days. As outlined above, SEC Rule 15c3-3
and FINRA Rule 4320 now apply and the short position must be closed out, in
EIGH¡¦s opinion, due to certain broker-dealers and/or clearing firms contravening
the very laws and regulations they are subject to--and here applicable.
1 0 4 3 2 B a l l s F o r d R o a d S u i t e 3 0 0 M a n a s s a s V i r g i n i a 2 0 1 0 9
Supporting References:
taft.law.uc.edu/CCL/34ActRls/rule15c3-3.html
finra.complinet.com/en/display/display.html?rbid=2403&element_id=9398
ftp.resource.org/courts.gov/c/F2/925/925.F2d.1469.36-3_1.html
camrhon.proboards.com/index.cgi?board=safe&action=print&thread=4220
www.dlapiper.com/sec_settles_its_first_two_naked_short_selling_cases/
EIGH will continue to keep its shareholders apprised as events unfold. Also keep updated on 8000 Inc.
developments on Facebook or Twitter.
www.brand8000.com
www.8000incgroup.com
www.8000inc.net
-ENDSThis
news release contains forward-looking statements that are subject to certain risks and
uncertainties that may cause actual results to differ materially from those projected on the basis of
such forward-looking statements. The words "estimate," "project," "intends," "expects," "believes,"
and similar expressions are intended to identify forward-looking statements. Such forward-looking
statements are made based on management's beliefs, as well as assumptions made by, and
information currently available to, management pursuant to the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995. For a more complete description of these and other
risk factors that may affect the future performance of 8000 Inc., see published disclosure documents
at www.OTCMarkets.com. Readers are cautioned not to place undue reliance on these forwardlooking
statements, which speak only as of the date made and the Company undertakes no obligation
to disclose any revision to these forward-looking statements to reflect events or circumstances after
the date made or to reflect the occurrence of unanticipated events.
We would ask all shareholders who have requested certificates to contact their broker-dealer and pointy out their obligations under SEC rule 15c3-3.
8000inc
8000 Inc. (EIGH.PK) Statement to Shareholders ¡V March 7, 2011
Applicable regulatory rules (SEC Rule 15c3-3 under the Securities Exchange Act of
1934 and FINRA Rule 4320) require broker-dealers to close out all short positions
immediately due to elapsed time and non-compliance, the details of which (including
timing) are addressed below. 8000 Inc. asks our shareholders to contact their
broker-dealers and inform them of their obligations under the cited authority.
Failure To Deliver Summary
(for details see below)
¡§Whenever a trade is made, both parties in the transaction have to transfer the cash
and assets before the settlement date. Subsequently, if the transaction is not settled,
one side of the transaction has failed to deliver. Failure to deliver also can occur if
there is a technical problem in the settlement process carried out by the respective
clearing house.
Failure to deliver is also important when discussing naked short selling. When
naked short selling occurs, an individual agrees to sell a stock that they neither
own nor have borrowed. Subsequently, the failure to deliver creates what are called
"phantom shares" in the market which may dilute the price of the underlying
stock¡¨- Investopedia on- line library 2011.
As previously announced, 8000 Inc. (EIGH.pk) has uncovered evidence
suggesting manipulation of its stock, including a significant naked short position and
multiple examples of broker-dealers and clearing firms failing to honor or otherwise
act upon shareholder requests for delivery of their certificates, having allowed
reasonable time to undertake this request pursuant to SEC Rules 17a-3 and 17a-4,
respectively. The underlying factual information has been volunteered to the SEC
with the hope the Staff would/will take action.
EIGH understands that, since the time permitted under applicable rules re
shorts (especially naked shorts) has now elapsed, the failure to deliver rules
apply and the short positions must be closed immediately pursuant to SEC Rule
13c3-3.
Moreover, EIGH understands that, as more than 0.5% of the shares in certificate form
have failed to be delivered by certain broker-dealers to shareholders, the ¡§threshold
limit¡¨ (see standard cited below) is also exceeded pursuant to the SEC¡¦s RegSHO
regulations as well as FINRA Rule 4320. Consequently, EIGH believes applicable
1 0 4 3 2 B a l l s F o r d R o a d S u i t e 3 0 0 M a n a s s a s V i r g i n i a 2 0 1 0 9
standards regarding short positions are being and have been ignored, those short
positions are being and have not been recorded and, in our opinion, the
¡§threshold rules¡¨ (see cited authority below) are being and have been ignored
and therefore all short positions in EIGH stock must be closed out immediately
by those broker-dealers and clearing firms carrying short EIGH positions. So
far, EIGH has been advised by its shareholders that not less than 1.3MM shares have
been requested from broker-dealers and not delivered, an amount twice the allowable
limit according to RegSHO and associated FINRA Rule 4320. Again, as the time
allocated for adherence to this FINRA Rule, and the number of shares permitted to
avoid the threshold list, have been exceeded (unless the SEC or FINRA were to tell us
differently), the Rule requires those EIGH short positions to be closed out
immediately.
As previously relayed, the following has been identified though shareholder and
certified record confirmation:
„h 146 shareholders (one sixth of the total) own 148.8MM shares. This is greater
than the total issued and outstanding EIGH stock.
„h Shareholder stock purchases have not been recorded on the certified
transaction or shareholder lists.
„h Shares were exchanged, traded or transferred by several brokerage firms
during the period of the Company¡¦s trading suspension, November 4, 2010 to
November 18, 2010.
„h Brokerage firms transacted to themselves, the sale and purchase stock,
converting old certificates into new multiple certificates on the same day.
These transactions were not recorded in the trading day volume.
„h Over defined periods, the number of shares purchased and recorded by
brokerage firms were greater than the recorded trading volume.
„h Brokerage firms are advising that the delivery time for certificates will be up
to 8 weeks, cannot be delivered, cannot find the certificates or assert that not
needed (since can transfer EIGH stock electronically even though it is a
physical certificate only traded stock and is not DTCC eligible).
„h The contemplated merger is on-going but cannot be fairly concluded for
shareholders and investors alike until all certificates are received.
„h Trading volume has been significantly less than the transactional volume in
over 60% of the trading days over the periods August 22, 2010 to September
30, 2010, and October 1, 2010 to December 31, 2010.
The market, public and regulatory authorities have now been presented with evidence
of shareholders who have demanded that their brokers issue certificates for their
holdings, evidence of non-recorded transactions, missing certificates and, in our
1 0 4 3 2 B a l l s F o r d R o a d S u i t e 3 0 0 M a n a s s a s V i r g i n i a 2 0 1 0 9
opinion, documented practices that evade the applicable market rules and regulations.
EIGH believes the situation and activities presented violate Nevada state law as well
due to the non delivery of shareholder certificates (NRS 78.235 cited below) and the
spirit, if not the letter, of federal law and regulations. We call on all authorities to
begin an investigation into what we are convinced is an injustice and ask that all
shareholders who have requested certificates which have not be delivered to contact
their broker-dealers to inform them of their obligations under Rule 15c3-3 (as well as
FINRA Rule 4320) and insist they close out their naked short position and deliver the
requested certificates immediately as applicable Rules require.
We submit that the use of Rule 15c3-3 and non-delivery of shareholder certificates
associated with naked short positions, and the applicable law has legal precedent, the
most well known of these being the case of CMKX (May 2010) resulting in a
settlement of nearly $4B USD. (See link below.)
Summary
Under Nevada state law 78.235, quoted below, every shareholder has the right to request
delivery of their rightfully owned certificates in a corporation. Under SEC Rule 13c3-
3 as well, every shareholder is entitled to delivery of their requested certificates. As
the number of certificates requested and not delivered account for more than
1,214,000 shares and have been requested more than 30 days ago, EIGH believes the
broker-dealers and or clearing firms must provide the certificates or close out all
associated short positions immediately. As the number of shares not delivered is
greater than 0.5% of the total issued¡Xand for more than 35 days--the short position
held in EIGH stock by the broker-dealers and clearing firms must be recorded and the
stock listed on the ¡§threshold securities¡¨ list as described below. Very specifically, in
our opinion, the broker-dealers and clearing firms must comply with FINRA Rule
4320, whereby all failures to deliver must be closed out and covered immediately.
Said another way, we believe the request for delivery of these certificates has been
greater than the time allowed and thus failure to deliver by the broker-dealers shorting
EIGH stock has been demonstrated, the short positions must be closed out
immediately. Furthermore, this situation has been on-going for over 12 months and, in
our view, is considerably outside all allowable time frames for acceptable delivery of
requested certificates. Rules 17a-3 and 17a-4 allows for a reasonable time to permit
delivery of certificates to the rightful owner. Reasonable time, in our opinion, has
been exceeded by all broker-dealers and clearing firms currently holding naked short
positions in shares of EIGH. Furthermore, we submit that (i) non-delivery of
certificates has been proven and, thus, (ii) failure to deliver has been demonstrated,
and thus SEC Rule 15c3-3 applies immediately.
1 0 4 3 2 B a l l s F o r d R o a d S u i t e 3 0 0 M a n a s s a s V i r g i n i a 2 0 1 0 9
Very simply, more than 1,214,000 shares have been requested for delivery and
not delivered for over 30 settlement days, in contravention of SEC Rule 15c3-3
and FINRA Rule 4320. We believe that more than 0.5% of the total issued stock has
been naked shorted, not recorded or reported for over 35 days, as proven through
shareholder documented non-delivery by broker dealers of physical certificates. All
broker-dealers and clearing firms who have not delivered the certificates are required
(see cited authority, not just our opinion), under applicable SEC Rules and
Regulations, at minimum Rule 15c3-3, to close out the position and to provide the
requested certificates. As the number of shares requested exceeds 0.5% of the total
issued shares of EIGH, the broker-dealers have to conform to RegSHO as well as
FINRA Rule 4320 for OTC stock, EIGH publicly placed on the threshold list and, as
the failure to deliver exceeds 35 days according to the associated Rules, the short
EIGH positions must be immediately closed out.
The Rules Contravened by Broker-Dealers Trading EIGH Shares
8000 Inc. was incorporated in Nevada in 2007. Nevada law NRS 78.235 mandates
that each shareholder has the right to request and receive certificates of ownership
from the company for their stock, especially critical for issuers whose shares are not
DTC (electronically transferrable) at this time. The statute states specifically that
¡§¡Kevery stockholder is entitled to have a certificate, signed by officers or agents
designated by the corporation for the purpose, certifying the number of shares owned
by him in the corporation¡K¡¨
Consequently, EIGH has documented complaints from a significant number of
shareholders who have been attempting to obtain physical certificates from their
brokers since January 2011 but have been unable to do so. The litany of excuses being
given by various broker-dealers for the refusal to honor their customers¡¦ request for
certificates continues ad nauseum. All stock transfer problems which exist at this
time are, we believe, between the broker-dealers and the shareholders. (See
shareholder statements below and the multiple reasons given by broker¡Vdealers which
are not conforming to this simple and legal request.) Accordingly, we are convinced
that, due to the time taken, this is clearly failure to deliver on EIGH stock by the
broker-dealers.
In our opinion, the most alarming problems are represented by those shareholders
who have been requesting certificates from their brokers since EIGH¡¦s first
announcement of a proposed merger nearly 3 months ago. The non-delivery and nonrecording
of certificate transactions by broker-dealers can be traced back through
shareholders account records and the Transfer Agent¡¦s reports, to 2009. Here is a
1 0 4 3 2 B a l l s F o r d R o a d S u i t e 3 0 0 M a n a s s a s V i r g i n i a 2 0 1 0 9
sampling of excuses being given to shareholders as reasons for the broker-dealers¡¦
purported inability to obtain a physical cert:
¡§EIGH is traded electronically and thus no paper certificates can be
issued.¡¨
¡§It will take us another 6 to 8 weeks to obtain.¡¨
¡§This stock purchase was a book entry only and no certificate is
available.¡¨
¡§I have been instructed we are no longer pulling certificates for any
security and there is nothing I can do. You need to contact the company.¡¨
¡§We can¡¦t locate your EIGH certificates.¡¨
¡§You will have to contact the Company as they are resp0onsible for
issuing certificates.¡¨
¡§We will not issue your certificates until we hear from the Transfer Agent
or the Company.¡¨
¡§We do not need to issue certificates; we can undertake the share
exchange electronically in-house for you.¡¨
Each quoted statement above is taken verbatim from a shareholder¡¦s letter or from a
broker¡¦s written response to a shareholder¡¦s request for a certificate.
Please note, EIGH is a paper (i.e., a certificate-traded) stock. It is not DTC-eligible for
electronic trading between brokers, the consequence of which is that all transactions
under applicable standards must be recorded and booked by date and by certificate
number on the affected broker-dealer¡¦s transactional records. Therefore, we believe
categorically that ALL EIGH share transactions must be conducted by physical
certificate form and, thus, non-delivery of a shareholder¡¦s duly-owned certificate is
not possible, unless naked short positions are in place.
The following quotes are direct quotes taken from both the SEC website and The
Securities Lawyer Desk Book, 2011.
SEC Rule 15c3-3
a. ¡§¡KPhysical possession or control of securities.
A broker or dealer shall promptly obtain and shall thereafter maintain the physical
possession or control of all fully-paid securities and excess margin securities carried
by a broker or dealer for the account of customers.
1 0 4 3 2 B a l l s F o r d R o a d S u i t e 3 0 0 M a n a s s a s V i r g i n i a 2 0 1 0 9
A broker or dealer shall not be deemed to be in violation of the provisions of
paragraph (b)(1) of this section regarding physical possession or control of
customers' securities if, solely as the result of normal business operations, temporary
lags occur between the time when a security is required to be in the possession or
control of the broker or dealer and the time that it is placed in his physical possession
or under his control, provided that the broker or dealer takes timely steps in good
faith to establish prompt physical possession or control. The burden of proof shall be
on the broker or dealer to establish that the failure to obtain physical possession or
control of securities carried for the account of customers as required by paragraph
(b)(1) of this section is merely temporary and solely the result of normal business
operations including same day receipt and redelivery (turnaround), and to establish
that he has taken timely steps in good faith to place them in his physical possession
or control.
Delivery of securities. Nothing stated in this section shall be construed as affecting
the absolute right of a customer of a broker or dealer to receive in the course of
normal business operations following demand made on the broker or dealer, the
physical delivery of certificates for:
Fully-paid securities to which he is entitled¡K¡¨
FINRA Rule 4320
¡§¡K4320. Short Sale Delivery Requirements [Please check to make sure this is a
direct quote and indicated by ¡K..s any deletions between quoted passages.]
(a) If a participant of a registered clearing agency has a fail to deliver position at a registered clearing
agency in a non-reporting threshold security for 13 consecutive settlement days, the participant shall
immediately thereafter close out the fail to deliver position by purchasing securities of like kind and
quantity.
(1) Provided, however, if a participant of a registered clearing agency has a fail to deliver position at a
registered clearing agency for thirty-five consecutive settlement days in a non-reporting threshold
security that was sold pursuant to SEC Rule 144, the participant shall immediately thereafter close out
the fail to deliver position in the security by purchasing securities of like kind and quantity. The
requirements in paragraph (b) shall apply to all such fails to deliver that are not closed out in
conformance with this paragraph (a)(1).
(b) If a participant of a registered clearing agency has a fail to deliver position at a registered clearing
agency in a non-reporting threshold security for 13 consecutive settlement days (or 35 consecutive
1 0 4 3 2 B a l l s F o r d R o a d S u i t e 3 0 0 M a n a s s a s V i r g i n i a 2 0 1 0 9
settlement days if entitled to rely on paragraph (a)(1)), the participant and any broker or dealer for which
it clears transactions, including any market maker that would otherwise be entitled to rely on the
exception provided in paragraph (b)(2)(iii) of Rule 203 of SEC Regulation SHO, may not accept a short
sale order in the non-reporting threshold security from another person, or effect a short sale in the nonreporting
threshold security for its own account, without borrowing the security or entering into a bonafide
arrangement to borrow the security, until the participant closes out the fail to deliver position by
purchasing securities of like kind and quantity and that purchase has cleared and settled at a registered
clearing agency.
(c) If a participant of a registered clearing agency reasonably allocates a portion of a fail to deliver
position to another registered broker or dealer for which it clears trades or for which it is responsible for
settlement, based on such broker or dealer's short position, then the provisions of this Rule relating to
such fail to deliver position shall apply to the portion of the fail to deliver position allocated to such
registered broker or dealer, and not to the participant.
(d) A participant of a registered clearing agency shall not be deemed to have fulfilled the requirements of
this Rule where the participant enters into an arrangement with another person to purchase securities as
required by this Rule, and the participant knows or has reason to know that the other person will not
deliver securities in settlement of the purchase.
(e) For the purposes of this Rule, the following terms shall have the meanings below:
(1) the term ¡§market maker¡¨ has the same meaning as in Section 3(a)(38) of the Exchange Act.
(2) the term ¡§non-reporting threshold security¡¨ means any equity security of an issuer that is not
registered pursuant to Section 12 of the Exchange Act and for which the issuer is not required to file
reports pursuant to Section 15(d) of the Exchange Act:
(A) for which there is an aggregate fail to deliver position for five consecutive settlement days at a
registered clearing agency of 10,000 shares or more and for which on each settlement day during the
five consecutive settlement day period, the reported last sale during normal market hours for the
security on that settlement day that would value the aggregate fail to deliver position at $50,000 or more,
provided that if there is no reported last sale on a particular settlement day, then the price used to value
the position on such settlement day would be the previously reported last sale; and
(B) is included on a list published by FINRA.
A security shall cease to be a non-reporting threshold security if the aggregate fail to deliver position at a
registered clearing agency does not meet or exceed either of the threshold tests specified in paragraph
(e)(2)(A) of this Rule for five consecutive settlement days.
(3) the term ¡§participant¡¨ means a participant as defined in Section 3(a)(24) of the Exchange Act, that is
a FINRA member.
(4) the term ¡§registered clearing agency¡¨ means a clearing agency, as defined in Section 3(a)(23)(A) of
the Exchange Act, that is registered with the SEC pursuant to Section 17A of the Exchange Act.
(5) the term ¡§settlement day¡¨ means any business day on which deliveries of securities and payments of
money may be made through the facilities of a registered clearing agency.
(f) Pursuant to the Rule 9600 Series, the staff, for good cause shown after taking into consideration all
relevant factors, may grant an exemption from the provisions of this Rule, either unconditionally or on
specified terms and conditions, to any transaction or class of transactions, or to any security or class of
1 0 4 3 2 B a l l s F o r d R o a d S u i t e 3 0 0 M a n a s s a s V i r g i n i a 2 0 1 0 9
securities, or to any person or class of persons, if such exemption is consistent with the protection of
investors and the public interest...¡¨
A number of EIGH shareholders have recently requested physical delivery of their
fully paid stock, requests to date neither honored nor delivered. We submit, as
outlined above, that SEC Rule 15c3-3 requires the physical EIGH certs be delivered
and any short positions must be closed out immediately. Due to the number of
shares involved, so far not less than 1,214,000, EIGH should be, and should have
been, in our opinion, placed on the RegSHO ¡§threshold list¡¨ (see below) under the
terms of FINRA Rule 4320. This listing and regulated recording of short positions
in EIGH has, in our opinion, been avoided through already identified trading
practices pursuant to which broker-dealers neither recorded nor addressed naked
short positions as per the applicable rules herein outlined.
RegSHO Summary (See especially Asset Manager references below)
Generally, a broker-dealer must mark all sales of equity securities as ¡§short,¡¨ ¡§long¡¨
or ¡§short exempt¡¨
„h Generally, a sale is ¡§short¡¨ if the seller does not ¡§own¡¨ the securities or will
settle the trade with borrowed securities.
Rules regarding ownership, aggregation, etc.
„h A sale may be marked ¡§long¡¨ only if the seller is deemed to ¡§own¡¨ the
security and either:
„h The security is in the Broker Dealer¡¦s physical possession or control; or
„h It is reasonably expected that the security will be in the physical possession or
control of the broker-dealer no later than the settlement of the transaction¡K¡¨
A broker-dealer may not effect a short sale in an equity security unless the brokerdealer
has:
„h Borrowed the security, or entered into a bona fide arrangement to borrow the
security (e.g., a pre-borrow); or
„h ¡§Reasonable grounds¡¨ to believe that the security can be borrowed so that it
can be delivered on the date delivery is due¡K¡¨
¡§Reasonable grounds¡¨ to believe a security can be borrowed may include:
1 0 4 3 2 B a l l s F o r d R o a d S u i t e 3 0 0 M a n a s s a s V i r g i n i a 2 0 1 0 9
„h Security is on ¡§easy to borrow¡¨ lists (but not ¡§hard to borrow¡¨ lists) ¡V if the
information is less than 24 hours old and securities on the list are so readily
available that it would be unlikely that a fail would occur; and
„h Customer provides assurances that it can obtain the security from an
identified source in time to settle the trade ¡V unless the customer¡¦s prior
assurances resulted in fails¡K
All broker-dealers are subject to a ¡§locate¡¨ requirement, subject to these limited
exceptions:
„h For example, does not apply to certain sales of securities the seller owns if
the broker-dealer has been reasonably informed the seller intends to deliver
as soon as all restrictions on delivery have been removed (e.g., restricted
stock, stock to be received in connection with an exercised warrant or option)
„h If the securities are not received within 35 days after trade date, broker-dealer
must borrow the securities or close out the transaction by purchasing the
securities
Additional delivery requirements apply for ¡§threshold securities,¡¨ namely equities of
certain reporting issuers where, for 5 consecutive settlement days there are aggregate
fails to deliver at a registered clearing agency of (i) at least 10,000 shares and (ii) at
least 0.5% of the issuer¡¦s shares outstanding, and the security is on a list
disseminated by an SRO (a self-regulatory organization).
Finally, while securities of non-reporting issuers (such as EIGH) are not ¡§threshold
securities,¡¨ the securities of such issuers are subject to similar requirements under
NASD Rule 4320.
EIGH believes its stock has been traded short for over 12 months and those shorts
have failed to deliver for more than 30 days. As outlined above, SEC Rule 15c3-3
and FINRA Rule 4320 now apply and the short position must be closed out, in
EIGH¡¦s opinion, due to certain broker-dealers and/or clearing firms contravening
the very laws and regulations they are subject to--and here applicable.
1 0 4 3 2 B a l l s F o r d R o a d S u i t e 3 0 0 M a n a s s a s V i r g i n i a 2 0 1 0 9
Supporting References:
taft.law.uc.edu/CCL/34ActRls/rule15c3-3.html
finra.complinet.com/en/display/display.html?rbid=2403&element_id=9398
ftp.resource.org/courts.gov/c/F2/925/925.F2d.1469.36-3_1.html
camrhon.proboards.com/index.cgi?board=safe&action=print&thread=4220
www.dlapiper.com/sec_settles_its_first_two_naked_short_selling_cases/
EIGH will continue to keep its shareholders apprised as events unfold. Also keep updated on 8000 Inc.
developments on Facebook or Twitter.
www.brand8000.com
www.8000incgroup.com
www.8000inc.net
-ENDSThis
news release contains forward-looking statements that are subject to certain risks and
uncertainties that may cause actual results to differ materially from those projected on the basis of
such forward-looking statements. The words "estimate," "project," "intends," "expects," "believes,"
and similar expressions are intended to identify forward-looking statements. Such forward-looking
statements are made based on management's beliefs, as well as assumptions made by, and
information currently available to, management pursuant to the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995. For a more complete description of these and other
risk factors that may affect the future performance of 8000 Inc., see published disclosure documents
at www.OTCMarkets.com. Readers are cautioned not to place undue reliance on these forwardlooking
statements, which speak only as of the date made and the Company undertakes no obligation
to disclose any revision to these forward-looking statements to reflect events or circumstances after
the date made or to reflect the occurrence of unanticipated events.