FINRA Responds to Investors Affected in the MMTLP Aftermath

Yesterday we published a piece highlighting FINRA and the MMTLP scandal, deeming it one of the biggest Wall Street frauds in modern finance history.

The MMTLP community got LOUD and managed to gain the attention of the self-regulatory institution FINRA.

That’s right, FINRA heard you and has released an extensive article responding to retail’s concerns, though unfortunately it doesn’t justify the manipulation and blatant theft that occurred to MMTLP shareholders.

In an FAQ, FINRA says it determined that MMTLP had a high probability of undergoing an extraordinary event and it could have caused or had the potential to cause major disruption to the marketplace or significant uncertainty in the settlement and clearance process.

Investors speculate a short squeeze could have been that extraordinary event that could have potentially swayed the market.

In this article, I’m going to include some of FINRA’s responses from their official page.

Why did FINRA halt trading in MMTLP?

“FINRA is permitted under its rules to impose a quoting and trading halt in an OTC equity security where FINRA determines that an extraordinary event has occurred or is ongoing that has had a material effect on the market for the security or has caused or has the potential to cause major disruption to the marketplace or significant uncertainty in the settlement and clearance process.

FINRA made such a determination for MMTLP and halted trading on December 9.

Among FINRA’s concerns were the facts that, after December 12, the MMTLP shares would cease to be DTC-eligible; MMTLP shares would be cancelled at the time of the distribution (i.e., December 14); and Next Bridge common stock was not expected to be DTC-eligible—raising uncertainty regarding how transactions executed after December 8 would settle in an orderly manner in relation to these dates.

Had MMTLP continued trading after December 8, there was the possibility that investors buying MMTLP during that time period may not have realized that those shares were about to be cancelled by Meta Materials, that they may not receive MMTLP shares before they were cancelled, and that they would not be recorded on December 12 as MMTLP holders eligible to receive Next Bridge common stock in the distribution.”

Why did FINRA halt trading on December 9 if shareholders as of December 12 were entitled to receive the Next Bridge distribution?

“FINRA halted trading in MMTLP on Friday, December 9, because securities transactions typically must settle within two business days in accordance with SEC rules.

This means that trades in MMTLP executed on December 8 typically would settle on December 12, while trades executed on December 9 or December 12 typically would not settle until after December 12.

This is important because a seller ceases to be a holder of shares and a purchaser becomes a holder of shares only after a transaction settles.

Therefore, for purposes of the Next Bridge / MMTLP corporate action, only those trades in MMTLP that were executed on or before December 8 typically would have settled in time to establish the purchaser as a new holder of the shares as of December 12.

In addition, after December 12, the MMTLP shares would no longer be DTC-eligible (and the Next Bridge shares were not expected to be DTC-eligible).

This means that, after December 12, any unsettled trades in MMTLP would have needed to be handled through broker-to-broker processes outside of DTC.

Thus, there was uncertainty about whether trades executed after December 8 would settle in an orderly manner, including whether they would settle before the MMTLP shares were cancelled on December 14.”

What happens if short positions in MMTLP were not closed out before FINRA halted trading?

“Broker-dealers have operational conventions in place for adjusting short positions following a corporate action. 

In this instance, FINRA understands that firms have adjusted short positions in MMTLP to reflect an equal size short position in Next Bridge (i.e., an account with a short position of 100 shares of MMTLP now reflects a short position of 100 shares of Next Bridge). 

In other words, the corporate action did not compel short positions to be closed or extinguish any obligations associated with outstanding short positions.”

Do FINRA’s Statements Justify What Happened?

These are just but a few statements made by FINRA in response to retail’s concerns in MMTLP.

Investors’ money is still missing after regulators delisted MMTLP in exchange for private stock of company Next Bridge Hydrocarbons.

But the entire promise by Next Bridge has also been questioned.

Next Bridge Hydrocarbons released the following statement regarding the MMTLP halt.

“We recognize that some of our shareholders who owned Meta’s Series A Non-Voting Preferred Stock prior to the Spin-Off might have been affected by FINRA’s halting of the trading in that stock while the Company was still wholly owned and controlled by Meta.

The current board and officers of the Company have no information from FINRA regarding the Trading Halt other than the information in the public notice published by FINRA announcing the Trading Halt.

Further, FINRA did not provide any advance notice to the Company or Meta prior to its initiating the Trading Halt.

While we were not involved in the Trading Halt, we certainly empathize with anyone adversely affected by the Trading Halt and are assessing the matter.

The Company believes that our primary means of delivering shareholder value is to develop our interests in the Orogrande Basin, and we remain focused on this objective.”

No further statement has been released since.

Investors Urge FINRA to relist MMTLP

Investors have come up with a solution — to temporary relist MMTLP and allow shareholders to trade the days that were taken from them in the market.

This would allow shareholders to at the very least take their money out of the trade.

If FINRA and parties involved cannot come up with a solid solution to the blatant theft, bigger consequences may head their way.

You can read the full statements by FINRA here.

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