Alertpay (Alertpay.com)

AlertPay, a privately owned and managed company founded in 2004, is a rapidly growing leader in online payments. The service provides individuals and businesses the ability to send and receive payments online without exposing their personal or financial information.

AlertPay is a Canadian Registered Corporation and a United States Registered Corporation and complies with the regulations of the OSFI (Office of the Superintendent of Financial Institutions Canada), FINTRAC (Financial Transactions and Reports Analysis Centre of Canada) and FinCEN (Financial Crimes Enforcement Network).

We fully integrate the principle of Know Your Customer (KYC) to ensure a safe and secure system for all our members yet we respect your privacy fully, and stand by our Privacy Policy to ensure your identity is secured with us.

All monies deposited with AlertPay are FDIC (Federal Deposit Insurance Corporation) and CDIC (Canada Deposit Insurance Corporation) pass-through insured in the U.S. and Canada, and are held with federally chartered and regulated banks.

Company Facts and Figures

AlertPay Inc
Founded	2004
Employees	45+
Location	Montreal, Quebec
Jobs	Available jobs
AlertPay.com
Accounts(as of August, 2008)	2.1 million
Currencies Supported	22
Countries Supported	206
Localized Banking	46 countries

Company Headquarters

AlertPay Inc. General Information 5200 De La Savane, Suite 220 Montreal QC H4P 2M8 Canada(map)

Liberty Reserve (Libertyreserve.com)

Liberty Reserve is an online payment system and provider of digital gold currency (LR-gold). They are an offshore company incorporated in Costa Rica, launching their USD backed digital currency (LR-USD) in 2002 and they also have a Euro backed digital currency (LR-EUR). Their gold backed digital currency was launched in 2008. Liberty Reserve is a member of the Global Digital Currency Association (GDCA), a voluntary regulatory body in the industry.

Today in any corner of the Internet one can hear the rumors that LibertyReserve is supported by some light-fingered people. Actually the Internet old-timers have started to guess that the nightmare of all the FBI agents – LibertyReserve payment system that allows to transfer money worldwide, has some connection with Eastern Europe, namely with Russia or Ukraine. The behavior of the immigrants from the former USSR can be recognized due to the secrecy and absence of any publicity of the company and suspicious awareness of the niches hiding those shady clients that were often served by the banal Russian mob.  

To understand the situation we decided to address the dusty archives of the Internet and go back to the beginning of the 2000, the time when the virtual economy has just appeared. We were attracted by the interview (http://web.archive.org/web/20030416025128/planetgold.com/interview.asp?SPID=08248138) 

in which some Arthur Budovsky, owner of Liberty Reserve payment system was confiding his secrets to planetgold.com.

planetgold: Please tell us about Liberty Reserve.

Arthur: Liberty Reserve was originally an escrow service for our private clients engaged mostly in the international import and export business. We have been operating for about three years, and only recently decided to expand Liberty Reserve into a digital currency.

The next question to the owner of LR was about his personality and the answer confirms all the hypotheses and guesses:

Arthur: I am a single child of a German mother and Ukrainian father. My parents immigrated to the United States about 15 years ago from Ukraine.

It is interesting to note that Ukrainian origin of LibertyReserve is rather alarming since a great number of the carders came from this country.  

Further Arthur Budovsky tells numerous compliments to E-gold payment system.

Arthur: I’d like to add that I was pleasantly surprised at the revolutionary idea behind e-gold. I must admit that it was looking at e-gold that gave us the final push to realize that we were doing something similar. We just never realized, until we saw e-gold, that someone would have the audacity to compete with the Federal Reserve, to claim that their money is better money.

It is still unknown why a primitive e-gold has attracted the owner of LibertyReserve. The only exception is that it was the first one though at that time webmoney has already appeared. Probably Arthur Budovsky admired the ability of e-gold to cover the financial operations supporting child porn.  

Supporting the strategy of LibertyReserve that is probably built on the principle “money is everything and no matter who sends it” Arthur Budovsky tells the following:

Arthur: Because we’re based in Nevis, you have to be a murderer, kidnapper, or drug kingpin for us to be forced to divulge any sensitive information. 

Logically we can conclude that LibertyReserve is ready to work with everybody who funds the system expect the dregs of society mentioned above.  

The facts that became known after the finding of the interview have already disturbed the whole Internet. One can see the endless discussions on the forums that do not stop even for a moment. Theoretically the recent problems in work with LibertyReserve and the dropped trust of the customers to the system may influence the exchange rate of LibertyReserve regarding WebMoney or any other currency. 

However, there is some additional information about the shady biography of LibertyReserve that is being checked at the moment. We can say only one thing: be careful with the payment processor the owner of which comes from the country that brings up the carders. There are too many black spots on the biography of LR and the absence of the precise contacts on the site of the payment system make LibertyReserve too suspicious. 

THE ECONOMICS OF THE PRIVATE MARKET

Differences among Firms Issuing in the Public, Private, and Bank Loan Markets

To summarize the preceding discussion, borrowers’ access to debt markets is apparently closely related to firm size, with size mainly a proxy for the degree of information problems that borrowers pose for lenders. Broadly speaking, very information-problematic companies without collateral may be unable to borrow even from an information-intensive lender.  53  Such companies, which are typically small, may be forced to rely on venture capital or on other forms of equity finance. Small firms that are less information problematic or those that can provide collateral are confined largely to the bank and finance company loan markets for debt financing. Even less problematic firms, which are typically medium-sized, also have access to the private placement market.  Large corporations can borrow in any of these markets and in the public bond market. Besides size of the firm, other characteristics, especially those related to the nature and size of the financing, are important in determining a firm’s choice of credit market.

Empirical evidence supports these assertions.  We analyzed the characteristics of firms classified according to a hierarchy of access to the public, private, and bank loan markets and found a pattern of firm sizes and other characteristics consistent with the explanation of borrowers’ choice of market that focuses on the different information problems posed by different firms. However, borrower size is also correlated with issue size and with observable borrower risk, so the observed difference in sizes of firms with different levels of access is also potentially consistent with explanations based on issuance costs or risk. To evaluate the relative importance of the three explanations, we looked at several other firm characteristics that are plausibly correlated either with the degree of information problems or with observable risk.

We employed an indirect approach in identifying the access of actual firms to the three markets, since access is not directly observable. We combined information on corporations in COMPUSTAT with data on private placements from the IDD database. 54  Corporations in COMPUSTAT with a long-term credit rating are assumed to have access to the public bond market, inasmuch as they must have issued corporate bonds at some time to have received a bond rating; those without a rating are assumed to lack access to the public market. 55  In 1989, 1,149 corporations in COMPUSTAT had ratings and thus constitute the public market group, that is, those corporations with the ability to raise funds in public debt markets. 56  To form a group of firms with access to the private placement market but not to the public market, companies listed in the IDD private placement database as issuing in 1989 were matched with those in COMPUSTAT that had no credit rating.  The cross-matching of the two databases yielded a total of 113 such companies, which make up what is called the private market group. Those firms in COMPUSTAT that in 1989 had neither a credit rating nor outstanding long-term debt but that did have some short-term debt outstanding were assumed to be constrained to borrow only from banks (or other, bank-like intermediaries such as finance companies); this collection of firms is called the bank group and contains 472 members.  Finally, those firms in COMPUSTAT that had neither a credit rating nor any outstanding debt (short or long term, except for trade debt) in 1989 were assumed to be shut out of all three debt markets. This collection of firms is called the equity group and consists of 613 firms.

This method of classifying firms is far from perfect for various reasons. First, and perhaps most important, implicit in the definition of each group is an assumption that a company cannot tap a particular debt market if it has not actually done so. This assumption is clearly not correct in all cases. For example, several firms classified in the bank group probably could have issued in the private or public bond markets on standard terms but simply chose not to do so. Firms that issued private placements before 1989 but not in 1989 are less likely to fall in the bank group because such firms probably still showed long-term debt on their balance sheets in 1989. Second, according to the bank group definition, the presence of shortterm debt on the balance sheet indicates the firm’s ability to tap the bank loan market. However, COMPUSTAT’s definition of short-term debt includes loans from various lenders: loans payable to stockholders, officers of the company, parents, subsidiaries, and brokerage companies as well as loans payable to banks, finance companies, and other intermediaries. Our aim is to include in the bank group all firms that have access to banks or bank-like intermediaries, but several firms without such access were probably misclassified (they should be in the equity group) because they had loans outstanding from stockholders or other non-intermediary sources. Third, many equity group firms may have had bank lines of credit that were simply unused at the end of their 1989 fiscal years. 57  Fourth, the presence of a credit rating in COMPUSTAT implies only that a firm once had access to the public bond market, not that it had access in 1989.

The private market, bank, and equity groups are also undoubtedly biased selections of firms because only those firms that appear on the COMPUSTAT tapes have been selected. COMPUSTAT’s bias toward large firms means that the firms in these three groups are likely larger on average than corresponding groups of firms for the economy as a whole. Other characteristics may show some bias as well. However, the bias probably makes observed differences across groups less dramatic. Consequently, any differences found in the analysis are unlikely to be the result of this sampling bias.

Finally, the criteria used to define the four groups focus on the characteristics of the firm, not on the characteristics of the debt issue. As mentioned earlier, some firms that could readily issue straight debt in the public market may be constrained to the private market for more complicated issues such as some leases or project financings. We address this issue later in this section.

Despite these classification problems and biases, we believe our method of classifying firms is on the whole roughly accurate and that the distinctions that are revealed are economically meaningful.

The firm characteristics examined include the size of the firm, measured by total assets, sales, and market value of equity. We also looked at the three-year growth rate of sales, return on assets, (measured by operating income before depreciation divided by total assets), research and development (R&D) expenditures as a percentage of sales, the fixed-asset ratio, the ratio of total debt to assets, and the interest coverage ratio.

Differences in firm size across groups, measured by total assets, total sales, or market value of equity, are pronounced (table 5). Firms in the public market group are much larger than firms in the private market group, which in turn are very much larger than firms in the bank or equity groups. For example, mean assets of companies in the public market group are $6.3 billion, considerably larger than the mean of $3.4 billion for firms in the private market group. The means for the bank and equity groups are even smaller at $40 million. These differences in means are all statistically significant at the 1 percent level. The medians have a similar relationship among the three groups. 58

Table 5 presents statistics for three other variables that are plausibly correlated with the degree of information problems posed by firms:  the ratio of R&D expenditures to sales, the fixed-asset ratio, and a three-year average growth rate for sales. Many economists have used R&D expenditures as a proxy for the potential severity of agency problems between shareholders and debtholders. 59  The risk implicit in research and development cannot be easily monitored by outsiders, including debtholders, as a firm with large R&D expenditures has wide scope for discretionary behavior. For example, such a firm may require intensive monitoring by debtholders to ensure that it is working on a mundane research project with a moderate but fairly sure payoff rather than a longshot with a high payoff. Intensive monitoring may be required to ensure that the firm is not underinvesting in projects with positive net present values (Myers, 1977). R&D-intensive companies, being inherently more information problematic than other firms, may therefore find banks more receptive to providing financing because banks can monitor more intensively than lenders in the public markets. The evidence provided by this variable on the intensity of monitoring in the private placement market generally conforms with our hypothesis about differences in the degree of information problems across the four groups. Mean R&D intensity is higher in the private placement market than in the public market, although the medians are about the same. The significantly higher R&D intensity for the bank and equity groups than that for the private market group indicates that issuers in the former groups tend to require significantly more monitoring by lenders than do issuers of private placements.

A similar hierarchy of information problems is suggested by the fixed-asset ratios. Firms with a large percentage of fixed assets may have fewer information problems than other firms for two reasons. First, they may be able to offer some of their fixed plant and equipment as collateral to potential creditors. Second, monitoring the sale of fixed assets or their transformation from one use to another may be easier than it is for more liquid assets. The more of a firm’s assets that are fixed, therefore, the smaller may be the scope for shareholders to engage in wealth-transferring investment projects.

As one moves from the public to the private to the bank and finally to the equity group, the decline in fixed-asset ratios implies that information problems increase. The higher fixed-asset ratio for the bank group compared with that for the equity group suggests that a small firm’s ability to provide fixed assets as collateral may be a factor in its ability to obtain bank loans.

Sales growth rates may also be correlated with information problems in that high growth may be a sign of entry into new lines of business or of being in lines of business that are in rapidly developing markets. Both situations offer more scope for agency problems to surface during the life of a debt contract. The evidence from this variable, however, is weaker than that from R&D intensity and the fixed-asset ratio: The mean is significantly smaller for firms in the public group than for those in the private group, a finding consistent with private issuers requiring more monitoring; the median is smaller as well. Values for the private group do not differ significantly from those for the bank and equity groups, however, and the medians display an uneven pattern.

On the whole, the results for the three variables conform with our hypothesis about the differing degree of information problems posed by the four groups of firms. They also accord with the remarks of market participants, who asserted that buyers of private placements, especially the larger life insurance companies, engage in organized and active monitoring, although their monitoring programs are typically not so intensive as those of banks.

Average return on assets and two measures of leverage, total-debt-to-asset ratios and interestcoverage ratios, are indicators of observable credit risk. As noted in part 1, section 1, information problems and observable credit risk are separate concepts, and in principle there is no reason that the pattern of credit risk should be different in information-intensive and non-informationintensive markets. In practice, however, both are related to borrower size.

Caution should be used in interpreting the differences between the bank and equity groups and the other groups in the measures of leverage, as firms in the former groups either had no long-term debt outstanding or no debt at all on their balance sheets (according to COMPUSTAT and ignoring trade debt). Thus, zeros will appear in either the numerator or the denominator of the ratios for many equity group firms, making the ratios poor measures of the riskiness of these firms and influencing the mean and median values for the groups.

A comparison of ratios for the public and private placement groups indicates that differences in credit risk may not be as great as differences in information problems. Both the mean and median debt-to-asset ratios and the return on assets are similar for the two groups. Median interestcoverage ratios are also similar, but the mean interest-coverage ratio is significantly higher for the public group. The implication is that private placements issuers may be somewhat riskier as a class, but not a great deal riskier, than public bond issuers. Comparing ratios for the private placement and bank groups, the means of the three ratios differ significantly; the medians also differ as predicted except for the debt-to-asset ratio. It appears that members of the bank group pose larger observable credit risks for lenders. 60

On the whole, these results accord well with the remarks of market participants, who often described private issuers as ‘‘solid companies’’ that have taken a major step in ‘‘graduating’’ from having access only to the bank loan market but that are typically ‘‘not quite ready’’ to issue in the public bond market. Some investors also indicated that their historical experience of loss on private placements and public bonds was virtually identical within credit-rating categories. The statistics presented here and the remarks of participants offer little support for a hypothesis that low observable credit risk is the primary requirement for a borrower to have access to the public market, instead of only the private placement and bank loan markets. The existence of the public junk bond market and the fact that contract terms, especially covenants, and lender due diligence and monitoring activities differ across the public and private markets for borrowers with the same bond ratings also imply that information problems are a more important determinant of market access than observable credit risk.

In sum, if the groups of firms analyzed here are representative of borrowers’ access to debt markets, then their characteristics are broadly consistent with our explanation of the factors influencing borrowers’ choice of debt market.  Corporations able to borrow in the public markets tend to be large and to pose relatively few information problems for lenders; thus they can borrow from a wide variety of lenders. Companies issuing in the private but not the public market are smaller and appear to be more information problematic; however, they apparently do not represent substantially greater observable credit risks. Such companies must be served by information-intensive lenders. The companies confined to the bank loan market or to equity markets are much smaller, are more information problematic, and pose larger pure credit risks.  Consequently, they require the greatest degree of due diligence and loan monitoring by lenders, or they are unable to issue debt at all. The information problems associated with smaller and medium-sized firms and their increased need for information-intensive lenders appear to be the major reasons for the size pattern observed among the three groups and for the differential access of firms to credit markets.

5.  Mean characteristics of firms with access to the public, private, bank loan, and equity markets 1

Variable	Group of firms Public (1) Private (2) Bank (3) Equity only (4)
	Billions of dollars
Total assets	6.32 (1.5)	3.42 (.5)	.04 (.05)	.04 (.09)
Total sales	3.22 (1.0)	1.02 (.4)	.04 (.03)	.04 (.03)
Market value of equity	1.82 (.3)	.72 (.06)	.10 (.01)	.07 (.02)
	Percent
Three-year average sales growth	6.23 (4.9)	13.9 (8.1)	14.4 (.9)	19.3 (5.0)
	Ratio
Ratio of R&D expenditures to sales	.03 (.01)	.072 (.009)	.38 (.04)	.39 (.05)
Fixed-asset ratio	.49 (.46)	.422 (.40)	.31 (.21)	.28 (.19)
Return on assets	.08 (.08)	.062 (.07)	-.17 (-.05)	-.04 (-.01)
Ratio of total debt to assets	.40 (.30)	.402 (.40)	.742 (.15)	0 (0)
Interest coverage ratio	3.502 (2.10)	2.702 (1.80)	1.302 (-.02)	40.40 (15.10)
Memo Number of firms in group	1,149	113	472	613

1. Numbers in parentheses are medians. Public firms are those with access to the public, private, and bank debt markets.  Private firms are those with access to the private and bank debt markets. Bank firms are those with access to the bank loan market only. Equity firms are those with no access to the bank loan, private placement, or public bond markets.


2. Mean of group is significantly different from mean of group in column to the right at the 1 percent level.


3. Mean of group is significantly different from mean of group in column to the right at the 5 percent level.

53. The taking of collateral can be viewed as another mechanism (like covenants) that lenders use to control risks associated with information problems.


54. COMPUSTAT provides no information on the types of long-term debt on balance sheets. For information on the IDD database, see appendix G.


55. In COMPUSTAT, the ratings are by Standard and Poor’s (S&P). Virtually all investment-grade firms and almost all below-investment-grade firms with public debt outstanding have a rating from S&P. Further, in 1989 S&P rarely provided a debt rating for a firm with some private or bank loan debt but no public debt outstanding.


56. The year 1989 was chosen to avoid distortions caused by the credit crunch in the private placement market in 1990–92, which is described in part 3, section 1. Also, since 1989, S&P has rated an increasing number of private placements, so our method of identifying public market group firms would be less reliable for those years.


57. Many smaller firms reportedly choose a date for the end of their fiscal year that is at a point in their annual cycle at which debt is at a minimum in an attempt to window-dress their year-end balance sheets.


58. Easterwood and Kadapakkam (1991) also find that industrial firms using the private market are smaller than those using the public market.


59. See Prowse (1990) and references therein.


60. The median debt-to-asset ratio may be lower for the bank group because firms with access only to banks may rely more on trade credit than do public or private placement group firms and trade debt is not included in COMPUSTAT’s debt measures.

Debt Private Placements - an extract from a major bank

As a market leader in private placements, Banc of America Securities consistently ranks first among placement agents for straight corporate debt private placements.

Their services to issuer and institutional investor clients include transaction structuring, execution, investor development and monitoring. An innovator in the market, they have aided issuer access to the markets through prepackaged documentation, master note agreements, and note auctions. They have long-standing relationships with hundreds of institutional investors, representing an important source of transactions for insurance companies, pension funds, mezzanine and equity funds, investment managers, banks, and finance companies.

Private placements allow the issuer to avoid the time and expense of SEC registration by placing securities directly with institutional investors. As such, a private placement is a very efficient instrument for raising capital.

They can work closely with you to uncover the factors that differentiate your company in a crowded marketplace, and prepare high-quality offering materials to attract and hold investors' attention. Thanks to our strong position on the buy side, the issuer gains superior information for their debt issues regarding pricing and covenant requirements that will clear the market. They aggressively support the offerings they bring to the market through their substantial sales network.

Above all, their relationship approach to corporate finance ensures that you receive balanced, objective advice.

Debt Private Placement Products

Banc of America Securities provides a comprehensive array of debt products, including:

• 
  

  Senior notes

  
  


• 
  

  Master note programs

  
  


• 
  

  Medium-term notes

  
  


• 
  

  Senior secured notes

  
  


• 
  

  Subordinated notes

  
  


• 
  

  Collateralized bond obligations

  
  


• 
  

  Mezzanine (high yield) structures

Debenture Bonds

Bonds without any security other than the general assets and credit of the issuer, Government, state, and municipal bonds, i.e., all civil bonds, are by definition debenture bonds since they are not secured by mortgages or any other specific pledge of assets.  Notwithstanding this fact, civil bonds represent the highest class of investments because their payment rests upon the taxing power and general credit.

Debenture bonds issued by corporations are, as a class, not considered high-grade investments, although where the general credit of the issuer is strong, they may command a high position.  Their strength depends upon the equity in the general assets, the extent of bond issues having prior liens, range of fluctuation of earnings, and margin of average earnings over prior charges.  Debenture bonds are sometimes known as plain debentures.  

CUSIP Security Identifier

CUSIP Security Identifier (Screen)

Introduction

CUSIP Service Bureau : Mission Statement 

The CUSIP Service Bureau, operated by Standard & Poor's for the American Bankers Association, exists for the primary purpose of uniquely identifying issuers and issues of financial instruments within a standard framework, and disseminating this data to the financial marketplace via various media. CUSIP numbers and standardized descriptions are used by virtually all sectors of the financial industry, and are critical for the accurate and efficient clearance and settlement of securities as well as back-office processing.

The CUSIP Service Bureau seeks to assign unique numbers and standardized descriptions in a timely and accurate manner, using its best efforts to use primary or reliable sources of information. However, because of the possibility of human or mechanical error by securities issuers, CUSlP's sources, Standard & Poor's or others, neither Standard & Poor's nor the American Bankers Association guarantees the accuracy, adequacy or completeness of any information, and Standard & Poor's and the American Bankers Association are not responsible for any errors or omissions or for the results obtained from use of such information.

Copyright 

Subscribers acknowledge that the Service to be provided under a CUSIP Agreement contains information obtained, selected, arranged and published by Standard & Poor's (S&P), under authority from the American Bankers Association, and according to methods and procedures developed and used by S&P, all at the expenditure of substantial amounts of work, time and money. Subscriber agrees to protect the proprietary and copyright position of S&P, and of the American Bankers Association, during the existence, and after the termination, of this Agreement. Subscriber agrees that without S&P's prior written consent, Subscriber shall not transfer or sell such information or copies thereof, or extracts therefrom, or summaries thereof, to any other person or organization, or permit any other person or organization to use or distribute such information. Subscriber represents and agrees it shall not publish or make distribution copies of, or distribute, any or all of the information provided Subscriber hereunder in any form, provided, however, that this Agreement shall not be deemed to prohibit the use by Subscriber of CUSIP uniform descriptions and CUSIP numbers in the normal internal processing of security transactions of business of Subscriber.

Background to the development of the CUSIP numbering system 

In 1962, after many informal discussions with members of the financial community, the New York Clearing House Association established a Securities Procedures Committee to study the question of developing a standard method of identifying securities. This Committee concluded that a uniform securities identification system was feasible and timely and because of the magnitude of the problems to be solved and their far-reaching implications the development of the system should involve the cooperation and support of the entire financial community.

The Clearing House approached The American Bankers Association's Department of Automation to develop the system. In July 1964, the A.B.A.'s Committee on Uniform Security Identification Procedures (CUSIP) was created under the chairmanship of John L. Gibbons, Chairman of the Trust Committee of Chemical Bank New York Trust Company. The main goals of the CUSIP Committee were to develop specifications for a uniform security identification system, for devising a format for imprinting the identification number on the certificate in man/machine readable type font, and to establish an agency to administer the identification system according to specifications.

The CUSIP Committee appointed three subcommittees: The Technical Subcommittee to develop specifications, and Legal and Agency Subcommittees to implement the system.

Development of the CUSIP Number

In developing specifications for the numbering system, the CUSIP Technical Subcommittee found two needs: 1) that the number should contain as few characters as possible, and 2) that it should be linked to an alphabetic sequence of issuer names. Also, the number should be capable of meeting future as well as present operating requirements; that it must be adaptable to the internal systems of all users, to communications systems, to automated document reading, etc.; and that the structure of the system should allow each user to assign numbers to securities or other assets carried by him but not covered by the CUSIP System.

In January, 1967, the A.B.A. announced the development of a CUSIP numbering system which met as closely as possible these criteria. This system is explained in detail in this Introduction. Basically, the CUSIP number consists of nine digits, the first six of which uniquely identify the issuer and have been assigned to issuers in alphabetic sequence, and two other characters (alphabetic or numeric) which identify the issue. The ninth digit is the check digit.

Who endorses the CUSIP numbering system?

The CUSIP numbering system has been endorsed by all major segments of the financial community including:

American Bankers Association

American Stock Exchange

Bond Market Association (PSA)

Canadian Depository for Securities Ltd.

Depository Trust Clearing Corporation

Midwest Stock Exchange

Government Finance Officers Association of the U.S. & Canada

Municipal Securities Rulemaking Board

National Association of Securities Dealers

National Association of Variable Annuities

National Securities Clearing Corp.

New York Stock Exchange

Philadelphia Depository Trust Company

Philadelphia Stock Exchange

Securities and Exchange Commission

Securities Industry Association

Who controls the CUSIP numbering system?

The CUSIP Board of Trustees controls the operation of the CUSIP numbering system. Through the work of the CUSIP Legal and Agency Subcommittees, the CUSIP service functions were outlined and Standard & Poor's was awarded the contract to function as the CUSIP Service Bureau, the operational arm of the system, which is responsible among other functions for the compilation and publication of the CUSIP Directory.

What securities are covered by the CUSIP numbering system? 

General interest is the primary consideration in determining what securities are covered by the CUSIP identification system, provided appropriate documentation is supplied to the CUSIP Bureau in requesting the assignment of a CUSIP number. Below are the types of documents which should be sent to the CUSIP Bureau with a cover letter requesting CUSIP assignments:

What do I send to CUSIP?

Corporates:

1. Public Offering of Equity or Debt -- " Red Herring" (Preliminary Prospectus) or Registration Statement


2. American Depository Receipts -- Registration Statement F-6


3. Bank Holding Company Formation -- Registration Statement S-4


4. Bankers Acceptances -- Summary of Offering / Information Statement


5. Certificates of Deposit -- Summary of Offering Terms ("Fact-Sheet")


6. Church Bonds -- Prospectus / Official Statement


7. Commercial Paper (Book Entry only) -- Info Statement & DTC-CP Filing


8. Company Emerging from Chapter XI -- Disclosure Statement


9. Medium-Term Notes (Book Entry only) -- Prospectus Supplement & DTC-MTN Filing


10. Merger / Acquisition -- Merger Agreement or Proxy Statement


11. Mutual Funds -- Registration Statement N-1


12. Name Change -- Proxy Statement (or) Certificate of Amendment


13. Publicly Traded Limited Partnerships -- Prospectus with S.E.C. File #


14. Reverse Stock Splits -- Letter to Shareholders


15. Right Offerings -- Rights Agreement / Company Press Release


16. Rule 144A Securities -- Offering Circular / Prospectus with 144A Representation


17. Shelf Registrations (415) -- Initial Shelf Filing (S-3) & Subsequent "Prospectus Supplements"


18. Unit Trusts -- Registration Statement S-6


19. Variable Annuities -- Prospectus and/or Contract

Municipals:

1. Negotiated Issues -- Preliminary Official Statement (to be followed up by final O/S)


2. Competitive Issues -- Notice of Sale (and follow-up final O/S)


3. Private Placements -- Private Placement Memorandum


4. Short-Term Notes -- Notice of Sale and/or Legal Opinion

The CUSIP Agency may, from time to time, review this list and add or delete as is deemed appropriate.

Although the foregoing describes those items included in the CUSIP System, subscribers may be interested to know that the following items, because of their short life or special status are not normally assigned CUSIP numbers:

For Corporate Issuers, CUSIP numbers have not been assigned to Fractional Shares and small local over-the-counter issues. In addition, no distinction is made between shares trading "when issued" and "regular way" (except where redemption of certificates is required).

Requests should be addressed to:

CUSIP SERVICE BUREAU

Data Collection Department

Standard & Poor's

55 Water Street, 47 Floor

New York, N.Y. 10041

Additional CUSIP Coverage

Canadian Issues

CUSIP numbers are assigned by the CUSIP Service Bureau of Standard & Poor's to securities listed on Canadian Exchanges and other securities as may be deemed of general interest by the CUSIP Agency. The Canadian Agent for Standard & Poor's is the Canadian Depository for Securities Limited ("CDS"). All applications by Canadian issuers for a CUSIP number must be made through CDS. The following is the prescribed procedure to ensure that the CUSIP is issued expeditiously:

1. A request in letter form should be sent to the attention of:

The Canadian Depository for Securities Limited

600, Boul. de Maisonneuve Ouest, Bureau 310

Montreal, Quebec Canada H3A 3J2

(514) 848 - 1010

2. The request should contain the following information:

1. Name of the Company


2. Head office and registered office address of the company


3. Law and date of incorporation


4. Authorized and issue capital for all classes authorized


5. Description of security for which the number is being requested


6. Nature and description of the offering to be made


7. For name changes, provide both the old and new names


8. Exchange(s) Issue is intended to be listed on

3. The following documentation, where applicable, in draft form, must be included with the request:

1. Preliminary Prospectus


2. Rights Offering Circular


3. Information Circular


4. Statement of Material Facts


5. Articles of Amendments in the case of reclassifications, reorganizations, or name changes

4. Final copies of the above documentation, where applicable, must be filed with CDS when available. Processing of the request will not be delayed pending receipt of the final copy.


5. Payment for service is in Canadian dollars, payable to the Canadian Depository for Securities Limited.

Note: Issues of local interest in Canada have been included in the Corporate edition of the CUSIP Directory, and are denoted by "CDS" in the Issuer and Issue descriptions.

TBA Securities

TBAs are futures contracts on mortgaged-backed pools. Working with the MBSCC, the CUSIP Service Bureau developed a specialized numbering scheme for TBA (To be announced) mortgaged-backed securities. TBA CUSIPs incorporate within the number itself, a security's mortgage type (Ginnie Mae, Fannie Mae, Freddie Mac), coupon, maturity, and settlement month.

International Issues

For securities actively traded on an International basis, which are either underwritten (debt issues) or domiciled (equities) outside the United States and Canada, the securities will be identified by a CINS (CUSIP International Numbering System) number.

The CINS number was developed in 1988 by Standard & Poor's and Telekurs (USA) in response to the North American securities industry's need for a 9-character identifier for international securities. CINS numbers appear in the International Securities Identification Directory (ISIDPlus Services) which is co-produced by Standard & Poor's and Telekurs (USA).

ISIDPlus contains over 400,000 global securities and cross-references all major national numbering systems. ISIDPlus has been designed to minimize the impact on back-office systems and operations, while facilitating cross-border communications among global custodians, depositories, banks, securities organizations, and exchanges.

CINS numbers employ the same Issuer (6 characters)/Issue (2 character & check digit) concept espoused by the CUSIP Numbering System, which is described in detail on the following page. It is important to note that the first position of a CINS code is always represented by an alpha character, signifying the Issuer's country code (domicile) or geographic region:

A = Austria	E = Spain
J = Japan	N = Netherlands
S = South Africa	W = Sweden
B = Belgium	F = France
K = Denmark	P = South America
T = Italy	X = Europe-Other
C = Canada	G = United Kingdom
L = Luxembourg	Q = Australia
U = United States	Y = Asia
D = Germany	H = Switzerland
M= Mid-East	R = Norway
V = Africa-Other

ISIDPlus provides a cross reference to major national securities numbers including the International Securities Identification Number (ISIN) which will facilitate global communications utilizing any global identifier. The following national numbering systems are incorporated in the ISIDPlus Services:

Argentina Canada Euroclear Italy Netherlands Switzerland

Austria CEDEL France Japan Panama United States

Belgium Common Code Germany Luxembourg Peru Venezuela

Brazil Denmark Great Britain Mexico Spain

ISIDPlus Services are available in the following formats: Transmission, CD-ROM and Internet. Updates for the ISIDPlus Master File Transmission Service are available daily or weekly; updates to the ISIDPlus CD-ROM Service with specialized search functionality are available daily, weekly and monthly; updates to the ISIDPlus Access Internet service is available daily or weekly.

Private Placements

The National Association of Insurance Commissioners (NAIC) in October 1988 mandated the use by insurers of a uniform private placement number (PPN) to identify investments in their annual statements filed with State Regulatory Authorities. Standard & Poor's CUSIP Service Bureau was selected by the NAIC to create, assign, and administer the PPN system primarily for the Insurance Industry.

Requests for a Private Placement Number (PPN) can be made in writing to:

Standard & Poor's

CUSIP Service Bureau

55 Water Street, 47 floor

New York, NY 10041

Attn: PPN Department

Please contact the CUSIP Service Bureau Customer Service Department at (212) 438 - 6500 for more information about PPN Services.

The CUSIP numbering system

The CUSIP number consists of nine characters: a base number of six characters known as the issuer number, (the 4th, 5th and/or 6th position may be alpha or numeric) and a two character suffix (either numeric or alphabetic or both) known as the issue number. The ninth character is a check digit which is described later.

Issuer Number

A single alphabetical file has been developed of corporate, municipal, and governmental issuers, and an issuer number of six digits has been assigned to each in alphabetical sequence. One number will be assigned to an issuer, except in those few cases where the issue numbers are not sufficient to accommodate all outstanding issues with their various rates and maturities, such as U. S. Governments and certain municipalities or states. In such instances, one or more additional issuer numbers will be assigned.

Gapping Factors: Gapping factors have been incorporated throughout the numbering system to allow for future file expansion; these are described more fully below.

Provision for Overflow: Issuer numbers (900 to 989 in each group of 1,000 numbers) have been reserved for overflow. These overflow numbers will be assigned in ascending sequence to any new issuer that cannot be accommodated at the proper alphabetical position in the preceding group of issuer numbers. Such names are always in a positively identifiable position as the number assigned will contain a 9 in the hundreds position.

Issuer Numbers Reserved for Internal Use: Issuer numbers (990 to 999 and 99A to 99Z in each group of 1,000 numbers) have also been reserved for the user's own purpose. This permits a user to assign an issuer number to any issuer which might be relevant to his holdings but which does not quality for coverage under the CUSIP numbering system. Other issuer numbers (990000 to 999999 and 99000A to 99999Z) are also reserved for the user so that they may be assigned to non-security assets or for other internal operating purposes. Thus, with the addition of at least two numeric digits in the issue number field, a minimum of three million numbers are available to the user for numbering internal miscellaneous assets.

The alphabetic character Z in the 5th and 6th position has been reserved for use by the Canadian Depository for Securities.

The Issue Number

The issue number uniquely identifies each individual issue of an issuer. (Each individual rate and maturity is considered a separate issue for numbering purposes.) The issue number consists of two numeric characters when assigned to equity securities and two alphabetic characters or one numeric and one alphabetic character when assigned to fixed income securities (this permits the user to differentiate between issues in the two groups).

Issue numbers are assigned in sequence as each issue is originated. However, in the setting up of the CUSIP numbering system and in the assignment of numbers to issues then in existence, numbers were assigned on the basis of rate and maturity and no consideration was given to the original date of issue.

Issue Numbers for Equity Securities

The first issue number for an issuer's equity securities is 10 (blanks in the issue number position indicate this is an issuer; in some cases only an issuer number has been assigned. As additional information is gathered, it will be added to the CUSIP file). The unit position of the equity number is used to identity rights, warrants and so on and is assigned on an as- available basis. When there are insufficient tens positions available for all individual issues, the necessary additional numbers are found through the use of the first open two-position digit in reverse sequence starting with 88 and assigned in descending order. (see illustration below) Issue numbers 00-09 are reserved for future use.

Options: Issue number 01 has been designated to identity options for an issuer.

Overflow Linkage: Issue Number 89 will be reserved for overflow linkage and will not be assigned to a specific issue.

Issue Numbers for Fixed Income Securities

The issue number assigned to an issuer's fixed income securities may consist of two alphabetic characters (AA etc.), one alphabetic character followed by one digit (A2 etc.), or one digit followed by one alphabetic character (2A etc.), assigned in that order. A separate issue number is assigned to each rate and/or maturity for each issue of bonds - thus a serial bond having 40 different maturities is assigned 40 separate issue numbers - but general obligations of a municipality having the same issue date, rate and maturity are normally assigned the same number regardless of purpose. The alphabetic letter "I" and numeric "1" as well as the alphabetic "O" and numeric zero are not used in the assignment of issue numbers to fixed income securities.

Overflow Linkage: Issue Number 9Z will be reserved for overflow linkage and will not be assigned to a specific use.

Issue Numbers Reserved for Internal Use

Issue Numbers 90 through 99 in the equity group, and 9A through 9Y in the fixed income group, are reserved for the user specifically for assignment to those issues of an eligible issuer where no CUSIP issue number has been assigned.

ILLUSTRATION OF THE ASSIGNMENT OF CUSIP ISSUE NUMBERS

ABC RAILROAD CORP 003761

Equity Issues

Com......................................................10

RT.........................................................11

PFD 5% ..............................................20

PFD 3.75%..........................................30

PFD 1st Ser 6%..................................40

PFD 2nd Ser 6%.................................50

CL A......................................................60

PFD Ser A Conv 5% …..................... 70

PFD Ser B Conv 5%...…................... 80

PFD $3.50............................................88

PFD 7.24%...........................................87

Fixed Income Issues

1st Cons Mtg 4% 10/01/1999..............AA

Sub Income Deb 5.25% 11/15/2000..AB

Sub Deb Conv 4.75% 06/01 /2005.....AC

Equip Tr Ser 70 7.75% 08/01 /2008...AD

Equip Tr Ser 72 7.00% 11/01/2010....AE

Check Digit

In data transmission, when accuracy of the number may represent the only means of identification, the use of a check digit becomes mandatory as it provides the means of mathematically determining the accuracy of the whole number transmitted. For this reason it is necessary to use the full nine digits of the CUSIP code.

A check digit based on the Modulus 10 Double Add Double technique will be assigned to each CUSIP security number. Modulus 10 was selected over the other systems because it provides the greatest degree of reliability without the loss of any available numbers.

The illustrations below will clarify the manner of calculation of a Modulus 10 Double Add Double check digit.

Illustration 1

Issuer Number 837649 Issue Number 12

8 3 7 6 4 9 1 2

x 1 x 2 x 1 x 2 x 1 x 2 x 1 x 2

--- --- --- ---- --- --- --- ---

8 6 7 12 4 18 1 4

Thus, 8 + 6 + 7 + 1 + 2 + 4 + 1 + 8 + 1 + 4 = 42

The complement of the last digit of the sum becomes the check digit. The complement of 2 is 8; therefore, the CUSIP number with optional check digit would appear as 837649 12 8

In the calculation of the check digit, alphabetic characters will be assigned a numeric value. The letter A will be 10; and the value of each subsequent letter will be the preceding letter's value incremented by 1. Normally, validation of the number would be made internally within a computer, using a relatively simple program.

Illustration 2

Issuer Number 392690 Issue Number QT

3 9 2 6 9 0 26(Q) 29(T)

x 1 x 2 x 1 x 2 x 1 x 2 x 1 x 2

---- --- --- --- --- --- ---- ----

3 18 2 12 9 0 26 58

Thus, 3 + 1 + 8 + 2 + 1 + 2 + 9 + 0 + 2 + 6 + 5 + 8 = 47; the complement of 7 is 3, and the CUSIP number with check digit would appear 392690 QT3

To avoid confusion, the fixed income issue number assignments have omitted the alphabetic "I" and numeric "1 " as well as the alphabetic ''O'' and numeric zero. However, in the check digit computation described above, the value of "Z" is 35.

A check digit has also been computed for Issuers assigned a six character issuer number.

Alpha characters and their equivalent numerical values

Alphabetic characters are assigned a numeric value. The letter A will be 10; and the value of each subsequent letter will be the preceding letters value incremented by 1:

A = 10 F = 15 K = 20 P = 25 U = 30 * = 36 (PPN System)

B = 11 G = 16 L = 21 Q = 26 V = 31 @ = 37 (PPN System)

C = 12 H = 17 M = 22 R = 27 W = 32 # = 38 (PPN System)

D = 13 I = 18 N = 23 S = 28 X = 33

E = 14 J = 19 O = 24 T = 29 Y = 34

Z = 35

CUSIP AGENCY

BOARD OF TRUSTEES

KEVIN SMITH, Senior Vice President, Bank of New York, New York, New York

RICHARD BETTS, Vice President, Deutsche Bank, New York, New York

J. DOUGLAS ADAMSON, Executive Director, American Bankers Association, Washington, DC

EDWARD R. BRANDS, Vice President, Union Bank of California, San Francisco, California

NOLAND CHENG, Executive Vice President, Lewco Securities, Jersey City, New Jersey

JOHN H. HAYNIE, Managing Director-Operations, Interstate/Johnston Lane Corp., Charlotte, North Carolina

JEFF KERR, Senior Vice President, Corporate Trust Services, U.S. Bank, St. Paul, Minnesota

RONALD KESSLER, Corporate Vice President, Director of Operations, A.G. Edwards & Sons, Inc., St. Louis, Missouri

FRANK MALARKEY, Director, Credit Suisse First Boston, New York, New York

SHERRY MORELAND, Vice President, Corporate Trust Group, First Union Bank, Charlotte, North Carolina

JAMES R. ORVIS, Senior Vice President, Director of Operations, The Advest Group, Hartford, Connecticut

MANUEL RIVERA, Senior Vice President, Operations, Chapdelaine & Company, New York, New York

JAMES J. RONAYNE, Managing Director, Depository Trust Clearing Corporation, New York, New York

RACHEL L. SCOTT, Senior Vice President, Bank of America Securities, Charlotte, North Carolina

JOSEPH SINISCALCHI, Executive Vice President, Morgan Stanley Dean Witter, Inc., New York, New York

JOHN W. ZAMBRANO, Vice President, Chase Manhattan Bank, New York, New York

ABA STAFF

DIANE POOLE

THOMAS JUDD

AGENCY SERVICES BUREAU STAFF

JAMES D. TAYLOR, Vice President

SCOTT J. PREISS, Director of Operations

HARRY J. LOPEZ, Director of Support Services

MARIA LATORRACA, Product Director

GERARD FAULKNER, Editor

SUBSCRIBER REQUESTED ADDITIONS

Subscribers may request additions to the file by submitting documentation to the CUSIP Service Bureau, Standard & Poor’s, 55 Water Street, 47 floor, New York, New York 10041.

Those issuers and issues eligible for inclusion in the CUSIP Master File are described under WHAT SECURITIES ARE COVERED BY THE CUSIP NUMBERING SYSTEM. The CUSIP Agency has sole jurisdiction on whether the qualifications for inclusion have been met.

For information on any of these services, contact the CUSIP Customer Service Department at the above address or phone 212-438–6500.

Information has been obtained by the CUSIP Service Bureau of Standard & Poor's from issuers of securities and other sources believed to be reliable. However, because of the possibility of human or mechanical error by the issuers, our sources, Standard & Poor's or others, neither Standard & Poor's nor The American Bankers Association guarantees the accuracy, adequacy or completeness of any information, and Standard & Poor's and The American Bankers Association are not responsible for any errors or omissions or for the results obtained from use of such information. The assignment of a CUSIP/CINS number to a particular security by Standard & Poor's is not intended by Standard & Poor's to be, and should not be construed as, an endorsement of such security, a recommendation to purchase, sell or hold such security or an opinion as to the legal validity of such security.

Corporate Promissory Notes

Corporate Promissory Notes
Corporate Promissory Notes (CPN's) - Issued by Major Corporations, usually public listedand underwritten by a Bank or Underwriter. This can be any foreign bank, or a Central Bankfrom country of origin.
Convert to Cash like handling a BG or raise a Credit Line.
Value conversion depends on many factors, some fixed, some floating such as…
Type of Promissory Note (time, maturity date, ownership, value, etc.)
Issuing Corporate Rating (preferably a Dunn and Bradstreet or similar Credit Rating)
Underwriting or Guarantor Bank and their Rating (Central Bank of a Government, Local inCountry Bank, Foreign Worldwide Bank, etc.)
Agent, Underwriter, Security House, or Bank Holding Promissory Note
What type of ‘Currency’, US Dollars is always preferred, but most others are acceptable
Market Conditions
Bank Policy or Underwriter Policy
Politics
Ownership, and Type of Restrictions, if any
Currency Fluctuation, if not already in US dollars
Client Anticipation of Return
Place Transaction Occurs
What is done with ‘Cash’ after conversion - this is becoming a paramount issue with banks or security houses converting the instrument, the preferred and acceptable method is to deposit a portion of the redeemed funds with the honoring bank or security house, usually as follows...
(1) For a 'Bank' not less than 50% for a period of not less than six (6) months. (2) For a 'Security Trading House' not less than 30% either reinvested in other types of asset portfolio management (stocks, bonds, mutual funds, etc.) or in their money market fund.
Helpful hints:
CPN's are usually issued by a corporation as collateral or for the sole purpose of raising capital (liquid assets in the form of cash).
CPN's held by individuals are highly questioned by banks throughout the world. It is generally easier to raise a 'Credit Line' than convert this type of instrument into CASH!
Fluctuating World Market Conditions set the pace and determine the trading value, if any.
Usually most every instrument can be converted, however, some are just Not desirable
Trading Instruments on the current World Market.
Substantiated "Documentation' is needed for this type of transaction.
The Following Corporate Promissory Notes are very difficult to do at the present, and only a 'Credit Line' could be raised:
Any CPN issued from any Corporation in Indonesian unless backed by a Major World Bank.
Any CPN issued from any Corporation in Thailand unless backed by a Major World Bank.
Any CPN issued from any Corporation in Philippines unless backed by a Major World Bank.
Any CPN issued from any Corporation in Malaysia unless backed by a Major World Bank.
Any CPN issued from Corporation in Russia unless backed by a Major World Bank.
Any CPN held by an Individual in lieu of a company, trust, corporation, endowment, or nonprofit entity.
The Following CPN's Are NOT Currently Tradable:
CPN's issued from Vietnam
CPN's issued from Cambodia
CPN's issued from Laos
CPN's issued from Burma