Does this have something to do with this new SEC rule regarding OTC stocks? I saw the notice and acknowledged it but didn't really understand it.
No, that’s different. A lot of otc stocks aren’t easily traded any more under that new rule that started Tuesday, but it’s nothing to do with OP.
I think what may be going on here is that IB is short the stock and has not borrowed in a timely fashion. If that is the case they eventually hit a threshold where they are not allowed to further short sell the stock. Check out rule 204 here: https://www.sec.gov/investor/pubs/regsho.htm I'm not sure why their failure to borrow should prevent you from borrowing. That seems like a conflict or interest between you and your broker, but I think there may some reason it's set up that way in SEC regulations for tracking purposes. This has more details: https://www.sec.gov/rules/final/34-50103.htm
This is reference to rule 204. The issue occurs when IBLLC has a buy-in that gets allocated to one of our affiliate accounts. Ie. US client gets a recall from stock lent from an affiliate omnibus account. There was a no-action letter associated with rule 204 that requires brokers to enforce that the bought in client remain a net purchaser in the amount of the allocated buy-in that day. Unfortunately this requires the affiliate account to prevent shorting for the day of the buy-in. Fortunately instances occur rarely.