Self-Regulatory Organizations; The Depository Trust Company; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Modify the DTC Operational Arrangements Necessary for Securities To Become and Remain Eligible for DTC Services in Order To Clarify and Update Provisions Relating to the Processing of Eligibility Requests and Servicing of Assets on Deposit at DTC, 36057-36064 [2017-16269]
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Federal Register / Vol. 82, No. 147 / Wednesday, August 2, 2017 / Notices
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–81249; File No. SR–DTC–
2017–010]
Self-Regulatory Organizations; The
Depository Trust Company; Notice of
Filing and Immediate Effectiveness of
a Proposed Rule Change To Modify the
DTC Operational Arrangements
Necessary for Securities To Become
and Remain Eligible for DTC Services
in Order To Clarify and Update
Provisions Relating to the Processing
of Eligibility Requests and Servicing of
Assets on Deposit at DTC
July 28, 2017.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on July 17,
2017, The Depository Trust Company
(‘‘DTC’’) filed with the Securities and
Exchange Commission (‘‘Commission’’)
the proposed rule change as described
in Items I, II and III below, which Items
have been prepared by the clearing
agency. DTC filed the proposed rule
change pursuant to Section 19(b)(3)(A) 3
of the Act and subparagraphs (f)(2) and
(f)(4) of Rule 19b–4 4 thereunder. The
proposed rule change was effective
upon filing with the Commission. The
36057
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
(A) Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
I. Clearing Agency’s Statement of the
Terms of Substance of the Proposed
Rule Change
1. Purpose
The proposed rule change consists of
modifications to the DTC Operational
Arrangements (Necessary for Securities
to Become and Remain Eligible for DTC
Services) (‘‘OA’’) 5 proposed in order to
clarify and update provisions relating to
the processing of eligibility requests and
servicing of securities on Deposit at
DTC, as more fully described below.6
II. Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
In its filing with the Commission, the
clearing agency included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
clearing agency has prepared
summaries, set forth in sections A, B,
and C below, of the most significant
aspects of such statements.
The OA was first published by DTC
in June 1987. It was then updated in
June 1988, February 1992, December
1994, January 1998, May, 2002, January
2009, December 2011 and most recently
in 2016.7 The OA is designed to
maximize the number of issues of
securities that may be made eligible for
DTC services, providing for the orderly
processing of such securities and timely
payments to Participants. DTC’s
experience demonstrates that when
Participants, Issuers, Underwriters,
Agents (as such terms are defined in the
Rules 8 or in the OA 9), and their counsel
are aware of DTC’s requirements, those
requirements can be readily met in most
instances. The purpose of this rule
change is to revise the text of the OA in
order to update and clarify DTC’s
processes in this regard. Additionally,
some ministerial changes, changes to
methods of notification, and clarifying
language have been introduced, to
provide a more concise description of
OA procedures. In this regard, the
proposed rule change would revise the
text of the OA as set forth in the
respective sections as described below:
OA Section
Revision
Important Legal Information ................................
The proposed change would (i) update the most recent copyright date of the OA from 2016 to
2017 and (ii) make grammatical corrections and revise text for readability.
The proposed rule change would (i) update a reference to a link for DTC securities eligibility
documentation (ii) revise the defined term for Money Market Instruments from ‘‘MMIs’’ to
‘‘MMI’’ for consistency with the Rules and the DTC Settlement Service Guide 10 and (iii) revise a cross-reference to a footnote regarding the DTC Custody Service to refer to the section number the footnote appears in, rather than just the page number the footnote appears
on.
The proposed rule change would revise text (i) for consistency with language in DTC’s Fee
Schedule,11 to describe charges made to underwriters that fail to meet the requirements of
this subsection as ‘‘surcharges’’ rather than ‘‘fines,’’ (ii) to move a reference to related standard time frames to earlier in the section for reference purposes and (iii) remove a link to the
Underwriting Service Guide in respect to a reference to DTC’s eligibility requirements, since
the OA is the primary source for these requirements.
Change word usage in a sentence relating to methods of transmission, recording or storage of
signatures, by replacing ‘‘xeroxing’’ with ‘‘photocopying.’’
Section I.A.2. (Securities Eligible for DTC’s
Services).
Section I.A.4. (Standard Time Frames for Providing Underwriting Information to DTC).
Section I.A.6. (Signature) ...................................
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A).
4 17 CFR 240.19b–4(f)(2) and (f)(4).
5 Available at https://www.dtcc.com/∼/media/
Files/Downloads/legal/issue-eligibility/eligibility/
operational-arrangements.pdf.
6 Each term not otherwise defined herein has its
respective meaning as set forth in the Rules, ByLaws and Organization Certificate of DTC (the
‘‘Rules’’), available at https://www.dtcc.com/legal/
rules-and-procedures.aspx and the OA, supra note
5.
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2 17
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7 See Securities Exchange Act Release Nos. 24818
(August 19, 1987), 52 FR 31833 (August 24, 1987)
(SR–DTC–87–10); 25948 (July 27, 1988), 53 FR
29294 (August 3, 1988) (SR–DTC–88–13); 30625
(April 30, 1992), 57 FR 18534 (April 30, 1992) (SR–
DTC–92–06); 35649 (April 26, 1995), 60 FR 21576
(May 2, 1995) (SR–DTC–94–19); 39894 (April 21,
1998), 63 FR 23310 (April 28, 1998) (SR–DTC–97–
23); 45994 (May 29, 2002), 68 FR 35037 (June 11,
2003) (SR–DTC–2002–02); 59199 (January 6, 2009),
74 FR 1266 (January 12, 2009) (SR–DTC–2008–14);
65901 (December 6, 2011), 76 FR 77281 (December
12, 2011) (SR–DTC–2011–10); 77043 (February 3,
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2016), 81 FR 6913 (February 9, 2016) (SR–DTC–
2016–002); and 79122 (October 19, 2016), 81 FR
73450 (October 25, 2016) (SR–DTC–2016–010). A
proposed change to amend the OA that was filed
with the Commission on July 7, 2017, SR–DTC–
2017–011 (‘‘ATOP Rule Filing’’), is pending
implementation. See Securities Exchange Act
Release No. 81096 (July 7, 2017), 82 FR 32406 (July
13, 2017) (SR–DTC–2017–011). The ATOP Rule
Filing and its pending implementation date are
discussed more fully below. See infra note 31.
8 See supra note 6.
9 See supra note 5.
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OA Section
Revision
Section I.B.1.b. (Required Riders to LOR) .........
The proposed rule change would (i) revise text for readability, (ii) update a reference to a link
for DTC securities eligibility documentation that includes various DTC forms Letters of Representation (‘‘LOR’’) and riders to the LOR, (iii) delete references to Exhibit C and Exhibit D
of the OA that contain forms of the Blanket Letter of Representations (‘‘BLOR’’) and Issuer
Letter of Representations (‘‘ILOR’’), respectively, which exhibits would be removed from the
OA, as discussed below, and (iv) replace the deleted references to Exhibits C and D with
links to the BLOR and ILOR. The proposed rule change would also add text noting that
sample offering document language is available in the form of BLOR and ILOR.
The proposed rule change would remove a provision stating that DTC may be require an
Agent to sign a ‘‘Tender LOR’’ for certificated issues with put features. The Tender LOR is
used by DTC to obtain the Agent’s agreement for DTC to use its procedures applicable to
the processing of tenders for Securities with put features. However, DTC already maintains
authority to use its procedures in this regard pursuant to the OA as set forth in Section
V.B.2. (Put Features with Special Processing Requirements). Therefore, it is unnecessary
for DTC to separately obtain a signed Tender LOR from Agents in this regard.
The proposed rule change would (i) revise the text to update links to documentation referenced by this section and (ii) revise the defined term for Segregation Account 100 service
from ‘‘SEG 100’’ to ‘‘Seg 100’’ for consistency with other references to this service in the
OA.
The proposed rule change would update a cross-reference relating to information on altering
the terms of an offer from referencing Section VI(A)(2)(d) to instead reference Section
VI(C)(5)(c).
The proposed rule change would (i) correct the text of this section to add ‘‘the Securities’’ after
‘‘Issuer of’’ and (ii) add links to existing forms and requirements for Issuers and Agents to
request the processing of exchanges relating to CUSIPs for securities that were originally
restricted pursuant to Rule 144A and/or Regulation S and which have become unrestricted.
The proposed rule change would make a grammatical change to the text of this section to improve readability.
The proposed rule change would add clarifying language in this section relating to additional
eligibility requirements for unit securities 12 for improved readability, including with respect to
(i) CUSIP requirements for immediately separable Units versus Units separable after their
initial closing date 13 and (ii) requirements as stated in this section relating to Units for which
are separable into their components on a voluntary basis versus on a mandatory basis.
The proposed rule change would revise this section to update the link to a list of NIIDS Data
Elements and related procedures.
The proposed rule change would revise this section to update a cross-reference to Section
IV.B.3. by changing the referenced title of that section from ‘‘Securities without an Option for
U.S. Dollar Payment’’ to ‘‘Securities Denominated in a Non-U.S. Currency without an Option
for U.S. Dollar Payment.’’
The proposed rule change would make a technical correction to remove unnecessary numbering within the section.
The proposed rule change would add this subsection to include the link to the DTC Fee
Schedule 14 for transparency with respect to current exception processing fees, late fees
and surcharges referred to in the OA.
The proposed rule change would make changes to the text of this section for clarity and improved readability with respect to an example provided within.
The proposed rule change would (i) add text to this section 15 to insert a cross-reference to a
related process concerning confirmation of FAST balances by an Agent and (ii) update the
address for delivery of security certificates to the DTC Securities Processing Department.
The proposed rule change would add a link as a reference for additional information for
Agents interested in becoming FAST Agents.
The proposed rule change would add text to this section to clarify that DTC may require a
FAST Agent to use the DWAC process for the separation of a Unit into its components.
The proposed rule change delete text in regard to monitoring by DTC of transfer turnaround
times for Agents and preventing eligibility of an Agent that fails to comply. It is not practical
for DTC to monitor transfer turnaround times since transfer turnaround times are established
outside of DTC pursuant to Rule 17Ad–2 under the Act 16 and, pursuant to that rule, Agent
reporting on compliance is required to be made to the SEC and the Agent’s ‘‘appropriate
regulatory agency,’’ if applicable.17
The proposed rule change would revise the text of this section (i) to state that Agents should
notify DTC by the effective date of the Agent’s assuming or terminating services as Agent
for an Issuer, or the Agent’s change of name or address, by the effective date of the
change, rather than at least 10 calendar days in advance, because receipt of such notice on
the effective date is sufficient for DTC to timely update its records to reflect the applicable
change and (ii) to update references to the form Agents use to notify DTC of such changes,
including updating the applicable link to the form and inserting the DTC e-mail address that
a completed form should be delivered to. Subsections within Section II.B.4.b. numbered and
titled, respectively, ‘‘(1) Termination of Transfer Agent Services,’’ ‘‘(2) Assumption of Transfer Agent Services’’ and ‘‘(3) Transfer Agent’s Change of Name or Address,’’ would become
separate sections and would renumbered to an alphabetical format sequentially numbered
with the other Sections of II.B.4.b. The section that would be renumbered Section II.B.4.c.,
(‘‘Termination of Transfer Agent Services’’), as mentioned above, would be revised for readability and clarity.
Section I.B.1.d. (LOR Requirements for Certificated Securities).
Section I.B.4.a. (Ownership Thresholds) ............
Section I.B.4.b. (Revisions to Eligible Securities)
Section I.B.5. (Instruction Letters Regarding the
Expiration of a Restrictive Period).
Section I.C.1. (Retail Certificates of Deposit) .....
Section I.C.2. (Unit Securities) ...........................
Section I.C.3. (New Issue Eligibility Requirements for Municipal Securities).
Section I.C.5. (Non-U.S. Currency Denominated
Securities).
Section I.D. (Compliance with Regulations) .......
Section I.E. (DTC Fee Schedule) .......................
Section II.A.1 (CUSIP Number Assignment) ......
Section II.B.1. (Possession and Inspection) .......
Section II.B.2.a. (FAST) ......................................
Section II.B.2.c. (DWAC) ....................................
Section II.B.3. (Transfer Turnaround Times) ......
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Section II.B.4.b. (Transfer Agent Required Notices).
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Federal Register / Vol. 82, No. 147 / Wednesday, August 2, 2017 / Notices
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OA Section
Revision
Section II.B.4.c. (Business Contingency) ...........
The proposed rule change would delete this subsection which relates to connectivity testing by
transfer agents and paying agents that are Participants, because this subsection is duplicative of the Rules and unnecessary for inclusion in the OA.18
The proposed rule change would clarify and update text from original Section VI.B.4 (Trustee
Requirements) and reposition the text to new Section II.B.5. (Trustee Required Notices).
The proposed rule change would (i) revise the text of this section to clarify text relating to the
option for Securities to pay distributions in one or more currencies and (ii) delete outmoded
language regarding establishment of record dates by securities exchanges, since the establishment of the record date by the Issuer is not dependent on the date of an ex-date established by a securities exchange.
The proposed rule change would clarify this section to state that where an Issuer or Agent
provides information or notice to DTC for distribution to Participants, the notice should include the terms of the event in addition to other relevant information as stated therein, including CUSIP numbers, payment information and any relevant instructions. The proposed
rule change would also change a cross reference from Exhibit E to Exhibit C to reflect the
deletion of certain exhibits, as described herein.
The proposed rule change would modify the text of this section to clarify that the prohibition
against Agents deducting fees from distribution payments to DTC includes a prohibition
against invoicing DTC for such fees.
The proposed rule change would delete a paragraph from this section in regard to instructing
Issuers to fund their Agents by 1 p.m. on a payable date since DTC has no visibility on the
transfer of funds between Issuers and Agents and is therefore unable to enforce such a requirement.
The proposed rule change would (i) delete a paragraph from this section in regard to instructing Issuers to fund their Agents for redemption and maturity payments by 1 p.m. on a payable date since DTC has no visibility on the transfer of funds between Issuers and Agents
and is therefore unable to enforce such a requirement, (ii) update a link referring to information about DTC principal and income processing, and (iii) delete a reference to a defunct
email address for informational inquiries and replace it with contact information for DTC’s client support team.
The proposed rule change would add e-mail addresses for DTC’s reorganization department
and a phone number to the DTCC customer service hotline to promote accessibility to DTC
staff for questions regarding wire instructions and payment arrangements. The text of this
section would also be revised to change ‘‘pm’’ to ‘‘p.m.’’ in connection with timeframe references appearing in two places.
The proposed rule change would revise the text of this section (i) to clarify language for improved readability and scope and (ii) update references to DTC contact information.
The proposed rule change would revise this section to correct capitalization of a defined term.
Section II.B.5. (Trustee Required Notices) .........
Section III.A. (Record Date Requirements) ........
Section III.B. (Notices) ........................................
Section III.C. (Payment Instructions) ..................
Section III.C.1. (Income Payment Standards) ....
Section III.C.2. (Redemption and Maturity Payment Standards).
Section III.C.3. (Reorganization Payment Standards).
Section III.D. (Additional Payment Arrangements/Policies/Procedures).
Section III.D.1. (Redemption Payments with
Presentation (‘‘PWP’’)).
Section III.D.2. (Compensation Claims Policy
and Related Procedures).
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Section III.D.3. (Requests for Return of Funds)
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The proposed rule change would add text for clarity and simplification to state DTC’s policy
with respect to DTC’s ability to claim Paying Agents and Issuers that fail to pay DTC for a
payment event on the scheduled payment date, rather than referring to a separate procedure in this regard. In addition, text regarding Agents ability to submit a claim to DTC for erroneous payments made to DTC would be deleted from this section as it is duplicative of information provided in Section III.D.3. of the OA—‘‘Requests for Return of Funds.’’ 19 In addition, Section III.D.2. would be renamed from ‘‘Compensation Claims Policy and Related Procedures’’ to ‘‘Compensation Claims Policy.’’
The proposed rule change would delete references to the ‘‘Return of Funds Procedure’’ and
contact information to obtain a copy of such procedure. The procedure is no longer separately provided because it was duplicative of this Section III.D.3.
The proposed rule change would clarify the text of this section in subsection a. with respect to
DTC’s practice for the return of funds to Agents with regard to payments for which the
Issuer has not paid the Agent and where the Agent has made erroneous payments to DTC.
In addition, subsection a., currently titled ‘‘Issuer Default/Bankruptcy Considerations’’ would
be changed to ‘‘Issuer Default/Bankruptcy Considerations/Agent Not Funded by Issuer’’ in
order to clarify the scope of the subsection.
The proposed rule change would revise subsection b. (Processing Errors) to add contact information for an Agent or Issuer to notify DTC in the event an Agent or Issuer makes an erroneous payment to DTC, and clarify DTC’s existing practice of returning funds only to the
bank account from which the erroneous payment was received. The purpose of this provision would be to ensure that funds are sent back only to the party that sent them to DTC
and reduce the possibility of error or fraud in the transmission of the return of funds. The
proposed rule change would also revise the text of this subsection for a grammatical change
and readability.
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OA Section
Revision
Section IV.A. (Dividend and Income Notification
Procedures).
The proposed rule change would (i) revise the title and text of this section, which relates to
payment notice information required from Agents, to (a) add the word ‘‘Payment’’ to the title
so that the section would be named ‘‘Dividend and Income Payment Notification Procedures,’’ (b) remove a requirement that information provided to DTC under this section must
include any income related to a corporate action, because DTC is able to determine this information from dividend and interest rate information that is required to be provided by an
Issuer or Agent pursuant to this section and (c) clarify that payment notices for exchange
traded funds (‘‘ETFs’’) are generally not required, unless specifically requested by DTC, because this information is sourced from securities exchanges on which the applicable ETF is
listed, (ii) remove the requirement for parties that send an e-mail to DTC’s Announcements
Department to telephone DTC if an e-mail receipt is not received by them from DTC within
an hour to confirm such notice was received and (iii) change the physical delivery address
used for transmission of notices to DTC in the event electronic transmission is not available.
The proposed rule change would clarify that ‘‘record date’’ and ‘‘payable date’’ are required information that must be provided to DTC in connection with minimal notification of structured
security rate information. In addition, the proposed rule change would remove the text ‘‘preferably two business days’’ from the description of the required timeframe to for minimum notification.
The proposed rule change would revise the text of this section to provide a link to a copy of
the Non-Conforming Structured Securities Attestation Letter.
The proposed rule change would delete this section as it is outdated and no longer applicable.
Section IV.A.1. (Structured Securities) ...............
Section IV.A.1.a. (Non-Conforming Structured
Securities).
Section IV.A.1.c. (Remittance Reporting to DTC
for Structured Securities).
Section IV.A.2. (American/Global Depositary
Receipts (‘‘ADR/GDR’’)).
Section IV.A.3. (Unit Investment Trust (‘‘UIT’’)
Securities).
Section IV.B. (Currency Payment Provisions) ....
Section IV.C.1. (Dividend or Interest Rate
Change).
Section IV.C.2. (Reduction of Payment on
Treasury or Repurchased Securities (for
Cash Dividend or Interest Payment)).
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Section IV.D. (Additional Dividend Policies) .......
Section IV.D.1.a. (Voluntary Dividend Reinvestment and Securities with an Automatic Dividend Reinvestment (with an option to elect a
cash dividend)).
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The proposed rule change would revise this section to update an email address provided to
contact the DTC Announcements Department. The text of this section would also be revised
to clarify that a notice of payment information for an American or Global Depository Receipt
must include the record date in addition to other information as provided in the text of this
section. The text of this section would also be revised to remove a reference to a preferred
timeframe for submission of a notice of payment information. The text would also be revised
to move the placement of ‘‘payable date,’’ which appears in a list of notice requirements,
from below to above ‘‘payment amount per share.’’
This section describes notice requirements for record date and other information that must be
provided to DTC for distributions and payments on UITs. The proposed rule change would
delete this section because it is no longer accurate. Securities Exchanges rather than
Agents provide the information required by this Section to DTC.
The proposed rule change would update headings of subsections within this section to clarify
their scope in relation Securities in Non-U.S. denominated currencies.
The proposed rule change would revise this section to provide updated delivery information for
notices by Issuers and Agents to DTC with respect to changes in dividend or interest rates,
and replace a reference to ‘‘Publication Date’’ with ‘‘payment date’’ to reflect currently used
terminology.
This section describes the process by which an Agent may inform DTC that payment to a Participant of cash dividend and interest payments for a particular distribution on Securities the
Participant is holding should be adjusted. The proposed rule change would revise this section to reflect an existing requirement for the Agent to provide a confirmation letter signed by
the Participant that holds the subject shares whereby the Participant authorizes the adjustment in payment and includes an indemnification statement indemnifying DTC with respect
to processing the adjustment.20
The proposed rule change would also amend the text to update (i) this section with respect to
information the Agent must provide to DTC with regard to the adjustment which DTC needs
to process the adjustment promptly and accurately and (ii) contact information for the delivery of such information by the Agent to DTC.
In addition, the proposed rule change would remove a provision from this section that states
that instructions submitted to DTC in accordance with this section that are submitted outside
of required timeframes will subject the responsible Participant to a disincentive fee. The disincentive fee is not necessary because it is in the best interest for the applicable responsible
parties to submit these instructions timely to allow same-day distribution of applicable principal and income payments to Participants and beneficial owners, and the disincentive fee is
not necessary for this purpose.
The proposed rule change would update the title of this section to reflect that the requirements
constitute procedures of DTC. Therefore, the section would be retitled ‘‘Additional Dividend
Procedures.’’
The proposed rule change would revise this section to re-order an existing list of Agent requirements and add clarifying terms regarding (i) the timing of the Agent’s acceptance of
dividend reinvestment-related instructions from DTC, (ii) the agreement of the Agent that
shares reinvested through DTC’s Dividend Reinvestment Program (‘‘DRP’’) shall of the
same Security as the issue paying the dividend, and (iii) a requirement, consistent with
DTC’s eligibility requirements, that reinvestment shares must carry transfer or ownership restrictions. The proposed rule change would also make changes to the text (i) for enhanced
readability on the purpose and function of the DRP and (ii) update email and mailing address information for the delivery of instructions and security certificates to DTC.
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36061
OA Section
Revision
Section IV.D.1.b. (Automatic Dividend Reinvestment).
The proposed rule change would delete text stating that DTC may not make an issue from an
Agent eligible if the Agent has a record of not complying with the provisions of this section
as this is not a criterion for determining eligibility of an issue for a reinvestment program.
DTC reviews issues for eligibility for inclusion in a reinvestment program by applying the criteria set forth in the OA on an issue-by-issue basis.
The proposed rule change would revise the text of this section to (i) rename the subsection
from ‘‘Stock Distributions to Holders of Record’’ to become ‘‘Stock/Pay-in-Kind (‘‘PIK’’) Distributions to Holders of Record’’ and (ii) reflect the required information flow of notices for
stock distributions to record date holders. The proposed text would also include a statement
on the processing of bond-related ‘‘Paid-in-kind distributions’’ and variations.
The proposed rule change would (i) revise the text of this section to reflect that DTC no longer
supports distribution of fractional shares; per SEC filing No. SR–DTC–2015–007,21 (ii) revise
language stating the timing by which an Issuer or Agent must provide DTC with the information DTC needs to collect Participant instructions (regarding liquidation or issuance of shares
to satisfy Participant cash-in-lieu (‘‘CIL’’)/roundup entitlements) 22 and (iii) update an address
for the delivery of physical securities to DTC.
The proposed rule change would clarify text relating to a requirement to send a notice to DTC
and the information on such notice.
The proposed rule change would revise this section to clarify Participant authorization requirements with regard to reductions of payment on treasury or repurchased shares for stock dividend payments, to add that the confirmation letter required pursuant to this section must
contain an officer-level authorization for the applicable reduction.23
In addition, the proposed rule change would remove a provision from this section that states
that instructions submitted to DTC outside of required timeframes will subject the responsible Participants to a disincentive fee. The disincentive fee is not necessary because it is in
the best interest for the applicable responsible parties to submit these instructions timely to
allow same-day distribution of stock to Participants and beneficial owners, and the disincentive fee is not necessary for this purpose.
The proposed rule change would (i) delete a need to call DTC to confirm hardcopy/email notice receipt, (ii) clarify the need for the Agent to contact DTC the first time they use the
spreadsheet submission process and (iii) conform the usage of the defined term ‘‘PWP’’
(i.e., Payment Without Presentation) with its initial definition in Section III.D.1.
The proposed rule change would revise this section to (i) delete references to discretionary
processing fees, relating to the release of lottery results, that are not charged, (ii) update
contact information with respect to information on ARS processing and (iii) make grammatical changes to text for improved readability.
This section relates to instructions from Issuers and Agents and information for the processing
of optional puts and mandatory tenders.24 The proposed rule change would revise this section and clarify text for purposes of completeness with regard to processing timeframes and
information DTC requires to timely process optional puts and mandatory tenders. The proposed rule change would also revise the text to update DTC contact information.
The proposed rule change would revise the text of this section to clarify the scope and indicate that mortgage backed securities, in addition to CMOs and ABSs are covered by this
section. The text of this section would also be revised to update DTC contact information,
Web site references and revise wording for improved readability.
The proposed rule change would clarify the text of this section to reflect the process as it has
been established in practice in conjunction with Agents on this type of put. The proposed
rule change would also revise the text of this section for enhanced readability and to update
DTC contact and mailing information.
The proposed rule change would revise the text to (i) clarify that late notification may result in
late notification fees in accordance with the DTC Fee Schedule and (ii) update DTC contact
and mailing information.
The proposed rule change would revise the text of this section to add the Web site location of
the DTC Reorganizations Service Guide for further information on processing. The proposed
rule change would also clarify that DTC does not monitor presentment of supporting documentation to an Agent for processing of survivor options.
The proposed rule change would update the text of this section to clarify the notice and timing
requirements for Issuers and Agents to allow DTC to timely process voluntary and mandatory corporate actions and update the title of the section to reflect that it pertains to notices.
The proposed rule change would also add a cross reference to the DTC Fee Schedule for
applicable fees.
The proposed rule change would shorten the amount of time in advance that Agents must provide to DTC (i) information as required by this section 27 and (ii) confirmation letters 28 to
DTC, prior to the processing of adjustments to Participant accounts reflecting a reduced
payment/distribution amount, in accordance with this section, from five business days to no
later than three business days prior to the payment/distribution date of the entitlement. The
change would more accurately reflect the amount of time required by DTC to receive the
necessary information and confirmation letters in order to timely process such adjustments.
The proposed rule change would revise the list of information DTC requires in connection
with processing such adjustments in order to specify the information that DTC needs in
order to promptly and accurately process an adjustment.29 The proposed rule change would
also revise DTC’s contact information to reflect that the information should no longer be
send to DTC via fax, but only via email.30
Section IV.D.2. (Stock Distributions to Holders
of Record).
Section IV.D.2.a. (Fractional Entitlements in
Cash or Additional Roundup Shares).
Section IV.D.2.b. (Restriction Distribution
Shares Issued).
Section IV.D.3. (Reduction of Payment on
Treasury or Repurchased Securities (for
Stock Dividend Payments)).
Section
V.A.
(Redemptions,
Advance
Refundings and Calls Inclusive of Sinking
Funds and Mandatory Redemptions).
Section V.A.2. Partial Redemptions for Auction
Rate Securities (‘‘ARS’’) and Requests for
ARS Lottery Results.
Section V.B.1. (Standards for Put Notifications)
Section V.B.2.b. (Collateralized Mortgage Obligations (‘‘CMOs’’) and Asset-Backed Securities (‘‘ABSs’’)).
Section V.B.2.c. (Put ‘‘Extendible’’ Issues) 25 .....
Section V.B.2.d. (Put Bonds (Repayment Options)).
Section V.B.2.e. (Survivor Options) 26 ................
Section VI.A. (Standards for Voluntary and
Mandatory Reorganizations).
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Section VI.B.1. (Reduction of Payment on
Treasury or Repurchased Securities).
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OA Section
Revision
Section VI.B.2. (Mandatory Separation of a Unit
After the Closing Date).
Section VI.C. (Processing for Specific Voluntary
Reorganizations).
The proposed rule change would move the text of former Section VI.A.2.i. to this newly numbered section.
The proposed rule change would change the numbering of former Section VI.A.2 to VI.C.31
and rename it from ‘‘Processing for Specific Voluntary Reorganization Features’’ to ‘‘Processing for Specific Voluntary Reorganizations.’’ The proposed rule change would divide the
content of the newly numbered section into 5 subsections reflecting, and separating for enhanced readability, the existing content of former Section VI.A.2.:
1. Unit Investment Trust.
2. Mortgage-Backed Securities with Monthly Early Redemption Features.
3. Rights Offers (Use of DTC’s Automated Subscription Offer Program (‘‘ASOP’’).
4. Standards for Convertible Issues/Warrants/Rights; and
5. Voluntary Tenders/Exchanges/Mergers with Elections (Use of DTC’s Automated Tender
Offer Program (‘‘ATOP’’).
Each of these subsections would be revised to clarify the text for enhanced readability and to
provide enhanced detail on relevant notice and information requirements. The proposed rule
change would also update DTC contact information and mailing addresses. Former subsection h (under form Section VI.A.2.) would be deleted and relevant text moved above in
the new Section VI.C. to consolidate text regarding unit investment trusts within the section.
The proposed rule change would also add text relating to processing of payment of cash for
convertible securities setting forth existing requirements for processing such payments.
The proposed rule change would renumber subsection VI.A.2.j. to become its own subsection
VI.D.
The proposed rule change would renumber former subsection VI.B. to become subsection
VI.E. The content of this subsection would be revised to update DTC contact information
and addresses and provide enhanced detail on consent and legal notices to be submitted by
Issuers, Agents, trustees or other third parties to DTC. Accurate delivery of such notices to
DTC facilitates the ability of DTC to process proxy-related requests and to make applicable
notice information available to the industry.
The proposed rule change would change the name of the ‘‘Call Notification Department’’ to
‘‘Redemption Notification Department’’ to reflect the updated name of the department.
The proposed rule change would (i) delete the text regarding use of vendor/service bureaus
that are obsolete and (ii) simplify notice requirements and related details and conform such
requirements to existing practice.
The proposed rule change would update the link to information regarding DTC deliver orders
and update DTC’s contact information.
The proposed rule change would change the name of the ‘‘Announcements Department’’ to reflect the updated name of the department and update DTC’s contact information.
The proposed rule change would update the text of this section to update DTC’s mailing address.
The proposed rule change would update the text of this section to add an email address for
DTC’s Reorganization Department to submit requests relating to DTC’s mandatory exclusion
procedures.
The proposed rule change would delete Section VIII. as it is obsolete and the remaining provisions of the OA shall apply to the securities covered by this Section.
Section VI.D. (Chargeback of Reorganization
Payments).
Section VI.E. (Proxy Related Procedures) .........
Section VII.A. (Partial Redemption Exclusions)
Section VII.B. (VRDO Interest Payment Information).
Section VII.C. (Optional Tender Provisions) ......
Section VII.D. (Mandatory Tender Provisions) ...
Section VII.E. (Use of Credit Facilities) ..............
Section VII.F. (Mandatory Tender Retention/Exclusion Provisions).
Section VIII. (Additional Operational Requirements for Cross-Currency and Other Warrants).
Exhibit B. (Underwriting Standard Time Frames)
Exhibit C (BLOR) ................................................
Exhibit D (ILOR) .................................................
sradovich on DSKBCFCHB2PROD with NOTICES
Exhibit E (Payments Time Frame chart) ............
Exhibit F (Non-Conforming Structured Securities
Attestation letter).
Throughout OA ...................................................
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This exhibit contains the timeframes, referred to in Section I.A.4. of the OA, for information
and/or materials needed by DTC to process an underwriting transaction and notify Participants in a timely fashion.
The proposed rule change would update Exhibit B to: (i) Revise text to indicate that that materials and information for underwriting transactions are submitted to DTC via UW SOURCE,
consistent with current practice as set forth in Section I.A.1., (ii) consolidate, for consistency,
time frames for the submission of offering documentation and certain information submitted
via UW SOURCE,32 (iii) reduce the number of days in advance of a closing date for an underwriting transaction that a BLOR or ILOR, as applicable, of a U.S. Issuer must be submitted,33 (iv) clarify that an Underwriter’s failure to timely submit final offering documents
would result in a surcharge in accordance with the Fee Schedule and (v) conform and clarify
text within the exhibit for consistency and enhanced readability.
The proposed rule change would remove this exhibit from the OA and move the document to
the DTCC Web site. The link would be provided under Section I.B.1.b. of the OA.
The proposed rule change would remove this exhibit from the OA and move the document to
the DTCC Web site. The link would be provided under Section I.B.1.b. of the OA.
The proposed rule change would remove Exhibit E which contains a chart outlining payment
and notification timeframes. The timeframes in the chart are outdated and redundant of information provided in the body of the OA.
The proposed rule change would remove this exhibit from the OA and move the document to
the DTCC Web site. The link to this document would be provided under Section IV.A.1.a. of
the OA.34
The proposed rule change would revise phone numbers, e-mail addresses, Web site locations
of documents, mailing addresses throughout the OA generally to the extent not mentioned
above. The proposed rule change would also generally revise text to, update and clarify
processing timeframes, improve readability, correct grammar and update cross-references to
the extent not already mentioned above. The proposed rule change would conform usage of
the defined term ‘‘Closing Date,’’ as defined in Section I.A.5., throughout the OA.
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Effective Date of Proposed Rule Change
The proposed rule change would be
effective immediately.
10 Available at https://www.dtcc.com/∼/media/
Files/Downloads/legal/service-guides/
Settlement.pdf.
11 Available at https://www.dtcc.com/∼/media/
Files/Downloads/legal/fee-guides/dtcfeeguide.pdf.
12 Unit securities or ‘‘Units’’ are securities
comprised of two or more separate components. A
Unit may be comprised of debt Securities, equity
Securities and/or warrants. Units may separate into
their component parts on or after the closing date
of their issuance. See Section I.C.2. of the OA, supra
note 5.
13 For immediately separable Units, DTC requires
CUSIPs only for each the components of the Unit,
but not for the Unit itself. For Units that are not
immediately separable, DTC requires a CUSIP for
the Unit itself and each of the individual
components of the Unit. See Section I.C.2. of the
OA, supra note 5.
14 See supra note 11.
15 This section describes conditions that must be
met for DTC to support distribution of securities
issued on a closing date. See Section II.B.1 of the
OA, supra note 5.
16 17 CFR 240.17Ad–2.
17 See 17 CFR 240.17Ad–2.
18 See Rule 2, supra note 6 at 22.
19 See OA, supra note 5.
20 The confirmation letter acts as the Participant’s
instruction to DTC pursuant to Rule 6 (Services) in
this regard. See Rule 6, supra note 6. Pursuant to
Rule 6 the Participant providing an instruction to
DTC indemnifies DTC against any loss, liability or
expense as a result of (a) any act done in reliance
upon the authenticity of the instruction, (b) the
inaccuracy of the information contained therein or
(c) effecting transactions in reliance upon such
information or instruction, so long as the
transaction is effected in accordance with such
information and instructions. Id.
21 Securities Exchange Act Release No. 75487
(July 20, 2015), 80 FR 44178 (July 24, 2015) (SR–
DTC–2015–007).
22 The revised language would require such
information be provided to DTC at least five
business days prior to the processing of a stock
distribution with a fractional entitlement, rather
than ‘‘approximately one to two weeks,’’ as
currently stated, because (a) the timeframe as
currently stated may create uncertainty for
responsible parties as to their obligations under this
provision and (b) in DTC’s experience, five business
days is sufficient time to allow for timely
processing in this regard.
23 Pursuant to Rule 6, DTC acts for a Participant,
subject to the Rules, on duly authorized
instructions from the Participant. See Rule 6, supra
note 6.
24 An optional put is a provision under which the
holder of securities may elect to have the securities
repaid at the stated put price after giving notice to
the tender agent within the required notification
period. Persons not giving notice retain the
securities. A mandatory tender is a provision under
which all holders of the securities are ‘‘cashed out’’
at the stated put price on the payable date. Holders
may have the right to retain their securities.
25 An extendible put is relates to a Security
subject to a ‘‘put’’ provision that may be exchanged
for a new security, in accordance with the terms
and conditions of such put, with a new maturity
date.
26 Survivor options relate to certain securities,
which by their terms, may contain early redemption
provisions in certain eventualities, such as the
death of a beneficial owner.
27 The list of information would also be revised,
as discussed below.
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2. Statutory Basis
Section 17A(b)(3)(F) of the Act 35
requires that the rules of the clearing
agency be designed, inter alia, to
promote the prompt and accurate
clearance and settlement of securities
transactions. DTC believes that the
proposed rule change is consistent with
this provision because it would update
the OA to clarify text, provide
additional detail on existing processes,
update DTC’s contact information and
therefore provide Participants, Issuers
and Agents with transparency with
respect to DTC’s eligibility and asset
servicing processes. By providing such
transparency, the proposed rule change
28 The confirmation letter acts as the Participant’s
instruction to DTC pursuant to Rule 6 (Services) in
with respect to the processing of the adjustments
processed pursuant to this section of the OA. See
Rule 6, supra note 6.
29 Pursuant to this section, information currently
required includes (i) Security description and
CUSIP number(s), (ii) total number of treasury or
repurchased shares, and (iii) Participant(s) account
name(s) and number(s) holding such share
positions. For the reason discussed above, the
proposed rule change would delete (ii) above and
add to the list of required information (a) total
number of shares/principal value and (b) number of
shares/principal value per Participant. The
proposed rule change would also modify (iii) above
to add ‘‘/principal’’ without a space after ‘‘share.’’
30 The purpose of this change is to enhance
efficiency and security of the processing of
information in this regard by having it transmitted
only to a secure DTC email account rather than by
fax which requires additional physical processing
to retrieve and maintain a record of the information.
The proposed rule change would also eliminate the
requirement for a sender to confirm DTC’s receipt
of the information.
31 On July 7, 2017, DTC submitted the ATOP Rule
Filing to the Commission pursuant to subparagraph
(f)(6) of Rule 19b–4 under the Act, 17 CFR 240.19b–
4(f)(6), to amend former Section VI.A.2. in the
subsection titled ‘‘Consents’’ thereunder, in order to
require Agents to use DTC’s Automated Tender
Offer Program to process consent solicitations for
book-entry securities. See Securities Exchange Act
Release No. 81096 (July 7, 2017), 82 FR 32406 (July
13, 2017) (SR–DTC–2017–011). By its terms, the
ATOP Rule Filing would be implemented 30 days
after the date of its filing date, or such shorter time
as the Commission may designate (‘‘ATOP Rule
Filing Implementation Date’’). See Id. Pursuant to
the proposed rule change, as of the ATOP Rule
Filing Implementation Date, the changes proposed
under the ATOP Rule Filing would be incorporated
into the corresponding subsection titled ‘‘Consents’’
under the renumbered Section VI.C. described
herein.
32 The number of days in advance of the closing
date of an underwriting transaction that DTC must
receive applicable offering documentation, as well
as certain identifying information with respect to
underwriters and securities relating to the
transaction would be reduced to more accurately
reflect the amount of lead time necessary for DTC
to timely process an underwriting transaction.
33 The related timeframe for non-U.S. Issuers to
submit a BLOR or ILOR, as applicable, prior to a
closing date of a transaction would not change due
to the amount of time necessary to complete
existing physical processing requirements for
BLORS and ILORS of non-U.S. Issuers.
34 See Section IV.A.1.a. of the OA, supra note 5.
35 15 U.S.C. 78q–1(b)(3)(F).
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36063
would allow each of these parties
greater transparency on processing of
transactions in their Securities and,
therefore, would promote the prompt
and accurate clearance and settlement of
securities transactions.
The proposed rule changes are also
designed to be consistent with Rule
17Ad–22(e)(23) of the Act,36 which was
recently adopted by the Commission.37
Rule 17Ad–22(e)(23) requires DTC, inter
alia, to establish, implement, maintain
and enforce written policies and
procedures reasonably designed to (i)
publicly disclose all relevant rules and
material procedures, including key
aspects of its default rules and
procedures, and (ii) provide sufficient
information to enable participants to
identify and evaluate the risks, fees, and
other material costs they incur by
participating in the covered clearing
agency. The proposed rule changes, as
described above, would update DTC’s
OA with respect to rules, material
procedures and certain fee provisions
relating to DTC’s securities eligibility
and asset servicing processes. As such,
DTC believes that the proposed changes
would promote disclosure of relevant
rules and material procedures and
provide sufficient information to enable
participants and other users of DTC’s
services to evaluate fees and other
material costs of utilizing DTC’s
services, in accordance with the
requirements of Rule 17Ad–22(e)(23),
promulgated under the Act, cited above.
(B) Clearing Agency’s Statement on
Burden on Competition
DTC does not believe that the
proposed rule change would have any
impact on competition because the
proposed changes merely relate to
updates and clarifications of the OA
which would not significantly affect the
rights and obligations of users of DTC’s
services, and would not
disproportionally impact any users.
(C) Clearing Agency’s Statement on
Comments on the Proposed Rule
Change Received From Members,
Participants, or Others
DTC has not solicited and does not
intend to solicit comments regarding the
proposed rule change. DTC has not
received any unsolicited written
comments from interested parties. To
36 17
CFR 240.17Ad–22(e)(23).
Commission adopted amendments to Rule
17ad–22, including the addition of new subsection
17ad–22(e), on September 28, 2016. See Securities
Exchange Act Release No. 78961 (September 28,
2016), 81 FR 70786 (October 13, 2016) (S7–03–14).
DTC is a ‘‘covered clearing agency’’ as defined by
new Rule 17ad–22(a)(5) and must comply with
subsection (e) of Rule 17Ad–22. Id.
37 The
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the extent DTC receives written
comments on the proposed rule change,
DTC will forward such comments to the
Commission.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A) 38 of the Act and paragraph
(f) of Rule 19b–4 39 thereunder. At any
time within 60 days of the filing of the
proposed rule change, the Commission
summarily may temporarily suspend
such rule change if it appears to the
Commission that such action is
necessary or appropriate in the public
interest, for the protection of investors,
or otherwise in furtherance of the
purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
sradovich on DSKBCFCHB2PROD with NOTICES
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
DTC–2017–010 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–DTC–2017–010. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
38 15
39 17
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f).
VerDate Sep<11>2014
19:43 Aug 01, 2017
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of DTC and on DTCC’s Web site
(https://dtcc.com/legal/sec-rulefilings.aspx). All comments received
will be posted without change; the
Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–DTC–
2017–010 and should be submitted on
or before August 23, 2017.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.40
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–16269 Filed 8–1–17; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[SEC File No. 270–381, OMB Control No.
3235–0434]
Proposed Collection; Comment
Request
Upon Written Request, Copies Available
From: U.S. Securities and Exchange
Commission, Office of FOIA Services,
100 F Street NE., Washington, DC
20549–2736.
Extension: Rule 15g–2.
Notice is hereby given that pursuant
to the Paperwork Reduction Act of 1995
(44 U.S.C. 3501 et seq.) (‘‘PRA’’), the
Securities and Exchange Commission
(‘‘Commission’’) is soliciting comments
on the collection of information
provided for in Rule 15g–2 (17 CFR
240.15g–2) under the Securities
Exchange Act of 1934 (15 U.S.C. 78a et
seq.) (‘‘Exchange Act’’). The
Commission plans to submit this
existing collection of information to the
Office of Management and Budget
(‘‘OMB’’) for extension and approval.
Rule 15g–2 (The ‘‘Penny Stock
Disclosure Rule’’) requires brokerdealers to provide their customers with
a risk disclosure document, as set forth
in Schedule 15G, prior to their first nonexempt transaction in a ‘‘penny stock.’’
As amended, the rule requires brokerdealers to obtain written
acknowledgement from the customer
that he or she has received the required
40 17
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risk disclosure document. The amended
rule also requires broker-dealers to
maintain a copy of the customer’s
written acknowledgement for at least
three years following the date on which
the risk disclosure document was
provided to the customer, the first two
years in an accessible place. Rule 15g–
2 also requires a broker-dealer, upon
request of a customer, to furnish the
customer with a copy of certain
information set forth on the
Commission’s Web site.
The risk disclosure documents are for
the benefit of the customers, to assure
that they are aware of the risks of
trading in ‘‘penny stocks’’ before they
enter into a transaction. The risk
disclosure documents are maintained by
the broker-dealers and may be reviewed
during the course of an examination by
the Commission.
There are approximately 198 brokerdealers that could potentially be subject
to current Rule 15g–2. The Commission
estimates that approximately 5% of
registered broker-dealers are engaged in
penny stock transactions, and thereby
subject to the Rule (5% × approximately
3,969 registered broker-dealers = 198
broker-dealers). The Commission
estimates that each one of these firms
processes an average of three new
customers for penny stocks per week.
Thus, each respondent processes
approximately 156 penny stock
disclosure documents per year. If
communications in tangible form alone
are used to satisfy the requirements of
Rule 15g–2, then the copying and
mailing of the penny stock disclosure
document takes no more than two
minutes. Thus, the total associated
burden is approximately 2 minutes per
response, or an aggregate total of 312
minutes per respondent. Since there are
198 respondents, the current annual
burden is 61,776 minutes (312 minutes
per each of the 198 respondents) or
1,030 hours for this third party
disclosure burden. In addition, brokerdealers incur a recordkeeping burden of
approximately two minutes per
response when filing the completed
penny stock disclosure documents as
required pursuant to the Rule
15(g)(2)(c), which requires a brokerdealer to preserve a copy of the written
acknowledgement pursuant to Rule
17a–4(b) of the Exchange Act. Since
there are approximately 156 responses
for each respondent, the respondents
incur an aggregate recordkeeping
burden of 61,776 minutes (198
respondents × 156 responses for each ×
2 minutes per response) or 1,030 hours,
under Rule 15g–2. Accordingly, the
current aggregate annual hour burden
associated with Rule 15g–2 (assuming
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]]>Agencies
[Federal Register Volume 82, Number 147 (Wednesday, August 2, 2017)]
[Notices]
[Pages 36057-36064]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-16269]
[[Page 36057]]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-81249; File No. SR-DTC-2017-010]
Self-Regulatory Organizations; The Depository Trust Company;
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change
To Modify the DTC Operational Arrangements Necessary for Securities To
Become and Remain Eligible for DTC Services in Order To Clarify and
Update Provisions Relating to the Processing of Eligibility Requests
and Servicing of Assets on Deposit at DTC
July 28, 2017.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on July 17, 2017, The Depository Trust Company (``DTC'') filed with the
Securities and Exchange Commission (``Commission'') the proposed rule
change as described in Items I, II and III below, which Items have been
prepared by the clearing agency. DTC filed the proposed rule change
pursuant to Section 19(b)(3)(A) \3\ of the Act and subparagraphs (f)(2)
and (f)(4) of Rule 19b-4 \4\ thereunder. The proposed rule change was
effective upon filing with the Commission. The Commission is publishing
this notice to solicit comments on the proposed rule change from
interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 CFR 240.19b-4(f)(2) and (f)(4).
---------------------------------------------------------------------------
I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change
The proposed rule change consists of modifications to the DTC
Operational Arrangements (Necessary for Securities to Become and Remain
Eligible for DTC Services) (``OA'') \5\ proposed in order to clarify
and update provisions relating to the processing of eligibility
requests and servicing of securities on Deposit at DTC, as more fully
described below.\6\
---------------------------------------------------------------------------
\5\ Available at https://www.dtcc.com/~/media/Files/Downloads/
legal/issue-eligibility/eligibility/operational-arrangements.pdf.
\6\ Each term not otherwise defined herein has its respective
meaning as set forth in the Rules, By-Laws and Organization
Certificate of DTC (the ``Rules''), available at https://www.dtcc.com/legal/rules-and-procedures.aspx and the OA, supra note
5.
---------------------------------------------------------------------------
II. Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
In its filing with the Commission, the clearing agency included
statements concerning the purpose of and basis for the proposed rule
change and discussed any comments it received on the proposed rule
change. The text of these statements may be examined at the places
specified in Item IV below. The clearing agency has prepared summaries,
set forth in sections A, B, and C below, of the most significant
aspects of such statements.
(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
1. Purpose
The OA was first published by DTC in June 1987. It was then updated
in June 1988, February 1992, December 1994, January 1998, May, 2002,
January 2009, December 2011 and most recently in 2016.\7\ The OA is
designed to maximize the number of issues of securities that may be
made eligible for DTC services, providing for the orderly processing of
such securities and timely payments to Participants. DTC's experience
demonstrates that when Participants, Issuers, Underwriters, Agents (as
such terms are defined in the Rules \8\ or in the OA \9\), and their
counsel are aware of DTC's requirements, those requirements can be
readily met in most instances. The purpose of this rule change is to
revise the text of the OA in order to update and clarify DTC's
processes in this regard. Additionally, some ministerial changes,
changes to methods of notification, and clarifying language have been
introduced, to provide a more concise description of OA procedures. In
this regard, the proposed rule change would revise the text of the OA
as set forth in the respective sections as described below:
---------------------------------------------------------------------------
\7\ See Securities Exchange Act Release Nos. 24818 (August 19,
1987), 52 FR 31833 (August 24, 1987) (SR-DTC-87-10); 25948 (July 27,
1988), 53 FR 29294 (August 3, 1988) (SR-DTC-88-13); 30625 (April 30,
1992), 57 FR 18534 (April 30, 1992) (SR-DTC-92-06); 35649 (April 26,
1995), 60 FR 21576 (May 2, 1995) (SR-DTC-94-19); 39894 (April 21,
1998), 63 FR 23310 (April 28, 1998) (SR-DTC-97-23); 45994 (May 29,
2002), 68 FR 35037 (June 11, 2003) (SR-DTC-2002-02); 59199 (January
6, 2009), 74 FR 1266 (January 12, 2009) (SR-DTC-2008-14); 65901
(December 6, 2011), 76 FR 77281 (December 12, 2011) (SR-DTC-2011-
10); 77043 (February 3, 2016), 81 FR 6913 (February 9, 2016) (SR-
DTC-2016-002); and 79122 (October 19, 2016), 81 FR 73450 (October
25, 2016) (SR-DTC-2016-010). A proposed change to amend the OA that
was filed with the Commission on July 7, 2017, SR-DTC-2017-011
(``ATOP Rule Filing''), is pending implementation. See Securities
Exchange Act Release No. 81096 (July 7, 2017), 82 FR 32406 (July 13,
2017) (SR-DTC-2017-011). The ATOP Rule Filing and its pending
implementation date are discussed more fully below. See infra note
31.
\8\ See supra note 6.
\9\ See supra note 5.
------------------------------------------------------------------------
OA Section Revision
------------------------------------------------------------------------
Important Legal Information.. The proposed change would (i) update the
most recent copyright date of the OA
from 2016 to 2017 and (ii) make
grammatical corrections and revise text
for readability.
Section I.A.2. (Securities The proposed rule change would (i) update
Eligible for DTC's Services). a reference to a link for DTC securities
eligibility documentation (ii) revise
the defined term for Money Market
Instruments from ``MMIs'' to ``MMI'' for
consistency with the Rules and the DTC
Settlement Service Guide \10\ and (iii)
revise a cross-reference to a footnote
regarding the DTC Custody Service to
refer to the section number the footnote
appears in, rather than just the page
number the footnote appears on.
Section I.A.4. (Standard Time The proposed rule change would revise
Frames for Providing text (i) for consistency with language
Underwriting Information to in DTC's Fee Schedule,\11\ to describe
DTC). charges made to underwriters that fail
to meet the requirements of this
subsection as ``surcharges'' rather than
``fines,'' (ii) to move a reference to
related standard time frames to earlier
in the section for reference purposes
and (iii) remove a link to the
Underwriting Service Guide in respect to
a reference to DTC's eligibility
requirements, since the OA is the
primary source for these requirements.
Section I.A.6. (Signature)... Change word usage in a sentence relating
to methods of transmission, recording or
storage of signatures, by replacing
``xeroxing'' with ``photocopying.''
[[Page 36058]]
Section I.B.1.b. (Required The proposed rule change would (i) revise
Riders to LOR). text for readability, (ii) update a
reference to a link for DTC securities
eligibility documentation that includes
various DTC forms Letters of
Representation (``LOR'') and riders to
the LOR, (iii) delete references to
Exhibit C and Exhibit D of the OA that
contain forms of the Blanket Letter of
Representations (``BLOR'') and Issuer
Letter of Representations (``ILOR''),
respectively, which exhibits would be
removed from the OA, as discussed below,
and (iv) replace the deleted references
to Exhibits C and D with links to the
BLOR and ILOR. The proposed rule change
would also add text noting that sample
offering document language is available
in the form of BLOR and ILOR.
Section I.B.1.d. (LOR The proposed rule change would remove a
Requirements for provision stating that DTC may be
Certificated Securities). require an Agent to sign a ``Tender
LOR'' for certificated issues with put
features. The Tender LOR is used by DTC
to obtain the Agent's agreement for DTC
to use its procedures applicable to the
processing of tenders for Securities
with put features. However, DTC already
maintains authority to use its
procedures in this regard pursuant to
the OA as set forth in Section V.B.2.
(Put Features with Special Processing
Requirements). Therefore, it is
unnecessary for DTC to separately obtain
a signed Tender LOR from Agents in this
regard.
Section I.B.4.a. (Ownership The proposed rule change would (i) revise
Thresholds). the text to update links to
documentation referenced by this section
and (ii) revise the defined term for
Segregation Account 100 service from
``SEG 100'' to ``Seg 100'' for
consistency with other references to
this service in the OA.
Section I.B.4.b. (Revisions The proposed rule change would update a
to Eligible Securities). cross-reference relating to information
on altering the terms of an offer from
referencing Section VI(A)(2)(d) to
instead reference Section VI(C)(5)(c).
Section I.B.5. (Instruction The proposed rule change would (i)
Letters Regarding the correct the text of this section to add
Expiration of a Restrictive ``the Securities'' after ``Issuer of''
Period). and (ii) add links to existing forms and
requirements for Issuers and Agents to
request the processing of exchanges
relating to CUSIPs for securities that
were originally restricted pursuant to
Rule 144A and/or Regulation S and which
have become unrestricted.
Section I.C.1. (Retail The proposed rule change would make a
Certificates of Deposit). grammatical change to the text of this
section to improve readability.
Section I.C.2. (Unit The proposed rule change would add
Securities). clarifying language in this section
relating to additional eligibility
requirements for unit securities \12\
for improved readability, including with
respect to (i) CUSIP requirements for
immediately separable Units versus Units
separable after their initial closing
date \13\ and (ii) requirements as
stated in this section relating to Units
for which are separable into their
components on a voluntary basis versus
on a mandatory basis.
Section I.C.3. (New Issue The proposed rule change would revise
Eligibility Requirements for this section to update the link to a
Municipal Securities). list of NIIDS Data Elements and related
procedures.
Section I.C.5. (Non-U.S. The proposed rule change would revise
Currency Denominated this section to update a cross-reference
Securities). to Section IV.B.3. by changing the
referenced title of that section from
``Securities without an Option for U.S.
Dollar Payment'' to ``Securities
Denominated in a Non-U.S. Currency
without an Option for U.S. Dollar
Payment.''
Section I.D. (Compliance with The proposed rule change would make a
Regulations). technical correction to remove
unnecessary numbering within the
section.
Section I.E. (DTC Fee The proposed rule change would add this
Schedule). subsection to include the link to the
DTC Fee Schedule \14\ for transparency
with respect to current exception
processing fees, late fees and
surcharges referred to in the OA.
Section II.A.1 (CUSIP Number The proposed rule change would make
Assignment). changes to the text of this section for
clarity and improved readability with
respect to an example provided within.
Section II.B.1. (Possession The proposed rule change would (i) add
and Inspection). text to this section \15\ to insert a
cross-reference to a related process
concerning confirmation of FAST balances
by an Agent and (ii) update the address
for delivery of security certificates to
the DTC Securities Processing
Department.
Section II.B.2.a. (FAST)..... The proposed rule change would add a link
as a reference for additional
information for Agents interested in
becoming FAST Agents.
Section II.B.2.c. (DWAC)..... The proposed rule change would add text
to this section to clarify that DTC may
require a FAST Agent to use the DWAC
process for the separation of a Unit
into its components.
Section II.B.3. (Transfer The proposed rule change delete text in
Turnaround Times). regard to monitoring by DTC of transfer
turnaround times for Agents and
preventing eligibility of an Agent that
fails to comply. It is not practical for
DTC to monitor transfer turnaround times
since transfer turnaround times are
established outside of DTC pursuant to
Rule 17Ad-2 under the Act \16\ and,
pursuant to that rule, Agent reporting
on compliance is required to be made to
the SEC and the Agent's ``appropriate
regulatory agency,'' if applicable.\17\
Section II.B.4.b. (Transfer The proposed rule change would revise the
Agent Required Notices). text of this section (i) to state that
Agents should notify DTC by the
effective date of the Agent's assuming
or terminating services as Agent for an
Issuer, or the Agent's change of name or
address, by the effective date of the
change, rather than at least 10 calendar
days in advance, because receipt of such
notice on the effective date is
sufficient for DTC to timely update its
records to reflect the applicable change
and (ii) to update references to the
form Agents use to notify DTC of such
changes, including updating the
applicable link to the form and
inserting the DTC e-mail address that a
completed form should be delivered to.
Subsections within Section II.B.4.b.
numbered and titled, respectively, ``(1)
Termination of Transfer Agent
Services,'' ``(2) Assumption of Transfer
Agent Services'' and ``(3) Transfer
Agent's Change of Name or Address,''
would become separate sections and would
renumbered to an alphabetical format
sequentially numbered with the other
Sections of II.B.4.b. The section that
would be renumbered Section II.B.4.c.,
(``Termination of Transfer Agent
Services''), as mentioned above, would
be revised for readability and clarity.
[[Page 36059]]
Section II.B.4.c. (Business The proposed rule change would delete
Contingency). this subsection which relates to
connectivity testing by transfer agents
and paying agents that are Participants,
because this subsection is duplicative
of the Rules and unnecessary for
inclusion in the OA.\18\
Section II.B.5. (Trustee The proposed rule change would clarify
Required Notices). and update text from original Section
VI.B.4 (Trustee Requirements) and
reposition the text to new Section
II.B.5. (Trustee Required Notices).
Section III.A. (Record Date The proposed rule change would (i) revise
Requirements). the text of this section to clarify text
relating to the option for Securities to
pay distributions in one or more
currencies and (ii) delete outmoded
language regarding establishment of
record dates by securities exchanges,
since the establishment of the record
date by the Issuer is not dependent on
the date of an ex-date established by a
securities exchange.
Section III.B. (Notices)..... The proposed rule change would clarify
this section to state that where an
Issuer or Agent provides information or
notice to DTC for distribution to
Participants, the notice should include
the terms of the event in addition to
other relevant information as stated
therein, including CUSIP numbers,
payment information and any relevant
instructions. The proposed rule change
would also change a cross reference from
Exhibit E to Exhibit C to reflect the
deletion of certain exhibits, as
described herein.
Section III.C. (Payment The proposed rule change would modify the
Instructions). text of this section to clarify that the
prohibition against Agents deducting
fees from distribution payments to DTC
includes a prohibition against invoicing
DTC for such fees.
Section III.C.1. (Income The proposed rule change would delete a
Payment Standards). paragraph from this section in regard to
instructing Issuers to fund their Agents
by 1 p.m. on a payable date since DTC
has no visibility on the transfer of
funds between Issuers and Agents and is
therefore unable to enforce such a
requirement.
Section III.C.2. (Redemption The proposed rule change would (i) delete
and Maturity Payment a paragraph from this section in regard
Standards). to instructing Issuers to fund their
Agents for redemption and maturity
payments by 1 p.m. on a payable date
since DTC has no visibility on the
transfer of funds between Issuers and
Agents and is therefore unable to
enforce such a requirement, (ii) update
a link referring to information about
DTC principal and income processing, and
(iii) delete a reference to a defunct
email address for informational
inquiries and replace it with contact
information for DTC's client support
team.
Section III.C.3. The proposed rule change would add e-mail
(Reorganization Payment addresses for DTC's reorganization
Standards). department and a phone number to the
DTCC customer service hotline to promote
accessibility to DTC staff for questions
regarding wire instructions and payment
arrangements. The text of this section
would also be revised to change ``pm''
to ``p.m.'' in connection with timeframe
references appearing in two places.
Section III.D. (Additional The proposed rule change would revise the
Payment Arrangements/ text of this section (i) to clarify
Policies/Procedures). language for improved readability and
scope and (ii) update references to DTC
contact information.
Section III.D.1. (Redemption The proposed rule change would revise
Payments with Presentation this section to correct capitalization
(``PWP'')). of a defined term.
Section III.D.2. The proposed rule change would add text
(Compensation Claims Policy for clarity and simplification to state
and Related Procedures). DTC's policy with respect to DTC's
ability to claim Paying Agents and
Issuers that fail to pay DTC for a
payment event on the scheduled payment
date, rather than referring to a
separate procedure in this regard. In
addition, text regarding Agents ability
to submit a claim to DTC for erroneous
payments made to DTC would be deleted
from this section as it is duplicative
of information provided in Section
III.D.3. of the OA--``Requests for
Return of Funds.'' \19\ In addition,
Section III.D.2. would be renamed from
``Compensation Claims Policy and Related
Procedures'' to ``Compensation Claims
Policy.''
Section III.D.3. (Requests The proposed rule change would delete
for Return of Funds). references to the ``Return of Funds
Procedure'' and contact information to
obtain a copy of such procedure. The
procedure is no longer separately
provided because it was duplicative of
this Section III.D.3.
The proposed rule change would clarify
the text of this section in subsection
a. with respect to DTC's practice for
the return of funds to Agents with
regard to payments for which the Issuer
has not paid the Agent and where the
Agent has made erroneous payments to
DTC. In addition, subsection a.,
currently titled ``Issuer Default/
Bankruptcy Considerations'' would be
changed to ``Issuer Default/Bankruptcy
Considerations/Agent Not Funded by
Issuer'' in order to clarify the scope
of the subsection.
The proposed rule change would revise
subsection b. (Processing Errors) to add
contact information for an Agent or
Issuer to notify DTC in the event an
Agent or Issuer makes an erroneous
payment to DTC, and clarify DTC's
existing practice of returning funds
only to the bank account from which the
erroneous payment was received. The
purpose of this provision would be to
ensure that funds are sent back only to
the party that sent them to DTC and
reduce the possibility of error or fraud
in the transmission of the return of
funds. The proposed rule change would
also revise the text of this subsection
for a grammatical change and
readability.
[[Page 36060]]
Section IV.A. (Dividend and The proposed rule change would (i) revise
Income Notification the title and text of this section,
Procedures). which relates to payment notice
information required from Agents, to (a)
add the word ``Payment'' to the title so
that the section would be named
``Dividend and Income Payment
Notification Procedures,'' (b) remove a
requirement that information provided to
DTC under this section must include any
income related to a corporate action,
because DTC is able to determine this
information from dividend and interest
rate information that is required to be
provided by an Issuer or Agent pursuant
to this section and (c) clarify that
payment notices for exchange traded
funds (``ETFs'') are generally not
required, unless specifically requested
by DTC, because this information is
sourced from securities exchanges on
which the applicable ETF is listed, (ii)
remove the requirement for parties that
send an e-mail to DTC's Announcements
Department to telephone DTC if an e-mail
receipt is not received by them from DTC
within an hour to confirm such notice
was received and (iii) change the
physical delivery address used for
transmission of notices to DTC in the
event electronic transmission is not
available.
Section IV.A.1. (Structured The proposed rule change would clarify
Securities). that ``record date'' and ``payable
date'' are required information that
must be provided to DTC in connection
with minimal notification of structured
security rate information. In addition,
the proposed rule change would remove
the text ``preferably two business
days'' from the description of the
required timeframe to for minimum
notification.
Section IV.A.1.a. (Non- The proposed rule change would revise the
Conforming Structured text of this section to provide a link
Securities). to a copy of the Non-Conforming
Structured Securities Attestation
Letter.
Section IV.A.1.c. (Remittance The proposed rule change would delete
Reporting to DTC for this section as it is outdated and no
Structured Securities). longer applicable.
Section IV.A.2. (American/ The proposed rule change would revise
Global Depositary Receipts this section to update an email address
(``ADR/GDR'')). provided to contact the DTC
Announcements Department. The text of
this section would also be revised to
clarify that a notice of payment
information for an American or Global
Depository Receipt must include the
record date in addition to other
information as provided in the text of
this section. The text of this section
would also be revised to remove a
reference to a preferred timeframe for
submission of a notice of payment
information. The text would also be
revised to move the placement of
``payable date,'' which appears in a
list of notice requirements, from below
to above ``payment amount per share.''
Section IV.A.3. (Unit This section describes notice
Investment Trust (``UIT'') requirements for record date and other
Securities). information that must be provided to DTC
for distributions and payments on UITs.
The proposed rule change would delete
this section because it is no longer
accurate. Securities Exchanges rather
than Agents provide the information
required by this Section to DTC.
Section IV.B. (Currency The proposed rule change would update
Payment Provisions). headings of subsections within this
section to clarify their scope in
relation Securities in Non-U.S.
denominated currencies.
Section IV.C.1. (Dividend or The proposed rule change would revise
Interest Rate Change). this section to provide updated delivery
information for notices by Issuers and
Agents to DTC with respect to changes in
dividend or interest rates, and replace
a reference to ``Publication Date'' with
``payment date'' to reflect currently
used terminology.
Section IV.C.2. (Reduction of This section describes the process by
Payment on Treasury or which an Agent may inform DTC that
Repurchased Securities (for payment to a Participant of cash
Cash Dividend or Interest dividend and interest payments for a
Payment)). particular distribution on Securities
the Participant is holding should be
adjusted. The proposed rule change would
revise this section to reflect an
existing requirement for the Agent to
provide a confirmation letter signed by
the Participant that holds the subject
shares whereby the Participant
authorizes the adjustment in payment and
includes an indemnification statement
indemnifying DTC with respect to
processing the adjustment.\20\
The proposed rule change would also amend
the text to update (i) this section with
respect to information the Agent must
provide to DTC with regard to the
adjustment which DTC needs to process
the adjustment promptly and accurately
and (ii) contact information for the
delivery of such information by the
Agent to DTC.
In addition, the proposed rule change
would remove a provision from this
section that states that instructions
submitted to DTC in accordance with this
section that are submitted outside of
required timeframes will subject the
responsible Participant to a
disincentive fee. The disincentive fee
is not necessary because it is in the
best interest for the applicable
responsible parties to submit these
instructions timely to allow same-day
distribution of applicable principal and
income payments to Participants and
beneficial owners, and the disincentive
fee is not necessary for this purpose.
Section IV.D. (Additional The proposed rule change would update the
Dividend Policies). title of this section to reflect that
the requirements constitute procedures
of DTC. Therefore, the section would be
retitled ``Additional Dividend
Procedures.''
Section IV.D.1.a. (Voluntary The proposed rule change would revise
Dividend Reinvestment and this section to re-order an existing
Securities with an Automatic list of Agent requirements and add
Dividend Reinvestment (with clarifying terms regarding (i) the
an option to elect a cash timing of the Agent's acceptance of
dividend)). dividend reinvestment-related
instructions from DTC, (ii) the
agreement of the Agent that shares
reinvested through DTC's Dividend
Reinvestment Program (``DRP'') shall of
the same Security as the issue paying
the dividend, and (iii) a requirement,
consistent with DTC's eligibility
requirements, that reinvestment shares
must carry transfer or ownership
restrictions. The proposed rule change
would also make changes to the text (i)
for enhanced readability on the purpose
and function of the DRP and (ii) update
email and mailing address information
for the delivery of instructions and
security certificates to DTC.
[[Page 36061]]
Section IV.D.1.b. (Automatic The proposed rule change would delete
Dividend Reinvestment). text stating that DTC may not make an
issue from an Agent eligible if the
Agent has a record of not complying with
the provisions of this section as this
is not a criterion for determining
eligibility of an issue for a
reinvestment program. DTC reviews issues
for eligibility for inclusion in a
reinvestment program by applying the
criteria set forth in the OA on an issue-
by-issue basis.
Section IV.D.2. (Stock The proposed rule change would revise the
Distributions to Holders of text of this section to (i) rename the
Record). subsection from ``Stock Distributions to
Holders of Record'' to become ``Stock/
Pay-in-Kind (``PIK'') Distributions to
Holders of Record'' and (ii) reflect the
required information flow of notices for
stock distributions to record date
holders. The proposed text would also
include a statement on the processing of
bond-related ``Paid-in-kind
distributions'' and variations.
Section IV.D.2.a. (Fractional The proposed rule change would (i) revise
Entitlements in Cash or the text of this section to reflect that
Additional Roundup Shares). DTC no longer supports distribution of
fractional shares; per SEC filing No. SR-
DTC-2015-007,\21\ (ii) revise language
stating the timing by which an Issuer or
Agent must provide DTC with the
information DTC needs to collect
Participant instructions (regarding
liquidation or issuance of shares to
satisfy Participant cash-in-lieu
(``CIL'')/roundup entitlements) \22\ and
(iii) update an address for the delivery
of physical securities to DTC.
Section IV.D.2.b. The proposed rule change would clarify
(Restriction Distribution text relating to a requirement to send a
Shares Issued). notice to DTC and the information on
such notice.
Section IV.D.3. (Reduction of The proposed rule change would revise
Payment on Treasury or this section to clarify Participant
Repurchased Securities (for authorization requirements with regard
Stock Dividend Payments)). to reductions of payment on treasury or
repurchased shares for stock dividend
payments, to add that the confirmation
letter required pursuant to this section
must contain an officer-level
authorization for the applicable
reduction.\23\
In addition, the proposed rule change
would remove a provision from this
section that states that instructions
submitted to DTC outside of required
timeframes will subject the responsible
Participants to a disincentive fee. The
disincentive fee is not necessary
because it is in the best interest for
the applicable responsible parties to
submit these instructions timely to
allow same-day distribution of stock to
Participants and beneficial owners, and
the disincentive fee is not necessary
for this purpose.
Section V.A. (Redemptions, The proposed rule change would (i) delete
Advance Refundings and Calls a need to call DTC to confirm hardcopy/
Inclusive of Sinking Funds email notice receipt, (ii) clarify the
and Mandatory Redemptions). need for the Agent to contact DTC the
first time they use the spreadsheet
submission process and (iii) conform the
usage of the defined term ``PWP'' (i.e.,
Payment Without Presentation) with its
initial definition in Section III.D.1.
Section V.A.2. Partial The proposed rule change would revise
Redemptions for Auction Rate this section to (i) delete references to
Securities (``ARS'') and discretionary processing fees, relating
Requests for ARS Lottery to the release of lottery results, that
Results. are not charged, (ii) update contact
information with respect to information
on ARS processing and (iii) make
grammatical changes to text for improved
readability.
Section V.B.1. (Standards for This section relates to instructions from
Put Notifications). Issuers and Agents and information for
the processing of optional puts and
mandatory tenders.\24\ The proposed rule
change would revise this section and
clarify text for purposes of
completeness with regard to processing
timeframes and information DTC requires
to timely process optional puts and
mandatory tenders. The proposed rule
change would also revise the text to
update DTC contact information.
Section V.B.2.b. The proposed rule change would revise the
(Collateralized Mortgage text of this section to clarify the
Obligations (``CMOs'') and scope and indicate that mortgage backed
Asset-Backed Securities securities, in addition to CMOs and ABSs
(``ABSs'')). are covered by this section. The text of
this section would also be revised to
update DTC contact information, Web site
references and revise wording for
improved readability.
Section V.B.2.c. (Put The proposed rule change would clarify
``Extendible'' Issues) \25\. the text of this section to reflect the
process as it has been established in
practice in conjunction with Agents on
this type of put. The proposed rule
change would also revise the text of
this section for enhanced readability
and to update DTC contact and mailing
information.
Section V.B.2.d. (Put Bonds The proposed rule change would revise the
(Repayment Options)). text to (i) clarify that late
notification may result in late
notification fees in accordance with the
DTC Fee Schedule and (ii) update DTC
contact and mailing information.
Section V.B.2.e. (Survivor The proposed rule change would revise the
Options) \26\. text of this section to add the Web site
location of the DTC Reorganizations
Service Guide for further information on
processing. The proposed rule change
would also clarify that DTC does not
monitor presentment of supporting
documentation to an Agent for processing
of survivor options.
Section VI.A. (Standards for The proposed rule change would update the
Voluntary and Mandatory text of this section to clarify the
Reorganizations). notice and timing requirements for
Issuers and Agents to allow DTC to
timely process voluntary and mandatory
corporate actions and update the title
of the section to reflect that it
pertains to notices. The proposed rule
change would also add a cross reference
to the DTC Fee Schedule for applicable
fees.
Section VI.B.1. (Reduction of The proposed rule change would shorten
Payment on Treasury or the amount of time in advance that
Repurchased Securities). Agents must provide to DTC (i)
information as required by this section
\27\ and (ii) confirmation letters \28\
to DTC, prior to the processing of
adjustments to Participant accounts
reflecting a reduced payment/
distribution amount, in accordance with
this section, from five business days to
no later than three business days prior
to the payment/distribution date of the
entitlement. The change would more
accurately reflect the amount of time
required by DTC to receive the necessary
information and confirmation letters in
order to timely process such
adjustments. The proposed rule change
would revise the list of information DTC
requires in connection with processing
such adjustments in order to specify the
information that DTC needs in order to
promptly and accurately process an
adjustment.\29\ The proposed rule change
would also revise DTC's contact
information to reflect that the
information should no longer be send to
DTC via fax, but only via email.\30\
[[Page 36062]]
Section VI.B.2. (Mandatory The proposed rule change would move the
Separation of a Unit After text of former Section VI.A.2.i. to this
the Closing Date). newly numbered section.
Section VI.C. (Processing for The proposed rule change would change the
Specific Voluntary numbering of former Section VI.A.2 to
Reorganizations). VI.C.\31\ and rename it from
``Processing for Specific Voluntary
Reorganization Features'' to
``Processing for Specific Voluntary
Reorganizations.'' The proposed rule
change would divide the content of the
newly numbered section into 5
subsections reflecting, and separating
for enhanced readability, the existing
content of former Section VI.A.2.:
1. Unit Investment Trust.
2. Mortgage-Backed Securities with
Monthly Early Redemption Features.
3. Rights Offers (Use of DTC's Automated
Subscription Offer Program (``ASOP'').
4. Standards for Convertible Issues/
Warrants/Rights; and
5. Voluntary Tenders/Exchanges/Mergers
with Elections (Use of DTC's Automated
Tender Offer Program (``ATOP'').
Each of these subsections would be
revised to clarify the text for enhanced
readability and to provide enhanced
detail on relevant notice and
information requirements. The proposed
rule change would also update DTC
contact information and mailing
addresses. Former subsection h (under
form Section VI.A.2.) would be deleted
and relevant text moved above in the new
Section VI.C. to consolidate text
regarding unit investment trusts within
the section. The proposed rule change
would also add text relating to
processing of payment of cash for
convertible securities setting forth
existing requirements for processing
such payments.
Section VI.D. (Chargeback of The proposed rule change would renumber
Reorganization Payments). subsection VI.A.2.j. to become its own
subsection VI.D.
Section VI.E. (Proxy Related The proposed rule change would renumber
Procedures). former subsection VI.B. to become
subsection VI.E. The content of this
subsection would be revised to update
DTC contact information and addresses
and provide enhanced detail on consent
and legal notices to be submitted by
Issuers, Agents, trustees or other third
parties to DTC. Accurate delivery of
such notices to DTC facilitates the
ability of DTC to process proxy-related
requests and to make applicable notice
information available to the industry.
Section VII.A. (Partial The proposed rule change would change the
Redemption Exclusions). name of the ``Call Notification
Department'' to ``Redemption
Notification Department'' to reflect the
updated name of the department.
Section VII.B. (VRDO Interest The proposed rule change would (i) delete
Payment Information). the text regarding use of vendor/service
bureaus that are obsolete and (ii)
simplify notice requirements and related
details and conform such requirements to
existing practice.
Section VII.C. (Optional The proposed rule change would update the
Tender Provisions). link to information regarding DTC
deliver orders and update DTC's contact
information.
Section VII.D. (Mandatory The proposed rule change would change the
Tender Provisions). name of the ``Announcements Department''
to reflect the updated name of the
department and update DTC's contact
information.
Section VII.E. (Use of Credit The proposed rule change would update the
Facilities). text of this section to update DTC's
mailing address.
Section VII.F. (Mandatory The proposed rule change would update the
Tender Retention/Exclusion text of this section to add an email
Provisions). address for DTC's Reorganization
Department to submit requests relating
to DTC's mandatory exclusion procedures.
Section VIII. (Additional The proposed rule change would delete
Operational Requirements for Section VIII. as it is obsolete and the
Cross-Currency and Other remaining provisions of the OA shall
Warrants). apply to the securities covered by this
Section.
Exhibit B. (Underwriting This exhibit contains the timeframes,
Standard Time Frames). referred to in Section I.A.4. of the OA,
for information and/or materials needed
by DTC to process an underwriting
transaction and notify Participants in a
timely fashion.
The proposed rule change would update
Exhibit B to: (i) Revise text to
indicate that that materials and
information for underwriting
transactions are submitted to DTC via UW
SOURCE, consistent with current practice
as set forth in Section I.A.1., (ii)
consolidate, for consistency, time
frames for the submission of offering
documentation and certain information
submitted via UW SOURCE,\32\ (iii)
reduce the number of days in advance of
a closing date for an underwriting
transaction that a BLOR or ILOR, as
applicable, of a U.S. Issuer must be
submitted,\33\ (iv) clarify that an
Underwriter's failure to timely submit
final offering documents would result in
a surcharge in accordance with the Fee
Schedule and (v) conform and clarify
text within the exhibit for consistency
and enhanced readability.
Exhibit C (BLOR)............. The proposed rule change would remove
this exhibit from the OA and move the
document to the DTCC Web site. The link
would be provided under Section I.B.1.b.
of the OA.
Exhibit D (ILOR)............. The proposed rule change would remove
this exhibit from the OA and move the
document to the DTCC Web site. The link
would be provided under Section I.B.1.b.
of the OA.
Exhibit E (Payments Time The proposed rule change would remove
Frame chart). Exhibit E which contains a chart
outlining payment and notification
timeframes. The timeframes in the chart
are outdated and redundant of
information provided in the body of the
OA.
Exhibit F (Non-Conforming The proposed rule change would remove
Structured Securities this exhibit from the OA and move the
Attestation letter). document to the DTCC Web site. The link
to this document would be provided under
Section IV.A.1.a. of the OA.\34\
Throughout OA................ The proposed rule change would revise
phone numbers, e-mail addresses, Web
site locations of documents, mailing
addresses throughout the OA generally to
the extent not mentioned above. The
proposed rule change would also
generally revise text to, update and
clarify processing timeframes, improve
readability, correct grammar and update
cross-references to the extent not
already mentioned above. The proposed
rule change would conform usage of the
defined term ``Closing Date,'' as
defined in Section I.A.5., throughout
the OA.
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[[Page 36063]]
Effective Date of Proposed Rule Change
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\10\ Available at https://www.dtcc.com/~/media/Files/Downloads/
legal/service-guides/Settlement.pdf.
\11\ Available at https://www.dtcc.com/~/media/Files/Downloads/
legal/fee-guides/dtcfeeguide.pdf.
\12\ Unit securities or ``Units'' are securities comprised of
two or more separate components. A Unit may be comprised of debt
Securities, equity Securities and/or warrants. Units may separate
into their component parts on or after the closing date of their
issuance. See Section I.C.2. of the OA, supra note 5.
\13\ For immediately separable Units, DTC requires CUSIPs only
for each the components of the Unit, but not for the Unit itself.
For Units that are not immediately separable, DTC requires a CUSIP
for the Unit itself and each of the individual components of the
Unit. See Section I.C.2. of the OA, supra note 5.
\14\ See supra note 11.
\15\ This section describes conditions that must be met for DTC
to support distribution of securities issued on a closing date. See
Section II.B.1 of the OA, supra note 5.
\16\ 17 CFR 240.17Ad-2.
\17\ See 17 CFR 240.17Ad-2.
\18\ See Rule 2, supra note 6 at 22.
\19\ See OA, supra note 5.
\20\ The confirmation letter acts as the Participant's
instruction to DTC pursuant to Rule 6 (Services) in this regard. See
Rule 6, supra note 6. Pursuant to Rule 6 the Participant providing
an instruction to DTC indemnifies DTC against any loss, liability or
expense as a result of (a) any act done in reliance upon the
authenticity of the instruction, (b) the inaccuracy of the
information contained therein or (c) effecting transactions in
reliance upon such information or instruction, so long as the
transaction is effected in accordance with such information and
instructions. Id.
\21\ Securities Exchange Act Release No. 75487 (July 20, 2015),
80 FR 44178 (July 24, 2015) (SR-DTC-2015-007).
\22\ The revised language would require such information be
provided to DTC at least five business days prior to the processing
of a stock distribution with a fractional entitlement, rather than
``approximately one to two weeks,'' as currently stated, because (a)
the timeframe as currently stated may create uncertainty for
responsible parties as to their obligations under this provision and
(b) in DTC's experience, five business days is sufficient time to
allow for timely processing in this regard.
\23\ Pursuant to Rule 6, DTC acts for a Participant, subject to
the Rules, on duly authorized instructions from the Participant. See
Rule 6, supra note 6.
\24\ An optional put is a provision under which the holder of
securities may elect to have the securities repaid at the stated put
price after giving notice to the tender agent within the required
notification period. Persons not giving notice retain the
securities. A mandatory tender is a provision under which all
holders of the securities are ``cashed out'' at the stated put price
on the payable date. Holders may have the right to retain their
securities.
\25\ An extendible put is relates to a Security subject to a
``put'' provision that may be exchanged for a new security, in
accordance with the terms and conditions of such put, with a new
maturity date.
\26\ Survivor options relate to certain securities, which by
their terms, may contain early redemption provisions in certain
eventualities, such as the death of a beneficial owner.
\27\ The list of information would also be revised, as discussed
below.
\28\ The confirmation letter acts as the Participant's
instruction to DTC pursuant to Rule 6 (Services) in with respect to
the processing of the adjustments processed pursuant to this section
of the OA. See Rule 6, supra note 6.
\29\ Pursuant to this section, information currently required
includes (i) Security description and CUSIP number(s), (ii) total
number of treasury or repurchased shares, and (iii) Participant(s)
account name(s) and number(s) holding such share positions. For the
reason discussed above, the proposed rule change would delete (ii)
above and add to the list of required information (a) total number
of shares/principal value and (b) number of shares/principal value
per Participant. The proposed rule change would also modify (iii)
above to add ``/principal'' without a space after ``share.''
\30\ The purpose of this change is to enhance efficiency and
security of the processing of information in this regard by having
it transmitted only to a secure DTC email account rather than by fax
which requires additional physical processing to retrieve and
maintain a record of the information. The proposed rule change would
also eliminate the requirement for a sender to confirm DTC's receipt
of the information.
\31\ On July 7, 2017, DTC submitted the ATOP Rule Filing to the
Commission pursuant to subparagraph (f)(6) of Rule 19b-4 under the
Act, 17 CFR 240.19b-4(f)(6), to amend former Section VI.A.2. in the
subsection titled ``Consents'' thereunder, in order to require
Agents to use DTC's Automated Tender Offer Program to process
consent solicitations for book-entry securities. See Securities
Exchange Act Release No. 81096 (July 7, 2017), 82 FR 32406 (July 13,
2017) (SR-DTC-2017-011). By its terms, the ATOP Rule Filing would be
implemented 30 days after the date of its filing date, or such
shorter time as the Commission may designate (``ATOP Rule Filing
Implementation Date''). See Id. Pursuant to the proposed rule
change, as of the ATOP Rule Filing Implementation Date, the changes
proposed under the ATOP Rule Filing would be incorporated into the
corresponding subsection titled ``Consents'' under the renumbered
Section VI.C. described herein.
\32\ The number of days in advance of the closing date of an
underwriting transaction that DTC must receive applicable offering
documentation, as well as certain identifying information with
respect to underwriters and securities relating to the transaction
would be reduced to more accurately reflect the amount of lead time
necessary for DTC to timely process an underwriting transaction.
\33\ The related timeframe for non-U.S. Issuers to submit a BLOR
or ILOR, as applicable, prior to a closing date of a transaction
would not change due to the amount of time necessary to complete
existing physical processing requirements for BLORS and ILORS of
non-U.S. Issuers.
\34\ See Section IV.A.1.a. of the OA, supra note 5.
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The proposed rule change would be effective immediately.
2. Statutory Basis
Section 17A(b)(3)(F) of the Act \35\ requires that the rules of the
clearing agency be designed, inter alia, to promote the prompt and
accurate clearance and settlement of securities transactions. DTC
believes that the proposed rule change is consistent with this
provision because it would update the OA to clarify text, provide
additional detail on existing processes, update DTC's contact
information and therefore provide Participants, Issuers and Agents with
transparency with respect to DTC's eligibility and asset servicing
processes. By providing such transparency, the proposed rule change
would allow each of these parties greater transparency on processing of
transactions in their Securities and, therefore, would promote the
prompt and accurate clearance and settlement of securities
transactions.
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\35\ 15 U.S.C. 78q-1(b)(3)(F).
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The proposed rule changes are also designed to be consistent with
Rule 17Ad-22(e)(23) of the Act,\36\ which was recently adopted by the
Commission.\37\ Rule 17Ad-22(e)(23) requires DTC, inter alia, to
establish, implement, maintain and enforce written policies and
procedures reasonably designed to (i) publicly disclose all relevant
rules and material procedures, including key aspects of its default
rules and procedures, and (ii) provide sufficient information to enable
participants to identify and evaluate the risks, fees, and other
material costs they incur by participating in the covered clearing
agency. The proposed rule changes, as described above, would update
DTC's OA with respect to rules, material procedures and certain fee
provisions relating to DTC's securities eligibility and asset servicing
processes. As such, DTC believes that the proposed changes would
promote disclosure of relevant rules and material procedures and
provide sufficient information to enable participants and other users
of DTC's services to evaluate fees and other material costs of
utilizing DTC's services, in accordance with the requirements of Rule
17Ad-22(e)(23), promulgated under the Act, cited above.
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\36\ 17 CFR 240.17Ad-22(e)(23).
\37\ The Commission adopted amendments to Rule 17ad-22,
including the addition of new subsection 17ad-22(e), on September
28, 2016. See Securities Exchange Act Release No. 78961 (September
28, 2016), 81 FR 70786 (October 13, 2016) (S7-03-14). DTC is a
``covered clearing agency'' as defined by new Rule 17ad-22(a)(5) and
must comply with subsection (e) of Rule 17Ad-22. Id.
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(B) Clearing Agency's Statement on Burden on Competition
DTC does not believe that the proposed rule change would have any
impact on competition because the proposed changes merely relate to
updates and clarifications of the OA which would not significantly
affect the rights and obligations of users of DTC's services, and would
not disproportionally impact any users.
(C) Clearing Agency's Statement on Comments on the Proposed Rule Change
Received From Members, Participants, or Others
DTC has not solicited and does not intend to solicit comments
regarding the proposed rule change. DTC has not received any
unsolicited written comments from interested parties. To
[[Page 36064]]
the extent DTC receives written comments on the proposed rule change,
DTC will forward such comments to the Commission.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) \38\ of the Act and paragraph (f) of Rule 19b-4 \39\
thereunder. At any time within 60 days of the filing of the proposed
rule change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.
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\38\ 15 U.S.C. 78s(b)(3)(A).
\39\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-DTC-2017-010 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-DTC-2017-010. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549 on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of DTC and on DTCC's
Web site (https://dtcc.com/legal/sec-rule-filings.aspx). All comments
received will be posted without change; the Commission does not edit
personal identifying information from submissions. You should submit
only information that you wish to make available publicly. All
submissions should refer to File Number SR-DTC-2017-010 and should be
submitted on or before August 23, 2017.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\40\
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\40\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-16269 Filed 8-1-17; 8:45 am]
BILLING CODE 8011-01-P
