Self-Regulatory Organizations; The Depository Trust Company; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Modify the DTC Operational Arrangements (Necessary for Securities To Become and Remain Eligible for DTC Services), 70700-70719 [2023-21945]
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solicit comments on the proposed rule
change from interested persons.
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–98604; File No. SR–DTC–
2023–010]
Self-Regulatory Organizations; The
Depository Trust Company; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Modify the
DTC Operational Arrangements
(Necessary for Securities To Become
and Remain Eligible for DTC Services)
September 28, 2023.
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
September 27, 2023, 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 primarily
prepared by the clearing agency. DTC
filed the proposed rule change pursuant
to Section 19(b)(3)(A) of the Act 3 and
Rules 19b–4(f)(4) thereunder.4 The
Commission is publishing this notice to
DATES:
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.
1. Purpose
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 7 or in the
OA),8 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 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
I.A.1. (Submission of an Eligibility Request) .......
Pursuant to Rule 5, DTC shall accept a Security as an Eligible Security only, among other requirements, upon a determination by the Corporation that it has the operational capability
and can obtain information regarding the Security necessary to permit it to provide its services to Participants and Pledgees when such Security is Deposited.9 Timely confirmation of
details relating to a security is an important part of making an eligibility determination.
Therefore, pursuant to the proposed rule change, the OA would be revised to add new text
to this subsection that requires the agent for a security to confirm an issue’s features and
attributes once the underwriter of the security has submitted the issue for eligibility.
In this regard, new text would be added to this subsection which would state:
‘‘As Agent for a new security qualifying for DTC eligibility, Agent must complete the Agent
Confirmation supplied by DTC’s Underwriting Department to confirm a new issue’s features
and attributes based on the security type. The agreement of the information supplied by the
underwriter, the Agent Confirmation, and the offering document ensure the accuracy of the
asset servicing of the security.
This confirmation must be provided by the Agent via email at least three (3) business days
prior to the Closing Date of the issue.’’
The proposed rule change would enhance instructions relating 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. In this regard, the proposed rule change would add three
subsections to respectively provide instructions for the three types of exchange processes
that may occur in this regard, namely (a) an optional exchange process, (b) a voluntary exchange process, and (c) a mandatory exchange process. The processes for (a) and (b) relate to exchanges where a Participant has an option to exchange existing 144A shares to
unrestricted shares, with the difference between an optional exchange and a voluntary exchange being described functionally in terms of, (i) with respect to (a), the agent for the
issue facilitating the exchange through DTC’s Deposit/Withdrawal at Custodian (‘‘DWAC’’)
function and (ii) with respect to (b) being conducted using DTC’s Automated Tender Offer
Program (‘‘ATOP’’). Under a mandatory exchange, the issuer requires the Participant to receive the unrestricted shares in exchange for any144A shares the Participant holds.
Section I.B.5 (Instruction Letters Regarding the
Expiration of a Restrictive Period).
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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 to clarify and update
provisions relating to the processing of
securities eligibility requests and
servicing of assets on Deposit at DTC, as
described in greater detail below.6
(A) Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
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)(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
2 17
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‘‘Rules’’), available at https://www.dtcc.com/legal/
rules-and-procedures.aspx and the OA, supra note
5.
7 See supra note 6.
8 See supra note 5.
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The text added with respect to (a) above would include a heading named ‘‘Optional Exchange
Process (Agent Facilitates via Deposit/Withdrawal at Custodian ‘‘DWAC’’))’’ for a new subsection a. under I.B.5. The new subsection a. would state: ‘‘To request DTC to provide for
the ability to have the Issuer’s Agent facilitate via DWAC the exchange on an optional basis
for Participants to request to exchange restricted Securities represented by a restricted
CUSIP number for new unrestricted Securities of the same issue represented by an unrestricted CUSIP, Issuer will complete and submit the instruction letter along with a copy of
the form of each unrestricted Security (without effective restrictive legends) bearing the new
unrestricted CUSIP to DTC’s Underwriting Department no later than 10 business days prior
to the effective date or exchange date (i.e., date of the end of the restrictive period and/or
distribution compliance period imposed under such exemptions has elapsed) or the date
Agent will begin acknowledging Participants’ DWAC requests. Receipt of the instruction letter must be in conjunction with the DTC Participant eligibility request via UW SOURCE for
the new unrestricted Securities. (Refer to Section I (A)(1), Submission of an Eligibility Request to DTC.)’’
Subsection a. would also incorporate existing text that provides an internet link to the applicable form for optional exchanges. This existing text also previously referred to voluntary exchanges, however, the reference to voluntary exchanges would be deleted and instead be
included in a new subsection relating to voluntary exchanges as described below. The internet link would be updated to reflect that the link uses a Hypertext Transfer Protocol Secure
(https:) format rather than a Hypertext Transfer Protocol (http:) format.
The text added with respect to (b) above would include a heading named ‘‘Voluntary Exchange Process (Use of DTC’s Automated Tender Offer Program ‘‘ATOP))’’ for a new subsection b. under I.B.5. The new subsection b. would state: ‘‘Issuer and Agent acknowledges
that any such exchange of restricted Securities for Securities of a CUSIP that is unrestricted
will be made in accordance with the rules and procedures of DTC’s Automated Tender Offer
Program (‘‘ATOP’’) including that Agent is required to approve and adhere to all requirements represented in the Letter of Agreement (‘‘LOA’’) for each exchange processed
through ATOP, (Refer to Section VI(D)(5)(a), Tender/Exchange Processing). To request
DTC to process a voluntary exchange of restricted Securities represented by a restricted
CUSIP number for new unrestricted Securities of the same issue represented by an unrestricted CUSIP, Issuer will complete and submit the instruction letter along with a copy of
the form of each unrestricted Security (without effective restrictive legends) bearing the new
unrestricted CUSIP no later than 10 business days prior to the effective date or exchange
date (i.e., date of the end of the restrictive period and/or distribution compliance period imposed under such exemptions has elapsed) to both DTC’s Underwriting Department and
Reorganization Voluntary Announcements Department by email at uwcorplor@dtcc.com and
voluntaryreorgannouncements@dtcc.com.
The form of instruction letter and related requirements for Issuers and Agents with respect to
such exchanges to be made voluntary for Participants are available at: https://
www.dtcc.com/∼/media/Files/Downloads/legal/issue-eligibility/special-letters/Optional-Process-Instruction-Letter.pdf.’’
The text added with respect to (c) above would include a heading named ‘‘Mandatory Exchange Process’’ for a new subsection b. under I.B.5. The new subsection c. would state:
‘‘To request DTC to process a mandatory exchange of restricted Securities represented by
a restricted CUSIP number for new unrestricted Securities of the same issue represented by
an unrestricted CUSIP, Issuer will complete and submit the instruction letter along with a
copy of the form of each unrestricted Security (without effective restrictive legends) bearing
the new unrestricted CUSIP no later than 10 business days prior to the effective date or exchange date (i.e., date of the end of the restrictive period and/or distribution compliance period imposed under such exemptions has elapsed) to both DTC’s Underwriting Department
and Reorganization Mandatory Announcements Department by email at uwcorplor@
dtcc.com and mandatoryreorgannouncements@dtcc.com. Issuer and Agent acknowledges
that any such exchange of restricted Securities for Securities of a CUSIP that is unrestricted
will be made in accordance with the DTC Rules concerning mandatory exchanges.’’
The new subsection c. would also incorporate existing text that provides internet links for documentation relating to mandatory exchanges. However, these links would be updated to indicate that they utilize a Hypertext Transfer Protocol Secure (https:) format rather than a
Hypertext Transfer Protocol (http:) format.
This subsection provides in its first of two paragraphs that DTC, at its sole discretion, may
make eligible a certificated security maturing within 60 calendar days of its closing date, on
an exception basis subject to processing considerations. However, this provision relates to
securities that are not in DTC’s money market instrument program (‘‘MMI Program’’) and the
MMI Program does facilitate the eligibility and processing of such short-term securities.10
The MMI Program operates using an automated platform providing MMI Issuing and Paying
Agents 11 (each, an ‘‘IPA’’) with the ability to issue, service, and settle Securities that are
money market instruments (‘‘MMI Securities’’) that are processed in the MMI Program 12
that they introduce into the marketplace through DTC.
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I.C.7. Monthly Optional Redemptions (New Subsection).
II.A.1. (CUSIP Number Assignment) ...................
II.B.2. (Balancing Securities) ...............................
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DTC believes that, given efficiencies for the processing of short-term securities that have been
built into the MMI Program, directing short term securities to the MMI Program would promote the prompt and accurate processing of such securities. In addition, pursuant to the
Rules, DTC maintains sole discretion with respect to accepting any security as eligible for
DTC services on a non-discriminatory basis; 13 and therefore the existing text relating to
DTC’s exercise discretion in this regard is redundant. Therefore, DTC would revise the OA
text to delete the substance of the text reflecting the provision described above relating to
DTC’s discretion with regard to accepting for eligibility a security maturing within 60 days of
its closing date and replace it with text that would state that a security that is scheduled to
mature in 30 calendar days or less from the issuance date or DTC eligibility date will not be
made eligible as a Non-MMI Security. The added text would also include a cross-reference
to the OA Section I(A)(2) (Special Rules and Processes for Money Market Instruments) for
more information relating to special rules and processes for MMI Securities. Also, a reference to referring to a short-term security as a ‘‘bond’’ would be changed to ‘‘security’’ to
make the reference consistent with DTC’s terminology for MMI whereby MMI are referred to
as MMI Securities in its Rules.14
In addition, the second paragraph of this subsection which relates specifically to monthly optional redemptions would be designated as a new subsection I.C.7., as described below.
The proposed rule change would break out the last paragraph of subsection I.C.6. into a separate subsection under the heading ‘‘Monthly Optional Redemptions.’’ The paragraph describes eligibility requirements for debt securities that have provisions allowing an issuer the
option to make monthly redemptions of securities. The paragraph is broken out as the requirements are not specific to short-term securities. The text of the newly broken out subsection would be revised for technical changes, including (i) clarifying that the securities
subject to the subsection are debt securities, (ii) change references to ‘‘issue’’ and
‘‘issuance’’ to ‘‘security, and (iii) remove text that the security will be considered for eligibility
if it is a new issuance that is registered under the Securities Act of 1933 (‘‘Securities Act’’)
and replace it with a cross-reference to the OA’s eligibility requirements.
This subsection describes DTC’s requirements for issuers to obtain CUSIP Numbers as part
of the eligibility process.
The second paragraph states that certain corporate actions on existing securities may require
the issuer to obtain a new CUSIP Number. This paragraph will be revised for technical
wording changes.
In this regard, the text currently states: ‘‘DTC may require the Issuer or Agent to obtain a new
CUSIP number from Standard & Poor’s CUSIP Service Bureau to facilitate the adequate
processing of a corporate action events, (e.g., reverse stock split, interest payment). An example of such a requirement for a new CUSIP for an interest payment is when the additional issuance of debt securities carries an interest accrual date or period that is different
than the original issuance.’’ Pursuant to the proposed rule change (i) ‘‘in order to’’ would be
shortened to ‘‘to’’, (ii) the ‘‘a’’ between ‘‘processing of’’ and ‘‘corporate action’’ will be deleted
and replaced with ‘‘certain’’, and (iii) and the word ‘‘event’’ will be changed to the plural
‘‘events’’ and a comma will be added after the word.
In addition, ‘‘Standard & Poor’s CUSIP Service Bureau’’ would be shortened to ‘‘CUSIP Service Bureau’’. Standard & Poor’s recently transferred the CUSIP Service Bureau to a different
entity and therefore the reference to Standard & Poor’s is outdated. However, since there is
only one CUSIP Service Bureau, DTC believes it is unnecessary for the OA to include the
name of the owner of the CUSIP Service Bureau in the OA.
This section contains several subsections that describe DTC’s FAST program of which balancing, referred to in the current title of the section, is a component. The title of the section
will be changed from ‘‘Balancing Securities’’ to ‘‘FAST Program’’ to better reflect the nature
of the content.
This subsection describes requirements relating to the use of the FRAC function by issuers’
agents for confirmation or rejection of balances or transfers of securities in DTC’s FAST
program.15 Pursuant to the OA, FAST Agents shall reconcile and confirm to DTC the
amount of the Securities reflected by such Balance Certificate and recorded in the name of
Cede & Co. daily, or other periodic basis as DTC may reasonably request. The subsection
that describes the FRAC process provides details on confirmation and rejection requirements relating to the closing date of a new issuance or secondary offering. DTC would like
to clarify the process requiring a FAST Agent to confirm or reject balance transfers associated with the presentation, by adding the following text to this subsection:
‘‘FRAC is to also be used by the FAST Agent to confirm or reject balances or transfers associated with the presentation, by DTC, of securities for a corporate action event for the drawdown of the FAST position on the target security and/or an add-to-balance of position when
the entitlement security will be FAST. Balances are to be confirmed by the FAST Agent
upon receipt of the SCL instruction from DTC on the effective date or the DTC allocation
date of the corporate action or as soon as practicable thereafter. It is the obligation of the
FAST Agent to use FRAC to confirm the Cede &Co. FAST Balance and process the event
according to the electronic SCL instructions presented.’’ 16
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II.B.2.c. DWAC ....................................................
II.B.4.c. (Termination of Transfer Agent Services).
II.B.4.g. (Other Notices Delivered by Transfer
Agents for Posting to LENS).
III.B. (Notices) .....................................................
III.C. (Payment Instructions) ................................
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III.C.1. (Income Payment Standards) ..................
III.C.2. (Redemption and Maturity Payment
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In addition, a sentence in the first paragraph of this subsection would be revised for clarity.
The sentence states: ‘‘Under no circumstances will a Participant’s account be credited unless DTC’s Underwriting Department receives closing information from the underwriter and
the Agent.’’ Alt text: It is necessary that the closing information provided to DTC, by each
the issuer and the agent, agree. In this regard, the following text would be added to the end
of the sentence (after ‘‘Agent’’ and before the period): ‘‘, and the closing information is in
agreement’’.
The text of this section will be revised to create a defined term to clarify that the term ‘‘ADRs’’
refers to American Depositary Receipts.
In compliance with Rule 17Ad–16 of the Act, all registered transfer agents are required to provide written notice (‘‘17Ad–16 Notice’’) to DTC when ceasing to perform or assuming transfer agent services on behalf of an Issuer or when the transfer agent is changing its name or
address. Subsection II.B.4.c. lists information to be included on termination notices, as required by DTC. Pursuant to the proposed rule change, the OA would be revised for technical and clarifying changes to (i) change references to ‘‘Transfer Agent’’ to ‘‘transfer agent,’’
(ii) remove text indicating that the agent must list issues for which the transfer agent will no
longer be responsible, and replace the text with a more succinct statement that the notice
include the issuer’s name, (iii) modify text stating ‘‘The name of each issuer . . .’’ to instead
state ‘‘The name and description of each Issuer’s Security . . .’’.
This subsection describes the delivery requirements for certain notices that an Agent forwards
to DTC to post to LENS. Two existing sentences will be revised for clarity. These sentences
state: ‘‘In order to be posted to LENS, the notice must be sent to TAServices@dtcc.com.
Hard copy notices will not be posted to LENS.’’ In order to clarify the text which is intended
to describe how notices must be sent by email, these sentences would be revised to: (i) delete ‘‘In order for’’ and replace it with ‘‘For a notice’’, (ii) add ‘‘an email with’’ between
‘‘LENS,’’ and ‘‘the notice’’, (iii) add ‘‘attached as a PDF file’’ between ‘‘the notice attached as
a PDF file’’ and ‘‘must’’ and (iv) add ‘‘and/or notices embedded in the body of the email’’ between ‘‘Hard copy notices’’ and ‘‘will not be posted’’.
This section sets forth requirements for Issuers and Agents provision of notices to DTC for
distribution to Participants. In addition to describing the information required to be included
in a notice, it provides that the information may be delivered to DTC by secure means such
as registered or certified mail, overnight delivery, or email. DTC believes that due to the
time sensitive nature of such notices and risks of delay in delivery and transmittal via hard
copy, for purposes of timeliness and processing efficiency relating to such notices, all such
notices should be sent to DTC electronically. Therefore, the proposed rule change would
delete provisions for hard copy delivery and instead provide that such notices should be
sent via email or other electronic transmission (i.e., BMA5 or REDCAL) and remove all references to transmittal by telecopy.17
DTC would also revise a sentence that states: ‘‘If the party sending the notice by telecopy or
email does not receive a telecopy or email receipt from DTC confirming that the notice has
been received, such party shall telephone the respective DTC department to confirm their
receipt of the notice.’’ The proposed change would change ‘‘shall’’ after ‘‘party’’ and before
‘‘telephone’’ with ‘‘may (in addition to removing references to telecopy notice as mentioned
above).’’
The proposed rule change would also delete a parenthetical cross-reference at the end of this
subsection that states: ‘‘(See Exhibit C for a summary of important notices and required
time frames for income, redemption and maturity, and reorganization payments.)’’ Exhibit C
does not exist, and any applicable timeframes are included within the main text of the OA.
This section states, among other things, that all payments must be received by DTC in immediately available funds and must equal the full amount due on payable date. However, occasionally payments are tied to an ‘‘effective date.’’ Also, for Reorganization events, a payment date or effective date may not be specified, but the funds are made available for payment at a certain time in accordance with the timing of a specific transaction. To account for
such varying terminology and timing of payments, the proposed rule change would clarify
this section to add text to, in addition to requiring immediate payment on ‘‘payable date’’,
payments should be made in immediately available funds on the full amount due on the
‘‘effective date’’ or the date on which funds are first made available for payment for Reorganization events, as applicable.
This subsection describes how income payments must be made to DTC. The section would
be revised for technical and grammatical changes. It would also be revised to (i) change a
reference to ‘‘same day funds’’ to ‘‘immediately available funds’’ as part of the description
on how income payments must be made, for consistency with terminology used in III.C.
(Payment Instructions) and (ii) remove text indicating that DTC may allow for special arrangements in exception to the requirement to make payment in immediate available funds
via Fedwire. DTC believes that accepting a special arrangement in exception to these
standards, such as payment by check, would introduce risk to DTC’s ability to timely pass
income through to its Participants.
Redemption and maturity payments include cash payments of principal proceeds due to redemptions and maturities (‘‘Redemption and Maturity Payments’’). Such payments must be
made to DTC’s Redemption Deposit Account in accordance with the Procedures set forth in
this subsection.
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III.D. (Additional Payment Arrangements/Policies/Procedures).
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The second paragraph of this subsection includes a paragraph that states: ‘‘DTC must receive
CUSIP-specific detail of payments, no later than 2:50 p.m. ET. The dollar amount associated with such detail must correspond with the actual dollar payment received by 3:00 p.m.
ET. All Redemption and Maturity Payments must be paid in same-day funds prior to 3:00
p.m. ET on the payable date. Failure to provide timely payment to DTC could jeopardize the
same-day distribution of these payments to Participants and beneficial holders.’’
To clarify text relating to the required timing of payments to DTC, the proposed rule change
would delete ‘‘by’’ in the second sentence after the word ‘‘received’’ and before ‘‘3:00 p.m.’’
with ‘‘prior to.’’
In addition, the proposed rule change would make clarifying changes to the third sentence of
the paragraph. Funds paid to DTC in accordance with this subsection are paid via Fedwire.
Fedwire funds are immediately available. Therefore, the third sentence as shown above
would be revised to instead state: ‘‘All Redemption and Maturity Payments must be delivered to Cede & Co., as nominee of DTC, in immediately available funds prior to 3:00 p.m.
ET on the payable date.’’
The proposed rule change would remove text indicating that DTC may allow for special arrangements in exception to the requirement to make payment in immediate available funds
via Fedwire. DTC believes that accepting a special arrangement in exception to these
standards, such as payment by check, would introduce risk to DTC’s ability to timely pass
income through to its Participants.
The proposed rule change would make technical and conforming changes to the third paragraph of the subsection by (i) replacing ‘‘payments’’ with ‘‘Redemption and Maturity Payments,’’ (ii) enhancing readability by moving the phrase ‘‘via Fedwire’’ from one place to another in a sentence describing how payments should be made and (iii) change a reference
from ‘‘same-day’’ funds to ‘‘immediately available’’ funds.
Finally, a reference in the final paragraph of the subsection to the ‘‘Customer Service Hotline’’
would be changed to ‘‘Client Support Line.’’ In addition, all other references to ‘‘Customer
Service Hotline’’ to ‘‘Client Support Line’’ would be changed throughout the OA.
As with a change described for the subsection directly above, this subsection would be revised to change references from ‘‘same-day’’ funds to ‘‘immediately available’’ funds. The
subsection would also be revised for other stylistic and descriptive purposes without altering
the substance of the text as well as updating an email address supplied for submission of
inquiries relating to wire instructions and payment information.
The proposed change would also remove text indicating that DTC may allow for special arrangements in exception to the requirement to make payment in immediate available funds
via Fedwire. DTC believes that accepting a special arrangement in exception to these
standards, such as payment by check, would introduce risk to DTC’s ability to timely pass
income through to its Participants.
This subsection includes a statement that ‘‘no fees, such as wire fees, may be deducted from
any payment due to DTC, its nominee, Cede & Co., or its assigns.’’ Because such payments are passed through to the beneficial owners that are entitled to the entirety of the
payment, it is not appropriate for an agent to charge DTC any fee in this regard. Therefore,
DTC would clarify this provision by replacing the word ‘‘deducted’’ with ‘‘charged to DTC;
this includes invoicing DTC a fee or deducting a fee.’’
Also, text relating to making inquiries directs the reader to email addresses further above in
the OA text. However, the referenced text also includes phone information. Therefore, the
proposed rule change would revise the reference to email addresses to instead refer to
‘‘contact information.’’
This would be added as a new subsection to describe DTC’s existing practices regarding
post-payable income adjustments. Adjustments can result from (but are not limited to)
changes in rate, record date, accrual period or payable date and any activity tracking for
stock loans, repos and due bill fail tracking.
The subsection would provide that DTC will agree to Agents’ requests for the reallocation of
certain misapplied, misdirected, or miscalculated income payments resulting in post-payable
adjustment to DTC Participants under the following conditions:
• Agent’s notice to DTC where the adjustment request will result in a credit to DTC Participants must be received by DTC no later than one calendar year from the initial payment date;
• Agent’s notice to DTC for any adjustment request which will cause a debit-only, or
there is a portion of the adjustment that will result in a debit, must be received by DTC
no later than 90 calendar days from the initial payment date;
• Agent’s notice to DTC for the adjustment request is to include the root cause adjustment code and information identifying issuance date, instrument, issuer, servicer, and
calculating agent. DTC will not process any post-payable adjustments missing these
key details; and
• In the event the Agent’s adjustment request (e.g., rate change) resulted in an overpayment of funds and requires DTC to charge back funds from DTC Participants’ accounts,
in order to receive the collect funds the Agent is to refer to Section III(D)(4)(b) Processing Errors, and contact DTC’s P&I Event Reconciliation and Support (PIERS) Department via email at returnofoverpayments@dtcc.com for further details.
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III.D.4. (Requests for Return-of Funds) ..............
III.D.4.b. (Processing Errors) ...............................
III.d.4.c. (DWAC Deposit and Income Payments)
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Issuers and/or Agents wishing to modify certain income payments beyond the time period that
DTC will process the adjustments may do so by obtaining a ‘‘P&I Allocation Register’’ by
emailing AnnouncementsRateChangeRequests@dtcc.com and making payment arrangements directly with the affected DTC participants.
For adjustments resulting from Agent’s requests to DTC to revise rates, record dates, or payable dates, DTC will notify Participants at least one day prior to processing the adjustment
to Participants’ accounts when the adjustment will be processed within 30 days of the original allocation, and DTC will notify Participants at least three days prior to processing the adjustment to Participants’ accounts when the adjustment will be processed 30 days or more
after the original allocation.
This subsection provides introductory text for provisions that apply to instances where the
Paying Agent and/or Issuer request the return of funds made to DTC. The proposed rule
change would clarify that this subsection applies to such requests as they relate to income,
redemption, or maturity payments, as applicable. A cross-reference to related text in Section
VI.E. (Chargeback of Reorganization Payments) would also be added.
This subsection provides instructions for agents and issuers on how to request returns of erroneous payments made to DTC. The proposed rule change would clarify that in addition to
erroneous payments, the instructions also apply to overpayments made to DTC. The subsection states that a return of payment will only be made to the account from which the payment was received. While this provision is intended to prevent the return of a payment to
the wrong location, occasionally, an issuer or agent may request that the payment be returned to an account other than the one that originally sent the payment. In these instances,
DTC will send the payment to an account designated by the agent or issuer in a signed
‘‘Account Designation Letter.’’ For security reasons, DTC believes it should receive such a
signed letter with respect to all such accounts to which payments are sent to an issuer or
agent. Therefore, DTC would replace the reference to payments being sent only to the account from which the payment was originally made, to state that the payment will be sent to
the account named in the Account Designation Letter from the issuer or agent that DTC has
on file.
In addition, it is DTC’s experience that the return of payments under $100 is not cost effective
for DTC or the applicable issuer or agent, as the cost of processing the return could be
equal to or exceed the amount of the erroneous payment. Therefore, DTC would add text to
this subsection to state that DTC will only process claims of $100.00 or greater.
A new subsection III.D.4.c. (DWAC Deposit Income Payments) will be added to clarify to
Agents’ their existing responsibilities relating to DWAC deposits made between a record
date and payment date. Failure by Agents to fulfill these responsibilities may cause processing errors requiring remediation in accordance with III.d.4.b.
In this regard, the text of this new subsection would read as follows:
‘‘Agent is to pay DTC income payments on payment date for record date position. Agent is responsible when approving a DWAC deposit after a record date and before the payment
date to ensure the deposited position is not included in the Cede & Co. captured record
date position when funding DTC on the payment date, and Agent will make the income payment due the depositing participant directly to the participant. DTC has no responsibility to
make the payment to the participant.
Agent is responsible when approving a DWAC deposit to ensure the deposited position has all
the same attributes of the security into which the deposit is being made, (e.g., accrual date
or period, record date, payment date, payment cycle, interest rate, call feature, put feature,
maturity date). Refer to Section II A. 1. CUSIP Number Assignment.
Failure by Agent to follow the above procedures could result in an overpayment by Agent to
DTC and jeopardize the timely and accurate payment to DTC and the same-day distribution
of these payments to Participants and beneficial holders. See also Section b., Processing
Errors, above.’’
The title of this section will be revised to remove the words ‘‘Dividend and’’, so that the section
will be named ‘‘Income Payment Details’’, because dividends are a form of income and including ‘‘Dividend’’ in the title is redundant. A reference to the text of the section to dividends and income would also be revised to delete the word ‘‘dividends.’’.
Text would also be added to describe that income payments include cash dividends, interest,
and periodic principal distributions paid to holders of record.
The section text provides that an Issuer or Agent shall provide a notice of dividend and income payment information to DTC electronically, as previously arranged by Issuer or Agent
and DTC, as soon as the information is available. However, if DTC does not receive such
information by a certain time prior to when the payment is to be made it is possible that that
payment will not be processed within the timeframe requested by the Issuer or Agent.
Therefore, DTC would revise the text to remove the reference that the notice should be provided as soon as the information is available, and instead include a specific timeframe such
that the notice must be provided to facilitate timely processing. Specifically, the changed
text would state that the notice should be received by DTC prior to the payable date, but in
no event later than 3 a.m. on the payable date, which is consistent with a timeframe already
noted in IV.A.1 of the OA with respect to notices relating to structured securities.
In addition, DTC will add text requiring that the electronic notification mentioned above must
be provided either via automated files (DCN/BMA/RedCal) or the standard spreadsheet files
(DCNLite/BMALite/RedCalLite).
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IV.A.1. (Structured Securities) .............................
IV.A.3. (Defaulted Issues) ...................................
IV.B. (Currency Payment Provisions) .................
IV.B.2.a. (Securities Denominated in a Non-U.S.
Currency with an Option for U.S Dollar Payments).
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IV.B.2.b. (Securities with Payments Made in Canadian Dollars and/or U.S. Dollars).
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In addition, because the text requires that notice be sent via electronic submission, DTC
would remove outdated references to an email address and a physical mailing address.
This subsection includes the specific information DTC requires to be in a notice for DTC to
process a payment relating to structured securities. The specified information would be revised to delete ‘‘coupon rate, expressed as a percentage’’ as this information is not needed
by DTC to process the payment. Also, an item requiring the notice to include the payment
classification (e.g., Interest, Principal, Premium, and Special Distribution) would be added as
this information is necessary to accurately designate the payment type in DTC’s system.
DTC would add a new subsection to describe information needed to process payments on
issues that are currently in a defaulted payment status. The additional text would read as
follows:
‘‘3. Defaulted Issues
Agent shall provide DTC with a notice of payments on defaulted issues. After establishing the
amount of any payment to be made on such Securities, Agent shall send such notice to
DTC’s Announcements Department via email to dividenddefaultpayments@dtcc.com, preferably five but no fewer than two business days prior to the payable or distribution date.
Such notice shall include the following information:
• Security description and CUSIP number;
• record date;
• payable date; and
• dividend (rate per share) or interest rate (per $1,000 principal amount) and the potential
tax liability, including but not limited to capital gains, liquidations, and any cash liquidating distributions.’’
This section describes requirements relating to currency payments, including that all income
payments must be made in U.S. dollars or Canadian dollars, as applicable. The section also
states that payments in other currencies must be made directly by the Agent. The proposed
rule change would clarify that such payments must be made directly by the Agent to the
DTC Participants.
This subsection provides terms for Issues and Agents making payments in currencies other
than U.S. dollars. The proposed rule change clarifies that any payment in non-U.S. currency
should be made in the currency designated in an offering document provided to DTC. The
non-U.S. currency would be defined as the ‘‘Initial Currency and/or Designated Currency.’’
Because this subsection is intended to apply to payments relating to equity and debt instruments, DTC would change references to such payments from describing them as income,
redemption and maturity, and reorganization payments and instead refer to them as principal, interest and dividends payments, as the latter more broadly captures both payment
types.
The text currently provides that the Agent is authorized by the Issuer to make payments on its
behalf. For the purpose of confirming that the Issuer is fully authorized to act on behalf of
the Agent in this regard, DTC would add text to this subsection whereby the Agent represents that it has been appointed by Issuer to receive and convert designated portions of
payments into U.S. dollars.
The subsection provides, among other things, that (i) absent any other arrangements, any
beneficial owners that do not elect payments in a non-US currency shall receive U.S. dollar
payments by DTC payment to the Participants holding on their behalf and, (ii) unless the
Agent is notified by DTC of any election to receive non-U.S. currency payments, all payments will be made in U.S. dollars. To provide for enhanced clarity in this regard, DTC
would revise the text to move the latter statement (ii) so that it appears in a sentence directly after the former statement (i) as opposed to further down the text as is currently the
case.
If payments are made by the Agent outside of DTC, then DTC is not part of such payment
process and is unable to confirm if the applicable Participants have been paid. To provide
for enhanced clarity, the proposed rule change would add the following text in this regard:
‘‘Agent accepts responsibility for the Non-U.S. currency payment made to DTC Participants,
including confirming directly to the DTC Participants that payment has been made. The
Agent acknowledges that DTC is unable to, and will not, confirm whether such payments
were made to or received by DTC Participants.’’
The proposed rule change would also make changes related to updating terminology to align
defined terms and modify text for grammar and readability.
This subsection relates to Securities that may make payments in Canadian and/or U.S. Dollars. DTC accepts and passes through income payments in U.S. Dollars and will also process payments in Canadian Dollars to the extent the Security is eligible for DTC’s CanadianLink Service. The proposed rule change would revise the text of this subsection to consolidate language relating to the responsibilities of DTC, Issuers and Agents in this regard, as
well as the acceptable denominations for payment on applicable Securities, namely U.S.
Dollars and Canadian Dollars. The proposed rule change also provides clarification relating
to the form and method of payments made to DTC (depending on whether payments are to
be made in Canadian Dollars or U.S. Dollars), details on tax withholding to reflect existing
arrangements where CDS serves as DTC’s Tax Withholding Agent, and notifications and related deadlines.
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IV.B.2.b.3. (Securities Denominated in a NonU.S. Currency without an Option for U.S. Dollar Payments).
IV.C.2. (Reduction of Payment on Treasury
Shares or Repurchased Debt Securities (for
Cash Dividend or Interest Payment).
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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IV.D.2. (Stock/Pay-in-Kind (‘‘PIK’’) Distributions
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DTC maintains an account at the CDS Clearing and Depository Services Inc. (‘‘CDS’’) in Canada and Securities credited to DTC by CDS are onward credited by DTC to Participants. As
Securities may transfer between CDS and DTC regularly, it is necessary that the records of
the Agent and DTC agree on record date so that the DTC position in the Security is in balance with the records of the Agent. In this regard, the proposed rule change would add text
relating to the applicable process necessary for such balancing to occur timely. Specifically,
the added text would state that the Agent must confirm via FRAC the Securities Control
Listing (SCL) by 6:00 p.m. ET on the record date or the date requested by DTC.
DTC does not process non-U.S. currency (other than Canadian). This subsection provides requirements on how such payments should be made by the Agent outside of DTC. The proposed rule change would clarify the text relating to the obligations for the Agent in this regard and clarifying that the Agent is solely responsible to ensure such payments are made
to Participants. This proposed change would provide that DTC shall bear no responsibility
with respect to such Non-U.S. currency payments, and note that DTC is unable to confirm
whether such payments were made to or received by DTC Participants.
This subsection provides that a Participant that holds treasury shares or repurchased debt securities (i.e., issuer buy-back) at DTC on the record date for a cash dividend or interest payment shall submit an instruction through the Corporate Actions Web (‘‘CA Web’’) to reduce
its entitlement to the payment by the amount attributable to such treasury shares or repurchased securities. If the Participant does not submit such instruction within a designated
timeframe, then the Agent shall provide to DTC a notice of reduction in the dividend or interest payment amount due DTC because of treasury shares or repurchased debt securities
held on deposit by DTC on the record date. With respect to each Participant with a reduced
entitlement, the Agent is responsible to ensure that the applicable Participants submit a confirmation letter providing details relating to the reduction. The proposed rule change would
clarify, that while it is the Agent’s responsibility to ensure that each Participant submits a
confirmation letter, it is the responsibility of the Participant to provide the letter to DTC. For
the sake of clarity, the proposed rule change would also consolidate a list of the contents
and requirements that relate to the required letter.
This subsection describes conditions for an Issuer’s securities to participate in the DTC Dividend Reinvestment Program. The DTC Dividend Reinvestment Program allows Participants
to reinvest income payments for additional securities. The DTC Dividend Reinvestment Program also includes an opt-out feature, where income payments on certain issues have been
automatically reinvested into securities and Participants could instruct to receive cash instead. For an issue to participate, the Issuer’s Agent, acting as the Issuer’s Dividend Reinvestment Plan Administrator, must complete and sign DTC’s Dividend Reinvestment Letter
of Agreement (reprinted on Agent’s letterhead). This Dividend Reinvestment Letter of Agreement details the terms agreed upon by the Agent for the processing of reinvestment instructions through DTC. The subsection includes the following statement: ‘‘The Agent must provide a written request to DTC for all Securities to be included in DTC’s DRP. DTC may
refuse to make eligible certain issues if Agent has a record of failing to comply with such arrangements.’’ DTC proposes to delete this statement as it is redundant because the provision of the letter of agreement constitutes the writing, and it is intuitive that an Agent would
need to comply with the agreement for its issues to be added to the program.
The text would also be modified to remove a reference to right fax as a method for Agents to
submit dividend reinvestment instructions.
This subsection contains information and requirements relating to a PIK, which is a distribution
that pays additional shares of a security that the payment relates to. Text in this subsection
relating to stock distributions would be revised for technical and clarifying changes for readability without altering its substance or meaning.
A sentence in the text relating to a PIK on a bond issue currently states: ‘‘If the new denomination of the new bond is different from the denomination of the Original Bond (i.e., the minimum denomination and/or the increment), then the Original Bond denomination (e.g.,
$1,000 by $1,000) is to be changed to reflect the denomination of the new bonds (e.g.,
$1000 by $1.00) for the remainder of the Original Bond’s term.’’ The proposed rule change
would modify this sentence to add the following words at the end of this sentence before
the period: ‘‘or until all baby bond positions are eliminated.’’ This sentence will also be
moved to another paragraph in the text for enhanced clarity and flow. In addition, text will
be modified for consistency with respect to defined terms.
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IV.D.2.a. (Fractional Entitlements in Cash or Additional Roundup Shares).
This subsection discusses the processing of fractional entitlements on a stock distribution
such as a stock split, stock dividend, or pay-in-kind distribution. The section states that DTC
does not support the distribution of fractional shares of securities and lists the acceptable
forms of fractional entitlements that may be processed through DTC, namely cash-in-lieu of
fractions (‘‘CIL’’) and roundup shares. CIL pays the cash value of fractional shares that
would otherwise be distributed. Roundup shares provide for issuers and their agents to
round the amounts of shares distributed to the next whole number. The section provides
those fractional entitlements are to be computed by the agent at the Participant level or
beneficial owner level and provides instructions relating to providing DTC with such payments. Pursuant to the proposed rule change, the OA text would add a clarification that
such information on fractional entitlements should not be calculated at the Cede & Co. level
only. An issuer and their Issuer and their Agent when paying CIL of fractions or additional
roundup shares are to calculate and pay such entitlement down to the beneficial owner level
when the event notification specifically refers to fractional entitlements being calculated at
the shareholder/beneficial owners level, however, if the timing of the event precludes providing the opportunity for participants to identify and receive payment calculated at the beneficial owner level, or it is not specified in the event, then calculations can be done at the
DTC participant level. Fractional entitlements should not be calculated at the Cede & Co.
level only.
The proposed rule change would also make technical and clarifying changes to the text of this
subsection relating to Participant instructions collected at the beneficial owner level and update a mailing address.
This subsection would be modified to remove a cross-reference to ‘‘Section VI(A), Standards
for Voluntary and Mandatory Reorganizations Notices for notice instructions.)’’ This reference is misplaced and not relevant to the subsection.
Treasury shares are owned by the issuer and not entitled to receive distributions. If a Participant holds any Treasury shares, the Participant must notify DTC via a confirmation letter regarding the treasury shares it holds so that the Participant’s entitlement will be reduced in
relation to the treasury shares it holds. The proposed rule change would revise the text to
clarify that the confirmation letter is only required of ‘‘applicable Participants’’ and that an
agent will facilitate obtaining the letter from Participants. The proposed change would also
consolidate a list of information required to be included in such letters so that all the elements of the letter are included in one list rather than two, as the OA currently reads.
The change would also remove a requirement that the Participant affix its medallion signature
guarantee stamp to the letter.
Text would also be added to refer the reader to an email address to contact to obtain a template of the confirmation letter.
This section sets forth certain requirements relating to redemptions of securities. An issuer
may conduct its redemptions pro-rata (distributed as an equal percentage across all holders) or by lottery (whereby DTC randomly selects holders whose securities will be redeemed). Once an issuer uses either a pro-rata process or the lottery process, future redemptions must be made using the same process. Pursuant to the proposed rule change,
this section would be clarified by adding the following text after a sentence that states that
DTC cannot support pro-rata lottery redemptions: ‘‘In addition, once a security starts paying
principal via lottery or pro-rata pass-through of principal, future principal payments must be
made using the same payment method. Securities must not use both lottery and pro-rata
pass through methods of paying principal. Pro-rata pass-through of principal must not be
used for securities that offer ‘‘pay-in-kind’’ distributions.’’
The proposed rule change would move text relating to eligibility of new issues that contain
provisions for monthly optional redemptions from this Section to a new subsection I.C.7.
(Monthly Optional Redemptions). The specific text to be moved states: ‘‘DTC will consider
for eligibility a new issue of securities where the issuance is registered under the Securities
Act and containing provisions for monthly optional redemptions by the Issuer only if the
issue is in book-entry ‘‘BEO’’ format and DTC has received an executed LOR prior to closing. (See Section (I)(B), Documentation).’’ This text is a more logical fit to be included under
Section I. of the OA as Section I. covers securities eligibility.
Text would also be revised to delete a provision relating to notifications under this subsection
that states that a ‘‘second’’ redemption notice shall be sent to DTC in a secure fashion within 60 calendar days if action is required and if DTC has not acted on the first notice, as it
would be redundant to require such a second notice to be sent.
The text would also be revised to delete text that states that an Agent’s receipt of securities
and redemption presentment documentation from DTC may be confirmed to DTC by using
DTC’s Participant Browser Service (‘‘PBS’’) function Redemption Payment Summary Return.
Paying agents on the PWP program shall send their confirmations via email at fastpay@
dtcc.com using the format provided by DTC. This confirmation verifies receipt of the redemption presentment and confirms intent to pay DTC, on the payable date by 3:00 p.m.
ET, the value stated in the presentment documentation, provided the item is funded. Agent
shall notify DTC immediately via email at rpsdiscrepancies@dtcc.com when discrepancies
between the securities and redemption presentment documentation and the Agent’s records
are identified. This text is unnecessary as such information is delivered electronically and as
such a confirmation would not be required.
IV.D.2.b. (Restricted Distribution Shares Issued)
IV.D.3. (Reduction of Payment on Treasury
Shares (for Stock Dividend Payments).
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V.A. (Redemptions, Advance Refundings, and
Calls Inclusive of Sinking Funds and Mandatory Redemptions).
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V.A.1. (Notice of Recission) ................................
V.A.2. (Notice of Revision) ..................................
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V.A.3. (Notice of a Security Declared ‘‘Null, Void
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The proposed rule change would also clarify that in addition to other methods described in this
section, instructions relating to redemptions may be sent to DTC using a supported automated feed, such as REDCAL, DCN or BMA, or using an appropriate DTC formatted Microsoft Excel spreadsheet.18
Finally, the subsection would be revised to for other technical and clarifying changes to the
text.
From time to time, an issuer will seek to rescind a redemption event. DTC requests information and documentation to process the recission. To enhance clarity relating to this process,
DTC would add a new subsection V.A.1. (Notice of Recission) that sets forth the information
and documentation that DTC needs to be able to process the recission. In this regard, the
new subsection would state:
‘‘To notify DTC of a rescinded redemption event, Issuer or Agent must utilize DTC’s automated file or email all related documents to redemptionnotification@dtcc.com, and the notice shall include the following:
• Security description and CUSIP number(s)
• statement that the redemption/refunding is rescind/cancel;
• amount of the redemption or refunding being rescinded;
• Publication Date of any related notices;
• Redemption date of event being rescinded;
• Redemption Agent’s name and address; and
• Administrator’s contact information.
Recission notice requests to DTC 30 days or more after the Redemption Date will only be accepted and processed when the Agent has provided a DTC debit request letter from each
DTC Participant paid in the redemption. The letter is to include the DTC indemnification
statement and medallion stamp. (Note: The authorized signer of the medallion stamp must
be a different party than the signer of the letter.) To request a letter template, please contact redemptionnotification@dtcc.com.’’
From time to time, an issuer may seek to revise a pending redemption event. DTC requests
information and documentation to process the revision. To enhance clarity relating to this
process, DTC would add a new subsection V.A.2. (Notice of Revision) that sets forth the information and documentation that DTC needs to be able to process the revision. In this regard, the new subsection would state:
‘‘To notify DTC of a revision to a redemption announcement, such as called amount, redemption date, or publication date, Issuer or Agent shall send a notice to DTC specifying:
• Security description and CUSIP number(s);
• the redemption notice is revised from the prior notice and clearly indicates the revised
information (e.g., called amount, redemption date, pub date);
• Amount of the redemption or refunding being revised;
• Publication date of the notice;
• Redemption date of event being revised;
• Redemption Agent’s name and address; and
• Administrator’s contact information.
Revision notices requests to DTC 30 days or more after the Redemption Date which increase
the called amount will not be accepted. A new notice with a current Redemption Date will
be required. Interest must be paid up to the new Redemption Date.
Revision notice requests to DTC 30 days or more after the Redemption Date which decrease
the called amount will only be accepted and processed when the Agent has provided a DTC
debit request letter from each DTC Participant paid in the redemption. The letter is to include the DTC indemnification statement and medallion stamp. Note: The authorized signer
of the medallion stamp must be a different party than the signer of the letter.) To request a
letter template, please contact redemptionnotification@dtcc.com.’’
DTC’s Null/Void Worthless Letter template provides agents with the required verbiage to initiate a mandatory corporate action that authorizes DTCC to delete/cancel a participant position on its books and records.19 The letter 20 is available for download on DTCC’s website
and contains the required indemnification language to confirm that the securities are
deemed null, void, and worthless, and that there will be no future payments.
Pursuant to the proposed rule change, DTC would add a new subsection V.A.3. to clarify that
the template letter should be used if a Security will not make a final paydown/redemption
and the agent or issuer/agent intends to have the Security removed from the books and
records. The new subsection would state the following:
‘‘In the event a security will not make a final paydown/redemption, as may be the case with a
structured security, or in the event that a security is being or has been cancelled pursuant
to a bankruptcy, court order, or other similar circumstance and is therefore worthless, the
Issuer, Trustee or Agent must instruct DTC to remove the position from DTC’s books and
records on the basis that the security is null, void, and worthless, that all interests in the security have been cancelled, and that there will be no further payments. The Issuer, Trustee
or Agent instruction to DTC must be in the form of the ‘‘Null, Void, and Worthless’’ (‘‘NVW’’)
letter template available on the DTCC’s website at https://www.dtcc.com/settlement-andasset-services/agent-services/corporate-action-information-for-agents and must be emailed
to the applicable email address as set forth in the following paragraph. The letter, including
an indemnification of DTC, must not be altered or edited.
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V.A.4. (to be renumbered from V.A.1.) (Pro
Rata Pass-Through Distributions of Principal).
V.A.5. (to be renumbered from V.A.2.) (Partial
Redemptions for Auction Rate Securities
(‘‘ARS’’) and Requests for ARS Lottery Results.
V.A.6. (to be renumbered from V.A.3.) (Redemption Notification Exceptions).
V.B.1. (Standards for Put Notifications) ..............
V.B.1.a. (Initial Notices of Puts) ..........................
V.B.1.b. (Timing) .................................................
V.B.1.c. (Additional Notices) ...............................
V.B.1.d. (Warning on Envelope for Physical Notice Delivery).
V.B.2.b. (Collateralized Mortgage Obligations
(‘‘CMOs’’) and Asset-Backed Securities
(‘‘ABSs’’).
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V.B.2.c. (Put ‘‘Extendible’’ Issues’’) .....................
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Issuer, Trustee or Agent shall email the completed and signed NVW letter for a security not
making a final paydown/redemption to redemptionnotification@dtcc.com. Issuer, Trustee or
Agent shall send the completed and signed NVW letter to DTC for convertible securities,
warrant or rights deemed null, void, and worthless to
conversionsandwarrantsannouncements@dtcc.com. Issuer, Trustee or Agent shall send the
completed and signed NVW letter to DTC for other event types to
mandatoryreorgannouncements@dtcc.com.
DTC reserves the right to request revised or additional documentation from the Agent, Issuer
or Trustee as DTC deems necessary or appropriate.’’
Considering the proposal to add the new subsections under Section V.A., as described above,
current Section V.A.1. will be renumbered as V.A.4. This subsection provides requirements
for notification to DTC and processing for pro rata pass-through distributions of principal.
The subsection will be updated to clarify that such a pass-through is referred to as a ‘‘final
pay-down’’ as opposed to a ‘‘pay-down’’ and adjust a related reference accordingly. The text
of the subsection would also be revised for clarity and readability and to add that in addition
to email, notification of a final pay-down can be provided to DTC via BMA5.
Considering the proposal to add the new subsections under Section V.A., as described above,
current Section V.A.2. will be renumbered as V.A.5. Also, a reference to the DTCC Customer Service Hotline, which can be called for further information regarding instructions on
processing requirements, would be updated to reflect the current name of this customer
support line, which is referred to as the ‘‘Client Support Line.’’
Considering the proposal to add the new subsections under Section V.A., as described above,
current Section V.A.3. will be renumbered as V.A.6.
Text would be removed that states ‘‘DTC requires Agents to meet standards for put notifications as they apply to notifications to depositories and to the extent that this OA or related
LOR does not supersede them.’’ This text is redundant as the specific provisions relating to
such put notifications are described in detail directly below the text to be deleted.
The text would be clarified to indicate that email addresses must be provided to DTC for the
delivery of put exercise instructions.
This subsection on the timing of notices to DTC would be modified to add that DTC should be
notified no fewer than 10 days prior to payment date for mandatory puts. This is in addition
to a stated requirement that the notice should be sent to DTC no fewer than 10 days prior
to the expiration of the applicable tender period for puts with instruction windows. Mandatory
puts would not necessarily involve an instruction window and therefore the existing text
would not apply to mandatory puts.
This subsection states a notice requirement relating to partial redemptions and information
that should be included in a notice. The proposed rule change deletes a provision that such
notices should be sent by the Issuer or Agent to one or more nationally recognized information services that disseminate put notices. This is a provision relating to a notification that
would occur outside DTC and is not required for DTC to process the partial redemption.
This subsection contains a provision relating to notice relating to the circumstance where a
bond indenture requires a physical notice to be sent in connection with a redemption. The
subsection contains a requirement that a warning should be printed on envelopes provided
to DTC in this regard and provides an example of such a warning and instructions for delivery of the notice. This subsection will be deleted as this relates to an obligation between an
agent/issuer and the indenture trustee for the issue, and such notice is not necessary to be
provided to DTC for DTC to process the event.
This subsection contains a provision that is currently misplaced relating to death redemptions,
which is an estate feature of some bonds that provides that the bond may be put back to
the issuer as a type of early redemption in the event of the death of a bondholder. The provision is misplaced and has been moved to the section relating to early Certificate of Deposit (‘‘CD’’) redemption/Survivor Options.
The proposed rule change also makes a grammatical change to enhance readability.
This subsection sets forth notice requirements for issues that may be subject to a ‘‘put’’ provision that allows the security to be exchanged into a new security in accordance with the
terms of the issuance. The proposed rule change will make technical and clarifying changes
relating to an example of such a put (i) to modify terminology in a parenthetical used to
refer to an extendible bond, from being referred to as ‘‘Extendible’’ to instead refer to it as
‘‘the extendible bond’’ and (ii) modify text in the example to refer to the new bond as having
a ‘‘shortened’’ maturity rather than a ‘‘new’’ maturity. The word ‘‘as’’ would also be added to
the text for the example before modified text ‘‘with a shortened maturity date.’’
In this regard, the existing text subject to these modifications currently states:
‘‘A security subject to a ‘‘put’’ provision may be exchanged for a new security, in accordance
with the terms and conditions of such put, with a new maturity date (i.e., ‘‘Extendible’’) if a
holder does not elect to retain the position.’’
The modified text would state:
‘‘A security subject to a ‘‘put’’ provision may be exchanged for a new security, in accordance
with the terms and conditions of such put, as with a shortened maturity date if a holder does
not elect to retain the position (i.e., the extendible bond).’’
The subsection would also be modified to add an additional email to which related confirmations must be sent to. In addition to putbonds@dtcc.com, the text will provide that
putsprocessing@dtcc.com could also be used for this purpose.
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V.B.2.d. (Put Bonds (Repayment Options)) ........
The proposed rule change would shift the location of text within the subsection, relating to certain notice requirements and related late fees for put bonds, to enhance clarity and readability. The proposed rule change also amends the notice requirements to remove the option to deliver notices to DTC using physical delivery methods in the event email transmission is unavailable. The proposed change would also modify text for accuracy of terminology.
This subsection contains provisions contained in the terms of certain Securities relating to survivor options which permit early redemption of a security in the event of the death of a
bondholder or if the bondholder is adjudicated as incompetent.
This section is focused on the early redemption of certificates of deposit and MMI Survivor
Options. In this regard, the heading of this subsection would be clarified to reflect this focus
by adding a reference to early CD redemptions in addition to survivor options, as well as
adding ‘‘MMI’’ before ‘‘Survivor Options’’. In this regard, the heading reads as ‘‘Survivor Options’’ and the modified title would read ‘‘Early CD Redemptions/MMI Survivor Options’’.
The text would be revised to clarify the system functions and procedures used for the early redemptions of certificates of deposit that are issued in DTC’s MMI Program and those that
are not issued in the program.
In this regard, the text would state that Participants should use the CD Early Redemption Request (‘‘CERR’’) function on PTS/PBS for non-MMI CDs to notify DTC in this regard, and
Participants should use the ‘‘PUTS’’ function on PTS for CDs issued in the MMI program to
notify the Issuing and Paying Agent (‘‘IPA’’). (In the MMI program, redemptions are initiated
directly between a Participant and an IPA on DTC’s MMI platform, whereas the Participant
provides instructions directly to DTC for other redemption types and DTC communicates
those instructions to the agent.
Text be updated and clarified relating to information actions required for Participants and
Agents to instruct and process early redemptions.
As such the following deletions and additions would be made.
The following text would be deleted:
‘‘When submitting instruction via CERR functions, hard copy supporting documentation is not
required to be delivered to DTC concurrently with instructions from Participants for certain
put exercise instructions, for example, a bond issue with a ‘‘death put’’ provision does not
require the submission of a death certificate concurrently with an exercise instruction, however, hard copy documentation must follow promptly. The presentment of the supporting
documentation to the Agent is not monitored by DTC.
Agent shall receive the specified Securities in accordance with DTC’s CERR procedures.
Upon receipt of payment, DTC will credit Participant, and the Participant shall forward the
payment to the legal representative of the named beneficial owner.
If such Securities are structured so that the redemption option (i.e., ‘‘death put’’) pays holders
accrued interest, Agent must include such accrued interest with the principal payment which
shall be calculated from the day prior to the regular interest payment date to and including
the day the funds are wired to DTC. Such funds shall be sent to the account in the manner
set forth in Section III(C)(2), Redemption and Maturity Payment Standards.’’
The deleted text would be replaced with the following:
‘‘(1) Early CD Redemptions (Non-MMI)
• Instruction Processing (with supporting documentation): For early CD redemption instructions submitted through CERR, DTC will provide the Agent the instructions from
Participants, and if in addition to the instruction the Agent requires the Participant to
present the beneficial-owner supporting documentation, (e.g., death certificate), DTC
will electronically provide to the Agent (unless otherwise notified by DTC) the supporting documentation received from Participants on the condition the Agent meets the
following requirements:
Æ Agent agrees to accept the beneficial owner documentation via email from DTC
and further agrees it fulfills the documentation requirement of the submission to
make the payment;
Æ Agent can accept the DTC email delivery in the form of a password-protected/
encrypted email; and
Æ Agent provides DTC a group/business unit email address (as opposed to an individual employee’s email address) for the delivery of the documentation.
If any of the above conditions cannot be met, DTC will not provide the Agent the supporting
documentation and Agent will be responsible to obtain the documentation directly from Participants as may be needed.
• Instruction Processing (without supporting documentation): For early CD redemption instructions submitted through CERR where the event indicates supporting documentation is not required to complete the submission for payment, DTC will provide the Agent
the instructions from Participants including contact information at the Participant should
the Agent want to obtain the documentation at a later time. When the event indicates
that documentation is not required, Participants submitting instructions will certify that
they will retain the documentation for 30 months from the submission should the Agent
want to obtain such documentation.
V.B.2.e. (Early CD Redemptions/Survivor Options).
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VI.A. (Standards for Voluntary and Mandatory
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• Early CD Redemption Instruction Confirmation: Agent is required to notify DTC of any
issues with instructions submitted to Agent, (e.g., invalid documentation, annual or
quarterly cap reached, lifetime cap reached) within 5 business days of receipt by
emailing survivoroptions@dtcc.com. For requests in good order, Agent will promptly inform DTC of the anticipated payment date for each instruction submitted to the Agent
by emailing CDdeathputs@dtcc.com.
• Early CD Redemption Payments: The Agent shall remit wire payment of early CD Redemption to DTC and include the CUSIP number, (e.g., CUSIP 123654AA0), and the
CERR transaction ID, (e.g., Transaction ID E@PF0101171216), on the wire. For all
payments, Agent must email wire payment details in an Excel file listing the CUSIPs,
CERR transaction ID’s, and amount to be paid. The email should be sent to
CDdeathputs@dtcc.com with the subject of the email containing the same transaction
ID (e.g., Transaction ID E@PF0101171216) contained in the wire. The amount to be
paid in the email attached Excel file must match the wire amount sent to DTC. If such
Securities are structured so that the redemption option (i.e., ‘‘death put’’) pays holders
accrued interest, (as payment is not occurring on a scheduled interest payment date),
Agent must include such accrued interest with the principal payment which shall be calculated from the day prior to the regular interest payment date to and including the day
the funds are wired to DTC. Such funds shall be sent to the account in the manner set
forth in Section III(C)(3), Reorganization Payment Standards.
(2) MMI Survivor Options: IPA is to refer to the ‘‘Survivor Options Puts User Guide for Agents’’
for instructions on viewing instructions, accepting/rejecting instructions, and responding to
withdrawal requests, and selecting instructions for payments.’’
This section provides notice standards, including timeframes and other requirements, for the
processing of voluntary and mandatory reorganization events. The proposed rule change
will revise the text of this section as follows:
1. The text of this section currently provides in its introductory paragraphs that notices for
mandatory reorganization events must be sent to DTC no fewer than five business
days prior to the transaction (event). Voluntary events require more time for processing
than mandatory events, because under a voluntary event Participants need to submit
instructions to DTC on how the event should be processed on their or their customers’
behalf. For a mandatory event, such instructions are not applicable. This subsection
currently provides for a 10-day notice period for voluntary events by stating that final
source documentation must be provided to DTC at least 10 business days prior to the
expiration of the voluntary event, but it resides further down in the section. The proposed rule change would move the text for the 10-day notice for voluntary events to be
closer to the description of the five-day notice period (for mandatory events) to make it
clearer to the reader as to which notice period applies to a mandatory or voluntary
event. In the regard, revision would also add text to clarify that the five-business day requirement set forth in this section for notice applies with respect to mandatory events.
Text referencing provision of preliminary source documentation and late notification
fees that are charged for late notifications for voluntary events would be moved further
up in the section for improved flow of the text.
2. The proposed rule change would delete the word ‘‘distribution’’ from text relating to
processing of cash in lieu of fractional shares because this paragraph is referring to reorganization events, which currently states: ‘‘the rate of distribution (e.g., stock rate and
exchange rate), including the rate for CIL fractions or roundup entitlements . . .’’ This
is because reorganization events do not result in distributions, but instead provide for
entitlements to cash or securities. In addition, the referenced text above would be revised to clarify that the ‘‘rate’’ is a ‘‘payment rate’’ and clarify how the rates are expressed for debt and equity.
3. The proposed rule change would add text noting that DTC does not support the distribution of fractional shares of securities.21
4. The following note would be added to the text:
‘‘Important Note: If there is a change in terms, a revised notice must be provided to DTC
immediately upon publication. Agent is to confirm that DTC took the appropriate action
with the information provided, (e.g., extended/revised the DTC expiration date when
given a new expiration date).’’
5. The proposed rule change would add that a notice should include information on
whether shares issued as the result of exercise of dissenter rights would be issued as a
certificate or in Direct Registration Statement format.
6. The subsection provides an email address for submission of notices of voluntary
events. The proposed rule change would clarify that notices for three of the event types
listed, namely conversions, right exercises, and warrant exercises should be sent to a
different email box than the email box currently listed for all voluntary reorganization
events. The email address currently listed for all such events is
voluntaryreorgannouncesments@dtcc.com. This will continue to be a valid address for
all events listed therein except for the three mentioned above, for which notices should
be sent to conversionsandwarrantsannouncements@dtcc.com. In addition, text would
be added stating that notifications pertaining to Put events should be sent to
putbonds@dtcc.com. Also, a reference to ‘‘dutch auctions’’ will be changed to ‘‘Dutch
auctions’’ to capitalize ‘‘Dutch’’ to reflect that it is referring to a specific type of auction.
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VI.B. (Fractional Entitlements in Cash or Additional Roundup Shares).
VI.C. (Processing of Specific Mandatory Reorganizations).
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7. The proposed rule change would revise text that describes requirements relating to
events that DTC is unable to process and that must be paid outside of DTC. For these
events, the OA states that details of the related entitlement must be provided. The revision would modify a clause that currently states ‘‘Agents will accept responsibility to
make payment directly to DTC Participants and agree to provide DTC details of the entitlement being allocated to DTC Participants, including calculations at the instruction
level at the time of the allocation to DTC Participants and to notify DTC that instructed
positions can be drawn down from the DTC balance as DTC has no ability to confirm
whether such payments were made to or received by DTC Participants’’ to add ‘‘if applicable between ‘‘including’’ and ‘‘calculations.’’
8. The proposed rule change would add wording in a sentence relating to issues listed on
an exchange, to make a reference to the plural ‘‘securities’’ to also refer to the singular
‘‘security’’ so that the applicable text would reflect ‘‘the security or securities.’’ In addition, ‘‘cash and/or stock merger’’ would be added to examples of transactions that are
corporate actions.
9. Pursuant to the DTC Fee Schedule, DTC may assess fees for the processing of a corporate action whose structure does not conform to DTC’s processing standards.22 Pursuant to the proposed rule change, DTC would move text describing these fees from
subsection VI.D.4. to this section, with clarifying modifications to clarify DTC’s discretion
to establish an appropriate fee for a given event once notice is received by DTC. The
proposed text would read: ‘‘Upon receipt of a notice and evaluation of the event/offer
details DTC may assess non-standard corporate action processing fees as DTC deems
appropriate to announce and process the corporate action event through DTC. Approval of the fee will be required prior to DTC committing to handling the offer/event as
well as agreement to provide DTC with allocation information in a specified format (e.g.,
spreadsheet). Payment of fees is due upon receipt of an invoice from DTC.’’
10. Revisions to this section would also include technical changes to clarify the text.
Section IV.D.2., described above, sets forth requirements relating to the handling of distributions that may result in fractional entitlements. Reorganizations can also result in the distribution of fractional entitlements. The proposed rule change would add a new section VI.B.
(Fractional Entitlements in Cash or Additional Roundup Shares). Such distributions are processed similarly as distributions that are not associated with reorganizations.
To provide clarity in this regard, the proposed rule change will add the following text to this
new subsection that is like that stated in Section IV.D.2.
Specifically, the new text would state:
‘‘In the event the corporate action rate of distribution results in fractional entitlements, Issuer
shall provide DTC one of the following:
(a) cash in lieu (‘‘CIL’’) of fractions or;
(b) additional roundup shares, or;
(c) written notification to DTC that fractional shares will be dropped.
Important Note: DTC does not support the distribution of fractional shares of securities.
Fractional entitlements should not be calculated at the Cede & Co. level only. For mandatory
corporate action events, Issuer and their Agent when paying CIL of fractions or additional
roundup shares are to calculate and pay such entitlement down to the beneficial owner level
when the event notification specifically refers to fractional entitlements being calculated at
the shareholder/beneficial owners level, however, if the timing of the event precludes providing the opportunity for participants to identify and receive payment calculated at the beneficial owner level, or it is not specified in the event, then calculations can be done at the
DTC participant level.
For voluntary corporate action events, the treatment of fractional entitlements (CIL, roundup,
or dropped) must be calculated at the Voluntary Offering Instruction (‘‘VOI’’) level.
For CIL or additional round-up shares, Issuer or Agent must:
(1) accept instructions from DTC to liquidate a designated quantity of full shares or issue additional roundup shares to satisfy Participant CIL/roundup entitlements down to the beneficial
owner level. Such instructions will be presented to Issuer or Agent on the date agreed upon
by DTC and Issuer or Agent. Issuer or Agent must provide DTC ample time (preferably 5
business days after the distribution) to collect Participant instructions;
(2) include additional roundup shares to DTC’s overall share entitlement;
(3) provide the CIL price to DTC on the date the price is established. Such price shall be provided to DTC by email in accordance with the type of corporate action to mandatoryreorg@
dtcc.com, reorgtenders@dtcc.com, or reorgconv@dtcc.com.
(4) wire funds for the payment of CIL of fractional entitlements to DTC’s Reorg Deposit Account via Fedwire using the Originator Beneficiary Instruction ‘‘Vol. CIL,’’ or ‘‘Mand CIL’’, as
applicable, (absent any other arrangement between paying agent and DTC); and
(5) upon issuance of additional roundup shares, for securities held in the DTC FAST program,
reconcile and confirm to DTC the FAST balance or for Non-FAST issues deliver physical
Securities to DTC. Such Securities shall be delivered to DTC at: Registered Corporate
Vault, The Depository Trust Company, 570 Washington Blvd., 5th Floor, Jersey City, NJ
07310’’.
This subsection will be renumbered from IV. B. to IV. C. The subsection describes processing
requirements for specific types of mandatory corporate actions, including an Item 1 for ‘‘Reduction of Payment on Treasury Shares or Repurchased Debt Securities’’ and Item 2 for
‘‘Mandatory Separation of a Unit After the Closing Date.’’
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The proposed rule change would renumber the above two items as 3 and 4, respectively and
add three additional items, including a new Item 1 for ‘‘Standards for Restricted to Unrestricted Exchanges,’’ a new Item 2 for ‘‘Standards for Maturity-for-Stock Events,’’ and Item 5
for ‘‘MMI to Non-MMI Exchanges.’’
Item 1
The new Item 1 (Standards for Restricted to Unrestricted Exchanges) would provide a crossreference for notice and documentation requirements relating to exchanges of restricted
shares for unrestricted shares, including securities that are eligible for resale pursuant to
Rule 144(b)1, in the case of former 144A securities, or pursuant to Section 4(1) of the Securities Act, in the case of former Regulation S restricted securities. In this regard this subsection would refer the reader to Section I(B)(5), Instruction Letters Regarding the Expiration of a Restrictive Period, for the notice and documentation requirements.
Item 2
It is DTC’s practice to require certain notices and information relating to mandatory events
where a security is being exchanged for stock (as opposed to cash) in order that it may be
able to make the entitlement security eligible and timely facilitate the exchange. In order to
enhance clarity relating to the notices and information required by DTC in this regard, the
new Item 2 (Standards for Maturity-for-Stock Events) would delineate these standards and
read as follows:
‘‘Issuer or Agent shall provide to DTC notice as soon as possible but no later than three business days prior to the maturity date for a Security which will make payment of a Security or
Securities upon maturity in lieu of all or part of the cash payment. Notice shall be on Issuer
or Agent’s letterhead and sent to DTC’s Reorganization Announcements Department by
email at mandatoryreorgannouncements@dtcc.com. The email subject line shall state the
maturing CUSIP number, the maturity date, and that the maturity is for stock (e.g., CUSIP
123456AB, due xx/xx/xx, maturity for stock). The notice shall include the following:
• Issuer/Security description and CUSIP number of the maturing security, the maturity
date, and that it is a maturity-for-stock event;
• Issuer name and CUSIP number of the entitlement stock, total number of shares to be
paid to DTC, and the rate of payment. (Note: When the maturing security is denominated in shares, the rate of payment is to be calculated per share, and when the maturing security is denominated in principal amount, the rate of payment is to be calculated
per $1,000 principal amount.);
• Participant account name and number holding the entitlement shares at DTC;
• If a cash component is applicable, provide the total cash payment amount to be paid to
DTC and the cash rate; and
• If an accrued interest payment is applicable, provide the total interest payment amount
to be paid to DTC, the interest rate, and the number of days of accrued interest.
In addition to the notice, (when the entitlement Security will be provided to DTC by a debit to
a DTC Participant’s account), DTC must receive the holding Participant’s letter authorizing
DTC to reduce their DTC position in the entitlement security by the total quantity of shares
to which DTC’s nominee name, Cede & Co., is entitled. In the event the Participant’s letter
is sent separately from the notice, it must be emailed to DTC no later than 3:00 p.m. ET on
the business day prior to the maturity date to the following email addresses:
mandatoryreorgannouncements@dtcc.com, and mandatoryreorg@dtcc.com. Such letter
must be on the DTC participant’s letterhead, and include the following:
• Issuer/Security description and CUSIP number of the maturing security;
• Participant account name and number;
• Issuer/Security description and CUSIP number of the entitlement shares to be reduced
(i.e., debited) from the Participant’s account;
• total number of entitlement shares to be debited;
• Participant contact name and telephone number;
• Participant officer-level signature authorizing the number of shares to be reduced from
the Participant’s account;
• DTC indemnification statement; and
• medallion signature guarantee stamp affixed to such letter. (Note: The authorized signer of the medallion stamp must be a different party than the signer of the letter)
Important: The holding DTC Participant must ensure that the total quantity of shares to which
DTC’s nominee name, Cede & Co., is entitled and needed to fund the distribution is on deposit in the holding DTC Participant’s General Free Account no later than 10:00 a.m. ET on
the maturity date.
The template of the DTC Participant (debit) letter can be obtained contacting DTC’s Reorganization Announcement Department at mandatoryreorgannouncements@dtcc.com.
Further note, in the event DTC will not be funded the total quantity of entitlement shares due
DTC, Agent shall provide to DTC a notice of the reduction in the shares (and if applicable
the cash component) due to DTC by no later than 3:00 p.m. ET on the business day prior to
the maturity date to the following email addresses: mandatoryreorgannouncements@
dtcc.com, and mandatoryreorg@dtcc.com. The notice shall include the information from the
Agent and the Participant(s) as described in Section VI(C)(3), Reduction of Payment on
Treasury or Repurchased Securities.
Delivery of the notices to an email address other than the email addresses set forth above
does not constitute a valid notification.
Failure to comply with any of the notification requirements could result in DTC being unable to
support the processing of the event.’’
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VI.D. (Processing for Specific Voluntary Reorganizations).
VI.D.2. (Mortgage-Backed Securities with
Monthly Early Redemption Features).
VI.D.2. (Rights Offers (Use of DTC’s Automated
Subscription Offer Program (‘‘ASOP’’)).
VI.D.3.a. (Convertible Issues/Warrants/Rights
Notifications).
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Item 3
Renumbered Item 3 (formerly Item 1) relates to the reduction of payment on Treasury Shares
or Repurchased Debt Securities. This item would be revised for to clarify and consolidate
text relating to requirements for a confirmation letter that the Agent must ensure that each
Participant provides to DTC in order for DTC to timely process the event using the appropriate payment amount.
Item 4
Renumbered Item 4 (formerly Item 2) relates to the mandatory separation of a unit from an eligible security after the closing date. The section would be clarified by adding a note that the
unit must be DTC eligible at the time the Unit Security was made DTC eligible, or the unit
must become eligible in accordance with the provisions of the OA.
Item 5
From time to time, an issuer and/or agent may request that a security be made eligible for
DTC’s Money Market Instrument (‘‘MMI’’) Program but later determine that it should have
been placed in DTC’s non-MMI services. DTC requires certain documentation and information from the Issuer and Issuing and Paying Agent for the MMI issue in order for it to be exchanged for a non-MMI CUSIP.
In order to enhance clarity relating to notices, documentation and information required by DTC
in this regard, a new Item 5 (MMI to Non-MMI Exchanges) would be added to this subsection and read as follows:
‘‘For DTC to agree to announce and process an MMI (CUSIP) to Non-MMI (CUSIP) exchange
the following conditions must be met.
DTC will not make a Non-MMI CUSIP eligible which will mature 30 days or less from the eligibility date nor perform an exchange from a CUSIP that will mature 30 days or less from the
exchange date. (See I (C) 6 Short-Term Maturities)
The Issuing Paying Agent (‘‘IPA’’) must provide notice to DTC on IPA letterhead by email to
mandatoryreorgannouncements@dtcc.com by no later than 5 business days prior to the exchange date acknowledging the reason for the exchange, (i.e., security was incorrectly
issued as an MMI CUSIP), the MMI CUSIP and the Non-MMI CUSIP, security description,
and the rate of exchange. In addition to the exchange notice, the following must be provided:
Æ notice from the Issuer which includes the DTC indemnification language acknowledging
the listed CUSIP(s) were issued incorrectly as MMI securities.
Æ written acknowledgment from the IPA to be billed all eligibility and exception processing
fees for each exchange per CUSIP
Æ the Non-MMI CUSIP obtained from the CUSIP Service Bureau for each exchange and
a copy of the prospectus, offering document, or offering statement describing terms of
the Non-MMI security to make the new CUSIP DTC eligible.
Æ other documentation that may be required by DTC’s Underwriting Dept. to determine
the eligibility of the NON–MMI security (e.g., new Letter of Representations for BEO
issues; and,
Æ Dependent upon the review of the information provided, DTC reserves the right to request revised or additional documentation from the Agent and/or Issuer as DTC deems
necessary to process the requested exchanges.’’
This section will be renumbered from IV. C. to become IV. D.
In addition, the proposed rule change would clarify the timing by which a Participant’s submission of an instruction relating to a voluntary reorganization is effective. In this regard, the following note would be added to the text of this section.
‘‘Note to Agents and Issuers regarding Participant instructions for events processed through a
DTC instruction processor (i.e., ATOP, ASOP, or APUT): By processing an event through a
DTC instruction processor (‘‘Instruction Processor’’), including, but not limited to, ATOP,
ASOP, or APUT, the Agent and Issuer acknowledge and agree that the date and time of a
Participant’s submission of its instruction to DTC (as reflected in the Transaction ID of the
completed transaction) is deemed to be the date and time of the Agent’s receipt of the instruction and, if applicable, the tendered securities. By way of example, but without limitation, for purposes of determining the timeliness of a Participant’s instruction and tender in
connection with an event, the Participant’s instruction is deemed to have been timely received by, and, if applicable, the securities timely tendered to, the Agent when the date and
time of the submission of a Participant’s instruction to DTC (as reflected in the Transaction
ID of the completed transaction) is prior to the applicable cutoff/expiration date and time,
even if the transaction does not complete until after the applicable cutoff/expiration date and
time for the event.’’
This subsection would be removed from the OA as it is redundant to language already included relating to Puts.
This subsection would be renumbered from IV.D.3 to IV.D.2.
This subsection would also be modified to modify the sentence that states: ‘‘In the case of
rights offers, DTC’s ASOP procedures and systems must be utilized to process subscription
exercise activities, including the submission of instructions for basic subscriptions, the exercise of step-up and oversubscriptions, sales of rights, and notices of guaranteed deliveries,
and all related activities.’’ The change would remove the words ‘‘step-up and’’ from this sentence.
This subsection would be renumbered from IV.D.4.a to IV.D.3.a.
The text of this subsection would be revised as follows:
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OA section
Revision
VI.D.3.b. (Convertible Issues/Warrants/Rights
Processing).
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1. A reference to ‘‘company/agent’’ would be revised to ‘‘Issuer/Agent’’ for consistency
with the term as used in the OA;
2. Text relating to notice provisions relating to the alteration of terms for conversions and
warrants would be revised to move text up from further down in the section that reflects
timeframes by which notice to DTC is required. This text states that DTC must be notified in accordance with the terms of the offering document, to instead state that DTC
must be notified no fewer than 10 business days prior to the effective date of such
change, or to the extent an event ‘‘triggers’’ the change (i.e., on short notice) then notice must be provided to DTC immediately, but, in any event, no later than 24 hours
after the triggering event, and that the Agent is to confirm receipt of such notice to
DTC. This proposed rule change would facilitate the provision of information to DTC in
sufficient time for DTC to process any such alteration in terms.
3. The email address to which such notices should be sent would be revised to
voluntaryreorganizations@dtcc.com to conversionsandwarrantsannouncemetns@
dtcc.com. The provision would also be revised to require such notices to be delivered
by email as opposed to email or to a physical mailbox.
4. Text would also be revised for clarity relating requirements for information that must be
included in a notice provided to DTC under this subsection and certain notification requirements for variable rate entitlements would be moved to further down in the text of
the OA to a renumbered Section IV.D.4.c, as described below.
5. Text would be added to clarify the requirements for an Agent to notify DTC relating to a
change in terms affecting an expiration date.
6. The proposed rule change would make other technical and clarifying changes to this
subsection with respect to updating cross-references as well as grammatical changes.
This subsection would be renumbered from IV.D.4.b to IV.D.3.b.
The subsection would be modified:
1. To add text moved from IV.D.4.a. relating to conversions with variable rate entitlements, as described above, and move and condense text from further below in the subsection that such notification include information as to whether a CIL entitlement is to
be paid per the instruction with the method of calculation and provide an example stating ‘‘market price or the Volume Weighted Average Price.’’
2. To separate text in a bullet relating to processing of a conversion through a DTC voluntary program so that text relating to an agreement of an issuer and agent relating to
a delivery instruction to debit the balance of a security certificate in connection with a
conversion, is separated from text setting forth the agreement of the issuer and agent
agreeing that any new securities resulting from a conversion, warrant or right exercise
shall (i) be issued as of the date on which the conversion, warrant, or right instruction is
entered into the DTC system and (ii) follow with issuance occurring no more than two
business days from the date of receipt by DTC of the instructions and the Agent is required to notify DTC by 12:00 noon ET the following day of any instructions that have
been rejected.
3. To delete text relating to CIL entitlements, as described above and which are replaced
by the applicable bullet described in 1 above and
4. Modify a sentence that states ‘‘For rights offering with oversubscriptions, proration and
rounding, Agent must agree to utilize DTC’s template for providing payment details for
oversubscription, proration and rounding, to add the reference ‘‘as well as guaranteed
delivery (protect) submissions and cover of protects’’ between ‘‘rounding,’’ and ‘‘Agent’’.
This subsection would be renumbered from IV.D.5.a to IV.D.4.a.
This section describes tender and exchange processing and processing of mergers with elections. It requires the use of DTC’s ATOP system for such processing. The subsection would
be modified to clarify that DTC will not process the event if the agent is not an ‘‘ATOP
agent’’ by adding the following text:
‘‘For DTC to support the processing of the offer/event, Issuer’s (or Offeror’s) Agent must be an
established ATOP agent with DTC (i.e., has an on-line connection to DTC’s ATOP-automated tender offer platform) at the time of the announcement submission to DTC.’’
Examples provided with respect to other transaction types that ATOP may be utilized for (at
DTC’s discretion) would be modified to expand the text from referring only to consent solicitations (with a fee), collection of tax withholding rate or exemption, conversion events where
the entitlement can be cash and collection of CIL entitlements to also include (a) conversion
events where the entitlement can be securities and are subject to an extended settlement
period (which could be in addition to or in the alternative to conversion events where the entitlement can be cash), and (b) cashless warrants. The qualification that a consent limitation
be ‘‘with a fee’’ would also be removed, to indicate that any collection of a consent solicitation could be processed by ATOP (with or without a fee (but processing of such an event
would still subject to DTC’s discretion as previously mentioned)).
A provision stating that a Letter of agreement (LOA) approval by an Agent is required within
24 hours of DTC posting to ATOP, and a reference to applicability of ‘‘late notification fees’’
relating to processing delays stemming from a late approval of a LOA, would be moved
from the end of this subsection to text higher up where the LOA is first referenced in this
section, so that it appears in the context of other stated requirements relating to the LOA.
Also, the reference to ‘‘within 24 hours’’ would be modified to instead reference ‘‘1 business
day’’ to take into consideration instances where a deadline for an agent’s approval might
otherwise fall on a non-business day.
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OA section
Revision
VI.D.4.c. (Altering the Terms of an Offer) ...........
VI.D.4.f. (Consents) .............................................
VI.E. (Chargeback of Reorganization Payments)
VI.F.1. (Consents and Legal Notices) .................
VI.F.2. (Security Position Reports (‘‘SPRs’’) .......
VI.F.3. (Shareholder Meetings) ...........................
ddrumheller on DSK120RN23PROD with NOTICES2
VII. Additional Operational Requirements for
Variable-Rate Demand Obligations
(‘‘VRDOs’’).
9 See
Rule 5, supra note 6.
to the Rules, the term MMI Program
means the Program for transactions in MMI
Securities, as provided in Rule 9(C) and as specified
in the Procedures. See Rule 1, Section 1, supra note
6.
11 Pursuant to the Rules, the term (i) ‘‘MMI
Issuing Agent’’ means a Participant, acting as an
10 Pursuant
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Text would also be added to clarify the timing by which DTC must receive certain information
and documentation relating to an entitlement to facilitate timely processing. In this regard,
the added text will state that the entitlement must have a CUSIP number and the Agent
must notify DTC of such CUSIP number assigned to the new Securities no less than 3 business days prior to allocation of the entitlement if security is already DTC eligible. The added
text would also state that if the security is not DTC eligible, the Agent must provide all required documentation no later than 5 business days prior to allocation of the entitlement security for DTC to complete the eligibility process prior to allocation. The text would also state
that additional eligibility processing time could be required dependent upon the determination of the eligibility review and the requirement for additional documentation, (e.g., legal
opinion for a Non-US security) and Issuer and Agent shall plan accordingly.
The subsection would also be modified to make technical and clarifying changes to the text.
This subsection would be renumbered from IV.D.5.c. to IV.D.4.c.
This subsection provides requirements for communication to DTC of a change in the terms of
an offer.
The text includes that all extensions to an offer must be provided to DTC via email ‘‘by noon
on the day following the expiration date of the event and if applicable, shall include any and
all changes to terms of the offer.’’ This provision would be revised to add emphasis to the
timing of this deadline to add ‘‘no later than’’ in front of ‘‘noon.’’
It is important that the Agent confirm that its extension of an expiration date of an offer is accurately reflected on DTC’s records. The subsection includes text indicating the need for an
Agent to confirm DTC’s receipt of the applicable notice via email or by phone. Pursuant to
the proposed rule change, this text would be clarified to state that the agent may make this
confirmation by viewing the ‘‘Transaction Entry End Date’’ field in ATOP. If the information is
not shown as updated, then the Agent should notify DTC via email or phone.
This subsection would also be revised for technical and grammatical changes.
This subsection would be revised for technical and grammatical changes.
This subsection would be revised to add examples of the type of refunds of payments covered
by this section.
This subsection would be revised to make technical changes, including updating to reflect the
elimination of hard copy delivery of notices.
This section describes how issuers, trustees and authorized third parties may access security
position reports (‘‘SPRs’’). This subsection would be revised to clarify and consolidate text
and make technical changes relating to the requirements relating SPRs, including with respect to how SPRs are accessed and how third parties may be authorized to obtain and
maintain access reports. The proposed rule change would also add contact information for
support resources relating to SPRs.
This subsection describes processes relating to the announcement of shareholder meetings
and issuance of omnibus proxies.
The following text would be added to this subsection:
‘‘Issuers and Agents are advised that in the event a voluntary offer (e.g., tender) at DTC is active on the record date of the meeting announcement and a Participant’s instructed position
is in the contra-CUSIP on record date, it will be added to that Participant’s record date position in the target CUSIP (i.e., issuer’s security) for purposes of the omnibus proxy and the
accompanying SPR. If the active voluntary offer is being made by the Issuer (as opposed to
a third-party) and the Issuer, in accordance with the terms of its voluntary offer, wants DTC
to exclude the instructed positions of Participants in the contra-CUSIP from the omnibus
proxy and accompanying SPR, the Issuer or their Agent must contact DTC, at least 5 business days before the record date for the meeting by emailing DTC at
proxyannouncements@dtcc.com. DTC can require indemnification from the Issuer to take
such action.’’
The text would be updated to include that a shareholder meeting announcement should include the ‘‘CUSIP number of the issuer’s security’’ in addition to other information fields already listed. Text saying that the ‘‘company name’’ field would also be updated to read
‘‘issuer/company name’’.
This subsection would also be revised to make technical changes, including, but not limited to,
relating to language hardcopy delivery and move text within the subsection for enhanced
readability.
This section would be revised to reflect that delivery of instructions and notices should be sent
to DTC electronically rather than via physical delivery.
issuing agent for an issuer with respect to a
particular issue for MMI Securities of that issuer,
that has executed such agreements as the
Corporation shall require in connection with the
participation of such Participant in the MMI
Program in that capacity, and (ii) ‘‘MMI Paying
Agent’’ means a Participant, acting as a paying
agent for an issuer with respect to a particular issue
of MMI Securities of that issuer, that has executed
such agreements as the Corporation shall require in
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connection with the participation of such
Participant in the MMI Program in that capacity.
See Rule 1, supra note 6.
12 Eligibility for inclusion in the MMI Program
covers Securities that are money market
instruments, which are short-term debt Securities
that generally mature 1 to 270 days from their
original issuance date. MMI Securities include, but
are not limited to, commercial paper, banker’s
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2. Statutory Basis
Section 17A(b)(3)(F) of the
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.
The proposed rule changes are also
designed to be consistent with Rule
17Ad–22(e)(23) of the Act,24 which was
recently adopted by the Commission.25
ddrumheller on DSK120RN23PROD with NOTICES2
Act 23
acceptances and short-term bank notes and are
issued by financial institutions, large corporations,
or state and local governments. Most MMI
Securities trade in large denominations (typically,
$250,000 to $50 million) and are purchased by
institutional investors. Eligibility for inclusion in
the MMI Program also covers medium term notes
that mature over a longer term.
13 See Rule 5, supra note 6.
14 See Rule 1, supra note 6.
15 DTC’s FAST program allows an Agent which is
an approved FAST Agent to act as custodian for
DTC and increase or decrease the amounts of a
balance certificate representing Securities eligible
for DTC book-entry services. See OA Section II.B.a.
(FAST), supra note 5.
16 A SCL, or Shipment Control List, is a form
generated by DTC that lists identifying information
about a shipped security certificate, including the
number of shares or other interests, CUSIP number,
and dollar value. An SCL serves as a manifest for
a transfer agent receiving security certificates from
DTC. See OA Section II.B.a. (FAST), supra note 5.
17 The BMA5 and REDCAL are automated system
to system files provided by agents that contain rate
and announcement information for distributions
and redemptions.
18 The BMA, DCN and REDCAL are automated
system to system files provided by agents that
contain rate and announcement information for
distributions and redemptions.
19 See DTCC’s website at https://www.dtcc.com/
settlement-and-asset-services/agent-services/
corporate-action-information-for-agents.
20 See Null/Void/Worthless Letter temple,
available at https://www.dtcc.com/-/media/Files/
Downloads/Settlement-Asset-Services/agentservices/Null-Void-Worthless-Letter-Temp.docx.
21 See Securities Exchange Act Release No. 75094
(June 2, 2015), 80 FR 32425 (June 8, 2015) (SR–
DTC–2015–007).
22 See Guide to the DTC Fee Schedule, available
at https://www.dtcc.com/-/media/Files/Downloads/
legal/fee-guides/DTC-Fee-Schedule.pdf at 7.
23 15 U.S.C. 78q–1(b)(3)(F).
24 17 CFR 240.17Ad–22(e)(23).
25 The Commission adopted amendments to Rule
17ad–22, including the addition of new subsection
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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-related
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 received or solicited any
written comments relating to this
proposal. If any written comments are
received, they would be publicly filed
as an Exhibit 2 to this filing, as required
by Form 19b–4 and the General
Instructions thereto.
Persons submitting comments are
cautioned that, according to Section IV
(Solicitation of Comments) of the
Exhibit 1A in the General Instructions to
Form 19b–4, the Commission does not
edit personal identifying information
from comment submissions.
Commenters should submit only
information that they wish to make
available publicly, including their
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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name, email address, and any other
identifying information.
All prospective commenters should
follow the Commission’s instructions on
how to submit comments, available at
https://www.sec.gov/regulatory-actions/
how-to-submit-comments. General
questions regarding the rule filing
process or logistical questions regarding
this filing should be directed to the
Main Office of the Commission’s
Division of Trading and Markets at
tradingandmarkets@sec.gov or 202–
551–5777.
DTC reserves the right to not respond
to any comments received.
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) 26 of the Act and paragraph
(f) 27 of Rule 19b–4 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:
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–2023–010 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549.
All submissions should refer to file
number SR–DTC–2023–010. 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 website (https://www.sec.gov/
rules/sro.shtml). Copies of the
26 15
27 17
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U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f).
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ddrumheller on DSK120RN23PROD with NOTICES2
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 website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
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17:58 Oct 11, 2023
Jkt 262001
Washington, DC 20549 on official
business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also
will be available for inspection and
copying at the principal office of DTC
and on DTCC’s website (https://
dtcc.com/legal/sec-rule-filings.aspx). Do
not include personal identifiable
information in submissions; you should
submit only information that you wish
to make available publicly. We may
redact in part or withhold entirely from
publication submitted material that is
obscene or subject to copyright
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70719
protection. All submissions should refer
to File Number SR–DTC–2023–010 and
should be submitted on or before
November 2, 2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.28
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–21945 Filed 10–11–23; 8:45 am]
BILLING CODE 8011–01–P
28 17
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CFR 200.30–3(a)(12).
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]]>Agencies
[Federal Register Volume 88, Number 196 (Thursday, October 12, 2023)]
[Notices]
[Pages 70700-70719]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-21945]
[[Page 70699]]
Vol. 88
Thursday,
No. 196
October 12, 2023
Part II
Securities and Exchange Commission
-----------------------------------------------------------------------
Self-Regulatory Organizations; The Depository Trust Company; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Modify
the DTC Operational Arrangements (Necessary for Securities To Become
and Remain Eligible for DTC Services); Notice
Federal Register / Vol. 88, No. 196 / Thursday, October 12, 2023 /
Notices
[[Page 70700]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-98604; File No. SR-DTC-2023-010]
Self-Regulatory Organizations; The Depository Trust Company;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Modify the DTC Operational Arrangements (Necessary for Securities To
Become and Remain Eligible for DTC Services)
DATES: September 28, 2023.
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 September 27, 2023, 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 primarily prepared by the clearing agency. DTC filed
the proposed rule change pursuant to Section 19(b)(3)(A) of the Act \3\
and Rules 19b-4(f)(4) thereunder.\4\ 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)(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\ to clarify and update
provisions relating to the processing of securities eligibility
requests and servicing of assets on Deposit at DTC, as described in
greater detail 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 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 \7\ or in
the OA),\8\ 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 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 supra note 6.
\8\ See supra note 5.
------------------------------------------------------------------------
OA section Revision
------------------------------------------------------------------------
I.A.1. (Submission of an Pursuant to Rule 5, DTC shall accept
Eligibility Request). a Security as an Eligible Security
only, among other requirements,
upon a determination by the
Corporation that it has the
operational capability and can
obtain information regarding the
Security necessary to permit it to
provide its services to
Participants and Pledgees when such
Security is Deposited.\9\ Timely
confirmation of details relating to
a security is an important part of
making an eligibility
determination. Therefore, pursuant
to the proposed rule change, the OA
would be revised to add new text to
this subsection that requires the
agent for a security to confirm an
issue's features and attributes
once the underwriter of the
security has submitted the issue
for eligibility.
In this regard, new text would be
added to this subsection which
would state:
``As Agent for a new security
qualifying for DTC eligibility,
Agent must complete the Agent
Confirmation supplied by DTC's
Underwriting Department to confirm
a new issue's features and
attributes based on the security
type. The agreement of the
information supplied by the
underwriter, the Agent
Confirmation, and the offering
document ensure the accuracy of the
asset servicing of the security.
This confirmation must be provided
by the Agent via email at least
three (3) business days prior to
the Closing Date of the issue.''
Section I.B.5 (Instruction Letters The proposed rule change would
Regarding the Expiration of a enhance instructions relating to
Restrictive Period). 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. In
this regard, the proposed rule
change would add three subsections
to respectively provide
instructions for the three types of
exchange processes that may occur
in this regard, namely (a) an
optional exchange process, (b) a
voluntary exchange process, and (c)
a mandatory exchange process. The
processes for (a) and (b) relate to
exchanges where a Participant has
an option to exchange existing 144A
shares to unrestricted shares, with
the difference between an optional
exchange and a voluntary exchange
being described functionally in
terms of, (i) with respect to (a),
the agent for the issue
facilitating the exchange through
DTC's Deposit/Withdrawal at
Custodian (``DWAC'') function and
(ii) with respect to (b) being
conducted using DTC's Automated
Tender Offer Program (``ATOP'').
Under a mandatory exchange, the
issuer requires the Participant to
receive the unrestricted shares in
exchange for any144A shares the
Participant holds.
[[Page 70701]]
The text added with respect to (a)
above would include a heading named
``Optional Exchange Process (Agent
Facilitates via Deposit/Withdrawal
at Custodian ``DWAC''))'' for a new
subsection a. under I.B.5. The new
subsection a. would state: ``To
request DTC to provide for the
ability to have the Issuer's Agent
facilitate via DWAC the exchange on
an optional basis for Participants
to request to exchange restricted
Securities represented by a
restricted CUSIP number for new
unrestricted Securities of the same
issue represented by an
unrestricted CUSIP, Issuer will
complete and submit the instruction
letter along with a copy of the
form of each unrestricted Security
(without effective restrictive
legends) bearing the new
unrestricted CUSIP to DTC's
Underwriting Department no later
than 10 business days prior to the
effective date or exchange date
(i.e., date of the end of the
restrictive period and/or
distribution compliance period
imposed under such exemptions has
elapsed) or the date Agent will
begin acknowledging Participants'
DWAC requests. Receipt of the
instruction letter must be in
conjunction with the DTC
Participant eligibility request via
UW SOURCE for the new unrestricted
Securities. (Refer to Section I
(A)(1), Submission of an
Eligibility Request to DTC.)''
Subsection a. would also incorporate
existing text that provides an
internet link to the applicable
form for optional exchanges. This
existing text also previously
referred to voluntary exchanges,
however, the reference to voluntary
exchanges would be deleted and
instead be included in a new
subsection relating to voluntary
exchanges as described below. The
internet link would be updated to
reflect that the link uses a
Hypertext Transfer Protocol Secure
(https:) format rather than a
Hypertext Transfer Protocol (http:)
format.
The text added with respect to (b)
above would include a heading named
``Voluntary Exchange Process (Use
of DTC's Automated Tender Offer
Program ``ATOP))'' for a new
subsection b. under I.B.5. The new
subsection b. would state: ``Issuer
and Agent acknowledges that any
such exchange of restricted
Securities for Securities of a
CUSIP that is unrestricted will be
made in accordance with the rules
and procedures of DTC's Automated
Tender Offer Program (``ATOP'')
including that Agent is required to
approve and adhere to all
requirements represented in the
Letter of Agreement (``LOA'') for
each exchange processed through
ATOP, (Refer to Section
VI(D)(5)(a), Tender/Exchange
Processing). To request DTC to
process a voluntary exchange of
restricted Securities represented
by a restricted CUSIP number for
new unrestricted Securities of the
same issue represented by an
unrestricted CUSIP, Issuer will
complete and submit the instruction
letter along with a copy of the
form of each unrestricted Security
(without effective restrictive
legends) bearing the new
unrestricted CUSIP no later than 10
business days prior to the
effective date or exchange date
(i.e., date of the end of the
restrictive period and/or
distribution compliance period
imposed under such exemptions has
elapsed) to both DTC's Underwriting
Department and Reorganization
Voluntary Announcements Department
by email at [email protected] and
[email protected].
The form of instruction letter and
related requirements for Issuers
and Agents with respect to such
exchanges to be made voluntary for
Participants are available at:
https://www.dtcc.com/~/media/Files/
Downloads/legal/issue-eligibility/
special-letters/Optional-Process-
Instruction-Letter.pdf.''
The text added with respect to (c)
above would include a heading named
``Mandatory Exchange Process'' for
a new subsection b. under I.B.5.
The new subsection c. would state:
``To request DTC to process a
mandatory exchange of restricted
Securities represented by a
restricted CUSIP number for new
unrestricted Securities of the same
issue represented by an
unrestricted CUSIP, Issuer will
complete and submit the instruction
letter along with a copy of the
form of each unrestricted Security
(without effective restrictive
legends) bearing the new
unrestricted CUSIP no later than 10
business days prior to the
effective date or exchange date
(i.e., date of the end of the
restrictive period and/or
distribution compliance period
imposed under such exemptions has
elapsed) to both DTC's Underwriting
Department and Reorganization
Mandatory Announcements Department
by email at [email protected] and
[email protected]. Issuer and Agent acknowledges
that any such exchange of
restricted Securities for
Securities of a CUSIP that is
unrestricted will be made in
accordance with the DTC Rules
concerning mandatory exchanges.''
The new subsection c. would also
incorporate existing text that
provides internet links for
documentation relating to mandatory
exchanges. However, these links
would be updated to indicate that
they utilize a Hypertext Transfer
Protocol Secure (https:) format
rather than a Hypertext Transfer
Protocol (http:) format.
Section I.C.6. (Certificated This subsection provides in its
Securities with Short-Term first of two paragraphs that DTC,
Maturities). at its sole discretion, may make
eligible a certificated security
maturing within 60 calendar days of
its closing date, on an exception
basis subject to processing
considerations. However, this
provision relates to securities
that are not in DTC's money market
instrument program (``MMI
Program'') and the MMI Program does
facilitate the eligibility and
processing of such short-term
securities.\10\ The MMI Program
operates using an automated
platform providing MMI Issuing and
Paying Agents \11\ (each, an
``IPA'') with the ability to issue,
service, and settle Securities that
are money market instruments (``MMI
Securities'') that are processed in
the MMI Program \12\ that they
introduce into the marketplace
through DTC.
[[Page 70702]]
DTC believes that, given
efficiencies for the processing of
short-term securities that have
been built into the MMI Program,
directing short term securities to
the MMI Program would promote the
prompt and accurate processing of
such securities. In addition,
pursuant to the Rules, DTC
maintains sole discretion with
respect to accepting any security
as eligible for DTC services on a
non-discriminatory basis; \13\ and
therefore the existing text
relating to DTC's exercise
discretion in this regard is
redundant. Therefore, DTC would
revise the OA text to delete the
substance of the text reflecting
the provision described above
relating to DTC's discretion with
regard to accepting for eligibility
a security maturing within 60 days
of its closing date and replace it
with text that would state that a
security that is scheduled to
mature in 30 calendar days or less
from the issuance date or DTC
eligibility date will not be made
eligible as a Non-MMI Security. The
added text would also include a
cross-reference to the OA Section
I(A)(2) (Special Rules and
Processes for Money Market
Instruments) for more information
relating to special rules and
processes for MMI Securities. Also,
a reference to referring to a short-
term security as a ``bond'' would
be changed to ``security'' to make
the reference consistent with DTC's
terminology for MMI whereby MMI are
referred to as MMI Securities in
its Rules.\14\
In addition, the second paragraph of
this subsection which relates
specifically to monthly optional
redemptions would be designated as
a new subsection I.C.7., as
described below.
I.C.7. Monthly Optional The proposed rule change would break
Redemptions (New Subsection). out the last paragraph of
subsection I.C.6. into a separate
subsection under the heading
``Monthly Optional Redemptions.''
The paragraph describes eligibility
requirements for debt securities
that have provisions allowing an
issuer the option to make monthly
redemptions of securities. The
paragraph is broken out as the
requirements are not specific to
short-term securities. The text of
the newly broken out subsection
would be revised for technical
changes, including (i) clarifying
that the securities subject to the
subsection are debt securities,
(ii) change references to ``issue''
and ``issuance'' to ``security, and
(iii) remove text that the security
will be considered for eligibility
if it is a new issuance that is
registered under the Securities Act
of 1933 (``Securities Act'') and
replace it with a cross-reference
to the OA's eligibility
requirements.
II.A.1. (CUSIP Number Assignment). This subsection describes DTC's
requirements for issuers to obtain
CUSIP Numbers as part of the
eligibility process.
The second paragraph states that
certain corporate actions on
existing securities may require the
issuer to obtain a new CUSIP
Number. This paragraph will be
revised for technical wording
changes.
In this regard, the text currently
states: ``DTC may require the
Issuer or Agent to obtain a new
CUSIP number from Standard & Poor's
CUSIP Service Bureau to facilitate
the adequate processing of a
corporate action events, (e.g.,
reverse stock split, interest
payment). An example of such a
requirement for a new CUSIP for an
interest payment is when the
additional issuance of debt
securities carries an interest
accrual date or period that is
different than the original
issuance.'' Pursuant to the
proposed rule change (i) ``in order
to'' would be shortened to ``to'',
(ii) the ``a'' between ``processing
of'' and ``corporate action'' will
be deleted and replaced with
``certain'', and (iii) and the word
``event'' will be changed to the
plural ``events'' and a comma will
be added after the word.
In addition, ``Standard & Poor's
CUSIP Service Bureau'' would be
shortened to ``CUSIP Service
Bureau''. Standard & Poor's
recently transferred the CUSIP
Service Bureau to a different
entity and therefore the reference
to Standard & Poor's is outdated.
However, since there is only one
CUSIP Service Bureau, DTC believes
it is unnecessary for the OA to
include the name of the owner of
the CUSIP Service Bureau in the OA.
II.B.2. (Balancing Securities).... This section contains several
subsections that describe DTC's
FAST program of which balancing,
referred to in the current title of
the section, is a component. The
title of the section will be
changed from ``Balancing
Securities'' to ``FAST Program'' to
better reflect the nature of the
content.
II.B.2.b. FRAC.................... This subsection describes
requirements relating to the use of
the FRAC function by issuers'
agents for confirmation or
rejection of balances or transfers
of securities in DTC's FAST
program.\15\ Pursuant to the OA,
FAST Agents shall reconcile and
confirm to DTC the amount of the
Securities reflected by such
Balance Certificate and recorded in
the name of Cede & Co. daily, or
other periodic basis as DTC may
reasonably request. The subsection
that describes the FRAC process
provides details on confirmation
and rejection requirements relating
to the closing date of a new
issuance or secondary offering. DTC
would like to clarify the process
requiring a FAST Agent to confirm
or reject balance transfers
associated with the presentation,
by adding the following text to
this subsection:
``FRAC is to also be used by the
FAST Agent to confirm or reject
balances or transfers associated
with the presentation, by DTC, of
securities for a corporate action
event for the drawdown of the FAST
position on the target security and/
or an add-to-balance of position
when the entitlement security will
be FAST. Balances are to be
confirmed by the FAST Agent upon
receipt of the SCL instruction from
DTC on the effective date or the
DTC allocation date of the
corporate action or as soon as
practicable thereafter. It is the
obligation of the FAST Agent to use
FRAC to confirm the Cede &Co. FAST
Balance and process the event
according to the electronic SCL
instructions presented.'' \16\
[[Page 70703]]
In addition, a sentence in the first
paragraph of this subsection would
be revised for clarity. The
sentence states: ``Under no
circumstances will a Participant's
account be credited unless DTC's
Underwriting Department receives
closing information from the
underwriter and the Agent.'' Alt
text: It is necessary that the
closing information provided to
DTC, by each the issuer and the
agent, agree. In this regard, the
following text would be added to
the end of the sentence (after
``Agent'' and before the period):
``, and the closing information is
in agreement''.
II.B.2.c. DWAC.................... The text of this section will be
revised to create a defined term to
clarify that the term ``ADRs''
refers to American Depositary
Receipts.
II.B.4.c. (Termination of Transfer In compliance with Rule 17Ad-16 of
Agent Services). the Act, all registered transfer
agents are required to provide
written notice (``17Ad-16 Notice'')
to DTC when ceasing to perform or
assuming transfer agent services on
behalf of an Issuer or when the
transfer agent is changing its name
or address. Subsection II.B.4.c.
lists information to be included on
termination notices, as required by
DTC. Pursuant to the proposed rule
change, the OA would be revised for
technical and clarifying changes to
(i) change references to ``Transfer
Agent'' to ``transfer agent,'' (ii)
remove text indicating that the
agent must list issues for which
the transfer agent will no longer
be responsible, and replace the
text with a more succinct statement
that the notice include the
issuer's name, (iii) modify text
stating ``The name of each issuer .
. .'' to instead state ``The name
and description of each Issuer's
Security . . .''.
II.B.4.g. (Other Notices Delivered This subsection describes the
by Transfer Agents for Posting to delivery requirements for certain
LENS). notices that an Agent forwards to
DTC to post to LENS. Two existing
sentences will be revised for
clarity. These sentences state:
``In order to be posted to LENS,
the notice must be sent to
[email protected]. Hard copy
notices will not be posted to
LENS.'' In order to clarify the
text which is intended to describe
how notices must be sent by email,
these sentences would be revised
to: (i) delete ``In order for'' and
replace it with ``For a notice'',
(ii) add ``an email with'' between
``LENS,'' and ``the notice'', (iii)
add ``attached as a PDF file''
between ``the notice attached as a
PDF file'' and ``must'' and (iv)
add ``and/or notices embedded in
the body of the email'' between
``Hard copy notices'' and ``will
not be posted''.
III.B. (Notices).................. This section sets forth requirements
for Issuers and Agents provision of
notices to DTC for distribution to
Participants. In addition to
describing the information required
to be included in a notice, it
provides that the information may
be delivered to DTC by secure means
such as registered or certified
mail, overnight delivery, or email.
DTC believes that due to the time
sensitive nature of such notices
and risks of delay in delivery and
transmittal via hard copy, for
purposes of timeliness and
processing efficiency relating to
such notices, all such notices
should be sent to DTC
electronically. Therefore, the
proposed rule change would delete
provisions for hard copy delivery
and instead provide that such
notices should be sent via email or
other electronic transmission
(i.e., BMA5 or REDCAL) and remove
all references to transmittal by
telecopy.\17\
DTC would also revise a sentence
that states: ``If the party sending
the notice by telecopy or email
does not receive a telecopy or
email receipt from DTC confirming
that the notice has been received,
such party shall telephone the
respective DTC department to
confirm their receipt of the
notice.'' The proposed change would
change ``shall'' after ``party''
and before ``telephone'' with ``may
(in addition to removing references
to telecopy notice as mentioned
above).''
The proposed rule change would also
delete a parenthetical cross-
reference at the end of this
subsection that states: ``(See
Exhibit C for a summary of
important notices and required time
frames for income, redemption and
maturity, and reorganization
payments.)'' Exhibit C does not
exist, and any applicable
timeframes are included within the
main text of the OA.
III.C. (Payment Instructions)..... This section states, among other
things, that all payments must be
received by DTC in immediately
available funds and must equal the
full amount due on payable date.
However, occasionally payments are
tied to an ``effective date.''
Also, for Reorganization events, a
payment date or effective date may
not be specified, but the funds are
made available for payment at a
certain time in accordance with the
timing of a specific transaction.
To account for such varying
terminology and timing of payments,
the proposed rule change would
clarify this section to add text
to, in addition to requiring
immediate payment on ``payable
date'', payments should be made in
immediately available funds on the
full amount due on the ``effective
date'' or the date on which funds
are first made available for
payment for Reorganization events,
as applicable.
III.C.1. (Income Payment This subsection describes how income
Standards). payments must be made to DTC. The
section would be revised for
technical and grammatical changes.
It would also be revised to (i)
change a reference to ``same day
funds'' to ``immediately available
funds'' as part of the description
on how income payments must be
made, for consistency with
terminology used in III.C. (Payment
Instructions) and (ii) remove text
indicating that DTC may allow for
special arrangements in exception
to the requirement to make payment
in immediate available funds via
Fedwire. DTC believes that
accepting a special arrangement in
exception to these standards, such
as payment by check, would
introduce risk to DTC's ability to
timely pass income through to its
Participants.
III.C.2. (Redemption and Maturity Redemption and maturity payments
Payment Standards). include cash payments of principal
proceeds due to redemptions and
maturities (``Redemption and
Maturity Payments''). Such payments
must be made to DTC's Redemption
Deposit Account in accordance with
the Procedures set forth in this
subsection.
[[Page 70704]]
The second paragraph of this
subsection includes a paragraph
that states: ``DTC must receive
CUSIP-specific detail of payments,
no later than 2:50 p.m. ET. The
dollar amount associated with such
detail must correspond with the
actual dollar payment received by
3:00 p.m. ET. All Redemption and
Maturity Payments must be paid in
same-day funds prior to 3:00 p.m.
ET on the payable date. Failure to
provide timely payment to DTC could
jeopardize the same-day
distribution of these payments to
Participants and beneficial
holders.''
To clarify text relating to the
required timing of payments to DTC,
the proposed rule change would
delete ``by'' in the second
sentence after the word
``received'' and before ``3:00
p.m.'' with ``prior to.''
In addition, the proposed rule
change would make clarifying
changes to the third sentence of
the paragraph. Funds paid to DTC in
accordance with this subsection are
paid via Fedwire. Fedwire funds are
immediately available. Therefore,
the third sentence as shown above
would be revised to instead state:
``All Redemption and Maturity
Payments must be delivered to Cede
& Co., as nominee of DTC, in
immediately available funds prior
to 3:00 p.m. ET on the payable
date.''
The proposed rule change would
remove text indicating that DTC may
allow for special arrangements in
exception to the requirement to
make payment in immediate available
funds via Fedwire. DTC believes
that accepting a special
arrangement in exception to these
standards, such as payment by
check, would introduce risk to
DTC's ability to timely pass income
through to its Participants.
The proposed rule change would make
technical and conforming changes to
the third paragraph of the
subsection by (i) replacing
``payments'' with ``Redemption and
Maturity Payments,'' (ii) enhancing
readability by moving the phrase
``via Fedwire'' from one place to
another in a sentence describing
how payments should be made and
(iii) change a reference from
``same-day'' funds to ``immediately
available'' funds.
Finally, a reference in the final
paragraph of the subsection to the
``Customer Service Hotline'' would
be changed to ``Client Support
Line.'' In addition, all other
references to ``Customer Service
Hotline'' to ``Client Support
Line'' would be changed throughout
the OA.
II.C.3. (Reorganization Payment As with a change described for the
Standards). subsection directly above, this
subsection would be revised to
change references from ``same-day''
funds to ``immediately available''
funds. The subsection would also be
revised for other stylistic and
descriptive purposes without
altering the substance of the text
as well as updating an email
address supplied for submission of
inquiries relating to wire
instructions and payment
information.
The proposed change would also
remove text indicating that DTC may
allow for special arrangements in
exception to the requirement to
make payment in immediate available
funds via Fedwire. DTC believes
that accepting a special
arrangement in exception to these
standards, such as payment by
check, would introduce risk to
DTC's ability to timely pass income
through to its Participants.
III.D. (Additional Payment This subsection includes a statement
Arrangements/Policies/Procedures). that ``no fees, such as wire fees,
may be deducted from any payment
due to DTC, its nominee, Cede &
Co., or its assigns.'' Because such
payments are passed through to the
beneficial owners that are entitled
to the entirety of the payment, it
is not appropriate for an agent to
charge DTC any fee in this regard.
Therefore, DTC would clarify this
provision by replacing the word
``deducted'' with ``charged to DTC;
this includes invoicing DTC a fee
or deducting a fee.''
Also, text relating to making
inquiries directs the reader to
email addresses further above in
the OA text. However, the
referenced text also includes phone
information. Therefore, the
proposed rule change would revise
the reference to email addresses to
instead refer to ``contact
information.''
III.D.3. (Post-Payable Income This would be added as a new
Adjustments). subsection to describe DTC's
existing practices regarding post-
payable income adjustments.
Adjustments can result from (but
are not limited to) changes in
rate, record date, accrual period
or payable date and any activity
tracking for stock loans, repos and
due bill fail tracking.
The subsection would provide that
DTC will agree to Agents' requests
for the reallocation of certain
misapplied, misdirected, or
miscalculated income payments
resulting in post-payable
adjustment to DTC Participants
under the following conditions:
Agent's notice to DTC
where the adjustment request
will result in a credit to DTC
Participants must be received by
DTC no later than one calendar
year from the initial payment
date;
Agent's notice to DTC
for any adjustment request which
will cause a debit-only, or
there is a portion of the
adjustment that will result in a
debit, must be received by DTC
no later than 90 calendar days
from the initial payment date;
Agent's notice to DTC
for the adjustment request is to
include the root cause
adjustment code and information
identifying issuance date,
instrument, issuer, servicer,
and calculating agent. DTC will
not process any post-payable
adjustments missing these key
details; and
In the event the Agent's
adjustment request (e.g., rate
change) resulted in an
overpayment of funds and
requires DTC to charge back
funds from DTC Participants'
accounts, in order to receive
the collect funds the Agent is
to refer to Section III(D)(4)(b)
Processing Errors, and contact
DTC's P&I Event Reconciliation
and Support (PIERS) Department
via email at
[email protected]
for further details.
[[Page 70705]]
Issuers and/or Agents wishing to
modify certain income payments
beyond the time period that DTC
will process the adjustments may do
so by obtaining a ``P&I Allocation
Register'' by emailing
[email protected] and making payment
arrangements directly with the
affected DTC participants.
For adjustments resulting from
Agent's requests to DTC to revise
rates, record dates, or payable
dates, DTC will notify Participants
at least one day prior to
processing the adjustment to
Participants' accounts when the
adjustment will be processed within
30 days of the original allocation,
and DTC will notify Participants at
least three days prior to
processing the adjustment to
Participants' accounts when the
adjustment will be processed 30
days or more after the original
allocation.
III.D.4. (Requests for Return-of This subsection provides
Funds). introductory text for provisions
that apply to instances where the
Paying Agent and/or Issuer request
the return of funds made to DTC.
The proposed rule change would
clarify that this subsection
applies to such requests as they
relate to income, redemption, or
maturity payments, as applicable. A
cross-reference to related text in
Section VI.E. (Chargeback of
Reorganization Payments) would also
be added.
III.D.4.b. (Processing Errors).... This subsection provides
instructions for agents and issuers
on how to request returns of
erroneous payments made to DTC. The
proposed rule change would clarify
that in addition to erroneous
payments, the instructions also
apply to overpayments made to DTC.
The subsection states that a return
of payment will only be made to the
account from which the payment was
received. While this provision is
intended to prevent the return of a
payment to the wrong location,
occasionally, an issuer or agent
may request that the payment be
returned to an account other than
the one that originally sent the
payment. In these instances, DTC
will send the payment to an account
designated by the agent or issuer
in a signed ``Account Designation
Letter.'' For security reasons, DTC
believes it should receive such a
signed letter with respect to all
such accounts to which payments are
sent to an issuer or agent.
Therefore, DTC would replace the
reference to payments being sent
only to the account from which the
payment was originally made, to
state that the payment will be sent
to the account named in the Account
Designation Letter from the issuer
or agent that DTC has on file.
In addition, it is DTC's experience
that the return of payments under
$100 is not cost effective for DTC
or the applicable issuer or agent,
as the cost of processing the
return could be equal to or exceed
the amount of the erroneous
payment. Therefore, DTC would add
text to this subsection to state
that DTC will only process claims
of $100.00 or greater.
III.d.4.c. (DWAC Deposit and A new subsection III.D.4.c. (DWAC
Income Payments). Deposit Income Payments) will be
added to clarify to Agents' their
existing responsibilities relating
to DWAC deposits made between a
record date and payment date.
Failure by Agents to fulfill these
responsibilities may cause
processing errors requiring
remediation in accordance with
III.d.4.b.
In this regard, the text of this new
subsection would read as follows:
``Agent is to pay DTC income
payments on payment date for record
date position. Agent is responsible
when approving a DWAC deposit after
a record date and before the
payment date to ensure the
deposited position is not included
in the Cede & Co. captured record
date position when funding DTC on
the payment date, and Agent will
make the income payment due the
depositing participant directly to
the participant. DTC has no
responsibility to make the payment
to the participant.
Agent is responsible when approving
a DWAC deposit to ensure the
deposited position has all the same
attributes of the security into
which the deposit is being made,
(e.g., accrual date or period,
record date, payment date, payment
cycle, interest rate, call feature,
put feature, maturity date). Refer
to Section II A. 1. CUSIP Number
Assignment.
Failure by Agent to follow the above
procedures could result in an
overpayment by Agent to DTC and
jeopardize the timely and accurate
payment to DTC and the same-day
distribution of these payments to
Participants and beneficial
holders. See also Section b.,
Processing Errors, above.''
IV.A. (Dividend and Income Payment The title of this section will be
Details). revised to remove the words
``Dividend and'', so that the
section will be named ``Income
Payment Details'', because
dividends are a form of income and
including ``Dividend'' in the title
is redundant. A reference to the
text of the section to dividends
and income would also be revised to
delete the word ``dividends.''.
Text would also be added to describe
that income payments include cash
dividends, interest, and periodic
principal distributions paid to
holders of record.
The section text provides that an
Issuer or Agent shall provide a
notice of dividend and income
payment information to DTC
electronically, as previously
arranged by Issuer or Agent and
DTC, as soon as the information is
available. However, if DTC does not
receive such information by a
certain time prior to when the
payment is to be made it is
possible that that payment will not
be processed within the timeframe
requested by the Issuer or Agent.
Therefore, DTC would revise the
text to remove the reference that
the notice should be provided as
soon as the information is
available, and instead include a
specific timeframe such that the
notice must be provided to
facilitate timely processing.
Specifically, the changed text
would state that the notice should
be received by DTC prior to the
payable date, but in no event later
than 3 a.m. on the payable date,
which is consistent with a
timeframe already noted in IV.A.1
of the OA with respect to notices
relating to structured securities.
In addition, DTC will add text
requiring that the electronic
notification mentioned above must
be provided either via automated
files (DCN/BMA/RedCal) or the
standard spreadsheet files (DCNLite/
BMALite/RedCalLite).
[[Page 70706]]
In addition, because the text
requires that notice be sent via
electronic submission, DTC would
remove outdated references to an
email address and a physical
mailing address.
IV.A.1. (Structured Securities)... This subsection includes the
specific information DTC requires
to be in a notice for DTC to
process a payment relating to
structured securities. The
specified information would be
revised to delete ``coupon rate,
expressed as a percentage'' as this
information is not needed by DTC to
process the payment. Also, an item
requiring the notice to include the
payment classification (e.g.,
Interest, Principal, Premium, and
Special Distribution) would be
added as this information is
necessary to accurately designate
the payment type in DTC's system.
IV.A.3. (Defaulted Issues)........ DTC would add a new subsection to
describe information needed to
process payments on issues that are
currently in a defaulted payment
status. The additional text would
read as follows:
``3. Defaulted Issues
Agent shall provide DTC with a
notice of payments on defaulted
issues. After establishing the
amount of any payment to be made on
such Securities, Agent shall send
such notice to DTC's Announcements
Department via email to
[email protected],
preferably five but no fewer than
two business days prior to the
payable or distribution date. Such
notice shall include the following
information:
Security description and
CUSIP number;
record date;
payable date; and
dividend (rate per
share) or interest rate (per
$1,000 principal amount) and the
potential tax liability,
including but not limited to
capital gains, liquidations, and
any cash liquidating
distributions.''
IV.B. (Currency Payment This section describes requirements
Provisions). relating to currency payments,
including that all income payments
must be made in U.S. dollars or
Canadian dollars, as applicable.
The section also states that
payments in other currencies must
be made directly by the Agent. The
proposed rule change would clarify
that such payments must be made
directly by the Agent to the DTC
Participants.
IV.B.2.a. (Securities Denominated This subsection provides terms for
in a Non-U.S. Currency with an Issues and Agents making payments
Option for U.S Dollar Payments). in currencies other than U.S.
dollars. The proposed rule change
clarifies that any payment in non-
U.S. currency should be made in the
currency designated in an offering
document provided to DTC. The non-
U.S. currency would be defined as
the ``Initial Currency and/or
Designated Currency.''
Because this subsection is intended
to apply to payments relating to
equity and debt instruments, DTC
would change references to such
payments from describing them as
income, redemption and maturity,
and reorganization payments and
instead refer to them as principal,
interest and dividends payments, as
the latter more broadly captures
both payment types.
The text currently provides that the
Agent is authorized by the Issuer
to make payments on its behalf. For
the purpose of confirming that the
Issuer is fully authorized to act
on behalf of the Agent in this
regard, DTC would add text to this
subsection whereby the Agent
represents that it has been
appointed by Issuer to receive and
convert designated portions of
payments into U.S. dollars.
The subsection provides, among other
things, that (i) absent any other
arrangements, any beneficial owners
that do not elect payments in a non-
US currency shall receive U.S.
dollar payments by DTC payment to
the Participants holding on their
behalf and, (ii) unless the Agent
is notified by DTC of any election
to receive non-U.S. currency
payments, all payments will be made
in U.S. dollars. To provide for
enhanced clarity in this regard,
DTC would revise the text to move
the latter statement (ii) so that
it appears in a sentence directly
after the former statement (i) as
opposed to further down the text as
is currently the case.
If payments are made by the Agent
outside of DTC, then DTC is not
part of such payment process and is
unable to confirm if the applicable
Participants have been paid. To
provide for enhanced clarity, the
proposed rule change would add the
following text in this regard:
``Agent accepts responsibility for
the Non-U.S. currency payment made
to DTC Participants, including
confirming directly to the DTC
Participants that payment has been
made. The Agent acknowledges that
DTC is unable to, and will not,
confirm whether such payments were
made to or received by DTC
Participants.''
The proposed rule change would also
make changes related to updating
terminology to align defined terms
and modify text for grammar and
readability.
IV.B.2.b. (Securities with This subsection relates to
Payments Made in Canadian Dollars Securities that may make payments
and/or U.S. Dollars). in Canadian and/or U.S. Dollars.
DTC accepts and passes through
income payments in U.S. Dollars and
will also process payments in
Canadian Dollars to the extent the
Security is eligible for DTC's
Canadian-Link Service. The proposed
rule change would revise the text
of this subsection to consolidate
language relating to the
responsibilities of DTC, Issuers
and Agents in this regard, as well
as the acceptable denominations for
payment on applicable Securities,
namely U.S. Dollars and Canadian
Dollars. The proposed rule change
also provides clarification
relating to the form and method of
payments made to DTC (depending on
whether payments are to be made in
Canadian Dollars or U.S. Dollars),
details on tax withholding to
reflect existing arrangements where
CDS serves as DTC's Tax Withholding
Agent, and notifications and
related deadlines.
[[Page 70707]]
DTC maintains an account at the CDS
Clearing and Depository Services
Inc. (``CDS'') in Canada and
Securities credited to DTC by CDS
are onward credited by DTC to
Participants. As Securities may
transfer between CDS and DTC
regularly, it is necessary that the
records of the Agent and DTC agree
on record date so that the DTC
position in the Security is in
balance with the records of the
Agent. In this regard, the proposed
rule change would add text relating
to the applicable process necessary
for such balancing to occur timely.
Specifically, the added text would
state that the Agent must confirm
via FRAC the Securities Control
Listing (SCL) by 6:00 p.m. ET on
the record date or the date
requested by DTC.
IV.B.2.b.3. (Securities DTC does not process non-U.S.
Denominated in a Non-U.S. currency (other than Canadian).
Currency without an Option for This subsection provides
U.S. Dollar Payments). requirements on how such payments
should be made by the Agent outside
of DTC. The proposed rule change
would clarify the text relating to
the obligations for the Agent in
this regard and clarifying that the
Agent is solely responsible to
ensure such payments are made to
Participants. This proposed change
would provide that DTC shall bear
no responsibility with respect to
such Non-U.S. currency payments,
and note that DTC is unable to
confirm whether such payments were
made to or received by DTC
Participants.
IV.C.2. (Reduction of Payment on This subsection provides that a
Treasury Shares or Repurchased Participant that holds treasury
Debt Securities (for Cash shares or repurchased debt
Dividend or Interest Payment). securities (i.e., issuer buy-back)
at DTC on the record date for a
cash dividend or interest payment
shall submit an instruction through
the Corporate Actions Web (``CA
Web'') to reduce its entitlement to
the payment by the amount
attributable to such treasury
shares or repurchased securities.
If the Participant does not submit
such instruction within a
designated timeframe, then the
Agent shall provide to DTC a notice
of reduction in the dividend or
interest payment amount due DTC
because of treasury shares or
repurchased debt securities held on
deposit by DTC on the record date.
With respect to each Participant
with a reduced entitlement, the
Agent is responsible to ensure that
the applicable Participants submit
a confirmation letter providing
details relating to the reduction.
The proposed rule change would
clarify, that while it is the
Agent's responsibility to ensure
that each Participant submits a
confirmation letter, it is the
responsibility of the Participant
to provide the letter to DTC. For
the sake of clarity, the proposed
rule change would also consolidate
a list of the contents and
requirements that relate to the
required letter.
IV.D.1.a. (Voluntary Dividend This subsection describes conditions
Reinvestment and Securities with for an Issuer's securities to
an Automatic Dividend participate in the DTC Dividend
Reinvestment (with an option to Reinvestment Program. The DTC
elect a cash dividend). Dividend Reinvestment Program
allows Participants to reinvest
income payments for additional
securities. The DTC Dividend
Reinvestment Program also includes
an opt-out feature, where income
payments on certain issues have
been automatically reinvested into
securities and Participants could
instruct to receive cash instead.
For an issue to participate, the
Issuer's Agent, acting as the
Issuer's Dividend Reinvestment Plan
Administrator, must complete and
sign DTC's Dividend Reinvestment
Letter of Agreement (reprinted on
Agent's letterhead). This Dividend
Reinvestment Letter of Agreement
details the terms agreed upon by
the Agent for the processing of
reinvestment instructions through
DTC. The subsection includes the
following statement: ``The Agent
must provide a written request to
DTC for all Securities to be
included in DTC's DRP. DTC may
refuse to make eligible certain
issues if Agent has a record of
failing to comply with such
arrangements.'' DTC proposes to
delete this statement as it is
redundant because the provision of
the letter of agreement constitutes
the writing, and it is intuitive
that an Agent would need to comply
with the agreement for its issues
to be added to the program.
The text would also be modified to
remove a reference to right fax as
a method for Agents to submit
dividend reinvestment instructions.
IV.D.2. (Stock/Pay-in-Kind This subsection contains information
(``PIK'') Distributions to and requirements relating to a PIK,
Holders of Record). which is a distribution that pays
additional shares of a security
that the payment relates to. Text
in this subsection relating to
stock distributions would be
revised for technical and
clarifying changes for readability
without altering its substance or
meaning.
A sentence in the text relating to a
PIK on a bond issue currently
states: ``If the new denomination
of the new bond is different from
the denomination of the Original
Bond (i.e., the minimum
denomination and/or the increment),
then the Original Bond denomination
(e.g., $1,000 by $1,000) is to be
changed to reflect the denomination
of the new bonds (e.g., $1000 by
$1.00) for the remainder of the
Original Bond's term.'' The
proposed rule change would modify
this sentence to add the following
words at the end of this sentence
before the period: ``or until all
baby bond positions are
eliminated.'' This sentence will
also be moved to another paragraph
in the text for enhanced clarity
and flow. In addition, text will be
modified for consistency with
respect to defined terms.
[[Page 70708]]
IV.D.2.a. (Fractional Entitlements This subsection discusses the
in Cash or Additional Roundup processing of fractional
Shares). entitlements on a stock
distribution such as a stock split,
stock dividend, or pay-in-kind
distribution. The section states
that DTC does not support the
distribution of fractional shares
of securities and lists the
acceptable forms of fractional
entitlements that may be processed
through DTC, namely cash-in-lieu of
fractions (``CIL'') and roundup
shares. CIL pays the cash value of
fractional shares that would
otherwise be distributed. Roundup
shares provide for issuers and
their agents to round the amounts
of shares distributed to the next
whole number. The section provides
those fractional entitlements are
to be computed by the agent at the
Participant level or beneficial
owner level and provides
instructions relating to providing
DTC with such payments. Pursuant to
the proposed rule change, the OA
text would add a clarification that
such information on fractional
entitlements should not be
calculated at the Cede & Co. level
only. An issuer and their Issuer
and their Agent when paying CIL of
fractions or additional roundup
shares are to calculate and pay
such entitlement down to the
beneficial owner level when the
event notification specifically
refers to fractional entitlements
being calculated at the shareholder/
beneficial owners level, however,
if the timing of the event
precludes providing the opportunity
for participants to identify and
receive payment calculated at the
beneficial owner level, or it is
not specified in the event, then
calculations can be done at the DTC
participant level. Fractional
entitlements should not be
calculated at the Cede & Co. level
only.
The proposed rule change would also
make technical and clarifying
changes to the text of this
subsection relating to Participant
instructions collected at the
beneficial owner level and update a
mailing address.
IV.D.2.b. (Restricted Distribution This subsection would be modified to
Shares Issued). remove a cross-reference to
``Section VI(A), Standards for
Voluntary and Mandatory
Reorganizations Notices for notice
instructions.)'' This reference is
misplaced and not relevant to the
subsection.
IV.D.3. (Reduction of Payment on Treasury shares are owned by the
Treasury Shares (for Stock issuer and not entitled to receive
Dividend Payments). distributions. If a Participant
holds any Treasury shares, the
Participant must notify DTC via a
confirmation letter regarding the
treasury shares it holds so that
the Participant's entitlement will
be reduced in relation to the
treasury shares it holds. The
proposed rule change would revise
the text to clarify that the
confirmation letter is only
required of ``applicable
Participants'' and that an agent
will facilitate obtaining the
letter from Participants. The
proposed change would also
consolidate a list of information
required to be included in such
letters so that all the elements of
the letter are included in one list
rather than two, as the OA
currently reads.
The change would also remove a
requirement that the Participant
affix its medallion signature
guarantee stamp to the letter.
Text would also be added to refer
the reader to an email address to
contact to obtain a template of the
confirmation letter.
V.A. (Redemptions, Advance This section sets forth certain
Refundings, and Calls Inclusive requirements relating to
of Sinking Funds and Mandatory redemptions of securities. An
Redemptions). issuer may conduct its redemptions
pro-rata (distributed as an equal
percentage across all holders) or
by lottery (whereby DTC randomly
selects holders whose securities
will be redeemed). Once an issuer
uses either a pro-rata process or
the lottery process, future
redemptions must be made using the
same process. Pursuant to the
proposed rule change, this section
would be clarified by adding the
following text after a sentence
that states that DTC cannot support
pro-rata lottery redemptions: ``In
addition, once a security starts
paying principal via lottery or pro-
rata pass-through of principal,
future principal payments must be
made using the same payment method.
Securities must not use both
lottery and pro-rata pass through
methods of paying principal. Pro-
rata pass-through of principal must
not be used for securities that
offer ``pay-in-kind''
distributions.''
The proposed rule change would move
text relating to eligibility of new
issues that contain provisions for
monthly optional redemptions from
this Section to a new subsection
I.C.7. (Monthly Optional
Redemptions). The specific text to
be moved states: ``DTC will
consider for eligibility a new
issue of securities where the
issuance is registered under the
Securities Act and containing
provisions for monthly optional
redemptions by the Issuer only if
the issue is in book-entry ``BEO''
format and DTC has received an
executed LOR prior to closing. (See
Section (I)(B), Documentation).''
This text is a more logical fit to
be included under Section I. of the
OA as Section I. covers securities
eligibility.
Text would also be revised to delete
a provision relating to
notifications under this subsection
that states that a ``second''
redemption notice shall be sent to
DTC in a secure fashion within 60
calendar days if action is required
and if DTC has not acted on the
first notice, as it would be
redundant to require such a second
notice to be sent.
The text would also be revised to
delete text that states that an
Agent's receipt of securities and
redemption presentment
documentation from DTC may be
confirmed to DTC by using DTC's
Participant Browser Service
(``PBS'') function Redemption
Payment Summary Return. Paying
agents on the PWP program shall
send their confirmations via email
at [email protected] using the
format provided by DTC. This
confirmation verifies receipt of
the redemption presentment and
confirms intent to pay DTC, on the
payable date by 3:00 p.m. ET, the
value stated in the presentment
documentation, provided the item is
funded. Agent shall notify DTC
immediately via email at
[email protected] when
discrepancies between the
securities and redemption
presentment documentation and the
Agent's records are identified.
This text is unnecessary as such
information is delivered
electronically and as such a
confirmation would not be required.
[[Page 70709]]
The proposed rule change would also
clarify that in addition to other
methods described in this section,
instructions relating to
redemptions may be sent to DTC
using a supported automated feed,
such as REDCAL, DCN or BMA, or
using an appropriate DTC formatted
Microsoft Excel spreadsheet.\18\
Finally, the subsection would be
revised to for other technical and
clarifying changes to the text.
V.A.1. (Notice of Recission)...... From time to time, an issuer will
seek to rescind a redemption event.
DTC requests information and
documentation to process the
recission. To enhance clarity
relating to this process, DTC would
add a new subsection V.A.1. (Notice
of Recission) that sets forth the
information and documentation that
DTC needs to be able to process the
recission. In this regard, the new
subsection would state:
``To notify DTC of a rescinded
redemption event, Issuer or Agent
must utilize DTC's automated file
or email all related documents to
[email protected],
and the notice shall include the
following:
Security description and
CUSIP number(s)
statement that the
redemption/refunding is rescind/
cancel;
amount of the redemption
or refunding being rescinded;
Publication Date of any
related notices;
Redemption date of event
being rescinded;
Redemption Agent's name
and address; and
Administrator's contact
information.
Recission notice requests to DTC 30
days or more after the Redemption
Date will only be accepted and
processed when the Agent has
provided a DTC debit request letter
from each DTC Participant paid in
the redemption. The letter is to
include the DTC indemnification
statement and medallion stamp.
(Note: The authorized signer of the
medallion stamp must be a different
party than the signer of the
letter.) To request a letter
template, please contact
[email protected].''
V.A.2. (Notice of Revision)....... From time to time, an issuer may
seek to revise a pending redemption
event. DTC requests information and
documentation to process the
revision. To enhance clarity
relating to this process, DTC would
add a new subsection V.A.2. (Notice
of Revision) that sets forth the
information and documentation that
DTC needs to be able to process the
revision. In this regard, the new
subsection would state:
``To notify DTC of a revision to a
redemption announcement, such as
called amount, redemption date, or
publication date, Issuer or Agent
shall send a notice to DTC
specifying:
Security description and
CUSIP number(s);
the redemption notice is
revised from the prior notice
and clearly indicates the
revised information (e.g.,
called amount, redemption date,
pub date);
Amount of the redemption
or refunding being revised;
Publication date of the
notice;
Redemption date of event
being revised;
Redemption Agent's name
and address; and
Administrator's contact
information.
Revision notices requests to DTC 30
days or more after the Redemption
Date which increase the called
amount will not be accepted. A new
notice with a current Redemption
Date will be required. Interest
must be paid up to the new
Redemption Date.
Revision notice requests to DTC 30
days or more after the Redemption
Date which decrease the called
amount will only be accepted and
processed when the Agent has
provided a DTC debit request letter
from each DTC Participant paid in
the redemption. The letter is to
include the DTC indemnification
statement and medallion stamp.
Note: The authorized signer of the
medallion stamp must be a different
party than the signer of the
letter.) To request a letter
template, please contact
[email protected].''
V.A.3. (Notice of a Security DTC's Null/Void Worthless Letter
Declared ``Null, Void and template provides agents with the
Worthless''). required verbiage to initiate a
mandatory corporate action that
authorizes DTCC to delete/cancel a
participant position on its books
and records.\19\ The letter \20\ is
available for download on DTCC's
website and contains the required
indemnification language to confirm
that the securities are deemed
null, void, and worthless, and that
there will be no future payments.
Pursuant to the proposed rule
change, DTC would add a new
subsection V.A.3. to clarify that
the template letter should be used
if a Security will not make a final
paydown/redemption and the agent or
issuer/agent intends to have the
Security removed from the books and
records. The new subsection would
state the following:
``In the event a security will not
make a final paydown/redemption, as
may be the case with a structured
security, or in the event that a
security is being or has been
cancelled pursuant to a bankruptcy,
court order, or other similar
circumstance and is therefore
worthless, the Issuer, Trustee or
Agent must instruct DTC to remove
the position from DTC's books and
records on the basis that the
security is null, void, and
worthless, that all interests in
the security have been cancelled,
and that there will be no further
payments. The Issuer, Trustee or
Agent instruction to DTC must be in
the form of the ``Null, Void, and
Worthless'' (``NVW'') letter
template available on the DTCC's
website at https://www.dtcc.com/settlement-and-asset-services/agent-services/corporate-action-information-for-agents and must be
emailed to the applicable email
address as set forth in the
following paragraph. The letter,
including an indemnification of
DTC, must not be altered or edited.
[[Page 70710]]
Issuer, Trustee or Agent shall email
the completed and signed NVW letter
for a security not making a final
paydown/redemption to
[email protected].
Issuer, Trustee or Agent shall send
the completed and signed NVW letter
to DTC for convertible securities,
warrant or rights deemed null,
void, and worthless to
[email protected]. Issuer, Trustee or Agent
shall send the completed and signed
NVW letter to DTC for other event
types to
[email protected].
DTC reserves the right to request
revised or additional documentation
from the Agent, Issuer or Trustee
as DTC deems necessary or
appropriate.''
V.A.4. (to be renumbered from Considering the proposal to add the
V.A.1.) (Pro Rata Pass-Through new subsections under Section V.A.,
Distributions of Principal). as described above, current Section
V.A.1. will be renumbered as V.A.4.
This subsection provides
requirements for notification to
DTC and processing for pro rata
pass-through distributions of
principal. The subsection will be
updated to clarify that such a pass-
through is referred to as a ``final
pay-down'' as opposed to a ``pay-
down'' and adjust a related
reference accordingly. The text of
the subsection would also be
revised for clarity and readability
and to add that in addition to
email, notification of a final pay-
down can be provided to DTC via
BMA5.
V.A.5. (to be renumbered from Considering the proposal to add the
V.A.2.) (Partial Redemptions for new subsections under Section V.A.,
Auction Rate Securities (``ARS'') as described above, current Section
and Requests for ARS Lottery V.A.2. will be renumbered as V.A.5.
Results. Also, a reference to the DTCC
Customer Service Hotline, which can
be called for further information
regarding instructions on
processing requirements, would be
updated to reflect the current name
of this customer support line,
which is referred to as the
``Client Support Line.''
V.A.6. (to be renumbered from Considering the proposal to add the
V.A.3.) (Redemption Notification new subsections under Section V.A.,
Exceptions). as described above, current Section
V.A.3. will be renumbered as V.A.6.
V.B.1. (Standards for Put Text would be removed that states
Notifications). ``DTC requires Agents to meet
standards for put notifications as
they apply to notifications to
depositories and to the extent that
this OA or related LOR does not
supersede them.'' This text is
redundant as the specific
provisions relating to such put
notifications are described in
detail directly below the text to
be deleted.
V.B.1.a. (Initial Notices of Puts) The text would be clarified to
indicate that email addresses must
be provided to DTC for the delivery
of put exercise instructions.
V.B.1.b. (Timing)................. This subsection on the timing of
notices to DTC would be modified to
add that DTC should be notified no
fewer than 10 days prior to payment
date for mandatory puts. This is in
addition to a stated requirement
that the notice should be sent to
DTC no fewer than 10 days prior to
the expiration of the applicable
tender period for puts with
instruction windows. Mandatory puts
would not necessarily involve an
instruction window and therefore
the existing text would not apply
to mandatory puts.
V.B.1.c. (Additional Notices)..... This subsection states a notice
requirement relating to partial
redemptions and information that
should be included in a notice. The
proposed rule change deletes a
provision that such notices should
be sent by the Issuer or Agent to
one or more nationally recognized
information services that
disseminate put notices. This is a
provision relating to a
notification that would occur
outside DTC and is not required for
DTC to process the partial
redemption.
V.B.1.d. (Warning on Envelope for This subsection contains a provision
Physical Notice Delivery). relating to notice relating to the
circumstance where a bond indenture
requires a physical notice to be
sent in connection with a
redemption. The subsection contains
a requirement that a warning should
be printed on envelopes provided to
DTC in this regard and provides an
example of such a warning and
instructions for delivery of the
notice. This subsection will be
deleted as this relates to an
obligation between an agent/issuer
and the indenture trustee for the
issue, and such notice is not
necessary to be provided to DTC for
DTC to process the event.
V.B.2.b. (Collateralized Mortgage This subsection contains a provision
Obligations (``CMOs'') and Asset- that is currently misplaced
Backed Securities (``ABSs''). relating to death redemptions,
which is an estate feature of some
bonds that provides that the bond
may be put back to the issuer as a
type of early redemption in the
event of the death of a bondholder.
The provision is misplaced and has
been moved to the section relating
to early Certificate of Deposit
(``CD'') redemption/Survivor
Options.
The proposed rule change also makes
a grammatical change to enhance
readability.
V.B.2.c. (Put ``Extendible'' This subsection sets forth notice
Issues''). requirements for issues that may be
subject to a ``put'' provision that
allows the security to be exchanged
into a new security in accordance
with the terms of the issuance. The
proposed rule change will make
technical and clarifying changes
relating to an example of such a
put (i) to modify terminology in a
parenthetical used to refer to an
extendible bond, from being
referred to as ``Extendible'' to
instead refer to it as ``the
extendible bond'' and (ii) modify
text in the example to refer to the
new bond as having a ``shortened''
maturity rather than a ``new''
maturity. The word ``as'' would
also be added to the text for the
example before modified text ``with
a shortened maturity date.''
In this regard, the existing text
subject to these modifications
currently states:
``A security subject to a ``put''
provision may be exchanged for a
new security, in accordance with
the terms and conditions of such
put, with a new maturity date
(i.e., ``Extendible'') if a holder
does not elect to retain the
position.''
The modified text would state:
``A security subject to a ``put''
provision may be exchanged for a
new security, in accordance with
the terms and conditions of such
put, as with a shortened maturity
date if a holder does not elect to
retain the position (i.e., the
extendible bond).''
The subsection would also be
modified to add an additional email
to which related confirmations must
be sent to. In addition to
[email protected], the text will
provide that
[email protected] could also
be used for this purpose.
[[Page 70711]]
V.B.2.d. (Put Bonds (Repayment The proposed rule change would shift
Options)). the location of text within the
subsection, relating to certain
notice requirements and related
late fees for put bonds, to enhance
clarity and readability. The
proposed rule change also amends
the notice requirements to remove
the option to deliver notices to
DTC using physical delivery methods
in the event email transmission is
unavailable. The proposed change
would also modify text for accuracy
of terminology.
V.B.2.e. (Early CD Redemptions/ This subsection contains provisions
Survivor Options). contained in the terms of certain
Securities relating to survivor
options which permit early
redemption of a security in the
event of the death of a bondholder
or if the bondholder is adjudicated
as incompetent.
This section is focused on the early
redemption of certificates of
deposit and MMI Survivor Options.
In this regard, the heading of this
subsection would be clarified to
reflect this focus by adding a
reference to early CD redemptions
in addition to survivor options, as
well as adding ``MMI'' before
``Survivor Options''. In this
regard, the heading reads as
``Survivor Options'' and the
modified title would read ``Early
CD Redemptions/MMI Survivor
Options''.
The text would be revised to clarify
the system functions and procedures
used for the early redemptions of
certificates of deposit that are
issued in DTC's MMI Program and
those that are not issued in the
program.
In this regard, the text would state
that Participants should use the CD
Early Redemption Request (``CERR'')
function on PTS/PBS for non-MMI CDs
to notify DTC in this regard, and
Participants should use the
``PUTS'' function on PTS for CDs
issued in the MMI program to notify
the Issuing and Paying Agent
(``IPA''). (In the MMI program,
redemptions are initiated directly
between a Participant and an IPA on
DTC's MMI platform, whereas the
Participant provides instructions
directly to DTC for other
redemption types and DTC
communicates those instructions to
the agent.
Text be updated and clarified
relating to information actions
required for Participants and
Agents to instruct and process
early redemptions.
As such the following deletions and
additions would be made.
The following text would be deleted:
``When submitting instruction via
CERR functions, hard copy
supporting documentation is not
required to be delivered to DTC
concurrently with instructions from
Participants for certain put
exercise instructions, for example,
a bond issue with a ``death put''
provision does not require the
submission of a death certificate
concurrently with an exercise
instruction, however, hard copy
documentation must follow promptly.
The presentment of the supporting
documentation to the Agent is not
monitored by DTC.
Agent shall receive the specified
Securities in accordance with DTC's
CERR procedures. Upon receipt of
payment, DTC will credit
Participant, and the Participant
shall forward the payment to the
legal representative of the named
beneficial owner.
If such Securities are structured so
that the redemption option (i.e.,
``death put'') pays holders accrued
interest, Agent must include such
accrued interest with the principal
payment which shall be calculated
from the day prior to the regular
interest payment date to and
including the day the funds are
wired to DTC. Such funds shall be
sent to the account in the manner
set forth in Section III(C)(2),
Redemption and Maturity Payment
Standards.''
The deleted text would be replaced
with the following:
``(1) Early CD Redemptions (Non-MMI)
Instruction Processing
(with supporting documentation):
For early CD redemption
instructions submitted through
CERR, DTC will provide the Agent
the instructions from
Participants, and if in addition
to the instruction the Agent
requires the Participant to
present the beneficial-owner
supporting documentation, (e.g.,
death certificate), DTC will
electronically provide to the
Agent (unless otherwise notified
by DTC) the supporting
documentation received from
Participants on the condition
the Agent meets the following
requirements:
[cir] Agent agrees to accept
the beneficial owner
documentation via email from
DTC and further agrees it
fulfills the documentation
requirement of the submission
to make the payment;
[cir] Agent can accept the DTC
email delivery in the form of
a password-protected/encrypted
email; and
[cir] Agent provides DTC a
group/business unit email
address (as opposed to an
individual employee's email
address) for the delivery of
the documentation.
If any of the above conditions
cannot be met, DTC will not provide
the Agent the supporting
documentation and Agent will be
responsible to obtain the
documentation directly from
Participants as may be needed.
Instruction Processing
(without supporting
documentation): For early CD
redemption instructions
submitted through CERR where the
event indicates supporting
documentation is not required to
complete the submission for
payment, DTC will provide the
Agent the instructions from
Participants including contact
information at the Participant
should the Agent want to obtain
the documentation at a later
time. When the event indicates
that documentation is not
required, Participants
submitting instructions will
certify that they will retain
the documentation for 30 months
from the submission should the
Agent want to obtain such
documentation.
[[Page 70712]]
Early CD Redemption
Instruction Confirmation: Agent
is required to notify DTC of any
issues with instructions
submitted to Agent, (e.g.,
invalid documentation, annual or
quarterly cap reached, lifetime
cap reached) within 5 business
days of receipt by emailing
[email protected]. For
requests in good order, Agent
will promptly inform DTC of the
anticipated payment date for
each instruction submitted to
the Agent by emailing
[email protected].
Early CD Redemption
Payments: The Agent shall remit
wire payment of early CD
Redemption to DTC and include
the CUSIP number, (e.g., CUSIP
123654AA0), and the CERR
transaction ID, (e.g.,
Transaction ID E@PF0101171216),
on the wire. For all payments,
Agent must email wire payment
details in an Excel file listing
the CUSIPs, CERR transaction
ID's, and amount to be paid. The
email should be sent to
[email protected] with the
subject of the email containing
the same transaction ID (e.g.,
Transaction ID E@PF0101171216)
contained in the wire. The
amount to be paid in the email
attached Excel file must match
the wire amount sent to DTC. If
such Securities are structured
so that the redemption option
(i.e., ``death put'') pays
holders accrued interest, (as
payment is not occurring on a
scheduled interest payment
date), Agent must include such
accrued interest with the
principal payment which shall be
calculated from the day prior to
the regular interest payment
date to and including the day
the funds are wired to DTC. Such
funds shall be sent to the
account in the manner set forth
in Section III(C)(3),
Reorganization Payment
Standards.
(2) MMI Survivor Options: IPA is to
refer to the ``Survivor Options
Puts User Guide for Agents'' for
instructions on viewing
instructions, accepting/rejecting
instructions, and responding to
withdrawal requests, and selecting
instructions for payments.''
VI.A. (Standards for Voluntary and This section provides notice
Mandatory Reorganizations standards, including timeframes and
Notices). other requirements, for the
processing of voluntary and
mandatory reorganization events.
The proposed rule change will
revise the text of this section as
follows:
1. The text of this section
currently provides in its
introductory paragraphs that
notices for mandatory
reorganization events must be
sent to DTC no fewer than five
business days prior to the
transaction (event). Voluntary
events require more time for
processing than mandatory
events, because under a
voluntary event Participants
need to submit instructions to
DTC on how the event should be
processed on their or their
customers' behalf. For a
mandatory event, such
instructions are not applicable.
This subsection currently
provides for a 10-day notice
period for voluntary events by
stating that final source
documentation must be provided
to DTC at least 10 business days
prior to the expiration of the
voluntary event, but it resides
further down in the section. The
proposed rule change would move
the text for the 10-day notice
for voluntary events to be
closer to the description of the
five-day notice period (for
mandatory events) to make it
clearer to the reader as to
which notice period applies to a
mandatory or voluntary event. In
the regard, revision would also
add text to clarify that the
five-business day requirement
set forth in this section for
notice applies with respect to
mandatory events. Text
referencing provision of
preliminary source documentation
and late notification fees that
are charged for late
notifications for voluntary
events would be moved further up
in the section for improved flow
of the text.
2. The proposed rule change would
delete the word ``distribution''
from text relating to processing
of cash in lieu of fractional
shares because this paragraph is
referring to reorganization
events, which currently states:
``the rate of distribution
(e.g., stock rate and exchange
rate), including the rate for
CIL fractions or roundup
entitlements . . .'' This is
because reorganization events do
not result in distributions, but
instead provide for entitlements
to cash or securities. In
addition, the referenced text
above would be revised to
clarify that the ``rate'' is a
``payment rate'' and clarify how
the rates are expressed for debt
and equity.
3. The proposed rule change would
add text noting that DTC does
not support the distribution of
fractional shares of
securities.\21\
4. The following note would be
added to the text:
``Important Note: If there is a
change in terms, a revised
notice must be provided to DTC
immediately upon publication.
Agent is to confirm that DTC
took the appropriate action with
the information provided, (e.g.,
extended/revised the DTC
expiration date when given a new
expiration date).''
5. The proposed rule change would
add that a notice should include
information on whether shares
issued as the result of exercise
of dissenter rights would be
issued as a certificate or in
Direct Registration Statement
format.
6. The subsection provides an
email address for submission of
notices of voluntary events. The
proposed rule change would
clarify that notices for three
of the event types listed,
namely conversions, right
exercises, and warrant exercises
should be sent to a different
email box than the email box
currently listed for all
voluntary reorganization events.
The email address currently
listed for all such events is
[email protected]. This will continue to be
a valid address for all events
listed therein except for the
three mentioned above, for which
notices should be sent to
[email protected]. In addition, text
would be added stating that
notifications pertaining to Put
events should be sent to
[email protected]. Also, a
reference to ``dutch auctions''
will be changed to ``Dutch
auctions'' to capitalize
``Dutch'' to reflect that it is
referring to a specific type of
auction.
[[Page 70713]]
7. The proposed rule change would
revise text that describes
requirements relating to events
that DTC is unable to process
and that must be paid outside of
DTC. For these events, the OA
states that details of the
related entitlement must be
provided. The revision would
modify a clause that currently
states ``Agents will accept
responsibility to make payment
directly to DTC Participants and
agree to provide DTC details of
the entitlement being allocated
to DTC Participants, including
calculations at the instruction
level at the time of the
allocation to DTC Participants
and to notify DTC that
instructed positions can be
drawn down from the DTC balance
as DTC has no ability to confirm
whether such payments were made
to or received by DTC
Participants'' to add ``if
applicable between ``including''
and ``calculations.''
8. The proposed rule change would
add wording in a sentence
relating to issues listed on an
exchange, to make a reference to
the plural ``securities'' to
also refer to the singular
``security'' so that the
applicable text would reflect
``the security or securities.''
In addition, ``cash and/or stock
merger'' would be added to
examples of transactions that
are corporate actions.
9. Pursuant to the DTC Fee
Schedule, DTC may assess fees
for the processing of a
corporate action whose structure
does not conform to DTC's
processing standards.\22\
Pursuant to the proposed rule
change, DTC would move text
describing these fees from
subsection VI.D.4. to this
section, with clarifying
modifications to clarify DTC's
discretion to establish an
appropriate fee for a given
event once notice is received by
DTC. The proposed text would
read: ``Upon receipt of a notice
and evaluation of the event/
offer details DTC may assess non-
standard corporate action
processing fees as DTC deems
appropriate to announce and
process the corporate action
event through DTC. Approval of
the fee will be required prior
to DTC committing to handling
the offer/event as well as
agreement to provide DTC with
allocation information in a
specified format (e.g.,
spreadsheet). Payment of fees is
due upon receipt of an invoice
from DTC.''
10. Revisions to this section
would also include technical
changes to clarify the text.
VI.B. (Fractional Entitlements in Section IV.D.2., described above,
Cash or Additional Roundup sets forth requirements relating to
Shares). the handling of distributions that
may result in fractional
entitlements. Reorganizations can
also result in the distribution of
fractional entitlements. The
proposed rule change would add a
new section VI.B. (Fractional
Entitlements in Cash or Additional
Roundup Shares). Such distributions
are processed similarly as
distributions that are not
associated with reorganizations.
To provide clarity in this regard,
the proposed rule change will add
the following text to this new
subsection that is like that stated
in Section IV.D.2.
Specifically, the new text would
state:
``In the event the corporate action
rate of distribution results in
fractional entitlements, Issuer
shall provide DTC one of the
following:
(a) cash in lieu (``CIL'') of
fractions or;
(b) additional roundup shares,
or;
(c) written notification to DTC
that fractional shares will be
dropped.
Important Note: DTC does not support
the distribution of fractional
shares of securities.
Fractional entitlements should not
be calculated at the Cede & Co.
level only. For mandatory corporate
action events, Issuer and their
Agent when paying CIL of fractions
or additional roundup shares are to
calculate and pay such entitlement
down to the beneficial owner level
when the event notification
specifically refers to fractional
entitlements being calculated at
the shareholder/beneficial owners
level, however, if the timing of
the event precludes providing the
opportunity for participants to
identify and receive payment
calculated at the beneficial owner
level, or it is not specified in
the event, then calculations can be
done at the DTC participant level.
For voluntary corporate action
events, the treatment of fractional
entitlements (CIL, roundup, or
dropped) must be calculated at the
Voluntary Offering Instruction
(``VOI'') level.
For CIL or additional round-up
shares, Issuer or Agent must:
(1) accept instructions from DTC to
liquidate a designated quantity of
full shares or issue additional
roundup shares to satisfy
Participant CIL/roundup
entitlements down to the beneficial
owner level. Such instructions will
be presented to Issuer or Agent on
the date agreed upon by DTC and
Issuer or Agent. Issuer or Agent
must provide DTC ample time
(preferably 5 business days after
the distribution) to collect
Participant instructions;
(2) include additional roundup
shares to DTC's overall share
entitlement;
(3) provide the CIL price to DTC on
the date the price is established.
Such price shall be provided to DTC
by email in accordance with the
type of corporate action to
[email protected],
[email protected], or
[email protected].
(4) wire funds for the payment of
CIL of fractional entitlements to
DTC's Reorg Deposit Account via
Fedwire using the Originator
Beneficiary Instruction ``Vol.
CIL,'' or ``Mand CIL'', as
applicable, (absent any other
arrangement between paying agent
and DTC); and
(5) upon issuance of additional
roundup shares, for securities held
in the DTC FAST program, reconcile
and confirm to DTC the FAST balance
or for Non-FAST issues deliver
physical Securities to DTC. Such
Securities shall be delivered to
DTC at: Registered Corporate Vault,
The Depository Trust Company, 570
Washington Blvd., 5th Floor, Jersey
City, NJ 07310''.
VI.C. (Processing of Specific This subsection will be renumbered
Mandatory Reorganizations). from IV. B. to IV. C. The
subsection describes processing
requirements for specific types of
mandatory corporate actions,
including an Item 1 for ``Reduction
of Payment on Treasury Shares or
Repurchased Debt Securities'' and
Item 2 for ``Mandatory Separation
of a Unit After the Closing Date.''
[[Page 70714]]
The proposed rule change would
renumber the above two items as 3
and 4, respectively and add three
additional items, including a new
Item 1 for ``Standards for
Restricted to Unrestricted
Exchanges,'' a new Item 2 for
``Standards for Maturity-for-Stock
Events,'' and Item 5 for ``MMI to
Non-MMI Exchanges.''
Item 1
The new Item 1 (Standards for
Restricted to Unrestricted
Exchanges) would provide a cross-
reference for notice and
documentation requirements relating
to exchanges of restricted shares
for unrestricted shares, including
securities that are eligible for
resale pursuant to Rule 144(b)1, in
the case of former 144A securities,
or pursuant to Section 4(1) of the
Securities Act, in the case of
former Regulation S restricted
securities. In this regard this
subsection would refer the reader
to Section I(B)(5), Instruction
Letters Regarding the Expiration of
a Restrictive Period, for the
notice and documentation
requirements.
Item 2
It is DTC's practice to require
certain notices and information
relating to mandatory events where
a security is being exchanged for
stock (as opposed to cash) in order
that it may be able to make the
entitlement security eligible and
timely facilitate the exchange. In
order to enhance clarity relating
to the notices and information
required by DTC in this regard, the
new Item 2 (Standards for Maturity-
for-Stock Events) would delineate
these standards and read as
follows:
``Issuer or Agent shall provide to
DTC notice as soon as possible but
no later than three business days
prior to the maturity date for a
Security which will make payment of
a Security or Securities upon
maturity in lieu of all or part of
the cash payment. Notice shall be
on Issuer or Agent's letterhead and
sent to DTC's Reorganization
Announcements Department by email
at
[email protected]. The email subject line shall
state the maturing CUSIP number,
the maturity date, and that the
maturity is for stock (e.g., CUSIP
123456AB, due xx/xx/xx, maturity
for stock). The notice shall
include the following:
Issuer/Security
description and CUSIP number of
the maturing security, the
maturity date, and that it is a
maturity-for-stock event;
Issuer name and CUSIP
number of the entitlement stock,
total number of shares to be
paid to DTC, and the rate of
payment. (Note: When the
maturing security is denominated
in shares, the rate of payment
is to be calculated per share,
and when the maturing security
is denominated in principal
amount, the rate of payment is
to be calculated per $1,000
principal amount.);
Participant account name
and number holding the
entitlement shares at DTC;
If a cash component is
applicable, provide the total
cash payment amount to be paid
to DTC and the cash rate; and
If an accrued interest
payment is applicable, provide
the total interest payment
amount to be paid to DTC, the
interest rate, and the number of
days of accrued interest.
In addition to the notice, (when the
entitlement Security will be
provided to DTC by a debit to a DTC
Participant's account), DTC must
receive the holding Participant's
letter authorizing DTC to reduce
their DTC position in the
entitlement security by the total
quantity of shares to which DTC's
nominee name, Cede & Co., is
entitled. In the event the
Participant's letter is sent
separately from the notice, it must
be emailed to DTC no later than
3:00 p.m. ET on the business day
prior to the maturity date to the
following email addresses:
[email protected], and [email protected].
Such letter must be on the DTC
participant's letterhead, and
include the following:
Issuer/Security
description and CUSIP number of
the maturing security;
Participant account name
and number;
Issuer/Security
description and CUSIP number of
the entitlement shares to be
reduced (i.e., debited) from the
Participant's account;
total number of
entitlement shares to be
debited;
Participant contact name
and telephone number;
Participant officer-
level signature authorizing the
number of shares to be reduced
from the Participant's account;
DTC indemnification
statement; and
medallion signature
guarantee stamp affixed to such
letter. (Note: The authorized
signer of the medallion stamp
must be a different party than
the signer of the letter)
Important: The holding DTC
Participant must ensure that the
total quantity of shares to which
DTC's nominee name, Cede & Co., is
entitled and needed to fund the
distribution is on deposit in the
holding DTC Participant's General
Free Account no later than 10:00
a.m. ET on the maturity date.
The template of the DTC Participant
(debit) letter can be obtained
contacting DTC's Reorganization
Announcement Department at
[email protected].
Further note, in the event DTC will
not be funded the total quantity of
entitlement shares due DTC, Agent
shall provide to DTC a notice of
the reduction in the shares (and if
applicable the cash component) due
to DTC by no later than 3:00 p.m.
ET on the business day prior to the
maturity date to the following
email addresses:
[email protected], and [email protected]. The
notice shall include the
information from the Agent and the
Participant(s) as described in
Section VI(C)(3), Reduction of
Payment on Treasury or Repurchased
Securities.
Delivery of the notices to an email
address other than the email
addresses set forth above does not
constitute a valid notification.
Failure to comply with any of the
notification requirements could
result in DTC being unable to
support the processing of the
event.''
[[Page 70715]]
Item 3
Renumbered Item 3 (formerly Item 1)
relates to the reduction of payment
on Treasury Shares or Repurchased
Debt Securities. This item would be
revised for to clarify and
consolidate text relating to
requirements for a confirmation
letter that the Agent must ensure
that each Participant provides to
DTC in order for DTC to timely
process the event using the
appropriate payment amount.
Item 4
Renumbered Item 4 (formerly Item 2)
relates to the mandatory separation
of a unit from an eligible security
after the closing date. The section
would be clarified by adding a note
that the unit must be DTC eligible
at the time the Unit Security was
made DTC eligible, or the unit must
become eligible in accordance with
the provisions of the OA.
Item 5
From time to time, an issuer and/or
agent may request that a security
be made eligible for DTC's Money
Market Instrument (``MMI'') Program
but later determine that it should
have been placed in DTC's non-MMI
services. DTC requires certain
documentation and information from
the Issuer and Issuing and Paying
Agent for the MMI issue in order
for it to be exchanged for a non-
MMI CUSIP.
In order to enhance clarity relating
to notices, documentation and
information required by DTC in this
regard, a new Item 5 (MMI to Non-
MMI Exchanges) would be added to
this subsection and read as
follows:
``For DTC to agree to announce and
process an MMI (CUSIP) to Non-MMI
(CUSIP) exchange the following
conditions must be met.
DTC will not make a Non-MMI CUSIP
eligible which will mature 30 days
or less from the eligibility date
nor perform an exchange from a
CUSIP that will mature 30 days or
less from the exchange date. (See I
(C) 6 Short-Term Maturities)
The Issuing Paying Agent (``IPA'')
must provide notice to DTC on IPA
letterhead by email to
[email protected] by no later than 5 business days
prior to the exchange date
acknowledging the reason for the
exchange, (i.e., security was
incorrectly issued as an MMI
CUSIP), the MMI CUSIP and the Non-
MMI CUSIP, security description,
and the rate of exchange. In
addition to the exchange notice,
the following must be provided:
[cir] notice from the Issuer
which includes the DTC
indemnification language
acknowledging the listed
CUSIP(s) were issued incorrectly
as MMI securities.
[cir] written acknowledgment from
the IPA to be billed all
eligibility and exception
processing fees for each
exchange per CUSIP
[cir] the Non-MMI CUSIP obtained
from the CUSIP Service Bureau
for each exchange and a copy of
the prospectus, offering
document, or offering statement
describing terms of the Non-MMI
security to make the new CUSIP
DTC eligible.
[cir] other documentation that
may be required by DTC's
Underwriting Dept. to determine
the eligibility of the NON-MMI
security (e.g., new Letter of
Representations for BEO issues;
and,
[cir] Dependent upon the review
of the information provided, DTC
reserves the right to request
revised or additional
documentation from the Agent and/
or Issuer as DTC deems necessary
to process the requested
exchanges.''
VI.D. (Processing for Specific This section will be renumbered from
Voluntary Reorganizations). IV. C. to become IV. D.
In addition, the proposed rule
change would clarify the timing by
which a Participant's submission of
an instruction relating to a
voluntary reorganization is
effective. In this regard, the
following note would be added to
the text of this section.
``Note to Agents and Issuers
regarding Participant instructions
for events processed through a DTC
instruction processor (i.e., ATOP,
ASOP, or APUT): By processing an
event through a DTC instruction
processor (``Instruction
Processor''), including, but not
limited to, ATOP, ASOP, or APUT,
the Agent and Issuer acknowledge
and agree that the date and time of
a Participant's submission of its
instruction to DTC (as reflected in
the Transaction ID of the completed
transaction) is deemed to be the
date and time of the Agent's
receipt of the instruction and, if
applicable, the tendered
securities. By way of example, but
without limitation, for purposes of
determining the timeliness of a
Participant's instruction and
tender in connection with an event,
the Participant's instruction is
deemed to have been timely received
by, and, if applicable, the
securities timely tendered to, the
Agent when the date and time of the
submission of a Participant's
instruction to DTC (as reflected in
the Transaction ID of the completed
transaction) is prior to the
applicable cutoff/expiration date
and time, even if the transaction
does not complete until after the
applicable cutoff/expiration date
and time for the event.''
VI.D.2. (Mortgage-Backed This subsection would be removed
Securities with Monthly Early from the OA as it is redundant to
Redemption Features). language already included relating
to Puts.
VI.D.2. (Rights Offers (Use of This subsection would be renumbered
DTC's Automated Subscription from IV.D.3 to IV.D.2.
Offer Program (``ASOP'')). This subsection would also be
modified to modify the sentence
that states: ``In the case of
rights offers, DTC's ASOP
procedures and systems must be
utilized to process subscription
exercise activities, including the
submission of instructions for
basic subscriptions, the exercise
of step-up and oversubscriptions,
sales of rights, and notices of
guaranteed deliveries, and all
related activities.'' The change
would remove the words ``step-up
and'' from this sentence.
VI.D.3.a. (Convertible Issues/ This subsection would be renumbered
Warrants/Rights Notifications). from IV.D.4.a to IV.D.3.a.
The text of this subsection would be
revised as follows:
[[Page 70716]]
1. A reference to ``company/
agent'' would be revised to
``Issuer/Agent'' for consistency
with the term as used in the OA;
2. Text relating to notice
provisions relating to the
alteration of terms for
conversions and warrants would
be revised to move text up from
further down in the section that
reflects timeframes by which
notice to DTC is required. This
text states that DTC must be
notified in accordance with the
terms of the offering document,
to instead state that DTC must
be notified no fewer than 10
business days prior to the
effective date of such change,
or to the extent an event
``triggers'' the change (i.e.,
on short notice) then notice
must be provided to DTC
immediately, but, in any event,
no later than 24 hours after the
triggering event, and that the
Agent is to confirm receipt of
such notice to DTC. This
proposed rule change would
facilitate the provision of
information to DTC in sufficient
time for DTC to process any such
alteration in terms.
3. The email address to which
such notices should be sent
would be revised to
[email protected] to
[email protected]. The provision
would also be revised to require
such notices to be delivered by
email as opposed to email or to
a physical mailbox.
4. Text would also be revised for
clarity relating requirements
for information that must be
included in a notice provided to
DTC under this subsection and
certain notification
requirements for variable rate
entitlements would be moved to
further down in the text of the
OA to a renumbered Section
IV.D.4.c, as described below.
5. Text would be added to clarify
the requirements for an Agent to
notify DTC relating to a change
in terms affecting an expiration
date.
6. The proposed rule change would
make other technical and
clarifying changes to this
subsection with respect to
updating cross-references as
well as grammatical changes.
VI.D.3.b. (Convertible Issues/ This subsection would be renumbered
Warrants/Rights Processing). from IV.D.4.b to IV.D.3.b.
The subsection would be modified:
1. To add text moved from
IV.D.4.a. relating to
conversions with variable rate
entitlements, as described
above, and move and condense
text from further below in the
subsection that such
notification include information
as to whether a CIL entitlement
is to be paid per the
instruction with the method of
calculation and provide an
example stating ``market price
or the Volume Weighted Average
Price.''
2. To separate text in a bullet
relating to processing of a
conversion through a DTC
voluntary program so that text
relating to an agreement of an
issuer and agent relating to a
delivery instruction to debit
the balance of a security
certificate in connection with a
conversion, is separated from
text setting forth the agreement
of the issuer and agent agreeing
that any new securities
resulting from a conversion,
warrant or right exercise shall
(i) be issued as of the date on
which the conversion, warrant,
or right instruction is entered
into the DTC system and (ii)
follow with issuance occurring
no more than two business days
from the date of receipt by DTC
of the instructions and the
Agent is required to notify DTC
by 12:00 noon ET the following
day of any instructions that
have been rejected.
3. To delete text relating to CIL
entitlements, as described above
and which are replaced by the
applicable bullet described in 1
above and
4. Modify a sentence that states
``For rights offering with
oversubscriptions, proration and
rounding, Agent must agree to
utilize DTC's template for
providing payment details for
oversubscription, proration and
rounding, to add the reference
``as well as guaranteed delivery
(protect) submissions and cover
of protects'' between
``rounding,'' and ``Agent''.
VI.D.4.a. (Tender/Exchange This subsection would be renumbered
Processing). from IV.D.5.a to IV.D.4.a.
This section describes tender and
exchange processing and processing
of mergers with elections. It
requires the use of DTC's ATOP
system for such processing. The
subsection would be modified to
clarify that DTC will not process
the event if the agent is not an
``ATOP agent'' by adding the
following text:
``For DTC to support the processing
of the offer/event, Issuer's (or
Offeror's) Agent must be an
established ATOP agent with DTC
(i.e., has an on-line connection to
DTC's ATOP-automated tender offer
platform) at the time of the
announcement submission to DTC.''
Examples provided with respect to
other transaction types that ATOP
may be utilized for (at DTC's
discretion) would be modified to
expand the text from referring only
to consent solicitations (with a
fee), collection of tax withholding
rate or exemption, conversion
events where the entitlement can be
cash and collection of CIL
entitlements to also include (a)
conversion events where the
entitlement can be securities and
are subject to an extended
settlement period (which could be
in addition to or in the
alternative to conversion events
where the entitlement can be cash),
and (b) cashless warrants. The
qualification that a consent
limitation be ``with a fee'' would
also be removed, to indicate that
any collection of a consent
solicitation could be processed by
ATOP (with or without a fee (but
processing of such an event would
still subject to DTC's discretion
as previously mentioned)).
A provision stating that a Letter of
agreement (LOA) approval by an
Agent is required within 24 hours
of DTC posting to ATOP, and a
reference to applicability of
``late notification fees'' relating
to processing delays stemming from
a late approval of a LOA, would be
moved from the end of this
subsection to text higher up where
the LOA is first referenced in this
section, so that it appears in the
context of other stated
requirements relating to the LOA.
Also, the reference to ``within 24
hours'' would be modified to
instead reference ``1 business
day'' to take into consideration
instances where a deadline for an
agent's approval might otherwise
fall on a non-business day.
[[Page 70717]]
Text would also be added to clarify
the timing by which DTC must
receive certain information and
documentation relating to an
entitlement to facilitate timely
processing. In this regard, the
added text will state that the
entitlement must have a CUSIP
number and the Agent must notify
DTC of such CUSIP number assigned
to the new Securities no less than
3 business days prior to allocation
of the entitlement if security is
already DTC eligible. The added
text would also state that if the
security is not DTC eligible, the
Agent must provide all required
documentation no later than 5
business days prior to allocation
of the entitlement security for DTC
to complete the eligibility process
prior to allocation. The text would
also state that additional
eligibility processing time could
be required dependent upon the
determination of the eligibility
review and the requirement for
additional documentation, (e.g.,
legal opinion for a Non-US
security) and Issuer and Agent
shall plan accordingly.
The subsection would also be
modified to make technical and
clarifying changes to the text.
VI.D.4.c. (Altering the Terms of This subsection would be renumbered
an Offer). from IV.D.5.c. to IV.D.4.c.
This subsection provides
requirements for communication to
DTC of a change in the terms of an
offer.
The text includes that all
extensions to an offer must be
provided to DTC via email ``by noon
on the day following the expiration
date of the event and if
applicable, shall include any and
all changes to terms of the
offer.'' This provision would be
revised to add emphasis to the
timing of this deadline to add ``no
later than'' in front of ``noon.''
It is important that the Agent
confirm that its extension of an
expiration date of an offer is
accurately reflected on DTC's
records. The subsection includes
text indicating the need for an
Agent to confirm DTC's receipt of
the applicable notice via email or
by phone. Pursuant to the proposed
rule change, this text would be
clarified to state that the agent
may make this confirmation by
viewing the ``Transaction Entry End
Date'' field in ATOP. If the
information is not shown as
updated, then the Agent should
notify DTC via email or phone.
This subsection would also be
revised for technical and
grammatical changes.
VI.D.4.f. (Consents).............. This subsection would be revised for
technical and grammatical changes.
VI.E. (Chargeback of This subsection would be revised to
Reorganization Payments). add examples of the type of refunds
of payments covered by this
section.
VI.F.1. (Consents and Legal This subsection would be revised to
Notices). make technical changes, including
updating to reflect the elimination
of hard copy delivery of notices.
VI.F.2. (Security Position Reports This section describes how issuers,
(``SPRs''). trustees and authorized third
parties may access security
position reports (``SPRs''). This
subsection would be revised to
clarify and consolidate text and
make technical changes relating to
the requirements relating SPRs,
including with respect to how SPRs
are accessed and how third parties
may be authorized to obtain and
maintain access reports. The
proposed rule change would also add
contact information for support
resources relating to SPRs.
VI.F.3. (Shareholder Meetings).... This subsection describes processes
relating to the announcement of
shareholder meetings and issuance
of omnibus proxies.
The following text would be added to
this subsection:
``Issuers and Agents are advised
that in the event a voluntary offer
(e.g., tender) at DTC is active on
the record date of the meeting
announcement and a Participant's
instructed position is in the
contra-CUSIP on record date, it
will be added to that Participant's
record date position in the target
CUSIP (i.e., issuer's security) for
purposes of the omnibus proxy and
the accompanying SPR. If the active
voluntary offer is being made by
the Issuer (as opposed to a third-
party) and the Issuer, in
accordance with the terms of its
voluntary offer, wants DTC to
exclude the instructed positions of
Participants in the contra-CUSIP
from the omnibus proxy and
accompanying SPR, the Issuer or
their Agent must contact DTC, at
least 5 business days before the
record date for the meeting by
emailing DTC at
[email protected]. DTC
can require indemnification from
the Issuer to take such action.''
The text would be updated to include
that a shareholder meeting
announcement should include the
``CUSIP number of the issuer's
security'' in addition to other
information fields already listed.
Text saying that the ``company
name'' field would also be updated
to read ``issuer/company name''.
This subsection would also be
revised to make technical changes,
including, but not limited to,
relating to language hardcopy
delivery and move text within the
subsection for enhanced
readability.
VII. Additional Operational This section would be revised to
Requirements for Variable-Rate reflect that delivery of
Demand Obligations (``VRDOs''). instructions and notices should be
sent to DTC electronically rather
than via physical delivery.
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\9\ See Rule 5, supra note 6.
\10\ Pursuant to the Rules, the term MMI Program means the
Program for transactions in MMI Securities, as provided in Rule 9(C)
and as specified in the Procedures. See Rule 1, Section 1, supra
note 6.
\11\ Pursuant to the Rules, the term (i) ``MMI Issuing Agent''
means a Participant, acting as an issuing agent for an issuer with
respect to a particular issue for MMI Securities of that issuer,
that has executed such agreements as the Corporation shall require
in connection with the participation of such Participant in the MMI
Program in that capacity, and (ii) ``MMI Paying Agent'' means a
Participant, acting as a paying agent for an issuer with respect to
a particular issue of MMI Securities of that issuer, that has
executed such agreements as the Corporation shall require in
connection with the participation of such Participant in the MMI
Program in that capacity. See Rule 1, supra note 6.
\12\ Eligibility for inclusion in the MMI Program covers
Securities that are money market instruments, which are short-term
debt Securities that generally mature 1 to 270 days from their
original issuance date. MMI Securities include, but are not limited
to, commercial paper, banker's acceptances and short-term bank notes
and are issued by financial institutions, large corporations, or
state and local governments. Most MMI Securities trade in large
denominations (typically, $250,000 to $50 million) and are purchased
by institutional investors. Eligibility for inclusion in the MMI
Program also covers medium term notes that mature over a longer
term.
\13\ See Rule 5, supra note 6.
\14\ See Rule 1, supra note 6.
\15\ DTC's FAST program allows an Agent which is an approved
FAST Agent to act as custodian for DTC and increase or decrease the
amounts of a balance certificate representing Securities eligible
for DTC book-entry services. See OA Section II.B.a. (FAST), supra
note 5.
\16\ A SCL, or Shipment Control List, is a form generated by DTC
that lists identifying information about a shipped security
certificate, including the number of shares or other interests,
CUSIP number, and dollar value. An SCL serves as a manifest for a
transfer agent receiving security certificates from DTC. See OA
Section II.B.a. (FAST), supra note 5.
\17\ The BMA5 and REDCAL are automated system to system files
provided by agents that contain rate and announcement information
for distributions and redemptions.
\18\ The BMA, DCN and REDCAL are automated system to system
files provided by agents that contain rate and announcement
information for distributions and redemptions.
\19\ See DTCC's website at https://www.dtcc.com/settlement-and-asset-services/agent-services/corporate-action-information-for-agents.
\20\ See Null/Void/Worthless Letter temple, available at https://www.dtcc.com/-/media/Files/Downloads/Settlement-Asset-Services/agent-services/Null-Void-Worthless-Letter-Temp.docx.
\21\ See Securities Exchange Act Release No. 75094 (June 2,
2015), 80 FR 32425 (June 8, 2015) (SR-DTC-2015-007).
\22\ See Guide to the DTC Fee Schedule, available at https://www.dtcc.com/-/media/Files/Downloads/legal/fee-guides/DTC-Fee-Schedule.pdf at 7.
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[[Page 70718]]
2. Statutory Basis
Section 17A(b)(3)(F) of the Act \23\ 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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\23\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------
The proposed rule changes are also designed to be consistent with
Rule 17Ad-22(e)(23) of the Act,\24\ which was recently adopted by the
Commission.\25\ 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-
related 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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\24\ 17 CFR 240.17Ad-22(e)(23).
\25\ 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 received or solicited any written comments relating to
this proposal. If any written comments are received, they would be
publicly filed as an Exhibit 2 to this filing, as required by Form 19b-
4 and the General Instructions thereto.
Persons submitting comments are cautioned that, according to
Section IV (Solicitation of Comments) of the Exhibit 1A in the General
Instructions to Form 19b-4, the Commission does not edit personal
identifying information from comment submissions. Commenters should
submit only information that they wish to make available publicly,
including their name, email address, and any other identifying
information.
All prospective commenters should follow the Commission's
instructions on how to submit comments, available at https://www.sec.gov/regulatory-actions/how-to-submit-comments. General
questions regarding the rule filing process or logistical questions
regarding this filing should be directed to the Main Office of the
Commission's Division of Trading and Markets at
[email protected] or 202-551-5777.
DTC reserves the right to not respond to any comments received.
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) \26\ of the Act and paragraph (f) \27\ of Rule 19b-4
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.
---------------------------------------------------------------------------
\26\ 15 U.S.C. 78s(b)(3)(A).
\27\ 17 CFR 240.19b-4(f).
---------------------------------------------------------------------------
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 [email protected]. Please include
file number SR-DTC-2023-010 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549.
All submissions should refer to file number SR-DTC-2023-010. 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 website (https://www.sec.gov/rules/sro.shtml). Copies of the
[[Page 70719]]
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 website 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 a.m. and 3 p.m.
Copies of the filing also will be available for inspection and copying
at the principal office of DTC and on DTCC's website (https://dtcc.com/legal/sec-rule-filings.aspx). Do not include personal identifiable
information in submissions; you should submit only information that you
wish to make available publicly. We may redact in part or withhold
entirely from publication submitted material that is obscene or subject
to copyright protection. All submissions should refer to File Number
SR-DTC-2023-010 and should be submitted on or before November 2, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\28\
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\28\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-21945 Filed 10-11-23; 8:45 am]
BILLING CODE 8011-01-P
