Notice2021-26067
Self-Regulatory Organizations; The Depository Trust Company; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Make Certain Revisions and Clarifications to the Rules
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Published
November 30, 2021
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 86 Issue 227 (Tuesday, November 30, 2021)</title>
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[Federal Register Volume 86, Number 227 (Tuesday, November 30, 2021)]
[Notices]
[Pages 68004-68006]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-26067]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-93669; File No. SR-DTC-2021-016]
Self-Regulatory Organizations; The Depository Trust Company;
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change
To Make Certain Revisions and Clarifications to the Rules
November 24, 2021.
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 November 15, 2021, The Depository Trust Company (``DTC'') filed with
the Securities and Exchange Commission (``Commission'') the proposed
rule change as described in Items I, II and III below, which Items have
been prepared by the clearing agency. DTC filed the proposed rule
change pursuant to Section 19(b)(3)(A) of the Act \3\ and Rule 19b-
4(f)(4) thereunder.\4\ The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
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\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).
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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 DTC's Rules,
Bylaws and Organization Certificate (``Rules'') to (1) incorporate into
the Rules the governing law of agreements and other documents provided
to DTC pursuant to the Rules; (2) incorporate in the Rules the
affirmative undertakings that Participants currently make in onboarding
membership agreements; (3) clarify that Participants shall appoint a
duly authorized representative in connection with their membership, and
remove the requirement that DTC approve the form of power of attorney
or resolutions of the Participant's board of directors that evidences
such authorization; and (4) clarify DTC's ability to rely on electronic
signatures on agreements and other documents provided to DTC pursuant
to the Rules, as described in greater detail below.\5\
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\5\ Capitalized terms not defined herein are defined in the
Rules, available at <a href="https://www.dtcc.com/legal/rules-and-procedures">https://www.dtcc.com/legal/rules-and-procedures</a>.
Unless otherwise indicated by the context, the term ``Participant''
as used herein includes the term ``Limited Participant.''
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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.
[[Page 68005]]
(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
1. Purpose
DTC is proposing amendments that would clarify, simplify and
improve the disclosures in the Rules, primarily related to onboarding
and other membership documentation between DTC and its Participants.
DTC, along with its affiliates, National Securities Clearing
Corporation and Fixed Income Clearing Corporation, has recently
completed a review of the templates of onboarding agreements and other
documents that are provided to DTC in connection with a firm's
application for membership, and the templates of agreements and
documents Participants may provide to DTC during the course of their
membership pursuant to the Rules. In connection with this review, DTC
is proposing to make certain revisions and clarifications to the Rules.
More specifically, the proposed rule changes would (1) incorporate
into the Rules the governing law of agreements and other documents
provided to DTC pursuant to the Rules; (2) incorporate in the Rules the
affirmative undertakings that Participants currently make in onboarding
membership agreements; (3) clarify that Participants shall appoint a
duly authorized representative in connection with their membership, and
remove the requirement that DTC approve the form of power of attorney
or resolutions of the Participant's board of directors that evidences
such authorization; and (4) clarify DTC's ability to rely on electronic
signatures on agreements and other documents provided to DTC pursuant
to the Rules, as described in greater detail below.
Proposed Revisions to Rules Regarding Governing Law
DTC is proposing to revise Section 4 of Rule 1 (Definitions;
Governing Law), which currently states that the Rules are governed by
New York law.\6\ The proposed change would revise Section 4 of Rule 1
to include a statement that agreements and other documents that are
entered into between DTC and its Participants are also governed by New
York law, unless otherwise expressly provided. Currently, agreements
and other documents entered into between DTC and its Participants
either include a governing law provision or are governed by New York
law through the application of both Section 4 of Rule 1, which provides
that the rights and obligations under the Rules are governed by New
York law, and the DTC membership agreements, which provide that the
Rules (including Section 4 of Rule 1) govern the matters and
transactions between DTC and its Participants.
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\6\ Id.
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This proposed change would both clarify the governing law of the
agreements and other documents entered into between DTC and its
Participants pursuant to the Rules, and would allow DTC to simplify
those documents by removing the governing law provisions in such
documents.
Proposed Revisions To Incorporate Participant Undertakings Into the
Rules
DTC is proposing to revise Section 1 of Rule 2 (Participants and
Pledgees) to incorporate affirmative undertakings that Participants
currently make in their onboarding membership agreements.\7\ This
section currently provides that an applicant for membership with DTC
shall sign and deliver to DTC an agreement under which the applicant
would agree to the affirmative undertakings that are listed in this
Section 1 of Rule 2.\8\ These undertakings include, for example, to
abide by the Rules and be bound by all the provisions thereof, and to
pay any amounts that become payable by the Participant to DTC pursuant
to the Rules.\9\
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\7\ Section 1 of Rule 2, id.
\8\ Id.
\9\ See Sections 1(a) and (d) of Rule 2, id.
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To simplify and standardize the membership onboarding
documentation, DTC is proposing to revise Section 1 of Rule 2 to state
directly that Participants agree to each of the undertakings listed in
that section. DTC would also make an identical revision to Rule 9(D)
(Settling Banks) regarding the undertakings of Settling Banks. In
connection with this proposed change, DTC would remove these
undertakings from the template membership agreement, which already
provides that Participants are bound by the Rules.
Proposed Revisions to Requirements Related to Participants' Authorized
Representatives
DTC is proposing to revise Sections 1 and 2 of Rule 7 (Participant
Representatives), which describes Participants' requirement to appoint
an authorized representative in connection with their membership with
DTC.\10\ Currently, Section 1 of Rule 7 provides that a Participant may
designate an authorized representative that is not either a general
partner or an officer of the Participant, by either a power of attorney
or resolutions of the Participant's board of directors, and requires
such power of attorney and resolutions be in a form approved by
DTC.\11\ Section 2 of Rule 7 requires Participants to provide DTC with
the signatures of individuals who are authorized representatives for
purposes of conducting business with DTC.\12\
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\10\ Sections 1 and 2 of Rule 7, id.
\11\ Id.
\12\ Id.
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In order to simplify the onboarding membership requirements, DTC is
proposing to amend Section 1 of Rule 7 to clarify that a Participant's
representative must be duly appointed and authorized, and to remove
references to a power of attorney or resolutions of the Participant's
board of directors. The proposed change would also remove the
requirement that DTC approve the form of power of attorney or
resolutions of the Participant's board of directors that evidences the
due authorization of that representative.
Finally, DTC is proposing to remove Section 2 of Rule 7, which
includes the requirement that Participants provide DTC with the
signatures of representatives who are authorized to conduct business
with DTC.\13\ In connection with this proposed change, DTC would
renumber the remaining sections in Rule 7.
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\13\ Id.
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Proposed Revisions to Rules Regarding DTC's Reliance on Electronic
Signatures
DTC is proposing to revise Rule 26, which is currently titled
``Facsimile Signatures'' and lists the circumstances in which DTC would
rely on an electronic signature.\14\ The proposed revision to this Rule
26 would rename the rule to remove the word ``Facsimile,'' and would
also revise the rule to clarify that DTC may rely on an electronic
signature with respect to any and all agreements and other documents
delivered pursuant to the Rules. DTC would also remove reference to the
circumstances in which it would accept an electronic signature, to make
clear that DTC would do so in any circumstances. The proposed revisions
would clarify and modernize the language in Rule 26, which still refers
to outdated modes of electronic communication, such as telex, and would
align the language in this Rule to language used in the New York
Electronic Signatures and Records Act.\15\
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\14\ Id.
\15\ N.Y. State Tech. Law Sec. 304(2) (McKinney 2021).
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[[Page 68006]]
2. Statutory Basis
Section 17A(b)(3)(F) of the Act requires that the rules of DTC be
designed to, among other things, promote the prompt and accurate
clearance and settlement of securities transactions.\16\ DTC believes
the proposed changes are consistent with the requirements of Section
17A(b)(3)(F) of the Act because such changes would clarify and improve
the transparency of the Rules and would allow DTC to simplify the
membership agreements and other documentation provided to it by
Participants pursuant to the Rules.
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\16\ 15 U.S.C. 78q-1(b)(3)(F).
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More specifically, the proposed changes would make clarifications
to the Rules regarding (i) Participants' duly authorized
representatives in connection with their memberships; and (ii) DTC's
ability to rely on electronic signatures on agreements and other
documents provided to it pursuant to the Rules. The proposed changes
would also update the Rules in order to allow DTC to simplify the
onboarding and other membership agreements and documents by
incorporating in the Rules (1) the governing law of agreements and
other documents provided to DTC pursuant to the Rules; and (2) the
affirmative undertakings that Participants currently make in onboarding
membership agreements.
By enhancing the clarity and transparency of the Rules, and
allowing DTC to simplify the membership agreements and other documents,
the proposed changes would allow Participants to more efficiently and
effectively conduct their business in accordance with the Rules, which
DTC believes would promote the prompt and accurate clearance and
settlement of securities transactions. As such, DTC believes that the
proposed changes would be consistent with Section 17A(b)(3)(F) of the
Act.\17\
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\17\ Id.
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(B) Clearing Agency's Statement on Burden on Competition
DTC does not believe the proposed rule changes would impact
competition. The proposed rule changes would merely enhance the clarity
and transparency of the Rules and would simplify the documentation that
is provided to DTC by Participants pursuant to the Rules. Therefore,
the proposed changes would not affect DTC's operations or the rights
and obligations of membership. As such, DTC believes the proposed rule
changes would not have any impact on competition.
(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 will 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 <a href="https://www.sec.gov/regulatory-actions/how-to-submit-comments">https://www.sec.gov/regulatory-actions/how-to-submit-comments</a>. 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
<a href="/cdn-cgi/l/email-protection#75010714111c1b12141b111814071e100106350610165b121a03"><span class="__cf_email__" data-cfemail="0d797f6c6964636a6c6369606c7f6668797e4d7e686e236a627b">[email protected]</span></a> 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) \18\ of the Act and paragraph (f) \19\ 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.
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\18\ 15 U.S.C 78s(b)(3)(A).
\19\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#9eecebf2fbb3fdf1f3f3fbf0eaeddeedfbfdb0f9f1e8"><span class="__cf_email__" data-cfemail="c7b5b2aba2eaa4a8aaaaa2a9b3b487b4a2a4e9a0a8b1">[email protected]</span></a>. Please include
File Number SR-DTC-2021-016 on the subject line.
Paper Comments
<bullet> 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-2021-016. 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 (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for 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 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of DTC and on DTCC's website
(<a href="http://dtcc.com/legal/sec-rule-filings.aspx">http://dtcc.com/legal/sec-rule-filings.aspx</a>). All comments received
will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-DTC-2021-016 and should be submitted on
or before December 21, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
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\20\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-26067 Filed 11-29-21; 8:45 am]
BILLING CODE 8011-01-P
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