Notice2023-21945
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)
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
October 12, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 88 Issue 196 (Thursday, October 12, 2023)</title>
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[Federal Register Volume 88, Number 196 (Thursday, October 12, 2023)]
[Notices]
[Pages 70700-70719]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-21945]
[[Page 70699]]
Vol. 88
Thursday,
No. 196
October 12, 2023
Part II
Securities and Exchange Commission
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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.
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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 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\
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\5\ Available at http://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 <a href="http://www.dtcc.com/legal/rules-and-procedures.aspx">http://www.dtcc.com/legal/rules-and-procedures.aspx</a> and the OA, supra note
5.
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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.
(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:
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\7\ See supra note 6.
\8\ See supra note 5.
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OA section Revision
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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 <a href="/cdn-cgi/l/email-protection#94e1e3f7fbe6e4f8fbe6d4f0e0f7f7baf7fbf9"><span class="__cf_email__" data-cfemail="592c2e3a362b2935362b193d2d3a3a773a3634">[email protected]</span></a> and
<a href="/cdn-cgi/l/email-protection#63150c0f160d1702111a11060c1104020d0d0c160d00060e060d171023071700004d000c0e"><span class="__cf_email__" data-cfemail="8ff9e0e3fae1fbeefdf6fdeae0fde8eee1e1e0fae1eceae2eae1fbfccfebfbececa1ece0e2">[email protected]</span></a>.
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 <a href="/cdn-cgi/l/email-protection#cbbebca8a4b9bba7a4b98bafbfa8a8e5a8a4a6"><span class="__cf_email__" data-cfemail="671210040815170b081527031304044904080a">[email protected]</span></a> and
<a href="/cdn-cgi/l/email-protection#573a363933362338252e253238253036393938223934323a3239232417332334347934383a"><span class="__cf_email__" data-cfemail="9af7fbf4fefbeef5e8e3e8fff5e8fdfbf4f4f5eff4f9fff7fff4eee9dafeeef9f9b4f9f5f7">[email protected]</span></a>. 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
<a href="/cdn-cgi/l/email-protection#2e7a6f7d4b5c58474d4b5d6e4a5a4d4d004d4143"><span class="__cf_email__" data-cfemail="217560724453574842445261455542420f424e4c">[email protected]</span></a>. 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:
<bullet> 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;
<bullet> 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;
<bullet> 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
<bullet> 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
<a href="/cdn-cgi/l/email-protection#f183948584839f9e979e8794838190889c949f8582b195859292df929e9c"><span class="__cf_email__" data-cfemail="6012051415120e0f060f1605121001190d050e141320041403034e030f0d">[email protected]</span></a>
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
<a href="/cdn-cgi/l/email-protection#cd8ca3a3a2b8a3aea8a0a8a3b9be9facb9a88ea5aca3aaa89fa8bcb8a8beb9be8da9b9aeaee3aea2a0"><span class="__cf_email__" data-cfemail="8bcae5e5e4fee5e8eee6eee5fff8d9eaffeec8e3eae5eceed9eefafeeef8fff8cbefffe8e8a5e8e4e6">[email protected]</span></a> 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
<a href="/cdn-cgi/l/email-protection#412528372825242f2525242720342d353120382c242f353201253522226f222e2c"><span class="__cf_email__" data-cfemail="16727f607f7273787272737077637a6266776f7b7378626556726275753875797b">[email protected]</span></a>,
preferably five but no fewer than
two business days prior to the
payable or distribution date. Such
notice shall include the following
information:
<bullet> Security description and
CUSIP number;
<bullet> record date;
<bullet> payable date; and
<bullet> 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 <a href="/cdn-cgi/l/email-protection#5f393e2c2b2f3e261f3b2b3c3c713c3032"><span class="__cf_email__" data-cfemail="0a6c6b797e7a6b734a6e7e696924696567">[email protected]</span></a> 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
<a href="/cdn-cgi/l/email-protection#9defedeef9f4eefeeff8edfcf3fef4f8eeddf9e9fefeb3fef2f0"><span class="__cf_email__" data-cfemail="8bf9fbf8efe2f8e8f9eefbeae5e8e2eef8cbefffe8e8a5e8e4e6">[email protected]</span></a> 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
<a href="/cdn-cgi/l/email-protection#42302726272f32362b2d2c2c2d362b242b2123362b2d2c02263621216c212d2f"><span class="__cf_email__" data-cfemail="60120504050d1014090f0e0e0f14090609030114090f0e20041403034e030f0d">[email protected]</span></a>,
and the notice shall include the
following:
<bullet> Security description and
CUSIP number(s)
<bullet> statement that the
redemption/refunding is rescind/
cancel;
<bullet> amount of the redemption
or refunding being rescinded;
<bullet> Publication Date of any
related notices;
<bullet> Redemption date of event
being rescinded;
<bullet> Redemption Agent's name
and address; and
<bullet> 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
<a href="/cdn-cgi/l/email-protection#f1839495949c8185989e9f9f9e85989798929085989e9fb195859292df929e9c"><span class="__cf_email__" data-cfemail="c3b1a6a7a6aeb3b7aaacadadacb7aaa5aaa0a2b7aaacad83a7b7a0a0eda0acae">[email protected]</span></a>.''
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:
<bullet> Security description and
CUSIP number(s);
<bullet> the redemption notice is
revised from the prior notice
and clearly indicates the
revised information (e.g.,
called amount, redemption date,
pub date);
<bullet> Amount of the redemption
or refunding being revised;
<bullet> Publication date of the
notice;
<bullet> Redemption date of event
being revised;
<bullet> Redemption Agent's name
and address; and
<bullet> 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
<a href="/cdn-cgi/l/email-protection#20524544454d5054494f4e4e4f54494649434154494f4e60445443430e434f4d"><span class="__cf_email__" data-cfemail="0d7f686968607d79646263636279646b646e6c796462634d69796e6e236e6260">[email protected]</span></a>.''
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 <a href="https://www.dtcc.com/settlement-and-asset-services/agent-services/corporate-action-information-for-agents">https://www.dtcc.com/settlement-and-asset-services/agent-services/corporate-action-information-for-agents</a> 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
<a href="/cdn-cgi/l/email-protection#0d7f686968607d79646263636279646b646e6c796462634d69796e6e236e6260"><span class="__cf_email__" data-cfemail="b8cadddcddd5c8ccd1d7d6d6d7ccd1ded1dbd9ccd1d7d6f8dcccdbdb96dbd7d5">[email protected]</span></a>.
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
<a href="/cdn-cgi/l/email-protection#6c0f03021a091e1f0503021f0d02081b0d1e1e0d02181f0d02020319020f09010902181f2c08180f0f420f0301"><span class="__cf_email__" data-cfemail="2e4d4140584b5c5d4741405d4f404a594f5c5c4f405a5d4f4040415b404d4b434b405a5d6e4a5a4d4d004d4143">[email protected]</span></a>. Issuer, Trustee or Agent
shall send the completed and signed
NVW letter to DTC for other event
types to
<a href="/cdn-cgi/l/email-protection#f79a969993968398858e859298859096999998829994929a92998384b793839494d994989a"><span class="__cf_email__" data-cfemail="aac7cbc4cecbdec5d8d3d8cfc5d8cdcbc4c4c5dfc4c9cfc7cfc4ded9eacedec9c984c9c5c7">[email protected]</span></a>.
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
<a href="/cdn-cgi/l/email-protection#ee9e9b9a8c81808a9dae8a9a8d8dc08d8183"><span class="__cf_email__" data-cfemail="ff8f8a8b9d90919b8cbf9b8b9c9cd19c9092">[email protected]</span></a>, the text will
provide that
<a href="/cdn-cgi/l/email-protection#621217161112100d010711110b0c0522061601014c010d0f"><span class="__cf_email__" data-cfemail="87f7f2f3f4f7f5e8e4e2f4f4eee9e0c7e3f3e4e4a9e4e8ea">[email protected]</span></a> 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)
<bullet> 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.
<bullet> 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]]
<bullet> 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
<a href="/cdn-cgi/l/email-protection#017274737768776e736e7175686e6f7241657562622f626e6c"><span class="__cf_email__" data-cfemail="e4979196928d928b968b94908d8b8a97a480908787ca878b89">[email protected]</span></a>. For
requests in good order, Agent
will promptly inform DTC of the
anticipated payment date for
each instruction submitted to
the Agent by emailing
<a href="/cdn-cgi/l/email-protection#d29196b6b7b3a6baa2a7a6a192b6a6b1b1fcb1bdbf"><span class="__cf_email__" data-cfemail="e4a7a0808185908c94919097a480908787ca878b89">[email protected]</span></a>.
<bullet> 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
<a href="/cdn-cgi/l/email-protection#c28186a6a7a3b6aab2b7b6b182a6b6a1a1eca1adaf"><span class="__cf_email__" data-cfemail="1a595e7e7f7b6e726a6f6e695a7e6e797934797577">[email protected]</span></a> 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
<a href="/cdn-cgi/l/email-protection#72041d1e071c0613000b00171d0015131c1c1d071c1117011f171c060132160611115c111d1f"><span class="__cf_email__" data-cfemail="dcaab3b0a9b2a8bdaea5aeb9b3aebbbdb2b2b3a9b2bfb9afb1b9b2a8af9cb8a8bfbff2bfb3b1">[email protected]</span></a>. 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
<a href="/cdn-cgi/l/email-protection#e2818d8c948790918b8d8c91838c8695839090838c9691838c8c8d978c81878f878c9691a286968181cc818d8f"><span class="__cf_email__" data-cfemail="abc8c4c5ddced9d8c2c4c5d8cac5cfdccad9d9cac5dfd8cac5c5c4dec5c8cec6cec5dfd8ebcfdfc8c885c8c4c6">[email protected]</span></a>. In addition, text
would be added stating that
notifications pertaining to Put
events should be sent to
<a href="/cdn-cgi/l/email-protection#b7c7c2c3d5d8d9d3c4f7d3c3d4d499d4d8da"><span class="__cf_email__" data-cfemail="d1a1a4a5b3bebfb5a291b5a5b2b2ffb2bebc">[email protected]</span></a>. 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
<a href="/cdn-cgi/l/email-protection#b6dbd7d8d2d7c2d9c4cfc4d3d9c4d1f6d2c2d5d598d5d9db"><span class="__cf_email__" data-cfemail="b4d9d5dad0d5c0dbc6cdc6d1dbc6d3f4d0c0d7d79ad7dbd9">[email protected]</span></a>,
<a href="/cdn-cgi/l/email-protection#3143545e435645545f5554434271554552521f525e5c"><span class="__cf_email__" data-cfemail="3042555f425744555e5455424370544453531e535f5d">[email protected]</span></a>, or
<a href="/cdn-cgi/l/email-protection#b2c0d7ddc0d5d1dddcc4f2d6c6d1d19cd1dddf"><span class="__cf_email__" data-cfemail="e7958288958084888991a783938484c984888a">[email protected]</span></a>.
(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
<a href="/cdn-cgi/l/email-protection#97faf6f9f3f6e3f8e5eee5f2f8e5f0f6f9f9f8e2f9f4f2faf2f9e3e4d7f3e3f4f4b9f4f8fa"><span class="__cf_email__" data-cfemail="b8d5d9d6dcd9ccd7cac1caddd7cadfd9d6d6d7cdd6dbddd5ddd6cccbf8dcccdbdb96dbd7d5">[email protected]</span></a>. 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:
<bullet> Issuer/Security
description and CUSIP number of
the maturing security, the
maturity date, and that it is a
maturity-for-stock event;
<bullet> 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.);
<bullet> Participant account name
and number holding the
entitlement shares at DTC;
<bullet> If a cash component is
applicable, provide the total
cash payment amount to be paid
to DTC and the cash rate; and
<bullet> 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:
<a href="/cdn-cgi/l/email-protection#9ff2fef1fbfeebf0ede6edfaf0edf8fef1f1f0eaf1fcfaf2faf1ebecdffbebfcfcb1fcf0f2"><span class="__cf_email__" data-cfemail="0a676b646e6b7e657873786f65786d6b6464657f64696f676f647e794a6e7e696924696567">[email protected]</span></a>, and <a href="/cdn-cgi/l/email-protection#7a171b141e1b0e150803081f15081d3a1e0e191954191517"><span class="__cf_email__" data-cfemail="1f727e717b7e6b706d666d7a706d785f7b6b7c7c317c7072">[email protected]</span></a>.
Such letter must be on the DTC
participant's letterhead, and
include the following:
<bullet> Issuer/Security
description and CUSIP number of
the maturing security;
<bullet> Participant account name
and number;
<bullet> Issuer/Security
description and CUSIP number of
the entitlement shares to be
reduced (i.e., debited) from the
Participant's account;
<bullet> total number of
entitlement shares to be
debited;
<bullet> Participant contact name
and telephone number;
<bullet> Participant officer-
level signature authorizing the
number of shares to be reduced
from the Participant's account;
<bullet> DTC indemnification
statement; and
<bullet> 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
<a href="/cdn-cgi/l/email-protection#87eae6e9e3e6f3e8f5fef5e2e8f5e0e6e9e9e8f2e9e4e2eae2e9f3f4c7e3f3e4e4a9e4e8ea"><span class="__cf_email__" data-cfemail="4c212d22282d38233e353e29233e2b2d22222339222f29212922383f0c28382f2f622f2321">[email protected]</span></a>.
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:
<a href="/cdn-cgi/l/email-protection#bbd6dad5dfdacfd4c9c2c9ded4c9dcdad5d5d4ced5d8ded6ded5cfc8fbdfcfd8d895d8d4d6"><span class="__cf_email__" data-cfemail="d2bfb3bcb6b3a6bda0aba0b7bda0b5b3bcbcbda7bcb1b7bfb7bca6a192b6a6b1b1fcb1bdbf">[email protected]</span></a>, and <a href="/cdn-cgi/l/email-protection#016c606f6560756e737873646e736641657562622f626e6c"><span class="__cf_email__" data-cfemail="711c101f1510051e030803141e031631150512125f121e1c">[email protected]</span></a>. 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
<a href="/cdn-cgi/l/email-protection#0b666a656f6a7f647972796e64796c6a6565647e65686e666e657f784b6f7f686825686466"><span class="__cf_email__" data-cfemail="deb3bfb0babfaab1aca7acbbb1acb9bfb0b0b1abb0bdbbb3bbb0aaad9ebaaabdbdf0bdb1b3">[email protected]</span></a> 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
[…truncated; see source link]Indexed from Federal Register on October 12, 2023.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.