Self-Regulatory Organizations; The Depository Trust Company; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Reorganizations Service Guide To Provide for the Segregation of a Participant's Shares on Which Dissenters' or Appraisal Rights Are Asserted

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Published

March 19, 2026

Issuing agencies

Securities and Exchange Commission

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<title>Federal Register, Volume 91 Issue 53 (Thursday, March 19, 2026)</title>
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[Federal Register Volume 91, Number 53 (Thursday, March 19, 2026)]
[Notices]
[Pages 13368-13370]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-05332]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-104999; File No. SR-DTC-2026-003]

Self-Regulatory Organizations; The Depository Trust Company;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend the Reorganizations Service Guide To Provide for the Segregation
of a Participant's Shares on Which Dissenters' or Appraisal Rights Are
Asserted

March 16, 2026.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby
given that on March 9, 2026, The Depository Trust Company (``DTC'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I, II and III below, which
Items have been prepared by the clearing agency. DTC filed the proposed
rule change pursuant to Section 19(b)(3)(A) of the Act \3\ and Rule
19b-4(f)(4) thereunder.\4\ The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 CFR 240.19b-4(f)(4).
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I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change

The proposed rule change would amend the Reorganizations Guide to
(i) provide for the segregation of a Participant's shares on which
dissenters'/appraisal rights have been asserted through DTC at the
request of such Participant and (ii) make clarifying, conforming, and
other technical changes, as described below.\5\
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\5\ Capitalized terms not defined herein are defined in the
Rules, By-Laws and Organization Certificate of DTC or the DTC
Reorganizations Service Guide (``Reorganizations Guide''), each
available at <a href="http://www.dtcc.com/legal/rules-and-procedures">www.dtcc.com/legal/rules-and-procedures</a>.
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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 proposed rule change would amend the Reorganizations Guide to
(i) provide for the segregation of a Participant's shares on which
dissenters'/appraisal rights have been asserted through DTC at the
request of such Participant and (ii) make clarifying, conforming, and
other technical changes, as described below.
(i) Background
Dissenters'/appraisal rights \6\ are available to many stockholders
as a remedy when they object to the terms of proposed corporate
actions. Such actions can include, but are not limited to, a merger or
a sale of assets. Typically, dissenters'/appraisal rights with respect
to a position in a security are required by statute or regulation to be
asserted by, or with the consent of, the record owner of the position
in a security. Cede & Co., nominee of DTC, is the record owner of
securities credited to the accounts of Participants. Therefore, in
order for a beneficial

[[Page 13369]]

owner to exercise dissenters'/appraisal rights for shares of a security
credited to the Account of a Participant at DTC, a beneficial owner
would need Cede & Co., as record owner of the shares, to assert those
rights or take other action as might be required by statute or
regulation.
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\6\ Dissenters' rights refer to the statutory protections under
state corporate law that permit a shareholder who objects to certain
fundamental corporate transactions, such as mergers or
consolidations, to refuse the transaction consideration and elect to
have their shares purchased by the company. Appraisal rights are the
specific remedy within that framework that entitle a dissenting
shareholder to receive cash equal to the judicially determined fair
value of their shares, as established through the appraisal
procedures set forth in the applicable statute.
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For corporate action events with dissenters'/appraisal rights, DTC
has an established process pursuant to which a Participant, acting on
behalf of a beneficial owner, can request that Cede & Co. execute a
letter asserting dissenters'/appraisal rights (``Assertion Letter'')
with respect to shares of the subject security credited to its DTC
Account. Specifically, when a Participant wants to exercise
dissenters'/appraisal rights for shares of a security credited to its
DTC Participant Account, it submits an instruction letter to DTC via a
designated web portal referred to as the MyDTCC portal (``MyDTCC'')
requesting that DTC's nominee, Cede & Co., as holder of record of the
shares, execute an Assertion Letter, asserting dissenters'/appraisal
rights with respect to the number of shares specified by the
Participant.
After Cede & Co. executes the Assertion Letter for the
Participant's dissented position, DTC returns the letter to the
Participant via MyDTCC. Prior to the effectiveness of the corporate
action, DTC will request from the transfer agent a Direct Registration
Service \7\ Statement (``DRS Statement'') or physical certificate, as
applicable, for the amount of the Participant's dissented position,\8\
and, once received, will deliver the DRS Statement or physical
certificate to the Participant.\9\
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\7\ The Direct Registration Service (DRS) is a system that
allows investors to hold securities directly in their own name on
the books of the issuer or its transfer agent, rather than in
``street name'' through a broker or in the form of physical
certificates. Instead of receiving certificates, investors receive
account statements that evidence ownership.
\8\ Because Cede & Co. is the registered holder of the shares
and signs the Assertion Letter, the DRS Statement or physical
certificate are made out to ``Cede & Co. FBO Beneficial Owner'' or
``Cede & Co. FBO Dissented Shares.'' FBO refers to ``for the benefit
of.''
\9\ When DTC orders a DRS Statement for dissented shares or a
certificate, the transfer agent will draw down DTC's balance on its
books, but DTC will not debit the Participant until it receives the
DRS Statement or physical certificate. The Participant will in turn
deliver the statement or certificate to the beneficial owner.
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Before DTC receives the DRS Statement or physical certificate for a
Participant's dissented position, the Participant may cancel the
assertion of dissenters'/appraisal rights for some or all of its
dissented position by submitting an instruction letter to DTC, via
MyDTCC, requesting that Cede & Co. execute a letter withdrawing the
assertion of dissenters'/appraisal rights with respect to a specified
number of shares in the dissented position. After Cede & Co. executes
the withdrawal letter, DTC returns the letter to the Participant using
MyDTCC.
(ii) Proposed Changes
With respect to the assertion of dissenters'/appraisal rights,
there is a risk that a Participant may inadvertently deliver the
subject shares out of its Account as part of a separate transaction
during the period that the DRS Statement or physical stock certificate
is being delivered to DTC for onward delivery to the Participant.
To mitigate this risk, DTC proposes to amend the Reorganizations
Guide to reflect the segregation of shares subject to dissenters'/
appraisal rights. More specifically, DTC will add text to the section
of the Reorganizations Guide relating to dissenters'/appraisal rights
to state that each time Cede & Co. executes a Participant's requested
Assertion Letter, DTC will transfer the Participant's dissented
position out of the CUSIP for the issue and into a contra-CUSIP.\10\
The text will further provide that the Participant's dissented position
will remain credited to the contra-CUSIP position to segregate that
position until DTC receives the DRS Statement or physical certificate
from the transfer agent for the dissented position and delivers it to
the Participant, or the Participant cancels the assertion of
dissenters'/appraisal rights. This approach ensures that the applicable
position is not delivered out of the Participant's DTC Account through
a separate transaction.
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\10\ Contra-CUSIP numbers are generated by DTC and currently
used to segregate positions (representing instructions submitted)
for voluntary offers and put bond options. The contra-CUSIP includes
the first three digits of the issuer number as assigned to the
security to be tendered.
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In addition, DTC proposes to update the text of the Reorganizations
Guide to include a clear description of its current practice for
handling a Participant's withdrawal of dissenters'/appraisal rights.
More specifically, DTC will add text to state that if a Participant
seeks to cancel the assertion of dissenters'/appraisal rights for a
specified number of shares in its dissented position, it must complete
and submit an instruction letter to DTC via MyDTCC requesting that Cede
& Co. execute a letter withdrawing the assertion of dissenters'/
appraisal rights with respect to the shares. Once Cede & Co. executes
the withdrawal letter, DTC will return it to the Participant via MyDTCC
and will then transfer the amount of the shares subject to the
withdrawal letter out of the contra-CUSIP and back into the CUSIP for
the security.
The proposed rule change would also make other clarifying,
conforming, and technical changes including:
<bullet> text describing that the Participant instructs DTC to sign
a letter in order to assert dissenters' rights or appraisal rights
(i.e., Assertion Letter) would be clarified to state that the
Participant instructs DTC to cause Cede & Co., as nominee of DTC, to
sign the letter; and
<bullet> text stating that DTC will deliver a ``Cede'' certificate
(or in the case of DRS securities, a DRS Statement representing the
appropriate quantity of securities to the Participant) would be
clarified to (i) state that DTC delivers the certificate or statement
to the Participant, (ii) remove the imprecise reference to ``Cede''
before ``certificate'' and add clarifying language that the certificate
or the DRS Statement, as applicable, is registered to Cede & Co. FBO
Beneficial Owner or Cede & Co. FBO Dissented Shares, and (iii) add text
to reflect current practice that DTC delivers a stock power from Cede &
Co. to the Participant.\11\
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\11\ The stock power authorizes a transfer agent to transfer
ownership of the shares from the current registered holder to a new
one, in this case from Cede & Co. to the beneficial owner.
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Implementation Timeframe
DTC would implement the proposed rule change by no later than June
1, 2026. DTC would announce the effective date of the proposed changes
by an Important Notice posted to its website.
2. Statutory Basis
DTC believes the proposed rule change is consistent with Section
17A(b)(3)(F) of the Exchange Act,\12\ which, among other things,
requires that a clearing agency's rules are designed to protect
securities and funds in its custody, control, or for which it is
responsible.
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\12\ 15 U.S.C. 78q-1(b)(3)(F).
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By segregating shares subject to dissenters'/appraisal rights into
a contra-CUSIP, as outlined above, DTC helps protect the integrity of a
Participant's position by ensuring that the shares are not
inadvertently transferred out of a Participant's Account before the
corresponding DRS Statement or physical certificate is provided to the
Participant. Likewise, by providing for reversal of securities back
into the CUSIP when Cede & Co. signs a letter for the withdrawal of
dissenters'/appraisal rights, the proposed rule change ensures that
Participants can change their position

[[Page 13370]]

and enable the securities for other transactions. These changes are
consistent with DTC's obligation to protect securities under its
custody or control.
Furthermore, by incorporating procedures that formalize the current
process for withdrawing assertion of dissenters'/appraisal rights--as
outlined above--DTC enhances transparency and operational certainty for
Participants. This clarification ensures that all parties clearly
understand the required steps for submission of a withdrawal letter and
provides assurance regarding how DTC will process and safeguard these
securities while they are under its custody or control.
Finally, the additional clarifying changes described above to (i)
note that the Participant instructs Cede & Co., rather than DTC, to
sign an Assertion Letter, (ii) clarify where DTC delivers a DRS
Statement or physical certificate, (iii) remove an imprecise reference
to ``Cede'' before ``certificate,'' (iv) clarify how a certificate or
the DRS Statement is registered, and (v) add text to reflect current
practice that DTC provides a stock power from Cede & Co. to the
Participant (that receives the DRS Statement or physical certificate)
are intended to align the Reorganizations Guide with current
operational procedures and ensure that the guide accurately reflects
the steps taken in the processing of dissenters'/appraisal rights,
thereby promoting transparency and consistency for all Participants. By
ensuring these operational details are clearly defined, these changes
also enhance the safeguarding of securities under DTC's custody or
control by minimizing the risk of misallocation or processing errors.
Therefore, by aligning the Reorganizations Guide with current
practices and providing for the segregation of positions subject to the
dissenter's/appraisal rights process, the proposed rule change is
consistent with Section 17A(b)(3)(F), cited above, in promoting the
protection of securities under DTC's custody or control.

(B) Clearing Agency's Statement on Burden on Competition

DTC does not believe that the proposed rule change will have any
impact, or impose any burden, on competition. The rule change simply
improves procedures for the segregation and handling of shares subject
to dissenters'/appraisal rights and aligns procedures with current
practice. These changes will apply uniformly to all Participants,
ensuring that no Participant is unfairly disadvantaged or favored.
Accordingly, DTC believes the proposal will not impose any burden on
competition.

DTC has not received or solicited any written comments relating to
this proposal. If any written comments are received, DTC will amend its
filing to publicly file such comments as an Exhibit 2 to its filing, as
required by Form 19b-4 and the General Instructions thereto.
Persons submitting written comments are cautioned that, according
to Section IV (Solicitation of Comments) of the Exhibit 1A in the
General Instructions to Form 19b-4, the Commission does not edit
personal identifying information from comment submissions. Commenters
should submit only information that they wish to make available
publicly, including their name, email address, and any other
identifying information.
All prospective commenters should follow the Commission's
instructions on how to submit comments, available at <a href="http://www.sec.gov/rules-regulations/how-submit-comment">www.sec.gov/rules-regulations/how-submit-comment</a>. General questions regarding the rule
filing process or logistical questions regarding this filing should be
directed to the Main Office of the Commission's Division of Trading and
Markets at <a href="/cdn-cgi/l/email-protection#790d0b181d10171e18171d14180b121c0d0a390a1c1a571e160f"><span class="__cf_email__" data-cfemail="1064627174797e77717e747d71627b756463506375733e777f66">[email&#160;protected]</span></a> or 202-551-5777.
DTC reserves the right to not respond to any comments received.

III. Date of Effectiveness of the Proposed Rule Change, and Timing for
Commission Action

The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) \13\ of the Act and paragraph (f) of Rule 19b-4
thereunder.\14\ At any time within 60 days of the filing of the
proposed rule change, the Commission summarily may temporarily suspend
such rule change if it appears to the Commission that such action is
necessary or appropriate in the public interest, for the protection of
investors, or otherwise in furtherance of the purposes of the Act. If
the Commission takes such action, the Commission will institute
proceedings to determine whether the proposed rule change should be
approved or disapproved.
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\13\ 15 U.S.C. 78s(b)(3)(A).
\14\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments

Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:

Electronic Comments

<bullet> Use the Commission's internet comment form (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#1361667f763e707c7e7e767d6760536076703d747c65"><span class="__cf_email__" data-cfemail="7002051c155d131f1d1d151e0403300315135e171f06">[email&#160;protected]</span></a>. Please include
file number SR-DTC-2026-003 on the subject line.

Paper Comments

<bullet> Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-DTC-2026-003. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>). Copies of the filing will be available for inspection and
copying at the principal office of DTC and on DTCC's website (<a href="https://dtcc.com/legal/sec-rule-filings.aspx">https://dtcc.com/legal/sec-rule-filings.aspx</a>). Do not include personal
identifiable information in submissions; you should submit only
information that you wish to make available publicly. We may redact in
part or withhold entirely from publication submitted material that is
obscene or subject to copyright protection. All submissions should
refer to File Number SR-DTC-2026-003 and should be submitted on or
before April 9, 2026.

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
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\15\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2026-05332 Filed 3-18-26; 8:45 am]
BILLING CODE 8011-01-P

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