Document ID: SEC-2022-0580-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The Depository Trust Co.
Posted Date: 2022-04-20T04:00Z

[Federal Register Volume 87, Number 76 (Wednesday, April 20, 2022)]
[Notices]
[Pages 23613-23616]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-08389]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94726; File No. SR-DTC-2022-003]

Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing of and Immediate Effectiveness of Proposed Rule Change 
To Amend the Reorganizations Service Guide and the Operational 
Arrangements

April 14, 2022.
    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 April 11, 2022, 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 is to amend the Reorganizations Guide to 
(i) remove the Eurobond Conversions Service, (ii) clarify and 
streamline language relating to omnibus proxies \5\ and proxy letters, 
and (iii) make conforming and clarifying changes. DTC is also proposing 
to amend the Reorganizations Guide and the Operational Arrangements to 
reflect that an issuer or trustee (each, an ``Issuer'') would only be 
able to access an omnibus proxy through the SPR Service,\6\ as 
described in greater detail below.\7\
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    \5\ Securities held at DTC are registered in the name of DTC's 
nominee Cede & Co. DTC does not vote securities registered in the 
name of Cede & Co. Instead, DTC provides the Issuer with an omnibus 
proxy, which assigns Cede & Co.'s voting rights to those 
Participants that have position credit to their DTC account at the 
close of business on the record date.
    \6\ In order for Issuers or their third party agents 
(collectively, ``Users'') to receive listings of Participants' 
holdings of a security of an Issuer as of a specific date (a 
``securities position report'' or ``SPR''), Users are required to 
register for the SPR Service with respect to the specific CUSIP. 
Users need access to SPRs to identify Participants holding 
securities in order to conduct functions they perform relating to 
security holders, including but not limited to record date 
functions. All Users must be registered and all requests for 
subscriptions or individual copies of SPRs must be made through the 
SPR Service. For further information on the SPR Service, see 
Securities Exchange Act Release No. 52393 (September 8, 2005), 70 FR 
54598 (September 15, 2005) (SR-DTC-2005-12).
    \7\ 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''), The Reorganizations Service 
Guide (``Reorganizations Guide''), and the Operational Arrangements 
(``OA''), available at http://www.dtcc.com/legal/rules-and-procedures.aspx.
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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 purpose of the proposed rule change is to amend the 
Reorganizations Guide to (i) remove the Eurobond Conversions Service, 
(ii) clarify and streamline language relating to omnibus proxies \8\ 
and proxy letters, and (iii) make conforming and clarifying changes. 
DTC is also proposing to amend the Reorganizations Guide and the 
Operational Arrangements to reflect that an issuer or trustee (each, an 
``Issuer'') would only be able to access an omnibus proxy through the 
SPR Service,\9\ as discussed more fully below.
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    \8\ Securities held at DTC are registered in the name of DTC's 
nominee Cede & Co. DTC does not vote securities registered in the 
name of Cede & Co. Instead, DTC provides the Issuer with an omnibus 
proxy, which assigns Cede & Co.'s voting rights to those 
Participants that have position credit to their DTC account at the 
close of business on the record date.
    \9\ In order for Issuers or their third party agents 
(collectively, ``Users'') to receive listings of Participants' 
holdings of a security of an Issuer as of a specific date (a 
``securities position report'' or ``SPR''), Users are required to 
register for the SPR Service with respect to the specific CUSIP. 
Users need access to SPRs to identify Participants holding 
securities in order to conduct functions they perform relating to 
security holders, including but not limited to record date 
functions. All Users must be registered and all requests for 
subscriptions or individual copies of SPRs must be made through the 
SPR Service. For further information on the SPR Service, see 
Securities Exchange Act Release No. 52393 (September 8, 2005), 70 FR 
54598 (September 15, 2005) (SR-DTC-2005-12).
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(i) Remove Eurobond Conversions Service
A. Background
    Pursuant to the proposed rule change, DTC would amend the 
Reorganization Guide to remove the Eurobond Conversions Service. The 
Eurobond Conversions Service allowed Participants to convert 
convertible Eurobonds into the underlying securities. The Eurobond 
Conversions Service began in the early 1980s. The service was a manual 
process whereby DTC received a hardcopy conversion instruction from the 
conversion agent that identified the applicable Participant and 
included the physical certificate for conversion. DTC then manually 
credited the Participant's account with the shares.
    The Eurobond Conversions Services was never widely used, and there 
has not been any demand for the service for many years. As the industry 
moved away from physical certificates and physical processing, the 
Eurobond Conversions Service became unnecessary. Today, a Participant 
can convert its Eurobond position at the agent, which then adds the 
underlying equity to the Participant's DTC account via a Deposit and 
Withdrawal at Custodian (DWAC) request. Accordingly, DTC is proposing 
to amend the Reorganizations Guide to remove the Eurobond Conversions 
Service.
B. Proposed Rule Change
    Pursuant to the proposed rule change with respect to the Eurobond 
Conversions Service, DTC is proposing to amend the Reorganizations 
Guide as follows:
    1. In the ``About the Service'' subsection of the ``Conversions'' 
section, delete the third bullet, ``Process

[[Page 23614]]

instructions from U.S. agents to convert Eurobonds into DTC-eligible 
securities,'' because the Eurobond Conversions Service would no longer 
be offered.
    2. Delete the ``Eurobond Conversions'' section in its entirety.
    3. In the ``Forms for Instructions Outside PTS/PBS'' table, delete 
the row for Eurobond Conversions.
(ii) Hardcopy Omnibus Proxy
A. Background
    Pursuant to the proposed rule change, DTC would amend the 
Reorganizations Guide and the Operational Arrangements to reflect that 
an Issuer would only be able to access an omnibus proxy through the SPR 
Service and would no longer be able to receive a physical copy directly 
from DTC.
    For proxy solicitations where a record date has been established, 
DTC assigns the voting rights of Cede & Co. to the Participants which, 
on the record date, have the security credited to their account at 
DTC.\10\ Shortly after record date, DTC generates an omnibus proxy, 
which includes an SPR of Participant positions in the security on the 
record date, and then makes the omnibus proxy available for download by 
the Issuer through the SPR Service.\11\
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    \10\ See Reorganizations Service Guide, supra note 7, at 20.
    \11\ See id.
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    However, from time to time there is a record date proxy 
solicitation where the Issuer had not registered for the SPR Service. 
In these cases, DTC printed out a copy of the omnibus proxy and mailed 
the physical copy of the omnibus proxy to the address of the Issuer on 
DTC's records.
    DTC is proposing to eliminate the delivery of a hardcopy omnibus 
proxy and to require that Issuers access the omnibus proxy 
electronically through the SPR Service. First, doing so would improve 
efficiency and security of the omnibus proxy process by replacing the 
manually intensive physical mailing with a secure method of electronic 
access by an authorized person. Second, the elimination of the hardcopy 
delivery method should not have a significant impact on Issuers because 
the percentage of Issuers that send meeting notices to DTC but are not 
registered for the SPR Service is less than five percent. Further, DTC 
has been performing outreach to facilitate Issuer registration for the 
SPR Service. When an Issuer sends in a meeting notice for a CUSIP and 
the Issuer is not registered, DTC obtains a contact of an authorized 
party for a related CUSIP or of the Issuer's investor relations group. 
DTC sends an email informing the Issuer that it needs to register for 
the SPR Service to obtain the omnibus proxy. The email contains 
directions on how to register. To date, those Issuers that received the 
email have registered for the SPR Service.
    Finally, the SPR Service does not require special connectivity 
because it can be accessed through the web. Registration in the SPR 
Service is free and an Issuer's access to the omnibus proxy is free as 
well.\12\ Accordingly, the proposed rule change would not impose 
additional costs on Issuers.
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    \12\ See Security Position Report Pricing, available at https://www.dtcc.com/settlement-and-asset-services/issuer-services/spr-pricing, which does not list any fees for SPR Service registration 
or omnibus proxy access.
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B. Proposed Rule Change
    Pursuant to the proposed rule change with respect to the delivery 
of a hardcopy omnibus proxy, DTC is proposing to amend Section VI(E)(3) 
(Shareholder Meetings) of the Operational Arrangements by (i) replacing 
the first sentence of the second paragraph with ``Soon after the record 
date for the meeting, DTC will make an omnibus proxy available to the 
Issuer, trustee, or authorized third-party agent through the Securities 
Position Report (SPR) Service,'' and (ii) adding ``For information 
about registering for the SPR Service, refer to http://www.dtcc.com/spr,'' before the last sentence in the second paragraph. In addition, 
DTC is proposing to replace the term ``are to'' in the second sentence 
of the first paragraph with ``must,'' to reinforce the requirement that 
the meeting announcement must be emailed to DTC at the designated email 
address.
    In addition, DTC is proposing to amend the Reorganizations Guide by 
removing the sentence ``Issuers and trustees who do not register for 
this service will receive an omnibus proxy and Security Position Report 
via hard copy mail,'' from the ``Omnibus Proxy'' subsection of the 
``Proxy Announcements'' section.
(iii) Other Proposed Rule Changes
    DTC is proposing to amend the Reorganizations Guide as follows:
    1. On the ``Important Legal Information'' page, change the 
copyright date from 2021 to 2022.
    2. In the ``Omnibus Proxy'' subsection of the ``Proxy 
Announcements'' section replace ``SPR'' with ``Security Position 
Reports (SPR).''
    3. In the ``Other Securityholder or Bondholder Services'' 
subsection of the ``Proxy Announcements'' section, update the Guide to 
reflect that (i) a Participant must submit its instruction letter and 
Cede & Co. securityholder letter through the MyDTCC portal, (ii) the 
instruction letter must identify the subject securities, the quantity 
of the securities involved, the beneficial owner, and the nature of the 
request, and must include the exact form of the requested 
securityholder letter, (iii) a user guide for MyDTCC portal is 
available on the DTCC website, and (iv) DTC will not accept any request 
from (x) any party other than a Participant or (y) outside of the 
MyDTCC portal.\13\ In addition, DTC is proposing to make changes to 
clarify that the sample letters on the DTCC website are for 
illustrative purposes only, and that (i) DTC makes no determination as 
to whether a letter is sufficient, legally or otherwise, for a 
Participant's or beneficial owner's intended purpose, and (ii) 
Participants and beneficial owners must consult with their own counsel 
to make such determination.
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    \13\ Previously, Participants submitted the documents through 
the DTC Web Inquiry Notification System (``WINS''), which was 
decommissioned on March 30, 2020. See Securities Exchange Act 
Release No. 88050 (January 27, 2020), 85 FR 5728 (January 31, 2020) 
(SR-DTC-2020-002).
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    DTC is also proposing to add the following paragraph to remind 
Participants to timely submit their instructions and form of 
securityholder letter and to anticipate a DTC processing time of 
approximately six business days: ``To help ensure timely processing of 
a Participant's request for a Cede & Co. securityholder letter, a 
Participant should anticipate a DTC processing time of approximately 
six business days. Processing time may increase if, for example, a 
Participant requests notarization of the Cede & Co. letter, or if, once 
a request is submitted to DTC, DTC needs to return the request to the 
Participant for technical revisions. In addition, Participants should 
anticipate longer processing times during periods of high volumes and 
plan accordingly. DTC is not responsible for a Participant's failure to 
meet any deadline or cut-off in connection with its request.'' Finally, 
DTC is also proposing to make minor changes to this subsection for 
conformity and readability.
    4. In the ``Dissenters' Rights/Appraisal Rights'' subsection of the 
``Proxy Announcements'' section, DTC is proposing to replace the 
existing Note and Warning sections, with a Note that conforms to the 
proposed changes to the ``Other Shareholder or Bondholder Services'' 
subsection. Specifically, DTC would insert the following:
    ``There are examples of instruction letters and Assertion Letter on 
the DTCC website at http://www.dtcc.com/settlement-and-asset-services/
issuer-

[[Page 23615]]

services/proxy-services. Please note that these example letters are for 
illustrative purposes only, and DTC makes no determination as to 
whether a letter is sufficient, legally or otherwise, for a 
Participant's or beneficial owner's intended purpose. Participants and 
beneficial owners must consult with their own counsel to make such 
determination.
    Completed forms must be submitted by a Participant via the MyDTCC 
portal. DTC will not accept the request from any other party or outside 
of the MyDTCC portal.
    A user guide is available at https://www.dtcc.com/-/media/Files/Downloads/Settlement-Asset-Services/Issuer-Services/Shareholder-Demand-Dissent-MyDTCC-CAWeb.pdf.''
    In addition, to conform with the ``Other Shareholder or Bondholder 
Services'' subsection. DTC is proposing to add a paragraph to remind 
Participants to timely submit their dissent/appraisal letter 
instructions and to anticipate a DTC processing time of approximately 
six business days. Specifically, DTC is proposing to add the following: 
``To help ensure timely processing of a Participant's request for an 
Assertion Letter, a Participant should anticipate a DTC processing time 
of approximately six business days. Processing time may increase if, 
for example, a Participant requests notarization of the Assertion 
Letter, or if, once a request is submitted to DTC, DTC needs to return 
the request to the Participant for technical revisions. In addition, 
Participants should anticipate longer processing times during periods 
of high volumes and plan accordingly. DTC is not responsible for a 
Participant's failure to meet any deadline or cut-off in connection 
with its request.'' Further, DTC is proposing to amend the 
Reorganizations Guide to expressly state that, upon receipt of an 
appropriate request for a dissenter/appraisal rights letter involving 
securities that are participating in the Direct Registration Service 
(DRS), DTC will deliver a DRS Statement--instead of a physical 
certificate--to the Participant. Finally, DTC is also proposing to make 
minor changes to this subsection for conformity and readability.
    In the ``Important Considerations'' subsection of the 
``Instructions/Expirations'' section: (i) In the fourth bullet, delete 
``either return the instructions form to you with a Rejection Notice 
attached, detailing the reason for the rejection, or,'' because the 
bullet refers to hardcopy instructions, which are not accepted, (ii) 
delete the fifth bullet in its entirety, because DTC does not notify 
Participants of a rejection by phone, and (iii) in the eighth bullet, 
for clarity, delete ``If you wish to put a unit comprised of a bond and 
a certificate evidencing a put option right, and you hold the 
securities in the form of the individual components, you must combine 
the components into a unit in order to effect the put,'' because this 
statement only applies to a specific put bond type and any specific 
requirement appears in the applicable announcement for such event.
2. Statutory Basis
    Section 17A(b)(3)(F) of the Act \14\ requires that the rules of the 
clearing agency be designed, inter alia, to promote the prompt and 
accurate clearance and settlement of securities transactions, and, in 
general, to protect investors and the public interest.
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    \14\ 15 U.S.C. 78q-1(b)(3)(F).
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    DTC believes that by deleting an obsolete service that is not being 
used, the proposed rule change to amend the Reorganizations Guide to 
remove the Eurobond Conversions Service would clarify the scope of 
reorganizations services offered by the DTC, thereby promoting the 
prompt and accurate clearance and settlement of securities transactions 
relating to reorganizations consistent with Section 17A(b)(3)(F) of the 
Act.
    By eliminating the manually intensive physical mailing of an 
omnibus proxy in favor of a secure method of electronic access by an 
authorized person, the proposed rule change would enhance the 
efficiency and security of the omnibus proxy process and facilitate 
record date shareholder identification and voting. Therefore, DTC 
believes that the proposed rule change is designed to protect investors 
and the public interest, particularly with respect to securityholder 
rights, consistent with Section 17A(b)(3)(F) of the Act.
    DTC believes that the proposed changes to (i) clarify and 
streamline language relating to omnibus proxies and proxy letters, and 
(ii) make conforming and clarifying changes in the Reorganizations 
Guide would enhance the clarity and transparency of the Reorganizations 
Guide. By enhancing the clarity and transparency of the Reorganizations 
Guide, the proposed rule change would allow Participants to more 
efficiently and effectively conduct their business in accordance with 
the Reorganizations Guide. Therefore, DTC believes that the proposed 
rule change is designed to promote the prompt and accurate clearance 
and settlement of securities transactions relating to reorganizations 
consistent with Section 17A(b)(3)(F) of the Act, cited above.

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

    DTC believes that the proposed rule change to amend the 
Reorganizations Guide to remove the Eurobond Conversions Service would 
not have any impact or impose any burden on competition because it 
would remove an outdated service that has not been utilized by 
Participants for several years.
    DTC believes that the proposed rule change to require Issuers to 
access the omnibus proxy electronically through the SPR Service would 
not have any impact or impose any burden on competition because an 
Issuer can register for the SPR Service and access the omnibus proxy 
without charge. In addition, Issuers can download and print their own 
hardcopies through the SPR Service.
    DTC believes that the proposed changes to (i) clarify and 
streamline language relating to omnibus proxies and proxy letters, and 
(ii) make conforming and clarifying changes in the Reorganizations 
Guide would not have any impact on competition because it would enhance 
the clarity and transparency of the Reorganizations Guide and therefore 
would not affect the rights or obligations of any party.
    In light of the foregoing, DTC does not believe that the proposed 
rule change would have any impact or impose any burden on 
competition.\15\
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    \15\ 15 U.S.C. 78q-1(b)(3)(I).
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(C) Clearing Agency's Statement on Comments on the Proposed Rule Change 
Received From Members, Participants, or Others

    DTC has not received or solicited any written comments relating to 
this proposal. If any written comments are received, they would be 
publicly filed as an Exhibit 2 to this filing, as required by Form 19b-
4 and the General Instructions thereto.
    Persons submitting comments are cautioned that, according to 
Section IV (Solicitation of Comments) of the Exhibit 1A in the General 
Instructions to Form 19b-4, the Commission does not edit personal 
identifying information from comment submissions. Commenters should 
submit only information that they wish to make available publicly, 
including their name, email address, and any other identifying 
information.
    All prospective commenters should follow the Commission's 
instructions on how to submit comments, available at

[[Page 23616]]

https://www.sec.gov/regulatory-actions/how-to-submit-comments. General 
questions regarding the rule filing process or logistical questions 
regarding this filing should be directed to the Main Office of the 
Commission's Division of Trading and Markets at 
[email protected] or 202-551-5777.
    DTC reserves the right to not respond to any comments received.

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) \16\ of the Act and paragraph (f) \17\ of Rule 19b-4 
thereunder. At any time within 60 days of the filing of the proposed 
rule change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act.
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    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-DTC-2022-003 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-DTC-2022-003. 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 (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549 on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of DTC and on DTCC's website 
(http://dtcc.com/legal/sec-rule-filings.aspx). All comments received 
will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-DTC-2022-003 and should be submitted on 
or before May 11, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-08389 Filed 4-19-22; 8:45 am]
BILLING CODE 8011-01-P