Category Archives: DTC legal opinion reverse

DTC Eligibility

What is DTC?

DTC describes itself as the world’s largest securities depository.  DTC is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law.
DTC is also a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code.  Finally, DTC is  a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934.

What does DTC Do?

DTC Provides Asset Servicing for Securities

DTC states that it holds and provides asset servicing for over 3. 6 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC.

DTC Facilitates Post Settlement of Securities

DTC also facilitates the post-settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates.

What are DTC Participants?

Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”).

What is DTCC?

DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies.
DTCC is owned by the users of its regulated subsidiaries.

Who Has Access to the DTC System?

Access to the DTC system is also available to others such as both U.S. and non – U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirec t Participants”). DTC has a Standard & Poor’s rating of AA +.
The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission.
More information about DTC can be found at www.dtcc.com.

DTC Eligibility

The process of obtaining DTC eligibility is usually a mystery to OTC Market’s Pink Sheet Issuers.

However, for securities lawyers who regularly represent over-the-counter public companies in DTC eligibility legal matters, the reality is that the process is straightforward when an OTC Markets securities lawyer can document the company’s history.

We Can Help Document Reasons for DTC and DWAC Eligibility

As securities lawyers working with OTC Bulletin Board or OTC Markets Pink Sheets, we know the criteria for DTC eligibility and DWAC eligibility.  With an OTC securities lawyer’s help, OTCMarkets public companies can document how they meets DTC’s requirements for eligibility.

OTC Securities Lawyers Can Confirm A DTC Chill

Sometimes OTC Issuers do not receive a letter from DTC, but still believe there is a chill on their stock.   When Pink Sheet or OTC public company learns from a market maker or broker that their securities might have a DTC chill, there are some steps the Issuer can take to confirm their DTC eligibility status:

1. An experienced OTC Markets securities attorney like Matt Stout contact DTC with the correct CUSIP to ask if there is a chill.  Many times, even when a market maker believes a Pink Sheet issuer to “have a DTC chill” they are working off of outdated information, even though DTC provides regular lists of securities which are DTC chilled.

2.  If there is a confirmed DTC chill, and it is not related to some specific bad actor, like an officer, director or promoter, who is currently connected to the company the next step is for the Issuer’s OTC Markets securities lawyer to contact DTC to start a dialogue.

We Help Public Companies Document Their History for DTC Eligibility

OTC public companies seeking more information or guidance in the DTC eligibility process, or a DTC legal opinion, can contact Matt Stout, OTCMarkets securities attorney, at (410) 429-7076 or mstout@otclawyers.com