What Is DTC Eligibility? Going Public Attorneys

DTC’s eligibility creates liquidity for companies after a going public transaction. DTC’s Issue Eligibility program allows newly issued securities as well as secondary offerings that meet DTC’s eligibility criteria to become eligible for the depository and book-entry services of The Depository Trust Company (DTC). DTC eligibility means that a security is freely tradable and fungible and is otherwise qualified to be held at DTC and traded and serviced through DTC’s electronic book-entry system. DTC’s eligibility criteria are more fully described in DTC’s Operational Arrangements.

DTC’s Depository services over the lifecycle of the security may include deposits, withdrawals, and a wide range of corporate action events such as dividend and interest payments, tender and rights offers, and corporate reorganizations.

DTC’s New Issue Eligibility program allows underwriters and other DTC Participants to submit eligibility requests for new and secondary security offerings. Once DTC makes an eligibility determination and accepts the securities for depository and book-entry services, the securities can be distributed quickly and efficiently. These securities are then DTC eligible and available for the full range of DTC depositor and book-entry services.  Issuers must comply with DTC’s requirements or their shares could be subject to a DTC chill.

Lead managers, underwriters, placement agents and other market players that are DTC participants can use the service. In addition, firms that are not direct participants but maintain a clearing relationship with a DTC participant can use the service as a correspondent; however, the Participant through which the securities are introduced to DTC remains responsible for all activities within its account.

To request DTC eligibility for a new or secondary equity, corporate or municipal debt, or retail certificate of deposit issue, a user of this service must submit securities offering data and offering documentation (e.g., prospectus, official statement, the offering memorandum) via Underwriting’s online platform Securities Origination, Underwriting and Reliable Corporate action Environment (UW SOURCE). The DTC Underwriting group then reviews the information to determine eligibility and, more generally, compliance with DTC’s Operational Arrangements.

Once the security is designated as DTC eligible, participants can use DTC’s Participant Terminal System (PTS) to:

• View the details of a DTC-eligible issue.
• View DTC Important Notices for corporate and municipal underwritings and money market instrument (MMI) issues.
• Monitor the market “flipping” activity of an initial public offering (IPO) and get itemized reports.
• Send electronically to DTC issuance and delivery instructions (as an Issuing/Paying Agent),  and
• receive instructions (as sales agent or custodian) for MMI.

UW SOURCE allows a user to transmit key data elements electronically via three submission options:

• Access the templates onscreen and populate the required data manually,
• Access the system and upload an Excel spreadsheet template, or
• Use a computer to compute auto-feed transmission.

Through UW SOURCE users can then monitor an issue’s progress throughout the underwriting process and track the approval, processing, packaging and closing status. There is no cost to register for UW SOURCE but users must be DTC participants or correspondents.

For further information about DTC eligibility, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real South, Suite 202 North, Boca Raton, FL, (561) 416-8956, or by email at [email protected].  This information is provided as a general or informational service to clients and friends of Hamilton & Associates Law Group, P.A. and should not be construed as, and does not constitute legal advice on any specific matter, nor does this message create an attorney-client relationship.  Please note that prior results discussed herein do not guarantee similar outcomes.

Hamilton & Associates | Securities Lawyers
Brenda Hamilton, Going Public Attorney
101 Plaza Real South, Suite 202 North
Boca Raton, Florida 33432
Telephone: (561) 416-8956
Facsimile: (561) 416-2855
www.SecuritiesLawyer101.com