Transfer agents have noticed a pause and significant slowdown in the Depository Trust & Clearing Corporation (DTCC) processing times as a result of Hurricane Sandy in October 2012. Here are some frequently asked questions that may help transfer agents and share management companies better handle this request:
Frequently Asked Questions regarding the DTCC Declaration Process
The STA has received many questions from members about the procedure that the STA and DTCC have agreed upon that enables “unavailable certificates” to be processed. Here is a recap of frequently asked questions.
- Q: Why was the original procedure changed from utilizing a notarized affidavit to a declaration without notarization?
A: The original procedure turned out to be inefficient and unworkable. Affidavits do require notarization, and the volume of documents made notarizations unfeasible. Attorneys representing the STA and DTCC agreed that the current declarations with indemnifications provide sufficient protection for both transfer agent and issuer.
- Q: Was the SEC involved when these agreements were reached?
A: Yes, representatives of the Division of Trading and Markets were included in the discussions on a regular basis and reviewed the final procedures.
- Q: When will the DTCC be able to resume normal operations from 55 Water St?
A: The STA has not been given that information. We do know that the DTCC has hired a company with expertise in dealing with problems of this nature and that the actual certificates are being assessed in a document recovery center. The daily physical processing has been moved to a DTCC site in Brooklyn. When we have any further information, we will inform our members.
- Q: Is the DTCC declaration procedure and indemnity applicable to non-members of the STA?
- Q: Why are agents no longer being asked to place stops against all the certificates and report them all as lost?
A: It is our understanding that the certificates, when dried out, may be perfectly legible and can be delivered to transfer agents for cancelation. Reporting these identifiable certificates as lost would only complicate this process.
- Q: Is an exhibit (Schedule 1) that lists multiple issuers acceptable?
A: Yes, there is no requirement to have a separate schedule for each issuer. However, the schedule must have enough information that the agent will be able to identify the actual certificate(s) being referenced. The STA asked that the DTCC group issuer certificates together on the schedule for easier processing.
- Q: We have received lists of certificates without the certificate prefixes. Is this acceptable?
A: The STA and DTCC attorneys have agreed that, if the certificate prefix cannot be read but all other information that identifies the certificate is presented, it is acceptable.
- Q: Does the declaration with indemnity do away with the need for a medallion signature guarantee?
A: No, the declaration is in lieu of the physical certificate until it can be presented. Agents should request all other normal requirements including medallions.
- Q: Is a photocopy of a medallioned stock power (no original medallion), acceptable when presented with the declaration?
A: No, see above answer.
- Q: Agents are receiving declarations without the “signature stamp” referred to in item 12. Is this acceptable?
A: Yes, as long as there is some signature. Item 12 says, “including by use of a signature stamp.” The STA explains that a signature stamp may be used, but the signature of an authorized signer is also acceptable.
- Q: If the DTCC reports a certificate as lost to the SEC, will they provide a copy of the X-17 form to the agent?
- Q: What is the most important thing for agents to understand about this declaration process?
A: If the DTCC reports to an agent that a certificate is lost, the agent MUST put a stop on it. If the certificate replaced under this procedure is subsequently presented for transfer, the agent MUST promptly notify DTCC prior to executing the transfer so that the DTCC can seek injunctive relief to prevent such transfer.