82 FR 48734 - Self-Regulatory Organizations; The Depository Trust Company; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the DTC Distributions Guide Relating to Announcements and Tax Treatment of Certain Corporate Action Events and To Amend the DTC Fee Schedule
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 82, Issue 201 (October 19, 2017)
Federal Register Volume 82, Issue 201 (October 19, 2017)
| Page Range | 48734-48737 | |
| FR Document | 2017-22643 |
[Federal Register Volume 82, Number 201 (Thursday, October 19, 2017)] [Notices] [Pages 48734-48737] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2017-22643] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-81871; File No. SR-DTC-2017-018] Self-Regulatory Organizations; The Depository Trust Company; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the DTC Distributions Guide Relating to Announcements and Tax Treatment of Certain Corporate Action Events and To Amend the DTC Fee Schedule October 13, 2017. 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 October 2, 2017, 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 Rules 19b- 4(f)(2) and (f)(4) thereunder.\4\ The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. --------------------------------------------------------------------------- \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)(2) and (f)(4). --------------------------------------------------------------------------- I. Clearing Agency's Statement of the Terms of Substance of the Proposed Rule Change The proposed rule change \5\ would (i) revise the Distributions Guide to (A) enhance the DTC Announcements feature (``Announcements'') within the DTC Distributions Service (``Distributions Service'') \6\ by adding new corporate action events that do not involve the payment of funds or distribution of Securities through DTC, but which may result in a taxable event for holders (``Tax Event''), as a type of distribution covered by Announcements (``Distribution Event'') \7\ and (B) make technical and conforming changes relating to U.S. tax withholding and information reporting performed by DTC with respect to Tax Events; and (ii) add a fee relating to the announcement of Tax Events (``New Fee'') to the DTC Fee Schedule (``Fee Schedule''),\8\ as discussed below. --------------------------------------------------------------------------- \5\ Each capitalized term not otherwise defined herein has its respective meaning as set forth in the Rules, By-Laws and Organization Certificate of DTC (the ``DTC Rules''), available at http://www.dtcc.com/legal/rules-and-procedures.aspx and the DTC Distributions Service Guide (``Distributions Guide''), available at http://www.dtcc.com/~/media/Files/Downloads/legal/service-guides/ Service%20Guide%20Distributions.pdf. \6\ The Distributions Service includes DTC's announcement, collection, allocation and reporting of dividend, interest and certain principal payments on behalf of Participants holding Securities at DTC. See Distributions Guide, supra note 1 at 9. \7\ Distribution Events covered by Announcements include cash dividends, interest, principal, capital gains, sale of rights on American depositary receipts, return of capital, dividend with option, stock splits, stock dividends, automatic dividend reinvestments, spinoffs, rights distributions, pay in kind, and liquidation. Distributions Guide, supra note 1 at 12. \8\ Available at http://www.dtcc.comn/media/Files/Downloads/legal/fee-guides/dtcfeeguide.pdf?la=en. --------------------------------------------------------------------------- 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 (i) revise the Distributions Guide to (A) enhance Announcements by adding Tax Events as a Distribution Event and (B) make technical and conforming changes relating to U.S. tax withholding and information reporting performed by DTC with respect to Tax Events; and (ii) add the New Fee to the Fee Schedule, as discussed below. A. Distributions Service Announcements Feature The Distributions Service includes the announcement, collection, allocation and reporting by DTC, on behalf of its Participants, of dividend, interest and principal payments for Eligible Securities held by Participants at DTC. This centralized processing provides efficiency for Participants for their receipt of (i) payment information and (ii) payments on Distribution Events, from multiple issuers and agents.\9\ In this regard, Announcements provides Participants with information pertaining to their record date (``Record Date'') \10\ positions for Distribution Events.\11\ This [[Page 48735]] information facilitates Participants' ability to reconcile their records with DTC before the payable date (``Payable Date'').\12\ --------------------------------------------------------------------------- \9\ See Distributions Guide, supra note 5 at 9. \10\ The Record Date is the date set by an issuer of a security by which an investor must own the security in order to be eligible to receive an upcoming distribution. \11\ See Distributions Guide, supra note 5 at 11-13. \12\ The Payable Date is a date established by an issuer on which a distribution to holders will be paid by the issuer. --------------------------------------------------------------------------- B. Internal Revenue Code Section 305(c) Section 305(c) of the Internal Revenue Code \13\ (``Section 305(c)'') states that holders of convertible securities may be deemed to have received a dividend because of a corporate action on common stock into which the convertible security may be converted.\14\ --------------------------------------------------------------------------- \13\ 26 U.S.C. 305(c). \14\ Under Section 305(c), a change in the conversion ratio or conversion price or a similar transaction is treated ``as a distribution [by the issuer] with respect to any shareholder whose proportionate interest in the earnings and profits or assets of the corporation is increased by such change.'' Id. --------------------------------------------------------------------------- In the most frequent scenario relevant to Distribution Events, an issuer that pays a cash dividend to its shareholders may trigger an increase to the conversion rate (``Convertible Rate Adjustment'') \15\ on a convertible debt Security. Under Section 305(c), this Convertible Rate Adjustment is considered as a deemed distribution.\16\ This deemed distribution under Section 305(c) \17\ may be subject to tax reporting by Participants, and if the convertible debt Securities are held by non-U.S. persons, the appropriate tax withholding. --------------------------------------------------------------------------- \15\ Such a convertible debt Security provides for a Conversion Rate Adjustment so that the conversion rate is changed if a distribution is made on the issuer's common stock. Generally, the primary purpose of a Convertible Rate Adjustment is to prevent the holder of a convertible debt Security from being diluted upon a distribution to the shareholders by adjusting the conversion rate on the stock to increase the number of shares that the debt holder can obtain in a conversion of the bond to shares of the issuer. \16\ Such a distribution based on dividend payments made to common shareholders will be considered to be deemed distribution to bondholders even before the bondholders convert the debt to equity. \17\ Supra note 14. --------------------------------------------------------------------------- In April 2016, the U.S. Treasury released proposed regulations to provide guidance to financial institutions regarding their withholding and reporting obligations.\18\ The regulations also require issuers of convertible securities to provide the amount and the timing of deemed distributions under Section 305(c) to the holders of convertible securities, i.e., DTC. Despite this reporting requirement, holders may not be directly informed of changes that have occurred in the instrument's conversion ratio or the amount of the resulting ``deemed'' distribution that may result in a tax withholding obligation for them. A lack of information relating to these deemed distributions and other Tax Events may affect Participants' ability to comply with applicable Federal tax withholding requirements and applicable DTC Rules requirements relating to the use of DTC services.\19\ --------------------------------------------------------------------------- \18\ IRS-2016-0016-0001. 81 FR 21795 (April 13, 2016) (REG- 133673-15). \19\ In connection with their use of DTC's services, Participants must comply with all applicable laws, including, but not limited to all applicable laws relating to taxation. See Rule 2, Section 8, supra note 5. --------------------------------------------------------------------------- C. Proposed Enhancement to Announcements Feature Pursuant to the proposed rule change, in order to facilitate Participants' ability to comply with the requirements described above, DTC would revise the Distributions Guide to allow it to source information on Section 305(c) deemed distributions and other Tax Events for Securities on Deposit at DTC directly from issuers, and then provide the Tax Event information to Participants. DTC would distribute the Tax Event information for a deemed distribution in the same standardized manner that DTC uses to announce distributions. In this regard, DTC would revise the text of the Distributions Guide to (i) add Tax Events as a Distribution Event covered by the functionality described in the Distributions Guide and (ii) add a new section titled ``Tax Event Announcements'' to (a) describe and define Tax Events and Tax Event Announcements and (b) describe the systemic data fields (``Fields'') that DTC would use to provide relevant Tax Event information for a Security to Participants, including: (1) ``Event Type'' to be shown as ``Tax Event,'' (2) ``Sub Event Type,'' which would be used to classify the type of Tax Event, (3) Payable Date, (4) Record Date, (5) ``Cash Rate,'' to provide the amount of the deemed distribution, and (6) ``Comments,'' which would be used to provide any other pertinent information regarding the Tax Event. D. Proposed New Fee Pursuant to the Fee Schedule, DTC charges fees to Participants for the processing of corporate action events. Fees are established to offset the cost of processing all aspects of the applicable corporate action event, including the announcement processing, the actual processing of payments, and book-entries associated with the corporate action. Pursuant to the proposed rule change, the Fee Schedule would be revised so that a Participant that holds Securities subject to a Tax Event would be charged flat fee of $40 per announcement. The proposed New Fee would align DTC's revenue with costs for retrieving Tax Event information from issuers and announcing that information to Participants, as proposed. The New Fee would be added to the Fee Schedule underneath the heading for U.S. Tax Withholding, which is a feature of the Distributions Service, for reference purposes so that it would be located on the Fee Schedule in the same place as other fees charged for tax-related processing performed by DTC. E. Processing of Tax Withholding and Information Reporting DTC performs adjustments for entitlement and allocation activity that is outside of traditional pay date allocations. This includes activity tracking for stock loans, repos, and due bill fail tracking.\20\ With respect to tax treatment of such adjustments, currently the text of the Distributions Guide refers to DTC's performance of U.S. tax withholding and information reporting for credit adjustments that occur with respect to Participant positions in their DTC accounts.\21\ The proposed rule change would modify the applicable text with respect to the tax treatment described within the Due Bill Fail Tracking System, Stock Loan Income Tracking System and Repurchase Agreement (REPO) Tracking System subsections of the Adjustments Section of the Distributions Guide, to state that such withholding and reporting would also be performed related to Tax Events. --------------------------------------------------------------------------- \20\ See Distributions Guide, supra note 5 at 32. \21\ Id. at 34, 36, and 37 --------------------------------------------------------------------------- F. Implementation Timeframe The proposed rule change would be implemented on October 2, 2017. 2. Statutory Basis DTC believes that the proposed rule change is consistent with the requirements of the Act, and the rules and regulations thereunder applicable to DTC, in particular Sections 17A(b)(3)(D) \22\ and 17A(b)(3)(F) \23\ of the Act. --------------------------------------------------------------------------- \22\ 15 U.S.C. 78q-1(b)(3)(D). \23\ 15 U.S.C. 78q-1(b)(3)(F). --------------------------------------------------------------------------- Section 17A(b)(3)(D) of the Act \24\ requires that the rules of the clearing agency provide for the equitable allocation of reasonable dues, fees, and other charges among its participants. DTC believes that the proposed New Fee would be equitably allocated among Participants because each Participant holding Securities subject to Tax Events would be charged the same New Fee [[Page 48736]] amount per Announcement. DTC believes that the proposed New Fee would be reasonable because it would allow DTC to align its revenue with its costs of providing important Tax Event information through Announcements to Participants, which information is needed by them to facilitate their compliance with applicable tax withholding obligations, as described above. Therefore, DTC believes that the proposed rule change is consistent with Section 17A(b)(3)(D) of the Act, cited above. --------------------------------------------------------------------------- \24\ Supra note 22. --------------------------------------------------------------------------- Section 17A(b)(3)(F) of the Act \25\ requires, inter alia, that the rules of the clearing agency be designed to promote the prompt and accurate clearance and settlement of securities transactions.\26\ As described above, the proposed rule change would enhance the Distributions Service to include the distribution of Announcements for Tax Events to Participants. As described above, by providing for the distribution of Tax Event information to Participants, the proposed rule change would facilitate Participants' ability to comply with their Federal tax withholding obligations. This would further facilitate Participant's ability to continue to maintain Eligible Securities subject to Tax Events on Deposit at DTC and make use of DTC's book- entry transfer and settlement services with respect to those Securities, in accordance with DTC Rules requirements relating to the use of DTC services by Participants.\27\ Therefore, by facilitating Participant's ability to continue to use DTC's book-entry transfer and settlement services at DTC with respect to Eligible Securities that are subject to Tax Events, the proposed rule change would promote the prompt and accurate clearance and settlement of securities transactions, consistent with the requirements of the Act, in particular Section 17A(b)(3)(F) of the Act, cited above. --------------------------------------------------------------------------- \25\ Supra note 23. \26\ 15 U.S.C. 78q-1(b)(3)(F). \27\ See supra note 19. --------------------------------------------------------------------------- Section 17A(b)(3)(F) of the Act \28\ requires, inter alia, that the rules of the clearing agency be designed to promote the prompt and accurate clearance and settlement of securities transactions.\29\ As described above, the proposed rule change would enhance the Distributions Service to include the distribution of Announcements for Tax Events to Participants. As described above, by providing for the distribution of Tax Event information to Participants, the proposed rule change would facilitate Participants' ability to comply with their Federal tax withholding obligations. This would further facilitate Participant's ability to continue to maintain Eligible Securities subject to Tax Events on Deposit at DTC and make use of DTC's book- entry transfer and settlement services with respect to those Securities. Therefore, by facilitating Participant's ability use DTC's book-entry transfer and settlement services at DTC with respect to Eligible Securities that are subject to Tax Events, the proposed rule change would promote the prompt and accurate clearance and settlement of securities transactions, consistent with the requirements of the Act, in particular Section 17A(b)(3)(F) of the Act, cited above. --------------------------------------------------------------------------- \28\ Supra note 23. \29\ 15 U.S.C. 78q-1(b)(3)(F). --------------------------------------------------------------------------- (B) Clearing Agency's Statement on Burden on Competition DTC does not believe that the proposed rule change proposing to amend the Distributions Guide to provide for the announcement of Tax Events would have any impact, or impose any burden, on competition, because the information that would be provided to Participants in this regard is necessary for Participants to receive in order to be able to accurately perform tax accounting for their positions held at DTC, and maintain compliance with their tax withholding requirements, as described above. The addition of the New Fee could have an impact on competition because only those Participants that hold Securities subject to Tax Events would be charged the New Fee. To the extent the proposed rule change to add the New Fee to the Fee Schedule would provide for a burden on competition, DTC believes it would be necessary and appropriate under the Act because the New Fee is required to cover the cost of providing the Tax Event information to Participants, which information is necessary for Participants to receive in order to facilitate their compliance with their tax withholding obligations. (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. DTC will notify the Commission of any written comments received by DTC. 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) of the Act \30\ and paragraph (f) of Rule 19b-4 thereunder.\31\ 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. --------------------------------------------------------------------------- \30\ 15 U.S.C. 78s(b)(3)(A). \31\ 17 CFR 240.19b-4(f). --------------------------------------------------------------------------- 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 CommentsUse 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-2017-018 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-2017-018. 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 Web site (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 Web site 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 Web site (http://dtcc.com/legal/sec-rule-filings.aspx). All comments received will be posted without change; the [[Page 48737]] Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-DTC- 2017-018 and should be submitted on or before November 9, 2017. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\32\ --------------------------------------------------------------------------- \32\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017-22643 Filed 10-18-17; 8:45 am] BILLING CODE 8011-01-P
![48734 Federal Register / Vol. 82, No. 201 / Thursday, October 19, 2017 / Notices
services as a condition to listing.20 The SECURITIES AND EXCHANGE technical and conforming changes
Commission believes that these COMMISSION relating to U.S. tax withholding and
representations should additionally information reporting performed by
[Release No. 34–81871; File No. SR–DTC– DTC with respect to Tax Events; and (ii)
help to ensure that individual listed 2017–018]
companies are not given specially add a fee relating to the announcement
negotiated deals, through Exchange Self-Regulatory Organizations; The of Tax Events (‘‘New Fee’’) to the DTC
subsidized discounts on products and Depository Trust Company; Notice of Fee Schedule (‘‘Fee Schedule’’),8 as
services from third-party vendors, to list Filing and Immediate Effectiveness of discussed below.
or remain listed that would raise unfair Proposed Rule Change To Amend the II. Clearing Agency’s Statement of the
discrimination issues under the Act . DTC Distributions Guide Relating to Purpose of, and Statutory Basis for, the
The Commission believes that the Announcements and Tax Treatment of Proposed Rule Change
Exchange is responding to competitive Certain Corporate Action Events and
To Amend the DTC Fee Schedule In its filing with the Commission, the
pressures in the market for listings in clearing agency included statements
making this proposal. Specifically, the October 13, 2017. concerning the purpose of and basis for
Exchange stated in its proposal that it Pursuant to Section 19(b)(1) of the the proposed rule change and discussed
expects to face competition as a new Securities Exchange Act of 1934 any comments it received on the
entrant in the market for exchange (‘‘Act’’),1 and Rule 19b–4 thereunder,2 proposed rule change. The text of these
listings and that it believes the notice is hereby given that on October statements may be examined at the
complimentary products and services 2, 2017, The Depository Trust Company places specified in Item IV below. The
that it offers to listed companies will (‘‘DTC’’) filed with the Securities and clearing agency has prepared
facilitate its ability to attract and retain Exchange Commission (‘‘Commission’’) summaries, set forth in sections A, B,
listings.21 In particular, the Exchange the proposed rule change as described and C below, of the most significant
states that it expects to face significant in Items I, II and III below, which Items aspects of such statements.
competition from the New York Stock have been prepared by the clearing (A) Clearing Agency’s Statement of the
Exchange (‘‘NYSE’’) and the Nasdaq agency. DTC filed the proposed rule Purpose of, and Statutory Basis for, the
Stock Market LLC (‘‘Nasdaq’’) for change pursuant to Section 19(b)(3)(A) Proposed Rule Change
listings, both of which offer of the Act 3 and Rules 19b–4(f)(2) and
(f)(4) thereunder.4 The Commission is 1. Purpose
complimentary products and services to
listed companies.22 Accordingly, the publishing this notice to solicit The proposed rule change would (i)
Commission believes that the proposed comments on the proposed rule change revise the Distributions Guide to (A)
from interested persons. enhance Announcements by adding Tax
rule reflects the current competitive
environment for exchange listings I. Clearing Agency’s Statement of the Events as a Distribution Event and (B)
among national securities exchanges, Terms of Substance of the Proposed make technical and conforming changes
and is appropriate and consistent with Rule Change relating to U.S. tax withholding and
Section 6(b)(8) of the Act.23 information reporting performed by
The proposed rule change 5 would (i) DTC with respect to Tax Events; and (ii)
IV. Conclusion revise the Distributions Guide to (A) add the New Fee to the Fee Schedule,
enhance the DTC Announcements as discussed below.
It is therefore ordered, pursuant to feature (‘‘Announcements’’) within the
Section 19(b)(2) of the Act,24 that the DTC Distributions Service A. Distributions Service
proposed rule change (SR–IEX–2017– (‘‘Distributions Service’’) 6 by adding Announcements Feature
20), be, and hereby is, approved. new corporate action events that do not The Distributions Service includes the
involve the payment of funds or announcement, collection, allocation
For the Commission, by the Division of
distribution of Securities through DTC, and reporting by DTC, on behalf of its
Trading and Markets, pursuant to delegated
but which may result in a taxable event Participants, of dividend, interest and
authority.25
for holders (‘‘Tax Event’’), as a type of principal payments for Eligible
Eduardo A. Aleman, distribution covered by Announcements Securities held by Participants at DTC.
Assistant Secretary. (‘‘Distribution Event’’) 7 and (B) make This centralized processing provides
[FR Doc. 2017–22644 Filed 10–18–17; 8:45 am] efficiency for Participants for their
1 15 U.S.C. 78s(b)(1).
BILLING CODE 8011–01–P receipt of (i) payment information and
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A).
(ii) payments on Distribution Events,
4 17 CFR 240.19b–4(f)(2) and (f)(4).
from multiple issuers and agents.9 In
5 Each capitalized term not otherwise defined this regard, Announcements provides
herein has its respective meaning as set forth in the Participants with information pertaining
Rules, By-Laws and Organization Certificate of DTC to their record date (‘‘Record Date’’) 10
(the ‘‘DTC Rules’’), available at http:// positions for Distribution Events.11 This
www.dtcc.com/legal/rules-and-procedures.aspx and
the DTC Distributions Service Guide (‘‘Distributions
Guide’’), available at http://www.dtcc.com/∼/ stock splits, stock dividends, automatic dividend
media/Files/Downloads/legal/service-guides/ reinvestments, spinoffs, rights distributions, pay in
Service%20Guide%20Distributions.pdf. kind, and liquidation. Distributions Guide, supra
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20 See id. 6 The Distributions Service includes DTC’s note 1 at 12.
8 Available at http://www.dtcc.comn/media/Files/
21 See id. at 41078. announcement, collection, allocation and reporting
22 See id. See also Section 907.00 of the NYSE of dividend, interest and certain principal payments Downloads/legal/fee-guides/dtcfeeguide.pdf?la=en.
9 See Distributions Guide, supra note 5 at 9.
Listed Company Manual and Nasdaq Rule IM– on behalf of Participants holding Securities at DTC.
See Distributions Guide, supra note 1 at 9. 10 The Record Date is the date set by an issuer of
5900–7.
7 Distribution Events covered by Announcements a security by which an investor must own the
23 15 U.S.C. 78f(b)(8).
include cash dividends, interest, principal, capital security in order to be eligible to receive an
24 15 U.S.C. 78s(b)(2).
gains, sale of rights on American depositary upcoming distribution.
25 17 CFR 200.30–3(a)(12). receipts, return of capital, dividend with option, 11 See Distributions Guide, supra note 5 at 11–13.
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![Federal Register / Vol. 82, No. 201 / Thursday, October 19, 2017 / Notices 48735
information facilitates Participants’ ‘‘deemed’’ distribution that may result announcement. The proposed New Fee
ability to reconcile their records with in a tax withholding obligation for them. would align DTC’s revenue with costs
DTC before the payable date (‘‘Payable A lack of information relating to these for retrieving Tax Event information
Date’’).12 deemed distributions and other Tax from issuers and announcing that
Events may affect Participants’ ability to information to Participants, as
B. Internal Revenue Code Section 305(c)
comply with applicable Federal tax proposed. The New Fee would be added
Section 305(c) of the Internal Revenue withholding requirements and to the Fee Schedule underneath the
Code 13 (‘‘Section 305(c)’’) states that applicable DTC Rules requirements heading for U.S. Tax Withholding,
holders of convertible securities may be relating to the use of DTC services.19 which is a feature of the Distributions
deemed to have received a dividend Service, for reference purposes so that it
because of a corporate action on C. Proposed Enhancement to
Announcements Feature would be located on the Fee Schedule
common stock into which the in the same place as other fees charged
convertible security may be converted.14 Pursuant to the proposed rule change, for tax-related processing performed by
In the most frequent scenario relevant in order to facilitate Participants’ ability DTC.
to Distribution Events, an issuer that to comply with the requirements
pays a cash dividend to its shareholders described above, DTC would revise the E. Processing of Tax Withholding and
may trigger an increase to the Distributions Guide to allow it to source Information Reporting
conversion rate (‘‘Convertible Rate information on Section 305(c) deemed DTC performs adjustments for
Adjustment’’) 15 on a convertible debt distributions and other Tax Events for entitlement and allocation activity that
Security. Under Section 305(c), this Securities on Deposit at DTC directly is outside of traditional pay date
Convertible Rate Adjustment is from issuers, and then provide the Tax allocations. This includes activity
considered as a deemed distribution.16 Event information to Participants. DTC tracking for stock loans, repos, and due
This deemed distribution under Section would distribute the Tax Event bill fail tracking.20 With respect to tax
305(c) 17 may be subject to tax reporting information for a deemed distribution in treatment of such adjustments, currently
by Participants, and if the convertible the same standardized manner that DTC the text of the Distributions Guide refers
debt Securities are held by non-U.S. uses to announce distributions. In this to DTC’s performance of U.S. tax
persons, the appropriate tax regard, DTC would revise the text of the withholding and information reporting
withholding. Distributions Guide to (i) add Tax for credit adjustments that occur with
In April 2016, the U.S. Treasury Events as a Distribution Event covered respect to Participant positions in their
released proposed regulations to by the functionality described in the DTC accounts.21 The proposed rule
provide guidance to financial Distributions Guide and (ii) add a new change would modify the applicable
institutions regarding their withholding section titled ‘‘Tax Event text with respect to the tax treatment
and reporting obligations.18 The Announcements’’ to (a) describe and described within the Due Bill Fail
regulations also require issuers of define Tax Events and Tax Event Tracking System, Stock Loan Income
convertible securities to provide the Announcements and (b) describe the Tracking System and Repurchase
amount and the timing of deemed systemic data fields (‘‘Fields’’) that DTC Agreement (REPO) Tracking System
distributions under Section 305(c) to the would use to provide relevant Tax Event subsections of the Adjustments Section
holders of convertible securities, i.e., information for a Security to of the Distributions Guide, to state that
DTC. Despite this reporting Participants, including: (1) ‘‘Event such withholding and reporting would
requirement, holders may not be Type’’ to be shown as ‘‘Tax Event,’’ (2)
also be performed related to Tax Events.
directly informed of changes that have ‘‘Sub Event Type,’’ which would be
occurred in the instrument’s conversion used to classify the type of Tax Event, F. Implementation Timeframe
ratio or the amount of the resulting (3) Payable Date, (4) Record Date, (5) The proposed rule change would be
‘‘Cash Rate,’’ to provide the amount of implemented on October 2, 2017.
12 The Payable Date is a date established by an the deemed distribution, and (6)
issuer on which a distribution to holders will be ‘‘Comments,’’ which would be used to 2. Statutory Basis
paid by the issuer.
13 26 U.S.C. 305(c).
provide any other pertinent information DTC believes that the proposed rule
14 Under Section 305(c), a change in the
regarding the Tax Event. change is consistent with the
conversion ratio or conversion price or a similar D. Proposed New Fee requirements of the Act, and the rules
transaction is treated ‘‘as a distribution [by the and regulations thereunder applicable to
issuer] with respect to any shareholder whose Pursuant to the Fee Schedule, DTC
proportionate interest in the earnings and profits or charges fees to Participants for the DTC, in particular Sections
assets of the corporation is increased by such processing of corporate action events. 17A(b)(3)(D) 22 and 17A(b)(3)(F) 23 of the
change.’’ Id.
Fees are established to offset the cost of Act.
15 Such a convertible debt Security provides for
processing all aspects of the applicable Section 17A(b)(3)(D) of the Act 24
a Conversion Rate Adjustment so that the
conversion rate is changed if a distribution is made corporate action event, including the requires that the rules of the clearing
on the issuer’s common stock. Generally, the announcement processing, the actual agency provide for the equitable
primary purpose of a Convertible Rate Adjustment
processing of payments, and book- allocation of reasonable dues, fees, and
is to prevent the holder of a convertible debt other charges among its participants.
Security from being diluted upon a distribution to entries associated with the corporate
the shareholders by adjusting the conversion rate on action. Pursuant to the proposed rule DTC believes that the proposed New Fee
the stock to increase the number of shares that the change, the Fee Schedule would be would be equitably allocated among
debt holder can obtain in a conversion of the bond
revised so that a Participant that holds Participants because each Participant
rmajette on DSKBCKNHB2PROD with NOTICES
to shares of the issuer. holding Securities subject to Tax Events
16 Such a distribution based on dividend Securities subject to a Tax Event would
be charged flat fee of $40 per would be charged the same New Fee
payments made to common shareholders will be
considered to be deemed distribution to
20 See Distributions Guide, supra note 5 at 32.
bondholders even before the bondholders convert 19 In connection with their use of DTC’s services,
21 Id.at 34, 36, and 37
the debt to equity. Participants must comply with all applicable laws,
17 Supra note 14. 22 15 U.S.C. 78q–1(b)(3)(D).
including, but not limited to all applicable laws
18 IRS–2016–0016–0001. 81 FR 21795 (April 13, 23 15 U.S.C. 78q–1(b)(3)(F).
relating to taxation. See Rule 2, Section 8, supra
2016) (REG–133673–15). note 5. 24 Supra note 22.
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![Federal Register / Vol. 82, No. 201 / Thursday, October 19, 2017 / Notices 48737
Commission does not edit personal California: Lake, Marin, Mendocino, organizations, think tanks, and
identifying information from Napa, Solano. academia.
submissions. You should submit only The Interest Rates are: FOR FURTHER INFORMATION CONTACT:
information that you wish to make Adam Lusin, 202–647–0724,
available publicly. All submissions Percent LusinAW2@state.gov.
should refer to File Number SR–DTC–
For Physical Damage: Dated: July 17, 2017.
2017–018 and should be submitted on
or before November 9, 2017. Homeowners With Credit Avail- Adam W. Lusin,
able Elsewhere ...................... 3.500 Designated Federal Officer.
For the Commission, by the Division of Homeowners Without Credit
Trading and Markets, pursuant to delegated Available Elsewhere .............. 1.750 Editorial Note: This document was
authority.32 Businesses With Credit Avail- received for publication by the Office of the
Eduardo A. Aleman, able Elsewhere ...................... 6.610 Federal Register on October 16, 2017.
Assistant Secretary. Businesses Without Credit [FR Doc. 2017–22675 Filed 10–18–17; 8:45 am]
Available Elsewhere .............. 3.305 BILLING CODE 4710–10–P
[FR Doc. 2017–22643 Filed 10–18–17; 8:45 am]
Non-Profit Organizations With
BILLING CODE 8011–01–P Credit Available Elsewhere ... 2.500
Non-Profit Organizations With-
out Credit Available Else- DEPARTMENT OF TRANSPORTATION
SMALL BUSINESS ADMINISTRATION where ..................................... 2.500
For Economic Injury: Federal Aviation Administration
[Disaster Declaration #15352 and #15353; Businesses & Small Agricultural
California Disaster Number CA–00279] Cooperatives Without Credit Thirty Seventh RTCA SC–216
Available Elsewhere .............. 3.305 Aeronautical Systems Security Plenary
Presidential Declaration of a Major Non-Profit Organizations With-
Disaster for the State of California out Credit Available Else- AGENCY: Federal Aviation
where ..................................... 2.500 Administration, U.S. Department of
AGENCY: U.S. Small Business Transportation.
Administration. ACTION: Thirty Seventh RTCA SC–216
ACTION: Notice. The number assigned to this disaster Aeronautical Systems Security Plenary.
for physical damage is 153525 and for
SUMMARY: This is a Notice of the economic injury is 153530. SUMMARY: The FAA is issuing this notice
Presidential declaration of a major to advise the public of a meeting of
(Catalog of Federal Domestic Assistance
disaster for the State of California Thirty Seventh RTCA SC–216 Plenary.
Number 59008)
(FEMA–4344–DR), dated 10/12/2017. This is a subcommittee to RTCA.
Incident: Wildfires. Rafaela Monchek, DATES: This meeting will be held
Incident Period: 10/08/2017 and Acting Associate Administrator for Disaster December 11–15, 2017 09:00 a.m.–5:00
continuing. Assistance. p.m.
DATES: Issued on 10/12/2017. [FR Doc. 2017–22673 Filed 10–18–17; 8:45 am] ADDRESSES: The meeting will be held at:
Physical Loan Application Deadline BILLING CODE 8025–01–P Embraer Engineering and Technology
Date: 12/11/2017. Center, 1400 General Aviation Drive,
Economic Injury (EIDL) Loan Melbourne, Florida 32935. Pre-
Application Deadline Date: 07/12/2018. DEPARTMENT OF STATE registration is required.
ADDRESSES: Submit completed loan [Public Notice: 10175] FOR FURTHER INFORMATION CONTACT:
applications to: U.S. Small Business Karan Hofmann at khofmann@rtca.org
Administration, Processing and Foreign Affairs Policy Board Charter or 202–330–0680, or The RTCA
Disbursement Center, 14925 Kingsport Renewal Secretariat, 1150 18th Street NW., Suite
Road, Fort Worth, TX 76155. 910, Washington, DC, 20036, or by
In accordance with the provisions of telephone at (202) 833–9339, fax at (202)
FOR FURTHER INFORMATION CONTACT: the Federal Advisory Committee Act, 5
A. Escobar, Office of Disaster 833–9434, or Web site at http://
U.S.C. App., the Department of State www.rtca.org. Registration is required
Assistance, U.S. Small Business announces the Charter of the Foreign
Administration, 409 3rd Street SW., and seating is limited.
Affairs Policy Board, established July
Suite 6050, Washington, DC 20416, SUPPLEMENTARY INFORMATION: Pursuant
2011, was renewed for a two year
(202) 205–6734. to section 10(a) (2) of the Federal
period. The Board is established under
SUPPLEMENTARY INFORMATION: Notice is
Advisory Committee Act (Pub. L. 92–
the general authority of the Secretary of
hereby given that as a result of the 463, 5 U.S.C., App.), notice is hereby
State and the Department of State set
President’s major disaster declaration on given for a meeting of the Thirty
forth in title 22 of the United States
10/12/2017, applications for disaster Seventh RTCA SC–216 Plenary. The
Code, in particular Section 2656 of that
loans may be filed at the address listed agenda will include the following:
Title, and consistent with the Federal
above or other locally announced Advisory Committee Act, as amended (5 Monday, December 11, 2017—9:00
locations. U.S.C., Appendix). The Foreign Affairs a.m.–5:00 p.m.
The following areas have been 1. Welcome and Administrative
Policy Board was established to provide
determined to be adversely affected by Remarks
the Secretary of State, the Deputy
rmajette on DSKBCKNHB2PROD with NOTICES
2. Introductions
the disaster: Secretary of State, and the Director of 3. Agenda Review
Primary Counties (Physical Damage and Policy Planning with independent, 4. Meeting-Minutes Review
Economic Injury Loans): Sonoma informed advice and opinions 5. Review Joint Action List
Contiguous Counties (Economic Injury concerning matters of U.S. foreign 6. Continuation of Plenary or Working
Loans Only): policy. It is comprised of twenty-five Group Sessions
distinguished U.S. citizens from the Tuesday, December 12, 2017—9:00
32 17 CFR 200.30–3(a)(12). private sector, nongovernmental a.m.–5:00 p.m.
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Document Created: 2017-10-19 02:56:42
Document Modified: 2017-10-19 02:56:42
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| FR Citation | 82 FR 48734 |
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