Other services - U.S.A.

05.10.2017

Reg S to 144A via Deposit/Withdrawal at Custodian (DWAC) Transfer

Note: DWAC is a fully automated, interactive DTC function that can be used for the book-entry transfer of securities between participants and DTC transfer agents.

A CBL customer can transfer Regulation S (Reg S) tranches held in CBL to the corresponding Rule 144A tranches in DTC using a two-sided DWAC instruction. The customer has to make a DWAC withdrawal (81) of the Reg S tranche in CBL and the domestic counterparty has to make a DWAC deposit of the 144A tranche. The transfer agent must have received the necessary forms from both parties prior to the transaction.

Note: Before sending the DWAC instruction, the customer should contact the transfer agent and complete all the necessary paperwork.

Medallion stamp service

A medallion stamp service is a process whereby a signature is validated and guaranteed by a third party. In CBL, this process is mainly used for:

  • DWAC exchanges from 144A into Reg S and vice versa, settling via CBL’s account at Citibank); and
  • DRS dumps in favour of CBL’s account at Citibank;

where the related settlement instructions should not be set up in CBL until CBL considers the transfer documentation to be in good order.

In order to obtain the medallion stamp on the required documentation, the following steps must be taken:

1.The CBL customer must contact the concerned transfer agent for gathering and completion of all required documents.
2.The CBL customer must prepare a cover letter addressed to the transfer agent and joined to the required document that includes the following details:
a)For DWAC conversion: the details of the conversion, including the respective ISIN of the 144A and Reg S tranches subject to the conversion, the description of the security and the amount, together with a confirmation that the conversion will be processed via CBL and its depository Citibank DTC 908 account 089154 CSCxxxxx;
b)For DRS dumps: confirmation that the delivery will be effected via the transfer agent in favour of CBL’s depository Citibank DTC 908 account 089154 CSCxxxxx;
(where xxxxx is the customer’s 5-digit CBL account).
The cover letter and related documents required by the transfer agent must be signed in accordance with the customer’s signature policy.
3.The CBL customer must send the complete documentation by fax to CBL’s Customer Service, who will forward the documentation for internal validation.
4.Once the customer’s signatures have been authenticated, CBL will stamp the signatures as “Signature Verified by CBL” and append two manager authorised signatures.
5.CBL then forwards the documents by fax to Citibank, who will place a medallion stamp on the documents as evidence that CBL’s signatures have been validated.
6.Citibank will then forward the documents to the agent.
7.If the agent requests original documents (as is usually the case for DRS dumps), the CBL customer must send these by mail (to the same address as for physical transfer documentation) to CBL for signature guarantee and further processing of the originals by Citibank and the agent.

Safekeeping of U.S. “restricted” securities

“Restricted” securities are in most cases physical issues received either via a “Private Placement” or as the result of a reorganisation or corporate action measure.

With a few exceptions, details of the restriction are printed on the back of the physical certificate in the form of stamp (called a “Restrictive Legend”) indicating that the securities have not been registered under the Securities Act of 1933 and that an obligatory holding period applies to them.

Customers can clarify any details regarding the specific restriction on a particular issue with the transfer agent concerned.

Settlement of “restricted”securities

Customers and their domestic counterparties are required to deliver the physical securities to Citibank in favour of account 096088/xxxxx (where xxxxx is the 5-digit CBL customer account) at the following address:

Citibank, N.A.
Attn: Mr Keith Whyte (Tel: +1 212 559 1207)
399 Park Avenue
Level B Vault
New York NY 10022
U.S.A.

Certificates received at Citibank will be accepted only if CBL has received a valid free-format message from its customer communicating the relevant instruction details. When such message has been verified by CBL, the securities will be deposited in the customer’s account under the appropriate Common Code, indicating that they are under safekeeping in “Streetname” (that is, without re-registration).

Note: Pre-advice instructions via free-format message that are incomplete or received after the official market deadline of 18:00 on SD (EST) cannot be considered for same-day settlement and the securities will be returned to the sender accordingly.

Instruction details

The free-format instruction from the receiving/delivering CBL account must be sent to CBL and include details as indicated:

Internal transfers:

  • Type of instruction;
  • Common Code;
  • Name of registered holder;
  • Counterparty CBL account;
  • Instructing CBL account;
  • Quantity;
  • Settlement date.

External receipts and deliveries:

  • Type of instruction;
  • Common Code;
  • Registration details;
  • Certificate number
  • Instructing CBL account;
  • Quantity;
  • USD cash amount (against payment transactions only);
  • Date of shipment (receipts only).

Plus, for external deliveries only:

  • The complete name and full address of the receiving party;
  • The name and telephone number of the contact person at the receiving party;
  • Formal acceptance of all re-registration and shipment fees.

In the case of external deliveries and/or when re-registration is requested, the customer must forward the necessary transfer documents (for example, Stock Power, Corporate Resolution etc.) to CBL at the following address:

Clearstream Banking AG
Settlement Global
OAA / EA.08.301
60485 Frankfurt am Main
Germany

Removal of restrictions

Before submitting free-format message instructions to CBL with regard to the removal of a securities restriction, the customer must ensure that the registered holder has received the necessary information and details of the relevant conditions directly from the transfer agent. If the required documentation and fee information have not been provided by the transfer agent, the registered holder is required to contact the transfer agent for clarification.

When the securities qualify for removal of the restriction, CBL will assist the customer in forwarding the required documentation (Stock Power, Corporate Resolution, Form 144K, Copy of Opinion letter etc.) and the physical certificates to the transfer agent.

CBL shall not be liable for any settlement delay or restriction removal delay due (i) to lack of all or part of the relevant conditions necessary to the restriction removal or (ii) to any action taken or that has to be taken by the customer, the registered holder, the transfer agent or any other third party.

The customer’s free-format message must indicate the following details:

  • Instructing CBL account;
  • Common Code;
  • Quantity;
  • Name of registered holder;
  • Contact person and telephone number and name and address of the agent to whom the securities are to be sent;
  • Certificate number;
  • Acceptance of all charges incurred in relation to the request for removal of the restriction.

Corporate actions and income collection

The transfer agent sends any income and corporate action notifications directly to the registered holder. Therefore, neither Citibank nor CBL will be notified of the relevant instructions and consequently no custody service can be provided.

Standard corporate action and income collection services are offered to customers only when the securities result from a corporate event (and, as a consequence, they are registered under Citibank nominee's name) and when the restriction has been removed.

Securities lending and borrowing

All U.S. debt securities are, in principle, eligible for CBL’s securities lending and borrowing programme.

Equities are not eligible for CBL’s securities lending and borrowing programme.

Multi-market securities service

U.S. domestic securities can be listed on foreign exchanges. These multi-market equities are traded on more than one stock exchange and are eligible for deposit and settlement in more than one CSD.

For further information, please refer to the Multi-Market Securities Guide.

Compliance

The U.S.A. asserts jurisdiction over transactions involving securities issued or held for custody in the U.S.A., even where the link between the transaction and the U.S.A. is quite attenuated. Some U.S. economic sanctions laws have extraterritorial effect and others impose or threaten third parties' actions with secondary boycotts, which may affect the third parties' access to U.S. financial or other markets. U.S. financial institutions and, in some cases, their foreign-incorporated subsidiaries and affiliates, are subject to U.S. regulations, even when operating outside the U.S.A. CBL intermediates transactions involving securities in which the U.S.A. is the jurisdiction of issuance or custody; it also engages U.S. financial institutions to provide custody and other services, both in the U.S.A. and throughout the world. Accordingly, transactions in or through a CBL account may expose CBL to U.S. laws and regulations even where the customer is not subject to such laws.

The customer acknowledges and accepts its obligation to comply and ensure compliance by any of the the customer’s underlying clients, up to the ultimate [legal and] beneficial owner, with any U.S. law, regulation, sanction, order, judgment, injunction, asset freeze, blocking regulation or order or any other act or action of, or by, any national or foreign government, authority, court, (self-) regulatory organisation, government agency or instrumentality of government, including, but not limited to, investment and holding restrictions (“U.S. Regulations”) applicable to any of the customer, its underlying clients or CBL. The customer shall not, by action or inaction, cause CBL to violate a U.S. Regulation and shall be liable for and hold CBL harmless against any direct or indirect loss, claim, damage, liability or expense, imposed on or incurred by or asserted against CBL in connection with any actual or alleged non-compliance with the aforesaid by the customer or any underlying client of such customer up to the ultimate [legal and] beneficial owner.

Please also refer to the Resource Center of the U.S. Department of the Treasury.

Disclosure requirements

Please refer to the Clearstream Banking Disclosure Requirements - U.S.A., which is an appendix to the Creation Market Guide.

Holding restrictions

Please refer to the Investment regulation section of the Market Profile - U.S.A.

Foreign exchange

Foreign exchange services for USD are available to customers upon request. To complete foreign exchange conversions for USD, customers should contact CBL’s Treasury Desk directly via an authenticated communications medium.

Securities Payment Order (SPO)

An SPO is a DTC product that enables two parties to adjust the payment in an against payment settlement transaction in the books of DTC without transferring the associated securities.

SPO transactions are used as follows:

  • To settle pair-off trades between parties; or
  • To settle the difference between current and previous market values in an open securities contract.

Note: In this context, a pair-off is to be understood either as a buy-back to offset and effectively liquidate a previous sale of securities or as a sell-back to offset and effectively liquidate a previous purchase of securities.

The SPO authorises DTC to credit the payee participant’s settlement account with the specified amount and to debit the payor participant’s settlement account for the same amount.

Types of SPO

The following SPO types can be processed in CBL:

One-sided (also called “Single Money”):

For incoming funds (Receive SPO), the SPO instruction triggers a debit of the counterparty’s account at DTC based on corresponding credit request received from the CBL customer. Once settled, funds are transferred from the counterparty’s account in DTC to the DTC account of Clearstream's depository. Such funds are then credited to the customer account in CBL.

For outgoing funds (Single-Sided Deliver SPO), a request from a counterparty in DTC is received in order to debit CBL. Before processing the counterparty’s debit request, a corresponding SPO instruction from the CBL customer must be sent and the customer’s account will be debited before the transfer of funds to the counterparty can be executed via DTC.

Note: In the event of settlement failure, the original debit will be reversed on the CBL customer’s account. In the event of a late settlement, the CBL customer’s original debit will be adjusted in accordance to the actual settlement date.

Two-sided (also called “Pair-off” or “Full Money Swap”):

In a full pair-off transaction, each against payment receipt/delivery instruction linked as part of the pair-off sequence is settled for the full settlement amount at the DTC with a separate SPO.

The cross-settlement amounts of all relevant transactions are processed via the customer’s CBL account. To ensure correct processing, the purchase instruction is settled and the respective sale instruction is cancelled and manually processed on the CBL customer’s account.

Instructions and deadlines for SPOs

SPOs must be instructed via SWIFT MT599 or CreationOnline free-format message and must include details as follows:

One-sided SPO:

  • “Attn: OAA”;
  • “Type of SPO: one-sided”;
  • Customer instruction including cash amount (mandatory), as follows:
    • For a debit: “Please accept SPO charge of USD <amount> from broker <account in DTC> and debit our account <5-digit CBL account number>“;
    • For a credit: “Please send SPO charge of USD <amount> to broker <account in DTC> and credit our account <5-digit CBL account number>“;
  • Counterparty details including contact name, telephone number and relevant account number at counterparty level;
  • Relevant receipt and delivery instruction references or at least the relevant security code and quantity.

Two-sided SPO:

  • “Attn: OAA”;
  • “Type of SPO: two-sided”;
  • Counterparty details including contact name, telephone number and relevant account number at counterparty level;
  • Relevant receipt and delivery instruction references.

Deadline

Customers must send their SWIFT MT599 instruction by no later than 18:30 CET to Clearstream for same day processing.

Applicable fees

Please refer to the Clearstream Banking Fee Schedule.

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