Other services - U.S.A.

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

The service for exchange between Rule 144A and Regulation S (“REGS”) line is also known as Deposit and Withdrawal at Custodian (DWAC). Rule 144A and Regulation S (“Reg S”) bonds are types of bonds, named after the related legal rules, which give the right to the issuer to issue these bonds without the need to register them under the Securities Act of 1933. The two rules are defined as follows:

• Under the Rule 144A, Qualified Institutional Buyers or QIBs are allowed to trade debt securities without registration and review by the SEC;
• The Reg S bond type is available for offers and trades of securities outside of the U.S.A. to US and non-US QIBs.

If a security is issued under both Rule 144A and Reg S, this allows the holders to exchange between the two types of bonds, in order to trade in or outside the U.S.A. The Prospectus of the bond clarifies if the exchange is possible and whether or not there are any restrictions to it.

CBL processes transfer instructions from 144A type into Reg S and the other way around. Clients who wish to exchange their bonds will start this process by sending their Swift instruction to Clearstream. Upon receiving an instruction from a client, who holds the position on their CBL account, CBL will send out necessary Swift instructions to the Transfer Agent, as well as the instructions to the depository. Only after the process is completed on the depository side will CBL credit the client's account with the proceeds.

Whenever applicable and known to Clearstream, as there is a large number of bonds of this type and exchange is possible throughout the entire life of the bond (unless defined differently by Prospectus), the conditions of the exchanges Reg S to 144A or 144A to Reg S, will be announced to clients via Corporate Action event (MT564/seev.031) CONV VOLU

If the original ISIN can be exchanged into two different ISINs, a separate event will be created for each resulting ISIN.

Clients are required to instruct via MT565/seev.033, where they need to confirm the compliance with the required certification and to provide necessary details for the exchange in the narrative field or MX equivalent:

• :70E::INST//Certification confirmation: Certification OK;
• :70E::PACO//Contact details

If no event is announced by Clearstream, clients can send an unsolicited instruction, that is, an MT565/seev.033 to request the exchange mentioning the following details:

• :70E::INST//1. Resulting ISIN code;
  Certification confirmation: Certification OK; 
• :70E::PACO//Contact details.

The certification of QIB or non-US status is achieved by simply stating "certification OK".

By stating "Certification OK", the client certifies that they are eligible to receive the resulting bonds.

To receive 144A bonds, clients certify that they are QIB, and to receive Reg S bond, they certify that they are QIB and/or non-U.S. entity.

Clients also give the power to CBL to either confirm their status in their name to the Transfer Agent electronically, or in cases where electronic certification is not possible, they agree that CBL completes the necessary forms on their behalf.

Note: For the U.S.-to-U.S. exchanges, the existing settlement instruction MT540/542 will be kept in parallel to the new asset servicing process.

CBL shall not be held liable for relying on the certification and for transmitting the certification provided CBL has not been grossly negligent, fraudulent or acted with wilful default. The client shall be liable towards CBL to provide a complete, true and accurate certification.

Medallion stamp service

A medallion stamp service is a process whereby a signature is validated and guaranteed by a third party. In Clearstream, 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 Clearstream until Clearstream 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:

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.

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

Settlement of “restricted”securities

Note: This service is only available for CBL clients. 

Clients 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 client 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 client communicating the relevant instruction details. When such message has been verified by CBL, the securities will be deposited in the client’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 client must forward the necessary transfer documents (for example, Stock Power, Corporate Resolution etc.) to CBL at the following address:

Clearstream Services Prague Branch
Deutsche Börse Group
Attn. Settlement Services
Sokolovska 662/136b
CZ-186 00 Prague 8

Removal of restrictions

Before submitting free-format message instructions to CBL with regard to the removal of a securities restriction, the client 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 client 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 client, the registered holder, the transfer agent or any other third party.

The client’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 clients 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 client is not subject to such laws.

The client acknowledges and accepts its obligation to comply and ensure compliance by any of the the client’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 client, its underlying clients or CBL. The client 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 Disclosure Requirements - U.S.A., which is an appendix to the Market Link 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 clients upon request. To complete foreign exchange conversions for USD, clients should contact CBL’s Treasury Desk directly via an authenticated communications medium.

Securities Payment Order (SPO)

Note: Securities Payment Order is not available for CFCL nor CEU accounts.

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 to settle the difference between current and previous market values in an open securities contract.

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 client. 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 client 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 client must be sent and the client’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 client’s account. In the event of a late settlement, the CBL client’s original debit will be adjusted in accordance to the actual settlement date.

Instructions and deadlines for SPOs

SPOs must be instructed via Swift MT599 or Xact Web Portal free-format message and must include details as follows:

One-sided SPO:

• “Attn: PSN -Settlement Americas ”;
• “Type of SPO: one-sided”;
• Client 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.

Deadline

Clients 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 Fee Schedule.