Proposals For DTC Chills and Global Locks WITHDRAWN

On December 18, 2013, the Depository Trust Company (“DTC”) submitted a proposed rule change to the Securities and Exchange Commission (“SEC”), which regulates its activities.  Its aim was to “specify procedures available to issuers of securities deposited at DTC for book entry services when DTC imposes or intends to impose restrictions on the further deposit and/or book entry transfer of those securities…”

In plain English, the new rule would provide that in most cases, issuers would receive advance notice of planned DTC chills or global locks, and would be able to protest the imposition of the chill or lock proposed.  Emergency actions would still be possible, but issuers could protest them after the fact.  It also set a limit for the duration of DTC chills and locks:  six months in the case of issuers who are SEC registrants, and one year in the case of non-registrants.

DTC had explained its proposals earlier, in a White Paper released in September 2013.

Following the submission of the rule change to the SEC, there was a comment period.  DTC responded with two amendments to the proposals.  More comments were offered through the summer of 2014.  We at Hamilton & Associates submitted two comments to the SEC, and blogged about the proposed rule here, here and here.  We applauded the depository’s efforts to create a standardized appeal process for issuers who believed DTC actions were unwarranted.  We further suggested that DTC publish a central list of chilled or locked stocks.  Issuers do not always tell their investors about these events, an omission that can result in confusion about the company’s status with the depository.

Months passed, and the proposed rule had still not become effective.  Then on August 18, 2014, at the height of the summer vacation season and three days before the end of the deadline for Commission action, the SEC announced that DTC had withdrawn the proposed rule and its amendments.  No further announcement was made, and the withdrawal escaped general notice. 

DTC has not commented on the withdrawal, and we are left to wonder what the reasons for it may have been.  In the SEC’s announcement, there was no suggestion that the old proposal might be substituted with a new one, so it seems issuers and investors will once again be left with inadequate information about deposit chills and global locks, and issuers may once again find these actions difficult to protest.

For further information about this securities law blog post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton, Florida, (561) 416-8956, by email at [email protected] or visit  This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group 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 the prior results discussed herein do not guarantee similar outcomes.