Unlocking U.S. Market Potential: A Guide to DTC Eligibility for Canadian Issuers
For Canadian issuers aiming to enter the U.S. market, obtaining Depository Trust Company (DTC) eligibility is essential. This status allows the electronic transfer of securities, a crucial factor for trading on platforms like OTC Markets and national exchanges. While not mandatory for listing, most U.S. broker-dealers prefer to work with securities that settle electronically. Without DTC eligibility, issuers face significant barriers to market access and liquidity.
Marrelli Trust: A Trusted Partner
Marrelli Trust provides a cost-effective, timely solution for Canadian issuers seeking DTC eligibility. As a trusted partner, Marrelli Trust ensures transparency throughout the process and helps issuers meet all compliance requirements. With years of experience facilitating cross-border share transfers and working closely with legal counsel and market makers, they have helped numerous clients successfully access the U.S. market.
The following outlines the step-by-step process for obtaining DTC eligibility:
- Initiation by Issuer: The process starts with the issuer working alongside legal counsel to prepare documentation that complies with SEC and DTC requirements. For “older issue” securities, shares must be held by non-affiliated shareholders, free from resale restrictions. These shares must be registered in the shareholder’s name.
- Market Maker’s Role: A market maker then submits the DTC eligibility application through a DTC participant, typically a U.S. broker-dealer or clearing firm. This intermediary guides the issuer through challenges and advocates for the securities.
- Coordination with Legal Counsel and Transfer Agents: Legal counsel prepares essential documentation, including legal opinions, and ensures regulatory compliance. Transfer agents, such as Marrelli Trust in Canada and ClearTrust in the U.S., facilitate cross-border share transfers and assist with subsequent steps.
- DTC Eligibility Process: After submission, DTC reviews the application and communicates any questions directly to the DTC participant. Once satisfied, DTC reaches out to the issuer’s legal counsel for a legal opinion regarding the shares to be deposited into DTC’s nominee, Cede & Co. Approval typically follows shortly thereafter, but it is crucial for the issuer to deposit the share certificate within 30 days of approval to avoid complications.
- Shareholder’s Role in Depositing Shares: Following approval, shareholders instruct their brokers to deposit their share certificates into Cede & Co’s name. If necessary, brokers will facilitate the transfer of these shares electronically. Once deposited, DTC holds the certificate in Cede & Co’s name, allowing trades to be settled electronically between brokerage accounts.
- Broker’s Role: The broker will arrange for the deposit of the shares into Cede & Co. Upon receiving the share certificate, they must complete this process within 30 days of DTC eligibility approval to ensure continued compliance.
- Conversion to Electronic Settlements of Trades: After depositing the share certificate, DTC electronically credits the shares to the appropriate brokerage firm, allowing for efficient trade settlements.
- Setup Electronic Deposits and Withdrawals: To further streamline the process, issuers can request FAST, DWAC, and DRS eligibility, enabling electronic deposits and withdrawals of shares.
Why Choose Marrelli Trust?
Marrelli Trust stands out for its transparency, cost-effectiveness, and timely service. With years of experience supporting Canadian issuers, their expertise and proven track record make them a reliable partner for companies seeking DTC eligibility and entry into the U.S. market.
Contact Marrelli Trust:
Andrew Moncur
Business Development, BC
info@marrellitrust.ca
403-437-3484