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Federal Register / Vol. 86, No. 210 / Wednesday, November 3, 2021 / Notices iii Other Technical and Clarifying Changes A. Rule 22 Right to Contest Decisions
khammond on DSKJM1Z7X2PROD with NOTICES

a. Clarify the Time Period for an Interested Person To Request a Hearing Rule 22 provides that a Participant or Pledgee, applicant to become a Participant or Pledgee or issuer of a Security, as the case may be an Interested Person, shall have an opportunity to be heard on any decision of DTC to take certain specified actions against such Interested Person.23 The Rule provides that the Interested Person may request an opportunity to be heard by filing with the Secretary of DTC, within the applicable time period specified by these Rules, a written request for a hearing . . . emphasis added.24 The time period, five Business Days, is not expressly stated in Rule 22.25 Therefore, in order to enhance the transparency of the hearing process, DTC is proposing to amend Rule 22 to expressly reflect the five Business Day time period within which an Interested Person must file its request for a hearing under Rule 22.
Therefore, pursuant to the proposed rule change, DTC would amend Rule 22
to provide that an Interested Person may request an opportunity to be heard by filing with the Secretary of DTC, within five Business Days from the date on which DTC informed the Interested Person of an action or proposed action of DTC with respect to the Interested Person or such other applicable time period specified by the Rules.
In sum, DTC believes that by clarifying the DTC time period for an Interested Person to request a hearing, the proposed rule change would provide 23 See Section 1 of Rule 22, supra note 5 stating that an Interested Person shall have an opportunity to be heard on any decision of the Corporation: a Which proposes to deny the applicants application to become a Participant or Pledgee; b to cease to act for the Participant pursuant to Rule 10, 11 or 12; c to summarily suspend and close the Accounts of the Participant or Pledgee pursuant to the Exchange Act; d to terminate its agreement with the Pledgee, as provided in Section 3 of Rule 2; e which proposes to impose a disciplinary sanction pursuant to Rule 21; or f any determination of the Corporation that an Eligible Security shall cease to be such.
24 See Section 2 of Rule 22, supra note 5.
25 The five Business Day time period is specified in Rule 21, supra note 5 The sanction proposed may be imposed by the Chairman of the Board, the President or the Secretary unless, within five Business Days after notification of such proposed sanction, the Participant or Pledgee provides notice of its desire to contest the sanction, as provided in Rule 22. emphasis added. See also Securities Exchange Act Release No. 57406 February 29, 2008, 73 FR 12236 March 6, 2008 SRDTC
200706 providing that an Interested Person has five business days from the date on which DTC first informs it of a sanction or a denial of membership in which to request a hearing..

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transparency for Participants with respect to their rights to a hearing under the Rules.
b. Align the DTC Process of Appointing a Hearing Panel With the NSCC Panel Selection Process Currently, Section 5 of Rule 22
provides that a hearing requested in connection with any matter which is not deemed a Minor Rule Violation as defined in Section 4 of this Rule, and any hearing requested in connection with an appeal of the decision of the Minor Rule Violation Panel, shall be before three members of a panel a Panel selected by the Chairman of the Board from a pool a Pool of Persons employed by or partners of Participants. Persons shall be appointed members of the Pool by the Board of Directors or the Chairman of the Board.
Notwithstanding the above, the Panel shall not include any Person who had responsibility for the action or proposed action of the Corporation as to which the hearing relates. 26
In contrast, Rule 37 of the National Securities Clearing Corporation NSCC Rules and Procedures NSCC
Rules provides that the hearing would be before a panel of three individuals drawn from members of the Board of Directors or their designees, and that the members of the Panel would be selected by the Chairman of the Board. Further, in addition to excluding from the panel any individual who had responsibility for the action or proposed action of NSCC as to which the hearing relates, NSCC Rule 37 also excludes any individual representing the Interested Person against which the proposed action is to be taken.27
DTC believes that panel selection process set forth in NSCC Rule 37
provides i a more straightforward and streamlined process than the current DTC process, which requires the additional step of selecting a Pool of potential panelists, a subset of which would then be selected for the Panel, and ii clearer guidance about avoiding conflicts of interests on the Panel.
Further, DTC believes that aligning its 26 Supra
note 5.
Section 4 of NSCC Rule 37 A hearing on any matter not covered by Section 2 of this rule, or a further hearing requested pursuant to Section 2
shall be before a panel hereinafter the Panel of three individuals drawn from members of the Board of Directors or their designees. The members of the Panel shall be selected by the Chairman of the Board. Notwithstanding the above, the Panel shall not include any individual representing the Interested Person against which the proposed action is to be taken, nor any person who had responsibility for the action or proposed action of the Corporation as to which the hearing relates..
The NSCC Rules are available at http
www.dtcc.com/legal/rules-and-procedures.aspx.
27 See
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Panel selection process with that of NSCC would provide enhanced efficiency for the DTC hearing process, as well as provide transparency and consistent treatment for Participants, particularly for a Participant that is a common member of NSCC that may have concurrent rights to a hearing under the Rules and the NSCC Rules.
Accordingly, DTC is proposing to replace the first two paragraphs of Section 5 of Rule 22 with the following two paragraphs:
A hearing requested in connection with any matter which is not deemed a Minor Rule Violation as defined in Section 4 of this Rule, and any hearing requested in connection with an appeal of the decision of the Minor Rule Violation Panel, shall be before three members of a panel a Panel drawn from members of the Board of Directors or their designees. The members of the Panel shall be selected by the Chairman of the Board.
Notwithstanding the above, the Panel shall not include any individual representing the Interested Person against which the proposed action will be taken, nor any Person who had responsibility for the action or proposed action of the Corporation as to which the hearing relates.

B. Align Rule 23 Bills Rendered With NSCC Rule 26 Bills Rendered Rule 23 Bills Rendered currently provides that the Corporation shall render bills to Participants in the manner specified in the Procedures for charges on account of services provided or fines imposed. DTC is proposing to amend this Rule to align with NSCC
Rule 26 Bills Rendered, which provides additional details about the process that is applicable to both DTC
and NSCC.28 Specifically, DTC would amend Rule 23 to state that the Corporation shall render bills to Participants for charges on account of services provided or fines imposed and shall charge their respective accounts with the amounts thereof on or before such date as determined by the Corporation from time to time. DTC
believes that aligning the language of Rule 23 with the analogous NSCC Rule 26 would provide transparency and consistent treatment of the rendering and payment of bills for Participants, in particular for Participants that are also members of NSCC.
28 NSCC Rule 26 provides, in relevant part, that the Corporation will render bills to Members . . .
for charges on account of the business of any month and will charge their respective accounts with the amounts thereof on or before such date as determined by the Corporation from time to time.
Supra note 27.

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