The Direct Registration System (DRS) enables investors to elect to hold their assets on the books and records of their transfer agent in electronic book-entry form. Through DTC’s DRS service, assets can be electronically transferred to and from the transfer agent and broker/dealer.
Issuer’s participating in DRS allow electronic registration of securities directly in an investor’s name on the books of the transfer agent or issuer. DTC’s DRS service facilitates the transfer of those securities between a transfer agent (where shares may be registered in the name of the investor) and a broker in “street name” on the books of DTC, and vice versa. DRS reflects the steep decline over recent years in the number of physical securities certificates issued and their substitution by securities ownership in electronic book-entry form.
Under direct registration book-entry positions, investors electing to have their ownership of securities registered directly on the issuer’s records have the option of a direct registration book-entry position recorded on the books of the transfer agent.(Un-certificated book-entry registration has been widely used in the mutual fund industry for many years.) DRS allows three holding options for investors:
- Physical Certificates: Certificates are registered and issued in the investor’s name. The investor receives all mailings directly from the issuer or its transfer agent, including dividend or interest payments, annual reports, and proxies.
- Street Name Registration: Securities are: (i) registered in the “street name” with DTC’s nominee, Cede & Co., as registered holder on the books of the FAST transfer agent and (ii) credited to the DTC account of the investor’s broker-dealer. While no physical certificate will be issued to the investor, the broker-dealer will issue, at least quarterly, account statements of the investor’s holdings. The broker-dealer will pass through dividends or interest to the investor, as well as provide the investor with mailing material from the issuer or transfer agent.
- Direct Registration: The investor is registered directly on the books of the transfer agent or issuer without the issuance of a physical certificate. While the investor does not receive a physical certificate, he or she receives a statement and periodic (at least yearly) account statements from the transfer agent or issuer evidencing his or her holdings. Dividend or interest payments, proxy materials, annual reports, etc., are mailed from the issuer or its transfer agent directly to the investor.
Who Can Use the Service
Issuers who act as their own transfer agent, transfer agents and DTC participants can use the service. Issuers and transfer agents must apply for DRS eligibility and the transfer agent must participate in DTC’s Fast Automated Securities Transfer (FAST) program. Prior to participating in the DRS process, the a user (a participant or transfer agent) is required to participate in either Surety or Insurance program approved byDTC, or provide proof of similar coverage from an approved surety/insurance provider to provide indemnification against false instructions.
- Provides accurate, quick and cost-efficient transfers between issuers or their transfer agents and broker/dealers.
- Provides for secure electronic transfer.
- Reduces the risk associated with physical securities processing of paper, including turnaround delays, mail losses and risks associated with stolen, forged or counterfeit securities.
- Supports the industry’s move to a dematerialized security environment and shortened settlement timeframes.
How the Service Works
Through the NWT1 function on DTC’s participant Terminal System (PTS), the Auto Night Withdrawal by Transfer on the participant Browser System (PBS), or the CF2WTC file transfer protocol, a participant transmits registration instructions to DTC, which forwards them to the FAST transfer agent. The submitting participant/broker-dealer selects an “S” for statement on the instructions. When the transfer agent receives the instructions, the agent establishes a book-entry account for the investor on its records and mails a transaction advice to the investor. This process creates the investor’s DRS account.
Through the DRS Profile system, an investor’s broker requests securities to be transferred from the book-entry DRS account at the issuer or transfer agent to the investor’s broker’s account at DTC. The request to transfer the securities is entered via the DRSP function on PTS, the Direct Registration System Profile Modification (participant) function on PBS, or via the Depository’s DRX1_5 file transfer protocol. The user enters proprietary information about the registered account, including the customer’s account number, account registration, share quantity, tax ID number, etc. A valid surety or insurance number must be submitted with the instructions from the initiating organization. The receiving institution validates the information and responds with a corresponding deliver order through DRS.
For More Information
- Relationship Management at 800-422-0582.
- Client Account Representative Team at 212-855-4270
- Product Manager: Joe Clemente firstname.lastname@example.org / (813) 470-1228