[Federal Register Volume 76, Number 238 (Monday, December 12, 2011)]
[Notices]
[Pages 77281-77283]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-31737]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-65901; File No. SR-DTC-2011-10]
Self-Regulatory Organizations; The Depository Trust Company;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend Rules Relating to Existing Operational Arrangements Involving
Eligibility of Securities
December 6, 2011.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on November 25, 2011, The
Depository Trust Company (``DTC'') filed with the Securities and
Exchange Commission (``Commission'') the proposed rule change described
in Items I and II below, which items have been prepared primarily by
DTC. DTC filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) and Rule 19b-4(f)(4) thereunder so that the proposed
rule change was effective upon filing with the Commission.\2\ The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested parties.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78s(b)(3)(A)(iii) and 17 CFR 240.19b-4(f)(4).
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I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change
The purpose of this proposed rule change is to update the existing
contractual operational arrangements necessary for a securities issue
to become and remain eligible for the services at DTC.\3\
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\3\ The text of the proposed rule change is attached as Exhibit
5 to DTC's filing, which is available at http://www.dtcc.com/downloads/legal/rule_filings/2011/dtc/2011-10.pdf.
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II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, DTC included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. DTC has prepared summaries, set forth in sections (A),
(B), and (C) below, of the most significant aspects of these
statements.\4\
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\4\ The Commission has modified the text of the summaries
prepared by NSCC.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
(1) Purpose
DTC's operational arrangement (``Operational Arrangement'' or
``OA'') was first published in June 1987 and subsequently updated in
June 1988, February 1992, December 1994, January 1998, May 2002, and
most recently in January 2009.\5\ The OA is designed to maximize the
number of issues of securities that may be made eligible for DTC
services and to provide for the orderly processing of such securities
and the timely payments to DTC participants. DTC's experience
demonstrates that when participants, issuers, underwriters, agents (as
such terms are defined in the DTC rules or in the OA), and their
counsel are aware of DTC's requirements, those requirements may be more
readily met. DTC is now proposing to update the OA to clarify DTC's
processes and to mitigate certain risk associated with those processes.
Additionally, DTC is proposing to make several ministerial changes,
including changes related to methods of notification, and to add
clarifying language to provide a more concise description of OA
procedures.
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\5\ Securities Exchange Act Release 24818 (August 19, 1987), 52
FR 31833 (August 24, 1987) (File No. SR-DTC-87-10); 25948 (July 27,
1988), 53 FR 29294 (August 3, 1988) (File No. SR-DTC-88-13); 30625
(April 30, 1992), 57 FR 18534 (April 30, 1992) (File No. SR-DTC-92-
06); 35342 (February 8, 1995), 60 FR 8434 (February 14, 1995) (File
No. SR-DTC-94-19); 39894 (April 21, 1998), 63 FR 23310 (April 28,
1998) (File No. SR-DTC-97-23); 45994 (May 29, 2002), 68 FR 35037
(June 11, 2003) (File No. SR-DTC-2002-02); 59199 (January 6, 2009),
74 FR 1266 (January 12, 2009) (File No. SR-DTC-2008-14).
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The primary differences between the proposed amended OA and the OA
as filed with the Commission in 2009 are as follows:
1. Matters that were previously the subject of proposed rule change
filings with the Commission but were never incorporated into the OA:
a. In March 2010, DTC filed with the Commission a proposed rule
change modifying the required notification method for the assumption or
termination of transfer agent services.\6\ DTC is now proposing to
update the OA to reflect those methods for notifying DTC of transfer
agency changes.
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\6\ Securities Exchange Release Act No. 61620 (March 1, 2010) 75
FR 10539 (March 8, 2010) (File No. SR-DTC-2010-04).
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b. In May 2010, DTC filed with the Commission a proposed rule
change updating DTC procedures regarding the Participant Tender Offer
Program in order to provide DTC participants with a more efficient
process for making elections regarding corporate action events which
DTC deemed appropriate for processing.\7\ DTC is now proposing to
update the OA to reflect that process.
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\7\ For Securities Exchange Act Release No. 62119 (May 18, 2010)
75 FR 29374 (May 25, 2010) (File No. SR-DTC-2010-08).
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c. In November 2010, DTC filed with the Commission a proposed rule
change to automate the approval process relating to providing trustee
access to the Security Position Report Service at the point of
eligibility.\8\ DTC is now proposing to update the OA to reflect that
process.
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\8\ Securities Exchange Release Act No. 63245 (November 4, 2010)
75 FR 69150 (November 10, 2010) (File No. SR-DTC-2010-10).
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d. In April 2011, the Commission approved a DTC proposed rule
change amending the requirements for transfer agents to maintain a
balance certificate in the Fast Automated Securities Transfer Program
(``FAST'').\9\ DTC is now proposing to update the OA to specify that
transfer agents participating in FAST that act for issues participating
in the Direct Registration System no
[[Page 77282]]
longer need to maintain a balance certificate.
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\9\ Securities Exchange Act Release No. 64191 (April 5, 2011),
76 FR 20061 (April 11, 2011) (File No. SR-DTC-2010-15).
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e. In August 2011, the Commission approved a DTC proposed rule
change relating to processing early redemptions of certain certificates
of deposit.\10\ DTC is now proposing to update the OA to reflect those
changes.
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\10\ Securities Exchange Act Release Numbers 64864 (July 12,
2011) 76 FR 42149 (July 18, 2011) (File No. SR-DTC-11-06).
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2. In January 2011, DTC published an Important Notice to provide
issuers and their transfer agents guidance on key criteria and
processes applicable to eligibility for book-entry delivery and
depository services.\11\ DTC is now proposing to update the OA in order
to be consistent with the Important Notice and to clarify DTC's
eligibility process.
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\11\ DTC Important Notice B0006-11 available at http://www.dtcc.com/downloads/legal/imp_notices/2011/dtc/set/0006-11.pdf.
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3. For purposes of consistency, DTC is proposing to include an
Important Legal Information Section in the OA, which adopts language
from current DTC's Rules and Procedures.
4. The following processes in order to mitigate risk associated
with processing:
a. DTC is proposing to require an issuer or its transfer agent
obtain a new CUSIP number from Standard & Poor's CUSIP Service Bureau
in order to facilitate the adequate processing of a corporate action
event, such as an interest payment. This change should reduce the
number of processing problems associated with corporate.
b. DTC is proposing to add language to the OA to establish that the
record date for equity securities must coincide with the established
ex-date announced by the applicable stock exchange on which the
security is listed. Additionally, DTC is proposing to require that if a
security is listed on an exchange or trading in the secondary market,
the issuer must distribute a shareholder notice to the respective
exchange that announces the issuer's intent to effect a corporate
action. These changes are consistent with current practice and should
help mitigate risk associated with corporate actions.
c. DTC is proposing to update the OA to require that agents send
payments of less than $1 billion in same-day funds no later than 1 p.m.
eastern time and to send payments of $1 billion or more in same day
funds no later than 12 p.m. eastern time in order to facilitate the
timely processing of payments. This change reflects the current
industry practice relating to reorganization payments.
d. DTC is proposing to require issuer and their agents to annually
certify that their bank account numbers on DTC's records are accurate.
e. DTC is proposing to codify established practice of requiring the
issuer or agent to provide DTC a notice of reduction in the stock
distribution or dividend amount due DTC as a result of the reduction of
treasury or repurchased shares (i.e., an issuer ``buy back'') held on
deposit by DTC on record date. As proposed, the issuer or agent will be
required to provide specified information together with the participant
or participants' confirmation letters preferable five business days but
no fewer than three business days prior to the payable date for that
security. Failure of a participant to comply with notification to DTC
to effect timely adjustments to the participant's accounts could
jeopardize the same-day distribution of payments to the participant and
beneficial owners holding through it. DTC is also proposing to add a
disincentive fee for participants that submit instructions to DTC
outside of the established timeframes.
5. DTC is proposing to include corrections and clarifications in
the OA relating to corporate action notification and processing
requirements. These changes reflect current practice with agents and
include requirements for what needs to be provided to DTC in the event
that the terms of an offer are amended.
(2) Statutory Basis
The proposed rule change is consistent with the requirements of the
Act and the rules and regulations thereunder applicable to DTC because
it should facilitate the prompt and accurate clearance and settlement
of securities transactions by clarifying provisions in the DTC's OA
pertaining to existing eligibility requirements and processes. In so
doing, these clarifications should in turn expedite the process of
making securities eligible for DTC services and reduce risk associated
with processing corporate reorganization events.
(B) Self-Regulatory Organization's Statement on Burden on Competition
DTC does not believe that the proposed rule change would impose any
burden on competition.
(C) Self-Regulatory Organization's Statement on Comments on the
Proposed Rule Change Received From Members, Participants or Others
Written comments relating to the proposed rule change have not been
solicited DTC.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective upon filing pursuant
to Section 19(b)(3)(A)(iii) of the Act \12\ and Rule 19b-4(f)(4) \13\
thereunder because it is a change in an existing service that does not
adversely affect the safeguarding of securities or funds in the custody
or control of the clearing agency and does not significantly affect the
respective rights or obligations of the clearing agency or persons
using the service. At any time within sixty days of the filing of such
rule change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.
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\12\ 15 U.S.C. 78s(b)(3)(A)(iii).
\13\ 17 CFR 240.19b-4(f)(4).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml) or
Send an email to [email protected]. Please include
File Number SR-DTC-2011-10 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submission should refer to File Number SR-DTC-2011-10. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than
[[Page 77283]]
those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Section, 100 F Street
NE., Washington, DC 20549-1090, on official business days between the
hours of 10 a.m. and 3 p.m. Copies of such filings will also be
available for inspection and copying at the principal office of NSCC
and on NSCC's Web site at http://www.dtcc.com/downloads/legal/rule_filings/2011/dtc/2011-10.pdf. All comments received will be posted
without change; the Commission does not edit personal identifying
information from submissions. You should submit only information that
you wish to make available publicly. All submissions should refer to
File Number SR-DTC-2011-10 and should be submitted on or before January
3, 2012.
For the Commission by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2011-31737 Filed 12-9-11; 8:45 am]
BILLING CODE 8011-01-P