[Federal Register Volume 78, Number 172 (Thursday, September 5, 2013)]
[Notices]
[Pages 54713-54715]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-21534]
[[Page 54713]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-70283; File No. SR-ICEEU-2013-08]
Self-Regulatory Organizations; ICE Clear Europe Limited; Notice
of Filing and Immediate Effectiveness of Proposed Rule Change To
Account for Sections 1471 through 1474 of the U.S. Internal Revenue
Code and U.S. Treasury Regulations and Other Guidance Thereunder
(Commonly Known as the Foreign Account Tax Compliance Act or ``FATCA'')
August 29, 2013.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on August 20, 2013, ICE Clear Europe Limited (``ICE Clear Europe'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule changes described in Items I and II below, which Items
have been prepared primarily by ICE Clear Europe. ICE Clear Europe
filed the proposal pursuant to Section 19(b)(3)(A)(ii) \3\ of the Act
and Rule 19b-4(f)(2) \4\ thereunder so that the proposal was effective
upon filing with the Commission. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A)(ii).
\4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
ICE Clear Europe submits proposed amendments to its CDS Procedures,
as described below, in connection with the implementation of sections
1471 through 1474 of the Internal Revenue Code of 1986, as amended,
which sections were enacted as part of the Foreign Account Tax
Compliance Act, and the Treasury Regulations or other official
interpretations thereunder (collectively ``FATCA'').
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, ICE Clear Europe 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. ICE Clear Europe has prepared summaries,
set forth in sections A, B and C below, of the most significant aspects
of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
ICE Clear Europe submits proposed amendments to its CDS Procedures
in order to clarify the scope of the obligation of CDS Clearing Members
to pay additional amounts to (or otherwise indemnify) ICE Clear Europe
for any tax imposed or collected pursuant to FATCA in connection with
CDS clearing.
FATCA was enacted on March 18, 2010, as part of the Hiring
Incentives to Restore Employment Act, and became effective, subject to
transition rules, on January 1, 2013. The U.S. Treasury Department
finalized and issued various implementing regulations (``FATCA
Regulations'') \5\ on January 17, 2013. FATCA's intent is to curb tax
evasion by U.S. citizens and residents through their use of offshore
bank accounts. FATCA generally requires foreign financial institutions
(``FFIs'') \6\ to become ``participating FIs'' by entering into
agreements with the Internal Revenue Service (``IRS''). Under these
agreements, FFIs are required to report to the IRS information on U.S.
persons and entities that have (directly or indirectly) accounts with
these FFIs. If an FFI does not enter into such an agreement with the
IRS, FATCA will generally impose a 30% withholding tax on U.S.-source
interest, dividends and other periodic amounts paid to such
``nonparticipating FFI'' (``Income Withholding''), as well as on the
payment of gross proceeds arising from the sale, maturity or redemption
of securities or any instrument yielding U.S.-source interest and
dividends (``Gross Proceeds Withholding,'' and, together with Income
Withholding, ``FATCA Withholding''). The 30% FATCA Withholding taxes
will apply to payments made to a nonparticipating FFI acting in any
capacity, including payments made to a nonparticipating FFI that is not
the beneficial owner of the amount paid and acting only as a custodian
or other intermediary with respect to such payment. To the extent that
U.S.-source interest, dividend, and other periodic amount or gross
proceeds payments are due to a nonparticipating FFI in any capacity, a
U.S. payor transmitting such payments to the nonparticipating FFI will
be liable to the IRS for any amounts of FATCA Withholding that the U.S.
payor should, but does not, withhold and remit to the IRS.
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\5\ Regulations Relating to Information Reporting by Foreign
Financial Institutions and Withholding on Certain Payments to
Foreign Financial Institutions and Other Foreign Entities, 78 FR
5874 (Apr. 15, 2013).
\6\ Non-U.S. financial institutions are referred to as ``foreign
financial institutions'' or ``FFIs'' in the FATCA Regulations.
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In addition, under FATCA, a U.S. payor could be required to deduct
Income Withholding with regard to a participating FFI if either: (x)
the participating FFI makes a statutory election to shift its
withholding responsibility under FATCA to the U.S. payor; or (y) the
U.S. payor is required to ignore the actual recipient and treat the
payment as if made instead to certain owners, principals, customers,
account holders or financial counterparties of the participating FFI.
As an alternative to FFIs entering into individual agreements with
the IRS, the U.S. Treasury Department provided another means of
complying with FATCA for FFIs which are resident in Non-U.S.
jurisdictions that enter into intergovernmental agreements (``IGAs'')
with the United States.\7\ Generally, such a jurisdiction (``FATCA
Partner'') would pass laws to eliminate the conflicts of law issues
that would otherwise make it difficult for FFIs in its jurisdiction to
collect the information required under FATCA and transfer this
information, directly or indirectly, to the United States. An FFI
resident in a FATCA Partner jurisdiction would either transmit FATCA
reporting to its local competent tax authority, which in turn would
transmit the information to the IRS, or the FFI would be authorized/
required by FATCA Partner law to enter into an FFI agreement and
transmit FATCA reporting directly to the IRS. Under both IGA models,
payments to such FFIs would not be subject to FATCA Withholding so long
as the FFI complies with the FATCA Partner's laws mandated in the IGA.
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\7\ As of the date of this proposed rule change filing, the
United Kingdom, Mexico, Ireland, Switzerland, Spain, Norway,
Denmark, Italy, and Germany have signed or initialed an IGA with the
United States. The U.S. Treasury Department has announced that it is
engaged in negotiations with more than 50 countries and
jurisdictions regarding entering into an IGA.
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In preparation for FATCA's implementation, FFIs are being asked to
identify their expected FATCA status as a condition of continuing to do
business. Customary legal agreements in the financial services industry
already contain provisions allocating the risk of any FATCA Withholding
tax that will need to be collected, and requiring that, upon FATCA's
effectiveness, foreign
[[Page 54714]]
counterparties must certify (and periodically recertify) their FATCA
status using the relevant tax forms that the IRS has announced it will
provide. Advance disclosure by an FFI client or counterparty would
permit a withholding agent to readily determine whether it must, under
FATCA, withhold on payments it makes to the FFI. If an FFI fails to
provide appropriate compliance documentation to a withholding agent,
such FFI would be presumed to be a nonparticipating FFI and the
withholding agent will be obligated to withhold on certain payments.
FATCA will require ICE Clear Europe to deduct FATCA Withholding on
payments to certain clearing members arising from certain transactions
processed by ICE Clear Europe on behalf of such clearing members.
Because FATCA treats any entity holding financial assets for the
account of others as a ``financial institution,'' ICE Clear Europe
believes that almost all of its clearing members which are treated as
non-U.S. entities for federal income tax purposes will likely be FFIs
under FATCA (collectively, ``FFI Members''). As such, ICE Clear Europe
will be liable to the IRS for any failures to withhold correctly under
FATCA on payments made to its FFI Members.
Accordingly, the proposed amendments are intended to clarify the
scope of the obligation of CDS Clearing Members to pay additional
amounts to (or otherwise indemnify) ICE Clear Europe for any tax
imposed or collected as a result of FATCA. This also includes any tax
that results from current or future regulations or interpretations of
FATCA, as well as any fiscal or regulatory legislation, rules or
practices adopted pursuant to any IGA entered into in connection with
the implementation of FATCA.
ICE Clear Europe believes that the proposed rule changes are
consistent with the requirements of Section 17A of the Act \8\ and the
regulations thereunder applicable to it. Specifically, the proposed
rule changes promote the prompt and accurate clearing and settlement of
CDS transactions by eliminating any uncertainty in payment settlement
that would arise if ICE Clear Europe were subject to FATCA Withholding
Obligations. The proposed rule changes are also consistent with Section
17A of the Act because they provide for the equitable allocation of
reasonable due, fees and other charges among ICE Clear Europe's CDS
Clearing Members. Finally, the proposed rule changes allow ICE Clear
Europe to be in compliance with FATCA Regulations.
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\8\ 15 U.S.C. 78q-1.
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B. Self-Regulatory Organization's Statement on Burden on Competition
ICE Clear Europe does not believe the proposed rule changes would
have any impact, or impose any burden, on competition. The proposed
rule changes would apply to all CDS Clearing Members of ICE Clear
Europe that may be subject to FATCA. The proposed rule changes are for
the purpose of ensuring that ICE Clear Europe, as well as its CDS
Clearing Members, are in compliance with FATCA Regulations and thereby
permit the operation of ICE Clear Europe's clearing services consistent
with the FATCA Regulations. As a result, ICE Clear Europe believes that
the obligations imposed under the proposed rule changes are appropriate
in furtherance of the purposes of the Act, and should not have any
effect on the competitive position of CDS Clearing Members.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
ICE Clear Europe has solicited written comments relating to the
proposed rule change, but has not received any written comments to
date. ICE Clear Europe will notify the Commission of any written
comments received by ICE Clear Europe.
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) \9\ of the Act and Rule 19b-4(f)(2) \10\
thereunder because it primarily establishes a fee or other charge
imposed by ICE Clear Europe on its CDS Clearing Members. Specifically,
the proposed rule changes will require CDS Clearing Members to pay
additional amounts to ICE Clear Europe for tax imposed or collected
pursuant to FATCA in connection with CDS clearing. At any time within
60 days of the filing of the proposed 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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\9\ 15 U.S.C. 78s(b)(3)(A).
\10\ 17 CFR 240.19b-4(f)(2).
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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-ICEEU-2013-08 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 submissions should refer to File Number SR-ICEEU-2013-08. 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 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 Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such filings also will be available
for inspection and copying at the principal office of ICE Clear Europe
and on ICE Clear Europe's Web site at https://www.theice.com/notices/Notices.shtml?regulatoryFilings.
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-ICEEU-2013-08
and should be submitted on or before September 26, 2013.
[[Page 54715]]
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-21534 Filed 9-4-13; 8:45 am]
BILLING CODE 8011-01-P