[Federal Register Volume 64, Number 78 (Friday, April 23, 1999)]
[Notices]
[Pages 20034-20036]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-10199]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-41305; File No. SR-DTC-99-08]
Self-Regulatory Organizations; The Depository Trust Company;
Notice of Filing of Proposed Rule Change Relating to Amendments to its
Organization Certificate and By-Laws
April 16, 1999.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on March 18, 1999, The
Depository Trust Company (``DTC'') filed with the Securities and
Exchange Commission (``Commission'') and on April 12, 1999, amended the
proposed rule change (File No. SR-DTC-99-08) as described in Items I,
II, and III below, which items have been prepared primarily by DTC. The
Commission is publishing this notice to solicit comments from
interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
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I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
Under the proposed rule change, DTC will amend its Organization
Certificate and By-Laws: (1) to increase the size of its Board of
Directors, (2) to redesignate its capital stock, and (3) to modernize
its Certificate of Organization. The amendments are subject to
stockholder approval. DTC anticipates implementing
[[Page 20035]]
the proposed rule change on June 15, 1999.
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 such
statements.\2\
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\2\ The Commission has modified the text of the summaries
prepared by DTC.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
Under the proposed rule change, DTC's Organization Certificate and
By-Laws will be amended as follows:
1. Increasing the Number of Board Directors
The Board of Directors of DTC has unanimously determined to proceed
with a plan for the integration over time of DTC with the National
Securities Clearing Corporation (``NSCC''), and DTC has been advised
that NSCC has taken similar action. An initial step in this plan is to
propose the reelection by shareholders of DTC at this year's annual
meeting and the reelection by the shareholders of NSCC at its annual
meeting in June of the two entities' current Boards of Directors.
Assuming there is no objection by DTC's and NSCC's regulators, the two
current Boards will then be restructured so that one group of
individuals will serve as the Board of Directors for each of the two
companies. Since simply adding DTC's current Board to NSCC's current
Board to achieve uniform Boards would result in certain user and
marketplace organizations having more than one representative on the
uniform Boards, each organization represented will be asked to select
only one representative. Through this process and with the inclusion of
DTC and NSCC management director, the Board of Directors for each
company will be comprised of twenty-seven people.\3\
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\3\ Under the Federal Reserve Act, DTC's may have no more than
twenty-five members on its Board. As a result, after the uniform
Boards are elected DTC's Board will have twenty-five members and two
non-voting advisors, and NSCC's board will have twenty-seven
members.
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DTC's Organization Certificate and By-Laws currently provide for
the number of directors of the Board to be not less than five nor more
than twenty. In order to accommodate the number of directors resulting
from the consolidation plan described above and in order to provide for
a possible limited future expansion of the Board, paragraph ``SEVENTH''
of the Organization Certificate (which after elimination of paragraph
``FOURTH,'' as described below, will become paragraph ``SIXTH'') and
Article II, Section 2.1 of the By-Laws will be amended to provide that
the number of directors be not less than seven nor more than twenty-
five. Section 2.1 of the By-Laws will also be amended to set the number
of directors at twenty-five.
2. Redesignating DTC's Capital Stock
DTC's Organization Certificate currently limits DTC to only one
class of stock, 18,500 shares of capital stock having a par value of
$100,000 per share. All of this stock is issued and outstanding. The
Board of Directors may in the future wish to consider authorizing the
issuance of preferred stock, for example, as part of DTC's program to
strengthen capital. Therefore, paragraph ``THIRD'' will be amended and
paragraph ``FOURTH'' will be eliminated in order to designate the
existing class of capital stock as ``common stock'' and to provide for
1,500,000 shares of preferred stock having a par value of $100,000 per
share.
3. Modernizing the Organization
DTC's Organization Certificate was originally drafted in 1973.
Provisions of the Organization Certificate relating to DTC's powers
refer both explicitly and implicitly to New York State Statutory
provisions that are no longer applicable. The Organization Certificate
also fails to recognize DTC's status as a securities depository
registered with the SEC (registration was required by federal law
enacted two years later in 1975) and to describe more clearly powers
incidental to DTC's role as a securities depository. Accordingly,
paragraph ``THIRTEENTH'' (which after elimination of paragraph
``FOURTH,'' as described above, will become paragraph ``TWELFTH'') will
be amended to correct these deficiencies.
DTC believes that the proposed rule change is consistent with the
requirements of Section 17A(b)(3)(a) of the Act \4\ and the rules and
regulations thereunder applicable to DTC. The proposed rule change will
not affect the safeguarding of securities and funds in DTC's custody or
control or for which it is responsible.
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\4\ 15 U.S.C. 78q-1(b)(3)(A).
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(B) Self-Regulatory Organization's Statement on Burden on Competition
DTC does not believe that the proposed rule change will impose any
burden on competition not necessary or appropriate in furtherance of
the purposes of the Act.
(C) Self-Regulatory Organization's Statement on Comments on the
Proposed Rule Change Received from Members, Participants or Others
Written comments from DTC Participants have not been solicited or
received on the proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing
for Commission Action
Within thirty-five days of the date of publication of this notice
in the Federal Register or within such longer period: (i) As the
Commission may designate up to ninety days of such date if it finds
such longer period to be appropriate and publishes its reasons for so
finding, or (ii) as to which DTC consents, the Commission will:
(A) by order approve such proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.
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. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549.
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 inspection and copying in the
Commission's Public Reference Section, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Copies of such filing also will be available
for inspection and copying at the principal office of DTC. All
submissions should refer to File No. SR-DTC-99-08 and should be
submitted by May 14, 1999.
[[Page 20036]]
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\5\
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\5\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-10199 Filed 4-22-99; 8:45 am]
BILLING CODE 8010-01-M