Self-Regulatory Organizations; The Depository Trust Company; Order Approving a Proposed Rule Change Relating to Eliminating the SRO Requirement as a Condition of DTC-Eligibility for Securities That Are Eligible for Resale Under Rule 144A Under the Securities Act of 1933, 7941-7942 [E9-3573]
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Federal Register / Vol. 74, No. 33 / Friday, February 20, 2009 / Notices
Extension:
Rule 15g–6;OMB Control No. 3235–0395;
SEC File No. 270–349.
SECURITIES AND EXCHANGE
COMMISSION
Notice is hereby given that pursuant
to the Paperwork Reduction Act of 1995
(44 U.S.C. 3501 et seq.), the Securities
and Exchange Commission
(‘‘Commission’’) is soliciting comments
on the existing collection of information
provided for in the following rule: Rule
15g–6—Account statements for penny
stock customers (17 CFR 240.15g–6)
under the Securities Exchange Act of
1934 (15 U.S.C. 78a et seq.). The
Commission plans to submit this
existing collection of information to the
Office of Management and Budget
(‘‘OMB’’) for extension and approval.
Rule 15g–6 requires brokers and
dealers that sell penny stocks to provide
their customers monthly account
statements containing information with
regard to the penny stocks held in
customer accounts. The purpose of the
rule is to increase the level of disclosure
to investors concerning penny stocks
generally and specific penny stock
transactions.
The Commission estimates that
approximately 240 broker-dealers will
spend an average of 90 hours annually
to comply with this rule. Thus, the total
compliance burden is approximately
21,600 burden-hours per year.
Written comments are invited on: (a)
Whether the proposed collection of
information is necessary for the proper
performance of the functions of the
agency, including whether the
information shall have practical utility;
(b) the accuracy of the agency’s
estimates of the burden of the proposed
collection of information; (c) ways to
enhance the quality, utility, and clarity
of the information to be collected; and
(d) ways to minimize the burden of the
collection of information on
respondents, including through the use
of automated collection techniques or
other forms of information technology.
Consideration will be given to
comments and suggestions submitted in
writing within 60 days of this
publication.
Comments should be directed to:
Charles Boucher, Director/Chief
Information Officer, Securities and
Exchange Commission, C/O Shirley
Martinson, 6432 General Green Way,
Alexandria, Virginia 22312 or send an email to: PRA_Mailbox@sec.gov.
Comments must be submitted within 60
days of this notice.
[Release No. 34–59384; File No. SR–DTC–
2008–13]
Dated: February 13, 2009.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9–3580 Filed 2–19–09; 8:45 am]
BILLING CODE 8011–01–P
VerDate Nov<24>2008
17:55 Feb 19, 2009
Jkt 217001
Self-Regulatory Organizations; The
Depository Trust Company; Order
Approving a Proposed Rule Change
Relating to Eliminating the SRO
Requirement as a Condition of DTCEligibility for Securities That Are
Eligible for Resale Under Rule 144A
Under the Securities Act of 1933
February 11, 2009.
I. Introduction
On October 9, 2008, The Depository
Trust Company (‘‘DTC’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) a proposed rule change
pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’).1 On December 17, 2008, the
Commission published notice of the
proposed rule change in the Federal
Register to solicit comments from
interested persons.2 The Commission
received no comment letters in response
to the proposed rule change. For the
reasons discussed below, the
Commission is approving the proposed
rule change.
II. Description
Prior to this rule change, Rule 144A
securities,3 other than Investment Grade
Securities, were eligible for DTC’s
deposit, book-entry delivery, and other
depository services provided, in part,
that such securities were included in an
‘‘SRO Rule 144A System’’ (frequently
referred to as the ‘‘SRO Requirement’’),
such as the NASD’s PORTAL Market
System.4
Under this rule change, DTC will
eliminate the SRO Requirement thereby
resulting in a uniform procedure for
making all Rule 144A Securities DTCeligible. Issuers and participants will
continue to be responsible for
1 15
U.S.C. 78s(b)(1).
2 Securities Exchange Act Release No. 59088 (Dec.
11, 2008), 73 FR 76688.
3 Rule 144A, 17 CFR 230.144A, provides a safeharbor from the registration requirements of the
Securities Act for resales to qualified institutional
buyers (‘‘QIBs’’) of certain restricted securities that
when issued were not of the same class as securities
listed on a national securities exchange registered
under the Act. Rule 144A(d)(2), 17 CFR
230.144A(d)(2), requires that the seller and any
person acting on its behalf take reasonable steps to
ensure that the purchaser is aware that the seller
may rely on the safe-harbor provided by Rule 144A.
4 Securities Exchange Release No. 33327 (Dec. 13,
1993), 58 FR 67878 (Dec. 22, 1993) [File No. SR–
DTC–90–06]. ‘‘Investment Grade Securities’’ are
defined in that Commission order as nonconvertible
debt securities and nonconvertible preferred stock
which are in one of the top four categories by a
nationally recognized statistical rating organization.
PO 00000
Frm 00092
Fmt 4703
Sfmt 4703
7941
determining that their deposit of Rule
144A Securities at DTC and their
transactions in Rule 144A Securities
through DTC’s facilities are in
compliance with existing DTC rules and
the federal securities laws,5 such as:
(i) Rule 2, Section 8, of DTC’s rules:
‘‘In connection with their use of the
Corporation’s [DTC’s] services,
Participants and Pledgees must comply
with all applicable laws, including all
applicable laws relating to securities,
taxation and money laundering.’’
(ii) DTC’s ‘‘Operational Arrangements
(Necessary for an Issue to Become and
Remain Eligible for DTC Services)’’
relating to BEO issues being made
eligible for DTC services: ‘‘Issuer
recognizes that DTC does not in any
way undertake to, and shall not have
any responsibility to, monitor or
ascertain the compliance of any
transactions in the Securities with the
following, as amended from time to
time: (1) Any exemptions from
registration under the Securities Act of
1933; (2) the Investment Company Act
of 1940; (3) the Employee Retirement
Income Security Act of 1974; (4) the
Internal Revenue Code of 1986; (5) any
rules of any self-regulatory
organizations (as defined under the
Securities Exchange Act of 1934); or (6)
any other local, state, federal, or foreign
laws or regulations there under.’’ This
and other representations made by
issuers to DTC pursuant to the DTC
Operational Arrangements are mirrored
in the Letter of Representations that
DTC receives from issuers in connection
with their deposits of BEO issues with
DTC.
(iii) When a Rule 144A Security is
made DTC eligible, the issuer will
continue to be required to execute a
copy of the rider to the Letter of
Representation in the form it appeared
prior to this rule change except that the
reference to the SRO Requirement will
be deleted.
III. Discussion
The Commission finds that the
proposed rule change is consistent with
the requirements of the Act and the
rules and regulations thereunder
5 In 1994, in an order clarifying certain language
in the Rule 144A Approval Order, the Commission
concurred in the position taken by DTC that ‘‘Rule
5 [of DTC’s rules] does not require DTC to
determine whether securities, when deposited at
DTC, may be transferred lawfully by book-entry in
light of the Federal securities law.’’ Order
Approving Proposed Rule Change Relating to a
Clarification of Rule 5, Securities Exchange Act
Release No. 33672, 56 SEC Docket 315 (Feb. 23,
1994) (‘‘Rule 5 Clarification Order’’). DTC Rule 5
was amended to delete any implication that DTC
was under any statutory or contractual obligation to
determine whether securities deposited with DTC
could be legally transferred by book-entry.
E:\FR\FM\20FEN1.SGM
20FEN1
7942
Federal Register / Vol. 74, No. 33 / Friday, February 20, 2009 / Notices
applicable to DTC. In particular, the
Commission believes the proposal is
consistent with Section 17A(b)(3)(F) of
the Act,6 which requires that the rules
of a registered clearing agency are
designed to, among other things, remove
impediments to the perfection of the
mechanism of a national system for the
prompt and accurate clearance and
settlement of securities transactions.
When DTC established the SRO
Requirement as a condition of eligibility
for Rule 144A Securities, DTC and the
Commission envisioned that an SRO
Rule 144A System would provide
comprehensive safeguards to facilitate
the SRO’s ability to monitor compliance
with Rule 144A. However, the only SRO
Rule 144A System that was developed
was the NASD’s PORTAL Market
System (‘‘PORTAL’’). Additionally,
PORTAL neither developed as
anticipated nor included the safeguards
contemplated by the DTC requirement.7
Thus, the Commission agrees with DTC
that the SRO Requirement is no longer
necessary or practical to achieve the
purpose for which it was added to
DTC’s rules. In addition, the
requirement appears to deter the
development of alternative markets for
Rule 144A Securities that could avail
traders in 144A Securities of DTC’s
automated clearance, settlement, and
risk management services.8
Accordingly, DTC’s removal of the SRO
Requirement should expand the number
of restricted securities that can become
eligible for DTC’s clearance and
settlement services thus helping to
perfect the mechanism of a national
system for the prompt and accurate
clearance and settlement of securities
transactions, which is consistent with
Section 17A(b)(3)(F) of the Act.
IV. Conclusion
On the basis of the foregoing, the
Commission finds that the proposed
rule change is consistent with the
requirements of the Act and in
particular Section 17A of the Act 9 and
the rules and regulations thereunder.
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,10 that the
proposed rule change (File No. SR–
6 15
U.S.C. 78q-1(b)(3)(F).
Exchange Release No. 56172 (Jul. 31,
2007), 72 FR 44196 (Aug. 7, 2007) [File No. SR–
NASDAQ–2006–65].
8 In a 2007 order approving Nasdaq’s
reestablishment of its PORTAL market, the
Commission acknowledged comments suggesting
such and encouraged DTC to review its SRO
Requirement. Supra note 7.
9 15 U.S.C. 78q–1.
10 15 U.S.C. 78s(b)(2).
7 Securities
VerDate Nov<24>2008
17:55 Feb 19, 2009
Jkt 217001
DTC–2008–13) be and hereby is
approved.11
For the Commission by the Division of
Trading and Markets, pursuant to delegated
authority.12
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9–3573 Filed 2–19–09; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–59409; File No. SR–DTC–
2009–03]
Self-Regulatory Organizations; The
Depository Trust Company; Notice of
Filing and Order Granting Accelerated
Approval of Proposed Rule Change To
Revise Its Fee Schedule
February 13, 2009.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 notice is hereby given that on
January 13, 2009, The Depository Trust
Company (‘‘DTC’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) and on February 13,
2009, amended the proposed rule
change described in Items I, II, and III
below, which items have been prepared
primarily by DTC. The Commission is
publishing this notice and order to
solicit comments on the rule change
from interested parties and to grant
accelerated approval of the proposal.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The purpose of the rule change is to
revise fees for certain DTC services.
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.2
11 In approving the proposed rule change, the
Commission considered the proposal’s impact on
efficiency, competition and capital formation. 15
U.S.C. 78c(f).
12 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 The Commission has modified the text of the
summaries prepared by DTC.
PO 00000
Frm 00093
Fmt 4703
Sfmt 4703
(A) Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
DTC is proposing to revise fees for
certain services. The revisions include:
(i) Decreases of Settlement Services fees
to realign fees with costs incurred in
providing the services; (ii) decreases of
Custody and Dividend service fees to
realign fees with costs scaled to reflect
processing complexity creating fee
simplification and transparency; (iii)
increases of Reorganization services fees
to realign fees with costs incurred due
to low volume tender offers which are
subject to extensive monitoring; and (iv)
increases of Custody and Deposits fees
to realign fees with costs associated
with intensive photocopy and research
requests.
In addition, DTC will increase certain
disincentive fees to discourage activities
that increase industry inefficiencies.
These revisions include: fee increases
for underwriters who have incomplete,
inaccurate, or untimely submission of
information in connection with DTC’s
Underwriting services and fee increases
for Withdrawals by Transfer and
Deposits (in connection with DTC’s
continuing efforts to discourage
continued traffic in physical securities
and to discourage erroneous requests).
The proposed fee revisions are
consistent with DTC’s overall pricing
philosophy to align service fees with
underlying costs, discourage manual
and exception processing, and
encourage immobilization and
dematerialization of securities. Except
as otherwise noted above, the effective
date for these fee adjustments is January
2, 2009.
The proposed rule change is
consistent with Section 17A of the Act,3
as amended, because it clarifies and
updates DTC’s fee schedule. As such, it
provides for the equitable allocation of
fees among its participants.
(B) Self-Regulatory Organization’s
Statement on Burden on Competition
DTC does not believe that the
proposed rule change will have any
impact or 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 yet been
solicited or received. DTC will notify
the Commission of any written
comments received by DTC.
3 15
E:\FR\FM\20FEN1.SGM
U.S.C. 78q–1.
20FEN1
]]>Agencies
[Federal Register Volume 74, Number 33 (Friday, February 20, 2009)]
[Notices]
[Pages 7941-7942]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-3573]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-59384; File No. SR-DTC-2008-13]
Self-Regulatory Organizations; The Depository Trust Company;
Order Approving a Proposed Rule Change Relating to Eliminating the SRO
Requirement as a Condition of DTC-Eligibility for Securities That Are
Eligible for Resale Under Rule 144A Under the Securities Act of 1933
February 11, 2009.
I. Introduction
On October 9, 2008, The Depository Trust Company (``DTC'') filed
with the Securities and Exchange Commission (``Commission'') a proposed
rule change pursuant to Section 19(b)(1) of the Securities Exchange Act
of 1934 (``Act'').\1\ On December 17, 2008, the Commission published
notice of the proposed rule change in the Federal Register to solicit
comments from interested persons.\2\ The Commission received no comment
letters in response to the proposed rule change. For the reasons
discussed below, the Commission is approving the proposed rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ Securities Exchange Act Release No. 59088 (Dec. 11, 2008),
73 FR 76688.
---------------------------------------------------------------------------
II. Description
Prior to this rule change, Rule 144A securities,\3\ other than
Investment Grade Securities, were eligible for DTC's deposit, book-
entry delivery, and other depository services provided, in part, that
such securities were included in an ``SRO Rule 144A System''
(frequently referred to as the ``SRO Requirement''), such as the NASD's
PORTAL Market System.\4\
---------------------------------------------------------------------------
\3\ Rule 144A, 17 CFR 230.144A, provides a safe-harbor from the
registration requirements of the Securities Act for resales to
qualified institutional buyers (``QIBs'') of certain restricted
securities that when issued were not of the same class as securities
listed on a national securities exchange registered under the Act.
Rule 144A(d)(2), 17 CFR 230.144A(d)(2), requires that the seller and
any person acting on its behalf take reasonable steps to ensure that
the purchaser is aware that the seller may rely on the safe-harbor
provided by Rule 144A.
\4\ Securities Exchange Release No. 33327 (Dec. 13, 1993), 58 FR
67878 (Dec. 22, 1993) [File No. SR-DTC-90-06]. ``Investment Grade
Securities'' are defined in that Commission order as nonconvertible
debt securities and nonconvertible preferred stock which are in one
of the top four categories by a nationally recognized statistical
rating organization.
---------------------------------------------------------------------------
Under this rule change, DTC will eliminate the SRO Requirement
thereby resulting in a uniform procedure for making all Rule 144A
Securities DTC-eligible. Issuers and participants will continue to be
responsible for determining that their deposit of Rule 144A Securities
at DTC and their transactions in Rule 144A Securities through DTC's
facilities are in compliance with existing DTC rules and the federal
securities laws,\5\ such as:
---------------------------------------------------------------------------
\5\ In 1994, in an order clarifying certain language in the Rule
144A Approval Order, the Commission concurred in the position taken
by DTC that ``Rule 5 [of DTC's rules] does not require DTC to
determine whether securities, when deposited at DTC, may be
transferred lawfully by book-entry in light of the Federal
securities law.'' Order Approving Proposed Rule Change Relating to a
Clarification of Rule 5, Securities Exchange Act Release No. 33672,
56 SEC Docket 315 (Feb. 23, 1994) (``Rule 5 Clarification Order'').
DTC Rule 5 was amended to delete any implication that DTC was under
any statutory or contractual obligation to determine whether
securities deposited with DTC could be legally transferred by book-
entry.
---------------------------------------------------------------------------
(i) Rule 2, Section 8, of DTC's rules: ``In connection with their
use of the Corporation's [DTC's] services, Participants and Pledgees
must comply with all applicable laws, including all applicable laws
relating to securities, taxation and money laundering.''
(ii) DTC's ``Operational Arrangements (Necessary for an Issue to
Become and Remain Eligible for DTC Services)'' relating to BEO issues
being made eligible for DTC services: ``Issuer recognizes that DTC does
not in any way undertake to, and shall not have any responsibility to,
monitor or ascertain the compliance of any transactions in the
Securities with the following, as amended from time to time: (1) Any
exemptions from registration under the Securities Act of 1933; (2) the
Investment Company Act of 1940; (3) the Employee Retirement Income
Security Act of 1974; (4) the Internal Revenue Code of 1986; (5) any
rules of any self-regulatory organizations (as defined under the
Securities Exchange Act of 1934); or (6) any other local, state,
federal, or foreign laws or regulations there under.'' This and other
representations made by issuers to DTC pursuant to the DTC Operational
Arrangements are mirrored in the Letter of Representations that DTC
receives from issuers in connection with their deposits of BEO issues
with DTC.
(iii) When a Rule 144A Security is made DTC eligible, the issuer
will continue to be required to execute a copy of the rider to the
Letter of Representation in the form it appeared prior to this rule
change except that the reference to the SRO Requirement will be
deleted.
III. Discussion
The Commission finds that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder
[[Page 7942]]
applicable to DTC. In particular, the Commission believes the proposal
is consistent with Section 17A(b)(3)(F) of the Act,\6\ which requires
that the rules of a registered clearing agency are designed to, among
other things, remove impediments to the perfection of the mechanism of
a national system for the prompt and accurate clearance and settlement
of securities transactions.
---------------------------------------------------------------------------
\6\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------
When DTC established the SRO Requirement as a condition of
eligibility for Rule 144A Securities, DTC and the Commission envisioned
that an SRO Rule 144A System would provide comprehensive safeguards to
facilitate the SRO's ability to monitor compliance with Rule 144A.
However, the only SRO Rule 144A System that was developed was the
NASD's PORTAL Market System (``PORTAL''). Additionally, PORTAL neither
developed as anticipated nor included the safeguards contemplated by
the DTC requirement.\7\ Thus, the Commission agrees with DTC that the
SRO Requirement is no longer necessary or practical to achieve the
purpose for which it was added to DTC's rules. In addition, the
requirement appears to deter the development of alternative markets for
Rule 144A Securities that could avail traders in 144A Securities of
DTC's automated clearance, settlement, and risk management services.\8\
Accordingly, DTC's removal of the SRO Requirement should expand the
number of restricted securities that can become eligible for DTC's
clearance and settlement services thus helping to perfect the mechanism
of a national system for the prompt and accurate clearance and
settlement of securities transactions, which is consistent with Section
17A(b)(3)(F) of the Act.
---------------------------------------------------------------------------
\7\ Securities Exchange Release No. 56172 (Jul. 31, 2007), 72 FR
44196 (Aug. 7, 2007) [File No. SR-NASDAQ-2006-65].
\8\ In a 2007 order approving Nasdaq's reestablishment of its
PORTAL market, the Commission acknowledged comments suggesting such
and encouraged DTC to review its SRO Requirement. Supra note 7.
---------------------------------------------------------------------------
IV. Conclusion
On the basis of the foregoing, the Commission finds that the
proposed rule change is consistent with the requirements of the Act and
in particular Section 17A of the Act \9\ and the rules and regulations
thereunder.
---------------------------------------------------------------------------
\9\ 15 U.S.C. 78q-1.
---------------------------------------------------------------------------
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\10\ that the proposed rule change (File No. SR-DTC-2008-13) be and
hereby is approved.\11\
---------------------------------------------------------------------------
\10\ 15 U.S.C. 78s(b)(2).
\11\ In approving the proposed rule change, the Commission
considered the proposal's impact on efficiency, competition and
capital formation. 15 U.S.C. 78c(f).
For the Commission by the Division of Trading and Markets,
pursuant to delegated authority.\12\
---------------------------------------------------------------------------
\12\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-3573 Filed 2-19-09; 8:45 am]
BILLING CODE 8011-01-P
