[Federal Register Volume 59, Number 42 (Thursday, March 3, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-4864]


[[Page Unknown]]

[Federal Register: March 3, 1994]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-33672; File No. SR-DTC-93-14]

 

Self-Regulatory Organizations; The Depository Trust Company; 
Order Approving Proposed Rule Change Relating to a Clarification of 
Rule 5

February 23, 1994.
    On December 20, 1993, The Depository Trust Company (``DTC'') filed 
a proposed rule change (File No. SR-DTC-93-14) with the Securities and 
Exchange Commission (``Commission'') pursuant to Section 19(b)(1) of 
the Securities Exchange Act of 1934 (``Act'')\1\ relating to a 
clarification of DTC Rule 5. On December 29, 1993, notice of the 
proposed rule change was published in the Federal Register to solicit 
comments from interested persons.\2\ No comments were received. For the 
reasons discussed below, the Commission is approving the proposed rule 
change.
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    \1\15 U.S.C. 78s(b)(1) (1988).
    \2\Securities Exchange Act Release No. 33365 (December 21, 
1993), 58 FR 68971.
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I. Description

    The purpose of the proposed rule change is to clarify the meaning 
of DTC Rule 5. On December 13, 1993, the Commission issued an order 
approving a proposed rule change by DTC relating to the eligibility of 
Rule 144A securities at DTC.\3\ In the Rule 144A Order, among other 
things, was the statement that Rule 5, Section 1 of DTC's Rule requires 
DTC to determine whether ``in light of the Federal securities laws, 
particularly the provisions of Rules 144, 144A, and 145, the 
securities, when deposited with DTC, may be lawfully transferred by 
book-entry.''\4\ DTC filed this proposed rule change in order to 
clarify that DTC Rule 5 does not require DTC to determine whether 
securities deposited at DTC may be transferred lawfully pursuant to 
Federal securities laws.\5\
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    \3\Securities Exchange Act Release No. 33327 (December 13, 
1993), 58 FR 67878 (hereinafter Rule 144A Order).
    \4\Id. n. 22 and accompanying text.
    \5\In the near future, DTC plans to adopt and file with the 
Commission as a proposed rule change revisions to Rule 5 that will 
clarify further the meaning of the Rule.
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II. Discussion

    The Commission believes that DTC's proposed rule change is 
consistent with section 17A of the Act and, specifically, with sections 
17A(b) (3) (A) and (F).\6\ Those sections require that the rules of a 
clearing agency be designed to facilitate the prompt and accurate 
clearance and settlement of securities transactions and to protect 
investors and the public interest.
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    \6\15 U.S.C. 78q-1(b) (3) (A) & (F).
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    Notwithstanding the language in footnote 22 of the Rule 144A Order, 
the Commission believes that DTC's interpretation of Rule 5 (i.e., that 
Rule 5 does not require DTC to determine whether securities, when 
deposited at DTC, may be transferred lawfully by book-entry in light of 
Federal securities laws) is a plausible interpretation. Prior to making 
specific issues of Rule 144A securities eligible for DTC's book-entry 
delivery and other depository services, DTC, as part of its procedures, 
requires issuers and transfer agents to make certain representations.
    These representations, together with DTC's periodic review to 
evaluate their effectiveness, serve to indicate that specific issues of 
Rule 144A securities are eligible for DTC services pursuant to the Rule 
144A Order. The Commission is satisfied that DTC's interpretation of 
Rule 5, along with its procedures for the acceptance of Rule 144A 
securities, is consistent with DTC's obligations to facilitate the 
prompt and accurate clearance and settlement of securities transactions 
and to protect investors and the public interest.

III. Conclusion

    It is therefore ordered, Pursuant to section 19(b)(2) of the Act, 
that the proposed rule change (File No. SR-DTC-93-14) be, and hereby 
is, approved.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\7\
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    \7\17 CFR 200.30-3(a)(12) (1990).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-4864 Filed 3-2-94; 8:45 am]
BILLING CODE 8010-01-M