[Federal Register Volume 59, Number 54 (Monday, March 21, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-6480]


[[Page Unknown]]

[Federal Register: March 21, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-33756; File No. SR-MSTC-94-02]

 

Self-Regulatory Organizations; Midwest Securities Trust Company; 
Filing and Immediate Effectiveness of a Proposed Rule Change Relating 
to the Legal Expert Service

March 11, 1994.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on January 21, 1994, Midwest 
Securities Trust Company (``MSTC'') filed with the Securities and 
Exchange Commission (``Commission'') the proposed rule change as 
described in Items I, II, and III below, which Items have been prepared 
primarily by MSTC. 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) (1988).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The proposed rule change establishes a fee for participants who use 
MSTC's Legal Expert System and adds an interpretation under MSTC's 
Rules that describes the Legal Expert System and MSTC's liability in 
connection with the information provided by the Legal Expert System.
    Additions are italicized.

Article II

Rule 1. Delivery and Withdrawal of Securities

Sec. 1. Delivery of Securities

* * * Interpretations and Policies

    01. In order to assist Participants in determining whether 
certain Securities that Participants intend to deliver for deposit 
are in good deliverable form, Participants may use the Corporation's 
Legal Expert System. The Legal Expert System is a menu-driven 
computer program that identifies all documentation necessary to 
effect a legal transfer. While the Legal Expert System is designed 
to provide the best available information with respect to the 
covered subject matter, occasional errors in content may occur. As a 
result, the Corporation makes no representation regarding the 
accuracy of information provided. The Corporation also makes no 
other warranty or representation, either express or implied, and the 
Corporation does not warrant the accuracy, completeness, 
performance, currentness, merchantability, or fitness for a 
particular purpose of the Legal Expert System or the information 
contained therein. The Corporation shall not be liable to any 
Participant or any other person or entity for any damage caused in 
whole or in part by Participants' use of the Legal Expert System. In 
no event will the Corporation be liable as a result of Participants' 
reliance upon information contained in the Legal Expert System or 
for any consequential, incidental, indirect, punitive, special or 
similar damages, even if advised of the possibility of such damages.
    The Legal Expert System should be used with the understanding 
that the Corporation is not engaged in rendering legal or other 
professional advice. If legal advice or other expert assistance is 
required, the services of a competent professional person should be 
sought.\2\
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    \2\The disclaimer of liability language included in the 
Interpretations and Policies 01 does not in any way effect MSTC's 
obligations and responsibilities with respect to and in connection 
with the deliverance and safekeeping of securities. Letter from 
David T. Rusoff, Foley & Lardner [counsel for MSTC], to Jerry W. 
Carpenter, Branch Chief, Division of Market Regulation, Commission 
(March 10, 1994).
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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, MSTC 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. MSTC 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

    The purpose of the proposal is to establish a fee for use of the 
Legal Expert System and to add an interpretation that describes MSTC's 
liability arising from the information provided by the Legal Expert 
System. Section 1 of rule 1 under article II of MSTC's rules governs 
the deposit of securities at MSTC and requires that all deposits be in 
good deliverable form. Currently, if a participant is not familiar with 
all the documentation that is required to effect a legal transfer of a 
security to be deposited at MSTC, the participant may call MSTC and 
informally inquire as to what documentation is needed in order for the 
intended deposit to be in good deliverable form. Alternatively, the 
participant may do research and try to ascertain this information on 
their own. While participants usually submit all the required 
documentation, when incorrect, erroneous, or incomplete documentation 
is provided, the processing of the deposit is delayed. The Legal Expert 
System is designed to automate these inquiry process so that the 
information on the documentation required for good deliverable form and 
legal transfer is available from one source.
    Specifically, the Legal Expert System is a menu-driven computer 
program that allows participants to inquire as to the documentation 
necessary to effect a legal transfer. The Legal Expert System utilizes 
standard industry criteria based on individual state regulations and 
provides specific requirements for good deliverable form in a user-
friendly format. The Legal Expert System provides self-help information 
to the novice user who is not familiar with good delivery requirements. 
The self-help narratives guide the participant through the Legal Expert 
System by providing information and examples for each certificate 
classification.
    The Legal Expert System provides the participant with a main menu 
and submenus for specific transfer situations. The participant is 
prompted to answer basic questions about the certificate and transfer 
situation to determine the necessary good delivery requirements for the 
specific state. The participant is then able to view what documentation 
will be needed so that he or she can gather the required documents for 
deposit with MSTC.
    The interpretation that has been added to MSTC's Rules provides a 
disclaimer and describes MSTC's liability for the information the Legal 
Expert System provides. Specifically, the interpretation acknowledges 
that although MSTC will try to provide accurate information, occasional 
errors in content may occur. Thus, MSTC expressly limits its liability 
as to the content of the information provided. Additionally, MSTC 
reminds participants that it is not engaged in the business of 
rendering legal advice.
    The proposed rule change is consistent with section 17A of the Act 
in that it facilitates the prompt and accurate clearance and settlement 
of securities transactions and provides for the equitable allocation of 
reasonable fees and other charges among participants using MSTC's 
facilities.

(B) Self-Regulatory Organization's Statements on Burden on Competition

    MSTC believes that no burden will be placed on competition as a 
result of the proposed rule change.

(C) Self-Regulatory Organization's Statement of Comments on the 
Proposed Rule Change Received From Members, Participants, or Others

    MSTC neither solicited nor received written comments on the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Changes and Timing for 
Commission Action

    The proposed rule change (1) establishes a due, fee, or other 
charge imposed by MSTC and (2) effects a change in an existing service 
that does not adversely affect the safeguarding of securities or funds 
in the custody or control of MSTC or for which MSTC is responsible and 
does not significantly affect the respective rights or obligations of 
MSTC or persons using the service. Therefore, the proposed rule change 
has become effective pursuant to 19(b)(3)(A)(ii) of the Act\3\ and 
subparagraphs (e)(2) and (e)(4) of Rule 19b-4 thereunder.\4\ At any 
time within sixty days of the filing of such rule change, the 
Commission may summarily abrogate 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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    \3\15 U.S.C. 78s(b)(3)(A)(ii) (1988).
    \4\17 CFR 240.19b-4(e) (2) & (4) (1993).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549. 
Copies of the submissions, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communication 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, NW., 
Washington, DC 20549. Copies of such filing will also be available for 
inspection and copying at the principal office of MSTC. All submissions 
should refer to File No. SR-MSTC-94-02 and should be submitted by April 
11, 1994.

    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) (1993).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-6480 Filed 3-18-94; 8:45 am]
BILLING CODE 8010-01-M