[Federal Register Volume 59, Number 221 (Thursday, November 17, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-28361]


[[Page Unknown]]

[Federal Register: November 17, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34960; International Series Release No. 748; File No. 
SR-MBS-94-04]

 

Self-Regulatory Organizations; MBS Clearing Corporation; Order 
Approving Proposed Rule Change Establishing Additional Requirements 
Applicable to Participants

November 9, 1994.
    On June 27, 1994, the MBS Clearing Corporation (``MBS'') filed with 
the Securities and Exchange Commission (``Commission'') a proposed rule 
change (File No. SR-MBS-94-04) pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act'').\1\ The proposed rule change 
establishes additional requirements in MBS's rules applicable to 
participants. The Commission published notice of the proposed rule 
change in the Federal Register on August 1, 1994.\2\ On November 7, 
1994, MBS filed Amendment No. 1 to the proposed rule change.\3\ The 
amendment was technical in nature and did not require republication of 
notice of filing. 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. Sec. 78s(b)(1) (1988).
    \2\Securities Exchange Act Release No. 34438 (July 25, 1994), 59 
FR 38997.
    \3\Amendment No. 1 modified the filing by clarifying that the 
additional requirements in MBS's rules apply to all participants and 
not, as originally proposed, only to participants that are organized 
under the laws of a foreign country. Letter from David T. Rusoff, 
Foley & Lardner, to Ari Burstein, Attorney, Division of Market 
Regulation, Commission (November 7, 1994).
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I. Description

    The proposed rule change establishes additional requirements in 
MBS's rules applicable to participants. Specifically, MBS is adding a 
new Section 13 to Article III, Rule 1 (``Requirements Applicable to 
participants'') of MBS's rules. New Section 13 requires that all 
participants prepare and maintain all required financial and other 
reports and a general ledger chart of accounts in English and in U.S. 
dollars, ensure the availability of an individual fluent in English and 
knowledgeable in securities and financial matters to assist 
representatives of MBS, and satisfy the financial net worth 
requirements in MBS's rules computed in accordance with generally 
accepted U.S. accounting principals. In addition, new Section 13 
requires that all participants maintain an agent located in the U.S. 
for service of process and maintain an office or agent located in the 
U.S. that can adequately address all purchase and sales, margin 
compliance, clearance, and cash settlement functions for the 
participant. Section 13 explicitly sets forth that these requirements 
are in addition to all other requirements applicable to MBS 
participants.

II. Discussion

    The Commission believes that MBS's proposed rule change is 
consistent with Section 17A of the Act\4\ and in particular with 
Sections 17A(b)(3) (A) and (F) of the Act.\5\ Sections 17A(b)(3) (A) 
and (F) require, among other things, that the rules of a clearing 
agency be designed to assure the safeguarding of securities and funds 
within its possession or control or for which it is responsible. The 
Commission believes that MBS's proposal to establish additional 
requirements in MBS's rules applicable to participants is consistent 
with this obligation.
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    \4\15 U.S.C. Sec. 78q-1 (1988).
    \5\15 U.S.C. Sec. 78q-1(b)(3) (A) and (F) (1988).
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    Under the proposed rule change, all MBS participants now will be 
required to satisfy their financial and reporting obligations in a 
manner which will better facilitate MBS's oversight of participants. 
For example, a participant now will be explicitly required to satisfy 
the financial net worth requirements in MBS's rules computed in 
accordance with generally accepted U.S. accounting principals and 
maintain an entity located in the U.S. to tend to certain securities 
matters related to MBS.
    The Commission believes that the additional requirements applicable 
to all participants should facilitate MBS's monitoring of the 
communications with participants and should help ensure that 
participants comply with all requirements in MBS's rules. As a result, 
MBS should be better able to reduce its risk exposure and consequently 
should be better able to fulfill its safeguarding obligations.

III. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposed rule change is consistent with the Act, in particular with 
Section 17A of the Act, and with the rules and regulations thereunder.
    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\6\ that the proposed rule change (File No. SR-MBS-94-04) be, and 
hereby is, approved.
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    \6\15 U.S.C. Sec. 78s(b)(2) (1988).

    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).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-28361 Filed 11-16-94; 8:45 am]
BILLING CODE 8010-01-M