[Federal Register Volume 60, Number 211 (Wednesday, November 1, 1995)]
[Notices]
[Pages 55624-55625]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-27001]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36413; File No. SR-DTC-95-09]


Self-Regulatory Organizations; The Depository Trust Company; 
Order Approving Proposed Rule Change Seeking To Establish a Legal 
Guidance System

October 25, 1995.
    On April 27, 1995, The Depository Trust Company (``DTC'') filed 
with the Securities and Exchange Commission (``Commission'') a proposed 
rule change (File No. SR-DTC-95-09) pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act'') to establish a Legal Guidance 
System.\1\ On July 25, 1995, DTC filed an amendment to the proposed 
rule change.\2\ On August 22, 1995, DTC filed a second amendment to the 
proposed rule change.\3\ Notice of the proposal was published in the 
Federal Register on September 18, 1995.\4\ No comment letters were 
received. For the reasons discussed below, the Commission is approving 
the proposed rule change.

    \1\15 U.S.C. 78s(b)(1) (1988).
    \2\DTC amended its proposal to permit organizations that are not 
DTC participants, such as transfer agents, to subscribe to the Legal 
Guidance System. Letter from Piku K. Thakkar, Assistant Counsel, 
DTC, to Mark Steffensen, Esq., Division of Market Regulation 
(``Division''), Commission (July 21, 1995).
    \3\As proposed in the original filing, once a user logged onto 
the Legal Guidance System a disclaimer of liability message was to 
appear on the terminal screen. DTC amended its proposal to eliminate 
this message, and instead the disclaimer will appear in a user guide 
for the Legal Guidance System to be provided to all users. Letter 
from Piku K. Thakkar, Assistant Counsel, DTC, to Peter Geraghty, 
Division, Commission (August 17, 1995).
    \4\Securities Exchange Act Release No. 36219 (September 12, 
1995), 60 FR 48181.
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I. Description of the Proposal

    DTC will establish an inquiry-only Legal Guidance System (``LGS''), 
which is a menu-driven, user-friendly system designed to provide DTC 
participants and nonparticipants (e.g. transfer agents) with 
information regarding the documents necessary to effect a legal 
deposit.\5\ LGS will be accessible by DTC participants and 
nonparticipants through DTC's Participant Terminal System (``PTS''). 
LGS contains industry requirements, individual state and province 
requirements, and transfer agent requirements for processing legal 
deposits. DTC will post a disclaimer in the LGS user guide notifying 
users that DTC shall not be liable to the user for 

[[Page 55625]]
any damages resulting from mistakes or omission in LGS.\6\

    \5\A ``legal deposit'' consists of a registered security and any 
legal documentation required to effect the legal transfer and 
registration of the security from the registered holder's name into 
DTC's nominee name.
    \6\Specifically, the disclaimer will state that ``DTC does not 
represent the accuracy, adequacy, or fitness for a particular 
purpose of the following information, which is provided as is. DTC 
shall not be liable for: (1) Any loss resulting directly or 
indirectly from mistakes, omissions, interruptions, delays, errors, 
or defects arising from or related to this service; and (2) any 
special, consequential, exemplary, incidental, or punitive 
damages.''
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    The LGS menu approach will guide users through a step-by-step 
process to ascertain the relevant requirements for transferring legal 
deposits. LGS also will have a ``fast forward'' navigation option that 
will allow an experienced user to quickly access the requisite 
information. Users also will be able to request through LGS that 
certain transfer documents be sent to their offices by facsimile 
transmission. In the near future, DTC plans to interface LGS with its 
Pending Legal Deposit System to track and monitor document expiration. 
The fee charged to DTC participants and nonparticipants for LGS service 
will be DTC's standard fee for PTS inquiries.

II. Discussion

    Section 17A(b)(3)(F)\7\ of the Act requires that the rules of a 
clearing agency be designed to foster cooperation and coordination with 
persons engaged in the clearance and settlement of securities 
transactions and to remove impediments to and perfect the mechanism of 
a national system for the prompt and accurate clearance and settlement 
of transactions. Furthermore, Section 17(a)(1)(C) of the Act\8\ sets 
forth a Congressional finding that new data processing and 
communications techniques create the opportunity for more efficient, 
effective, and safe procedures for clearance and settlement. As 
discussed below, the Commission believes that DTC's proposed rule 
change is consistent with DTC's obligations under the Act.

    \7\15 U.S.C. 78q-1(b)(3)(F) (1988).
    \8\15 U.S.C. 78q-1(a)(1)(C) (1988).
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    Implementation of LGS will assist DTC participants and 
nonparticipants in the preparation of the documentation necessary to 
effect a legal deposit of securities at DTC by providing guidance as to 
state, province, and transfer agent requirements as well as forms of 
the documents required to effect such transfer. This could help to 
reduce the number of deposits that cannot be immediately processed 
through DTC due to improper documentation. Because use of LGS could 
make the legal deposit eligible for DTC processing in a more timely 
manner, it in turn could serve to improve the efficiency and 
effectiveness of clearance and settlement of securities transactions.

III. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposal is consistent with the requirements of the Act and in 
particular with the requirements of Section 17A of the Act and the 
rules and regulations thereunder.
    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change (File No. SR-DTC-95-09) be, and hereby 
is, approved.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\9\

    \9\17 CFR 200.30-3(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-27001 Filed 10-31-95; 8:45 am]
BILLING CODE 8010-01-M