[Federal Register Volume 61, Number 211 (Wednesday, October 30, 1996)]
[Notices]
[Pages 56079-56081]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-27811]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37858; File No. SR-Philadep-96-16]
Self-Regulatory Organizations; Philadelphia Depository Trust
Company; Notice of Filing of Proposed Rule Change Relating to the
Procedure to Establish a Direct Registration System
October 23, 1996.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on October 16, 1996,
Philadelphia Depository Trust Company (``Philadep'') filed with the
Securities and Exchange Commission the proposed rule change as
described in Items I, II, and III below, which items have been prepared
[[Page 56080]]
primarily by Philadep. On October 17, 1996, Philadep filed an amendment
to the proposed rule change.\2\ 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).
\2\ Letter from J. Keith Kessel, Compliance Officer, Philadep,
to Jerry W. Carpenter, Assistant Director Division of Market
Regulation, Commission, (October 16, 1996).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Philadep's proposed rule change will establish (1) a new service
called the Direct Registration System (``DRS'') and (2) a new category
of participants whose use of Philadep's services will be limited to
DRS.
II. Self-Regulatory Organization's Statements Regarding the Proposed
Rule Change
In its filing with the Commission, Philadep included statements
concerning the purpose of and the 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. Philadep has prepared summaries, as set forth in
sections (A), (B), and (C) below, of the most significant aspects of
these statements.\3\
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\3\ The Commission has modified parts of these statements.
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A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
In December 1994, the Commission published a concept release on DRS
which solicited comments on DRS as a way to offer investors a method
whereby they could maintain their positions in corporate equities and
debt securities in book-entry form directly on the books of the
issuer.\4\ In November 1995, a joint industry committee comprised
representatives of the Securities Transfer Agent Association (``STA''),
Corporate Transfer Agents Association, Inc. (``CTA''), Securities
Industry Association (``SIA''), and the depositories prepared a process
outline for DRS.\5\ In May 1996, the joint committee informed Chairman
Levitt that a consensus had been reached regarding the prospective
operation of DRS.\6\
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\4\ Securities Exchange Act Release No. 35038 (December 1,
1994).
\5\ ``Direct Registration System: A Process Outline'' (November
1995).
\6\ Letter from representatives of the joint committee to Arthur
Levitt, Chairman, Commission, (May 20, 1996).
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In accordance with this consensus, Philadep will implement certain
procedures to establish DRS.\7\ The transfer agents of issuers
interested in participating in DRS must join DTC and Philadep as
limited participants. In order for transfer agents to participate in
this service, they must have certain electronic interfaces with
Philadep, commonly known as fully automated securities transfer
(``FAST'') interfaces. As a depository participant, the transfer agent
will be able to engage in book-entry movements of positions between the
transfer agent's DRS participant account and a broker/dealer's account.
Once the transfer agents have supplied Philadep with the DRS issue,
Philadep will add the indicator to its Security Profile On-Line
(``SPOL'') system to reflect that the issue DRS eligible and to notify
the respective participants accordingly. Once Philadep supplies
information to the transfer agent or issuer, the transfer agent will
adjust the DRS position and decease the depository FAST account on its
books. To execute any withdrawal/transfer (``WT'') activity,
participants must supply Philadep with an appropriate code specifying a
DRS account or a certificate. Absent the proper code, Philadep will not
process these requests. Participants must use indicators to operate the
automated WT file to (i) register positions on the books of the issuer,
(ii) issue a physical certificate, (iii) indicate that the submitting
broker for the WT request is serving in a correspondent capacity (known
as third party transfers) and (iv) reverse the prior DRS transaction.
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\7\ Philadep Direct Registration System (``DRS'') Procedures,
attached as Exhibit A.
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When the transfer agent completes a certificate request for a DRS
issue, the transfer agent will return the certificate to Philadep
according to the standard procedure for these securities' shipments. If
the investor requests to hold his position on the books of the issuer
through DRS, the agent will establish the position, will mail the
transaction advice directly to the investor, and will confirm such
activities to Philadep. Moreover, Philadep will confirm to its
participant that the account has been established providing the date
and the DRS account number to such participant.
In the event that an investor wants to sell the position, the
transfer agent will provide miscellaneous delivery order (``MDO'')
instructions and the proper reason code to move the position into the
appropriate account at Philadep. The transfer agent will increase
depository FAST account at Philadep and notify Philadep to increase its
transfer agent participant account. Concurrently, the agent must
provide Philadep with the CUSIP number, quantity, broker/dealer
identification number, broker/dealer customer account number, and any
other miscellaneous information in the comments field. If the receiving
participant does not recognize the position, it may deliver the
position back to the transfer agent's Philadep account. At the end of
the processing day, Philadep will reverse the transfer agent's Limited
Participant account and return all positions. Philadep will produce an
activity report for all movements.
This proposed change complies with Section 17A(a)(1) of the Act \8\
in that it promotes efficiencies in the prompt and accurate clearance
and settlement of securities transactions and funds in Philadep's
custody and under its control. Individual investors electing book-entry
positions on the books of the issuers will be able to subsequently
arrange to have such positions transferred electronically to banks or
broker-dealers in connection with sales or other dispositions of the
securities. By effecting transfers through automated linkages between
broker-dealers, transfer agents, and Philadep, the DRS service to be
offered by Philadep will promote efficiencies in the clearance and
settlement system. Moreover, DRS will foster cooperation and
coordination between Philadep and other entities engaged in the
clearance and settlement of securities transactions.
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\8\ 15 U.S.C. 78q-1(a)(1) (1988).
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B. Self-Regulatory Organization's Statement on Competition
Philadep does not believe that the proposed rule change will impose
any inappropriate burden on competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
No written comments relating to the proposed rule change have been
received. Philadep will notify the Commission of any written comments
received by Philadep.
III. Date of Effectiveness of the Proposed Rule Changes and Timing for
Commission Action
Within thirty-five days of the date of publication of this notice
in the Federal Register or within such longer period (i) as the
Commission may designate up to ninety days of such date if it finds
such longer period to be appropriate and publishes its reasons for so
finding or
[[Page 56081]]
(ii) as to which Philadep consents, the Commission will:
A. By order approve such proposed rule change or
B. Institute procedures to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing. Persons making such submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street NW, Washington, DC 20549. Copies
of the submission, all subsequent amendments, all written statements
respecting the proposed rule change that are filed with the Commission,
and all written communications concerning the proposed rule change
between the Commission and any person, other than those that may be
withheld from the public pursuant to 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 filings will also be available for inspection and copying at the
principal office of Philadep. All submissions should refer to file
number SR-Philadep-96-16 and should be submitted by November 20, 1996.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-27811 Filed 10-29-96; 8:45 am]
BILLING CODE 8010-01-M