[Federal Register Volume 61, Number 214 (Monday, November 4, 1996)] [Notices] [Page 56730] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 96-28231] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-37883; File No. SR-PHILADEP-96-11] Self-Regulatory Organizations; Philadelphia Depository Trust Company; Order Granting Approval of a Proposed Rule Change Regarding the Destruction of Certain Expired Securities Certificates October 28, 1996. On June 28, 1996, the Philadelphia Depository Trust Company (``Philadep'') filed with the Securities and Exchange Commission (``Commission'') a proposed rule change (File No. SR-PHILADEP-96-11) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ regarding the destruction of certain expired securities certificates. Notice of the proposal was published in the Federal Register on August 21, 1996.\2\ No comment letters were received. For the reasons discussed below, the Commission is approving the proposed rule change. --------------------------------------------------------------------------- \1\ 15 U.S.C. Sec. 78s(b)(1) (1988). \2\ Securities Exchange Act Release No. 37570 (August 14, 1996), 61 FR 43287. --------------------------------------------------------------------------- I. Description The rule change will amend Philadep Rule 31 which governs the orderly destruction of securities certificates relating to expired warrants and rights to permit the destruction of such securities certificates to be carried out under the supervision of Philadep's internal audit department.\3\ Section (c) of Rule 31 previously required that all securities to be destroyed pursuant to the rule had to be forwarded to Philadep's internal audit department for destruction.\4\ Under the rule change, Philadep is permitted to destroy the certificates in a designated area of Philadep under the supervision of the internal audit department instead of being required to destroy such certificates in the internal audit department itself. --------------------------------------------------------------------------- \3\ The procedures for the destruction of expired securities set forth in Rule 31 require Philadep to (i) contact the transfer agent or the issuer of the expired securities to verify that the respective warrants or rights have expired, (ii) obtain written confirmation from such transfer agent or issuer that the certificates representing such warrants or rights have expired (if there is no transfer agent, Philadep personnel must exercise all reasonable due diligence to confirm the expired nature of the respective certificates including consulting with the Philadep's legal department, internal audit department and senior management), (iii) notify its participants that in the judgment of the transfer agent, or other appropriate parties if a transfer agent does not exist, the securities certificates have expired, (iv) delete such securities positions from its participants' account on or after the thirtieth day following the date of such notice, and (v) appropriately mark the securities certificates and forward them to its internal audit department for destruction. \4\ Securities Exchange Act Release No. 35426 (February 28, 1995) [File No. SR-PHILADEP-94-05] (order approving proposed rule change authorizing Philadep to implement a program for the destruction of securities certificates relating to expired warrants and rights). --------------------------------------------------------------------------- II. Discussion Section 17A(b)(3)(F) \5\ of the Act requires that the rules of a clearing agency be designed to assure the safeguarding of securities and funds which are in the custody or control of the clearing agency or for which it is responsible. The Commission believes Philadep's proposed rule change is consistent with Philadep's obligations under Section 17A of the Act because the rule change does not significantly alter the procedures previously approved by the Commission by which expired rights and warrants certificates are to be destroyed and thereby should not negatively affect Philadep's ability to safeguard securities or funds.\6\ --------------------------------------------------------------------------- \5\ 15 U.S.C. Sec. 78q-1(b)(3)(F) (1988). \6\ The Commission previously stated upon establishment of Philadep's expired certificate destruction program for warrants and rights that such program is consistent with Section 17A of the Act because the program should reduce the administrative expenses associated with safekeeping and storage of worthless certificates and that Philadep's procedures were reasonably designed to prevent inadvertent destruction of warrants and rights certificates that have not expired. Supra note 4. --------------------------------------------------------------------------- III. Conclusion On the basis of the foregoing, the Commission finds that the proposed rule change is consistent with the requirements of the Act and in particular 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-PHILADEP-96-11) be and hereby is approved. For the Commission by the Division of Market Regulation, pursuant to delegated authority.\7\ --------------------------------------------------------------------------- \7\ 17 CFR 200.30-3(a)(12) (1996). --------------------------------------------------------------------------- Margaret H. McFarland, Deputy Secretary. [FR Doc. 96-28231 Filed 11-1-96; 8:45 am] BILLING CODE 8010-01-M