[Federal Register Volume 62, Number 41 (Monday, March 3, 1997)]
[Notices]
[Pages 9474-9475]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-5080]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-38333; File No. SR-DTC-97-02]
Self-Regulatory Organizations; The Depository Trust Company;
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change
Relating to Fees and Charges
February 24, 1997.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act''), notice is hereby given that on February 3, 1997, The
Depository Trust Company (``DTC'') 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 DTC. The Commission is publishing this notice to solicit
comments from interested persons on the proposed rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The proposed rule change establishes fees for DTC's Foreign Tax
Withholding Service and Non-Transferable Issue Safekeeping Service and
eliminates the fee DTC charges its participants for unnecessary
inquiries.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, DTC 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. DTC has prepared summaries, set forth in sections (A),
(B), and (C) below, of the most significant aspects of such
statements.\2\
---------------------------------------------------------------------------
\2\ The Commission has modified the text of the summaries
prepared by DTC.
---------------------------------------------------------------------------
(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
(1) Foreign Tax Withholding Service Fee
DTC's Foreign Tax Withholding Service allows DTC participants to
certify to foreign-issue paying agents for DTC-eligible issues the tax-
treaty and, where applicable, the tax exempt withholding rates that
they are entitled to based on the tax classes of their customers.\3\
DTC's participants make the certification to the foreign-issue paying
agents by using the Elective Dividend Service (``EDS'') which is
supported by DTC's Participant Terminal System (``PTS''). This
procedure eliminates the need for processing more complex and time-
consuming reclamations of previously withheld taxes.\4\
---------------------------------------------------------------------------
\3\ For a more detailed description of the Foreign Tax
Withholding Service, refer to Securities Exchange Act Release No.
3211 (April 19, 1993), 58 FR 22003 [File No. SR-DTC-92-17] (notice
of filing and immediate effectiveness relating to eligibility in the
foreign securities option of the existing elective dividends
function).
\4\ EDS was developed for issues from foreign countries that
have tax treaties with the U.S. that permit the withholding of
foreign taxes from distributions of foreign issues at different
rates for different classes of beneficial owners. EDS enables a DTC
participant to use PTS to certify the number of foreign securities
credited to the participant's account as of the record date that are
entitled to favorable tax treatment at source (i.e., the tax exempt
benefit to which the participant is entitled will be included in the
payment DTC receives from the foreign payor). Without this service,
many DTC participants that are entitled to favorable tax treatment
find the procedures for claiming refunds so burdensome that they
forgo their refund and thereby frustrate the purpose of the tax
treaty.
---------------------------------------------------------------------------
According to DTC, it has expended considerable time and incurred
significant legal fees to implement the Foreign Tax Withholding Service
and continues to devote its resources to monitoring individual
distributions to ensure that existing arrangements are processed
correctly or to facilitate any special arrangements, if necessary. DTC
also states that the processing of withholding certifications on
individual distributions sometimes requires DTC's staff to contact the
participant to obtain additional information to complete the
certifications. Accordingly, the proposed rule change establishes a fee
for DTC's Foreign Tax Withholding Service of $7.00 per CUSIP regardless
of the number of tax classifications requested by a participant for a
single CUSIP. This fee is in addition to the cash or stock dividend
fee, as applicable, which is charged on a per credit basis.
(2) Non-Transferable Issue Safekeeping Fee
DTC established the Non-Transferable Issue Safekeeping Service to
allow nontransferable securities to be deposited at DTC.\5\ The service
requires DTC's staff to periodically follow up on each nontransferable
security (i.e., generally, at least annually) to determine the issuer's
status in its state of incorporation, to determine if the issue is
again transferable, and to make the results of these inquiries
available to interested participants.
---------------------------------------------------------------------------
\5\ Securities Exchange Act Release No. 31673 (December 30,
1992), 58 FR 3046 [File No. SR-DTC-92-16] (order approving proposed
rule change).
---------------------------------------------------------------------------
According to DTC, as a result of its absorption of the Midwest
Securities Trust Company, the number of nontransferable issues on DTC's
books has doubled from roughly 8,000 to more than 16,000. DTC also
believes that the ongoing effort and cost to carefully monitor these
additional non-transferable issues should be apportioned among those
holding positions in these securities. Therefore, the proposed rule
change establishes a fee for DTC's Non-Transferable Issue Safekeeping
Service of $.17 per CUSIP per month in addition to regular monthly long
position charges for these issues.
(3) Elimination of Fees Regarding Unnecessary Dividend, Reorganization
and Reconciliation Inquiries
Currently, DTC charges its participants $6.00 when a participant
submits certain unnecessary inquiries for processing at DTC's
Dividends, Reconciliation, and Reorganization departments. DTC
classifies an inquiry as unnecessary if a participant could have
obtained the information independently from automated DTC sources
readily available to a participant rather than have DTC staff conduct
the research. An inquiry with incomplete or inaccurate data from a
participant also is considered unnecessary. Because the average daily
volume of unnecessary
[[Page 9475]]
inquiries has declined to less than twenty submissions, DTC proposes to
eliminate the fee related to such unnecessary inquiries.
DTC believes the proposed rule change is consistent with the
requirements of Section 17A of the Act \6\ and the rules and
regulations thereunder because DTC's fees will be more equitably
allocated among DTC participants. DTC also believes that the proposed
rule change will not affect the safeguarding of the securities and
funds in DTC's custody or control or for which it is responsible.
---------------------------------------------------------------------------
\6\ 15 U.S.C. 78q-1.
---------------------------------------------------------------------------
(B) Self-Regulatory Organization's Statement on Burden on Competition
DTC does not believe that the proposed rule change will impose any
burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act.
(C) Self-Regulatory Organization's Statement on Comments on the
Proposed Rule Change Received From Members, Participants, or Others
Written comments from DTC participants have not been solicited or
received on the proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) \7\ of the Act and pursuant to Rule 19b-4(e)(2) \8\
promulgated thereunder because the proposal establishes or changes a
due, fee, or other charge imposed by DTC. 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.
---------------------------------------------------------------------------
\7\ 15 U.S.C. 78s(b)(3)(A)(ii).
\8\ 17 CFR 240.19b-4(e)(2).
---------------------------------------------------------------------------
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 submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications 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 also will be available for
inspection and copying at the principal office of DTC. All submissions
should refer to File No. SR-DTC-97-02 and should be submitted by March
24, 1997.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\9\
---------------------------------------------------------------------------
\9\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-5080 Filed 2-28-97; 8:45 am]
BILLING CODE 8010-01-M