[Federal Register Volume 62, Number 95 (Friday, May 16, 1997)]
[Notices]
[Pages 27100-27102]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-12892]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-38615; International Series Release No. 1079; File No.
SR-ISCC-96-05]
Self-Regulatory Organizations; International Securities Clearing
Corporation; Notice of Filing of a Proposed Rule Change Relating to
Election of Directors
May 12, 1997.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''), \1\ notice is hereby given that on October 11, 1996, the
International Securities Clearing Corporation (``ISCC'') filed with the
Securities and Exchange Commission (``Commission'') and on October 17,
1996, December 11, 1996, March 21, 1997, and May 8, 1997, filed
amendments to the proposed rule change (File No. SR-ISCC-96-05) as
described in Items I, II, and III below, which items have been prepared
primarily by ISCC. The Commission is publishing this notice to solicit
[[Page 27101]]
comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
ISCC is filing the proposed rule change to amend its procedures for
election of directors.
II. Self-Regulatory Organization's Statement of the Purpose of and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, ISCC 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. ISCC has prepared summaries, set forth in sections (A),
(B), and (C) below, of the most significant aspects of such
statements.\2\
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\2\ The Commission has modified these summaries.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
The purpose of the proposed rule is to modify ISCC's by-laws and to
adopt an Amended and Restated Shareholders Agreement between ISCC and
the National Securities Clearing Corporation (``NSCC''), ISCC's sole
shareholder. ISCC's current by-laws and shareholders agreement set
forth provisions establishing the number and composition of ISCC's
board as well as the procedures for the election of directors. Such
provisions provide for a staggered board of twenty-two directors
composed of management, shareholder, and participant directors divided
into four classes. Each director is nominated by a nominating committee
consisting of seven members. ISCC participants have the opportunity to
nominate additional candidates for directors and the right to vote in
the event that additional nominees are submitted by participants.
In connection with its original application for registration as a
clearing agency, ISCC obtained and continues to have a temporary
exemption from Section 17A(b)(3)(C) of the Act,\3\ which exemption
permits NSCC to retain control over the composition of ISCC's board.\4\
Since that time, NSCC has continued to appoint ISCC's entire board.
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\3\ 15 U.S.C. 78q-1 (b)(3)(C).
\4\ At the time of its initial temporary registration, ISCC
argued that it did not have a meaningful participant base which
required the protections for fair representation. (ISCC had twelve
participants.) ISCC believed that if only a small number of
participants were able to use the provisions for the nomination of
the board and nominating committee members, each participant would
have had inordinate control of the nominations and voting. Moreover,
NSCC was interested in controlling ISCC's board because it believed
the financial risk it had assumed on ISCC's behalf due to its
guarantee of certain ISCC obligations was substantial. Securities
Exchange Act Release No. 26812 (May 12, 1989), 54 FR 21691 (order
granting temporary approval of ISCC's registration as a clearing
agency).
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The proposed rule change retains the process of the selection of
directors by the nominating committee, but the nominating committee
will be reduced from seven persons to three persons divided into two
classes whose terms would expire on a staggered basis every two years.
Beginning in 1998, at least fifteen business days prior to the
regularly scheduled board meeting, which is (i) closest in time to the
upcoming annual meeting of shareholders and (ii) at least ninety days
before such annual meeting, the nominating committee will submit by
overnight mail or by telefax its list of nominees to fill the
nominating committee positions whose terms are expiring immediately
following such annual meeting (i.e., for the nominating committee that
will serve for the next year's election).\5\ The Secretary will include
such list in the materials sent to the directors in connection with
such board meeting.
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\5\ The nominating committee that will select candidates for the
1998 annual meeting of shareholders will be appointed by the board
of directors.
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At the board meeting, the board may nominate individuals for one or
more vacancies on the nominating committee. The board must notify the
Secretary of any nominations within two business days of the meeting by
overnight mail, telefax, or telephone. Within three days of receipt of
nominees from the board, the Secretary must mail a list of all nominees
to each participant.
Participants have the right to nominate candidates for the
nominating committee and for the board of directors by filing with the
Secretary, not less than sixty days prior to the date of the annual
meeting, a petition signed by the lesser of 5% of all participants or
fifteen participants. If a participant petition is filed or the board
nominates additional candidates to the nominating committee, the
Secretary will mail, at least forty-five days prior to the date of the
annual meeting, to each participant a ballot setting forth all of the
nominees. Each participant is entitled to one vote for each ten dollars
of its average monthly fee payable or paid by the participant to ISCC
during the previous twelve month period. Participants must return their
ballots to the Secretary at least fifteen days prior to the annual
meeting. NSCC will then vote its shares in favor of the nominees
selected by the participants.
The board of directors will also be reduced from twenty-two to
seven directors of which two will be selected by NSCC. The NSCC
directors will serve one year terms. The other five directors will be
divided into three classes and their terms will expire on a staggered
basis. ISCC believes that the reduced size of its board of directors
and nominating committee is more suitable given ISCC's relatively small
number of participants (forth-four as of September 30, 1996).
Furthermore, ISCC believes that because its board will no longer be
selected by NSCC upon approval of the changes proposed herein, there
will no longer be a need for ISCC to receive an exemption from the fair
representation requirement.
The proposed rule change is consistent with the requirements of the
Act and the rules and regulations thereunder. In particular, the
proposed rule change is consistent with Section 17A(b)(3)(F) of the Act
\6\ because it enables ISCC to comply with Section 17A(b)(3)(C) of the
Act \7\ thereby eliminating the need for ISCC to obtain an exemption
from complying with such requirement.
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\6\ 15 U.S.C. 78q-1(b)(3)(F).
\7\ 15 U.S.C. 78q-1(b)(3)(C).
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(B) Self-Regulatory Organization's Statement on Burden on Competition
ISCC does not believe that the proposed rule change will have an
impact on or impose a 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
solicited or received. ISCC will notify the Commission of any written
comments received by ISCC.
III. Date of Effectiveness of the Proposed Rule Change 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 (ii) as to which ISCC consents, the Commission will:
[[Page 27102]]
(a) By order approve such proposed rule change or
(b) institute proceedings 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 written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 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 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,
N.W., Washington, D.C. 20549. Copies of such filing will also be
available for inspection and copying at the principal office of ISCC.
All submissions should refer to the file number (ISCC-96-05) and should
be submitted by June 6, 1997.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\8\
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\8\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-12892 Filed 5-15-97; 8:45 am]
BILLING CODE 8010-01-M