[Federal Register Volume 64, Number 189 (Thursday, September 30, 1999)]
[Rules and Regulations]
[Pages 52638-52641]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-25442]


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DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Part 30

[Docket No. 99-12]
RIN 1557-AB73


Guidelines Establishing Year 2000 Standards for Safety and 
Soundness for National Bank Transfer Agents and Broker-Dealers

AGENCY: Office of the Comptroller of the Currency, Treasury.

ACTION: Interim rule with request for comment.

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SUMMARY: The Office of the Comptroller of the Currency (OCC) is issuing 
interim guidelines (Supplemental Guidelines) establishing Year 2000 
standards for safety and soundness for national bank transfer agents 
and brokers or dealers pursuant to section 39 of the Federal Deposit 
Insurance Act (FDI Act). Last year, the OCC, together with the other 
member agencies of the Federal Financial Institutions Examination 
Council (FFIEC), published joint Guidelines (Year 2000 Guidelines) 
establishing standards for safety and soundness that insured depository 
institutions must follow to ensure the Year 2000 readiness of their 
mission-critical systems. These Supplemental Guidelines complement the 
Year 2000 Guidelines by describing two essential steps that national 
banks and, in certain cases, national bank operating subsidiaries, and 
Federal branches that are subject to the provisions of section 39 of 
the FDI Act must take to ensure the Year 2000 readiness of their 
transfer agent and broker or dealer automated systems.

DATES: This interim rule is effective on September 30, 1999. Comments 
must be received by November 29, 1999.

ADDRESSES: Direct comments to the Office of the Comptroller of the 
Currency, Communications Division, 250 E Street, SW, Washington, DC 
20219, Attention: Docket No. 99-12. Comments may be inspected and 
photocopied at the same location. In addition, comments may be sent by 
fax to (202) 874-5274 or by electronic mail to 
[email protected].

FOR FURTHER INFORMATION CONTACT: Karl Betz, Attorney, Legislative and 
Regulatory Activities (202) 874-5090; Stuart E. Feldstein, Assistant 
Director, Legislative and Regulatory Activities (202) 874-5090; Joe 
Malott, National Bank Examiner (202) 874-4967; or Vaughn Folks, 
National Bank Examiner (202) 874-4270.

SUPPLEMENTARY INFORMATION:

Background

    Pursuant to section 39 of the FDI Act (12 U.S.C. 1831p-1), the OCC 
is issuing Supplemental Guidelines establishing Year 2000 standards for 
safety and soundness for the following: (1) Registered transfer agents 
that are national banks, national bank operating subsidiaries, and 
Federal branches subject to the provisions of section 39 of the FDI Act 
(bank transfer agents); and (2) national banks and Federal branches 
subject to the provisions of section 39 of the FDI Act that effect 
securities brokerage or dealer transactions (bank brokers or 
dealers).1 These standards apply to transfer agent and 
broker or dealer systems that have not been designated as mission-
critical and, therefore, are not covered under the Year 2000 Guidelines 
jointly issued by the OCC and the other member agencies of the FFIEC 
(collectively, the Agencies) 2, which also implement section 
39 of the FDI Act. The Securities and Exchange Commission (SEC) 
recently approved a rule for non-bank transfer agents and broker-
dealers that further highlights these risks. See Year 2000 Operational 
Capability Requirements for Registered Broker-Dealers and Transfer 
Agents, 64 FR 42012 (August 3, 1999) (imposing Year 2000 readiness 
requirements on non-bank transfer agents and broker-
dealers).3
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    \1\ Section 39 requires each appropriate Federal banking agency 
to establish operational and managerial standards relating to, among 
other things, internal controls, information systems, and internal 
audit systems, or such other standards as each agency determines to 
be appropriate.
    \2\ The OCC, the Board of Governors of the Federal Reserve 
System (Board), the Federal Deposit Insurance Corporation (FDIC), 
and the Office of Thrift Supervision (OTS) jointly issued the Year 
2000 Guidelines.
    \3\ The SEC's rule requires broker-dealers and non-bank transfer 
agents to file a notice regarding any Year 2000 problems with the 
SEC by August 31, 1999, but allows firms that have Year 2000 
problems to continue to operate if they certify that they will 
complete their Year 2000 efforts no later than November 15, 1999. 
Firms that are not Year 2000 compliant on November 15 will be 
required to cease operations by December 1, 1999.
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    On October 15, 1998, the Agencies issued joint interim final 
guidelines (Year 2000 Guidelines) establishing Year 2000 standards for 
safety and

[[Page 52639]]

soundness pursuant to section 39 of the FDI Act. 63 FR 55480 (Oct. 15, 
1998). The Year 2000 Guidelines describe certain essential steps that 
each insured depository institution must take in order to achieve Year 
2000 readiness of its mission-critical systems.
    The Supplemental Guidelines complement but do not supersede the 
existing Year 2000 Guidelines. Therefore, if a national bank has 
designated or should have designated a transfer agent or broker-dealer 
system as mission-critical, the standards contained in the Year 2000 
Guidelines continue to apply to these systems, including the 
renovation, testing, and contingency planning deadlines that are 
earlier than the deadlines contained in the Supplemental Guidelines.
    The FFIEC has also issued Guidance Concerning Fiduciary Services 
and Year 2000 Readiness (September 2, 1998). This issuance instructed 
financial institutions that offer transfer agent services to clients to 
ensure that they address any Year 2000 concerns, particularly those 
associated with the use of automated transfer agent systems. The 
Supplemental Guidelines complement this guidance by providing specific 
instructions on the steps national banks, and where applicable, their 
operating subsidiaries, or Federal branches that are subject to section 
39 of the FDI Act must take at a minimum to ensure that their automated 
transfer agent and broker or dealer systems are Year 2000 ready.
    The OCC anticipates that most bank transfer agents and bank brokers 
or dealers will already have satisfied the safety and soundness 
standards set forth in the Supplemental Guidelines. Plans or procedures 
that a national bank has already adopted may suffice for purposes of 
complying with the Supplemental Guidelines if they have been deemed 
acceptable by the OCC. However, the Supplemental Guidelines will help 
ensure that non-mission-critical transfer agent and broker or dealer 
systems are Year 2000 ready.

Description of Supplemental Guidelines

Definitions (Section C.)

    The Supplemental Guidelines define certain key terms to help 
clarify the types of actions national banks and, where applicable, 
national bank operating subsidiaries, and Federal branches that are 
subject to the provisions of section 39 of the FDI Act, are expected to 
undertake. In addition to those terms previously defined in the Year 
2000 Guidelines, these Supplemental Guidelines define the terms ``bank 
transfer agent,'' ``bank broker or dealer,'' and ``system.''
    For example, the term ``bank transfer agent'' covers a national 
bank that provides transfer agent services directly or through an 
operating subsidiary, or a Federal branch that is subject to the 
provisions of section 39 of the FDI Act, and either the national bank, 
operating subsidiary or Federal branch is a registered transfer agent 
whose appropriate regulatory agency, as that term is defined in 15 
U.S.C. 78c(a)(34), is the OCC.4 For purposes of these 
Supplemental Guidelines, the term ``bank transfer agent'' does not 
cover a transfer agent that qualifies as an issuer or small transfer 
agent as these terms are defined under SEC rules. 17 CFR 240.17Ad-
13(d)(1) and (2).
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    \4\ The OCC is the appropriate regulatory agency for operating 
subsidiaries of national banks that are registered transfer agents. 
The Securities Exchange Act of 1934 defines ``appropriate regulatory 
agency,'' when used with respect to transfer agents, as ``the 
Comptroller of the Currency, in the case of a national bank or a 
bank operating under the Code of Law for the District of Columbia, 
or a subsidiary of any such bank.'' 15 U.S.C. 78(c)(a)(34)(B)(i) 
(emphasis added).
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    The term ``bank broker or dealer'' means a national bank or a 
Federal branch that is subject to the provisions of section 39 of the 
FDI Act, that effects securities brokerage or dealer transactions for 
customers. This definition does not include operating subsidiaries of 
national banks because national bank operating subsidiaries are subject 
to the SEC's regulations. For purposes of these Supplemental 
Guidelines, the term ``bank broker or dealer'' does not cover a 
national bank effecting fewer than 500 securities brokerage 
transactions per year for customers over the prior three calender year 
period.5
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    \5\ This exception is drawn from existing OCC provisions in 12 
CFR Part 12 exempting national banks that do not engage in extensive 
securities transactions from the specific recordkeeping and 
securities policies and procedures set forth in that part.
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Year 2000 Standards for Safety and Soundness (Section D.)

    The Supplemental Guidelines impose two requirements. First, no 
later than November 1, 1999, each bank transfer agent and broker or 
dealer must identify all transfer agent or broker or dealer systems 
that are not Year 2000 ready. Second, for each non-Year 2000 ready 
transfer agent or broker or dealer system the bank transfer agent or 
bank broker or dealer must develop and implement an effective written 
business resumption contingency plan by November 15, 1999. Among other 
things, this contingency plan must describe how the bank transfer agent 
or bank broker or dealer will mitigate the risks associated with the 
failure of the transfer agent and broker or dealer systems.
    As noted earlier, plans and procedures already adopted may suffice 
if the OCC has deemed them acceptable. Nevertheless, contingency 
planning is a dynamic process. A contingency plan may become inadequate 
at a later date if it is not revised to address current needs. 
Accordingly, each bank transfer agent and bank broker or dealer must 
continue to update the contingency plans they have developed and 
implemented, as needed, to ensure the plans remain effective.
    This interim rule also updates 12 CFR part 30 pertaining to safety 
and soundness standards issued under section 39 of the FDI Act. The 
Supplemental Guidelines published today will appear as appendix C to 
part 30. This interim rule makes minor conforming amendments to part 30 
to incorporate appropriate references to the Supplemental Guidelines.
    This interim rule makes no substantive change to part 30.

Request for Comment

    The OCC invites comment on all aspects of the Supplemental 
Guidelines.

Request for Comments on Plain Language

    On June 1, 1998, the President issued a Memorandum directing each 
agency in the Executive branch to write its rules in plain language. 
This directive is effective for all new proposed and final rulemaking 
documents issued on or after January 1, 1999. The OCC invites comments 
on how to make this interim rule clearer. For example, you may wish to 
discuss: (1) Whether we have organized the material to suit your needs; 
(2) whether the requirements of this interim rule are clear; or (3) 
whether there is something else we could do to make this rule easier to 
understand.

Request for Comment on Impact of Guidelines on Community Banks

    The OCC also seeks comments on the impact of this interim rule on 
community banks. The OCC recognizes that community banks operate with 
more limited resources than larger institutions and may present a 
different risk profile. Thus, the OCC specifically requests comments on 
the impact of this interim rule on community banks' current resources 
and available personnel with the requisite expertise, and whether the 
goals of the interim rule could be achieved, for community banks, 
through an alternative approach.

[[Page 52640]]

Effective Date

    The OCC finds good cause for issuing this interim rule effective 
immediately, without prior notice and comment. (Cf. 5 U.S.C. 553(b)(B) 
(Administrative Procedure Act (APA) provision permitting an agency to 
issue a rule without prior notice and comment when the agency for good 
cause finds that notice and public procedure thereon are impracticable, 
unnecessary, or contrary to the public interest); 5 U.S.C. 553(d) (good 
cause exception to APA requirement for a 30-day delayed effective date 
for interim rule); 12 U.S.C. 4802(b)(1) (good cause exception to the 
CDRIA requirement that the Federal banking agencies make rules 
effective on the first day of a calender quarter which begins on or 
after the date on which the regulations are published in final form). 
Making this interim rule effective immediately is essential for 
ensuring that the OCC can properly and timely address the Year 2000 
problem and that insured depository institutions can achieve Year 2000 
readiness in the relatively short time remaining before Year 2000 
problems may begin to occur. The OCC notes that Congress recently 
underscored the importance and urgency of ensuring Year 2000 readiness 
in the financial services sector by passing the Examination Parity and 
Year 2000 Readiness for Financial Institutions Act, Public Law 105-164, 
sec. 2, 112 Stat. 32, 32 (1998). Congress expressly found that the Year 
2000 problem poses a serious challenge to the American economy, 
including the Nation's banking and financial services industries, and 
that Federal financial regulatory agencies must have sufficient 
examination authority to ensure that the safety and soundness of the 
Nation's financial institutions will not be at risk. See also the Y2K 
Act, Pub. L. 106-37, 113 Stat. 185 (July 20, 1999) (addressing the 
economic threat posed by Year 2000 problems). Under these 
circumstances, the OCC concludes that it has good cause for issuing 
this interim rule with an immediate effective date, without prior 
notice and comment. Nevertheless, the OCC is inviting comment and will 
consider the comments received before finalizing the rule.

Regulatory Flexibility Act Analysis

    An initial regulatory flexibility analysis under the Regulatory 
Flexibility Act (RFA) is required when an agency is required to publish 
a general notice of proposed rulemaking. 5 U.S.C. 603. As noted above, 
the OCC concluded, for good cause, that this interim rule should take 
immediate effect and, therefore, that a notice of proposed rulemaking 
is not required. Accordingly, the RFA does not require an initial 
regulatory flexibility analysis of this interim rule.
    Nonetheless, the OCC has considered the likely impact of this 
interim rule on small entities and believes that this interim rule will 
not have a significant economic impact on a substantial number of small 
entities. The potential inability of computers to correctly recognize 
certain dates in 1999, and on and after January 1, 2000, compels all 
national banks, including small national banks, to formulate 
appropriate and timely management responses. The interim rule provides 
a procedural framework for formulating that response and reiterates the 
OCC's expectations regarding appropriate business practices for 
achieving Year 2000 readiness. For example, as indicated earlier in 
this preamble, plans and procedures that bank transfer agents and bank 
broker or dealers have already developed to achieve Year 2000 readiness 
can satisfy the Supplemental Guidelines if they have been deemed 
acceptable by the OCC.
    The OCC invites interested persons to submit comments on the impact 
of the interim rule on small entities for consideration in the 
development of the final rule.

Paperwork Reduction Act

    The OCC invites comment on:
    (1) Whether the proposed collection of information contained in the 
Supplemental Guidelines are necessary for the proper performance of the 
OCC's functions, including whether the information has practical 
utility;
    (2) The accuracy of the OCC's estimate of the burden of the 
proposed information collection;
    (3) Ways to enhance the quality, utility, and clarity of the 
information to be collected;
    (4) Ways to minimize the burden of the information collection on 
respondents, including the use of automated collection techniques or 
other forms of information technology; and
    (5) Estimates of capital or start-up costs and costs of operation, 
minutes, and purchase of services to provide information.
    The collection of information requirement contained in this interim 
rule has been submitted to and approved by the OMB under its emergency 
procedures and in accordance with the Paperwork Reduction Act of 1995. 
44 U.S.C. 3507. Since OMB clearance is for a six-month period, OCC will 
use any comments received to develop its renewed request if 
appropriate. Comments on the collection of information should be sent 
to the Office of Management and Budget, Paperwork Reduction Project 
(1557-0214), Washington, DC 20503, with a copy to the Communications 
Division (1557-0214), Office of the Comptroller of the Currency, 250 E 
Street, SW, Washington, DC 20219.
    Respondents and recordkeepers are not required to respond to this 
collection of information unless it displays a currently valid Office 
of Management and Budget (OMB) control number. The OMB Control Number 
for this collection is 1557-0214.
    In addition to the paperwork usually maintained by a national bank 
in the regular course of business, the Supplemental Guidelines impose 
some additional paperwork burden. This burden is found in appendix C, 
section D to part 30. The OCC needs this information to assess a 
national bank's compliance with the Supplemental Guidelines set forth 
in appendix C. The likely respondents are national banks.
    Estimated number of respondents: 98.
    Estimated average annual burden hours per respondent: 1.6 
hours.6
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    \6\ Consistent with guidance provided by the Office of 
Management and Budget, the burden hour estimate is presented as an 
average for all national banks subject to the Supplemental 
Guidelines. Most of the paperwork burden associated with this 
interim rule results from the requirement to prepare a contingency 
plan. The OCC expects that only a small percentage of the national 
banks covered by these guidelines will be required to prepare a 
contingency plan.
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    Estimated total annual recordkeeping burden: 161 hours.

Executive Order 12866

    The OCC has determined that this interim rule is not a significant 
regulatory action under Executive Order 12866.

Unfunded Mandates Reform Act Analysis

    The Unfunded Mandates Reform Act of 1995 (UMA), Public Law 104-4, 
applies only when an agency is required to issue a general notice of 
proposed rulemaking or a final rule for which a general notice of 
proposed rulemaking was published. 2 U.S.C. 1532. As noted earlier, the 
OCC has concluded, for good cause, that a notice of proposed rulemaking 
is not required. Accordingly, the OCC has concluded that the UMA does 
not require an unfunded mandates analysis of this interim rule.
    Moreover, the OCC believes that the interim rule will not result in 
expenditures by State, local, and tribal governments, or by the private 
sector, of more than $100 million in any one year.

[[Page 52641]]

Accordingly, the OCC has not prepared a budgetary impact statement or 
specifically addressed the regulatory alternatives considered.

List of Subjects in 12 CFR Part 30

    Administrative practice and procedure, National banks, Reporting 
and recordkeeping requirements, Safety and soundness.

Authority and Issuance

    For the reasons set out in the preamble, part 30 of chapter I of 
title 12 of the Code of Federal Regulations is amended as set forth 
below:

PART 30--SAFETY AND SOUNDNESS STANDARDS

    1. The authority citation for part 30 is revised to read as 
follows:

    Authority: 12 U.S.C. 93a, 1818, 1831p-1, 3102(b).

    2. In Sec. 30.2, the last sentence is revised to read as follows:


Sec. 30.2  Purpose.

    * * * The Interagency Guidelines Establishing Standards for Safety 
and Soundness are set forth in appendix A to this part, the Interagency 
Guidelines Establishing Year 2000 Standards for Safety and Soundness 
are set forth in appendix B to this part, and the Supplemental 
Guidelines Establishing Year 2000 Standards for Safety and Soundness 
for National Bank Transfer Agents and Brokers or Dealers are set forth 
in appendix C to this part.
    3. In Sec. 30.3, paragraph (a) is revised to read as follows:


Sec. 30.3  Determination and notification of failure to meet safety and 
soundness standard and request for compliance plan.

    (a) Determination. The OCC may, based upon an examination, 
inspection, or any other information that becomes available to the OCC, 
determine that a bank has failed to satisfy the safety and soundness 
standards contained in the Interagency Guidelines Establishing 
Standards for Safety and Soundness set forth in appendix A to this 
part, the Interagency Guidelines Establishing Year 2000 Standards for 
Safety and Soundness set forth in appendix B to this part, or the 
Guidelines Establishing Year 2000 Standards for Safety and Soundness 
for National Bank Transfer Agents and Brokers or Dealers are set forth 
in appendix C to this part.
* * * * *
    4. A new appendix C is added to part 30 to read as follows:

Appendix C to Part 30--Supplemental Guidelines Establishing Year 
2000 Standards for Safety and Soundness for National Bank Transfer 
Agents and Brokers or Dealers

Table of Contents

A. Introduction.
B. Preservation of existing authority.
C. Definitions.
D. Year 2000 Standards for safety and soundness.

A. Introduction

    These Supplemental Guidelines are issued pursuant to section 39 
of the Federal Deposit Insurance Act (FDI Act) (12 U.S.C. 1831p-1) 
and apply to transfer agent and broker or dealer systems that a 
national bank has not designated as mission-critical. These 
Supplemental Guidelines are in addition to, but do not supersede, 
the Year 2000 Guidelines previously adopted as Appendix B to 12 CFR 
Part 30. The Guidelines in Appendix B continue to apply to efforts 
of national banks to achieve Year 2000 readiness of their mission-
critical systems.

B. Preservation of existing authority

    Neither section 39 nor these Supplemental Guidelines in any way 
limits the authority of the OCC to address unsafe or unsound 
practices, violations of law, unsafe or unsound conditions, or other 
practices of bank transfer agents and brokers or dealers. For 
example, failure to complete any of the standards set forth in the 
Supplemental Guidelines may constitute an unsafe or unsound practice 
under 12 U.S.C. 1818(b). Action under section 39 and the 
Supplemental Guidelines may be taken independently of, in 
conjunction with, or in addition to any other remedy, including 
enforcement action, available to the OCC.

C. Definitions

    1. In general. For purposes of the Supplemental Guidelines the 
following definitions apply:
    a. Bank transfer agent means a national bank that provides 
transfer agent services directly or through an operating subsidiary, 
or a Federal branch that is subject to the provisions of section 39 
of the FDI Act (12 U.S.C. 1831p-1), if the national bank, operating 
subsidiary or Federal branch is a registered transfer agent whose 
appropriate regulatory agency, as that term is defined in 15 U.S.C. 
78c(a)(34), is the Office of the Comptroller of the Currency. The 
term bank transfer agent does not include a transfer agent that 
qualifies as an issuer or small transfer agent, as these terms are 
defined in 17 CFR 240.17Ad-13(d) (1) and (2).
    b. Bank broker or dealer means a national bank that effects 
securities brokerage or dealer transactions for customers, or a 
Federal branch that is subject to the provisions of section 39 of 
the FDI Act (12 U.S.C. 1831p-1). The term bank broker or dealer does 
not include operating subsidiaries of national banks. The term bank 
broker or dealer does not include a national bank effecting fewer 
than 500 securities brokerage transactions per year for customers 
during the prior three calendar year period.
    c. System means an automated system and related applications 
necessary to ensure the prompt and accurate processing of securities 
transactions, including order entry, transfer execution, comparison, 
allocation, clearance and settlement of securities transactions, the 
maintenance of customer accounts, the delivery of funds and 
securities, or the production or retention of required records.
    d. Business resumption contingency plan means a plan that 
describes how a bank transfer agent or bank broker or dealer will 
continue to perform transfer agent or broker or dealer functions, 
respectively, in the event transfer agent or broker or dealer 
systems fail to function because of Year 2000 readiness.
    e. Year 2000 ready or readiness with respect to a system means 
the system accurately processes, calculates, compares, or sequences 
date or time data from, into, or between the 20th and 21st 
centuries; and the years 1999 and 2000; and with regard to leap year 
calculations.

D. Year 2000 standards for safety and soundness

    1. No later than November 1, 1999, each bank transfer agent and 
bank broker or dealer shall identify all transfer agent and broker 
or dealer systems that are not Year 2000 ready.
    2. For each system identified pursuant to section D.1., each 
bank transfer agent and bank broker or dealer shall develop and 
implement an effective written business resumption contingency plan 
by November 15, 1999, that, at a minimum:
    a. Defines scenarios for transfer agent and broker or dealer 
systems failing to achieve Year 2000 readiness;
    b. Evaluates options and selects a reasonable contingency 
strategy for those systems; and
    c. Provides for independent testing of the business resumption 
contingency plan by an objective independent party (such as an 
auditor, consultant, or qualified individual from another area of 
the insured depository institution who is independent of the plan 
under review).

    Dated: September 17, 1999.
John D. Hawke, Jr.,
Comptroller of the Currency.
[FR Doc. 99-25442 Filed 9-29-99; 8:45 am]
BILLING CODE 4810-33-P