[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