[Federal Register Volume 65, Number 112 (Friday, June 9, 2000)]
[Rules and Regulations]
[Pages 36602-36615]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-14594]


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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 240 and 249b

[Release No. 34-42892; File No. S7-11-99]
RIN 3235-AH44


Revised Transfer Agent Form and Related Rule

AGENCY: Securities and Exchange Commission.

ACTION: Final rule.

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SUMMARY: The Securities and Exchange Commission is adopting amendments 
to Rule 17Ac2-2 and to related Form TA-2 and rescinding Rule 17a-24 
under the Securities Exchange Act of 1934. The amendments are designed 
to clarify filing requirements and instructions; eliminate or change 
ambiguous terms and phrases; delete certain redundant or unnecessary 
questions; and add questions that will help the Commission to more 
effectively monitor the transfer agent industry.

EFFECTIVE DATE: July 10, 2000.

FOR FURTHER INFORMATION CONTACT: Jerry W. Carpenter, Assistant 
Director, Lori R. Bucci, Special Counsel, or Michael G. Rae, Staff 
Attorney, at 202/942-4187, Office of Risk Management and Control, 
Division of Market Regulation, Securities and Exchange Commission, 
Washington, D.C. 20549-1001.

SUPPLEMENTARY INFORMATION:

I. Introduction

A. Rule 17Ac2-2 and Form TA-2

    In 1986, the Securities and Exchange Commission (Commission) 
adopted Rule 17Ac2-2 \1\ under the Securities Exchange Act of 1934 
(Exchange Act), which requires all registered transfer agents to file 
an annual report of their business activities on Form TA-2.\2\ Rule 
17Ac2-2 and Form TA-2 have not been revised since their adoption.
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    \1\ 17 CFR 240.17Ac2-2.
    \2\ Securities Exchange Act Release No. 23084 (March 27, 1986), 
51 FR 12124. Form TA-2 is referenced in 17 CFR 249b.102.
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    On March 23, 1999, as part of the Commission's continuing efforts 
to improve and simplify rules and forms, the Commission proposed for 
comment amendments to Rule 17Ac2-2 and Form TA-2.\3\ The Commission and 
the other appropriate regulatory agencies (ARA) have direct oversight 
responsibility for transfer agents, and there is no self-regulatory 
organization for transfer agents.\4\ The receipt by ARAs of annual 
information about transfer agent activities is therefore an essential 
component of their oversight of transfer agents. The proposed 
amendments were intended to allow the Commission to obtain clearer and 
more comprehensive information from transfer agents about their 
activities.
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    \3\ Securities Exchange Act Release No. 41204 (March 23, 1999), 
64 FR 15310 (March 31, 1999).
    \4\ ``ARA'' is defined in Section 3(a)(34) of the Securities 
Exchange Act of 1934, 15 U.S.C. 78c(a)(34), and includes the 
Commission, the Board of Governors of the Federal Reserve System, 
the Federal Deposit Insurance Corporation, and the Office of the 
Comptroller of the Currency.
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B. Lost Securityholders

    To help address the problem of lost securityholders, on October 1, 
1997, the Commission adopted Rules 17Ad-17 and 17a-24.\5\ Rule 17Ad-17 
requires transfer agents to conduct database searches in an effort to 
locate lost securityholders. Rule 17a-24 requires

[[Page 36603]]

transfer agents to submit on Form TA-2 aggregate data regarding the 
accounts of lost securityholders.\6\ The purpose of Rule 17a-24 is to 
gather data to assess the effectiveness of the search requirements of 
Rule 17Ad-17. As a result of its continuing review of the lost 
securityholder issue, the Commission is reviewing the information that 
transfer agents must submit to help the Commission assess the 
effectiveness of the search requirements of Rule 17Ad-17. Therefore, 
the Commission proposed to require transfer agents to report on Form 
TA-2 specific information about the results of the required database 
searches for lost securityholders and proposed to rescind Rule 17a-24 
and its reporting requirements.
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    \5\ Securities Exchange Act Release No. 39176 (October 1, 1997), 
62 FR 52229. ``Lost securityholder,'' as defined in Rule 17Ad-17, 
means a securityholder: (i) to whom an item of correspondence that 
was sent to the securityholder at the address contained in the 
transfer agent's master securityholder file has been returned as 
undeliverable; provided, however, that if such item is re-sent 
within one month to the lost securityholder, the transfer agent may 
deem the securityholder to be a lost securityholder as of the day 
the re-sent item is returned as undeliverable; and (ii) for whom the 
transfer agent has not received information regarding the 
securityholder's new address. The Commission also adopted amendments 
to Rule 17Ad-7 incorporating the time periods for retention of 
records required by Rule 17Ad-17.
    \6\ Rule 17a-24 requires registered transfer agents to report 
the number of lost securityholder accounts as of June 30 of each 
year and the percentage of total accounts represented by such lost 
securityholder accounts. These figures are broken down by the length 
of time the securityholder was classified as lost: one year or less; 
three years or less; five years or less; or more than five years. 
Rule 17a-24 also requires that transfer agents annually report 
information on lost securityholder accounts that were remitted to 
state unclaimed property administrators.
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II. Discussion

    The Commission received 12 comment letters on the proposal, most of 
which were favorable.\7\ As discussed below, the Commission has decided 
to adopt the amendments to Rule 17Ac2-2 and Form TA-2 and to rescind 
Rule 17a-24 substantially as proposed but with certain modifications 
suggested by the commenters.
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    \7\ Letters from Lynette M. States, Assistant Director, Arizona 
Department of Revenue (May 14, 1999); Scott Muirhead, Vice 
President, Bankers Trust (May 17, 1999); Robert E. Smith, President, 
Corporate Transfer Agents Association, Inc. (CTA) (July 29, 1999); 
Charles V. Rossi, President, EquiServe (May 17, 1999); Nancy C. 
Ashcom, Corporate Secretary, FirstEnergy (May 14, 1999); Kathleen C. 
Joaquin, Director--Transfer Agency & International Operations, 
Investment Company Institute (May 17, 1999); Jessie Baker, 
President, National Association of Unclaimed Property Administrators 
(NAUPA) (May 17, 1999); Thomas L. Montrone, President and Chief 
Executive Officer, Registrar and Transfer Company (RTC) (May 5, 
1999); Robert Dietz, President, Securities Transfer Association, 
Inc. (STA) (May 17, 1999); James R. Alden, Manager and Assistant 
Secretary, Shareholder Services (April 27, 1999); and James R. 
Alden, Assistant Secretary and Manager of Shareholder Services, 
Southern California Edison (April 27, 1999). The comment letters and 
a Commission staff summary of the comments are contained in File No. 
S7-11-99 and are available for inspection in the Commission's Public 
Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549.
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A. Rule 17Ac2-2

1. Elimination of Filing Exception
    The Commission proposed several modifications to Rule 17Ac2-2. Rule 
17Ac2-2 currently provides that a transfer agent that engages a service 
company to perform all of its transfer and processing functions is not 
required to file Form TA-2.\8\ As a consequence, in processing Form TA-
2 filings, the Commission's staff frequently cannot determine whether a 
transfer agent that did not file Form TA-2 is properly using the 
exception or has simply neglected to file. To address this problem, we 
proposed to eliminate the exception and to require a transfer agent 
that engaged a service company to perform all of its transfer and 
processing functions to answer four questions on Form TA-2 about the 
service company relationship.\9\
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    \8\ ``Named transfer agent'' is defined in Rule 17Ad-9(j) as the 
registered transfer agent that is engaged by an issuer to perform 
transfer agent functions for an issue of securities but has engaged 
a service company to perform some or all of those functions. 17 CFR 
240.17Ad-9(j).
    ``Service company'' is defined in Rule 17Ad-9(k) as the 
registered transfer agent engaged by a named transfer agent to 
perform transfer agent functions for that named transfer agent. 17 
CFR 240.17Ad-9(k).
    \9\ As proposed, the portion of Form TA-2 such a transfer agent 
would be required to complete would provide basic information such 
as the transfer agent's name, its use of a service company, the name 
of its ARA, whether it filed any amendments to its registration, and 
the number of items it received for transfer and processing during 
the reporting period.
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    Two comment letters received on the elimination of the filing 
exception were favorable.\10\ Three commenters, however, expressed 
concern that asking for information other than the service company's 
name was redundant.\11\ One commenter argued that if the service 
company and the transfer agent for which it acts as the service agent 
both are required to submit data about the number of items it received 
for transfer, the Commission will receive duplicative information.\12\
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    \10\ Letters from CTA and RTC.
    \11\ Letters from CTA, EquiServe, and STA.
    \12\ Letter from EquiServe.
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    The Commission has decided that in order to strike a balance 
between obtaining more comprehensive information from transfer agents 
about their activities and not imposing unnecessary burdens on transfer 
agents that outsource all of their transfer agent functions, the 
Commission is adopting this provision with several changes.\13\ As 
adopted, transfer agents that hire service companies to perform all of 
their transfer agent functions will not be required to provide the 
number of items it received for transfer during the reporting period. 
In addition, in order to obtain the most current and complete 
information regarding a transfer agent's use of a service company, the 
Commission is adopting an additional question that requires the 
transfer agent to state whether it has been engaged as a service 
company during the reporting period.
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    \13\ Rule 17Ac2-2 requires a named transfer agent that engages a 
service company to perform some but not all of its transfer and 
processing functions to file a Form TA-2 and to enter zero for those 
questions that relate to transfer agent activities performed by the 
service company on behalf of the named transfer agent. These 
requirements would not be changed.
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2. Reporting Period
    Current Rule 17Ac2-2 states that every registered transfer agent 
shall file an annual report on Form TA-2 in accordance with the 
instructions contained therein by August 31 of each calendar year. Most 
of the data reported on the pre-amended Form TA-2 is as of June 30, but 
some of the data reported is as of December 31. In order to have a 
uniform annual reporting period, the Commission proposed that the term 
``reporting period'' mean the 12 months ended June 30 of the year for 
which the form was filed. The June 30 date was chosen to avoid 
increasing the year-end reporting burden on transfer agents.
    No commenters supported June 30 as the reporting period. Three 
commenters suggested that it made more sense for Rule 17Ac2-2 to 
require that data be reported on Form TA-2 as of the end of the 
calendar year, or December 31.\14\ For example, one commenter explained 
that year-end reporting would not only ``coincide with the usual 
corporate accounting standards, it should make the information more 
accurate and consistent and would likely lessen the burden of creating 
reports from mid-stream data.'' \15\ This commenter pointed out that 
because the employees that prepare Form TA-2 are usually different from 
those that prepare other general corporate reporting, compiling data 
for Form TA-2 reporting at year-end would not create significant 
additional work. In response to these comments, the Commission has 
modified the definition of the reporting period to require that, 
beginning with the reporting period for the Year 2000, each transfer 
agent registered on December 31 must file a report on Form TA-2 by 
March 31 \16\ covering the prior calendar year.\17\
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    \14\ Letters from CTA, FirstEnergy, and STA.
    \15\ Letter from CTA.
    \16\ While some transfer agents have said they prefer a later 
reporting date because of other year-end processing, the Commission 
believes that a reporting date past March 31 would make the data 
less useful.
    \17\ As a transition measure, transfer agents' next required 
From TA-2 filing will be on March 31, 2001, which will cover their 
activities during calendar Year 2000. This will eliminate the filing 
for the period ending June 30, 2000 (which would have been due on 
August 31, 2000).

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[[Page 36604]]

3. Clarification on Filing Requirements
    The Commission proposed that Rule 17Ac2-2 be amended to require 
every transfer agent that is registered on June 30 to file Form TA-2 by 
August 31 of that calendar year. The Commission received no comment 
letters on this provision. We are adopting this provision with 
modifications to conform it to the new reporting period. As adopted, 
Rule 17Ac2-2 states that every transfer agent registered on December 31 
must file Form TA-2. Therefore, a transfer agent that withdraws from 
registration prior to December 31 is not required to file Form TA-2 for 
the portion of the year that it was registered.
4. Items Received for Transfer and Processing
    Current Rule 17Ac2-2 provides that a registered transfer agent is 
required to complete only Items 1 through 4 of Form TA-2 if it: 
Received fewer than 500 items for transfer and fewer than 500 items for 
processing in the six months ending June 30 and did not maintain master 
securityholder files for more than 1,000 individual securityholder 
accounts as of June 30. The Commission proposed to revise this partial 
exception to conform it to the full 12 month reporting period so that 
it applied to a registered transfer agent that received fewer than 
1,000 items for transfer and fewer than 1,000 items for processing in 
the 12 months ending June 30 of the year for which the form is being 
filed.\18\
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    \18\ As proposed, the matter securityholder account element did 
not change. In addition, as proposed, low volume transfer agents 
were still required to complete a partial Form TA-2.
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    No commenters objected to this change, although two commenters said 
that ``the receipt of 1,000 items for processing is not adequately 
defined.'' \19\ The ``processing'' term refers to transfer agents 
acting as a registrar. However, today transfer agents are rarely hired 
to act solely as a registrar. Therefore, the rule as adopted omits the 
reference to processing but includes the other proposed changes.
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    \19\ Letters from RTC and STA.
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B. Form TA-2

    This section describes major proposed modifications to Form TA-2, 
the comments received, and the changes we are adopting.
1. CUSIP Number
    Currently, in determining the number of investment company 
securities for which they act as transfer agents, transfer agents are 
instructed to count each prospectus as one issue. The Commission 
proposed that transfer agents count investment company securities as 
one issue per CUSIP number rather than by prospectuses. We received one 
favorable comment on this proposal, and are adopting the change.\20\
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    \20\ Letter from CTA.
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2. Amendments to Form TA-1
    The Commission proposed adding a new question to Form TA-2 which 
would ask if the transfer agent had amended Form TA-1 as required by 
existing transfer agent rules. \21\ The new question would also require 
the transfer agent to provide an explanation if it had failed to file a 
required amendment. The Commission received no comments regarding this 
provision. We are adopting this provision as proposed.
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    \21\ Transfer agents registered with the Commission are required 
by Rule 17Ac2-1(c) to amend Form TA-1 or the SEC Supplements to Form 
TA-1 within 60 calendar days following the date on which information 
reported therein became inaccurate, incomplete, or misleading. 17 
CFR 240.17Ac2-1(c). Federal bank regulators (FBRs) also require 
their registrants to amend their Form TA-1 within 60 calendar days 
following the date on which the reported information became 
inaccurate, incomplete, or misleading. FBRs send copies of the 
submitted filings to the Commission on behalf of their registrants.
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3. Direct Purchase and Dividend Reinvestment Plans
    Currently, Form TA-2 elicits information regarding dividend 
reinvestment plans for which a transfer agent provides services. The 
Commission proposed revising Form TA-2 to require transfer agents to 
include data about direct purchase plans as well.
    The Commission received five comments on this proposed change. One 
commenter stated that it had no objection to the proposed change that 
would require transfer agents to report separately the number of direct 
purchase and dividend reinvestment plan accounts.\22\ One commenter 
noted that the question that requests the combined total of the number 
of direct purchase and dividend reinvestment plan accounts can be 
interpreted ``to mean the number of accounts in issues that have open 
enrollment plans or the issues that have optional cash investment 
features included with dividend reinvestment plans.'' \23\ The 
commenter suggested that in order to clarify what information is 
requested, the section should be divided into two distinct categories, 
one for dividend reinvestment plans and one for direct purchase 
facilities.\24\ Three commenters essentially stated that it is common 
for a dividend reinvestment plan and a direct purchase plan to be the 
same plan. As a result, there is no need, for recordkeeping purposes, 
to segregate a dividend reinvestment plan from a direct purchase 
plan.\25\ One commenter also highlighted that Direct Registration 
System (DRS) \26\ shares are also not distinguished from plan 
shares.\27\
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    \22\ Letter from EquiServe.
    \23\ Letter from RTC.
    \24\ Id. The commenter suggested that the categories should 
include one dealing with dividend reinvestment plans, whether or not 
they have an optional cash contribution for current participants, 
and a second for issues that have the open availability/direct 
purchase functionality. Issues in the later category usually have 
dividend reinvestment and optional cash features for participants. 
The commenter further recommended that the questions on dividend 
reinvestment plans should include only those plans that are not 
listed under the direct purchase responses.
    \25\ Letters from CTA, FirstEnergy, and STA.
    \26\ ``Direct Registration System'' means the system, as 
administered by The Depository Trust Company, that allows investors 
to hold their securities in electronic book-entry from directly on 
the books of the issuer or its transfer agent. Securities Exchange 
Act Release No. 37931 (November 7, 1996), 61 FR 58600. DRS 
securityholdings are growing. Currently, 11 transfer agents service 
292 DRS eligible issues.
    \27\ Letter from CTA.
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    In response to the commenters' concerns, Form TA-2 has been 
modified to elicit information regarding the number of issues for which 
dividend reinvestment plan and/or direct purchase plan services are 
provided. We are requiring that transfer agents provide the number of 
individual securityholder dividend reinvestment plan and/or direct 
purchase plan accounts. In addition, Form TA-2 has been modified to 
elicit information regarding the number of issues for which DRS 
services are provided. We are also requiring that transfer agents 
provide the number of individual securityholder DRS accounts.
4. Securityholder Accounts
    Currently, Form TA-2 requires transfer agents to set forth the 
percentage of individual securityholder accounts they maintain broken 
down into six categories: corporate equity securities, corporate debt 
securities, investment company securities, limited partnership 
securities, municipal debt securities, and other securities. For 
clarification purposes, we proposed that the category of investment 
company securities be renamed as ``open-end investment company 
securities.'' In addition, we proposed that closed-end investment 
company securities be included in the corporate equity category. No 
comments were received on these proposed changes. We are adopting these 
changes as proposed.

[[Page 36605]]

5. Securities Record Differences Upon Change of Transfer Agents
    Form TA-2 requires transfer agents to provide information about the 
number and aggregate market value of (1) securities record differences 
that the current transfer agent received as an out of balance issue 
from the prior transfer agent and (2) securities record differences 
resulting from the current transfer agent.\28\ The Commission proposed 
requiring transfer agents to report the number and aggregate market 
value of securities aged record differences with no detail as to 
whether the securities differences occurred before or after the change 
in transfer agents. Several commenters expressed concern that the 
Commission would not be able to differentiate between differences for 
which the current agent is or may be responsible versus those created 
by a former agent.\29\ In light of these comments, we have determined 
not to adopt the proposed change.
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    \28\ ``Record difference,'' as defined in Rule 17Ad-9(g), occurs 
when either (1) the total number of shares or total principal dollar 
amount of securities in the master securityholder file does not 
equal the number of shares or principal dollar amount in the control 
book, or (2) the security transferred or redeemed contains 
certificate detail different from the certificate detail currently 
on the master securityholder file, which difference cannot be 
immediately resolved.
    \29\ Letters from EquiServe, RTC, and STA.
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6. Buy-Ins and Turnaround Time
    We proposed to add two sections dealing with buy-ins and turnaround 
time to Form TA-2. The first section would require the number of 
quarterly reports of aged record differences that were filed and that 
should have been filed by the registrant with its ARA during the 
reporting period pursuant to Rule 17Ad-11(c)(2).\30\ These reports 
contain information such as the size and dollar value of the record 
difference, the reason for the record difference, and the size and 
dollar value of any buy-ins executed to remedy the record difference. 
The second section would require transfer agents to report the number 
of months during the reporting period in which the registrant was not 
in compliance with the specified turnaround time for routine items 
pursuant to Rule 17Ad-2.\31\ This section also would require transfer 
agents to report the number of written notices the transfer agent filed 
and should have filed during the reporting period documenting its 
noncompliance with turnaround time for routine items pursuant to Rule 
17Ad-2. Lastly, the proposed section would require transfer agents to 
respond to the same questions with respect to compliance with 
turnaround times for when the transfer agent acted as an outside 
registrar.
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    \30\ 17 CFR 240.17Ad-11(c)(2). Generally, Rule 17Ad-11(c)(2) 
requires a transfer agent to file a report at the end of each 
quarter during which it has an aged record difference (i.e., where 
the number of shares on the securityholder file does not equal the 
number of shares authorized and issued by the issuer). A buy-in is 
required when a registered transfer agent overissues shares. The 
registered transfer agent within 60 days of the discovery of such 
overissuance buys-in securities equal to the number of shares in the 
case of equity securities or equal to the principal dollar amount in 
the case of debt securities. 17 CFR 240.17Ad-10(g).
    \31\ Turnaround times for routine items are set forth in Rule 
17Ad-2. 17 CFR 240.17Ad-2.
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    Three commenters argued that the proposed sections regarding buy-
ins and turnaround time seemed unnecessary and redundant, as the 
Commission or other appropriate regulatory agencies have received and 
should know the number of reports made to it by a transfer agent.\32\ 
One commenter, however, stated that the additional information 
requested regarding transfer turnarounds is relevant and easy to 
report.\33\
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    \32\ Letters from EquiServe, RTC, and STA.
    \33\ Letter from Bankers Trust.
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    While these proposals will elicit information regarding buy-ins and 
turnaround time that are required to be reported to the Commission or 
to other appropriate regulatory agencies, the Commission believes that 
it will be helpful to both issuers and the Commission to have this 
self-reported information included on the annual summary report, Form 
TA-2. These reporting elements will assist the ARAs in fulfilling their 
oversight responsibilities for transfer agents. The annual report would 
provide a better picture of patterns of a transfer agent's activity, 
and also would alert the ARA to instances where a transfer agent failed 
to file required reports. We are adopting these sections as proposed 
with one change. Consistent with the other changes to the proposal 
regarding registrar activities, we are not adopting the proposal 
pertaining to compliance with turnaround time by a transfer agent that 
acted as an outside registrar.
7. Technical Changes
    The proposal also included numerous technical and conforming 
changes. For example, we proposed: changing the format of the box at 
the top of Form TA-2 that reflects the reporting period; adding 
definitions; requesting that the actual amounts be reported instead of 
abbreviated amounts; eliminating the collection of information about 
transfer agent custodian (TAC) arrangements; \34\ and eliminating 
requests for certain percentages and figures. We received two comments 
supporting the changes to these provisions.\35\ No negative comments 
regarding these provisions were received. We are adopting these 
modifications as proposed.
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    \34\ TAC arrangements, which are more commonly referred to as 
fast automated securities transfer (FAST) arrangements, exist 
between large transfer agents and The Depository Trust Company.
    \35\ Letters from CTA and Banker Trust.
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C. Rule 17a-24

    Rule 17a-24 requires registered transfer agents to report the 
aggregate number of lost securityholder accounts as of June 30 of each 
year and the percentage of total accounts represented by such lost 
securityholder accounts. These figures currently must be reported for 
lost securityholder accounts outstanding for: one year or less, three 
years or less, five years or less, or more than five years. Rule 17Ad-
17 requires transfer agents to conduct periodic searches of databases 
to obtain current addresses for lost securityholders. We adopted Rule 
17a-24 to obtain information on aged lost securityholder accounts in 
order to assess the effectiveness of searches. Rule 17a-24 also 
requires information on lost securityholder accounts that were 
escheated to state unclaimed property administrators. Frequently, 
transfer agent representatives have told our staff that they have 
difficulty compiling information on the aging of lost securityholder 
accounts.
    In the proposal, we intended to refine transfer agents' reporting 
requirements so that the reported information would give a better 
indication of the effectiveness of the database searches and be less 
burdensome to compile. We proposed that: (1) Transfer agents be 
required to report on Form TA-2 the number of lost securityholder 
accounts for which a first and a second database search has been 
conducted, and the number of lost securityholder accounts for which a 
correct address has been obtained as a result of each of these 
searches; (2) transfer agents continue, as required by Rule 17a-24, to 
report on Form TA-2 the current number of lost securityholder accounts 
and the number of lost securityholder accounts that were remitted to 
the states during the last year; (3) the remaining information (i.e., 
aging of lost securityholder accounts) would no longer be required to 
be reported; and (4) Rule 17a-24 would be rescinded.
    Several commenters stated that the proposed reporting requirements 
would not be easier to comply with than the current reporting 
requirements. Most of the commenters pointed out that, while

[[Page 36606]]

they can determine the number of different addresses generated by 
database searches for lost securityholder accounts, it is virtually 
impossible to determine the number of lost securityholder accounts for 
which a correct address has been obtained during any specific database 
search.\36\ For example, address changes are received from account 
holders continuously without the transfer agent knowing the cause or 
the source of the change. Therefore, transfer agents would have to 
manually research every address received from an account holder in 
order to determine if the address change resulted from the transfer 
agent's actions following a database search or from some other cause.
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    \36\ Letters from Bankers Trust, CTA, EquiServe, RTC, 
Shareholder Services, Southern California Edison, and STA.
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    A few commenters expressed concern that the proposed requirement 
that transfer agents report the number of lost securityholder accounts 
that have been remitted to the states needs to be clarified as to 
whether the Commission wanted information on remittance of funds or 
securities.\37\ These commenters also pointed out that with respect to 
state escheatment laws some transfer agents do not distinguish between 
lost and dormant accounts.
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    \37\ Letters from CTA, RTC, and STA.
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    Two commenters also essentially argued that the Commission should 
prohibit a transfer agent from using any service that results in the 
lost securityholders not receiving the full value of their 
property.\38\ These commenters believe that often the securityholder 
becomes lost as a result of poor recordkeeping on the transfer agent's 
books rather than the neglect of the owner. The commenters further 
suggested that to the extent that search firms are used, the 
requirements of fee limits and full disclosure to the securityholder 
would be reasonable.
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    \38\ Letters from Arizona Department of Revenue and NAUPA. 17Ad-
17 provides in pertinent part that every recordkeeping transfer 
agent whose master securityholder file includes accounts of lost 
securityholders shall exercise reasonable care to ascertain such 
lost securityholders' current addresses. Each recordkeeping transfer 
agent shall conduct two database searches without charge to a lost 
securityholder.
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    In response to the comments, we are simplifying the reporting 
requirements. As adopted, transfer agents will be required to provide 
the date of each database search for lost securityholders during the 
reporting period, the number of lost securityholder accounts submitted 
for each database search, and the number of lost securityholder 
accounts for which a different address was obtained as a result of each 
database search. Transfer agents will continue to report on Form TA-2 
the number of lost securityholder accounts that were remitted to the 
states during the reporting period, but will not be required to report 
aging of lost securityholder accounts. For purposes of clarification, 
transfer agents should only report those accounts held by 
securityholders that are defined as lost by Rule 17Ad-17 \39\ and 
should only report those accounts where the underlying securities have 
been remitted to the states. These reporting requirements should 
provide the Commission with useful information about the number of lost 
securityholders and the efficiency of the searches, but should not be 
burdensome for transfer agents to implement.
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    \39\ Supra, note 4.
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III. Paperwork Reduction Act

    Certain provisions of the amendments to Rule 17Ac2-2 and Form TA-2 
contain ``collection of information'' requirements within the meaning 
of the Paperwork Reduction Act of 1995,\40\ and the Commission has 
submitted them to the Office of Management and Budget for review in 
accordance with 44 U.S.C. 3507(d) and 5 CFR 1320.11. The Commission 
notes that it is rescinding Rule 17a-24. However, the Commission is 
keeping two questions generated by Rule 17a-24 on Form TA-2 and is 
adding a question to Form TA-2 about the results of the required 
database searches for lost securityholders. The title for the 
collection of information is: ``Transfer Agents Annual Report 17 CFR 
240.17Ac2-2, Form TA-2.'' The OMB control number for the collection of 
information is 3235-0337.
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    \40\ 44 U.S.C. 3501 et seq.
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    In the proposing release, the Commission requested comment on the 
proposed collections of information. No comments were received that 
addressed the PRA submission. In the proposing release, the Commission 
based its estimates of the collection of information on statistics 
gathered from 1998. Because transfer agent statistics gained from 
various filings are now available for the year 1999, the Commission has 
revised the figures it used in the proposing release to update the 
collections of information required under the rules, as discussed 
below.
    Under the amendments, Rule 17Ac2-2 requires the collection of 
additional information on amended Form TA-2. First, the amendments 
eliminate the filing exception for named transfer agents and require 
every named transfer agent using a service company for all of its 
transfer agent functions to complete only the first three questions 
(which request only simple information) and the signature section of 
Form TA-2. Second, registered transfer agents that meet the criteria 
based on volume of transfer business and number of shareholder accounts 
are required to answer Questions 1 through 5, 11, and the signature 
section of Form TA-2. Finally, registered transfer agents that file a 
complete Form TA-2 are required to respond to new questions regarding 
the use of service companies, amendments to Form TA-1, direct purchase 
and dividend reinvestment plan accounts, buy-ins, DRS, lost 
securityholders, and turnaround time for routine items.
    The Commission uses the information on Form TA-2 to monitor the 
annual business activities of registered transfer agents. The proposed 
collection of information under amended Rule 17Ac2-2 and Form TA-2 is 
intended to facilitate greater accuracy of transfer agents' records. 
Furthermore, the information elicited from the additional questions 
regarding lost securityholder accounts should help the Commission to 
assess the effectiveness of the search requirements of Rule 17Ad-17 and 
the scope of the lost securityholder problem.
    The collection of information required by the amendments to Rule 
17Ac2-2 and Form TA-2 should not result in any new significant burden 
to transfer agents. All information required by Form TA-2 is available 
in the internal files of the transfer agents and a large portion of the 
information is already required to be calculated or maintained by 
existing Commission transfer agent rules.
    The amount of time needed to comply with the requirements of 
amended Rule 17Ac2-2 and Form TA-2 will vary. There are approximately 
1,093 registered transfer agents.\41\ From this total number, 
approximately 270 registrants will be required to complete only 
Questions 1 through 3 and the signature section of amended Form TA-2, 
which the Commission estimates will take each registrant about 30 
minutes, for a total of 135 hours (270  x  .5 hours). Approximately 371 
registrants will be required to answer Questions 1 through 5, 11, and 
the signature section, which the Commission estimates will take about 1 
hour and 30 minutes, for a total of 557 hours (371  x  1.5 hours). The 
remaining registrants, approximately 452, will be required to complete 
the entire Form TA-2, which the Commission estimates will take about 6

[[Page 36607]]

hours, for a total of 2,712 hours (452  x  6 hours). The Commission 
estimates that the total burden will be 3,404 hours (135 + 557 + 
2712).\42\
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    \41\ Since the proposing release, the total number of registered 
transfer agents has decreased.
    \42\ Based on an estimated average administative labor cost of 
$31.50 per hour, the Commission's staff estimates that the labor 
cost to the transfer agent industry for complying with Rule 17Ac2-2 
and Form TA-2 would be $107,226 annually ($31.50  x  3,404).
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    The collection of information pursuant to the amendments to Form 
TA-2 and Rule 17Ac2-2 does not contain any additional burdensome 
recordkeeping requirements. Providing the information will be 
mandatory. Responses to the collection of information will not be kept 
confidential. An agency may not conduct or sponsor, and a person is not 
required to respond to, a collection of information unless it displays 
a currently valid Office of Management and Budget control number.

IV. Costs and Benefits of the Proposed Amendments

    The Commission believes that significant benefits will result from 
the amendments to Rule 17Ac2-2 and Form TA-2 and the rescission of Rule 
17a-24. To assist the Commission in its evaluation of the costs and 
benefits that may result from the new rules, commenters were requested 
to provide analysis and data, if possible, relating to costs and 
benefits associated with the proposed rule changes. In particular, the 
Commission requested comment on the potential costs for any necessary 
modifications to information gathering, management, and recordkeeping 
systems or procedures. The Commission received three comments that 
touched on this issue.\43\
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    \43\ Letters from Bankers Trust (``amendments * * * do not pose 
significant modifications to procedures or systems''), RTC and STA 
(``costs cannot be accurately estimated'').
---------------------------------------------------------------------------

    Since the proposing release was issued, we have made a few changes 
to the proposed amendments to further improve the information obtained 
from the Form TA-2. In particular, we changed the reporting period to 
year end; shortened the questions on turnaround time; and further 
simplified the reporting requirements pertaining to lost securityholder 
information.

A. Benefits

    The Commission believes that the rules will provide the following 
benefits:
     The elimination of the filing exception will help the 
Commission to keep complete records on all registered transfer agents.
     The additional questions to Form TA-2, including those 
regarding the use of service companies, amendments to Form TA-1, direct 
purchase and dividend reinvestment plan accounts, DRS, buy-ins, and 
turnaround time, will provide more accurate information about transfer 
agent business activities.
     The uniform reporting period at year-end should eliminate 
confusion from varying reporting periods.
     The simplification of the reporting requirements regarding 
lost securityholder accounts and the associated database searches 
should be less burdensome for transfer agents to report. This 
information should enable the Commission to assess the scope of the 
lost securityholder problem and to assess the effectiveness of the 
search requirements of Rule 17Ad-17 more effectively.

B. Costs

    The simplification of Rule 17Ac2-2 and Form TA-2 through the 
amendments will most likely lead to a reduction of costs to transfer 
agents. The majority of information required by Form TA-2 is available 
in the internal files of the transfer agents, and a large portion of 
the information is already required to be calculated or maintained by 
other Commission rules.
    The primary cost associated with the rule and Form TA-2 is the time 
that it will take transfer agent personnel to complete the form and 
file it with the Commission. The Commission estimates that because 
there is no increase in complexity to Form TA-2, there will be no 
increase in costs imposed on transfer agents over the amount previously 
spent in complying with the pre-amended versions of Rule 17Ac2-2 and 
Form TA-2. The amount of time needed to comply with the requirements of 
amended Rule 17Ac2-2 and Form TA-2 will vary depending on a particular 
transfer agent's activity. There are approximately 1,093 transfer 
agents who are registered with the Commission. Of this number, 
approximately 270 registrants would be required to complete only 
Questions 1 through 3 and the signature section of amended Form TA-
2.\44\ Approximately 371 registrants will be required to answer only 
Questions 1 through 5, 11 and the signature section due to their low 
volume of transfer business and number of shareholder accounts. The 
remaining registrants, approximately 452, would be required to complete 
the entire Form TA-2.
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    \44\ Registrants that hire service companies to perform all of 
their transfer agent functions will be required to complete 
questions one through three and the signature section.
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    Additionally, the Commission sought comment and empirical data on 
the cost associated with modifying computer systems to report all items 
for a twelve month reporting period, instead of for a six month period. 
The Commission estimated that this likely would require a simple, one-
time change to database reporting functions and would have a negligible 
cost on transfer agents. Only one commenter directly addressed the 
Commission's request for information regarding the cost required to 
modify transfer agents' systems to comply with the reporting changes on 
Form TA-2. The commenter wrote that the proposed amendments to Rule 
17Ac2-2 and Form TA-2 do not pose significant modifications to 
procedures or systems.\45\ The Commission believes that the rule 
changes are necessary to improve information regarding transfer agent 
business activities and lost securityholder information.
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    \45\ Letter from Bankers Trust.
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V. Consideration of Burden on Competition and Promotion of 
Efficiency, Competition, and Capital Formation

    Section 23(a)(2) of the Exchange Act requires that the Commission, 
when adopting or amending rules under the Exchange Act, consider the 
anticompetitive effects of those rules, if any, and refrain from 
adopting a rule that would impose a burden on competition not necessary 
or appropriate in furthering the purposes of the Exchange Act.\46\ 
Moreover, Section 3(f) of the Exchange Act as amended by the National 
Securities Markets Improvement Act of 1996 provides that whenever the 
Commission is engaged in rulemaking and is required to consider or 
determine whether an action is necessary or appropriate in the public 
interest, the Commission shall consider, in addition to the protection 
on investors, whether the action will promote efficiency, competition, 
and capital formation. In the proposing release, the Commission 
solicited comment on the effects of the proposed amendments to Rule 
17Ac2-2 and Form TA-2 on competition, efficiency and capital formation 
as cited in Sections 3(f) and 23(a)(2). The Commission received no 
comments in direct response to this solicitation. However, several 
commenters did suggest that calendar year-end reporting would be more 
efficient than would a reporting period ending in June.\47\
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    \46\ 15 U.S.C. 78w(a)(2).
    \47\ Letters from FirstEnergy, STA, and CTA.
---------------------------------------------------------------------------

    The Commission has considered the amendments to Rule 17Ac2-2 and 
Form TA-2 in light of the comments received and the standards cited in 
Sections 3(f)

[[Page 36608]]

and 23(a)(2) of the Exchange Act.\48\ The Commission proposed these 
amendments not only to enhance the Commission's ability to monitor more 
effectively the transfer agent industry, but to make the Form TA-2 more 
efficient for both the Commission and transfer agents. Because transfer 
agents of a similar size and with similar business are required to 
complete the Form in the same manner, there should be no negative 
impact on competition.
---------------------------------------------------------------------------

    \48\ See 15 U.S.C. 78w(a)(2).
---------------------------------------------------------------------------

VI. Final Regulatory Flexibility Analysis

    This Final Regulatory Flexibility Analysis (``FRFA'') has been 
prepared in accordance with the provisions of the Regulatory 
Flexibility Act (``RFA''), as amended by Public Law No. 104-121, 110 
Stat. 847, 864 (1996), 5 U.S.C. 604. The FRFA relates to the adoption 
of the amendments to Rule 17Ac2-2 and Form TA-2 and to the rescission 
of Rule 17a-24 under the Exchange Act.
    An Initial Regulatory Flexibility Analysis (IRFA) summary regarding 
the proposed amendments to Rule 17Ac2-2 and Form TA-2 and the proposed 
rescission of Rule 17a-24 appeared in Securities Exchange Act Release 
No. 41204 (March 23, 1999).

A. Need for and Objectives of Amendments to Rule 17Ac2-2 and Form TA-2 
and Rescission of Rule 17a-24

    The purpose of the amendments to Rule 17Ac2-2 and Form TA-2 and the 
rescission of Rule 17a-24 is to allow the Commission to obtain more 
comprehensive information from transfer agents about their activities 
while making Form TA-2 clearer and easier for transfer agents to 
complete. The objectives of the amendments are to: Elicit information 
regarding transfer agent business activities, such as direct purchase 
and dividend reinvestment plan accounts, buy-ins, and turnaround time 
for routine items; obtain more comprehensive lost securityholder 
information; enhance service company information; eliminate the filing 
exception; clarify the filing requirements and instructions; conform 
reporting periods; delete unnecessary questions; and make technical 
changes.
    Prior to being amended, Rule 17Ac2-2 and Form TA-2 required 
transfer agents to submit information regarding the number of issues 
for which they provided dividend reinvestment plan services. Because 
many dividend reinvestment plans can now include, or can be separate 
from, a direct stock purchase plan, the Commission is now requesting 
the number of issues and individual securityholder accounts with 
dividend reinvestment plans and/or direct stock purchase plans on Form 
TA-2.
    In addition, the Commission is now requiring registrants to report 
the number of Direct Registration System (DRS) accounts that they 
maintain for securityholders. Because DRS is relatively new in the 
securities industry, Form TA-2 did not address transfer agent activity 
concerning it. By requiring registrants to report their involvement 
with DRS, the Commission will now be in a better position to monitor 
this new system in the securities industry.
    As amended, Rule 17Ac2-2 and Form TA-2 now require two sections 
dealing with buy-ins and turnaround time. The first section requires 
the transfer agent to report the number of quarterly reports that were 
filed and that should have been filed by the transfer agent with its 
ARA during the reporting period pursuant to Rule 17Ad-11(c)(2). The 
second section requires transfer agents to report the number of months 
during the reporting period in which the transfer agent was not in 
compliance with the specified turnaround time for routine items 
pursuant to Rule 17Ad-2. This section also requires transfer agents to 
report the number of written notices the transfer agent filed and 
should have filed during the reporting period documenting its 
noncompliance with turnaround time for routine items pursuant to Rule 
17Ad-2. The Commission added these sections to Form TA-2 because the 
information requested will be helpful to issuers and to the Commission 
in monitoring overissuance and buy-in activities and compliance with 
turnaround time by registered transfer agents.
    In addition, Form TA-2 now requires a registrant to state whether 
it had amended Form TA-1 during the reporting period if it was required 
to do so under existing transfer agent rules.\49\ The Commission 
believes that the addition of this information in a year-end report 
will enable the Commission to monitor more comprehensively transfer 
agent business activities conducted during the course of a year.
---------------------------------------------------------------------------

    \49\ 17 CFR 240.17Ac2-1(c).
---------------------------------------------------------------------------

    Since 1998, registrants using Form TA-2 have been required to 
submit information regarding the aging of lost securityholder 
accounts.\50\ Since that time, transfer agent representatives have 
informed Commission staff that compiling this information is extremely 
difficult and burdensome and frequently is impossible. In an effort to 
simplify the reporting requirements, the Commission proposed to 
eliminate Rule 17a-24, which required the reporting of information on 
aged lost securityholder accounts, and to require registrants to report 
on the number of database searches conducted and the results of such 
searches, and the number of lost securityholder accounts that were 
remitted to the states during the reporting period. In response to the 
near unanimity of comment letters opposing the format and content of 
the requested information, the Commission decided to further simplify 
the rule's lost securityholder reporting requirements by requiring 
registrants to report the dates and number of lost securityholder 
accounts submitted for each database search, and to report the number 
of lost securityholder accounts for which a different address was 
obtained as a result of each search. This information is needed for the 
Commission to assess the effectiveness of transfer agents' efforts to 
find lost securityholders. Transfer agents will continue to report on 
Form TA-2 the number of lost securityholder accounts that were remitted 
to the states during the reporting period.
---------------------------------------------------------------------------

    \50\ 17 CFR 240.17a-24.
---------------------------------------------------------------------------

    An additional component of the amended rule and Form TA-2 enhances 
the Commission's collection of information about registrants' use of 
service companies. Before the adoption of the amendments to Rule 17Ac2-
2 and Form TA-2, a transfer agent that engaged a service company to 
perform all of its transfer and processing functions was exempt from 
filing an annual TA-2 form. This exception had the unintended result of 
making it difficult for the Commission to determine if a transfer agent 
was actually engaging a service company or whether the transfer agent 
was merely neglecting to file the TA-2 form as required by the rule. 
Therefore, in adopting the new rule, the Commission eliminated the 
filing exception for transfer agents that engage service companies to 
perform all of their transfer functions. However, such transfer agents 
must only complete the first three questions of the TA-2 form.
    Additional changes to Rule 17Ac2-2 and Form TA-2 seek to clarify 
the filing requirements and instructions. Before the amendments, some 
transfer agents were unsure of whether they were required to file if 
they withdrew during the filing period. The amended rule now clarifies 
that if a transfer agent is registered as of December 31, then a Form 
TA-2 must be filed by March 31 of the following calendar year. 
Additionally, the pre-amended Form

[[Page 36609]]

TA-2 lacked definitions for several key terms. As amended, Form TA-2 
adds several definitions.
    Additionally, some technical changes that make reporting more 
accurate and informative are incorporated into the amended Rule 17Ac2-2 
and Form TA-2. These changes include counting investment company 
securities by CUSIP number instead of by prospectus and using actual 
numerical figures on Form TA-2 instead of omitting the zeroes at the 
end. The Commission believes that these changes are necessary to avoid 
confusion and to obtain a more accurate assessment of the types of 
securities that are being serviced by transfer agents.
    Another change which the Commission made concerns the reporting 
period for the TA-2 which formerly ran from June 30 to June 29 of the 
following year. The amended Rule 17Ac2-2 and Form TA-2 change the 
reporting period to conform with current accounting and tax preparation 
methods. This will make it easier for transfer agents to use the 
information contained within their tax and accounting records for 
purposes of filing Form TA-2.

B. Significant Issues Raised by Public Comments

    The Commission requested comment with respect to the Initial 
Regulatory Flexibility Analysis (``IRFA'') that was prepared when the 
amendments to Rule 17Ac2-2 and form TA-2 were proposed. While no 
comment letters were received that directly addressed the IRFA, one 
commenter wrote that the proposed amendments do not pose significant 
modifications to procedures or systems.\51\
---------------------------------------------------------------------------

    \51\ See letter from Bankers Trust. In addition, the Bankers 
Trust letter indicated that the proposed changes regarding the lost 
securityholder accounts would cost Bankers Trust a total of forty 
person-hours and $6,260 to comply with the rule. However, as the 
Commission had decided to significantly simplify the reporting 
requirements for lost securityholder account searches, the 
Commission believes that the Bankers Trust cost estimate will be 
greatly reduced.
---------------------------------------------------------------------------

C. Description and Estimate of the Number of Small Entities Subject to 
the Amendments

    The amended rule and form will affect transfer agents that are 
small entities pursuant to Rule 0-10(h) under the Exchange Act.\52\ 
Rule 0-10(h) defines the term ``small business'' or ``small 
organization'' to include any transfer agent that: (1) Received less 
than 500 items for transfer and less than 500 items for processing 
during the preceding six months (or in the time that it has been in 
business, if shorter); (2) maintained master shareholder files that in 
the aggregate contained less than 1,000 shareholder accounts or was the 
named transfer agent for less than 1,000 shareholder accounts at all 
times during the preceding fiscal year (or in the time that it has been 
in business, if shorter); (3) only transferred items of issuers with 
total assets of $5 million or less; and (4) is not affiliated with any 
person (other than a natural person) that is not a small business or 
small organization under Rule 0-10.
---------------------------------------------------------------------------

    \52\ 17 CFR 240.0-10(h). The Commission recently amended this 
definition. Securities Exchange Commission Release No.s 33-7548, 34-
40122, IC-23272, and IA-1727 (June 24, 1998), 63 FR 35508.
---------------------------------------------------------------------------

    When the Commission adopted the new definition of ``small entity'' 
with respect to transfer agents in 1998, the Commission estimated that 
approximately 180 registered transfer agents would qualify as small 
entities under Rule 0-10. Since that time, the total number of 
registered transfer agents has fallen. As a result, the Commission is 
revising its estimate of registered transfer agents that would qualify 
as small entities under Rule 0-10 from 180 to 163. As a result of the 
new rule, the Commission now estimates that 163 small entities would be 
subject to the requirements of the proposed amendments to Rule 17Ac2-2 
and Form TA-2.
    The amendments to Rule 17Ac2-2 provide that a registered transfer 
agent that received fewer than 1,000 items for transfer in the twelve 
months ending December 31, and did not maintain master securityholder 
files for more than 1,000 individual securityholder accounts as of 
December 31, would have to complete only a portion of Form TA-2. 
Therefore, all ``small entities'' as defined by Rule 0-10 would 
continue to have reduced reporting requirements under the proposal.
    In addition, the proposed amendments will impose different 
reporting and compliance requirements on certain transfer agents 
because it eliminates the filing exception for named transfer agents 
using service companies and requires every registered transfer agent to 
file Form TA-2 annually. The Commission estimates that the incremental 
annual burden on all ``small entities'' will be approximately 73 hours 
and $2,300.\53\
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    \53\ The FRFA arrives at this estimate, which is different then 
the IRFA estimate, by using the latest available transfer agent 
data. The IRFA, using the data available at that time, estimated 
that the total burden to 180 small entity trasfer agents would be 81 
hours (180  x  .45) at a cost of $2,552 ($31.5  x  81 hours). The 
FRFA, with a revised figure of 163 small entity transfer agents, 
calculate the following burden: 163  x  .45=73 hours; and $31.5  x  
73 hours=$2300.
---------------------------------------------------------------------------

D. Description of Steps Taken to Minimize the Economic Impact on Small 
Entities

    The RFA directs the Commission to consider significant alternatives 
to the amendments to Rule 17Ac2-2 and Form TA-2 that would accomplish 
the stated objectives while minimizing any significant adverse economic 
impact on small entities. Such alternatives include: (1) The 
establishment of differing compliance or reporting requirements or 
timetables that take into account the resources of small entities; (2) 
the clarification, consolidation, or simplification of compliance and 
reporting requirements under the proposed amendments for small 
entities; (3) the use of performance rather than design standards; and 
(4) an exception from coverage of the rule or any part thereof for 
small entities.
    Taking into account the burden that would be imposed on small 
transfer agents, the Commission proposed that transfer agents that meet 
the definition of a ``small entity'' still be required to respond to 
only a portion of Form TA-2. Accordingly, the Commission has determined 
that it is not feasible to further clarify, consolidate, or simplify 
the rule for ``small entities'' beyond its current form. The Commission 
also believes that it would be inconsistent with the purpose of the 
Exchange Act to exempt ``small entities'' from the proposed amendments 
or to use performance standards to specify different requirements for 
small entities. Therefore, as adopted, the rule will not have an 
additional significant economic impact on a substantial number of small 
entities.

E. Description of the Projected Reporting, Recordkeeping, and Other 
Compliance Requirements

    The amendments to Rule 17Ac2-2 and Form TA-2 will not result in any 
significant additional costs to transfer agents. The majority of 
information required by Form TA-2 is available in the internal files of 
the transfer agents, and a large portion of the information is already 
required by the Commission to be calculated or maintained.
    The primary cost associated with the rule and Form TA-2 is the time 
that it will take transfer agent personnel to complete the form and 
file it with the Commission. The Commission estimates that because 
there is no increase in complexity to Form TA-2, there will be no 
increase in costs imposed on transfer agents over the amount previously 
spent in complying with Rule 17Ac2-2 and Form TA-2. The amount of time 
needed to comply with the requirements of

[[Page 36610]]

amended Rule 17Ac2-2 and Form TA-2 would vary depending on a particular 
transfer agent's activity. There are approximately 1093 registered 
transfer agents.\54\ Of this number, approximately 270 registrants 
would be required to complete only Questions 1 through 3 and the 
signature section of amended Form TA-2. Based on their low volume of 
transfer business and number of shareholder accounts, approximately 371 
registrants would be required to answer only Questions 1 through 5, 11, 
and the signature section. The remaining registrants, approximately 
452, would be required to complete the entire Form TA-2.
---------------------------------------------------------------------------

    \54\ This figure is different than the figure put forth in the 
proposing release because data available since publication of the 
proposing release has shown a decrease in the number of registered 
transfer agents.
---------------------------------------------------------------------------

    Additionally, in order to comply with the rule, transfer agents 
will make minor modifications to computer systems to report all items 
for the twelve months ending December 31, instead of the previous six 
month reporting cycle. The Commission estimates that this likely would 
require a simple, one-time change to database reporting functions and 
would have a negligible cost on transfer agents. The only commenter who 
directly addressed the Commission's request for information regarding 
this cost agreed with the Commission's assessment and wrote that the 
proposed amendments to Rule 17Ac2-2 and Form TA-2 do not pose 
significant modifications to procedures or systems.\55\
---------------------------------------------------------------------------

    \55\ Letter from Bankers Trust.
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VII. Statutory Basis

    Pursuant to the Exchange Act and particularly Sections 3(f), 17, 
17A, and 23(a) thereof, 15 U.S.C. 78q, 78q-1, and 78w(a), the 
Commission is adopting amendments to Sec. 240.17Ac2-2 and Form TA-2 
(referenced in 17 CFR 249b.102) of Chapter II of Title 17 of the Code 
of Federal Regulations in the manner set forth below.

List of Subjects in 17 CFR Parts 240 and 249b

    Reporting and recordkeeping requirements, Securities.

Text of Amendment

    In accordance with the foregoing, Title 17, Chapter II of the Code 
of Federal Regulations is amended as follows:

PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF 
1934

    1. The authority citation for Part 240 continues to read in part as 
follows:

    Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77eee, 
77ggg, 77nnn, 77sss, 77ttt, 78c, 78d, 78f, 78i, 78j, 78j-1, 78k, 
78k-1, 78l, 78m, 78n, 78o, 78p, 78q, 78s, 78u-5, 78w, 78x, 78ll(d), 
77mm, 79q, 79t, 80a-20, 80a-23, 80a-29, 80a-37, 80b-3, 80b-4 and 
80b-11, unless otherwise noted.
* * * * *


Sec. 240.17a-24  [Removed]

    2. Section 240.17a-24 is removed.

    3. Section 240.17Ac2-2 is revised to read as follows:


Sec. 240.17Ac2-2  Annual reporting requirement for registered transfer 
agents.

    (a) Every transfer agent registered on December 31 must file a 
report covering the reporting period on Form TA-2 (Sec. 249b.102 of 
this chapter) by March 31 following the end of the reporting period. 
Form TA-2 must be completed in accordance with the instructions 
contained in the Form.
    (1) A registered transfer agent that received fewer than 1,000 
items for transfer in the reporting period and that did not maintain 
master securityholder files for more than 1,000 individual 
securityholder accounts as of December 31 of the reporting period must 
complete Questions 1 through 5, 11, and the signature section of Form 
TA-2.
    (2) A named transfer agent that engaged a service company to 
perform all of its transfer agent functions during the reporting period 
must complete Questions 1 through 3 and the signature section of Form 
TA-2.
    (3) A named transfer agent that engaged a service company to 
perform some but not all of its transfer agent functions during the 
reporting period must complete all of Form TA-2 but should enter zero 
(0) for those questions that relate to transfer agent functions 
performed by the service company on behalf of the named transfer agent.
    (b) For purposes of this section, the term reporting period shall 
mean the calendar year ending December 31 for which Form TA-2 is being 
filed. The term named transfer agent shall have the same meaning as 
defined in Sec. 240.17Ad-9(j). The term service company shall have the 
same meaning as defined in Sec. 240.17Ad-9(k).
    (c) As a transition measure, transfer agents' next required Form 
TA-2 filing will be on March 31, 2001, which will cover their 
activities during calendar Year 2000. This will eliminate the filing 
for the period ending June 30, 2000, which would have been due on 
August 31, 2000.

PART 249b--FURTHER FORMS, SECURITIES EXCHANGE ACT OF 1934

    4. The authority citation for Part 249b continues to read in part 
as follows:

    Authority: 15 U.S.C. 78a et seq., unless otherwise noted;
* * * * *


Sec. 249b.1202   [Amended]

    5. Form TA-2 (referenced in Sec. 249b.102) is revised to read as 
set forth in the attached appendix.

    Note: Form TA-2 is attached as an Appendix.)


    Dated: June 2, 2000.

    By the Commission.
Margaret H. McFarland,
Deputy Secretary.

    Note: This Appendix to the Preamble will not appear in the Code 
of Federal Regulations.

United States Securities and Exchange Commission Washington, D.C. 
20549

Instructions for Use of Form TA-2

    Form TA-2 is to be used by transfer agents registered pursuant to 
Section 17A of the Securities Exchange Act of 1934 for the annual 
report of transfer agent activities.
    Attention: Certain sections of the Securities Exchange Act of 1934 
applicable to transfer agents are referenced below. Transfer agents are 
urged to review all applicable provisions of the Securities Exchange 
Act of 1934, the Securities Act of 1933, and the Investment Company Act 
of 1940, as well as the applicable rules promulgated by the SEC under 
those Acts.

I. General Instructions for Filing and Amending Form TA-2

    A. Terms and Abbreviations. The following terms and abbreviations 
are used throughout these instructions:
    1. ``Act'' means the Securities Exchange Act of 1934, 15 U.S.C. 78a 
et seq.
    2. ``Aged record difference,'' as defined in Rule 17Ad-11(a)(2), 17 
CFR 240.17Ad-11(a)(2), means a record difference that has existed for 
more than 30 calendar days.
    3. ``ARA'' means the appropriate regulatory agency, as defined in 
Section 3(a)(34)(B) of the Act, 15 U.S.C. 78c(a)(34)(B).
    4. ``Direct Registration System'' means the system, as administered 
by The Depository Trust Company, that allows investors to hold their 
securities in electronic book-entry form directly on the books of the 
issuer or its transfer agent.
    5. ``Form TA-2'' includes the Form TA-2 itself and any attachments.
    6. ``Lost securityholder,'' as defined in Rule 17Ad-17, 17 CFR 
240.17Ad-17, means a securityholder: (i) to whom an item of 
correspondence that was sent to

[[Page 36611]]

the securityholder at the address contained in the transfer agent's 
master securityholder file has been returned as undeliverable; 
provided, however, that if such item is re-sent within one month to the 
lost securityholder, the transfer agent may deem the securityholder to 
be a lost securityholder as of the day the re-sent item is returned as 
undeliverable; and (ii) for whom the transfer agent has not received 
information regarding the securityholder's new address.
    7. ``Named transfer agent'' is defined in Rule 17Ad-9(j), 17 CFR 
240.17Ad-9(j), and means a registered transfer agent that has been 
engaged by an issuer to perform transfer agent functions for an issue 
of securities but has engaged a service company (another registered 
transfer agent) to perform some or all of those functions.
    8. ``Record difference'' means any of the imbalances described in 
Rule 17Ad-9(g), 17 CFR 240.17Ad-9(g).
    9. ``Registrant'' means the transfer agent on whose behalf the Form 
TA-2 is filed.
    10. ``Reporting period'' means the calendar year ending December 31 
of the year for which Form TA-2 is being filed.
    11. ``SEC'' means the United States Securities and Exchange 
Commission.
    12. ``Service company'' is defined in Rule 17Ad-9(k), 17 CFR 
240.17Ad-9(k), and means the registered transfer agent engaged by a 
named transfer agent to perform transfer agent functions for that named 
transfer agent.
    13. ``Transfer agent'' is defined in Section 3(a)(25) of the Act, 
15 U.S.C. 78c(a)(25), and means any person who engages on behalf of an 
issuer of securities or on behalf of itself as an issuer in at least 
one of the functions enumerated therein.
    B. Who Must File; When to File.
    1. Every transfer agent that is registered on December 31 must file 
Form TA-2 in accordance with the instructions contained therein by the 
following March 31.
    a. A registered transfer agent that received fewer than 1,000 items 
for transfer during the reporting period and that did not maintain 
master securityholder files for more than 1,000 individual 
securityholder accounts as of December 31 of the reporting period is 
required to complete Questions 1 through 5, 11, and the signature 
section of Form TA-2.
    b. A named transfer agent that engaged a service company to perform 
all of its transfer agent functions during the reporting period is 
required to complete Questions 1 through 3 and the signature section of 
Form TA-2.
    c. A named transfer agent that engaged a service company to perform 
some but not all of its transfer agent functions during the reporting 
period must complete all of Form TA-2 but should enter zero (0) for 
those questions that relate to functions performed by the service 
company on behalf of the named transfer agent.
    2. The date on which any filing is actually received by the SEC is 
the Registrant's filing date provided that the filing complies with all 
applicable requirements. The SEC may reject a filing that does not 
comply with applicable requirements. The SEC's receipt of a filing, 
however, shall not constitute a finding that the filing has been filed 
as required or that the information therein is accurate, current, or 
complete.
    C. Number of Copies; How and Where to File. The Registrant must 
file the original and two copies of Form TA-2 with the SEC. The 
original copy of Form TA-2 must be manually signed and any additional 
copies may be photocopies of the signed original copy. All copies must 
be legible and on good quality 8\1/2\  x  11 inch white paper. The 
Registrant must keep an exact copy of any filing in its records. (For 
recordkeeping rules see 17 CFR 240.17Ad-6 and 7).
    The Registrant must file Form TA-2 directly with the SEC at: 
Securities and Exchange Commission, 450 5th Street, N.W., Washington, 
DC 20549-0013.

II. Special Instructions for Filing Form TA-2

    A. Indicate the calendar year for which Form TA-2 is filed in the 
box at the upper left hand corner. A transfer agent registered on 
December 31 shall file Form TA-2 by the following March 31 even if the 
transfer agent conducted business for less than the entire reporting 
period.
    B. In answering Question 4, indicate the number of items received 
for transfer during the reporting period. Omit the purchase and 
redemption of open-end investment company shares. Report those items in 
response to Question 10.
    C. In answering Questions 5 and 6, include closed-end investment 
company securities in the corporate equity securities category.
    In answering Question 5.a, include Direct Registration System, 
dividend reinvestment plan and/or direct purchase plan accounts in the 
total number of individual securityholder accounts maintained. In 
Question 5.b., include dividend reinvestment plan and/or direct 
purchase plan accounts only. In Question 5.c., include Direct 
Registration System accounts only. In Question 5.d., include American 
Depositary Receipts (ADRs) in the corporate equity or corporate debt 
category, as appropriate, and include dividend reinvestment plan and/or 
direct purchase plan accounts in the corporate equity or open-end 
investment company securities category.
    In answering Question 6, debt securities are to be counted as one 
issue per CUSIP number. Open-end investment company securities 
portfolios are to be counted as one issue per CUSIP number.
    D. In answering Question 7.c., exclude coupon payments and 
transfers of record ownership as a result of corporate actions.
    E. In answering Question 10, exclude non-value transactions such as 
name or address changes.
    F. In answering Question 11.b., include only those accounts held by 
securityholders that are defined as lost by Rule 17Ad-17 when the 
underlying securities (i.e., not just dividends and interest) have been 
remitted to the states.

III. Federal Information Law and Requirements

    SEC's Collection of Information: An Agency may not conduct or 
sponsor, and a person is not required to respond to, a collection of 
information unless it displays a currently valid control number. Under 
Sections 17, 17A(c) and 23(a) of the Act and the rules and regulations 
thereunder, the SEC is authorized to solicit from registered transfer 
agents the information required to be supplied on Form TA-2. The filing 
of this Form is mandatory for all registered transfer agents. The 
information will be used for the principal purpose of regulating 
registered transfer agents but may be used for all routine uses of the 
SEC or of the ARAs. Information supplied on this Form will be included 
routinely in the public files of the ARAs and will be available for 
inspection by any interested person. Any member of the public may 
direct to the SEC any comments concerning the accuracy of the burden 
estimate on the application facing page of this Form, and any 
suggestions for reducing this burden. The Office of Management and 
Budget has reviewed this collection of information in accordance with 
the clearance requirements of 44 U.S.C. 3507. The applicable Privacy 
Act system of records is SEC-2. Form TA-2 is subject to the routine 
uses set forth at 40 FR 39255 (Aug. 27, 1975) and 41 FR 5318 (Feb. 5, 
1976).

[[Page 36612]]



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            File Number:                                             OMB Approval
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For the reporting period ended        OMB Number: 3235-0337.
 December 31.                         Expires: June 30, 2002.
                                      Estimated average burden hours per full response:  6.00.
                                      Estimated average burden hours per intermediate response:  1.50.
                                      Estimated average burden hours per minimum response:  .50.
----------------------------------------------------------------------------------------------------------------

United States Securities and Exchange Commission, Washington, D.C. 
20549

Form TA-2--Form for Reporting Activities of Transfer Agents Registered 
Pursuant to Section 17A of the Securities Exchange Act of 1934

Attention: Intentional misstatements or omissions of fact constitute 
Federal criminal violations. See 18 U.S.C. 1001 and 15 U.S.C. 78ff(a)
    1. Full name of Registrant as stated in Question 3 of Form TA-1: 
(Do not use Form TA-2 to change name or address.)
----------------------------------------------------------------------
----------------------------------------------------------------------

    2. a. During the reporting period, has the Registrant engaged a 
service company to perform any of its transfer agent functions? (Check 
appropriate box.)

{time}  All   {time}  Some   {time}  None

    b. If the answer to subsection (a) is all or some, provide the 
name(s) and transfer agent file number(s) of all service company(ies) 
engaged.

------------------------------------------------------------------------
              Name:                File No. (beginning with 84- or 85-):
------------------------------------------------------------------------
                                   .....................................
------------------------------------------------------------------------
                                   .....................................
------------------------------------------------------------------------
 
------------------------------------------------------------------------

    c. During the reporting period, has the Registrant been engaged as 
a service company by a named transfer agent to perform transfer agent 
functions?

__Yes____No
    d. If the answer to subsection (c) is yes, provide the name(s) and 
file number(s) of the named transfer agent(s) for which the Registrant 
has been engaged as a service company to perform transfer agent 
functions: (If more room is required, please complete and attach the 
Supplement to Form TA-2.)

----------------------------------------------------------------------------------------------------------------
                   Name:                                    File No. (beginning with 84- or 85-):
----------------------------------------------------------------------------------------------------------------
                                            ....................................................................
----------------------------------------------------------------------------------------------------------------
                                            ....................................................................
----------------------------------------------------------------------------------------------------------------
                                            ....................................................................
----------------------------------------------------------------------------------------------------------------
                                            ....................................................................
----------------------------------------------------------------------------------------------------------------

    3. a. Registrant's appropriate regulatory agency. (Check one box 
only.)

__ Comptroller of the Currency
__ Federal Deposit Insurance Corporation
__ Board of Governors of the Federal Reserve System
__ Securities and Exchange Commission

    b. During the reporting period, has the Registrant amended Form TA-
1 within 60 calendar days following the date on which information 
reported therein became inaccurate, incomplete, or misleading? (Check 
appropriate box.)

__ Yes, filed amendment(s)
__ No, failed to file amendment(s)
__ Not applicable

    c. If the answer to subsection (b) is no, provide an explanation.
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------

    If the response to any of questions 4-11 below is none or zero, 
enter ``0.''


[[Page 36613]]



4. Number of items received for transfer during the reporting period............................
                                                                                                 ---------------
5. a. Total number of individual securityholder accounts, including accounts in the Direct
 Registration System (DRS), dividend reinvestment plans and/or direct purchase plans as of
 December 31....................................................................................
                                                                                                 ---------------
    b. Number of individual securityholder dividend reinvestment plan and/or direct purchase
     plan accounts as of December 31............................................................
                                                                                                 ---------------
    c. Number of individual securityholder DRS accounts as of December 31.......................
                                                                                                 ---------------
    d. Approximate percentage of individual securityholder accounts from subsection (a) in the
     following categories as of December 31.....................................................
 


--------------------------------------------------------------------------------------------------------------------------------------------------------
    Corporate equity           Corporate debt          Open-end investment       Limited partnership         Municipal debt
       securities                securities            company securities            securities                securities            Other securities
--------------------------------------------------------------------------------------------------------------------------------------------------------
 
--------------------------------------------------------------------------------------------------------------------------------------------------------
 
--------------------------------------------------------------------------------------------------------------------------------------------------------

    6. Number of securities issues for which Registrant acted in the 
following capacities, as of December 31:

----------------------------------------------------------------------------------------------------------------
                                     Corporate equity & debt    Open-end
                                           securities          investment    Limited     Municipal      Other
                                   --------------------------   company    partnership      debt      securities
                                       Equity        Debt      securities   securities   securities
----------------------------------------------------------------------------------------------------------------
a. Receives items for transfer and
 maintains the master
 securityholder files.............
----------------------------------------------------------------------------------------------------------------
b. Receives items for transfer but
 does not maintain the master
 securityholder files.............
----------------------------------------------------------------------------------------------------------------
c. Does not receive items for
 transfer but maintains the master
 securityholder files.............
----------------------------------------------------------------------------------------------------------------


7. Scope of certain additional types of activities performed:
    a. Number of issues for which dividend reinvestment plan and/or direct purchase plan
     services were provided, as of December 31..................................................
                                                                                                 ---------------
    b. Number of issues for which DRS services were provided, as of December 31.................
                                                                                                 ---------------
    c. Dividend disbursement and interest paying agent activities conducted during the reporting
     period:  ..................................................................................
        i. number of issues.....................................................................
                                                                                                 ---------------
        ii. amount (in dollars).................................................................
                                                                                                 ---------------
 
 

8. a. Number and aggregate market value of securities aged record 
differences, existing for more than 30 days, as of December 31:

----------------------------------------------------------------------------------------------------------------
                                                                               Prior transfer
                                                                                  agent (If     Current transfer
                                                                                 applicable)          agent
----------------------------------------------------------------------------------------------------------------
i. Number of issues.........................................................  ................  ................
ii. Market value (in dollars)...............................................  ................  ................
----------------------------------------------------------------------------------------------------------------


b. Number of quarterly reports regarding buy-ins filed by the Registrant with its ARA (including
 the SEC) during the reporting period pursuant to Rule 17Ad-11(c)(2)............................
                                                                                                 ---------------
c. During the reporting period, did the Registrant file all quarterly reports regarding buy-ins
 with its ARA (including the SEC) required by Rule 17Ad-11(c)(2)?...............................
                                                                                                 ---------------
 

__ Yes    __ No

d. If the answers to subsection (c) is no, provide an explanation for 
each failure to file.
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------

9. a. During the reporting period, has the Registrant always been in 
compliance with the turnaround time for routine items as set forth in 
Rule 17Ad-2?

[[Page 36614]]

__Yes    __ No


If the answer to subsection (a) is no, complete subsections (i) through (ii).
    i. Provide the number of months during the reporting period in which the Registrant was not
     in compliance with the turnaround time for routine items according to Rule 17Ad-2..........
                                                                                                 ---------------
    ii. Provide the number of written notices Registrant filed during the reporting period with
     the SEC and with its ARA that reported its noncompliance with turnaround time for routine
     items according to Rule 17Ad-2.............................................................
                                                                                                 ---------------
10. Number of open-end investment company securities purchases and redemptions
 (``transactions'') excluding dividend, interest and distribution postings processed during the
 reporting period:
    a. Total number of transactions processed:..................................................
                                                                                                 ---------------
    b. Number of transactions processed on a date other than date of receipt of order (``as
     ofs''):....................................................................................
                                                                                                 ---------------
11. a. During the reporting period, provide the date of all database searches conducted for lost
 securityholder accounts listed on the transfer agent's master securityholder files, the number
 of lost securityholder accounts for which a database search has been conducted, and the number
 of lost securityholder accounts for which a different address has been obtained as a result of
 a database search.
 


----------------------------------------------------------------------------------------------------------------
                                          Number of lost securityholder
       Date of database search           accounts submitted for database        Number of different addresses
                                                     search                     obtained from database search
----------------------------------------------------------------------------------------------------------------
                                      ....................................  ....................................
----------------------------------------------------------------------------------------------------------------
                                      ....................................  ....................................
----------------------------------------------------------------------------------------------------------------
                                      ....................................  ....................................
----------------------------------------------------------------------------------------------------------------
                                      ....................................  ....................................
----------------------------------------------------------------------------------------------------------------


b. Number of lost securityholder accounts that have been remitted to states during the reporting
 period.........................................................................................
                                                                                                 ---------------
 
 

SIGNATURE: The Registrant submitting this Form, and the person signing 
the Form, hereby represent that all the information contained in the 
Form is true, correct, and complete.

----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
Manual signature of Official responsible for Form................  Title:
                                                                   Telephone number:
----------------------------------------------------------------------------------------------------------------
Name of Official responsible for Form: (First name, Middle name,   Date signed
 Last name).                                                       (Month/Day/Year):
----------------------------------------------------------------------------------------------------------------
File Number......................................................  Supplement to Form TA-2
----------------------------------------------------------------------------------------------------------------
For the reporting period ended December 31,--------..............  Full Name of Registrant
----------------------------------------------------------------------------------------------------------------

Use this schedule to provide the name(s) and file number(s) of the 
named transfer agent(s) for which the Registrant has been engaged as a 
service company to perform transfer agent functions:

 
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                   Name:                                                        File No. (beginning with 84- or 85-):
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[FR Doc. 00-14594 Filed 6-8-00; 8:45 am]
BILLING CODE 8010-01-P