[Federal Register Volume 65, Number 240 (Wednesday, December 13, 2000)]
[Notices]
[Pages 77948-77949]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-31685]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-43675; File No. SR-EMCC-00-01]


Self-Regulatory Organizations; Emerging Markets Clearing 
Corporation; Notice of Filing of Proposed Rule Change Relating to 
Financial Statements Prepared in Accordance With International 
Accounting Standards or United Kingdom Generally Accepted Accounting 
Principles

December 5, 2000.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on February 29, 2000, the 
Emerging Markets Clearing Corporation (``EMCC'') filed a proposed rule 
change with the Securities and Exchange Commission (``Commission'') and 
on October 26, 2000, and on November 15, 2000, amended it proposed rule 
change as described in Items I, II, and III below, which Items have 
been prepared primarily by EMCC. The Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The proposed rule change would permit EMCC to accept financial 
statements from an applicant prepared in accordance with International 
Accounting Standards (``IAS'') or United Kingdom Generally Accepted 
Accounting Principles (``UK GAAP'') without requiring the applicant to 
provide a discussion of the material variations of such accounting 
principles from United States Generally Accepted Accounting Principles 
(``US GAAP'').

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, EMCC included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. EMCC has prepared summaries, set forth in sections A, B, 
and C below of the most significant aspects of such statements.\2\
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    \2\ The Commission has modified the text of the summaries 
prepared by EMCC.
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A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    Currently, Rule 2, Section 3(b) of EMCC's Rules and procedures 
requires applicants to provide audited financial statements for the two 
fiscal years immediately preceding the year the application is made. To 
the extent such financial statements are not prepared in accordance 
with US GAAP, applicants must provide EMCC with a discussion of the 
material variations of such accounting principles from US GAAP.
    When membership requirements were initially established in 1996, 
EMCC had minimal experience in analyzing non-U.S. financial statements. 
Therefore, it was deemed prudent to require applicants submitting 
audited financial statements prepared on a basis other than US GAAP to 
provide a discussion of the material differences. Since that time, 
EMCC's staff's familiarity with, understanding, and expertise in 
evaluating financial statements not prepared in accordance with US GAAP 
has significantly increased.
    Pursuant to the proposed rule change, EMCC would have the authority 
to determine that a discussion of the material variations between US 
GAAP and another financial accounting standard used in a preparing an 
applicant's audited financial statement is unnecessary. Also under 
EMCC's proposal, EMCC is seeking Commission approval of its 
determination that with respect to audited financial statements 
prepared in accordance with IAS or UK GAAP, it will not require an 
applicant to provide a discussion of such material variations from US 
GAAP. EMCC retains the right to require any applicant not submitting 
audited financial statements prepared according to US GAAP to provide a 
discussion of such material variations if EMCC in its sole discretion 
determines that circumstances warrant the applicant providing such a 
discussion.
    Moreover, when assessing an applicant's qualifications for EMCC 
membership, the audited financial statements comprise only a portion of 
the materials provided to and reviewed by the company. Such materials 
include, but are not limited to, reports filed with the applicant's 
primary regulator, interim financial, and a detailed questionnaire. To 
demonstrate to EMCC the applicant's financial responsibility and 
operational capability is sufficient for membership, EMCC may also 
require an applicant to make its books and records available to EMCC. 
Thus, EMCC has the ability to seek information it deems necessary or 
relevant to sufficiently assess and review an applicant's 
qualifications and capability for membership.
    EMCC believes that the proposed rule change will not adversely 
affect the safeguarding of securities or funds in the custody or 
control EMC or for which it is responsible and is therefore consistent 
with the requirements of Section 17A of the Act and the rules and 
regulations thereunder.

B. Self-Regulatory Organization's Statement on Burden on Competition

    EMCC does not believe that the proposed rule change will impact or 
impose a burden on competition.

C. Self-Regulatory Organization's Statements on Comments on the 
Proposed Rule Change Received From Members, Participants, or Others

    No written comments relating to the proposed rule change have been 
solicited or received. EMCC will notify the Commission of any written 
comments received by EMCC.

III. Date of Effectiveness of the Proposed Rule Change and Timing 
for Commission Action

    Within thirty-five days of the date of publication of this notice 
in the Federal Register or within such longer period (i) as the 
Commission may designate up to ninety days of such date if it finds 
such longer period to be appropriate and publishes its reasons for so 
finding or (ii) as to which the self-regulatory organization consents, 
the Commission will:
    (a) By order approve such proposed rule change, or
    (b) Institute proceedings to determine whether the proposed rule 
changes should be disapproved.

IV. Solicitation of Comments.

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the propose rule 
change is consistent with the Act. Persons making written submission 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. 
Copies of

[[Page 77949]]

the submission, all subsequent amendments, all written statements with 
respect to the proposed rule change that are filed with the Commission, 
and all written communication relating to the proposed rule change 
between the Commission and any person, other than those that may be 
withheld from the public in accordance with provisions of 5 U.S.C. 552, 
will be available for inspection and copying in the Commission's Public 
Reference Room in Washington, DC. Copies of such filing will also be 
available for inspection and copying at EMCC's principal office. All 
submissions should refer to File No. SR-EMCC-00-01 and should be 
submitted by January 3, 2001.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\3\
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    \3\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-31685 Filed 12-12-00; 8:45 am]
BILLING CODE 8010-01-M