[Federal Register Volume 67, Number 19 (Tuesday, January 29, 2002)]
[Notices]
[Pages 4299-4301]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-2070]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-45316; File No. SR-DTC-2001-05]


Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing of Proposed Rule Change Relating to Adopting Unitary 
Action Procedures

January 18, 2002.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on April 12, 2001, The 
Depository Trust Company (``DTC'') filed with the Securities and 
Exchange Commission (``Commission'') the proposed rule

[[Page 4300]]

change (File No. SR-DTC-2001-05) as described in Items I, II, III 
below, which items have been prepared primarily by DTC. The Commission 
is publishing this notice to solicit comments 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

    DTC proposes to adopt procedures to enable its nominee, Cede & Co., 
to exercise certain rights as the recordholder of securities on deposit 
at DTC where Cede & Co. is only permitted to act with respect to 100% 
of the securities on deposit or not act at all. This is known as a 
``Unitary Action'' situation.\2\
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    \2\ The text of DTC's Unitary Action Procedures is labeled as 
Exhibit 2 of DTC's proposed rule change and is available through the 
Commission's Public Reference Room or through DTC.
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II. Self-Regulatory Organization's Statement of the Purpose of, and 
the Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, DTC 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. DTC has prepared summaries set forth in sections A, B, 
and C below of the most significant aspects of such statements.\3\
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    \3\ The Commission has modified the text of the summaries 
prepared by DTC.
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A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

    Under DTC's current procedures, in situations involving 
solicitations when an issuer has announced an annual or special 
shareholders meeting or consent solicitation and where a record date 
has been established, DTC assigned applicable Cede & Co. voting rights 
or consenting rights to its participants that have securities credited 
to their accounts on the record date and issues an omnibus proxy and 
forwards it to the issuer or trustee. DTC also assists its participants 
in exercising other rights available to Cede & Co. as the recordholder 
of securities on deposit at DTC, such as the right to dissent and seek 
an appraisal of stock, the right to inspect a stock ledger, and the 
right to accelerate a bond. Participants may seek DTC's assistance in 
exercising such rights on their own behalf or on behalf of their 
customers. DTC will act in these matters only upon written instructions 
from participants with securities credited in its DTC free account.
    In a Unitary Action situation, however, DTC cannot follow the 
procedures described above.\4\ DTC's proposed rule change would enable 
DTC, in its sole discretion, to determine whether it has a reasonable 
amount of time to solicit and receive instructions from participants in 
advance of taking the Unitary Action. If DTC believes it has time to 
solicit and receive information from its participants, as a general 
rule DTC will use reasonable efforts to obtain instructions from 
participants holding a position in the affected security as to how to 
act. DTC will then act in accordance with the instructions timely 
received from the holders of a plurality of the number of shares or 
principal amount of bonds or notes of the affected security registered 
in Cede & Co.'s name. For matters that are ministerial or otherwise 
nonsubstantive in nature, DTC may in its sole discretion announce to 
its participants an action that it plans to take. DTC shall then be 
deemed to be authorized by participants to take such action, absent 
instructions timely received to the contrary from its participants 
representing a majority of the number of shares or principal amount of 
bonds or notes of the affected security registered in Cede & Co.'s 
name.
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    \4\ DTC has experienced only one Unitary Action event. That 
event involved a non U.S.-issuer in a bankruptcy situation.
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    When involved in a situation requiring a Unitary Action where DTC 
in its sole discretion determines that it does not have a reasonable 
amount of time to solicit and receive instructions from participants in 
advance of taking the Unitary Action, DTC may use reasonable efforts to 
act for the benefit of participants holding positions in the affected 
security but shall have no obligation to do so.
    Under the proposed Unitary Action procedures, DTC will not be 
liable for any losses arising from Unitary Actions it takes or fails to 
take in connection with the above-described procedures, other than 
those losses that are directly caused by DTC's gross negligence or 
willful misconduct. Moreover, under DTC Rule 20, DTC may charge each 
participant that holds a position in the affected security a pro rate 
share (based on the number of shares or principal amount of bonds or 
notes) of expenses related to DTC's taking a Unitary Action. In such a 
situation, DTC may incur unusual expenses (e.g., hiring outside 
counsel) that are specifically attributable to the securities that are 
subject to the Unitary Action, whereas the Unitary Action does not 
involve any other securities on deposit with DTC.
    DTC believes that the proposed rule change is consistent with the 
requirements of the Act and the rules and regulations thereunder 
applicable to DTC since the proposed rule change will, by clarifying 
the procedures that DTC will follow in situations calling for Unitary 
Actions, promote the prompt and accurate clearance and settlement of 
securities transactions.

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

    DTC does not believe that the proposed rule change will impose any 
burden on competition.

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

    Written comments from DTC participants have not been solicited or 
received on the proposed rule change.

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 such longer period (i) as the Commission may 
delegate up to ninety days of such date if it finds such longer period 
to be appropriate and published 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 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing including whether the proposed rule 
change is consistent with the Act. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for inspection and copying in

[[Page 4301]]

the Commission's Public Reference Room, 450 Fifth Street, NW., 
Washington, DC. Copies of such filing will also be available for 
inspection and copying at DTC's principal office. All submissions 
should refer to File No. SR-DTC-2001-05 and should be submitted by 
February 19, 2002.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\5\
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    \5\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. 02-2070 Filed 1-28-02; 8:45 am]
BILLING CODE 8010-01-M