[Federal Register Volume 67, Number 34 (Wednesday, February 20, 2002)]
[Notices]
[Pages 7727-7728]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-4014]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-45430; File No. SR-DTC-2002-01]


Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to Dutch Issues in the Direct Registration System and to a 
Modification to the Surety Bond That is Part of the Direct Registration 
System

February 11, 2002.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on January 18, 2002, The 
Depository Trust Company (``DTC'') filed with the Securities and 
Exchange Commission (``Commission'') the proposed rule change as 
described in Items I, II, and III below, which items have been prepared 
primarily by DTC. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested parties.
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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 provides (i) an interpretation of a rule 
relating to Dutch issues in the Profile Modification System 
(``Profile'') feature of the Direct Registration System (``DRS'') 
facility and (ii) increases the limits of the surety bond that is part 
of the Profile Surety Program (``PSP'').\2\
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    \2\ For a description of DRS, including Profile and PSP, refer 
to Securities Exchange Act Release Nos. 35038 (December 1, 1994), 59 
FR 63652; 37931 (November 7, 1996), 61 FR 58600; 41862 (September 
10, 1999), 64 FR 51162; 42366 (January 28, 2000), 65 FR 5714; 42704 
(April 19, 2000), 65 FR 24242; 43586 (November 17, 2000), 65 FR 
70745; 44696 (August 14, 2001), 66 FR 43939; and 45232 (January 3, 
2002), 67 FR 1254.
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II. Self-Regulatory Organization's Statement of the Purpose of, and 
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 these 
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 
Statutory Basis for, the Proposed Rule Change

    The purpose of the proposed rule change is to (i) provide an 
interpretation with respect to Dutch issues in DRS and (ii) increase 
the limits of the surety bond that is part of PSP.
(1) Dutch Issues
    DTC established a deadline of December 14, 2001, as the date by 
which all securities issues eligible for DRS would have to be eligible 
for processing through Profile.\4\ Counsel for a transfer agent for 
securities of certain Dutch issuers has informed DTC, however, that in 
order for a transfer of registration of Dutch securities to be

[[Page 7728]]

effected under Dutch law, a deed (i.e., a stock power) signed by the 
transferor must be presented to or on behalf of and acknowledged by or 
on behalf of the Dutch issuer. DTC has been informed that this 
requirement could be satisfied by the following mechanism that DTC 
proposes to adopt for Dutch issues eligible for DRS.
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    \4\ See Securities Exchange Act Release Nos. 44696 (August 14, 
2001), 66 FR 43939 [File No. SR-DTC-2001-07] and 45232 (January 3, 
2002), 67 FR 1254 (File No. SR-DTC-2001-18).
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    In order to ensure Dutch law is complied with, the transfer agent 
would put a flag on each account of a registered holder of a DRS 
position in a Dutch issue. Such registered holders would be sent a 
``Notice'' describing Profile and informing them that in order to avail 
themselves of Profile and have any future transfer of the Dutch 
securities under Profile be in compliance with Dutch law, such 
registered holders would be required to complete and deliver to the 
transfer agent a signed deed in the form provided by the transfer 
agent. At such time as the transfer agent receives a properly executed 
deed from a holder, the flag will be removed from the holder's account. 
If a Profile transaction or any other attempted movement of a position 
through DRS is proposed on a flagged account, it will be rejected until 
the deed has been properly received.
    For the two Dutch issues currently in DRS, the Notice would 
initially be mailed to affected holders by January 15, 2002. A follow-
up reminder Notice would be mailed to such holders by February 20, 
2002. The last day for such holders to submit their deeds to the issuer 
would be March 29, 2002. Any such holders that have not submitted a 
deed by March 29, 2002, would be certificated beginning on April 1, 
2002. After January 15, 2002, and continuing in the future, any new 
holders of a DRS position in a Dutch issue would have seventy-five days 
from the date such position is created to deliver a deed. If a deed is 
not received within seventy-five days, the position would be 
certificated.
    Such a procedure will serve to facilitate the movement of Dutch 
issuers' securities issues that are already in DRS into Profile and 
should help ensure that holders of DRS positions are kept in DRS. For 
any new Dutch issues going into DRS, registered holders of DRS 
positions will have seventy-five days from the time of becoming a DRS 
holder to submit a deed or else have their position certificated. DTC 
interprets its current rules relating to the administration of the DRS 
facility and Profile as being satisfied by the above-described 
mechanism.
(2) PSP Surety Bond
    In a previous rule filing with the Commission, DTC set forth 
certain requirements for the surety bond to be issued in connection 
with PSP.\5\ One characteristic of the surety bond was that it was 
required to have a limit of $2 million per occurrence with an aggregate 
limit of $6 million. The surety bond is now required to have a limit of 
$3 million per occurrence. The required aggregate limit remains $6 
million. DTC is not aware of any increases in price that will accrue to 
subscribers of the surety bond at this point in time.
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    \5\ Securities Exchange Act Release No. 43586 (November 17, 
2000), 65 FR 70745 (File No. SR-DTC-00-09).
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    The proposed rule change is consistent with the requirements 
section 17A of the Act and the rules and regulations thereunder 
applicable to DTC because it clarifies DTC's interpretation of its rule 
thereby eliminating confusion in the industry relating to the 
implementation of the Profile feature, providing for more expeditious 
implementation of Profile, and strengthening a risk management feature 
of Profile. The proposed rule change will be implemented consistently 
with the safeguarding of securities and funds in DTC's custody or 
control or for which it is responsible because the operation of DRS, as 
modified by the proposed rule change, will be similar to the current 
operation of DRS.

(B) Self-Regulatory Organization's Statement on Burden on Competition

    DTC perceives no adverse impact on competition by reason of the 
proposed rule change.

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

    Written comments from DTC participants or others 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

    The foregoing rule change has become effective pursuant to section 
19(b)(3)(A)(i) \6\ of the Act and Rule 19b-4(f)(1) \7\ promulgated 
thereunder because the proposal constitutes a stated interpretation 
with respect to the meaning, administration, or enforcement of an 
existing rule. At any time within sixty days of the filing of such 
proposed rule change, the Commission may summarily abrogate such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act.
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    \6\ 15 U.S.C. 78s(b)(3)(A)(i).
    \7\ 17 CFR 240.19b-4(f)(1).
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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 the 
Commission's Public Reference Section, 450 Fifth Street, NW, 
Washington, DC 20549. Copies of such filing also will be available for 
inspection and copying at the principal office of DTC. All submissions 
should refer to File No. SR-DTC-2002-01 and should be submitted by 
March 13, 2002.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-4014 Filed 2-19-02; 8:45 am]
BILLING CODE 8010-01-P