[Federal Register Volume 67, Number 235 (Friday, December 6, 2002)]
[Notices]
[Pages 72713-72714]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-30889]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46930; File No. SR-DTC-2002-08]


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

November 27, 2002.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on June 13, 2002, The 
Depository Trust Company (``DTC'') filed with the Securities and 
Exchange Commission (``Commission'') the proposed rule change (File No. 
SR-DTC-2002-08) 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 permitted to act with respect to 100% of the 
securities on deposit or not act at all under applicable law. (This is 
known as a ``Unitary Action'' situation.) When involved in a situation 
that purports to require a Unitary Action under applicable law, DTC 
would still attempt to follow the procedures it applies when exercising 
rights that do not purport to require a Unitary Action.

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.\2\
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    \2\ 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 not involving Unitary 
Actions for solicitations when an issuer has announced an annual or 
special shareholders meeting or consent solicitation and where a record 
date has been established, DTC assigns 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. Examples of the rights 
that participants may exercise through DTC are 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 their DTC free accounts.
    When involved in a situation that purports to require a Unitary 
Action under applicable law, DTC would nevertheless attempt to follow 
the procedures described in the preceding paragraph. If, for example, a 
foreign bankruptcy court stated that it would accept votes for approval 
of a plan of bankruptcy from bondholders holding through DTC from Cede 
& Co. but only in the form of a 100% yes or no vote or not at all, DTC 
would attempt to assign its voting rights to its participants or 
otherwise act in accordance with its participants' instructions.
    DTC will not be liable for any losses arising from actions it takes 
or fails to take in connection with Unitary Actions other than those 
losses that are directly caused by DTC's gross negligence or willful 
misconduct.
    In Unitary Action situations, DTC may incur unusual expenses (e.g., 
hiring outside counsel) that are specifically attributable to the 
securities that are subject to the Unitary Action. Under DTC Rule 20, 
DTC may charge back to each participant holding a position in Unitary 
Action security such participant's pro rata share (based on the number 
of shares or the principal

[[Page 72714]]

amount of bonds or notes) of DTC's expenses related to DTC's taking or 
not taking an action in connection with a Unitary Action.
    DTC believes that the proposed rule change is consistent with the 
requirements of the Act and the rules and regulations thereunder 
applicable to DTC because the proposed rule change will clarify the 
procedures that DTC will follow in situations calling for Unitary 
Actions and thereby 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.\3\
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    \3\ Previously, DTC had filed another proposed rule change to 
establish procedures for Unitary Actions. Securities Exchange Act 
Release No. 34-45316 (Jan. 18, 2002), 67 FR 4299 (Jan. 29, 2002) 
(File No. SR-DTC-2001-05). In response to a comment letter from the 
Corporate Actions Division of the Securities Industry Association 
(Mar. 25, 2002) and conversations with Board members of that 
Division, DTC withdrew that proposed rule change and submitted the 
present filing.
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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 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-2002-08 and should be submitted by December 27, 2002.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\4\
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    \4\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 02-30889 Filed 12-5-02; 8:45 am]
BILLING CODE 8010-01-P