[Federal Register Volume 69, Number 41 (Tuesday, March 2, 2004)]
[Notices]
[Pages 9886-9887]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-4571]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49317; File No. SR-FICC-2003-12]


Self-Regulatory Organizations; Fixed Income Clearing Corporation; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to Modifications to FICC's Rules Regarding Member Compliance 
With Applicable Laws, Modern Forms of Signatures, and Non-Eligibility 
of Certain Securities

February 24, 2004.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on October 17, 2003, Fixed 
Income Clearing Corporation (``FICC'') 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 FICC. 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 purpose of the proposed rule change is to allow FICC to amend 
rules for its Government Securities Division (``GSD'') and Mortgage-
Backed Securities Division (``MBSD'') regarding member compliance with 
applicable laws in the use of FICC's services, use of modern forms of 
signatures, and the non-eligibility of certain securities.\2\
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    \2\ On January 1, 2003, the MBS Clearing Corporation (``MBSCC'') 
was merged into the Government Securities Clearing Corporation 
(``GSCC''), and GSCC was renamed FICC. FICC operates through two 
divisions, the Government Securities Division (the ``GSD,'' formerly 
GSCC) and the Mortgage-Backed Securities Division (``MBSD,'' 
formerly MBSCC) handling Government securities and mortgage-backed 
securities transactions, respectively. Each Division has retained 
its own set of rules. This rule filing will implement changes to the 
rules of both the GSD and MBSD. Changes to the MBSD rules will 
affect both clearing and electronic pool notification (``EPN'') 
services.
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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, FICC 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. FICC 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 FICC.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Compliance With Laws
    The proposed rule change will allow FICC to add language to GSD and 
MBSD rules to clarify and to remind members of the requirement to 
comply with all applicable laws in connection with their use of FICC's 
services.\4\ In particular, members should be cognizant of all 
applicable securities, taxation, and money laundering laws because 
these laws are likely to be invoked each time a member submits a 
transaction for processing through FICC. For example, a member must 
comply with the applicable requirements pertaining to it

[[Page 9887]]

that are contained in the Uniting and Strengthening America by 
Providing Appropriate Tools Required to Intercept and Obstruct 
Terrorism (USA Patriot Act) Act \5\ prior to submitting a transaction 
for processing through FICC's systems. Members cannot use FICC's system 
in furtherance of violation of any laws.
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    \4\ FICC will add language to GSD Rule 3, Section 8 and amend 
language in MBSD Article III, Rule 1, Section 7 of the clearing 
rulebook and in MBSD Article VIII, Rule 1, Section 5 of the EPN 
rulebook.
    \5\ 15 U.S.C. 7001-7006, 7021, and 7031 (2000).
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2. Electronic Signatures
    The proposed rule change will also allow FICC to update its rules 
with respect to acceptable forms of signatures. Currently, GSD Rule 32 
permits GSD to accept documents from members that have been executed 
using mechanically reproduced facsimile signatures. The proposed rule 
change modernizes Rule 32 to permit GSD at its option to accept other 
forms of signatures, such as electronic signatures, in lieu of original 
signatures.
    The MBSD does not currently have a provision regarding acceptable 
forms of signatures in its rules. This filing adds Article V, Rule 16 
to MBSD's clearing rulebook and Article X, Rule 15 to the EPN rulebook. 
The new language will mirror the language in GSD Rule 32.
3. Non-Eligibility of Certain Securities
    The proposed rule change will also allow FICC to amend its 
definition of ``eligible security'' to make clear that any security of 
an issuer that either is listed on the U.S. Department of the 
Treasury's Office of Foreign Assets Control (``OFAC'') issuer list or 
is incorporated in a country that is on the OFAC list of pariah 
countries cannot be an eligible security for purposes of FICC's 
rules.\6\
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    \6\ The affected rules are GSD Rule 1; MBSD, clearing rulebook, 
Rule 1; and MBSD, EPN rulebook, Article VI, Rule 2.
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    The proposed rule change is consistent with Section 17A(b)(3)(F) of 
the Act \7\ and the rules and regulations thereunder because it will 
allow FICC to enhance compliance with applicable laws, thereby reducing 
risk, and to modernize its rules.
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    \7\ 15 U.S.C. 78q-1(b)(3)(F).
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(B) Self-Regulatory Organization's Statement on Burden on Competition

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

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

    Written comments relating to the proposed rule change have not yet 
been solicited or received. FICC will notify the Commission of any 
written comments received by FICC.

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

    The foregoing rule change took effect upon filing pursuant to 
Section 19(b)(3)(A)(iii) of the Act \8\ and Rule 19b-4(f)(4) \9\ 
thereunder because the proposal effected a change in an existing 
service of FICC that (i) does not adversely affect the safeguarding of 
securities or funds in FICC's custody or control or for which it was 
responsible and (ii) does not significantly affect the respective 
rights or obligations of FICC or persons using the service. At any time 
within sixty days of the filing of such rule change, the Commission 
could have summarily abrogated such rule change if it appeared to the 
Commission that such action was 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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    \8\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \9\ 17 CFR 240.19b-4(f)(4).
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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. 
Comments may also be submitted electronically at the following e-mail 
address: [email protected]. All comment letters should refer to 
File No. SR-FICC-2003-12. This file number should be included on the 
subject line if e-mail is used. To help the Commission process and 
review your comments more efficiently, comments should be sent in 
either hardcopy or by e-mail but not by both methods. 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-
0609. Copies of such filing also will be available for inspection and 
copying at the principal office of FICC. Copies of the proposed rule 
change and all subsequent amendments are also available at 
www.ficc.com. All submissions should refer to File No. SR-FICC-2003-12 
and should be submitted by March 23, 2004.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-4571 Filed 3-1-04; 8:45 am]
BILLING CODE 8010-01-P