[Federal Register Volume 69, Number 157 (Monday, August 16, 2004)]
[Rules and Regulations]
[Pages 50307-50312]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-18763]


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DEPARTMENT OF THE TREASURY

Fiscal Service

31 CFR Parts 351, 359, and 363


Regulations Governing Treasury Securities, New Treasury Direct 
System

AGENCY: Bureau of the Public Debt, Fiscal Service, Treasury.

ACTION: Final rule.

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SUMMARY: New Treasury Direct (also referred to as TreasuryDirect) is a 
book-entry, online system for purchasing, holding and conducting 
transactions in Treasury securities. This rule describes a new 
security, the non-interest-bearing New Treasury Direct certificate of 
indebtedness (C of I), whose sole purpose is to permit investors to 
accumulate the purchase price of other eligible securities, currently 
Series I and Series EE U.S. Savings Bonds in New Treasury Direct.
    In addition, when the regulations for New Treasury Direct were 
first published, we delayed the effective date for certain provisions 
in the rule. The remaining provisions with delayed effective dates are 
hereby made effective upon publication of this rule.

DATES: Effective: The amendments to parts 351, 359, and 363 are 
effective August 16, 2004.
    The provisions of 363.24(e), (f), (g), (h), (m) and 363.69(d), (e), 
(f), (g), published at 67 FR 64286 (October 17, 2002), with a stayed 
date, are effective August 16, 2004.

ADDRESSES: You can download this final rule at the following Internet 
addresses: http://www.publicdebt.treas.gov or http://www.gpoaccess.gov/ecfr.

FOR FURTHER INFORMATION CONTACT: Elisha Whipkey, Director, Division of 
Program Administration, Office of Securities Operations, Bureau of the 
Public Debt, at (304) 480-6319 or [email protected]. Susan 
Klimas, Attorney-Adviser, Office of the Chief Counsel, Bureau of the 
Public Debt, at (304) 480-8692 or [email protected]. Dean 
Adams, Assistant Chief Counsel, Office of the Chief Counsel, Bureau of 
the Public Debt, at (304) 480-8692 or [email protected]. Edward 
Gronseth, Deputy Chief Counsel, Bureau of the Public Debt, at (304) 
480-8692 or [email protected].

SUPPLEMENTARY INFORMATION: New Treasury Direct is an account-based, 
online, book-entry system for purchasing, holding, and conducting 
transactions in Treasury securities via the Internet. Treasury is 
offering to New Treasury Direct account holders a new security, a New 
Treasury Direct certificate of indebtedness (C of I), a non-interest 
bearing, short-term security whose sole purpose is to permit investors 
to accumulate the purchase price of other eligible Treasury securities 
in New Treasury Direct. Currently, electronic Series EE and Series I 
savings bonds are offered through New Treasury Direct. Until now, 
customers could only purchase these bonds by authorizing a debit of 
their financial institution checking or savings account for the full 
purchase price.
    For many years, Treasury has also offered paper savings bond 
products through a payroll savings plan that permits investors to 
accumulate the purchase price of a savings bond over time through 
payroll deductions. Participating employers are responsible for 
accumulating and accounting for employees' deductions until they reach 
the full purchase price of a bond. The introduction of the C of I 
enables Treasury to provide an electronic alternative to the 
traditional payroll savings plan by permitting an account holder to 
purchase a non-interest bearing C of I as a means to accumulate the 
purchase price of an electronic security in New Treasury Direct. This 
greatly reduces the burden on employers, who will simply forward the 
deductions to Treasury via the ACH method. The cost of handling and 
accounting for deductions has often dissuaded businesses from offering 
a payroll deduction program for buying savings bonds. With this new 
feature, employees can direct their employers to send funds to their 
New Treasury Direct account to be invested in a C of I until they have 
accumulated the purchase price of other eligible securities.
    The underlying principle of New Treasury Direct is to establish 
direct relationships with investors, enabling them to do business with 
Treasury online and conduct transactions without personal assistance 
from Treasury and its agents. The C of I supports Treasury's goal to 
provide the maximum convenience, flexibility, and investor self-
sufficiency to New Treasury Direct investors. A C of I also allows 
account holders to consolidate funds from various sources for the 
purchase of another eligible security. A C of I is issued daily and has 
a one-day maturity with an automatic rollover at maturity, until the 
account holder redeems the C of I. The account holder may use the 
redemption proceeds to purchase an eligible security in New Treasury 
Direct, or may send the redemption proceeds by the ACH method to his or 
her account at a financial institution. The C of I is backed by the 
full faith and credit of the United States.
    An account holder may purchase a C of I in four ways: (1) By 
directing his or her employer to send payroll funds to a New Treasury 
Direct account; (2) by directing his or her financial institution to 
send funds to his or her New Treasury Direct account; (3) by using the 
Buy Direct function of his or her New Treasury Direct account to 
authorize a debit from his or her account at a financial institution to 
purchase a C of I; and (4) by using the proceeds of a security 
redemption or payment to purchase a C of I.

[[Page 50308]]

    The C of I expands the convenience and flexibility of New Treasury 
Direct and electronic securities for our customers. Employers will be 
able to significantly reduce their costs in administering savings bond 
payroll savings plans. The C of I also positions Treasury to offer 
customers a convenient way to reinvest interest or proceeds of maturing 
marketable securities when marketable securities are available in New 
Treasury Direct.
    The account owner may direct purchases of securities to be paid for 
from his or her C of I holdings on a recurring basis or on a one-time 
basis. The account owner may redeem his or her C of I holdings, but may 
not transfer or deliver a C of I to another account owner (except to 
deliver a C of I from a minor linked account to the adult primary 
account of the former minor).
    Upon the death of the account owner, his or her C of I will belong 
to the estate of the account owner. We will not be responsible for any 
redemptions of securities that were purchased using the redemption 
proceeds of a C of I after the death of the account owner prior to our 
receiving notice of the death.
    The custodian of a minor may purchase a C of I within the minor's 
account. The minor's C of I is the property of the minor.
    In addition, when the regulations for New Treasury Direct were 
first published, in 67 FR 64286 (October 17, 2002), we delayed the 
effective date for certain provisions in the rule. Certain 
functionalities of the system involving the granting of view and 
transact rights to other persons, and the ability to delete pending 
transactions, were not ready to be deployed at that time. In addition, 
the sections relating to minors were not ready to be deployed. By a 
later rule published at 69 FR 2507 (January 16, 2004), we deleted the 
delayed provisions relating to minors and replaced them with other 
provisions relating to minors that were effective upon publication. The 
remaining provisions with delayed effective dates become effective upon 
publication of this rule.

Procedural Requirements

    This final rule does not meet the criteria for a ``significant 
regulatory action'' as defined in Executive Order 12866. Therefore, a 
regulatory assessment is not required.
    Because this final rule relates to matters of public contract and 
procedures for United States securities, notice and public procedure 
and delayed effective date requirements are inapplicable, pursuant to 5 
U.S.C. 553(a)(2).
    As no notice of proposed rulemaking is required, the Regulatory 
Flexibility Act (5 U.S.C. 601 et seq.) does not apply.
    We ask for no new collections of information in this final rule. 
Therefore, the Paperwork Reduction Act (44 U.S.C. 3507) does not apply.

List of Subjects

31 CFR Part 351

    Bonds, Federal Reserve system, Government securities.

31 CFR Part 359

    Bonds, Federal Reserve system, Government securities, Securities.

31 CFR Part 363

    Bonds, Electronic funds transfer, Federal Reserve system, 
Government securities, Securities.

0
Accordingly, for the reasons set out in the preamble, 31 CFR Chapter 
II, Subchapter B, is amended as follows:

PART 351--OFFERING OF UNITED STATES SAVINGS BONDS, SERIES EE

0
1. The authority citation for Part 351 continues to read as follows:

    Authority: 5 U.S.C. 301; 12 U.S.C. 391; 31 U.S.C. 3105.

0
2. Revise Sec. Sec.  351.62, 351.63 and 351.64 to read as follows:


Sec.  351.62  How is payment made for purchases of book-entry Series EE 
savings bonds?

    You may only purchase book-entry Series EE savings bonds online 
through your New Treasury Direct account. You may pay for your 
securities through a debit to your designated account at a United 
States depository financial institution, or by applying the redemption 
proceeds of a certificate of indebtedness held in your New Treasury 
Direct account.


Sec.  351.63  How are redemption payments made for my redeemed book-
entry Series EE savings bonds?

    We will make payments electronically by direct deposit, using the 
ACH method, to your designated account at a United States depository 
financial institution. You may also direct that a payment be used to 
purchase a certificate of indebtedness to be held in your New Treasury 
Direct account.


Sec.  351.64  What is the issue date of a book-entry Series EE savings 
bond?

    The issue date of a book-entry Series EE savings bond is the first 
day of the month in which the security posts to the current holdings of 
the account owner.

PART 359--OFFERING OF UNITED STATES SAVINGS BONDS, SERIES I

0
3. The authority citation for part 359 continues to read as follows:

    Authority: 5 U.S.C. 301; 12 U.S.C. 391; 31 U.S.C. 3105.


0
4. Revise Sec. Sec.  359.47, 359.48 and 359.49 to read as follows:


Sec.  359.47  How is payment made for purchases of book-entry Series I 
savings bonds?

    You may only purchase book-entry Series I savings bonds online 
through your New Treasury Direct account. You may pay for your 
securities through a debit to your designated account at a United 
States depository financial institution, or by applying the redemption 
proceeds of a certificate of indebtedness held in your New Treasury 
Direct account.


Sec.  359.48  How are redemption payments made for my redeemed book-
entry Series I savings bonds?

    We will make payments electronically by direct deposit, using the 
ACH method, to your designated account at a United States depository 
financial institution. You may also direct that a payment be used to 
purchase a certificate of indebtedness to be held in your New Treasury 
Direct account.


Sec.  359.49  What is the issue date of a book-entry Series I savings 
bond?

    The issue date of a book-entry Series I savings bond is the first 
day of the month in which the security posts to the current holdings of 
the account owner.

PART 363--REGULATIONS GOVERNING SECURITIES HELD IN THE NEW TREASURY 
DIRECT SYSTEM

0
5. Revise the authority citation for part 363 to read as follows:

    Authority: 5 U.S.C. 301; 12 U.S.C. 391; 31 U.S.C. 3102, et seq.; 
31 U.S.C. 3121, et seq.


0
6. Revise Sec.  363.3 to read as follows:


Sec.  363.3  What Treasury securities may be held in New Treasury 
Direct?

    Book-entry Series EE savings bonds, book-entry Series I savings 
bonds, and certificates of indebtedness may be held in New Treasury 
Direct.

0
7. Amend Sec.  363.6 by revising the definitions of ``Interest on a 
savings bond'', ``Redemption of a savings bond'', ``Series EE savings 
bond'', ``Series I savings bond'', and by adding the definition of 
``certificate of indebtedness'', to read as follows:

[[Page 50309]]

Sec.  363.6  What special terms do I need to know to understand this 
part?

* * * * *
    Certificate of Indebtedness (certificate of indebtedness) is a one-
day security held within your primary or linked account, including a 
minor account for which you are the custodian, that automatically 
matures and is rolled over each day until you request that it be 
redeemed.
* * * * *
    Interest on a savings bond means the difference between the 
purchase price and the redemption value of the bond.
* * * * *
    Redemption of a savings bond refers to the payment of principal and 
interest at final maturity, or prior to final maturity at the option of 
the owner. The owner may redeem all principal and interest or a portion 
of the principal and the proportionate amount of interest.
* * * * *
    Series EE savings bond is an accrual-type savings bond, issued 
either in definitive (paper) form or in book-entry form, that accrues 
interest on the principal based on rates determined by Treasury.
* * * * *
    Series I savings bond is a savings bond, issued either in 
definitive (paper) form or in book-entry form, that accrues interest in 
accordance with a formula that includes a fixed component and a 
component indexed to the rate of inflation.
* * * * *

0
8. Amend Sec.  363.24 by adding paragraphs (q) and (r), to read as 
follows:


Sec.  363.24  What transactions can I perform online through my New 
Treasury Direct account?

* * * * *
    (q) You can purchase a certificate of indebtedness.
    (r) You can redeem a partial or total amount of your certificate of 
indebtedness.


0
9. Amend 363.27 by adding paragraphs (d)(8) and (e)(4), to read as 
follows:


Sec.  363.27  What do I need to know about accounts for minors who have 
not had a legal guardian appointed by a court?

    (d) * * *
    (8) The custodian may purchase a certificate of indebtedness on 
behalf of the minor. The certificate of indebtedness is the property of 
the minor.
    (e) * * *
    (4) The minor may gain control of his or her certificate of 
indebtedness by the custodian de-linking the account and transferring 
the certificate of indebtedness to the minor's primary account, or the 
minor may request that Public Debt de-link the account and transfer the 
certificate of indebtedness to his or her primary account.
* * * * *

0
10. Revise Sec. Sec.  363.36, 363.37 and 363.38 to read as follows:


Sec.  363.36  What securities can I purchase and hold in my New 
Treasury Direct account?

    You can purchase and hold eligible Treasury securities in your 
account. Eligible securities are Series EE and I savings bonds and 
certificates of indebtedness.


Sec.  363.37  How do I purchase eligible Treasury securities to be held 
in my New Treasury Direct account?

    Eligible Treasury securities may only be purchased online through 
your New Treasury Direct account. Payment for eligible securities other 
than certificates of indebtedness is made by a debit to your designated 
account at a United States depository financial institution using the 
ACH method, or using the redemption proceeds of your certificate of 
indebtedness.


Sec.  363.38  What happens if my financial institution returns an ACH 
debit?

    If your designated financial institution returns an ACH debit, we 
reserve the right to reinitiate the debit at our option. We also 
reserve the right to reverse the transaction, thereby removing the 
security from your New Treasury Direct account. We are not responsible 
for any fees your financial institution may charge relating to returned 
ACH debits.


0
11. Revise Sec.  363.41 to read as follows:


Sec.  363.41  What happens if an ACH payment is returned to Public 
Debt?

    We will notify you electronically of the returned payment. We will 
hold your payment until you provide us with instructions. Returned 
payments will not earn interest. We reserve the right to redirect a 
returned payment to the bank account at a financial institution that 
you have designated in your New Treasury Direct account as your primary 
bank account, if that account is different from the one that returned 
the payment to us. We are not responsible for any fees your financial 
institution may charge relating to returned ACH payments.


0
12. Amend Sec.  363.90 by adding paragraph (a)(6) and by revising 
paragraph (d) introductory text to read as follows:


Sec.  363.90  What happens when a New Treasury Direct account owner 
dies and his or her estate is entitled to savings bonds held in the 
account?

    (a) * * *
    (6) If the value of the New Treasury Direct account greater than 
$100,000, we will require probate.
* * * * *
    (d) Survivors' order of precedence for payment or transfer. If 
there has been no administration, no administration is contemplated, no 
summary or small estate procedures have been used, and the total 
redemption value of the Treasury securities that are the property of 
the decedent's estate is $100,000 or less, then the securities may be 
paid to the persons named in the following order of precedence:
* * * * *

0
13. Amend part 363 by adding Subpart D, to read as follows:

Subpart D--Certificate of Indebtedness

Sec.
363.130 What does this subpart cover?
363.131 What is a New Treasury Direct certificate of indebtedness?
363.132 Can the sale of the certificate of indebtedness be 
suspended?
363.133 What happens to my certificate of indebtedness if the 
offering is terminated by the Secretary?
363.134 What regulations cover a certificate of indebtedness?
363.135 In what form is a certificate of indebtedness issued?
363.136 Do certificates of indebtedness pay interest?
363.137 What do I need to know about the registration of a 
certificate of indebtedness?
363.138 How do I purchase a certificate of indebtedness?
363.139 Is Treasury liable for the purchase of a certificate of 
indebtedness that is made in error?
363.140 When is a certificate of indebtedness issued?
363.141 How do I purchase a security using the redemption proceeds 
of my certificate of indebtedness?
363.142 May I redeem my certificate of indebtedness for cash?
363.143 What happens if an ACH payment used to purchase a 
certificate of indebtedness is later reversed?
363.144 May I delete a pending transaction involving a certificate 
of indebtedness?
363.145 May I transfer or deliver my certificate of indebtedness?
363.146 What happens to a certificate of indebtedness upon the death 
of the New Treasury Direct account owner?
363.147 Does Public Debt reserve the right to require that any 
transaction in a certificate of indebtedness be conducted offline?
363.148 What are the rules for judicial and administrative actions 
involving a certificate of indebtedness?

[[Page 50310]]

363.149 What evidence is required to establish the validity of 
judicial proceedings?
363.150 May a certificate of indebtedness be pledged or used as 
collateral?
363.151 Can Treasury suspend transactions in my certificate of 
indebtedness?
363.152 Does Public Debt make any reservations as to issue of 
certificates of indebtedness?


Sec.  363.130  What does this subpart cover?

    This subpart is the offering of the certificate of indebtedness by 
the Secretary of the Treasury (Secretary), and will continue until 
suspended or terminated by the Secretary. This subpart is also the 
governing regulations for the certificate of indebtedness.


Sec.  363.131  What is a New Treasury Direct certificate of 
indebtedness?

    A New Treasury Direct certificate of indebtedness (certificate of 
indebtedness) is a security held within your primary or linked account, 
including a minor account for which you are the custodian, that is 
issued daily, with a one-day maturity, that automatically rolls over at 
maturity until you request redemption. A certificate of indebtedness 
has a minimum purchase amount of one cent. The only purpose of a 
certificate of indebtedness is to accumulate funds for the purchase of 
another eligible security in the New Treasury Direct system. A 
certificate of indebtedness within a minor's account is the property of 
the minor alone.


Sec.  363.132  Can the sale of the certificate of indebtedness be 
suspended?

    The Secretary may suspend and rescind the suspension of sales of 
the certificate of indebtedness by announcement at any time.


Sec.  363.133  What happens to my certificate of indebtedness if the 
offering is terminated by the Secretary?

    Upon the termination of this offering by the Secretary, the 
certificate of indebtedness ceases to roll over; the proceeds will be 
paid by the ACH method to the bank account at a financial institution 
that you designated in your New Treasury Direct account as your primary 
bank account.


Sec.  363.134  What regulations cover a certificate of indebtedness?

    The regulations in part 363 apply to a certificate of indebtedness. 
We expressly disclaim representations or warranties regarding a 
certificate of indebtedness that in any way conflict with these 
regulations and other applicable law.


Sec.  363.135  In what form is a certificate of indebtedness issued?

    A certificate of indebtedness is issued in electronic form only in 
the New Treasury Direct system.


Sec.  363.136  Do certificates of indebtedness pay interest?

    Certificates of indebtedness do not pay any interest. However, the 
Secretary may prescribe a rate of interest, or change the interest 
rate, for certificates of indebtedness by announcement at any time. The 
new rate would apply to certificates of indebtedness issued thereafter, 
as provided in the announcement. The Secretary's determination of the 
rate will be final.


Sec.  363.137  What do I need to know about the registration of a 
certificate of indebtedness?

    A certificate of indebtedness is automatically registered in the 
single ownership form of registration in the New Treasury Direct 
account owner's name.


Sec.  363.138  How do I purchase a certificate of indebtedness?

    You may purchase your certificate of indebtedness through one or 
more of the following four methods:
    (a) payroll deduction, in which your employer sends funds through 
the ACH method to your New Treasury Direct account;
    (b) deposit by your financial institution, in which your financial 
institution sends funds by the ACH method to your New Treasury Direct 
account on a recurring or one-time basis;
    (c) through the Buy Direct function of your New Treasury Direct 
account, in which you direct us to debit funds from your account at a 
financial institution to purchase a certificate of indebtedness. This 
method is limited to no greater than $25 per transaction; or
    (d) by using the proceeds from the redemption or interest payment 
of a security to purchase a certificate of indebtedness.


Sec.  363.139  Is Treasury liable for the purchase of a certificate of 
indebtedness that is made in error?

    We are not liable for any deposits of funds for the purchase of a 
certificate of indebtedness that are made in error by your financial 
institution or employer.


Sec.  363.140  When is a certificate of indebtedness issued?

    A certificate of indebtedness is issued the business day after the 
purchase transaction is made.


Sec.  363.141  How do I purchase a security using the redemption 
proceeds of my certificate of indebtedness?

    You may purchase an eligible security by redeeming all or a portion 
of your certificate of indebtedness and applying the proceeds toward 
the purchase of another eligible security. To do this, your certificate 
of indebtedness must be of sufficient value to cover the cost of the 
security. If you are paying for a security using the redemption 
proceeds of a certificate of indebtedness, you must pay the full amount 
of the purchase price of the security using the redemption proceeds.


Sec.  363.142  May I redeem my certificate of indebtedness for cash?

    You may redeem part or all of the value of your certificate of 
indebtedness at any time. The redemption proceeds will be deposited 
electronically using the ACH method into the account at your financial 
institution that you designated for the deposit of the proceeds.


Sec.  363.143  What happens if an ACH payment used to purchase a 
certificate of indebtedness is later reversed?

    If an ACH payment used to purchase a certificate of indebtedness is 
later reversed, we reserve the right to reverse the purchase of the 
certificate of indebtedness. If the ACH reversal occurs after the 
certificate of indebtedness has been redeemed, we reserve the right to 
reverse previously processed security transactions, including 
securities that were purchased as gifts and securities that have been 
transferred or delivered from your account to the account of another 
New Treasury Direct account owner.


Sec.  363.144  May I delete a pending transaction involving a 
certificate of indebtedness?

    (a) You may delete a pending purchase of a certificate of 
indebtedness initiated from your New Treasury Direct account.
    (b) You may delete a pending purchase of a security using a 
certificate of indebtedness as payment.
    (c) You may not delete a pending redemption of all or part of the 
value of a certificate of indebtedness.


Sec.  363.145  May I transfer or deliver my certificate of 
indebtedness?

    A certificate of indebtedness is nontransferable. You may not 
deliver a certificate of indebtedness to another New Treasury Direct 
account as a gift.

[[Page 50311]]

Sec.  363.146  What happens to a certificate of indebtedness upon the 
death of the New Treasury Direct account owner?

    (a) Upon the death of the New Treasury Direct account owner, a 
certificate of indebtedness is the property of the estate of the 
account owner. If any purchases of other eligible securities are made 
after the death of the owner using the redemption proceeds of a 
certificate of indebtedness as payment, we will consider the securities 
to be the property of the estate of the account owner, notwithstanding 
any registration on the security.
    (b) We are not liable for the redemption of a security that was 
purchased using the redemption proceeds of a certificate of 
indebtedness as payment. We are not liable for the redemption of a 
certificate of indebtedness that may occur after the death of the 
account owner but prior to our receiving notice of the death of the 
account owner.
    (c) If the estate is being administered, we will require 
appropriate proof of appointment for the legal representative of the 
estate. Letters of appointment must be dated within one year of 
submission. The legal representative of the estate must request payment 
of the certificate of indebtedness to the person(s) entitled. We will 
require ACH instructions. If the value of the New Treasury Direct 
account is greater than $100,000, we will require probate.
    (d) If the estate has been previously settled through judicial 
proceedings, the person(s) entitled must request payment of the 
certificate of indebtedness. We will require ACH instructions. We will 
require a certified copy of the court-approved final accounting for the 
estate, the court's decree of distribution, or other appropriate 
evidence.
    (e) If there is no formal administration and no representative of 
the estate is to be appointed, the person(s) entitled under state law 
summary or small estates procedures may request payment of the 
certificate of indebtedness. We will require appropriate evidence. We 
will require ACH instructions.
    (f) If there has been no administration, no administration is 
contemplated, no summary or small estate procedures have been used, and 
the total redemption value of the Treasury securities that are the 
property of the decedent's estate is $100,000 or less, then the 
certificate of indebtedness may be paid to the persons named in the 
following order of precedence:
    (1) There is a surviving spouse and no surviving child or 
descendant of a deceased child: to the surviving spouse.
    (2) There is a surviving spouse and a child or children of the 
decedent, or descendants of deceased children: one-half to the 
surviving spouse and one-half to the child or children of the decedent, 
and the descendants of deceased children, by representation, or by 
agreement of all persons entitled in this class;
    (3) There is no surviving spouse and there is a surviving child or 
descendant of deceased children: to the child or children of the 
decedent, and the descendants of deceased children, by representation.
    (4) There are no surviving spouse, no surviving child, and no 
surviving descendants of deceased children: to the parents of the 
decedent, one-half to each, or in full to the survivor.
    (5) There are no surviving spouse, no surviving child or surviving 
descendants of deceased children, and no surviving parents: to the 
brothers and sisters and descendants of deceased brothers and sisters 
by representation.
    (6) There are no surviving spouse, no surviving child or surviving 
descendants of deceased children, no surviving parents, and no brothers 
or sisters or descendants of deceased brothers and sisters: to other 
next of kin, as determined by the laws of the decedent's domicile at 
the time of death.
    (7) There are no surviving spouse, no surviving child or surviving 
descendants of deceased children, no surviving parents, no brothers or 
sisters or descendants of deceased brothers and sisters, and no next of 
kin, as determined by the laws of the decedent's domicile at the time 
of death: to persons related to the decedent by marriage, i.e., heirs 
of a spouse of the last decedent where the spouse predeceased that 
registrant.
    (8) There are no surviving spouse, no surviving child or surviving 
descendants of deceased children, no surviving parents, no brothers or 
sisters or descendants of deceased brothers and sisters, no next of 
kin, as determined by the laws of the decedent's domicile at the time 
of death, and no persons related to the decedent by marriage: to the 
person who paid the burial and funeral expenses, or a creditor of the 
decedent's estate, but payment may be made only to the extent that the 
person has not been reimbursed.
    (9) Escheat according to the applicable state law.
    (g) When we make payments according to paragraph (f) of this 
section, we will make the payments by the ACH method to either a person 
individually, or individually and on behalf of all other persons 
entitled. We will require ACH instructions for payment. A person who 
receives payment of certificate of indebtedness proceeds individually 
and on behalf of others agrees to make distribution of the proceeds to 
the other persons entitled by the law of the decedent's domicile. The 
provisions of this section are for our convenience and do not determine 
ownership of the securities or their proceeds. We may rely on 
information provided by the person who requests payment, and are not 
liable for any action taken in reliance on the information furnished.


Sec.  363.147  Does Public Debt reserve the right to require that any 
transaction in a certificate of indebtedness be conducted offline?

    We reserve the right to require any transaction to be conducted 
offline using an approved form. Signatures on offline transactions must 
be certified or guaranteed as provided in instructions in Sec.  363.43.


Sec.  363.148  What are the rules for judicial and administrative 
actions involving a certificate of indebtedness?

    (a) We are not subject to and will not accept a notice of an 
adverse claim or notice of pending judicial proceedings involving a 
certificate of indebtedness.
    (b) Treasury, Public Debt, and the Federal Reserve Banks are not 
proper defendants in a judicial proceeding involving competing claims 
to a certificate of indebtedness.
    (c) We will pay the redemption proceeds of a certificate of 
indebtedness pursuant to a divorce decree that either disposes of the 
certificate of indebtedness or ratifies a property settlement agreement 
disposing of the certificate of indebtedness of either of the parties. 
If the divorce decree does not set out the terms of the property 
settlement agreement, we will require a certified copy of the 
agreement.
    (d) We will recognize a final order entered by a court that affects 
ownership rights in a certificate of indebtedness only to the extent 
that the order is consistent with the provisions of this part. The 
owner of the certificate of indebtedness must be a party to the 
proceedings. We will require a certified copy of the court order.
    (e) We will pay the redemption proceeds of a certificate of 
indebtedness pursuant to a valid levy to satisfy a money judgment 
against the owner of the certificate of indebtedness. Payment will be 
made only to the extent necessary to satisfy the money judgment.
    (f) We will honor an IRS administrative levy under section 6331 of 
the Internal Revenue Code with respect to the owner.
    (g) We will pay the redemption proceeds of a certificate of 
indebtedness

[[Page 50312]]

to a trustee in bankruptcy, a receiver of an insolvent's estate, a 
receiver in equity, or a similar court officer, if the original court 
order is against the owner. Payment will be made electronically through 
the ACH method to a U.S. depository financial institution account 
designated by the receiver or a similar court official.


Sec.  363.149  What evidence is required to establish the validity of 
judicial proceedings?

    (a) We require certified copies of the final judgment, decree, or 
court order, and any necessary supplementary proceedings.
    (b) A request for payment by a trustee in bankruptcy or a receiver 
of an insolvent's estate must be supported by evidence of appointment 
and qualification.
    (c) A request for payment by a receiver in equity or a similar 
court officer (other than a receiver of an insolvent's estate) must be 
supported by a copy of an order that authorizes the redemption of the 
certificate of indebtedness.


Sec.  363.150  May a certificate of indebtedness be pledged or used as 
collateral?

    A certificate of indebtedness may not be pledged or used as 
collateral for the performance of an obligation.


Sec.  363.151  Can Treasury suspend transactions in my certificate of 
indebtedness?

    We reserve the right to suspend transactions in your certificate of 
indebtedness if we deem it to be in the best interests of the United 
States.


Sec.  363.152  Does Public Debt make any reservations as to issue of 
certificates of indebtedness?

    We may reject any application for the purchase of a certificate of 
indebtedness, in whole or in part. We may refuse to issue a certificate 
of indebtedness in any case or class of cases, if we deem the action to 
be in the public interest. Our action in any such respect is final.

    Dated: August 11, 2004.
Donald V. Hammond,
Fiscal Assistant Secretary.
[FR Doc. 04-18763 Filed 8-12-04; 12:13 pm]
BILLING CODE 4810-39-P