[Federal Register Volume 70, Number 55 (Wednesday, March 23, 2005)]
[Notices]
[Pages 14742-14743]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-1254]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51372; File No. SR-NYSE-2004-62]


Self-Regulatory Organizations; New York Stock Exchange Inc.; 
Notice of Filing of Proposed Rule Change To Eliminate Rule 496 and To 
Amend the Listed Company Manual Relating to Transfer Agents

March 15, 2005.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on October 29, 2004, the New 
York Stock Exchange Inc. (``NYSE'') filed with the Securities and 
Exchange Commission (``Commission'') and on December 3, 2004, and 
February 9, 2005, amended the proposed rule change as described in 
items I, II, and III below, which items have been prepared primarily by 
the NYSE. 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 NYSE proposes to: (i) Eliminate Rule 496; (ii) amend the Listed 
Company Manual (``LCM'') to remove references to the current 
requirement of Rule 496 that transfer agents for listed companies 
maintain an office or an agent in Manhattan below Chambers Street; 
(iii) incorporate in the LCM certain other requirements currently in 
Rule 496; and (iv) codify exceptions to the transfer agent provisions 
that the NYSE has historically applied.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the NYSE 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. The NYSE has prepared summaries, set forth in sections 
(A), (B), and (C) below, of the most significant aspects of these 
statements.\2\
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    \2\ The Commission has modified the text of the summaries 
prepared by the NYSE.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    The NYSE proposes to eliminate Rule 496 and proposes to amend its 
LCM to retain and to continue to impose certain current significant 
requirements of Rule 496 with respect to entities acting as transfer 
agents for listed companies. The NYSE believes it is appropriate that 
the transfer agent requirements be set forth solely in the LCM due to 
the fact that its rules are generally applicable to members rather than 
listed companies. In addition, the current requirements of Rule 496 are 
referred to, and to some extent, repeated in various sections of the 
LCM. Accordingly, the NYSE believes that the transfer agent 
requirements are more properly contained in the LCM.
    Rule 496 requires, among other things, that transfer agents for 
listed companies maintain an office or obtain an agent located south of 
Chambers Street in the Borough of Manhattan, City of New York, where 
securities can be delivered in person for registration of transfer and 
can be picked up after completion of such registration (often referred 
to in the industry as a ``drop''). The current requirement was 
implemented when most securities traded on the NYSE were held in 
certificated form and were settled with physical delivery. The transfer 
agents' presence in lower Manhattan, where the brokers were also 
concentrated, facilitated the speedy settlement of transactions and 
processing of securities transfers. However, most securities are now 
held in ``street name'' at The Depository Trust Company (``DTC''), a 
securities depository registered as clearing agency under section 17A 
of the Exchange Act,\3\ and transfers of such securities occur through 
automated book-entry systems at DTC without the need for transfer of 
physical certificates. As a result, very few transfers are facilitated 
any longer by the drop in lower Manhattan. The NYSE believes that 
marketplace participants, including securityholders, would not be 
harmed by elimination of the drop requirement in Rule 496.
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    \3\ 15 U.S.C. 78q-1(b).
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    Rule 496 also requires transfer agents to record the transfer of 
securities received at the transfer agent's drop before the close of 
business on a record date as being transferred on the record date in 
order to establish the transferee's rights on the record date. As 
revised, the LCM will provide the same protection for securities mailed 
by the close of business on a record date by a registered clearing 
agency (i.e., DTC). Because the vast majority of securities are now 
held in ``street name,'' the NYSE believes that securityholders will 
not be disadvantaged by providing this record date protection only to 
registered clearing agencies.
    Rule 496 also requires transfer agents to meet certain capital and 
insurance standards. Currently under the rule, transfer agents are 
required to (i) have capital, surplus (both capital and earned), 
undivided profits, and capital reserves aggregating at least 
$10,000,000 and (ii) maintain blanket bond insurance coverage of at 
least $25,000,000 to protect securities while in transit or being 
processed. The proposed revisions to the LCM will retain the capital 
and insurance requirements of current Rule 496 and will codify several 
long-standing policies and practices of the NYSE by providing for the 
qualification of certain transfer agents that do not otherwise meet the 
capital and insurance requirements of Rule 496. Accordingly, the LCM 
will specify that a bank, trust company, or other qualified 
organization acting as transfer agent may:
    1. Act in a dual capacity as transfer agent/co-transfer agent and 
registrar if (i) a majority of its equity is owned by an entity that 
meets the standard capital requirements, (ii) its parent guarantees the 
subsidiary's performance, and (iii) the subsidiary maintains the 
$25,000,000 blanket bond insurance coverage or the parent maintains the 
coverage for the benefit of the subsidiary;
    2. Act in dual capacity as transfer agent/co-transfer agent and 
registrar if it (i) has capital of at least $2,000,000 and errors and 
omissions insurance which, taken together with its capital, equals at 
least $10,000,000 and (ii) maintains the standard $25,000,000 blanket 
bond insurance coverage; or
    3. Act as co-transfer agent or co-registrar (but not in a dual 
capacity) for securities listed on the NYSE if it has capital equal to 
at least $2,000,000 without maintaining the $25,000,000 blanket bond 
insurance coverage.
    Additionally a listed company may act as its own transfer agent 
provided that it complies with all the requirements applicable to 
transfer agents not affiliated with the listed company apart from the 
capital and

[[Page 14743]]

insurance requirements. However, a listed company may not act as sole 
registrar for its listed securities unless it also acts as transfer 
agent. The NYSE believes the foregoing exceptions to the capital and 
insurance requirements are policies that have been applied by the NYSE 
for many years. The NYSE believes that these policies are consistent 
with the protections provided to securityholders by the general 
standards applicable to transfer agent, as in each case the listed 
company must have at least one transfer agent which directly or 
indirectly has the equivalent of at least $10,000,000 in capital and 
$25,000,000 blanket bond insurance coverage.
    Section 6(b)(5) of the Act that requires rules of an exchange are 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principles of trade, to remove impediments 
to and to perfect the mechanism of a free and open market and a 
national market system and, in general, to protect investors and the 
public interest.\4\ The NYSE believes that the proposed rule is 
consistent with its obligations under section 6(b)(5) of the Act 
because it allows transfer agents acting for listed companies to 
provide for transfers of securities in a more efficient and cost 
effective manner by eliminating the drop office requirement, which is 
now obsolete. Furthermore the proposed rule is consistent because the 
remainder of the changes are technical in nature. Although the capital 
and insurance requirements will be removed from Rule 496 and added to 
the LCM, the amount of capital and insurance required will remain the 
same.
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    \1\ 15 U.S.C. 78f(b)(5).
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(B) Self-Regulatory Organization's Statement on Burden on Competition

    NYSE does not believe that the proposed rule change will have an 
impact on or impose a burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Exchange Act.

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

    No written comments relating to the proposed rule change have been 
solicited or received. NYSE will notify the Commission of any written 
comments it receives.

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 within such longer period (i) as the 
Commission may designate up to ninety days of such date if it finds 
such longer period to be appropriate and publishes 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. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to [email protected]. Please include 
File Number SR-NYSE 2004-62 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., 
Washington, DC 20549-0609.
    All submissions should refer to File Number SR-NYSE 2004-62. 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, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). 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 the 
NYSE or on the NYSE's Web site at http://www.nyse.com. All comments 
received will be posted without change; the Commission does not edit 
personal identifying information from submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NYSE 2004-62 and should be 
submitted on or before April 13, 2005.

    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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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-1254 Filed 3-22-05; 8:45 am]
BILLING CODE 8010-01-P