[Federal Register Volume 70, Number 89 (Tuesday, May 10, 2005)]
[Notices]
[Pages 24665-24666]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-2240]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51643; File No. SR-FICC-2005-01]


Self-Regulatory Organizations; Fixed Income Clearing Corporation; 
Notice of Filing of a Proposed Rule Change Relating to Timely 
Notification of Significant Events That Effect a Change in Control of a 
Member or Could Have a Substantial Impact on a Member's Business or 
Financial Condition

May 2, 2005.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on January 6, 2005, the 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 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

    The proposed rule change would require certain FICC members to 
notify FICC when they experience an event that would effect a change in 
control of such member or could have a substantial impact on such 
member's business or financial condition.

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 such statements.\2\
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    \2\ 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

    Currently, FICC's Government Securities Division's (``GSD'') rules 
require a member to ``promptly'' inform FICC when they experience a 
``material change in control or financial condition.'' \3\ FICC's 
Mortgage-Backed Securities Division's (``MBSD'') rules do not contain 
any similar requirements.
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    \3\ GSD Rule 3, Section 4.
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    FICC believes that the GSD rule does not cover a broad-enough scope 
of events that FICC should be aware of in order to properly manage the 
risks that such events might pose to FICC and its membership. In 
addition, FICC believes that the current rule is not effectively 
enforceable because the terms ``promptly'' and ``material change in 
control or financial condition'' are not adequately defined.
    Under the proposed rule change, GSD netting members and MBSD 
clearing members would be required to provide oral and written 
notification to FICC upon experiencing a ``Reportable Event.'' The term 
``Reportable Event'' would be defined as an event that would effect a 
change in control of a GSD netting member or an MBSD clearing member or 
an event that could have a substantial impact on those types of 
member's business or financial condition including, but not limited to: 
(a) Material organizational changes including mergers, acquisitions, 
changes in corporate form, name changes, changes in the ownership of a 
netting or clearing member or its affiliates, and material changes in 
management; (b) material changes in business lines, including new 
business lines undertaken; and (c) status as a defendant in litigation 
which could reasonably impact the netting or clearing member's 
financial condition or ability to conduct business.\4\
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    \4\ A similar requirement was added as Addendum T to the 
National Securities Clearing Corporation's rules in 1998. Securities 
Exchange Act Release No. 40582 (Oct. 20, 1998), 63 FR 57346 (Oct. 
27, 1998).
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    In order to provide FICC with enough time to analyze the 
implications of a Reportable Event and to determine an appropriate 
course of action, FICC believes that it is important for it to learn of 
a Reportable Event as soon as possible. As such, a netting or clearing 
member must submit written notice to FICC at least 90 calendar days 
prior to the effective date of such Reportable Event unless the member 
demonstrates that it could not have reasonably done so and also 
provides oral and written notice to FICC as soon as possible. Failure 
to so notify FICC would result in a $5,000 fine.
    FICC believes that the proposed rule change is consistent with the 
requirements of Section 17A of the Act and the rules and regulations 
thereunder because it should enhance FICC's ability to collect and 
evaluate the type of information that it needs to be aware of in order 
to properly manage risks and enforce its rules, thereby assuring the 
safeguarding of securities and funds for which FICC is in control.

 B. Self-Regulatory Organization's Statement on Burden on Competition

    FICC does not believe that the proposed rule change will have any 
impact or 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 relating to the proposed rule change have not yet 
been solicited or received. FICC 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

[[Page 24666]]

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-FICC-2005-01 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-FICC-2005-01. 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 FICC 
and on FICC's Web site at http://ficc.com/gov/gov. docs.jsp?NS-query=. 
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-FICC-2005-01 
and should be submitted on or before May 31, 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. E5-2240 Filed 5-9-05; 8:45 am]
BILLING CODE 8010-01-P