[Federal Register Volume 62, Number 4 (Tuesday, January 7, 1997)]
[Rules and Regulations]
[Pages 920-923]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-228]
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TENNESSEE VALLEY AUTHORITY
18 CFR Part 1314
Book-Entry Procedures for TVA Power Securities Issued Through the
Federal Reserve Banks
AGENCY: Tennessee Valley Authority (TVA).
ACTION: Final rule.
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SUMMARY: This final rule revises the procedures governing the issuance
of, and transactions in, all TVA Power Securities issued in book-entry
form through the Federal Reserve Banks. These revisions incorporate
recent changes in commercial and property law and bring TVA's book-
entry procedures into accord with the revised book-entry procedures of
the United States Department of Treasury.
EFFECTIVE DATE: January 7, 1997.
FOR FURTHER INFORMATION CONTACT:
Edward S. Christenbury at (423) 632-2241.
SUPPLEMENTARY INFORMATION: TVA, a wholly owned corporate agency and
instrumentality of the United States, is authorized to issue bonds,
notes, and other evidences of indebtedness to assist its power program.
Many TVA Power Securities are available exclusively in book-entry form
and are thus subject to TVA's book-entry procedures. This final rule
revises TVA's book-entry procedures to incorporate recent changes in
commercial and property law and to bring them into accord with the
revised book-entry procedures of the United States Department of
Treasury published in the Federal Register on August 23, 1996 (61 FR
43,626).
Because the revised Treasury Regulations become effective on
January 1, 1997, it is in the public interest that this final rule
become effective as close to this date as possible to facilitate TVA's
performance of its responsibilities under Section 15d and other
sections of the TVA Act, 16 U.S.C. 831-831dd. The notice, public
comment, and delayed effective date are therefore contrary to the
public interest and inapplicable to this final rule.
List of Subjects in 18 CFR Part 1314
Accounting, Bonds, Brokers, Federal Reserve System, Reporting and
recordkeeping requirements, Securities.
For the reasons set forth in the preamble, part 1314 of chapter
XIII of title 18 of the Code of Federal Regulations is revised to read
as follows:
PART 1314--BOOK-ENTRY PROCEDURES FOR TVA POWER SECURITIES ISSUED
THROUGH THE FEDERAL RESERVE BANKS
Sec.
1314.1 Applicability and effect.
1314.2 Definition of terms.
1314.3 Authority of Reserve Banks.
1314.4 Law governing the rights and obligations of TVA and Reserve
Banks; law governing the rights of any Person against TVA and
Reserve Banks; law governing other interests.
1314.5 Creation of Participant's Security Entitlement; security
interests.
1314.6 Obligations of TVA.
1314.7 Liability of TVA and Reserve Banks.
1314.8 Identification of accounts.
1314.9 Waiver of regulations.
1314.10 Additional provisions.
Authority: 16 U.S.C. 831-831dd.
Sec. 1314.1 Applicability and effect.
(a) Applicability. The regulations in this part govern the issuance
of, and transactions in, all TVA Power Securities issued by TVA in
book-entry form through the Reserve Banks.
(b) Effect. The TVA Power Securities to which the regulations in
this part apply are obligations which, by the terms of their issue, are
available exclusively in book-entry form through the Reserve Banks'
Book-entry System.
Sec. 1314.2 Definition of terms.
Unless the context requires otherwise, terms used in this part 1314
that are not defined in this section have the meanings as set forth in
31 CFR 357.2. Definitions and terms used in 31 CFR part 357 should be
read as though modified to effectuate their application to Book-entry
TVA Power Securities where applicable.
Book-entry System means the automated book-entry system operated by
the Reserve Banks acting as the fiscal agent for TVA on which Book-
entry TVA Power Securities are issued, recorded, transferred, and
maintained in book-entry form.
(b) Book-entry TVA Power Security means any TVA Power Security
issued or maintained in the Book-entry System of the Reserve Banks.
(c) CUSIP Number is a unique identification for each security issue
established by the Committee on Uniform Security Identification
Procedures.
(d) Depository Institution means any Participant.
(e) Entitlement Holder means a Person to whose account an interest
in a Book-
[[Page 921]]
entry TVA Power Security is credited on the records of a Securities
Intermediary.
(f) Funds Account means a reserve and/or clearing account at a
Reserve Bank to which debits or credits are posted for transfers
against payment, book-entry securities transaction fees, or principal
and interest payments.
(g) Other TVA Power Evidences of Indebtness means any TVA Power
Security issued under section 2.5 of the TVA Basic Bond Resolution (see
paragraph (r) of this section).
(h) Participant (also called ``holder'' in the TVA Basic Bond
Resolution) means a Person that maintains a Participant's Security
Account with a Reserve Bank.
(i) Participant's Security Account means an account in the name of
a Participant at a Reserve Bank to which Book-entry Securities held for
a Participant are or may be credited.
(j) Person means and includes an individual, corporation, company,
governmental entity, association, firm, partnership, trust, estate,
representative, and any other similar organization, but does not mean
or include the United States or a Reserve Bank.
(k) Reserve Banks means the Federal Reserve Banks of the Federal
Reserve System and their branches.
(l) Reserve Bank Operating Circular means the publication issued by
each Reserve Bank that sets forth the terms and conditions under which
the Reserve Bank maintains book-entry securities accounts and transfers
book-entry securities.
(m) Securities Documentation means the applicable documents
establishing the terms of a Book-entry TVA Power Security.
(n) Securities Intermediary means:
(1) A Person that is registered as a ``clearing agency'' under the
Federal securities law; a Reserve Bank; any other Person that provides
clearance or settlement services with respect to a Book-entry TVA Power
Security that would require it to register as a clearing agency under
the Federal securities laws but for an exclusion or exemption from the
registration requirement, if its activities as a clearing corporation,
including promulgation of rules, are subject to regulation by a Federal
or State governmental authority; or
(2) A Person (other than an individual, unless such individual is
registered as a broker or dealer under the Federal securities laws),
including a bank or broker, that in the ordinary course of business
maintains securities accounts for others and is acting in that
capacity.
(o) Security Entitlement means the rights and property interests of
an Entitlement Holder with respect to a Book-entry TVA Power Security.
(p) State means any State of the United States, the District of
Columbia, Puerto Rico, the Virgin Islands, or any other territory or
possession of the United States.
(q) TVA means the Tennessee Valley Authority, a wholly owned
corporate agency and instrumentality of the United States of America
created and existing under the Tennessee Valley Authority Act of 1933,
as amended (16 U.S.C. 831-831dd).
(r) TVA Basic Bond Resolution means the Basic Tennessee Valley
Authority Power Bond Resolution \1\ adopted by the TVA Board of
Directors on October 6, 1960, as heretofore and hereafter amended.
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\1\ A copy of the TVA Basic Bond Resolution may be obtained upon
request directed to TVA, 400 West Summit Hill Drive, Knoxville,
Tennessee 37902-1499, Attn.: Treasurer.
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(s) TVA Power Bond means any TVA Power Security issued by TVA under
section 2.2 of the TVA Basic Bond Resolution and the supplemental
resolution adopted by the TVA Board of Directors authorizing the
issuance thereof.
(t) TVA Power Bond Anticipation Obligation means any TVA Power
Security issued under section 2.3 of the TVA Basic Bond Resolution.
(u) TVA Power Note means any Other TVA Power Evidences of
Indebtedness in the form of a note having a maturity at the date of
issue of less than one year.
(v) TVA Power Security means a TVA Power Bond, TVA Power Bond
Anticipation Obligation, TVA Power Note, or Other TVA Power Evidence of
Indebtedness issued by TVA under section 15d of the TVA Act, as
amended, and the TVA Basic Bond Resolution.
Sec. 1314.3 Authority of Reserve Banks.
(a) Each Reserve Bank is hereby authorized as fiscal agent of TVA
to perform the following functions with respect to the issuance of
Book-entry TVA Power Securities offered and sold by TVA to which this
part 1314 applies, in accordance with the Securities Documentation,
Reserve Bank Operating Circulars, this part 1314, and procedures
established by the Secretary of the United States Treasury consistent
with these authorities:
(1) To service and maintain Book-entry TVA Power Securities in
accounts established for such purposes;
(2) To make payments with respect to such securities, as directed
by TVA;
(3) To effect transfer of Book-entry TVA Power Securities between
Participants' Securities Accounts as directed by the Participants;
(4) To perform such other duties as fiscal agent as may be
requested by TVA.
(b) Each Reserve Bank may issue Reserve Bank Operating Circulars
not inconsistent with this part 1314, governing the details of its
handling of Book-entry TVA Power Securities, Security Entitlements, and
the operation of the Book-entry System under this part 1314.
Sec. 1314.4 Law governing the rights and obligations of TVA and
Reserve Banks; law governing the rights of any Person against TVA and
Reserve Banks; law governing other interests.
(a) Except as provided in paragraph (b) of this section, the
following rights and obligations are governed solely by the book-entry
regulations contained in this part 1314, the Securities Documentation
(but not including any choice of law provisions in such documentation),
and Reserve Bank Operating Circulars;
(1) The rights and obligations of TVA and Reserve Banks with
respect to:
(i) A book-entry TVA Power Security or Security Entitlement; and
(ii) The operation of the Book-entry System as it applies to TVA
Power Securities; and
(2) The rights of any Person, including a Participant, against TVA
and Reserve Banks with respect to:
(i) A Book-entry TVA Power Security or Security Entitlement; and
(ii) The operation of the Book-entry System as it applies to TVA
Power Securities.
(b) A security interest in a Security Entitlement that is in favor
of a Reserve Bank from a Participant and that is not recorded on the
books of a Reserve Bank pursuant to Sec. 1314.5(c) is governed by the
law (not including the conflict-of-law rules) of the jurisdiction where
the head office of the Reserve Bank maintaining the Participant's
securities account is located. A security interest in a Security
Entitlement that is in favor of a Reserve Bank from a Person that is
not a Participant, and that is not recorded on the books of a Reserve
Bank pursuant to Sec. 1314.5(c), is governed by the law determined in
the manner specified in paragraph (d) of this section.
(c) If the jurisdiction specified in the first sentence of
paragraph (b) of this section is a State that has not adopted Revised
Article 8, then the law specified in paragraph (b) of this section
shall be the law of that State as though Revised Article 8 had been
adopted by that State.
(d) To the extent not otherwise inconsistent with this part 1314,
and
[[Page 922]]
notwithstanding any provision in the Security Documentation setting
forth a choice of law, the provisions set forth in 31 CFR 357.11
regarding law governing other interests apply and should be read as
though modified to effectuate the application of 31 CFR 357.11 to Book-
entry TVA Power Securities.
Sec. 1314.5 Creation of Participant's Security Entitlement; security
interests.
(a) A Participant's Security Entitlement is created when a Reserve
Bank indicates by book-entry that a Book-entry TVA Power Security has
been credited to a Participant's security account.
(b) A security interest in a Security Entitlement of a Participant
in favor of the United States to secure deposits of public money,
including without limitation deposits to the Treasury tax and loan
accounts, or other security interest in favor of the United States that
is required by Federal statute, regulation or agreement, and that is
marked on the books of a Reserve Bank, is thereby effected and
perfected, and has priority over any other interest in the securities.
Where a security interest in favor of the United States in a Security
Entitlement of a participant is marked on the books of a Reserve bank,
such Reserve Bank may rely, and is protected in relying, exclusively on
the order of an authorized representative of the United States
directing the transfer of the security. For purposes of this paragraph,
an ``authorized representative of the United States'' is the official
designated in the applicable regulations or agreement to which a
Reserve Bank is a party governing the security interest.
(c) TVA and Reserve Banks have no obligation to agree to act on
behalf of any Person or to recognize the interest of any transferee of
a security interest or other limited interest in favor of any Person
except to the extent of any specific requirement of Federal law or
regulation or to the extent set forth in any specific agreement with
the Reserve Bank on whose books the interest of the Participant is
recorded. To the extent required by such law or regulation or set forth
in an agreement with a Reserve Bank or in a Reserve Bank Operating
Circular, a security interest in a Security Entitlement that is in
favor of a Reserve Bank or a Person may be created and perfected by a
Reserve Bank marking its books to record the security interest. Subject
to paragraph (b) of this section with respect to a security interest in
favor of the United States, a security interest in a Security
Entitlement marked on the books of a Reserve Bank shall have priority
over any other interest in the securities.
(d) In addition to the method provided in paragraph (c) of this
section, a security interest, including a security interest in favor of
a Reserve Bank, may be perfected by any method by which a security
interest may be perfected under applicable law as described in
Sec. 1314.4(b) or (d). The perfection, effect of perfection or non-
perfection, and priority of a security interest are governed by such
applicable law. A security interest in favor of a Reserve Bank shall be
treated as a security interest in favor of a clearing corporation in
all respects under such law, including with respect to the effect of
perfection and priority of such security interest. A Reserve Bank
Operating Circular shall be treated as a rule adopted by a clearing
corporation for such purposes.
Sec. 1314.6 Obligations of TVA.
(a) Except in the case of a security interest in favor of the
United States or a Reserve Bank or otherwise as provided in
Sec. 1314.5(c), for the purposes of this part 1314, TVA and Reserve
Banks shall treat the Participant to whose securities account an
interest in a Book-entry TVA Power Security has been credited as the
Person exclusively entitled to issue a transfer message, to receive
interest and other payments with respect thereof, and otherwise to
exercise all the rights and powers with respect to such security,
notwithstanding any information or notice to the contrary. Neither TVA
nor the Reserve Banks are liable to a Person asserting or having an
adverse claim to a Security Entitlement or to a Book-entry TVA Power
Security in a Participant's security account, including any such claim
arising as a result of the transfer or disposition of a Book-entry TVA
Power Security by a Reserve Bank pursuant to a transfer message that
the Reserve Bank reasonably believes to be genuine.
(b) The obligation of TVA to make payments with respect to Book-
entry TVA Power Securities is discharged at the time payment in the
appropriate amount is made as follows:
(1) Interest or other payments on Book-entry TVA Power Securities
are either credited by a Reserve Bank to a Funds Account maintained at
such bank or otherwise paid as directed by the Participant.
(2) Book-entry TVA Power Securities are redeemed in accordance with
their terms by a Reserve Bank withdrawing the securities from the
Participant's security account in which they are maintained and by
either crediting the amount of the redemption proceeds, including both
principal and interest, where applicable, to a Funds Account at such
bank or otherwise paying such principal and interest as directed by the
Participant. No action by the Participant ordinarily is required in
connection with the redemption of a Book-entry TVA Power Security.
Sec. 1314.7 Liability of TVA and Reserve Banks.
TVA and the Reserve Banks may rely on the information provided in a
transfer message and are not required to verify the information. TVA
and the Reserve Bank shall not be liable for any action taken in
accordance with the information set out in a transfer message or
evidence submitted in support thereof.
Sec. 1314.8 Identification of accounts.
Book-entry accounts may be established in such form or forms as
customarily permitted by the entity (e.g., Depository Institution,
Securities Intermediary, etc.) maintaining them, except that each
account established by such entity (other than a Reserve Bank) should
include data to permit both customer identification by name, address,
and taxpayer identifying number, as well as a determination of the
Book-entry TVA Power Securities being held in such account by amount,
maturity, date, and CUSIP number, and of transactions relating thereto.
Sec. 1314.9 Waiver of regulations.
TVA reserves the right in TVA's discretion to waive any provision
of the regulations in this part in any case or class of cases for the
convenience of TVA or in order to relieve any Person of unnecessary
hardship, if such action is not inconsistent with law and does not
adversely affect any substantial existing rights, and TVA is satisfied
that such action will not subject TVA to any substantial expense or
liability.
Sec. 1314.10 Additional provisions.
(a) Additional requirements. In any case or any class of cases
arising under the regulations in this part, TVA may require such
additional evidence and a bond of indemnity, with or without surety, as
may in the judgment of TVA be necessary for the protection of the
interests of TVA.
(b) Notice of attachment for TVA Power Securities in Book-entry
System. The interest of a debtor in a Security Entitlement may be
reached by a creditor only by legal process upon the Securities
Intermediary with whom the debtor's securities account is maintained,
except where a Security Entitlement is maintained in the name of a
secured party, in which case the debtor's interest may be reached by
legal process upon the secured party. The
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regulations in this part do not purport to establish whether a Reserve
Bank is required to honor an order or other notice of attachment in any
particular case or class of cases.
Dated: December 31, 1996.
John L. Dugger,
Assistant General Counsel.
[FR Doc. 97-228 Filed 1-6-97; 8:45 am]
BILLING CODE 8120-01-M
