[Federal Register Volume 61, Number 203 (Friday, October 18, 1996)]
[Notices]
[Pages 54473-54475]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-26715]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37800; File No. SR-DTC-96-15]
Self-Regulatory Organizations; The Depository Trust Company;
Notice of Filing of an Amendment to a Proposed Rule Change Relating to
the Procedures To Establish a Direct Registration System
October 9, 1996.
On September 17, 1996, The Depository Trust Company (``DTC'') filed
with the Securities and Exchange Commission (``Commission'') the
proposed rule change (File No. SR-DTC-96-15) pursuant to Section
19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ relating
to the procedures to establish a direct registration system. On October
7, 1996, DTC filed an amendment to the proposed rule change.\2\ Notice
of the proposed rule change was published in the Federal Register on
October 9, 1996.\3\ The amendment is described in Items I, II, and III
below, which items have been prepared primarily by DTC. The Commission
is publishing this notice to solicit comments on the proposed rule
change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1) (1988).
\2\ Letter from Larry Thompson, Senior Vice President and Deputy
General Counsel, DTC, to Jerry Carpenter, Assistant Director,
Division of Market Regulation. Commission (October 7, 1996).
\3\ Securities Exchange Act Release No. 37778 (October 3, 1996),
61 FR 52985.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The purpose of the amendment to the proposed rule change is to
delete the requirement that limited participants accept dividend
reinvestment instructions from DTC on DRS eligible securities that
offer dividend reinvestment plans.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, DTC 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. DTC has prepared summaries, set forth in sections (A),
(B), and (C) below, of the most significant aspects of such
statements.\4\
---------------------------------------------------------------------------
\4\ The Commission has modified parts of these statements.
---------------------------------------------------------------------------
(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
The purpose of the amendment of the proposed rule change is to
delete a requirement that in order to participate in the DRS program
that any DRS issue with a dividend reinvestment plan must be open to
street-name holders. The amendment also modifies the Limited
Participant Account Agreement to reflect the change in requirements.\5\
---------------------------------------------------------------------------
\5\ A complete description of the amended DRS service may be
found in the Important Notices issued by DTC on the implementation
of a DRS, which are attached as Exhibit A and Exhibit B. Important
Notice B# 1811-96 (October 7, 1996) and Important Notice B# 1841-96
(October 7, 1996).
---------------------------------------------------------------------------
(B) Self-Regulatory Organization's Statement on Burden on Competition
DTC perceives no impact on competition by reason of the proposed
rule change.
[[Page 54474]]
(C) Self-Regulatory Organization's Statement on Comments on the
Proposed Rule Change Received From Members, Participants or Others
Although DTC did not solicit comments on DRS, over the last two
years, a joint committee of representatives of the Securities Transfer
Association, the Securities Industry Association, the Corporate
Transfer Agents Association, and the depositories had met and agreed on
the features of DRS.
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. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549.
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 Room in Washington, D.C. Copies of such
filing will also be available for inspection and copying at the
principal office of DTC. All submissions should refer to the file
number SR-DTC-96-15 and should be submitted by November 8, 1996.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
Exhibit A--The Depository Trust Company Important Notice, DRS Alert
October 7, 1996.
B#: 1811-96
To: All Participants
Attention: Managing Partner/Officer, Cashier, Transfer Manager
Subject: Implementation of a Direct Registration System
In July DTC advised Participants (reference Important Notice
#1368-96 dated July 15, 1996) to plan for the implementation of a
Direct Registration System (DRS) scheduled to pilot in November.
Under DRS, Investors electing to have their ownership of securities
registered on the issuer's records would be offered a choice between
a registered certificate and a book-entry or ``direct registration''
position recorded on the books of the issuer's transfer agent.
The DRS pilot is scheduled to begin on November 11. DTC expects
to be able to announce the issue selected for the initial pilot next
week.
Eligibility
The DRS issues will be identified with special indicators on the
Eligible Corporate Securities File (ELISC and ELISCD) and the
Eligible Securities (CONI) Inquiry on PTS effective November 8,
1996. Specifications for the new indicators were released on August
20.
Transfers
Beginning November 11, all Withdrawal-by-Transfer (WT) requests
on the DRS Issues made via PTS using function NWT1 or via computer-
to-computer (CCF/CCFII) must include the following:
a DRS indicator (permissible values are ``C'' if the
investor wants a certificate issued, ``S'' if the investor is
choosing to have a DRS position established, ``Y'' if the
instruction represents a third-party transfer for a DRS position, or
``X'' if the Participant is reversing a previously established DRS
position),
the Participant's account number for this customer
(required if the value of the DRS indicator is ``S'' or ``Y''), and
the Participant's or correspondent's name (required
if the value of the DRS indicator is ``S'' or ``Y'').
Specifications for the new WT input record were released on
August 20. The new PTS input screen on the NWT1 function will be
available in early November before the start of the DRS pilot.
Participants submitting WT requests prior to cut-off time on Friday,
November 8, for normal processing on Monday, November 11, for the
pilot issues should not submit these WTs until Monday, November 11,
to avoid drops due to a missing DRS indicator.
It should be noted that if a Participant has not made the new
CCF changes to accommodate DRS, DTC will continue to accept the
current format and process non-DRS WTs. However, DRS WTs will not be
processed and will drop since no DRS indicator has been provided.
DRS WTs would then have to be processed over PTS until the
Participant's new CCF formats are in place. All DRS WT's that drop
will be carefully monitored, and the Participant will be contacted
by a Participant Services representative regarding follow-up on
these items.
When a Participant's customer requests a DRS position, a DRS
``transaction advice'' will be mailed directly by the agent to the
customer. The transfer agent's fee of 55 cents for mailing and
handling the DRS transaction advice will be charged back to the
Participant directly by DTC, similar to the Direct Mail process. DTC
will then receive an automated confirmation from the agent that the
DRS transaction advice has been process and mailed. Participants can
access this information through their normal DMA return files (CCF,
PTS, or hard copy). Participants not currently using the Direct Mail
service will need to consider modifications to their procedures to
monitor these advices as they are printed over the PTS network.
Investor-Directed Sale
An investor who opted for a DRS position must contact the
transfer agent to direct the movement of the DRS position to its
bank or broker/dealer. Specifications for the changes to the
delivery order record to reflect movement of a DRS position were
released on August 20 with modifications made on September 17.
Preparing for Implementation
Participants are urged to complete their final systems
modifications to accommodate the DRS pilot scheduled to begin on
November 11. As mentioned previously, the pilot issues will be
announced next week.
DTC will be issuing weekly ``updates'' on the status of
preparation for the DRS pilot from today through initial
implementation. In addition, Participant Services representatives
will be contacting those Participants submitting significant numbers
of WT instructions to ensure their preparedness.
Please direct your questions to Al DeMalo, Director of
Operations, at (212) 898-3171, the undersigned at (516) 227-4004, or
your Participant Services representative.
Ronald J. Burns,
Vice President, Operations.
Exhibit B--The Depository Trust Company, Important
October 7, 1996.
B#: 1841-96
To: All Participants
Attention: Managing Partner/Officer, Cashier, Transfer Manager
Subject: Direct Registration System Amendment
The Direct Registration System (DRS) will permit issuers of
securities to elect to create a DRS Program under which investors
seeking to be registered on the books of an issuer or transfer agent
would be offered the option of having their ownership reflected in a
DRS position (essentially a ``book share'' position), rather than
through the issuance of
[[Page 54475]]
a physical securities certificate. Under the structure for DRS
developed by a joint committee of representatives of the Securities
Industry Association, the Securities Transfer Association, and the
Corporate Transfer Agents Association, issuers or transfer agents
desiring to establish a DRS Program and meeting certain criteria
would become DRS ``Limited Participants'' at DTC (see Important
Notice B#1368-96).
In connection with certain recent actions by the New York Stock
Exchange to amend the Exchange's listing standards as they apply to
DRS issues, DTC is amending the criteria which must be met by
entities wishing to become DRS Limited Participants at DTC. Under
the original criteria as recently filed for approval with the SEC,
transfer agents or issuers seeking admission to DTC as Limited
Participants for the purpose of participating in DRS are required
to, among other things, accept dividend reinvestment instructions
from DTC on DRS issues which offer Dividend Reinvestment Plans. DTC
will no longer require those seeking DRS Limited Participant status
to meet this requirement as a condition precedent to membership.
Nevertheless, DTC continues to believe that the issue of ``open
access'' to issuers' Dividend Reinvestment Plans for investors
holding their positions through the depository is a significant one.
The current exclusion of these investors by some issuers' plans is
inappropriate and conflicts directly with the industry's efforts to
promote efficient clearance and settlement practices. DTC will
continue to press the SEC and issuers to make Dividend Reinvestment
Plans available to all investors without regard to the form in which
securities are held, working with others in the industry to achieve
this important objective.
Please direct your questions to the undersigned at (516) 227-
4004.
Ronald J. Burns,
Vice President, Operations.
[FR Doc. 96-26715 Filed 10-17-96; 8:45 am]
BILLING CODE 8010-01-M
