[Federal Register Volume 61, Number 205 (Tuesday, October 22, 1996)]
[Rules and Regulations]
[Pages 54908-54911]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-26376]
[[Page 54907]]
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Part III
Department of the Treasury
_______________________________________________________________________
Fiscal Service
_______________________________________________________________________
31 CFR Parts 356 and 370
Sale and Issue of Marketable Book-Entry Treasury Bills, Notes, and
Bonds; Regulations Governing Payments by the Automated Clearing House
Method on Account of United States Securities; Final Rule
Federal Register / Vol. 61, No. 205 / Tuesday, October 22, 1996 /
Rules and Regulations
[[Page 54908]]
DEPARTMENT OF THE TREASURY
Fiscal Service
31 CFR Parts 356 and 370
Sale and Issue of Marketable Book-Entry Treasury Bills, Notes,
and Bonds; Regulations Governing Payments by the Automated Clearing
House Method on Account of United States Securities
AGENCY: Bureau of the Public Debt, Fiscal Service, Treasury.
ACTION: Final rule.
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SUMMARY: The Department of the Treasury (``Department'' or
``Treasury'') is issuing in final form an amendment to 31 CFR Part 370
(Regulations Governing Payments by the Automated Clearing House Method
on Account of United States Securities) to permit purchasers of United
States securities, where authorized by the appropriate offering
circular, to pay for their securities by means of a debit entry to
their deposit account by the Automated Clearing House (ACH) method. The
amendment will offer investors an additional means of payment for the
purchase of their securities.
Also, this final rule amends 31 CFR Part 356 (Uniform Offering
Circular for the Sale and Issue of Marketable Book-Entry Treasury
Bills, Notes, and Bonds). The amendment will authorize bidders in
Treasury security auctions to make payment for awarded Treasury
securities by approved electronic means.
EFFECTIVE DATE: October 22, 1996. For purchasers of securities to be
held in the TREASURY DIRECT system, debit ACH will be implemented with
a phased-in approach.
FOR FURTHER INFORMATION CONTACT: Maureen Parker, Director, Division of
Securities Systems, Bureau of the Public Debt, Parkersburg, West
Virginia, 26106-1328, (304) 480-7761 or Susan Klimas, Attorney-Adviser,
Office of the Chief Counsel, Bureau of the Public Debt, (304) 480-5192.
SUPPLEMENTARY INFORMATION:
I. Background
The title of Part 370 is being changed to Regulations Governing the
Transfer of Funds by Electronic Means on Account of United States
Securities, to indicate that the part is intended to provide regulatory
coverage for various methods of payment by electronic means. It is
anticipated that the ACH method will, in the future, be one of several
electronic payment mechanisms for United States securities. Subparts
have been added to part 370 to separate the already-existing credit ACH
regulations, governing payments from the Department to the owner of the
security, from the debit ACH regulations, which will govern the payment
to the Department by the owner for the settlement amount of the
security. The debit ACH regulations provide an additional payment
method, that of a debit entry to the owner's deposit account, using the
ACH method, if authorized by the appropriate offering circular. The
TREASURY DIRECT system will offer debit ACH as an additional method of
payment for the purchase of marketable Treasury securities, as
authorized in the offering circular at 31 CFR Part 356. An
authorization signed by the investor for the debit transaction will be
required. The debit ACH payment option is only available for TREASURY
DIRECT accounts established at least two weeks prior to the scheduled
debit ACH entry.
Although investors may continue to pay for the purchase of their
securities by non-electronic means, the additional method of payment
will benefit investors by permitting them the use of their money until
the debit entry takes place on the settlement date of the Treasury
securities.
31 CFR Part 356, also referred to as the uniform offering circular,
sets out the terms and conditions for the sale and issuance by the
Department to the public of marketable Treasury bills, notes, and
bonds. The uniform offering circular, in conjunction with offering
announcements, represents a comprehensive statement of those terms and
conditions.1
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\1\ The uniform offering circular was published as a final rule
on January 5, 1993 (58 FR 412). Amendments to the circular were
published on June 3, 1994 (59 FR 28773), March 15, 1995 (60 FR
13906), July 16, 1996 (61 FR 37007) and August 23, 1996 (61 FR
43626).
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The Department believes that the future expansion of payment
methods for securities in Treasury auctions to accommodate payment
through electronic means will be beneficial to investors in Treasury
securities and will enhance the efficiency of the Treasury securities
market. Accordingly, Sec. 356.17 of the uniform offering circular has
been amended to allow payment for marketable Treasury securities to be
made by those electronic means approved by the Department (see 31 CFR
Part 370). Also, Sec. 356.25 has been amended to provide that, where
payment is made by authorized electronic means, such payment will be
made on the issue date of the Treasury security by charging the
settlement amount to the account specified by the bidder or the
submitter on behalf of the bidder.
Debit ACH is one such means of electronic payment that the
Department is approving as an option for bidders whose awarded
securities will be held in TREASURY DIRECT. To utilize the debit ACH
payment option for securities to be held in TREASURY DIRECT, a bidder,
or a submitter on behalf of a bidder, will be required to meet the
necessary conditions, and to complete any required authorizations, as
described in part 370.
Conforming changes are being made to Sec. 356.17 to allow for the
possibility of various means of electronic payment in the future by
bidders whose awarded securities are held in the commercial book-entry
system.2
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\2\ When the final rule (61 FR 43626) becomes effective, the
commercial book-entry system will be known as the Treasury/Reserve
Automated Debt Entry System (TRADES).
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II. Section by Section Summary
31 CFR Part 356
(1.) Section 356.17 has been amended by adding new paragraphs
(a)(2) and (b)(2) to add payment by authorized electronic means as a
payment option available to bidders in Treasury security auctions. If
the awarded securities are to be held in TREASURY DIRECT, the bidder
must meet certain conditions, and complete any required authorizations,
as provided in 31 CFR part 370. Conforming changes are also made to
paragraphs (a) and (b), and the newly redesignated paragraphs (a)(3)
and (b)(3) of this section.
(2.) Section 356.25 has been amended by adding a new paragraph (b)
which provides that when the method of payment is by authorized
electronic means, the settlement amount will be charged to the
specified account on the issue date of the particular Treasury bill,
note or bond. Conforming changes are also made to paragraph (a) and the
newly redesignated paragraph (c) of this section.
31 CFR Part 370
(1.) The title of this part has been changed from Regulations
Governing Payments by the Automated Clearing House Method on Account of
United States Securities, to Regulations Governing the Transfer of
Funds by Electronic Means on Account of United States Securities. This
change will permit the part to be used in the future for methods of
payment for United States securities by other electronic means in
addition to the ACH method.
(2.) Section 370.0 has been amended to indicate that the
regulations in this
[[Page 54909]]
part apply to the electronic transfer of funds where employed by the
Bureau of the Public Debt (Public Debt) in connection with United
States securities, except where otherwise provided. Previously, the
section indicated that the part applies to the ACH method of payment
where employed by Public Debt in connection with United States
securities. The amendment indicates the potential for the future
expansion of the part should Public Debt choose to use other electronic
means in connection with United States securities.
(3.) Subparts have been added to separate the credit and debit ACH
sections. Subpart A contains general information which will apply to
the entire part.
(4.) Section 370.1 has been amended to redefine several terms used
in the section and to add appropriate definitions. The definition of
deposit account has been expanded from the account maintained at a
financial institution specified by a recipient into which ACH payments
under this part are to be made, to the account into which either
payments or debit entries under this part are to be made.
Entry has been defined as an order or request for the deposit of
money to the deposit account of an owner (a credit entry) or for the
payment of money from the deposit account of an owner (a debit entry).
A definition of payment has been added to clarify that where used
in this part, payment means the transfer of funds from the Department
to the deposit account of the owner. A definition of settlement date
has been added.
(5.) Subpart B has been added to the regulations to indicate that
this subpart contains provisions applicable to payments under the ACH
method, and applies to payments from the Department on account of
United States securities. Sections have been renumbered to fit the new
structure of the part, and to provide space for the addition of future
sections, if necessary.
(6.) Former Sec. 370.2 through and including Sec. 370.11 have been
renumbered as Sec. 370.5 through Sec. 370.14.
(7.) The title of former Sec. 370.12, Other payments, has been
changed to indicate that this section refers to other payments by the
ACH method, and renumbered as Sec. 370.15.
(8.) The former Sec. 370.13, Waiver of regulations, has been moved
to subpart D, and will be renumbered as Sec. 370.30.
(9.) The former Sec. 370.14, Liability of Department and Federal
Reserve Banks, has been renumbered as Sec. 370.16.
(10.) Subpart C has been added to provide a structure to contain
the regulations covering debit entries by the ACH method.
(11.) Section 370.20, Designation of a financial institution to
receive debit ACH entries, provides that an owner of a security shall
designate the financial institution and the deposit account within that
institution which will receive the debit ACH entries. For securities
that will be held in the TREASURY DIRECT system, the designation will
be made using the ACH information provided in the TREASURY DIRECT
tender for the direct deposit of payments for that account. In the
TREASURY DIRECT system, the purchaser must receive the debit entries in
the same deposit account which has been designated to receive payments
of principal and interest from the TREASURY DIRECT system by credit
entries. This means that the purchaser may not designate one account to
receive payments by the ACH method and another account to pay for
securities, but must use the same account for both transactions. The
TREASURY DIRECT account must have been established at least two weeks
prior to the scheduled debit ACH entry. Written authorization for the
debit must be provided by the purchaser.
(12.) Section 370.21, Agreement of the financial institution,
provides that the acceptance and handling by a financial institution of
a debit entry constitutes its agreement to this subpart.
(13.) Section 370.22, Prenotification, provides the procedures for
prenotification messages for debit ACH, if a prenotification message is
sent.
(14.) Section 370.23, Responsibility of financial institution, sets
forth the responsibilities of the financial institution designated to
receive a debit entry.
(15.) Section 370.24, Handling of debit entries by Federal Reserve
Banks, provides that the Federal Reserve Banks, as the fiscal agents of
the United States, shall initiate a debit to the owner's account in
accordance with the instructions of the owner.
(16.) Section 370.25, Liability of Department and Federal Reserve
Banks, provides that the Department, which includes the Capital Area
Servicing Center, and the Federal Reserve Banks shall not be liable for
any action taken in accordance with the information furnished by the
owner as to the debit entry.
(17.) Subpart D has been added to accommodate those provisions
which apply equally to all subparts contained in this part.
(18.) Section 370.30, Waiver of regulations, is the former
Sec. 370.13, which has been moved and renumbered.
(19.) The former Sec. 370.15 Supplements, amendments or revisions,
has been redesignated Sec. 370.31. The phrase payments made by ACH has
been changed to the transfer of funds by electronic means.
Procedural Requirements
It has been determined that this final rule does not meet the
criteria for a ``significant regulatory action,'' as defined in
Executive Order 12866. Therefore, the regulatory review procedures
contained therein do not apply.
This rule relates to matters of public contract and procedures for
U.S. securities. Accordingly, pursuant to 5 U.S.C. 553(a)(2), the
notice, public comment and delayed effective date provisions of the
Administrative Procedure Act do not apply. As no notice of proposed
rulemaking is required, the provisions of the Regulatory Flexibility
Act (5 U.S.C. 601, et seq.) do not apply.
There are no new collections of information contained in this Final
Rule, and, therefore, the Paperwork Reduction Act (44 U.S.C. 3504(h))
does not apply.
List of Subjects in 31 CFR Parts 356 and 370
Bonds, Federal Reserve System, Government securities, Securities,
Electronic funds transfer.
Dated: October 8, 1996.
Gerald Murphy,
Fiscal Assistant Secretary.
For the reasons set out in the preamble, 31 CFR parts 356 and 370
are amended as follows:
PART 356--SALE AND ISSUE OF MARKETABLE BOOK-ENTRY TREASURY BILLS,
NOTES, AND BONDS (DEPARTMENT OF THE TREASURY CIRCULAR, PUBLIC DEBT
SERIES NO. 1-93)
1. The authority citation for part 356 continues to read as
follows:
Authority: 5 U.S.C. 301; 31 U.S.C. 3102, et seq.; 12 U.S.C. 391.
2. Section 356.17 is amended by revising the introductory text of
paragraphs (a) and (b), redesignating paragraphs (a)(2) and (b)(2) as
paragraphs (a)(3) and (b)(3), adding new paragraphs (a)(2) and (b)(2),
and revising redesignated paragraph (a)(3) and the introductory text of
paragraph (b)(3) to read as follows:
[[Page 54910]]
Sec. 356.17 Responsibility for payment.
* * * * *
(a) TREASURY DIRECT. For securities to be held in TREASURY DIRECT,
payment of the par amount and announced accrued interest, if any, must
be submitted with the tender unless other provisions have been made,
such as payment by an authorized electronic means providing for
immediately available funds or payment by charge to the funds account
of a depository institution.
* * * * *
(2) Payment by authorized electronic means. Payment may be made by
electronic means approved by the Department, provided the bidder, or
the submitter on behalf of the bidder, has met the necessary conditions
and has satisfactorily completed any required authorizations for such
means of payment, in accordance with 31 CFR part 370.
(3) Authorized charge to a funds account. If a depository
institution or dealer submits a tender for a TREASURY DIRECT bidder and
payment is not submitted with the tender or made by an authorized
electronic means, an authorization from a depository institution to
charge the institution's funds account at a Federal Reserve Bank must
be on file with the Bank to which the tender was submitted.
(b) Commercial book-entry system. For securities to be held in the
commercial book-entry system, payment of the par amount and announced
accrued interest, if any, must be submitted with the tender unless
other provisions have been made, such as by payment by an authorized
electronic means providing for immediately available funds or by charge
to the funds account of a depository institution.
* * * * *
(2) Payment by authorized electronic means. Payment may be made by
electronic means approved by the Department, provided the bidder, or
the submitter on behalf of the bidder, has met the necessary
conditions, and has satisfactorily completed any required
authorizations, for such means of payment.
(3) Authorized charge to a funds account. Where payment is not
submitted with the tender or made by an authorized electronic means, an
authorization to charge the funds account of a depository institution
must be provided as follows.
* * * * *
3. Section 356.25 is amended by redesignating paragraph (b) as
paragraph (c), adding a new paragraph (b), and revising the
introductory text of paragraphs (a) and (c), to read as follows:
Sec. 356.25 Payment for awarded securities.
* * * * *
(a) Payment with tender. When payment is made with the tender as
provided for in Sec. 356.17 (a)(1) and (b)(1), settlement is
accomplished as follows:
* * * * *
(b) Payment by authorized electronic means. Where the method of
payment is by an authorized electronic means as provided for in
Sec. 356.17 (a)(2) or (b)(2), the settlement amount will be charged to
the specified account on the issue date.
(c) Payment by authorized charge to a funds account. Where the
submitter's method of payment is an authorized charge to the funds
account of a depository institution as provided for in Secs. 356.17
(a)(3) or (b)(3), the settlement amount will be charged to the
specified funds account on the issue date.
* * * * *
PART 370--REGULATIONS GOVERNING THE TRANSFER OF FUNDS BY ELECTRONIC
MEANS ON ACCOUNT OF UNITED STATES SECURITIES
1. The authority citation for part 370 continues to read as
follows:
Authority: 31 U.S.C. Chapter 31.
2. The heading of Part 370 is revised to read as set forth above.
3. Section 370.0 is revised to read as follows:
Sec. 370.0 Applicability.
The regulations in this part apply to the transfer of funds by
electronic means where employed by the Bureau of the Public Debt in
connection with United States securities, except as otherwise provided.
4. Sections 370.1 through 370.4 are designated as Subpart A and a
heading for subpart A is added to read as follows:
Subpart A--General Information
5. Section 370.1 is amended by revising the definitions for deposit
account, financial institution, and owner, and adding definitions for
entry, payment, and settlement date to read as follows:
Sec. 370.1 Definitions.
* * * * *
Deposit account means the account maintained at a financial
institution specified by a recipient into which ACH credit or debit
entries under this part are to be made.
Entry means an order or request for the deposit of money to the
deposit account of an owner (a credit entry) or for the payment of
money from the deposit account of an owner (a debit entry).
Financial institution means, for purposes of this part, an
institution which processes the transfer of funds by authorized
electronic means.
Owner means the individual(s) or entity in whose name(s) a security
is registered and who is authorized under the appropriate subparts of
this title to request that the security be transferred, reissued,
reinvested, exchanged or paid.
Payment means, for the purpose of this part, the deposit of money
from the Department to the deposit account of the owner.
* * * * *
Settlement Date means the date an exchange of funds with respect to
an entry is reflected on the books of the Federal Reserve Bank(s). The
settlement date will in most cases be the same as the issue date of a
security held in the TREASURY DIRECT system.
* * * * *
Secs. 370.13 and 370.15 [Redesignated]
6. Sections 370.13 and 370.15 are redesignated as Secs. 370.30 and
370.31.
Secs. 370.2-370.12 and 370.14 [Redesignated]
7. Section 370.14 is redesignated as section 370.16; sections 370.2
through 370.12 are redesignated as sections 370.5 through 370.15
respectively.
8. The heading of the newly redesignated section 370.15 is revised
as set forth below:
Sec. 370.15 Other payments by the ACH method.
* * * * *
9. Newly redesignated sections 370.5 through 370.16 are designated
as Subpart B and a heading for subpart B is added to read as follows:
Subpart B--Credit ACH Entries
10. Subpart C is added to read as follows:
Subpart C--Debit ACH Entries
Sec.
370.20 Designation of a financial institution to receive debit ACH
entries.
370.21 Agreement of the financial institution.
370.22 Prenotification.
370.23 Responsibility of financial institution.
370.24 Handling of debit entries by Federal Reserve Banks.
370.25 Liability of Department and Federal Reserve Banks.
[[Page 54911]]
Sec. 370.20 Designation of a financial institution to receive debit
ACH entries.
The purchaser of a security shall designate a financial institution
to receive debit ACH entries and shall identify the deposit account to
which the debit entries are to be received, by written authorization,
or by an authorization similarly authenticated by the purchaser, in a
manner approved by the Department. The purchaser of a security to be
held in TREASURY DIRECT must receive debit ACH entries in the same
deposit account designated to receive TREASURY DIRECT payments by the
ACH method. Such TREASURY DIRECT account must have been established at
least two weeks prior to the scheduled debit ACH entry and must be an
account which is capable of receiving debit entries. The authorization
of the purchaser shall not be recurring, that is, it shall be effective
for one debit transaction only.
Sec. 370.21 Agreement of the financial institution.
A financial institution's acceptance and handling of a debit entry
made with respect to a security covered by this subpart shall
constitute its agreement to the provisions of this subpart.
Sec. 370.22 Prenotification.
(a) General. The Department may send a prenotification message to
the financial institution designated to receive debit ACH entries to
confirm the accuracy of the account information furnished by an owner,
or other person or entity entitled to make the designation, and to
advise the financial institution that such account has been so
designated. Prenotification messages may be sent at any time prior to
the first debit ACH entry. The prenotification message shall contain
the ABA routing/transit number of the financial institution designated
to receive the debit entry, as well as a depositor name reference,
deposit account number, and type or classification of account at such
institution.
(b) Response to prenotification. The financial institution must
respond to the prenotification message within eight calendar days after
the date of receipt, if the information as to the account number and/or
the type of account contained in the message does not agree with the
records of the financial institution, or if the financial institution
for any other reason has questions about the forthcoming debit entry,
including its ability to debit the account in accordance with this
subpart. Upon receipt of a response to the prenotification message, the
Department or the Federal Reserve Bank, as appropriate, will correct
the debit instructions and send another prenotification message, or
contact the owner for further instructions.
(c) Effect of failure to reject. If a financial institution does
not reject or otherwise respond to a prenotification message within the
specified time period, the financial institution shall be deemed to
have accepted the prenotification and to have warranted to the
Department or the Federal Reserve Bank that the information as to the
deposit account number and/or the type of account contained in the
message is accurate as of the time of such prenotification.
Sec. 370.23 Responsibility of financial institution.
A financial institution which receives a debit entry on behalf of
its customer must:
(a) Debit the customer's account on the settlement date. If the
financial institution is unable to debit the designated account, it
shall return the entry by no later than the next business day after
receipt, with an electronic message or other response explaining the
reason for the return.
(b) Promptly notify the appropriate Federal Reserve Bank or the
Capital Area Servicing Center when the designated account has been
closed, or when it is on notice of the death or legal incapacity (as
determined under applicable State law) of any individual named on such
account, or when it is on notice of the dissolution of a corporation in
whose name the deposit account is held.
Sec. 370.24 Handling of debit entries by Federal Reserve Banks.
Each Federal Reserve Bank, as fiscal agent of the United States,
shall initiate the debit entry in accordance with the information
furnished by the owner.
Sec. 370.25 Liability of Department and Federal Reserve Banks.
The Department and the Federal Reserve Banks will rely on the
information provided by the owner, or other person or entity entitled
to make the designation, concerning the financial institution or
deposit account designated to receive the debit entry, and are not
required to verify this information. The Department and the Federal
Reserve Banks shall not be liable for any action taken in accordance
with the information so furnished.
11. Newly redesignated section 370.31 is revised to read as
follows:
Sec. 370.31 Supplements, amendments or revisions.
The Secretary may, at any time, prescribe additional supplemental,
amendatory or revised regulations with respect to the transfer of funds
by electronic means.
12. Newly redesignated sections 370.30 and 370.31 are designated as
Subpart D and a heading for Subpart D is added to read as follows:
Subpart D--Additional Provisions
[FR Doc. 96-26376 Filed 10-21-96; 8:45 am]
BILLING CODE 4810-39-W
