[Federal Register Volume 60, Number 211 (Wednesday, November 1, 1995)]
[Notices]
[Pages 55624-55625]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-27001]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36413; File No. SR-DTC-95-09]
Self-Regulatory Organizations; The Depository Trust Company;
Order Approving Proposed Rule Change Seeking To Establish a Legal
Guidance System
October 25, 1995.
On April 27, 1995, The Depository Trust Company (``DTC'') filed
with the Securities and Exchange Commission (``Commission'') a proposed
rule change (File No. SR-DTC-95-09) pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (``Act'') to establish a Legal Guidance
System.\1\ On July 25, 1995, DTC filed an amendment to the proposed
rule change.\2\ On August 22, 1995, DTC filed a second amendment to the
proposed rule change.\3\ Notice of the proposal was published in the
Federal Register on September 18, 1995.\4\ No comment letters were
received. For the reasons discussed below, the Commission is approving
the proposed rule change.
\1\15 U.S.C. 78s(b)(1) (1988).
\2\DTC amended its proposal to permit organizations that are not
DTC participants, such as transfer agents, to subscribe to the Legal
Guidance System. Letter from Piku K. Thakkar, Assistant Counsel,
DTC, to Mark Steffensen, Esq., Division of Market Regulation
(``Division''), Commission (July 21, 1995).
\3\As proposed in the original filing, once a user logged onto
the Legal Guidance System a disclaimer of liability message was to
appear on the terminal screen. DTC amended its proposal to eliminate
this message, and instead the disclaimer will appear in a user guide
for the Legal Guidance System to be provided to all users. Letter
from Piku K. Thakkar, Assistant Counsel, DTC, to Peter Geraghty,
Division, Commission (August 17, 1995).
\4\Securities Exchange Act Release No. 36219 (September 12,
1995), 60 FR 48181.
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I. Description of the Proposal
DTC will establish an inquiry-only Legal Guidance System (``LGS''),
which is a menu-driven, user-friendly system designed to provide DTC
participants and nonparticipants (e.g. transfer agents) with
information regarding the documents necessary to effect a legal
deposit.\5\ LGS will be accessible by DTC participants and
nonparticipants through DTC's Participant Terminal System (``PTS'').
LGS contains industry requirements, individual state and province
requirements, and transfer agent requirements for processing legal
deposits. DTC will post a disclaimer in the LGS user guide notifying
users that DTC shall not be liable to the user for
[[Page 55625]]
any damages resulting from mistakes or omission in LGS.\6\
\5\A ``legal deposit'' consists of a registered security and any
legal documentation required to effect the legal transfer and
registration of the security from the registered holder's name into
DTC's nominee name.
\6\Specifically, the disclaimer will state that ``DTC does not
represent the accuracy, adequacy, or fitness for a particular
purpose of the following information, which is provided as is. DTC
shall not be liable for: (1) Any loss resulting directly or
indirectly from mistakes, omissions, interruptions, delays, errors,
or defects arising from or related to this service; and (2) any
special, consequential, exemplary, incidental, or punitive
damages.''
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The LGS menu approach will guide users through a step-by-step
process to ascertain the relevant requirements for transferring legal
deposits. LGS also will have a ``fast forward'' navigation option that
will allow an experienced user to quickly access the requisite
information. Users also will be able to request through LGS that
certain transfer documents be sent to their offices by facsimile
transmission. In the near future, DTC plans to interface LGS with its
Pending Legal Deposit System to track and monitor document expiration.
The fee charged to DTC participants and nonparticipants for LGS service
will be DTC's standard fee for PTS inquiries.
II. Discussion
Section 17A(b)(3)(F)\7\ of the Act requires that the rules of a
clearing agency be designed to foster cooperation and coordination with
persons engaged in the clearance and settlement of securities
transactions and to remove impediments to and perfect the mechanism of
a national system for the prompt and accurate clearance and settlement
of transactions. Furthermore, Section 17(a)(1)(C) of the Act\8\ sets
forth a Congressional finding that new data processing and
communications techniques create the opportunity for more efficient,
effective, and safe procedures for clearance and settlement. As
discussed below, the Commission believes that DTC's proposed rule
change is consistent with DTC's obligations under the Act.
\7\15 U.S.C. 78q-1(b)(3)(F) (1988).
\8\15 U.S.C. 78q-1(a)(1)(C) (1988).
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Implementation of LGS will assist DTC participants and
nonparticipants in the preparation of the documentation necessary to
effect a legal deposit of securities at DTC by providing guidance as to
state, province, and transfer agent requirements as well as forms of
the documents required to effect such transfer. This could help to
reduce the number of deposits that cannot be immediately processed
through DTC due to improper documentation. Because use of LGS could
make the legal deposit eligible for DTC processing in a more timely
manner, it in turn could serve to improve the efficiency and
effectiveness of clearance and settlement of securities transactions.
III. Conclusion
On the basis of the foregoing, the Commission finds that the
proposal is consistent with the requirements of the Act and in
particular with the requirements of Section 17A of the Act and the
rules and regulations thereunder.
It is therefore ordered, pursuant to Section 19(b)(2) of the Act,
that the proposed rule change (File No. SR-DTC-95-09) be, and hereby
is, approved.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\9\
\9\17 CFR 200.30-3(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-27001 Filed 10-31-95; 8:45 am]
BILLING CODE 8010-01-M
