96-28231. Self-Regulatory Organizations; Philadelphia Depository Trust Company; Order Granting Approval of a Proposed Rule Change Regarding the Destruction of Certain Expired Securities Certificates

[Federal Register Volume 61, Number 214 (Monday, November 4, 1996)]
[Notices]
[Page 56730]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-28231]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37883; File No. SR-PHILADEP-96-11]


Self-Regulatory Organizations; Philadelphia Depository Trust 
Company; Order Granting Approval of a Proposed Rule Change Regarding 
the Destruction of Certain Expired Securities Certificates

October 28, 1996.
    On June 28, 1996, the Philadelphia Depository Trust Company 
(``Philadep'') filed with the Securities and Exchange Commission 
(``Commission'') a proposed rule change (File No. SR-PHILADEP-96-11) 
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ regarding the destruction of certain expired securities 
certificates. Notice of the proposal was published in the Federal 
Register on August 21, 1996.\2\ No comment letters were received. For 
the reasons discussed below, the Commission is approving the proposed 
rule change.
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    \1\ 15 U.S.C. Sec. 78s(b)(1) (1988).
    \2\ Securities Exchange Act Release No. 37570 (August 14, 1996), 
61 FR 43287.
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I. Description

    The rule change will amend Philadep Rule 31 which governs the 
orderly destruction of securities certificates relating to expired 
warrants and rights to permit the destruction of such securities 
certificates to be carried out under the supervision of Philadep's 
internal audit department.\3\ Section (c) of Rule 31 previously 
required that all securities to be destroyed pursuant to the rule had 
to be forwarded to Philadep's internal audit department for 
destruction.\4\ Under the rule change, Philadep is permitted to destroy 
the certificates in a designated area of Philadep under the supervision 
of the internal audit department instead of being required to destroy 
such certificates in the internal audit department itself.
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    \3\ The procedures for the destruction of expired securities set 
forth in Rule 31 require Philadep to (i) contact the transfer agent 
or the issuer of the expired securities to verify that the 
respective warrants or rights have expired, (ii) obtain written 
confirmation from such transfer agent or issuer that the 
certificates representing such warrants or rights have expired (if 
there is no transfer agent, Philadep personnel must exercise all 
reasonable due diligence to confirm the expired nature of the 
respective certificates including consulting with the Philadep's 
legal department, internal audit department and senior management), 
(iii) notify its participants that in the judgment of the transfer 
agent, or other appropriate parties if a transfer agent does not 
exist, the securities certificates have expired, (iv) delete such 
securities positions from its participants' account on or after the 
thirtieth day following the date of such notice, and (v) 
appropriately mark the securities certificates and forward them to 
its internal audit department for destruction.
    \4\ Securities Exchange Act Release No. 35426 (February 28, 
1995) [File No. SR-PHILADEP-94-05] (order approving proposed rule 
change authorizing Philadep to implement a program for the 
destruction of securities certificates relating to expired warrants 
and rights).
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II. Discussion

    Section 17A(b)(3)(F) \5\ of the Act requires that the rules of a 
clearing agency be designed to assure the safeguarding of securities 
and funds which are in the custody or control of the clearing agency or 
for which it is responsible. The Commission believes Philadep's 
proposed rule change is consistent with Philadep's obligations under 
Section 17A of the Act because the rule change does not significantly 
alter the procedures previously approved by the Commission by which 
expired rights and warrants certificates are to be destroyed and 
thereby should not negatively affect Philadep's ability to safeguard 
securities or funds.\6\
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    \5\ 15 U.S.C. Sec. 78q-1(b)(3)(F) (1988).
    \6\ The Commission previously stated upon establishment of 
Philadep's expired certificate destruction program for warrants and 
rights that such program is consistent with Section 17A of the Act 
because the program should reduce the administrative expenses 
associated with safekeeping and storage of worthless certificates 
and that Philadep's procedures were reasonably designed to prevent 
inadvertent destruction of warrants and rights certificates that 
have not expired. Supra note 4.
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III. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposed rule change is consistent with the requirements of the Act and 
in particular 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-PHILADEP-96-11) be and 
hereby is approved.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12) (1996).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-28231 Filed 11-1-96; 8:45 am]
BILLING CODE 8010-01-M