[Federal Register Volume 63, Number 231 (Wednesday, December 2, 1998)]
[Notices]
[Pages 66617-66618]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-32041]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-40705; File No. SR-EMCC-98-08]
Self-Regulatory Organizations; Emerging Markets Clearing
Corporation Order Approving a Proposed Rule Change Relating to the
Offering of Shares of Common Stock
November 24, 1998.
On August 17, 1998, Emerging Markets Clearing Corporation
(``EMCC'') filed with the Securities and Exchange Commission
(``Commission'') a proposed rule change (File No. SR-EMCC-98-08)
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'').\1\ Notice of the proposal was published in the Federal
Register on September 21, 1998.\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. 78s(b)(1).
\2\ Securities Exchange Act Release No. 40433 (September 11,
1998), 63 FR 50271.
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I. Description
Pursuant to the rule change EMCC has reclassified 2,000 shares of
previously authorized EMCC common stock as Class A common stock
(``Class A stock'') and has created a second class of common stock. In
addition, the rule change amends EMCC's shareholder agreement to
reflect the changes to the common stock.
On March 2, 1998, the Commission authorized EMCC to issue 2,000
shares of common stock (``original stock'').\3\ On July 31, 1998, EMCC
filed an amendment to its certificate of incorporation to reclassify
the original stock as Class A stock and to authorized the issuance of
non-voting Class B stock. The creation and offering of the Class B
stock is intended to permit EMCC to raise additional capital which EMCC
will use in part to fund the development of EMCC projects.
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\3\ Securities Exchange Act Release No. 39694 (March 2, 1998),
63 FR 10251 [File No. SR-EMCC-98-01].
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Under the rule change, EMCC will offer the shares of Class B stock
to the same entities that were offered the opportunity to purchase the
original stock.\4\ The purchase price of the Class B stock is $1,000
per share with a minimum purchase requirement of $25,000. EMCC is
offering the Class B shares to prospective buyers through an offering
letter.\5\
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\4\ The original stock was offered to the entities that
contributed to the development fund for the organization and initial
operation of EMCC.
\5\ Each prospective purchaser of the original stock was
provided with a copy of EMCC's Form CA-1 (excluding the confidential
documents). EMCC will provide the prospective purchasers of the
Class B stock with updates to the Form CA-1 as appropriate.
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The Class B stock is non-voting and is subject to repurchase upon
the determination of EMCC's Board. However, EMCC has no obligation to
repurchase Class B shares owned by a member that terminates its EMCC
membership prior to the repurchase of all Class B shares. All
purchasers of Class A and Class B stock will be required to enter into
an amended version of EMCC's shareholders agreement. No dividends will
be paid on either the Class A or Class B stock and shareholders may
sell or transfer their shares only in compliance with EMCC's amended
shareholder agreement.
EMCC's amended shareholder agreement replaces the shareholder
agreement written for the original offering.\6\ The changes to the
shareholder agreement reflect (i) the creation and offering of the
Class B stock, (ii) the conditions under which EMCC may repurchase the
Class B stock, and (iii) the fact that EMTA has not yet been issued any
shares of EMCC stock. In addition, the amended shareholder agreement
permits EMCC to issue EMTA 300 Class A shares prior to, concurrent
with, or after the closing of
[[Page 66618]]
the issuance of Class A stock to all other persons. A further
modification reflects that the issuance of the original stock did not
occur prior to the previously established deadline of June 30, 1998,
and provides that the issuance and sale of Class A stock must be
completed by December 31, 1998. Each purchaser of Class A or Class B
shares will be obligated to enter into the amended shareholder
agreement.
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\6\ The signatories of the amended shareholder agreement are the
National Securities Clearing Corporation (``NSCC''), the
International Securities Markets Association (``ISMA''), and the
Emerging Markets Traders Association (``EMTA'').
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After the Class A stock has been issued, EMCC will amend its
articles of incorporation to permit the following actions to be taken
upon a two-thirds vote of the shareholders instead of the current
requirement of unanimity: (i) any amendment or change to EMCC's
certificate of incorporation; (ii) any adoption, amendment or repeal by
the shareholders of by-laws of the corporation; (iii) any repurchase of
any securities issued by the corporation; and (iv) any issuance of any
securities by the corporation.
II. Discussion
Section 17A(b)(3)(A) of the Act \7\ requires that a clearing agency
be so organized and have the capacity to facilitate the prompt and
accurate clearance and settlement of securities transactions. The
Commission believes that the rule change is consistent with EMCC's
obligations under Section 17A(b)(3)(A) because the additional capital
raised by the issuance of the stock should enable EMCC to increase the
efficiency of its clearance and settlement of securities transactions.
In addition, the amendments to EMCC's articles of incorporation make
more efficient EMCC's ability to take corporate actions that may be
necessary to facilitate the clearance and settlement of securities
transactions.
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\7\ 15 U.S.C. 78q-1(b)(3)(A).
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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 with Section 17A of the Act \8\ and the rules and
regulations thereunder.
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\8\ 15 U.S.C. 78q-1.
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It is therefore ordered, pursuant to Section 19(b)(2) of the Act,
that the proposed rule change (File No. SR-EMCC-98-08) be and hereby is
approved.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\9\
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\9\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-32041 Filed 12-1-98; 8:45 am]
BILLING CODE 8010-01-M
