[Federal Register Volume 63, Number 25 (Friday, February 6, 1998)]
[Notices]
[Pages 6249-6250]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-3009]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-39608; File No. SR-Philadep-97-06]
Self-Regulatory Organizations; Philadelphia Depository Trust
Company; Notice of Filing and Order Granting Accelerated Approval of a
Proposed Rule Change Regarding Certain Corporate Governance Changes
February 2, 1998.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on December 22, 1997, the
Philadelphia Depository Trust Company (``Philadep'') filed with the
Securities and Exchange Commission (``Commission'') the proposed rule
change as described in Items I and II below, which items have been
primarily prepared by Philadep. The Commission is publishing this
notice and order to solicit comments on the proposed rule change from
interested parties and to grant accelerated approval of the proposed
rule change.
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\1\ 15 U.S.C. 78s(b)(1).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The proposed rule change involves amendments to Philadep's by-laws
to reflect its current winding down of operations and to streamline its
board of directors and committee structures.\2\ More specifically, the
proposed rule change involves amendments to Philadep's by-laws to
require that nonparticipant directors compose at least fifty percent of
the director positions on the board of directors.\3\
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\2\ Securities Exchange Act Release No. 39444 (December 11,
1997), 62 FR 66703, (File Nos. SR-Philadep-97-04 and SR-SCCP-97-04)
(order approving a proposed rule change relating to a decision by
the Philadelphia Stock Exchange, Incorporated to withdraw from the
securities depository business and to restructure and limit its
clearance and settlement business).
\3\ Pursuant to the Commission's administrative proceedings
order entered against Philadep, Philadep is required to amend its
by-laws to require that nonparticipant directors fill fifty percent
of Philadep's board of directors. In the Matter of Stock Clearing
Corporation of Philadelphia and Philadelphia Depository Trust
Company, Respondents, Order Instituting Proceedings Pursuant to
Sections 19(h) and 21C of the Securities Exchange Act of 1934,
Making Findings and Imposing Remedial Sanctions, Administrative
Proceeding File No. 3-9360, Securities Exchange Act Release No.
38918 (August 11, 1997).
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II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, Philadep included statements
concerning the purpose of and the basis for the proposed rule change
and discussed any comments that it received on the proposed rule
change. The text of these statements may be examined at the places
specified in Item IV below. Philadep has prepared summaries, as set
forth in sections (A), (B), and (C) below, of the most significant
aspects of such statements.\4\
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\4\ The Commission has modified the text of the summaries
prepared by Philadep.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
The proposed rule change amends Philadep's by-laws to reflect its
winding down of operations and to streamline its board of directors and
committee structures.\5\ In addition, the proposed rule change amends
Article IV of Philadep's by-laws to require that nonparticipant
directors compose at least fifty percent of the director positions on
the board of directors. The by-laws now define nonparticipants as (a)
persons who are not officers, directors, or employees of participants
and persons who have not been employed in any such capacity at any time
within the prior three years and (b) persons who (i) do not have a
consulting nor employment relationship with the Philadelphia Stock
Exchange, Incorporated (``PHLX''), Stock Clearing
[[Page 6250]]
Corporation of Philadelphia (``SCCP''), or Philadep, (ii) do not
provide professional services to PHLX, SCCP, or Philadep, and (iii)
have not had any such relationship nor have provided any such services
at any time within the prior three years. The proposed rule change also
reduces the number of directors that may serve at one time from not
less than fifteen or more than seventeen to not less than five or more
than nine.
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\5\ These changes: (a) Require Philadep to call a special
meeting of shareholders if the by-laws regarding composition of the
board are to be amended, (b) limit the nominating committee to three
persons selected by the chairman of the board, (c) allow the
chairman, instead of the president, to call special meetings of
shareholders and of the board, and (d) reduce the number of board
committees to an audit committee, a finance committee, and a
nominating committee.
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Philadep believes the proposed rule change is consistent with
Section 17A(b)(3)(F) \6\ of the Act because the amendments to its by-
laws reflect its winding down of operations. In particular, Philadep
believes that the proposed governance changes, such as the change in
the composition of the board of directors, will help protect investors
and the public interest.
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\6\ 15 U.S.C. 78q-1(b)(3)(F).
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(B) Self-Regulatory Organization's Statement on Burden on Competition
Philadep believes that the proposed rule change will not impose a
burden on competition not contemplated under the Act.
(C) Self-Regulatory Organization's Statement on Comments on the
Proposed Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received with respect
to the proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Section 17A(b)(3)(F) \7\ 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 and to protect investors and the public
interest. The Commission believes that the change in the composition of
Philadep's board of directors should help Philadep to better safeguard
securities and funds and to better protect investors and the public
interest. The requirement that nonparticipant directors compose at
least fifty percent of the director positions on the board of directors
will provide a more diverse governance structure for Philadep. If
carefully selected, nonparticipant directors should bring diverse
experience to the board and thus enable Philadep to better perform its
self-regulatory obligations. In addition, the Commission believes that
the changes Philadep is making in connection with the termination of
its depository business are being made in a manner that is consistent
with Philadep's obligations under Section 17A of the Act.
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\7\ 15 U.S.C. 78q-1(b)(3)(F).
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Philadep has requested that the Commission find good cause for
approving the proposed rule change prior to the thirtieth day after the
date of publication of notice of the filing. The Commission finds good
cause for approving the proposed rule change prior to the thirtieth day
after the date of publication of notice of filing because accelerated
approval will allow Philadep to institute reforms called for in the
settlement of its administrative proceedings in an expedient fashion.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. 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 Section, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Copies of such filing will also be available
for inspection and copying at the principal office of Philadep. All
submissions should refer to the File No. SR-Philadep-97-06 and should
be submitted by February 27, 1998.
It is therefore ordered, pursuant to Section 19(b)(2) of the Act,
that the proposed rule change (File No. SR-Philadep-97-06) be and
hereby is approved on an accelerated basis.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\8\
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\8\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-3009 Filed 2-5-98; 8:45 am]
BILLING CODE 8010-01-M
