[Federal Register Volume 63, Number 53 (Thursday, March 19, 1998)]
[Notices]
[Pages 13439-13440]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-7069]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-39746; File No. SR-GSCC-97-04]
Self-Regulatory Organizations; Government Securities Clearing
Corporation; Order Approving a Proposed Rule Change Relating to the
Implementation of a Final Schedule
March 12, 1998.
On May 21, 1997, the Government Securities Clearing Corporation
(``GSCC'') filed with the Securities and Exchange Commission
(``Commission'') a proposed rule change (File No. SR-GSCC-97-04)
pursuant to Section 19(b)(1) of the Securities and Exchange Act of 1934
(``Act'').\1\ Notice of the proposal was published in the Federal
Register on September 19, 1997.\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 and Exchange Act Release No. 39054 (September 11,
1997), 62 FR 49281.
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I. Description
The proposed rule change amends GSCC's rules to implement a fine
schedule as it relates to the late payment of a funds-only settlement
obligations. This fee is being established in connection with GSCC's
``autodebit'' arrangement.\3\ The severity of any fine will be a
function of the magnitude and recent history of the member's late
payments. In addition, the proposed rule change eliminates the current
limitation of $5,000 as the maximum size of any single fine GSCC may
impose.
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\3\ The autodebit arrangement allows GSCC's netting members to
satisfy funds-only settlement obligations by payment instructions
given directly by GSCC to the members' banks. For a complete
description of the autodebit arrangement, refer to Securities and
Exchange Act Release No. 39309 (November 7, 1997) 62 FR 61158 [File
No. SR-GSCC-97-06] (notice of filing and order granting accelerated
approval of a proposed rule change regarding funds-only settlement
payment procedures).
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After the first late payment of a funds-only settlement
obligations, a warning letter will be sent to senior officials of the
offender describing the nature of the violation and the consequences of
successive violations. GSCC will deem each instance of late payment of
a funds settlement debit or late satisfaction of a clearing fund
deficiency call to be a separate occasion. These instances will be
combined, regardless of type, to determine the number of occasions. The
number of occasions is determined over a moving 30 calendar-day period
beginning with date of the first occasion. A specific determination
will be made by GSCC's Membership and Standards Committee of the Board
of Directors (``Committee'') when the number of occasions exceeds four
or when the number of occasions of lateness of more than an hour
exceeds two. The Committee will reserve the discretion to waive or
reduce scheduled fines when a particular occasion is not deemed to be
the fault of the affected member. GSCC's late payment fine schedule is
set forth below.
[[Page 13440]]
GSCC Fine Schedule Late Payment of Funds Settlement Debit/Late Satisfaction of Clearing Fund Deficiency Call
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Any
lateness
Second Third more than
Amount First occasion occasion occasion one hour or
fourth
occasion
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$1 to $100M............................. Warning Letter................. $100 $200 $500
Greater than $100M to $1MM.............. Warning Letter................. 300 600 1,000
Greater than $1MM to $2MM............... Warning Letter................. 600 1,200 2,000
Greater than $2MM....................... $250........................... 1,000 2,000 3,000
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II. Discussion
Section 17A(b)(3)(F) \4\ 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 that GSCC's
proposed rule change is consistent with its obligations under the Act
because the fine schedule should provide GSCC members with an incentive
to meet their financial responsibilities on a timely basis. The
possibility of being assessed a fine should increase GSCC's members'
timeliness of their payments of settlement and clearing fund
obligations to GSCC. By increasing compliance with GSCC's deadlines for
the payment of settlement and clearing fund obligations, the proposed
rule change should enable GSCC to better safeguard securities and funds
which are in its custody or control or for which it is responsible.
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\4\ 15 U.S.C. 78q-1(b)(3)(F).
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III. Conclusion
On the basis of the foregoing, the Commission finds that the
proposal is consistent with requirements of the Act and in particular
with 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-GSCC-97-04) be, and hereby
is approved.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\5\
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\5\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-7069 Filed 3-18-98; 8:45 am]
BILLING CODE 8010-01-M
