[Federal Register Volume 59, Number 54 (Monday, March 21, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-6480]
[[Page Unknown]]
[Federal Register: March 21, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-33756; File No. SR-MSTC-94-02]
Self-Regulatory Organizations; Midwest Securities Trust Company;
Filing and Immediate Effectiveness of a Proposed Rule Change Relating
to the Legal Expert Service
March 11, 1994.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on January 21, 1994, Midwest
Securities Trust Company (``MSTC'') filed with the Securities and
Exchange Commission (``Commission'') the proposed rule change as
described in Items I, II, and III below, which Items have been prepared
primarily by MSTC. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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\1\15 U.S.C. 78s(b)(1) (1988).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The proposed rule change establishes a fee for participants who use
MSTC's Legal Expert System and adds an interpretation under MSTC's
Rules that describes the Legal Expert System and MSTC's liability in
connection with the information provided by the Legal Expert System.
Additions are italicized.
Article II
Rule 1. Delivery and Withdrawal of Securities
Sec. 1. Delivery of Securities
* * * Interpretations and Policies
01. In order to assist Participants in determining whether
certain Securities that Participants intend to deliver for deposit
are in good deliverable form, Participants may use the Corporation's
Legal Expert System. The Legal Expert System is a menu-driven
computer program that identifies all documentation necessary to
effect a legal transfer. While the Legal Expert System is designed
to provide the best available information with respect to the
covered subject matter, occasional errors in content may occur. As a
result, the Corporation makes no representation regarding the
accuracy of information provided. The Corporation also makes no
other warranty or representation, either express or implied, and the
Corporation does not warrant the accuracy, completeness,
performance, currentness, merchantability, or fitness for a
particular purpose of the Legal Expert System or the information
contained therein. The Corporation shall not be liable to any
Participant or any other person or entity for any damage caused in
whole or in part by Participants' use of the Legal Expert System. In
no event will the Corporation be liable as a result of Participants'
reliance upon information contained in the Legal Expert System or
for any consequential, incidental, indirect, punitive, special or
similar damages, even if advised of the possibility of such damages.
The Legal Expert System should be used with the understanding
that the Corporation is not engaged in rendering legal or other
professional advice. If legal advice or other expert assistance is
required, the services of a competent professional person should be
sought.\2\
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\2\The disclaimer of liability language included in the
Interpretations and Policies 01 does not in any way effect MSTC's
obligations and responsibilities with respect to and in connection
with the deliverance and safekeeping of securities. Letter from
David T. Rusoff, Foley & Lardner [counsel for MSTC], to Jerry W.
Carpenter, Branch Chief, Division of Market Regulation, Commission
(March 10, 1994).
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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, MSTC included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. MSTC has prepared summaries, set forth in sections (A),
(B), and (C) below, of the most significant aspects of such statements.
(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
The purpose of the proposal is to establish a fee for use of the
Legal Expert System and to add an interpretation that describes MSTC's
liability arising from the information provided by the Legal Expert
System. Section 1 of rule 1 under article II of MSTC's rules governs
the deposit of securities at MSTC and requires that all deposits be in
good deliverable form. Currently, if a participant is not familiar with
all the documentation that is required to effect a legal transfer of a
security to be deposited at MSTC, the participant may call MSTC and
informally inquire as to what documentation is needed in order for the
intended deposit to be in good deliverable form. Alternatively, the
participant may do research and try to ascertain this information on
their own. While participants usually submit all the required
documentation, when incorrect, erroneous, or incomplete documentation
is provided, the processing of the deposit is delayed. The Legal Expert
System is designed to automate these inquiry process so that the
information on the documentation required for good deliverable form and
legal transfer is available from one source.
Specifically, the Legal Expert System is a menu-driven computer
program that allows participants to inquire as to the documentation
necessary to effect a legal transfer. The Legal Expert System utilizes
standard industry criteria based on individual state regulations and
provides specific requirements for good deliverable form in a user-
friendly format. The Legal Expert System provides self-help information
to the novice user who is not familiar with good delivery requirements.
The self-help narratives guide the participant through the Legal Expert
System by providing information and examples for each certificate
classification.
The Legal Expert System provides the participant with a main menu
and submenus for specific transfer situations. The participant is
prompted to answer basic questions about the certificate and transfer
situation to determine the necessary good delivery requirements for the
specific state. The participant is then able to view what documentation
will be needed so that he or she can gather the required documents for
deposit with MSTC.
The interpretation that has been added to MSTC's Rules provides a
disclaimer and describes MSTC's liability for the information the Legal
Expert System provides. Specifically, the interpretation acknowledges
that although MSTC will try to provide accurate information, occasional
errors in content may occur. Thus, MSTC expressly limits its liability
as to the content of the information provided. Additionally, MSTC
reminds participants that it is not engaged in the business of
rendering legal advice.
The proposed rule change is consistent with section 17A of the Act
in that it facilitates the prompt and accurate clearance and settlement
of securities transactions and provides for the equitable allocation of
reasonable fees and other charges among participants using MSTC's
facilities.
(B) Self-Regulatory Organization's Statements on Burden on Competition
MSTC believes that no burden will be placed on competition as a
result of the proposed rule change.
(C) Self-Regulatory Organization's Statement of Comments on the
Proposed Rule Change Received From Members, Participants, or Others
MSTC neither solicited nor received written comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Changes and Timing for
Commission Action
The proposed rule change (1) establishes a due, fee, or other
charge imposed by MSTC and (2) effects a change in an existing service
that does not adversely affect the safeguarding of securities or funds
in the custody or control of MSTC or for which MSTC is responsible and
does not significantly affect the respective rights or obligations of
MSTC or persons using the service. Therefore, the proposed rule change
has become effective pursuant to 19(b)(3)(A)(ii) of the Act\3\ and
subparagraphs (e)(2) and (e)(4) of Rule 19b-4 thereunder.\4\ At any
time within sixty days of the filing of such rule change, the
Commission may summarily abrogate such rule change if it appears to the
Commission that such action is necessary or appropriate in the public
interest, for the protection of investors, or otherwise in furtherance
of the purposes of the Act.
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\3\15 U.S.C. 78s(b)(3)(A)(ii) (1988).
\4\17 CFR 240.19b-4(e) (2) & (4) (1993).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549.
Copies of the submissions, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communication 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, NW.,
Washington, DC 20549. Copies of such filing will also be available for
inspection and copying at the principal office of MSTC. All submissions
should refer to File No. SR-MSTC-94-02 and should be submitted by April
11, 1994.
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) (1993).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-6480 Filed 3-18-94; 8:45 am]
BILLING CODE 8010-01-M
