[Federal Register Volume 64, Number 119 (Tuesday, June 22, 1999)]
[Notices]
[Pages 33333-33334]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-15842]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-41529; File No. SR-DTC-99-08]
Self-Regulatory Organizations; The Depository Trust Company;
Order Approving a Proposed Rule Change Relating to Amendments to
Organization Certificate and By-Laws
June 15, 1999.
On March 18, 1999, The Depository Trust Company (``DTC'') filed
with the Securities and Exchange Commission (``Commission'') and on
April 12, 1999, amended a proposed rule change (File No. SR-DTC-99-08)
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 April 23, 1999.\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 Lease No. 41305 (April 16, 1999), 64
FR 20034.
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I. Description
Under the rule change, DTC is amending its Organization Certificate
and By-Laws to increase the size of its Board of Directors, to
redesignate its capital stock, and to modernize its Certification of
Organization. The amendments are subject to stockholder approval.
A. Increasing the Number of Board Directors
The Boards of Directors of DTC and the National Securities Clearing
Corporation (``NSCC'') have decided to integrate DTC and NSCC. An
initial step in the integration is to propose at this year's annual
shareholders' meeting the reelection of DTC's Board of Directors.\3\
Subject to regulatory approval, the Boards of DTC and NSCC will be
restructed so that the same group of individuals will serve as the
Board of Directors for each of the two companies.\4\ Through this
process and with the inclusion of DTC and NSCC management directors,
the Board of Directors for each company will be comprised of twenty-
seven people.\5\
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\3\ The Commission recently approved a similar proposal
submitted by NSCC. Securities Exchange Act Release No. 41520 (June
11, 1999) [File No. SR-NSCC-99-08].
\4\ Simply combining DTC's current Board to NSCC's current Board
to achieve uniform Boards would result in certain user and
marketplace organizations having more then one representative on the
uniform Boards. As a result, each organization represented will be
asked to select only one representative.
\5\ Under the Federal Reserve Act, DTC may have no more than
twenty-five members on its Board. As a result, after the uniform
Boards are elected DTC's Board will have twenty-five members and two
non-voting advisors, and NSCC's board will have twenty-seven
members.
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DTC's Organization Certificate and By-Laws currently provide for
the number of directors of the Board to be not less than five nor more
than twenty. In order to accommodate the number of directors resulting
from the consolidated plan described above, paragraph ``SEVENTH'' of
the Organization Certificate (which after elimination of paragraph
``FOURTH,'' as described below, will become paragraph ``SIXTH'') and
Article II, Section 2.1 of the By-laws will be amended to provide that
the number of directors be not less than seven nor more than twenty-
five. Section 2.1 by the By-Law will also be
[[Page 33334]]
amended to set the current number of directors at twenty-five.
B. Redesignating DTC's Capital Stock
DTC's Organization Certificate currently limits DTC to only one
class of stock, specifically 18,500 shares of capital stock having a
par value of $100.00 per share. All of this stock is issued and
outstanding. DTC has informed the Commission that its Board of
Directors may in the future wish to consider authorizing the issuance
of preferred stock. Therefore, paragraph ``THIRD'' will be amended, and
paragraph ``FOURTH'' will be eliminated in order to designate the
existing class of capital stock as ``common stock'' and to provide for
1,500,000 shares of preferred stock having a par value of $100.00 per
share.
C. Modernizing the Organization Certificate
DTC's Organization Certificate was originally drafted in 1973. DTC
has informed the Commission that provisions of the Organization
Certificate relating to DTC's powers refer both explicitly and
implicitly to New York State Statutory provisions that are no longer
applicable. In addition, the Organization Certificate does not
recognize DTC's status as a clearing agency registered with the
Commission or provide for powers incidental to that status.
Accordingly, paragraph ``THIRTEENTH'' (which after elimination of
paragraph ``FOURTH,'' as described above, will become paragraph
``TWELFTH'') will be amended to update DTC's Organization Certificate.
II. Discussion
Section 17A(b)(3)(C) of the Act \6\ requires that the rules of a
clearing agency assure a fair representation of its shareholders (or
members) and participants in the selection of its directors and
administration of its affairs. The Commission believes that the
proposed rule change is consistent with DTC's obligations under Section
17A(b)(3)(C) because it should not affect the representation of DTC's
shareholders and participants in the selection of its directors and the
administration of its affairs.
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\6\ 15 U.S.C. 78q-1(b)(3)(C).
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III. Conclusion
On the basis of the foregoing, the Commission finds that DTC's
proposal is consistent with the requirements of the Act and in
particular with the 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-DTC-99-08) 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).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-15842 Filed 6-21-99; 8:45 am]
BILLING CODE 8010-01-M
