[Federal Register Volume 61, Number 162 (Tuesday, August 20, 1996)]
[Notices]
[Pages 43105-43107]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-21158]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37555; File Nos. SR-MCC-96-04; SR-MSTC-96-04]
Self-Regulatory Organizations; Midwest Clearing Corporation;
Midwest Securities Trust Company; Notice of Filing of Proposed Rule
Changes Relating to Nominations for Board Membership, the Risk
Assessment Committee, the Appeals Process, Audits and Financial
Reports, and Temporary Sponsored Participants and Accounts
August 9, 1996.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that the Midwest Clearing
Corporation (``MCC'') and Midwest Securities Trust Company (``MSTC'')
filed with the Securities and Exchange Commission (``Commission'') on
June 26, 1996, the proposed rule changes as described in Items I and II
below, which items have been prepared primarily by MCC and MSTC,
respectively. The Commission is publishing this notice to solicit
comments on the proposed rule changes from interested persons.
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\1\ 15 U.S.C. 78s(b)(1) (1995).
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I. Self-Regulatory Organizations' Statement of the Terms of Substance
of the Proposed Rule Changes
MCC and MSTC respectively propose to (i) eliminate the sections of
their by-laws that require the corporate secretary to mail copies of
the list of nominees for the respective boards of directors to each
participant of MSTC and MCC; \2\ (ii) amend their respective rules to
remove any reference to their risk assessment committees; \3\ (iii)
adjust some of the appeal time periods, the composition of the appeal
panels, and eliminate a second level of internal appeals; \4\ (iv)
eliminate their respective
[[Page 43106]]
Risk Assessment Committees; \5\ (v) delete their respective rules
relating to audits and financial reports; \6\ and (vi) delete their
respective rules relating to Temporary Sponsored Accounts.\7\
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\2\ MSTC proposes to amend Article III, Section 2 of its By-Laws
and MCC proposes to amend Article 3, Section 3.2 of its By-Laws. The
specific proposed amendments to MSTC's and MCC's respective rules
are attached as exhibit A to MSTC's and MCC's respective proposed
rule changes, which are available for inspection at the places
specified in Item IV below.
\3\ MSTC proposes to delete Article I, Rule 4 and to amend
Article V, Rule 2. MCC proposes to delete Article I, Rule 4 and to
amend Article VIII, Rule 2.
\4\ MSTC proposes to amend Article VII, Rule 8, Section 3 and to
delete Section 5, and MCC proposes to amend Article X, Rule 8,
Section 3 and to delete Section 5.
\5\ MSTC proposes to delete Article I, Rule 4, and MCC proposes
to delete Article I, Rule 4.
\6\ MSTC proposes to delete Article VII, Rule 5, and MCC
proposes to delete Article X, Rule 5.
\7\ MSTC proposes to delete Article VIII, Rules 1 through 5, and
MCC proposes to amend Article XI, Rules 1, 2(a), 2(b), 2(c), 3(a),
3(b), 3(c), 5(d), 7(a) through 7(e), 7(g), 7(i), 10(a), 11(a),
11(d)(3) through 11(d)(6), 11(e) through 11(i), and delete Rules
5(c), 7(f), and 7(h).
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II. Self-Regulatory Organizations' Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Changes
In their filings with the Commission, MSTC and MCC included
statements concerning the purpose of and basis for the proposed rule
changes and discussed any comments they received on the proposed rule
changes. The text of these statements may be examined at the places
specified in Item IV below. MSTC and MCC have prepared summaries, set
forth in sections (A), (B), and (C) below, of the most significant
aspects of such statements.\8\
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\8\ The Commission has modified the language in these sections.
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(A) Self-Regulatory Organizations' Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Changes
On December 26, 1995, MSTC and MCC filed proposed rule changes
relating to MSTC's withdrawal from the securities depository business
and MCC's withdrawal from the securities clearance and settlement
business.\9\ Subsequent to the Commission's approval of the filings,
MSTC commenced an orderly wind-down of its operations and a transition
of all of its participants, including Temporary Sponsored Participants,
to other service providers, and MCC ceased operations for all of its
participants except its Sponsored Participants.
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\9\ For a complete discussion of MCC's and MSTC's withdrawal
from the clearing and depository businesses, refer to Securities
Exchange Act Release No. 36684 (January 5, 1996), 61 FR 1195 (File
Nos. SR-CHX-95-27, SR-DTC-95-22, SR-MCC-95-4, and SR-MSTC-95-10)
(order approving MCC's and MSTC's withdrawal from the clearance and
settlement and securities depository businesses).
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Because MSTC no longer has any active participants, it is no longer
appropriate to require MSTC to provide participants with information
relating to the nomination and election of board members. Membership in
the Chicago Stock Exchange (``CHX'') is a prerequisite to being
accepted by MCC as a Sponsored Participant, and thus all of MCC's
Sponsored Participants are CHX members. As CHX members, MCC's Sponsored
Participants receive information relating to the nomination and
election of the CHX board of governors pursuant to CHX rules. As a
result, one purpose of the proposed rule changes is to amend MSTC's and
MCC's By-Laws to eliminate the requirement that participants receive
the list of nominations and to eliminate the provisions that give
participants an opportunity to nominate additional persons.
Another purpose of the proposed rule changes is to delete the
provisions relating to MSTC's and MCC's respective Risk Assessment
Committees from their rules. Again, because of MSTC's withdrawal from
the securities depository business and MCC's withdrawal from the
securities clearance and settlement business, MSTC and MCC believe that
it is no longer necessary to maintain a Risk Assessment Committee that
serves as an appellate review board and independent consultant to
management. Because of the elimination of the Risk Assessment
Committees, the rule changes also propose to (i) eliminate the
requirement that MSTC and MCC consult with the Risk Assessment
Committee before ceasing to act for a participant, (ii) amend MSTC's
rules and MCC's rules to allow their respective boards to appoint a
panel of board members to hear appeals, and (iii) replace subsequent
references to the Risk Assessment Committee with references to a panel
of board members.
The proposed rule changes also amend MSTC's and MCC's appeal
processes. These changes will conform MSTC's and MCC's appeal
procedures to similar procedures currently used by the CHX for
emergency suspensions. Because all MCC participants are also required
to be CHX floor members, MCC desires to coordinate the CHX emergency
suspension provision and the MCC ceasing to act provision.
Specifically, the proposed rule changes will eliminate a second level
of internal appeals and will adjust some of the time periods set forth
in the rules.
An additional purpose of the proposed rule changes is to delete
MSTC's rules and MCC's rules relating to audits and financial reports
of MSTC and MCC. Because MSTC and MCC have withdrawn from the
securities depository business, and the securities clearance and
settlement business, MSTC and MCC believe that it is no longer
necessary to produce independent financial statements or maintain
internal accounting controls. Currently, there are no internal
operations at MSTC, and MCC no longer maintains independent positions
of securities. MCC merely acts as a conduit for Sponsored Participants
to enable them to hold their positions at NSCC. As a result, MCC
believes that it is no longer necessary to produce independent
financial statements or maintain internal accounting controls. However,
MSTC's and MCC's financial statements will be reflected as part of the
consolidated annual audited financials of their parent, the CHX.
Finally, the proposed rule changes will delete in their entirety
MSTC's and MCC's rules relating to Temporary Sponsored Participants and
Accounts. As a result of MCC's withdrawal from the Securities clearance
and settlement business and MSTC's winding-down of business activities
and transition of participants, including Temporary Sponsored
Participants, to other service providers, it is no longer necessary to
sponsor Temporary Sponsored Participants or maintain Temporary
Sponsored Accounts.
MSTC and MCC believe that the proposed rule changes are consistent
with Section 17A\10\ of the Act because the proposed changes will
facilitate the prompt and accurate clearance and settlement of
securities transactions and are designed to assure the safeguarding of
securities and funds which are in their control or for which they are
responsible.
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\10\ 15 U.S.C. Sec. 78q-1 (1988).
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(B) Self-Regulatory Organizations' Statement on Burden on Competition
MSTC and MCC believe that the proposed rule changes will not impose
a burden on competition.
(C) Self-Regulatory Organizations' Statement on Comments on the
Proposed Rule Changes Received From Members, Participants or Others
MSTC and MCC have neither solicited nor receive any comments on the
proposed rule changes.
III. Date of Effectiveness of the Proposed Rule Changes and Timing for
Commission Action
Within thirty-five days of the date of publication of this notice
in the Federal Register or within such longer period (i) as the
Commission may designate up to ninety days of such date if it finds
such longer period to be appropriate and publishes its reasons for so
finding or (ii) as to which MSTC and MCC consent, the Commission will:
(A) By order approve such proposed rule changes or
[[Page 43107]]
(B) Institute proceedings to determine whether the proposed rule
changes should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing. Persons making written submission
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, N.W., Washington D.C. 20549.
Copies of the submissions, all subsequent amendments, all written
statements with respect to the proposed rule changes that are filed
with the Commission, and all written communications relating to the
proposed rule changes 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 Room, 450 Fifth Street,
N.W., Washington, D.C. 20549. Copies of such filings will also be
available for inspection and copying at the principal offices of MSTC
and MCC. All submissions should refer to file numbers SR-MSTC-96-04 and
SR-MCC-96-04 and should be submitted by September 10, 1996.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12) (1995).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-21158 Filed 8-19-96; 8:45 am]
BILLING CODE 8010-01-M
