[Federal Register Volume 64, Number 186 (Monday, September 27, 1999)]
[Notices]
[Pages 52115-52116]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-24991]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-41891; File No. SR-DTC-99-10]
Self-Regulatory Organizations; The Depository Trust Company;
Order Granting Approval of Proposed Rule Change Adding a New Service
for the Deposit of Securities Subject to Transfer Restrictions
September 20, 1999.
On April 30, 1999, The Depository Trust Company (``DTC'') filed
with the Securities and Exchange Commission (``Commission'') a proposed
rule change (File No. SR-DTC-99-10) pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (``Act'').\1\ Notice of the proposed
rule change was published in the Federal Register on July 28, 1999.\2\
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 Release No. 41635 (July 21, 1999),
64 FR 40927.
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I. Description
DTC's Restricted Deposit Service (``RDS'') allows a participant to
deposit restricted securities into a participant's segregated account
until the applicable restriction has been lifted and the full or
partial sale of the securities is complete.\3\ In particular, RDS
allows: (i) participants to deposit restricted securities in a
participant's segregated account within DTC's existing Custody Service,
(ii) the processing of a transfer of all or a portion of the securities
once the restriction is lifted, (iii) the registration of the
unrestricted securities (or portion thereof) in the name of Cede & Co.,
DTC's nominee, and (iv) if requested, the delivery of the restricted
portion of the securities as directed by the depositing participant.\4\
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\3\ Securities credited to this account will not be registered
in the name of Cede & Co. and therefore will not be available for
book-entry transfer.
\4\ DTC will charge is customary fee for restricted transfers of
$45.48.
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The process is initiated when a participant enters and transmits
restricted securities deposit information to DTC through the new
Restricted Deposit Service by Participant (``RDSP'') function on DTC's
Participant Terminal System (``PTS'').\5\ This information will include
the CUSIP number, quantity and certificate number of each certificate
to be deposited, deposit type (e.g., partial sale), the sold and unsold
quantities of the securities, registration instructions for the
restricted and unsold portion of the securities, and whether the
issuer's opinion of counsel will accompany the deposit or will be sent
directly to the transfer agent. After DTC reviews the deposit
information,\6\ an RDS deposit ticket will be transmitted to the
participant's PTS printer. The RDS deposit ticket and the Securities
will then be delivered to DTC.
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\5\ In the future, DTC plans to enhance the Custody Service to
provide participants with the capability to transmit RDS
instructions via the ``CUST'' function on PTS and via computer-to-
computer transmissions.
\6\ DTC will review the deposit information entered by the
participant to make sure that the security in question is DTC-
eligible and that all appropriate fields have been populated.
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After receiving and examining the deposited securities, DTC will
credit the participant's segregated account for the quantity of the
deposit. DTC will use two subaccounts in the process. One subaccount
will be used for the quantity of unrestricted (sold) securities and the
other for the quantity of restricted (unsold) securities. At this
stage, no positions in either subaccount will be available for book-
entry transfer by the participant. The securities and detailed transfer
instructions will then be sent to the transfer agent for processing.\7\
RDS should have no affect on the role of the transfer agent which will
approve or reject the transfers using its internal transfer procedures
(e.g., receipt of opinion from issuer's counsel).\8\
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\7\ While the securities are still at the agent, the participant
may enter and transmit amended transfer instructions through the
RDSP PTS function (e.g., the sold portion of the deposit has been
increased). DTC will communicate the amended transfer instructions
to the transfer agent.
\8\ An inquiry option of the RDSP PTS function will enable the
depositing participant to view the current status of the securities,
including information DTC has received from the transfer agent as to
when the transfer is expected to be completed.
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For deposited securities in DTC-eligible issues, the sold and
unrestricted portion of the transferred securities will be registered
in DTC's nominee name, Cede & Co. When the transfer is complete and the
newly transferred securities are returned to DTC, the quantity of
unrestricted securities registered in DTC's nominee name, Cede & Co.,
will be removed from the participant's segregated account and added to
the participant's general free account. The quantity of restricted
securities, if any, will also be removed
[[Page 52116]]
from the participant's segregated account. At the same time, the
restricted portion of the securities will be sent to the destination
specified by the depositing participant in its original RDSP
instruction. That is, the restricted securities will either be made
available for pick-up by the participant, mailed directly to the
registered holder, or deposited into DTC's Custody Service for the
account of the depositing participant.
Additionally, the service will accommodate certificate denomination
breakdowns for restricted securities, transfer agent approval of
reregistrations of restricted securities (e.g., ``gifting,''
transactions, where the restricted security may be registered into the
name of the spouse of the original owner), and reregistrations of
unrestricted securities into Cede & Co's name once the restriction is
lifted.
II. Discussion
Section 17A(b)(3)(F) of the Act requires that the rules of a
clearing agency be designed to promote the prompt and accurate
clearance and settlement of securities transactions and 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 finds that the proposed rule change is consistent with these
obligations. The proposed rule change should facilitate the efficient
processing of partial and full sale of restricted securities where the
applicable restriction has been lifted by or on behalf of the issuer by
streamlining the mechanics of the physical process that currently
occurs outside of DTC. In addition, the Commission finds the new
service is being implemented in a manner which should not affect DTC's
ability to safeguard securities and funds in its custody or control or
for which it is responsible.
III. Conclusion
On the basis of the foregoing, the Commission finds that the
proposed rule change is consistent with the requirements of the Act and
in particular with 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-99-10) be and hereby is
approved.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\9\
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\9\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-24991 Filed 9-24-99; 8:45 am]
BILLING CODE 8010-01-M
