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SECURITIES AND EXCHANGE COMMISSION
Securities and Exchange Commission
DOCUMENT ID: [Release No. 34-58122; File No. SR-DTC-2007-07]
NOTICE: NOTICES
ACTION: Self-Regulatory Organizations; Proposed Rule Changes:
SUBJECT CATEGORY: Self-Regulatory Organizations; The Depository Trust Company; Notice of Filing of Proposed Rule Change To Amend the Applicant Disqualification Criteria Contained in Its Rules
DOCUMENT SUMMARY: July 9, 2008.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b4 thereunder \2\ notice is hereby given that
on April 30, 2007, The Depository Trust Company (``DTC'') filed with
the Securities and Exchange Commission (``Commission''), and on
February 7, 2008, and March 18, 2008, amended, the proposed rule change
described in Items I, II, and III below, which items have been prepared
primarily by DTC. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested parties. \1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b4.
I. SelfRegulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change
The proposed rule change seeks to amend the applicant
disqualification criteria contained in DTC's rules in an effort to
harmonize them with similar rules of DTC's affiliates, National Securities Clearing Corporation
[[Page 40889]]
(``NSCC'') and Fixed Income Clearing Corporation (``FICC'').
II. SelfRegulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, DTC 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. DTC has prepared summaries, set forth in sections (A),
(B), and (C) below, of the most significant aspects of these statements.\3\
\3\ The Commission has modified the text of the summaries prepared by DTC.
(A) SelfRegulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change
(1) Statutory Disqualification
DTC Rule 2 sets forth the basic standards for the admission of DTC
Participants and defines certain criteria that may disqualify an
applicant from participation. While the factors that may disqualify an
applicant are generally consistent among DTC, FICC, and NSCC rules,
DTC's rules do not specifically reference an order of statutory
disqualification as defined in Section 3(a)(39) of the Act \4\ among
its disqualification criteria.\5\ To promote uniformity among the rules
of DTC and its affiliates, DTC is proposing to add such a provision to its rules.
\4\ 15 U.S.C. 78c(a)(39).
\5\ As a clearing agency registered under the Act, DTC must evaluate those members subject to an order of statutory
disqualification as defined in the Act.
(2) Associated Persons
DTC rules include applicant disqualification criteria for persons and/or entities ``associated'' with the applicant firm. Because it is not easily ascertainable as to what entities or individuals are ``associated'' with a particular entity, DTC is proposing to amend these provisions in its rules so that they are consistent with internal surveillance procedures. DTC proposes to change references to persons ``associated'' with the applicant to references to ``controlling management,'' which shall be defined to mean the Chief Executive Officer, Chief Financial Officer, and Chief Operating Officer, or their equivalents. These are the officers that are currently screened by DTC's risk management pursuant to internal procedures. Finally, DTC proposes to add language to its rules that would require applicants to inform DTC as to any member of its controlling management that is or becomes subject to statutory disqualification.
(3) Amendment to Willful Violation
DTC rules currently include as a disqualification criterion the
applicant's or an associated person's ``willful'' violation of the
Securities Act of 1933,\6\ the Act, the Investment Company Act of
1940,\7\ the Investment Advisors Act of 1940,\8\ or any rule or
regulation promulgated thereunder. DTC proposes to remove the word
``willful'' from this provision because DTC believes that any violation
of these provisions should be a disqualification criterion. \6\ 15 U.S.C. 77a et seq.
\7\ 15 U.S.C. 80a1 et seq.
\8\ 15 U.S.C. 80b1 et seq.
Changes similar to those outlined in sections (1), (2), and (3) above will be made to DTC Rule 10, ``Discretionary Termination.''
DTC believes that the proposed rule change is consistent with the
requirements of Section 17A of the Act \9\ and the rules and
regulations thereunder because the proposed changes provide
transparency with respect to the applicant and member disqualification
criteria in DTC rules and uniformity with NSCC and FICC rules and
thereby promote the prompt and accurate clearance and settlement of securities transactions.
\9\ 15 U.S.C. 78q1.
(B) SelfRegulatory Organization's Statement on Burden on Competition
DTC does not believe that the proposed rule change will have any impact or impose any burden on competition.
(C) SelfRegulatory Organization's Statement on Comments on the
Proposed Rule Change Received From Members, Participants, or Others
Written comments relating to the proposed rule change have not been
solicited or received. DTC will notify the Commission of any written comments received by DTC.
III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action
Within thirtyfive 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 the selfregulatory organization consents, the Commission will:
(A) by order approve such proposed rule change or
(B) institute proceedings to determine whether the proposed rule change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of the following methods:
Electronic Comments
Paper Comments
[[Page 40890]]
submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SRDTC 200707 and should be submitted on or before August 6, 2008.
For the Commission by the Division of Trading and Markets, pursuant to delegated authority.\10\
\10\ 17 CFR 200.303(a)(12).
Florence E. Harmon,
Acting Secretary. 6
[FR Doc. E816227 Filed 71508; 8:45 am]
BILLING CODE 801001P
SUMMARY: Depository Trust Co.,
DOCUMENT BODY 2: July 9, 2008.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b4 thereunder \2\ notice is hereby given that
on April 30, 2007, The Depository Trust Company (``DTC'') filed with
the Securities and Exchange Commission (``Commission''), and on
February 7, 2008, and March 18, 2008, amended, the proposed rule change
described in Items I, II, and III below, which items have been prepared
primarily by DTC. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested parties. \1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b4.
I. SelfRegulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change
The proposed rule change seeks to amend the applicant
disqualification criteria contained in DTC's rules in an effort to
harmonize them with similar rules of DTC's affiliates, National Securities Clearing Corporation
[[Page 40889]]
(``NSCC'') and Fixed Income Clearing Corporation (``FICC'').
II. SelfRegulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, DTC 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. DTC has prepared summaries, set forth in sections (A),
(B), and (C) below, of the most significant aspects of these statements.\3\
\3\ The Commission has modified the text of the summaries prepared by DTC.
(A) SelfRegulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change
(1) Statutory Disqualification
DTC Rule 2 sets forth the basic standards for the admission of DTC
Participants and defines certain criteria that may disqualify an
applicant from participation. While the factors that may disqualify an
applicant are generally consistent among DTC, FICC, and NSCC rules,
DTC's rules do not specifically reference an order of statutory
disqualification as defined in Section 3(a)(39) of the Act \4\ among
its disqualification criteria.\5\ To promote uniformity among the rules
of DTC and its affiliates, DTC is proposing to add such a provision to its rules.
\4\ 15 U.S.C. 78c(a)(39).
\5\ As a clearing agency registered under the Act, DTC must evaluate those members subject to an order of statutory
disqualification as defined in the Act.
(2) Associated Persons
DTC rules include applicant disqualification criteria for persons and/or entities ``associated'' with the applicant firm. Because it is not easily ascertainable as to what entities or individuals are ``associated'' with a particular entity, DTC is proposing to amend these provisions in its rules so that they are consistent with internal surveillance procedures. DTC proposes to change references to persons ``associated'' with the applicant to references to ``controlling management,'' which shall be defined to mean the Chief Executive Officer, Chief Financial Officer, and Chief Operating Officer, or their equivalents. These are the officers that are currently screened by DTC's risk management pursuant to internal procedures. Finally, DTC proposes to add language to its rules that would require applicants to inform DTC as to any member of its controlling management that is or becomes subject to statutory disqualification.
(3) Amendment to Willful Violation
DTC rules currently include as a disqualification criterion the
applicant's or an associated person's ``willful'' violation of the
Securities Act of 1933,\6\ the Act, the Investment Company Act of
1940,\7\ the Investment Advisors Act of 1940,\8\ or any rule or
regulation promulgated thereunder. DTC proposes to remove the word
``willful'' from this provision because DTC believes that any violation
of these provisions should be a disqualification criterion. \6\ 15 U.S.C. 77a et seq.
\7\ 15 U.S.C. 80a1 et seq.
\8\ 15 U.S.C. 80b1 et seq.
Changes similar to those outlined in sections (1), (2), and (3) above will be made to DTC Rule 10, ``Discretionary Termination.''
DTC believes that the proposed rule change is consistent with the
requirements of Section 17A of the Act \9\ and the rules and
regulations thereunder because the proposed changes provide
transparency with respect to the applicant and member disqualification
criteria in DTC rules and uniformity with NSCC and FICC rules and
thereby promote the prompt and accurate clearance and settlement of securities transactions.
\9\ 15 U.S.C. 78q1.
(B) SelfRegulatory Organization's Statement on Burden on Competition
DTC does not believe that the proposed rule change will have any impact or impose any burden on competition.
(C) SelfRegulatory Organization's Statement on Comments on the
Proposed Rule Change Received From Members, Participants, or Others
Written comments relating to the proposed rule change have not been
solicited or received. DTC will notify the Commission of any written comments received by DTC.
III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action
Within thirtyfive 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 the selfregulatory organization consents, the Commission will:
(A) by order approve such proposed rule change or
(B) institute proceedings to determine whether the proposed rule change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of the following methods:
Electronic Comments
Paper Comments
[[Page 40890]]
submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SRDTC 200707 and should be submitted on or before August 6, 2008.
For the Commission by the Division of Trading and Markets, pursuant to delegated authority.\10\
\10\ 17 CFR 200.303(a)(12).
Florence E. Harmon,
Acting Secretary. 6
[FR Doc. E816227 Filed 71508; 8:45 am]
BILLING CODE 801001P
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