[Federal Register: November 24, 2003 (Volume 68, Number 226)]
[Notices]
[Page 65977-65978]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24no03-136]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-48773; File No. SR-DTC-2003-13]
Self-Regulatory Organizations; The Depository Trust Company;
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change
Relating to the Termination of the DALI Tax Service
November 12, 2003.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on October 2, 2003, The
Depository Trust Company filed a proposed rule change with the
Securities and Exchange Commission and on October 30, 2003, amended its
proposed rule change as 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 persons.
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\1\ 15 U.S.C. 78s(b)(1).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The proposed rule change will terminate DTC's Data Link for
Intermediaries (``DALI'') tax service.
II. Self-Regulatory 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 such statements.\2\
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\2\ The Commission has modified the text of the summaries
prepared by DTC.
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A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
The proposed rule change will terminate DTC's DALI tax service
effective December 31, 2003. DALI is a communications hub that allows
financial institutions (typically, a U.S. paying institution acting as
a U.S. withholding agent and its foreign customer payee) to exchange
the data necessary to determine correct withholding and reporting of
U.S. tax on
[[Page 65978]]
payments such as dividends and interest to a foreign payee.\3\
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\3\ See Sections 1441 et seq. of the Internal Revenue Code and
regulations promulgated thereunder.
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DTC introduced DALI in January 2001 at the request of four DTC
participants (``Consortium''). DALI's principal features are
communicating payment events and withholding instructions relating to
such events, managing payee tax documentation (such as IRS Forms W-8
and W-9), and aggregating information for tax reporting and
recordkeeping.
At the Consortium's request, DTC agreed to act as project manager
for developing the DALI software system and for operating and
maintaining the system as a DTC service that would be available to all
DTC participants and their customers at standard DTC fees. The
Consortium members agreed to finance the product development costs and
expected to be reimbursed for such costs over time from the proceeds of
user service fees in excess of these costs. The Consortium also agreed
to fund DALI's operating losses during the initial phase of operations.
The Consortium expected that the DALI system would be widely used by
DTC participants, which would therefore obviate the need for the
Consortium to continue to fund operating losses and would enable the
Consortium to recoup any amounts previously funded.
Only Consortium members have used DALI, and by mid-2003, only one
out of those four members continued using DALI. Given the costs of
maintaining DALI, DTC has determined that it will no longer offer this
service. Consistent with the agreements between DTC and the Consortium,
DTC will transfer the DALI system to the Consortium member that is
still using and funding DALI. DTC will operate the system as a
facilities manager on behalf of that member for a limited period of
time (less than one year) during the transition. This member intends to
operate the DALI system in-house for its own customers.
DTC believes that the proposed rule change is consistent with the
requirements of Section 17A(b)(3)(A) of the Act \4\ and the rules and
regulations thereunder applicable to DTC because it will enhance DTC's
ability to safeguard securities and funds in its custody or control or
for which it is responsible by promoting the efficient allocation of
DTC resources. This will be done by terminating the operation of a
service that is not being utilized by a sufficient number of DTC
participants to support its costs or justify its use of DTC's
operational resources.
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\4\ 15 U.S.C. 78q-1(b)(3)(A).
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B. Self-Regulatory Organization's Statement on Burden on Competition
DTC perceives no impact on competition by reason of the proposed
rule change. Each of the three Consortium members that used DALI
informed DTC that it has developed its own internal system to perform
withholding and reporting with respect to DALI's functions and that
DTC's discontinuance of DALI will not adversely affect it. DTC will
assist the remaining Consortium member in transitioning the DALI system
for its own use.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
DTC has not solicited nor received written comments on the proposed
rule change. DTC will inform the Commission of any written comments it
receives.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) of the Act \5\ and Rule 19b-4(f)(6) thereunder \6\ because
it effects a change that does not significantly affect the protection
of investors or the public interest, does not impose any significant
burden on competition, and does not become operative for 30 days after
the date of the filing. At any time within 60 days of the filing of
such proposed 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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\5\ 15 U.S.C. 78s(b)(3)(A).
\6\ 17 CFR 270.19b-4(f)(6).
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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. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 5th Street NW., Washington, DC 20549-0069.
Comments may also be submitted electronically at the following e-mail address: rule-comments@sec.gov. All comment letters should refer to
File No. SR-DTC-2003-13. This file number should be included on the
subject line if e-mail is used. To help us process and review comments
more efficiently, comments should be sent in hardcopy or by e-mail but
not by both methods. Copies of the submission, all subsequent
amendments, all written statements with respect to the rule filing that
are filed with the Commission, and all written communications relating
to the rule filing between the Commission and any person, other than
those that may be withheld from the public in accordance with
provisions of 5 U.S.C. 552, will be available for inspection and
copying in the Commission's Public Reference Room in Washington, DC.
Copies of such filing will also be available for inspection and copying
at DTC's principal office and on DTC's Web site at http://www.dtc.org/impNtc/mor/index.html.
All submissions should refer to File No. SR-DTC-
2003-13 and should be submitted by December 15, 2003.
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. 03-29297 Filed 11-21-03; 8:45 am]
BILLING CODE 8010-01-P