[Federal Register: December 6, 2007 (Volume 72, Number 234)]
[Notices]
[Page 68920-68922]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr06de07-99]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-56863; File No. SR-DTC-2007-06]
Self-Regulatory Organizations; The Depository Trust Company;
Notice of Filing of Proposed Rule Change To Amend the Hearing
Procedures Afforded to an Interested Person and Harmonize Them With
Similar Rules of Its Affiliates
November 29, 2007.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on April 30, 2007, The Depository Trust Company (``DTC'') filed with
the Securities and Exchange Commission (``Commission'') 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 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The proposed rule change seeks (1) to modify DTC's rules regarding
hearing procedures afforded to Interested Persons \3\ and (2) where
practicable or beneficial, to harmonize them with similar rules of
DTC's affiliates, the National Securities Clearing Corporation
[[Page 68921]]
(``NSCC'') and the Fixed Income Clearing Corporation (``FICC'').
---------------------------------------------------------------------------
\3\ ``A Participant or Pledgee, [or] applicant to become a
Participant or Pledgee or issuer of a Security.'' Rule 22, Section
1.
---------------------------------------------------------------------------
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 these
statements.\4\
---------------------------------------------------------------------------
\4\ The Commission has modified the text of the summaries
prepared by DTC.
---------------------------------------------------------------------------
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Minor Rule Violation Plan
In 1984, the Commission adopted amendments to Rule 19d-1(c) under
the Act \5\ that allow self-regulatory organizations to adopt with
Commission approval plans for the disposition of minor violations of
rules.\6\
---------------------------------------------------------------------------
\5\ 17 CFR 240.19d-1(c).
\6\ Securities Exchange Act Release No. 21013 (June 1, 1984), 49
FR 23828 (June 8, 1984) [File No. S7-983A].
---------------------------------------------------------------------------
Currently under DTC's rules, an Interested Person subject to
disciplinary action has a right to a hearing before a member or members
of a panel selected by the Chairman of the Board from a pool of persons
employed by or partners of participants. Because some rule violations
are not sufficiently serious to merit Board review, DTC is proposing to
adopt a Minor Rule Violation Plan within the meaning of Rule 19d-
1(c)(2) of the Act for those rule violations DTC deems minor.
Consistent with Rule 19d-1(c)(2) of the Act, DTC would designate those
rule violations for which a fine may be assessed in an amount not to
exceed $5,000 as minor rule violations. If a member were to dispute a
fine imposed by DTC by filing a written request for hearing and a
written statement, DTC management would have the authority to waive the
fine. DTC management would notify the Board of Directors (or a
Committee authorized by the Board of Directors) of its determination to
waive the fine and would provide the reasons for the waiver. The Board
or Committee could in its discretion decide to reinstate any fine
waived by DTC management. If DTC management were not to waive the fine,
the member could appeal the decision to a panel comprised of DTC
officers (``Minor Rule Violation Panel'').
2. Hearings for All Other Violations and Minor Rule Violation Appeals
For matters involving (i) an alleged violation of a DTC rule or
procedure for which a fine in an amount of over $5,000 is assessed,
(ii) applicants for participation, or (iii) other disciplinary actions
to which the Minor Rule Violation Plan would not apply or for appeals
from a Minor Rule Violation Panel decision adverse to an Interested
Person, the Interested Person would be entitled to a hearing before a
panel comprised of three individuals selected by the Chairman of the
Board from a pool of persons employed by or partners of participants.
Persons shall be appointed members of the pool by the Board. Decisions
of the panel would be final; however, the full Board of Directors would
retain the right to modify any sanction or reverse any decision of the
Board panel that is adverse to the Interested Person.
Currently with respect to hearings, an Interested Person is
afforded the opportunity to be heard and may be represented by counsel
if desired. A record is kept of the hearing, and at the discretion of
the Board panel, the associated cost may be charged in whole or part to
the Interested Person in the event that the decision is adverse to the
Interested Person. The Interested Person is advised of the Board
panel's decision within ten business days after the conclusion of the
hearing. These procedures would also apply with respect to the Minor
Rule Violation Plan.
3. Administrative Changes: Uniformity of Time Frames
The proposed rule changes seek to implement uniform time periods
among DTC, NSCC, and FICC governing actions an Interested Person would
be required to take in order to request a hearing. The deadlines an
Interested Person must adhere to in order to request a hearing
currently vary between DTC, NSCC, and FICC. Under the proposed rule
change, an Interested Person would have five business days from the
date on which DTC first informed it of a sanction or a denial of
membership by which to request a hearing.
Within seven business days, or three days in the case of a summary
action taken against the Interested Person, after filing a request for
a hearing with DTC, the Interested Person would be required to submit
to DTC a clear and concise written statement setting forth the action
or proposed action of DTC with respect to which the hearing is
requested, the basis for objection to such action, whether the
Interested Person intends to attend the hearing, and whether the
Interested Person chooses to be represented by counsel at the hearing.
The proposed time frames would be consistent with time frames being
proposed by FICC and NSCC.
DTC believes that the proposed rule change is consistent with the
requirements of Section 17A of the Act \7\ and the rules and
regulations thereunder because the adoption of a Minor Rule Violation
Plan furthers the statutory objective of providing a fair procedure for
disciplining Participants and will provide DTC with the ability to
impose a meaningful sanction for those rule violations that do not
necessarily rise to a level of meriting a full disciplinary proceeding.
Accordingly, the proposed rule change promotes the prompt and accurate
clearance and settlement of securities transactions.
---------------------------------------------------------------------------
\7\ 15 U.S.C. 78q-1.
---------------------------------------------------------------------------
B. Self-Regulatory 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. Self-Regulatory 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 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 the self-regulatory 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.
[[Page 68922]]
Comments may be submitted by any of the following methods:
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml.
) or Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-DTC-2007-06 on the subject line.
Paper Comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-DTC-2007-06. This file
number should be included on the subject line if e-mail is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml
). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change 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 Section, 100 F Street,
NE., Washington, DC 20549 on official business days between the hours
of 10 a.m. and 3 p.m. Copies of such filings also will be available for
inspection and copying at the principal office of DTC and on DTC's Web
site at http://www.dtcc.com/downloads/legal/rule_filings/2007/dtc/2007-06.pdf.
All comments received will be posted without change; the
Commission does not edit personal identifying information from
submissions. You should submit only information that you wish to make
available publicly. All submissions should refer to File Number SR-DTC-
2007-06 and should be submitted on or before December 21, 2007.
For the Commission by the Division of Trading and Markets,
pursuant to delegated authority.\8\
---------------------------------------------------------------------------
\8\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-23591 Filed 12-5-07; 8:45 am]
BILLING CODE 8011-01-P