[Federal Register: November 15, 2004 (Volume 69, Number 219)]
[Notices]
[Page 65662-65664]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr15no04-115]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-50642; File No. SR-FICC-2004-06]
Self-Regulatory Organizations; Fixed Income Clearing Corporation;
Notice of Filing of Proposed Rule Change To Institute Fines for Late
Payment of Cash Obligations and Margin and To Institute Informal
Hearing Procedures for Fine Disputes
November 5, 2004.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on March 18, 2004, the Fixed
Income
[[Page 65663]]
Clearing Corporation (``FICC'') filed with the Securities and Exchange
Commission (``Commission'') and on April 16, 2004, amended the proposed
rule change described in items I, II, and III below, which items have
been prepared primarily by FICC. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
parties.
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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 purpose of the proposed rule change is to institute at the
Mortgage Backed Securities Division (``MBSD'') (i) fines for the late
payment of cash obligation items \2\ and margin deficits and (ii)
informal hearing procedures for disputed MBSD fines.
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\2\ Cash obligation items are cash receivables/payables that
have been assigned a due date by the MBSD.
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II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, FICC 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. FICC has prepared summaries, set forth in sections (A),
(B), and (C) below, of the most significant aspects of these
statements.\3\
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\3\ The Commission has modified the text of the summaries
prepared by FICC.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
The purpose of the proposed rule change is to institute at the MBSD
(i) fines for the late payment of cash obligation items and margin
deficits and (ii) informal hearing procedures for disputed MBSD fines.
1. Fines for Late Payments
The MBSD has for some time imposed fees in order to promote greater
compliance with its cash obligation and margin payment deadlines.\4\
Fees differ from fines in that fines must be reported by FICC to the
Commission. FICC management believes that, consistent with the practice
of the Government Securities Division (``GSD'') of FICC, assessments
for late payment of margin and cash obligation items should be
categorized as fines. Management believes that this change will provide
a greater incentive for participant compliance with appropriate payment
timeframes which will reduce risk to all MBSD participants.
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\4\ Currently, the MBSD rules state that failure to pay a cash
settlement obligation will result in the assessment of a fine.
However, the MBSD Schedule of Charges refers to such charges as
``fees,'' and they have been processed as fees by MBSD in the past.
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2. Procedures Relating to Disputed Fines
The rules of the MBSD currently contain procedures whereby a
participant can dispute any fine assessment through a formal appeal
process. FICC believes that, consistent with the practice of the GSD,
the fine process would be more effective and equitable and would
provide participants with additional due process if an initial less
formal dispute process was also included in MBSD's rules. The initial
dispute process would be utilized by participants prior to availing
themselves of the formal appeal process. A participant that becomes
subject to a fine would have the opportunity within seven calendar days
to dispute the fine by explaining in writing any mitigating
circumstances that contributed to the participant's infraction and to
request a fine waiver. Based on such written documentation provided by
the participant, management would have the discretion to waive a fine
if it believed that sufficient mitigating circumstances had been shown
by the participant. If management waives a fine, it would have to
inform the Membership and Risk Management Committee (``Committee'') at
the next regularly scheduled Committee meeting and would have to
explain management's reasons for doing so. The Committee would then
have the opportunity to overrule management's action with respect to
the waiver. If management chooses to not waive a fine or if its waiver
is overruled by the Committee, the participant would have the right to
pursue the formal hearing process currently provided for in the FICC
Rules.
FICC is proposing to make parallel changes with respect to the fine
dispute process to the MBSD's EPN rules.
In addition, FICC is proposing certain technical changes to the
MBSD's Schedules of Charges to (i) delete references to ``MBSCC'' and
replace them with references to ``MBSD'' and (ii) eliminate obsolete
fees which are no longer being charged by the MBSD.
FICC believes that the proposed rule change is consistent with the
requirements of section 17A of the Act \5\ and the rules and
regulations thereunder applicable to FICC because it is designed to
perfect the mechanism of a national system for the prompt and accurate
clearance and settlement of securities transactions by (i) encouraging
participants to make timely payments of cash obligation items and
margin to MBSD and (ii) clearly setting forth in FICC's rules
procedures for management's review and possible waiver of fines which
should provide members with a more efficient and less burdensome method
for the possible resolution of disputed fines before a full hearing
takes place.
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\5\ 15 U.S.C. 78q-1.
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(B) Self-Regulatory Organization's Statement on Burden on Competition
FICC 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 yet
been solicited or received. FICC will notify the Commission of any
written comments received by FICC.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 35 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. 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-FICC-2004-06 on the subject line.
[[Page 65664]]
Paper Comments
Send paper comments in triplicate to Jonathan G. Katz,
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW.,
Washington, DC 20549-0609.
All submissions should refer to File Number SR-FICC-2004-06. 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, 450 Fifth
Street, NW., Washington, DC 20549. Copies of such filing also will be
available for inspection and copying at the principal office of FICC
and on FICC's Web site at http://www.ficc.com. 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-FICC-2004-06 and
should be submitted on or before December 6, 2004.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\6\
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\6\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E4-3157 Filed 11-12-04; 8:45 am]
BILLING CODE 8010-01-P