[Federal Register: June 16, 2003 (Volume 68, Number 115)]
[Notices]
[Page 35743-35744]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr16jn03-115]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-48005; File No. SR-DTC-2002-16]
Self-Regulatory Organizations; The Depository Trust Company;
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change
Relating To Enhancements to the Elective Dividend Service
June 9, 2003.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''), \1\ notice is hereby given that on October 22, 2002, The
Depository Trust Company (``DTC'') filed with the Securities and
Exchange Commission the 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 enables foreign participants to receive
dividend, interest, or principal payments in foreign currency directly
from foreign issuers through DTC's Direct Payment Option (``DPO'') of
its Elective Dividend Service (``EDS'') for DTC-eligible securities
issued by foreign issuers that were not initially issued with the
option of payment in either U.S. or foreign currency.
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. 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
Currently, DTC offers its participants the option of receiving a
dividend, interest, or principal payment either in foreign currency
(outside of DTC) or in U.S. dollars (within DTC) when the foreign
currency option is included in the initial offering terms of the DTC-
eligible issue.\3\ For DTC-eligible securities issued by foreign
issuers that are not initially issued with the option of payment in
either U.S. or foreign currency, the issuer must arrange for payment to
DTC in U.S. dollars through a U.S. transfer or paying agent. In order
for a non-U.S. DTC participant that is organized and resides in the
same foreign jurisdiction as the issuer to receive payment in its home
country and in its home currency, it must withdraw the securities from
DTC and arrange for processing of the foreign currency payment directly
with the paying agent. In order to once again achieve the benefits of
immobilization of the security after the payment is made, the
participant must then redeposit the certificate after payment has been
made.
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\3\ This service was first introduced in 1991. Securities
Exchange Act Release No. 29144 (Apr. 30, 1991), 56 FR 21182 (May 7,
1991).
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DTC believes that the physical movement of certificates solely to
achieve payment in the currency of the foreign jurisdiction where the
issuer and payee both reside presents to DTC participants various
inefficiencies, cost, and risk such as the inefficiencies of handling
physical securities and the associated risk of loss and the risk of
currency fluctuation.
Under DTC's new rule, in order for an issue to be eligible for the
DPO option (1) the issuer and transfer agent must agree to the
arrangement (since the option has not been established at initial
issuance) and (2) the issuer must certify that the income generated by
the security is not U.S.-source income, in order to assure U.S.
withholding tax requirements do not apply. Once an issue is eligible
for the DPO option, the participant must elect to receive foreign
currency directly from the issuer via DTC's EDS system, as is the case
with issues that are currently eligible for foreign currency options
established at initial instances. Similarly, the election will include
the payment instructions to the issuer and payment/transfer agent to
enable them to make payment directly to the non-U.S. participant
outside of DTC.
DTC believes that the proposed rule change is consistent with the
requirements of section 17A of the Act \4\ and the rules and
regulations thereunder because it promotes the prompt and accurate
clearance and settlement of securities transactions by further
immobilizing securities certificates and eliminating the need for
customers to withdraw and redeposit physical securities in order to
achieve payment outside of DTC.
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\4\ 15 U.S.C. 78q-1.
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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.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
Written comments from DTC's participants or others have not been
solicited or received on the proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission
The foregoing rule change has become effective pursuant to section
19(b)(3)(A)
[[Page 35744]]
of the Act and Securities Exchange Act Rule 19b-4(f)(4) because the
proposed rule change effects a change in an existing service that does
not adversely affect the safeguarding of securities or funds in DTC's
custody or control and does not significantly affect the respective
rights or obligations of DTC or the persons using the service. At any
time within sixty days of the filing of the 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.
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-2002-16. 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. All submissions should refer to File No. SR-
DTC-2002-16 and should be submitted within July 7, 2003.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\5\
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\5\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-15086 Filed 6-13-03; 8:45 am]
BILLING CODE 8010-01-P