[Federal Register Volume 77, Number 54 (Tuesday, March 20, 2012)]
[Rules and Regulations]
[Pages 16165-16170]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-6351]


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DEPARTMENT OF THE TREASURY

Fiscal Service

31 CFR Parts 321 and 330


United States Savings Bonds and Notes; Payments

AGENCY: Bureau of the Public Debt, Fiscal Service, Treasury.

ACTION: Final rule.

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SUMMARY: Treasury is changing the procedures for financial institutions 
to transmit and receive settlement for redeemed definitive (paper) 
savings securities (savings bonds and savings notes) from the EZ Clear 
system to an image-based securities process through the Federal 
Reserve. By changing the procedures, Treasury will reduce costs and 
provide for a more efficient method of processing savings securities 
through the Federal Reserve. Treasury is making discretionary the 
payment of fees to paying agents for the processing of redeemed 
definitive savings securities. Treasury will have the flexibility to 
adjust paying agent fees and significantly reduce program costs.

DATES: Effective date: April 11, 2012.

ADDRESSES: You can download this Final Rule at the following Internet 
addresses: <http://www.publicdebt.treas.gov>, <http://www.gpo.gov>, or 
<http://www.regulations.gov>.

FOR FURTHER INFORMATION CONTACT: D. Michael Linder, Director, Division 
of Program Administration, Office of Retail Securities, Bureau of the 
Public Debt, at (304) 480-6319 or <<a href="/cdn-cgi/l/email-protection#a7caceccc289cbcec9c3c2d5e7c5d7c389d3d5c2c6d489c0c8d1"><span class="__cf_email__" data-cfemail="402d292b256e2c292e242532002230246e34322521336e272f36">[email protected]</span></a>>.
    Ann Fowler, Attorney-Adviser, Brian Metz, Attorney-Adviser, Dean 
Adams, Assistant Chief Counsel, Edward Gronseth, Deputy Chief Counsel, 
Office of the Chief Counsel, Bureau of the Public Debt, at (304) 480-
8692 or <<a href="/cdn-cgi/l/email-protection#d7b3b2b6b9f9b6b3b6baa497b5a7b3f9a3a5b2b6a4f9b0b8a1"><span class="__cf_email__" data-cfemail="afcbcacec181cecbcec2dcefcddfcb81dbddcacedc81c8c0d9">[email protected]</span></a>>.

SUPPLEMENTARY INFORMATION: United States savings securities are non-
marketable Treasury securities. Generally, definitive savings 
securities are redeemed by banks and other financial institutions that 
are authorized by Treasury as paying agents to redeem eligible savings 
securities for cash and process those securities in accordance with 
Treasury regulations and instructions.
    Beginning October 1, 1988, Treasury permitted paying agents to 
transmit and receive settlement for redeemed definitive savings 
securities through the EZ CLEAR system, under which the securities are 
manually sorted and mailed to the appropriate Federal Reserve Bank or 
Branch. Service fees for redeemed definitive savings securities 
presented through EZ CLEAR are paid to the institution presenting the 
securities to a Federal Reserve Bank.
    Effective April 11, 2012, financial institutions will begin to 
transition the submission of redeemed definitive savings securities 
from the EZ CLEAR process to an existing image-based securities process 
through the Federal Reserve. Use of this existing image-based 
securities process will enable paying agents to image redeemed 
definitive savings securities in the same manner as they do for checks 
and electronically transmit the images to a Federal Reserve Processing 
Site for payment. The Federal Reserve will provide specific details on 
the use of the image-based securities process while the Bureau of the 
Public Debt will provide other detailed instructions to paying agents 
via its Web site at www.treasurydirect.gov and other established means 
of communication such as FedFlash and FedFocus. The new procedures will 
enable financial institutions to eliminate the manual sorting of 
redeemed definitive savings securities and mailing them to a Federal 
Reserve Bank for clearing. This will simplify and modernize the 
processing of redeemed definitive savings securities for paying agents.
    Treasury will be using a more streamlined, efficient, and cost-
effective method for redeeming and processing definitive savings 
securities through a Federal Reserve Processing Site to which the 
paying agent is instructed to transmit images of redeemed definitive 
savings securities for payment. The Federal Reserve Bank of Minneapolis 
will continue to provide fiscal services as the designated Treasury 
Retail Securities Site.
    The new procedures eliminate exception processing for paying agents 
and greatly reduce their handling costs. Accordingly, Treasury is 
making the payment of paying agent fees discretionary, which will allow 
Treasury the flexibility to adjust paying agent fees and significantly 
reduce Treasury's program costs. Treasury anticipates that most agents 
will continue redeeming definitive savings securities as a service to 
their customers.

Procedural Requirements

    Executive Order 12866. This rule is not a significant regulatory 
action pursuant to Executive Order 12866.
    Administrative Procedure Act (APA). Because this rule relates to 
United States securities, which are contracts between Treasury and the 
owner of the security, this rule falls within the contract exception to 
the APA, 5 U.S.C. 553(a)(2). As a result, the notice, public comment, 
and delayed effective date provisions of the APA are inapplicable to 
this rule.
    Regulatory Flexibility Act. The provisions of the Regulatory 
Flexibility Act, 5 U.S.C. 601 et seq., do not apply to this rule 
because, pursuant to 5 U.S.C. 553(a)(2), it is not required to be 
issued with notice and opportunity for public comment.
    Paperwork Reduction Act (PRA). We ask for no collections of 
information in this final rule. Therefore, the Paperwork Reduction Act, 
44 U.S.C. 3501 et seq., does not apply.
    Congressional Review Act (CRA). This rule is not a major rule 
pursuant to the CRA, 5 U.S.C. 801 et seq., because it is a minor 
amendment that is expected to decrease costs for taxpayers; therefore, 
this rule is not expected to lead to any of the results listed in 5 
U.S.C. 804(2). This rule will take effect April 11, 2012, after we 
submit a copy of it to Congress and the Comptroller General.

List of Subjects

31 CFR Part 321

    Banks and banking, Federal Reserve System, Government Securities.

31 CFR Part 330

    Banks and banking, Federal Reserve System, Government Securities.


[[Page 16166]]


    Accordingly, for the reasons set out in the preamble, Treasury 
amends 31 CFR Chapter II, Subchapter B, as follows:

PART 321--PAYMENTS BY BANKS AND OTHER FINANCIAL INSTITUTIONS OF 
DEFINITIVE UNITED STATES SAVINGS BONDS AND UNITED STATES SAVINGS 
NOTES (FREEDOM SHARES)

0
1. Revise the authority citation for part 321 to read as follows:

    Authority:  5 U.S.C. 301; 12 U.S.C. 391; 31 U.S.C. 321; 31 
U.S.C. 3105, 3126.


0
2. The heading for part 321 is revised to read as set forth above.

0
3. Revise Sec.  321.0 to read as follows:


Sec.  321.0  Purpose.

    These regulations govern the manner in which financial institutions 
may qualify and act as paying agents for the redemption of:
    (a) Definitive United States Savings Bonds of Series A, B, C, D, E, 
EE, and I, and United States Savings Notes (Freedom Shares), presented 
for cash payment; and
    (b) Eligible definitive Series E and Series EE savings bonds and 
savings notes presented for redemption in exchange for Series HH 
savings bonds under the provisions of Department of the Treasury 
Circular, Public Debt Series No. 2-80 (31 CFR part 352).

0
4. Amend Sec.  321.1 by:
0
a. Removing the paragraph designations and arranging the definitions in 
alphabetical order;
0
b. Removing the definitions for ``Central site,'' ``EZ Clear,'' 
``Federal Reserve Bank or Branch,'' ``Mixed cash letter,'' ``Presenting 
institution,'' and ``Separately sorted cash letter,''; and
0
c. Adding the definitions of ``Definitive security,'' ``Federal Reserve 
Operating Circular,'' ``Federal Reserve Processing Site,'' and 
``Federal Reserve Treasury Retail Securities Site or TRS Site'' to read 
as follows:


Sec.  321.1  Definitions.

* * * * *
    Definitive security means a Treasury security held in paper form.
* * * * *
    Federal Reserve Operating Circular means the operating circular 
referred to in Sec.  321.27, issued by the Federal Reserve Banks, that 
provides instructions on the requirements for submitting definitive 
redeemed securities to a Federal Reserve Processing Site and sets forth 
the rights and obligations of paying agents with respect to such 
securities.
    Federal Reserve Processing Site means a Federal Reserve Bank 
(including any Branch or office thereof, as appropriate) referred to in 
Sec.  321.26 to which the paying agent, or institution acting on its 
behalf, is instructed to transmit redeemed securities for payment 
pursuant to the Federal Reserve Operating Circular.
    Federal Reserve Treasury Retail Securities Site or TRS Site means a 
Federal Reserve Bank (including any Branch or office thereof, as 
appropriate) referred to in Sec.  321.26 that is authorized to qualify 
paying agents and provide other fiscal agency services consistent with 
this part.
* * * * *

0
5. Amend Sec.  321.2, by revising paragraph (a)(3) to read as follows:


Sec.  321.2  Eligible organizations.

    (a) * * *
    (3) Are under the supervision of a federal or state regulatory 
agency or equivalent authority; and
* * * * *

0
6. Amend Sec.  321.2 by revising paragraph (b) to read as follows:


Sec.  321.2  Eligible organizations.

* * * * *
    (b) An organization that desires to redeem securities must first 
qualify as a paying agent. An organization that has qualified and is 
serving as a paying agent must:
    (1) Submit redeemed securities directly to a Federal Reserve 
Processing Site in accordance with the Federal Reserve Operating 
Circular; and
    (2) Have the ability to receive payment of applicable fees by ACH, 
or arrange to obtain one or more of these services from another 
financial institution.

0
7. In Sec.  321.3:
0
a. Amend paragraph (a):
0
i. In the introductory text by adding the paragraph designation ``(1)'' 
before ``An eligible'' and revising the first sentence;
0
ii. By redesignating paragraphs (a)(1) and (2) as (a)(1)(i) and (ii), 
respectively; and
0
iii. By designating the undesignated paragraph as (a)(2) and revising 
it;
0
b. Amend paragraph (b) by revising the first two sentences; and
0
c. Revise paragraphs (c) and (d).
    The revisions read as follows:


Sec.  321.3  Procedure for qualifying and serving as paying agent.

    (a) Execution of application-agreement. (1) An eligible 
organization wishing to act as a paying agent shall obtain from, 
execute, and file an application-agreement with a TRS Site. * * *
* * * * *
    (2) For the purpose of these regulations, all eligible institutions 
shall make application to a TRS Site.
* * * * *
    (b) Qualification. A TRS Site, as fiscal agent of the United 
States, is authorized to qualify any eligible organization that 
possesses adequate authority under its charter to act as paying agent. 
Upon approval of an application-agreement, a TRS Site will issue a 
certificate of qualification to the organization. * * *
    (c) Announcement of authority. Upon receipt of a certificate of 
qualification from a TRS Site, a financial institution may announce or 
advertise its authority to redeem eligible securities for cash and to 
process eligible Series E and EE savings bonds and savings notes 
presented for redemption in exchange for Series HH savings bonds under 
the provisions of Department of the Treasury Circular, Public Debt 
Series No. 2-80 (31 CFR part 352).
    (d) Adverse action. A TRS Site will notify an organization in 
writing if its application-agreement to act as paying agent is not 
approved.

0
8a. Amend Sec.  321.5 by revising paragraphs (a) and (b) to read as 
follows:


Sec.  321.5  Termination of qualification.

    (a) By the Treasury. The Secretary of the Treasury, or a designee, 
may authorize a TRS Site to terminate the qualification of any paying 
agent at any time, following prior written notice of such action to the 
agent.
    (b) At request of paying agent. A TRS Site will terminate the 
qualification of a paying agent upon its written request, provided the 
agent renders a final accounting for all redeemed securities and is 
found to have fully complied with the terms of its agreement and the 
applicable regulations and instructions.
* * * * *


Sec.  321.7  [Amended]

0
8b. In Sec.  321.7(e), in the first sentence, remove the reference 
``Sec.  321.1(f)'' and add in its place ``Sec.  321.1''.

0
9. Amend Sec.  321.8 by revising paragraph (d) to read as follows:


Sec.  321.8  Redemption-exchange of Series E and EE savings bonds and 
savings notes.

* * * * *
    (d) Completion of transaction. An agent shall transmit for 
settlement eligible securities redeemed on exchange and, at the same 
time, forward the exchange application (PD F 3253) and any additional 
cash needed to complete the transaction to a TRS Site.

0
10. Revise Sec.  321.13 to read as follows:

[[Page 16167]]

Sec.  321.13  Cancellation of redeemed securities.

    A paying agent shall cancel each redeemed security by imprinting 
the word ``PAID'' on its face and entering the amount and date of the 
actual payment and the agent's name, location, and four-digit code 
number assigned by a TRS Site or nine-digit ABA code number. The 
recordation of this data shall constitute a certification by the agent 
that the security was redeemed in accordance with the provisions of 
this part, that the presenter's identity and entitlement to request 
payment were duly established, and that the proceeds were paid to the 
presenter or remitted to a TRS Site in payment for Series HH savings 
bonds.

0
11. Revise Sec.  321.14 to read as follows:


Sec.  321.14  Transmittal to and settlement with a Federal Reserve 
Processing Site.

    Except for eligible securities redeemed on exchange pursuant to 
Sec.  321.8, a paying agent shall transmit for payment all redeemed 
securities to a Federal Reserve Processing Site in accordance with the 
Federal Reserve Operating Circular.

0
12. Revise Sec.  321.16 to read as follows:


Sec.  321.16  Report of erroneous payment.

    If an agent discovers an erroneous payment of securities, it should 
immediately advise the Bureau of the Public Debt, Parkersburg, WV, as 
further described in the instructions and guidance issued pursuant to 
Sec.  321.27.

0
13. Revise Sec.  321.20 to read as follows:


Sec.  321.20  Applicability of provisions.

    The provisions of this subpart shall apply to securities redeemed 
by or submitted to any Federal Reserve Processing Site, any TRS Site, 
or any Treasury office authorized to redeem securities, as well as to 
paying agents.

0
14. Revise Sec.  321.22 to read as follows:


Sec.  321.22  Forwarding securities not payable by an agent.

    Any securities an agent is not authorized to pay under the 
provisions of this part should be forwarded for redemption to a TRS 
Site. The requests for payment on the securities should be properly 
certified. Any documentary evidence required to support the transaction 
should accompany the securities. If the securities are presented for 
redemption-exchange, they must also be accompanied by a completed and 
signed exchange subscription and additional cash needed to complete the 
transaction. Unpaid securities must be forwarded to a TRS Site in 
accordance with the rules in this part. The Bureau of the Public Debt 
provides agents with instructions and guidance regarding forwarding 
items. These instructions identify the specific types of redemption 
cases that should be forwarded and the processing instructions that 
paying agents must follow. These instructions are available from a TRS 
Site or online at www.treasurydirect.gov.

0
15. Revise Sec.  321.23 to read as follows:


Sec.  321.23  Paying agent fees and charges.

    (a) Fees. Fees may be paid as outlined in this section. A schedule 
setting out the fees, and the basis on which they are computed and 
paid, is separately published in the Federal Register. Current 
information is available from a TRS Site or online at 
www.treasurydirect.gov.
    (b) Discontinuance, reduction, or delay in fees. The Secretary may 
authorize, upon notice in the Federal Register, the discontinuance, 
reduction, or delay of fee payments.
    (c) Charges to presenters. A paying agent shall not make any charge 
whatever to persons entitled to request payment of securities, for 
redeeming them under the provisions of this part.

0
16. Revise Sec.  321.25 to read as follows:


Sec.  321.25  Payment and retention of definitive securities.

    The definitive security must be presented and surrendered to the 
paying agent in order to receive payment. An agent is prohibited from 
accepting an image, or other copy or reproduction of the definitive 
security, for redemption or processing. To ensure that all transactions 
processed by agents are properly validated, agents must establish and 
comply with a retention period for definitive securities that are 
truncated and converted to an electronic image. At a minimum, the agent 
must retain such securities for a period of thirty calendar days 
following the date that the agent submitted the electronic image of the 
paid security to a Federal Reserve Processing Site. Agents may 
establish longer retention periods for definitive securities at their 
discretion.


Sec. Sec.  321.26 and 321.27  [Redesignated as Sec. Sec.  321.28 and 
321.29]

0
17. Redesignate Sec. Sec.  321.26 and 321.27 as Sec. Sec.  321.28 and 
321.29, respectively.

0
18. Add a new Sec.  321.26 to read as follows:


Sec.  321.26  Role of Federal Reserve Banks.

    Federal Reserve Banks (including any Branch or office thereof, as 
appropriate) perform services as fiscal agents of the United States. 
These Federal Reserve Banks shall perform such services in connection 
with this part as may be requested by the Secretary of the Treasury, or 
a designee. These Federal Reserve Banks are authorized and directed to 
perform such duties, including the issuance of supplemental 
instructions and forms, as may be necessary to fulfill the purposes and 
requirements of these regulations. The instructions and guidance issued 
pursuant to Sec.  321.27 set forth each Federal Reserve Bank that has 
been designated as a Federal Reserve Processing Site or as a TRS Site 
by the Secretary of the Treasury, or a designee.

0
19. Add a new Sec.  321.27 to read as follows:


Sec.  321.27  Instructions and guidance.

    (a) The Bureau of the Public Debt will provide Federal Reserve 
Processing Sites, TRS Sites, and paying agents with instructions and 
guidance on how to process redemption transactions. This information is 
available online at the Bureau of the Public Debt's Web site at 
www.treasurydirect.gov, Federal Reserve Processing Sites, and TRS 
Sites. Paying agents must follow these instructions and guidance.
    (b) The Federal Reserve Operating Circular sets forth additional 
rights and obligations of paying agents with respect to redemption 
transactions. Additional instructions and guidance are available online 
at the Federal Reserve Bank Services Web site at www.FRBservices.org.
    (c) Paying agents are required to process redemptions in accordance 
with the terms and conditions cited in paragraphs (a) and (b) of this 
section. The Secretary of the Treasury, or a designee, reserves the 
right to hold an agent liable whose failure to follow these 
instructions results in an incorrect amount being paid for a redeemed 
security.
* * * * *

0
20. Amend the appendix to part 321:
0
a. Under ``Subpart B'' by:
0
i. Revising paragraph 4; and
0
ii. Revising the first sentence of paragraph 5
0
b. Under ``Subpart C,'' in paragraph 9, by revising the first sentence 
of paragraph (a);
0
c. Under ``Subpart D'' by:
0
i. Revising, under paragraph 13, paragraphs (a) and (b);
0
ii. Revising, under paragraph 14, paragraphs (a), (b), and (d);
0
iii. Revising paragraph 15;
0
iv. Removing paragraphs 16 and 17; and
0
v. Redesignating paragraph 18 as paragraph 16 and revising it;
0
d. Under ``Subpart E'' by:
0
i. Revising the Subpart E heading;

[[Page 16168]]

0
ii. Redesignating paragraphs 19 through 22 as paragraphs 17 through 20, 
respectively; and
0
iii. Revising newly redesignated paragraph 17;
0
e. Under ``Subpart F'' by redesignating paragraph 23 and paragraph 21 
and revising its heading, paragraphs (a) and (d), and revising the last 
sentence of paragraph (e);
0
f. Under ``Subpart G'' by:
0
i. Redesignating paragraphs 24 through 26 as paragraphs 22 through 24 
respectively;
0
ii. Revising newly redesignated paragraphs 22 and 23;
0
iii. Adding new paragraph 25; and
0
iv. Redesignating paragraph 27 and paragraph 26 and revising it.
0
The revisions and addition read as follows:

Appendix to Part 321--Appendix to Department of the Treasury Circular 
No. 750, Fourth Revision

Fiscal Service, Bureau of the Public Debt

* * * * *

Subpart B--Procedures for Qualification

* * * * *
    4. Paying agent code numbers. [Sec. Sec.  321.3(b) and 321.13] 
The TRS Site may assign a four-digit code number to each agent it 
qualifies. A separate number may be assigned to each branch of the 
paying agent authorized to redeem and submit redeemed securities for 
its own account at a TRS Site. At the paying agent's request, only 
one four-digit code will be assigned for use by all of its branches.
    5. Requalification. [Sec.  321.3(b)] If there has been a change 
in the corporate name of an agent, whether through merger, 
consolidation, sale of assets, or in any other manner, the agent may 
be asked by a TRS Site to requalify to reflect the change. * * *
* * * * *

Subpart C--Scope of Authority

* * * * *
    9. * * *
    (a) * * * Securities that an agent may not redeem because of the 
limitations in Sec.  321.9 should be forwarded to a TRS Site for 
handling. * * *
* * * * *

Subpart D--Payment and Transmittal of Securities

* * * * *
    13. * * *
    (a) Redemption value tables. [Sec.  321.12] The Bureau of the 
Public Debt distributes redemption values in various formats and as 
parts of programs for personal computers, for: (1) Series E savings 
bonds, (2) Series EE savings bonds, (3) Series I savings bonds, and 
(4) savings notes. Additional tables or information may be requested 
from a TRS Site.
    (b) Use of tables. [Sec.  321.12] Care should be exercised to 
correctly determine the current redemption value of the security 
presented for the month in which it is redeemed. Incorrect payments 
can lead to costly and time-consuming adjustments for the agent, 
Department of the Treasury, and a TRS Site.
* * * * *
    14. * * *
    (a) Paying agent stamp. [Sec.  321.13] Each redeemed security 
must be cancelled by the imprint of a payment stamp. The stamp may 
not exceed 1\1/8\ inches in any dimension and must include the 
following information in the arrangement shown:

Paid $------ (for recording amount paid)
Name, location, and four-digit paying agent code number assigned by 
a TRS Site (subject to abbreviation and arrangement by a TRS Site) 
or ABA code number.
Date ------ (for recording actual date of payment).
By ------ (for use by agent in recording initials, or signature, 
codes, symbols, etc., of the officer or employee who approved or 
made the payment.)

    (b) Procurement of stamps. [Sec.  321.12] A paying agent may 
requisition stamps from a TRS Site or purchase its own stamps. 
Stamps not provided by a TRS Site must conform exactly in size to 
that prescribed or approved by a TRS Site. To insure legible 
impressions, stamps should be replaced when worn.
* * * * *
    (d) Redemption-exchange. [Sec.  321.13] Eligible Series E and EE 
savings bonds and savings notes presented for redemption-exchange 
shall be stamped ``PAID'' in the same manner as securities redeemed 
for cash, but only when all elements of the transaction have been 
completed, including the receipt of any additional cash. The exact 
date of redemption shall also be recorded on the exchange 
subscription to enable a TRS Site to establish the proper issue date 
for the Series HH savings bonds. An officer or authorized employee 
of the agent shall also sign the exchange subscription, in his or 
her official capacity, and furnish other requested information that 
identifies the paying agent.
* * * * *
    15. Transmittal of securities to a Federal Reserve Processing 
Site. [Sec.  321.14] An agent shall transmit and settle a redeemed 
security in accordance with the rules and instructions set forth in 
the Federal Reserve Operating Circular.
    16. Record of securities paid. [Sec. Sec.  321.14 and 321.24] A 
record of the serial number, amount paid, and any other information 
necessary to complete the form for an ``Application for Relief Due 
to the Loss, Theft, or Destruction of Paid United States Savings 
Bonds/Notes'' (PD F 2517) must be retained by the agent for each 
definitive security sent to a Federal Reserve Processing Site. 
Copies or other records of the front and back of a paper savings 
bond must be kept confidential, and prints of the bond may be made 
only with the permission of the Bureau of the Public Debt or a TRS 
Site.

Subpart E--Losses Resulting from Erroneous Payments [Sec.  321.16]

    17. Report of erroneous payment. Any erroneous payment that 
comes to the attention of an agent should be reported immediately to 
the Bureau of the Public Debt, Parkersburg, WV, as further described 
in the instructions and guidance issued pursuant to Sec.  321.27.
* * * * *

Subpart F--Forwarding Items

    21. Securities forwarded to a TRS Site for payment. [Sec.  
321.22]
    (a) General. [Sec.  321.22] Securities presented for cash 
payment or redemption-exchange that an agent is not authorized to 
redeem shall be forwarded to a TRS Site, with all required 
supporting documentation and any necessary payment instructions.
* * * * *
    (d) Redemption-exchange. [Sec.  321.22] For redemption-exchange 
transactions submitted as forwarding items, the issue date of the 
Series HH savings bonds will be the first day of the month in which 
a correctly completed and signed exchange subscription and full 
payment are received by a TRS Site.
    (e) Partial redemption. [Sec. Sec.  321.9(l) and 321.22] * * * 
The security shall be forwarded to a TRS Site.

Subpart G--Miscellaneous Provisions

    22. Fees and charges. [Sec.  321.23] Service fees are not 
intended to compensate paying agents for the reporting of interest 
paid as part of the redemption value of securities as required by 
Federal Tax Regulations (26 CFR 1.6049-4). Fees may be paid as set 
out in Sec.  321.23.
    23. Claims on account of lost securities. [Sec.  321.24] If a 
security redeemed by an agent is lost, stolen, or destroyed while in 
the custody of the agent, or in transit prior to settlement or 
audit, relief will be considered, provided the security can be 
identified by serial number. [See paragraph 16 of this Appendix 
regarding the maintenance of records of redeemed securities.] The 
agent should resubmit a facsimile of the security to obtain 
settlement in accordance with established procedures. Questions 
concerning the established procedures should be referred to a TRS 
Site.
* * * * *
    25. Payment and retention of definitive securities. [Sec.  
321.25] The definitive security must be presented to the agent in 
order to receive payment. An agent is prohibited from accepting an 
image, or other copy or reproduction of the definitive security, for 
redemption or processing. To ensure that all transactions processed 
by agents are properly validated, agents must establish and comply 
with a retention period for definitive securities that are truncated 
and converted to an electronic image. At a minimum, the agent must 
retain such definitive securities for a period of thirty calendar 
days following the date that the agent submitted the electronic 
image of the paid security to a Federal Reserve Processing Site. 
Agents may establish longer retention periods for definitive 
securities at their discretion.
    (a) Example: if the agent paid the presenter of a security on 
May 7, 2012, and submitted the security's electronic image to a 
Federal Reserve Processing Site on May 11, 2012, then the retention 
requirements would obligate the agent to retain the definitive 
security, at a minimum, until June 10, 2012.
    (b) During the specified retention period, agents must store the 
securities under

[[Page 16169]]

suitably secured conditions that safeguard customer information. 
Specifically, the securities must be stored in a secured location 
with physical, procedural, and systemic controls in place to ensure 
that access to the securities is restricted to authorized personnel 
and that the securities are protected from loss, theft, destruction, 
and unauthorized or inadvertent viewing.
    (c) At the end of the retention period, agents must destroy the 
securities in a manner that safeguards customer information. 
Specifically, securities must be destroyed by burning, mulching, 
pulping, pulverizing, or shredding beyond recognition and 
reconstruction.
    26. Additional information. [Sec.  321.26] Requests for 
additional advice, clarification of the payment regulations or this 
Appendix, and other matters relating to the actions of a financial 
institution as paying agent should generally be made to a TRS Site.

PART 330--REGULATIONS GOVERNING PAYMENT UNDER SPECIAL ENDORSEMENT 
OF DEFINITIVE UNITED STATES SAVINGS BONDS AND UNITED STATES SAVINGS 
NOTES (FREEDOM SHARES)

0
21. The authority citation for part 330 continues to read as follows:

    Authority:  5 U.S.C. 301; 31 U.S.C. 3105.


0
22. Revise Sec.  330.0 to read as follows:


Sec.  330.0  Purpose.

    The regulations in this part establish a procedure under which 
qualified paying agents may specially endorse definitive United States 
Savings Bonds of certain series and United States Savings Notes 
(Freedom Shares), and either redeem the securities so endorsed, or 
forward them to a TRS Site for redemption, with or without the owner's 
signature to the request for payment.

0
23. Amend Sec.  330.1 by:
0
a. Removing the paragraph designations and arranging the defintions in 
alphabetical order;
0
b. Removing the definition for ``Federal Reserve Bank or Bank'';
0
c. Adding the definitions of ``Definitive security,'' ``Federal Reserve 
Processing Site,'' and ``Federal Reserve Treasury Retail Securities 
Site or TRS Site''; and
0
d. Revising the definitions of ``Savings bond(s) or bond(s),'' 
``Security or securities,'' and ``Special endorsement''.
    The additions and revisions read as follows:


Sec.  330.1  Definition of terms.

* * * * *
    Definitive security means a Treasury security held in paper form.
* * * * *
    Federal Reserve Processing Site means a Federal Reserve Bank 
(including any Branch or office thereof, as appropriate) referred to in 
31 CFR part 321, to which the paying agent, or institution acting on 
its behalf, is instructed to transmit redeemed securities for payment 
pursuant to the Federal Reserve Operating Circular.
    Federal Reserve Treasury Retail Securities Site or TRS Site means a 
Federal Reserve Bank (including any Branch or office thereof, as 
appropriate) referred to in 31 CFR part 321, that is authorized to 
qualify paying agents, provide customer service, and provide other 
fiscal agency services under the provisions of this part. See Sec.  
330.9.
* * * * *
    Savings bond(s) or bond(s) means a definitive United States Savings 
Bond of Series A, B, C, D, E, EE, or I.
* * * * *
    Security or securities means a savings bond or savings note, as 
defined in paragraphs (h) and (i) of this section.
    Special endorsement means a procedure under which a security is 
redeemed by an agent, qualified under the provisions of this part, for 
cash or on redemption-exchange (or forwarded for redemption to a TRS 
Site), utilizing a special stamp placed on the security in lieu of a 
request for payment signed by the owner.

0
24. Amend Sec.  330.3 by revising the first sentence of the endorsement 
in paragraph (a) and revising paragraph (b) to read as follows:


Sec.  330.3  Special endorsement of securities.

    (a) * * *
    Request by owner and validity of transaction guaranteed in 
accordance with Treasury Department Circular No. 888, as revised. 
(Name, location and paying agent code number assigned by a TRS Site.)
* * * * *
    (b) Endorsement stamps. Endorsement stamps may be obtained from a 
TRS Site or, with its approval, purchased by the agent. Requests for 
stamps to be furnished or approved by a TRS Site must be made in 
writing by an officer of the paying agent. Stamps procured by an agent 
may not exceed a space bounded by 1\3/4\ inches vertically and 3 inches 
horizontally. They must follow exactly the wording prescribed. They may 
also include space for the transaction date and the initials or 
signature of the officer or employee authorized to approve the 
transaction.
* * * * *

0
25. Revise Sec.  330.4 to read as follows:


Sec.  330.4  Guaranty given to the United States.

    By the act of paying or submitting to any Federal Reserve 
Processing Site, any TRS Site, or any Treasury office authorized to 
redeem securities, a security on which it has affixed the special 
endorsement, a paying agent shall be deemed to have:
    (a) Unconditionally guaranteed to the United States the validity of 
the transaction, including the identification of the owner and the 
disposition of the proceeds or the new bonds, as the case may be, in 
accordance with the presenter's instruction;
    (b) Assumed complete and unconditional liability to the United 
States for any loss which may be incurred by the United States as a 
result of the transaction; and
    (c) Unconditionally agreed to make prompt reimbursement for the 
amount of any loss, upon request of the Department of the Treasury.

0
26. Amend Sec.  330.6, by revising paragraph (c) to read as follows:


Sec.  330.6  Securities eligible for special endorsement.

* * * * *
    (c) Securities owned by nonresident aliens. As securities owned by 
a nonresident alien individual, or a nonresident foreign corporation, 
partnership, or association, may be subject to the nonresident alien 
withholding tax, bonds and notes held or received by an agent for the 
account of such owners must be forwarded to a TRS Site for redemption, 
even though the agent may specially endorse the securities.

0
27. Amend Sec.  330.7 by removing the last two sentences of the section 
and adding a new last sentence to read as follows:


Sec.  330.7  Payment or redemption-exchange by agent.

    * * * Securities so paid should be combined with other securities 
paid under that Circular and presented for settlement in accordance 
with 31 CFR part 321.

0
28. Revise Sec.  330.8 to read as follows:


Sec.  330.8  Payment or redemption-exchange by a TRS Site.

    Specially endorsed securities that an agent is not authorized to 
redeem for cash or on exchange should be forwarded to a TRS Site in 
accordance with the instructions set forth in 31 CFR part 321. The 
transmittals must be accompanied by appropriate instructions governing 
the transaction and the disposition of the redemption proceeds. The 
securities must be kept

[[Page 16170]]

separate from other securities the agent has paid and must be submitted 
in accordance with instructions issued by the Bureau of the Public Debt 
and/or its fiscal agents.

0
29. Revise Sec.  330.9 to read as follows:


Sec.  330.9  Fiscal agents.

    Federal Reserve Banks (including any Branch or office thereof, as 
appropriate) perform services as fiscal agents of the United States. 
These Federal Reserve Banks shall perform such services in connection 
with this part as may be requested by the Secretary of the Treasury, or 
a designee. These Federal Reserve Banks are authorized and directed to 
perform such duties, including the issuance of supplemental 
instructions and forms, as may be necessary to fulfill the purposes and 
requirements of these regulations. The instructions and guidance issued 
pursuant to Sec.  321.27 set forth each Federal Reserve Bank that has 
been designated as a Federal Reserve Processing Site or as a TRS Site 
by the Secretary of the Treasury, or a designee.

Richard L. Gregg,
Fiscal Assistant Secretary.
[FR Doc. 2012-6351 Filed 3-19-12; 8:45 am]
BILLING CODE 4810-39-P


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