65700 Federal Register / Vol. 65, No. 212 / Wednesday, November 1, 2000 / Rules and Regulations

DEPARTMENT OF THE TREASURY

Fiscal Service

31 CFR Parts 355 and 358

Fiscal Agency Checks and Book-Entry

Conversion of Detached Bearer

Coupons and Bearer Corpora

AGENCY: Bureau of the Public Debt,

Fiscal Service, Treasury.

ACTION: Final rule.

SUMMARY: We rewrote Regulations

Governing Fiscal Agency Checks and

Regulations Governing Book-Entry

Conversion of Detached Bearer Coupons

and Bearer Corpora, in plain language.

We also made two changes in the

regulations. We removed references to

the Federal Reserve Bank of New York

as the processor for bearer corpora and

coupons, and we eliminated the fees

requirement for conversions.

DATES: Effective November 1, 2000.

ADDRESSES: You can download this final

rule at the following World Wide Web

address: <http://

www.publicdebt.treas.gov>.

FOR FURTHER INFORMATION CONTACT:

• Maureen Parker, Director, Division of

Securities Systems, Office of

Securities and Accounting Services,

Bureau of the Public Debt, at (304)

480–7761 or

<mparker@bpd.treas.gov>.

• Susan Klimas, Attorney-Adviser,

Office of the Chief Counsel, Bureau of

the Public Debt, at (304) 480–3688 or

<sklimas@bpd.treas.gov>.

• Edward Gronseth, Deputy Chief

Counsel, Bureau of the Public Debt, at

(304) 480–3692 or

<egronset@bpd.treas.gov>.

SUPPLEMENTARY INFORMATION: Executive

Order 12866 and the President’s

memorandum of June 1, 1998 (63 FR

31885) require each agency to write all

rules in plain language. We have

rewritten 31 CFR part 355, Regulations

Governing Fiscal Agency Checks, and

31 CFR part 358, Regulations Governing

Book-Entry Conversion of Detached

Bearer Coupons and Bearer Corpora, in

plain language.

No substantive changes were made to

part 355 which was originally published

as an interim regulation in 1985. This

final rule will adopt part 355 in a final

form.

Part 358 has been changed to remove

references to the Federal Reserve Bank

of New York as the agent for the

conversion to book-entry of bearer

corpora and detached bearer coupons

because the Bureau of the Public Debt

will process the conversions at its

Parkersburg, WV location.

Fees for conversions of corpora and

coupons have been eliminated. The

collection of fees is not cost-effective

and is counter-productive to our goal of

eliminating paper securities.

Procedural Requirements

This final rule does not meet the

criteria for a ‘‘significant regulatory

action,’’ as defined in Executive Order

12866. Therefore, the regulatory review

procedures contained therein do not

apply.

This final rule relates to matters of

public contract and procedures for

United States securities. The notice and

public procedures requirements and

delayed effective date requirements of

the Administrative Procedure Act are

inapplicable, pursuant to 5 U.S.C.

553(a)(2).

As no notice of proposed rulemaking

is required, the Regulatory Flexibility

Act (5 U.S.C. 601, et seq.) does not

apply.

We ask for no new collections of

information in this final rule. Therefore,

the Paperwork Reduction Act (44 U.S.C.

3507) does not apply.

List of Subjects in 31 CFR Parts 355 and

358

Federal Reserve System, Government

securities.

Accordingly, for the reasons set out in

the preamble, 31 CFR Chapter II is

amended as follows:

1. Revise 31 CFR part 355 to read as

follows:

PART 355—REGULATIONS

GOVERNING FISCAL AGENCY

CHECKS

Sec.

355.0 What does this part cover?

355.1 Do any other regulations cover fiscal

agency checks?

355.2 What special terms do I need to know

to understand this part?

355.3 Where can I cash my fiscal agency

check?

355.4 Is there a time limit on cashing a

fiscal agency check?

355.5 What warranties does a presenting

bank make?

355.6 What happens if the presenting bank

breaches its warranty?

355.7 What notice should I give if I do not

receive my check or if a check is lost,

stolen, or destroyed?

355.8 How can I get a replacement fiscal

agency check?

355.9 What should I do if I recover a check

reported as lost, stolen, destroyed, or not

received?

355.10 What happens if I present my check

to the payor Reserve Bank more than six

months after the issue date of the check?

355.11 What should I do if the endorsement

on my check is forged or unauthorized?

355.12 What requirements apply if the

check is payable to two or more persons?

355.13 Are there any additional

requirements related to fiscal agency

checks?

355.14 Can these regulations be waived?

355.15 Can these regulations be amended?

Authority: 12 U.S.C. 391; 31 U.S.C. Ch. 31.

§ 355.0 What does this part cover?

This part governs checks issued for

payments in connection with United

States securities. These checks, referred

to as ‘‘fiscal agency checks,’’ are issued

by a designated Federal Reserve Bank in

its capacity as fiscal agent of the United

States. The checks are drawn on the

payor Federal Reserve Bank in its

banking capacity. The drawer of a fiscal

agency check is the United States, and

the drawee is a Federal Reserve Bank.

The rights and liabilities of the United

States, the Federal Reserve Banks, and

others are set out in this part.

§ 355.1 Do any other regulations cover

fiscal agency checks?

The regulations governing checks

drawn on the United States and on

designated depositories of the United

States do not apply to fiscal agency

checks, unless a statute specifically

provides differently, or unless we state

differently in this part. If a definition or

matter pertaining to fiscal agency checks

is not specifically covered in this part,

we will apply the provisions of

Regulations J of the Board of Governors

of the Federal Reserve System, at 12

CFR part 210. To the extent not

otherwise covered by this part or by

Regulation J, we will apply the

provisions of the Uniform Commercial

Code (U.C.C.)

§ 355.2 What special terms do I need to

know to understand this part?

Depository institution means:

(1) Any insured bank, mutual savings

bank or savings bank as defined in 12

U.S.C. 1813, or any institution eligible

to become an insured bank under 12

U.S.C. 1815;

(2) Any insured credit union as

defined in 12 U.S.C. 1752, or any credit

union eligible to become an insured

credit union under 12 U.S.C. 1781;

(3) Any member as defined in 12

U.S.C. 1422; and

(4) Any savings association as defined

in 12 U.S.C. that is an insured

depository institution as defined in the

Federal Deposit Insurance Act, 12

U.S.C. 1811 et seq., or is eligible to

become an insured depository

institution under that Act.

Fiscal agency check means a check for

a payment in connection with a United

States security drawn upon a Reserve

Bank and issued on our behalf by the

Reserve Bank in its capacity as fiscal

agent of the United States.

Federal Register / Vol. 65, No. 212 / Wednesday, November 1, 2000 / Rules and Regulations 65701

Payee (or ‘‘you’’) means the person or

persons to whom a fiscal agency check

is made payable.

Payor Reserve Bank means the

Reserve Bank on which a fiscal agency

check is drawn.

Presenting bank means a depository

institution that sends a fiscal agency

check directly to a Reserve Bank for

payment or collection.

Reserve Bank or Federal Reserve Bank

means any Federal Reserve Bank or any

branch of a Federal Reserve Bank.

Security, for the purpose of this part,

means a direct obligation of the United

States, including a Treasury bill, note,

bond or savings bond/note.

We (or ‘‘us’’) refers to the Secretary of

the Treasury and the Secretary’s

delegates at the Treasury Department

and the Bureau of the Public Debt. The

term also extends to any fiscal or

financial agency acting on behalf of the

United States when designated to act by

the Secretary or the Secretary’s

delegates. The term does not refer to a

United States Savings Bond issuing or

paying agent.

§ 355.3 Where can I cash my fiscal agency

check?

Presentment of a fiscal agency check

must be made to the payor Reserve

Bank. The payor Reserve Bank will only

cash a fiscal agency check presented by

the payee who can be identified to the

satisfaction of the Reserve Bank.

Otherwise, a fiscal agency check must

be presented through banking channels.

A refusal to accept or to pay fiscal

agency check presented by a person

other than the payee, or by a payee who

is not reasonably identified, does not

constitute dishonor.

§ 355.4 Is there a time limit on cashing a

fiscal agency check?

A payor Reserve Bank may refuse to

pay a fiscal agency check presented

more than six (6) months after the issue

date of the check. If the check is not

presented within this time, you must

follow the procedures in § 355.10.

§ 355.5 What warranties does a presenting

bank make?

(a) A presenting bank makes the

warranties required of a sender under

Subpart A of Regulation J (12 CFR part

210). This paragraph does not limit any

warranty by a presenter or other party

arising under State law.

(b) We are not barred from recovering

on a breach of warranty solely because:

(1) Our negligence contributed to a

fraudulent endorsement or material

alteration;

(2) We did not promptly discover an

unauthorized signature or alteration;

(3) An impostor fraudulently caused

the issuance of a fiscal agency check in

the name of any existing payee; or

(4) Our employee fraudulently caused

the issuance of a fiscal agency check in

the name of any existing payee.

§ 355.6 What happens if the presenting

bank breaches its warranty?

If the presenting bank breaches its

warranty, the payor Reserve Bank may

either return the check to the presenting

bank or send notice of the breach to the

presenting bank. If the presenting bank

does not make prompt restitution when

it receives the returned check or notice

of breach, we may begin appropriate

collection procedures.

§ 355.7 What notice should I give if I do

not receive my check or if a check is lost,

stolen, or destroyed?

If a fiscal agency check is not received

within a reasonable time after a

payment is due, or if a check is lost,

stolen, or destroyed, you must provide

prompt written notification. Your

written notice may be sent to us or to

the payor Reserve Bank. You may give

notice by telephone, but we will not

issue a replacement check until you

confirm the notice in writing. The

written notice must provide enough

information for us to identify the

account and the security to which the

payment relates. We will stop payment

on the fiscal agency check if we have a

reasonable time to act before final

payment.

§ 355.8 How can I get a replacement fiscal

agency check?

The payor Federal Reserve Bank will

issue a replacement fiscal agency check

if:

(a) You submit written notice:

(b) The check is unpaid;

(c) We determine that recovery of the

original check is unlikely; and

(d) The payee and endorsee, if any, of

the check execute the required

indemnification agreement.

§ 355.9 What should I do if I recover a

check reported as lost, stolen, destroyed, or

not received?

If you recover the original check you

must notify us in writing. If we have not

yet issued a replacement check, we will

remove the stop payment order against

the original check. If we have already

issued a replacement check, you must

return the original check to us.

§ 355.10 What happens if I present my

check to the payor Reserve Bank more than

six months after the issue date of the

check?

If the payor Reserve Bank refuses

payment on a fiscal agency check solely

because it is presented more than six (6)

months after the issue date of the check,

a replacement check will be issued if

you:

(a) Surrender the original check; and

(b) Executive the required

indemnification agreement.

§ 355.11 What should I do if the

endorsement on my check is forged or

unauthorized?

If we verify the existence or a forged

or unauthorized endorsement on a paid

fiscal agency check, the payor Reserve

Bank will issue a replacement check to

the person entitled. The payee or

endorsee must execute an affidavit that

there has been a forged or unauthorized

endorsement. We may also require an

indemnification agreement.

§ 355.12 What requirements apply if the

check is payable to two or more persons?

If the fiscal agency check is payable

to two or more persons, the

requirements of this part apply to all

designated payees.

§ 355.13 Are there any additional

requirements related to fiscal agency

checks?

We may require an indemnification

agreement, with or without surety. You

must provide any additional evidence

we consider necessary. We will require

any information necessary for the

protection of the interests of the United

States.

§ 355.14 Can these regulations be waived?

We reserve the right, in our

discretion, to waive any provision of the

regulations in this part in any case or

class of cases for the convenience of the

United States, or to relieve any person

of unnecessary hardship, if the waiver is

not inconsistent with law and will not

subject the United States to substantial

expense or liability.

§ 355.15 Can these regulations be

amended?

We may, at any time, supplement,

amend, or revise the regulations in this

part.

1. Revise 31 CFR part 358 to read as

follows:

PART 358–REGULATIONS

GOVERNING BOOK—ENTRY

CONVERSION OF BEARER CORPORA

AND DETACHED BEARER COUPONS

Sec.

358.0 What does this part cover?

358.1 What special terms apply to this part?

358.2 What regulations cover these

securities?

358.3 Are there any bearer corpora or

detached bearer coupons that are not

eligible for conversion?

358.4 Which bearer corpora or detached

bearer coupons are eligible for

65702 Federal Register / Vol. 65, No. 212 / Wednesday, November 1, 2000 / Rules and Regulations

conversion to transferable BECCS or

CUBES securities?

358.5 Which bearer corpora or detached

bearer coupons are eligible for

conversion to non-transferable BECCS or

CUBES securities?

358.6 What is the procedure for converting

bearer corpora and detached bearer

coupons to book-entry?

358.7 Where do I send my bearer corpora

and detached bearer coupons to be

converted?

358.8 Are there fees for the conversion of

bearer corpora or detached bearer

coupons?

358.9 Who is responsible for the cost and

risks associated with the shipment of

securities?

358.10 How are amounts of less than one

dollar credited?

358.11 What is required to establish the

authroity of a depository institution to

request conversion?

358.12 What is Treasury’s liability if the

depository institution does not have

authority to convert securities?

358.13 What is Treasury’s liability if the

depository institution incurs a loss

because it does not follow required

procedures?

358.14 What happens when securities are

accepted for conversion?

358.15 What happens if securities are

adjusted?

358.16 Are BECCS and CUBES accounts

maintained separately from the STRIPS

program?

358.17 Can BECCS and CUBES securities be

reconstituted to physical form?

358.18 What limitations exist on liability?

358.19 Who is responsible for any loss

resulting from the conversion of a bearer

corpus missing callable coupons?

358.20 Can these regulations be waived?

358.21 Can these regulations be amended?

Authority: 12 U.S.C. 391, 31 U.S.C. Ch. 31.

§ 358.0 What does this part cover?

(a) This part applies to the conversion

to book-entry of United States Treasury

bearer corpora and detached bearer

coupons.

(b) These instruments are accepted

from depository institutions for

conversion under the Bearer Corpora

Conversion System (BECCS) and

Coupons Under Book Entry Safekeeping

(CUBES) programs.

(1) For coupons converted after

November 1, 2000, these regulations

supersede the terms and conditions

governing CUBES set forth in the

written ‘‘Agreements to the Terms and

Conditions Governing CUBES’’ signed

by depository institutions that

previously participated in the CUBES

program.

(2) Depository institutions that submit

bearer corpora and detached bearer

coupons are deemed to agree to the

terms and conditions in this part and

any other requirements we may

prescribe.

§ 358.1 What special terms apply to this

part?

Bearer security means a definitive

security payable to the bearer on its face

at maturity or when called for

redemption before maturity in

accordance with its terms. Ownership of

a bearer security is not recorded. Title

to the security may pass by delivery

without endorsement or notice. The

only remaining unmatured bearer

securities are bearer bonds.

BECCS means the Treasury’s Bearer

Corpora Conversion System.

BECCS security means a United States

Treasury bearer security converted to

book-entry form and held in BECCS.

Callable means a United States

Treasury security subject to call before

maturity.

Callable Coupons means the coupons

associated with a callable security that

are due after the date the security is

subject to call.

Conversion, as used in this part,

means a change in the form of a security

from definitive form to book-entry form.

Corpus (plural corpora) means the

principal portion of a United States

Treasury bearer security.

Coupon means a definitive bearer

interest instrument associated with a

United States Treasury bearer security.

CUBES means the Treasury’s Coupon

Under Book-Entry Safekeeping program.

CUBES security means a definitive

coupon detached from a United States

Treasury security and held in CUBES.

Definitive security means a security

held in paper form.

Depository institution means:

(1) Any insured bank, mutual savings

bank, or savings bank as defined in 12

U.S.C. 1813, or any institution eligible

to become an insured bank under 12

U.S.C. 1815;

(2) Any insured credit union as

defined in 12 U.S.C. 1752, or any credit

union eligible to become an insured

credit union under 12 U.S.C. 1781;

(3) Any member as defined in 12

U.S.C. 1422; and

(4) Any savings association as defined

in 12 U.S.C. that is an insured

depository institution as defined in the

Federal Deposit Insurance Act, 12

U.S.C. 1811 et seq., or is eligible to

become an insured depository

institution under that Act.

Non-callable means a United States

Treasury bearer security not subject to

call before maturity.

Non-callable coupons means coupons

associated with a non-callable bearer

security or coupons associated with a

callable bearer security that are due on

or before the date on which the callable

bearer security is subject to call.

Non-transferable means the

ownership of a security held in BECCS

or CUBES may not be transferred. See

§ 358.5.

Transferable means the ownership of

a security held in BECCS or CUBES may

be transferred. See § 358.4 of this part.

We (or ‘‘us’’) refers to the Secretary of

the Treasury and the Secretary’s

delegates at the Treasury Department

and the Bureau of the Public Debt. The

term also extends to any fiscal or

financial agent we designate to act on

behalf of the United States.

§ 358.2 What regulations cover these

securities?

BECCS and CUBES securities are

deemed to be securities for the purposes

of 31 CFR part 357, subparts A, B, and

D, and are governed by that part.

Notwithstanding the provisions of 31

CFR part 357, certain BECCS and

CUBES securities are non-transferable.

See § 358.5.

§ 358.3 Are there any bearer corpora or

detached bearer coupons that are not

eligible for conversion?

Bearer corpora and detached bearer

coupons will not be accepted if they are

submitted:

(a) Within 30 days of their maturity

date; or

(b) If the call provision has been

invoked, within 30 days of their call

date.

§ 358.4 Which bearer corpora or detached

bearer coupons are eligible for conversion

to transferable BECCS or CUBES

securities?

(a) For a callable corpus to be eligible

for conversion to a transferable BECCS

security, all associated callable coupons

must be submitted with the corpus.

These callable coupons will be linked

with the corpus within BECCS when

converted. Once the coupons are linked

to the corpus, they may not be

transferred separately.

(b) A corpus that is not subject to call

will be converted to a transferable

BECCS security.

(c) Non-callable coupons will be

converted to transferable CUBES

securities.

§ 358.5 Which bearer corpora or detached

bearer coupons are eligible for conversion

to non-transferable BECCS or CUBES

securities?

If all of the callable coupons

associated with the corpus are not

submitted with the corpus, the corpus

will be converted to a non-transferable

BECCS security. Any remaining callable

coupons submitted with the corpus will

be converted to individual nontransferable CUBES securities.

Federal Register / Vol. 65, No. 212 / Wednesday, November 1, 2000 / Rules and Regulations 65703

§ 358.6 What is the procedure for

converting bearer corpora and detached

bearer coupons to book-entry?

Bearer corpora and detached bearer

coupons must be submitted in

accordance with our procedures. They

must be accompanied by an approved

form executed by an authorized officer

of the submitting depository institution.

Until we verify the submission, the

bearer corpora and detached bearer

coupons are subject to rejection or

adjustment.

§ 358.7 Where do I send my bearer corpora

and detached bearer coupons to be

converted?

Send bearer corpora and detached

bearer coupons to be converted to:

Bureau of the Public Debt, Division of

Customer Service, P. O. Box 426,

Parkersburg, WV 26106–0426.

§ 358.8 Are there fees for the conversion

of bearer corpora or detached bearer

coupons?

We do not charge fees for the

conversion of bearer corpora or

detached bearer coupons to BECCS or

CUBES securities.

§ 358.9 Who is responsible for the cost

and risks associated with the shipment of

securities?

The following guidelines apply to the

transportation of bearer corpora and

detached bearer coupons:

(a) Shipment from the depository

institution is at the risk and expense of

the depository institution;

(b) Shipment between our designated

agent and the Department, if required, is

at our risk and expense; and

(c) Shipment of securities that are

returned to the depository institution is

at the risk and expense of the depository

institution.

§ 358.10 How are amounts of less than one

dollar credited?

Only full dollar amounts can be held

in CUBES; principal amounts that

include cents cannot be held in CUBES.

Upon the conversion of coupons to

CUBES, amounts of less than one dollar

in aggregate per CUBES CUSIP will not

be credited to the account of the

depository institution.

Example: A depository institution submits

five coupons with face amount of $346.88

each, and a total dollar amount of $1,734.40.

Upon conversion of these coupons to CUBES,

only $1,734.00 will be credited to the

depository institution’s account.

§ 358.11 What is required to established

the authority of a depository institution to

request conversion?

By submitting bearer corpora and

detached bearer coupons for conversion

to BECCS and CUBES securities, a

depository institution represents that it

has the authority to request the

conversion.

§ 358.12 What is Treasury’s liability if the

depository institution does not have

authority to convert securities?

We are not liable if the depository

institution has no authority to convert

the bearer corpora and detached bearer

coupons to book-entry form or to take

other actions in respect to book-entry

accounts in BECCS and CUBES.

§ 358.13 What is Treasury’s liability if the

depository institution incurs a loss because

it does not follow required procedures?

We are not liable for any loss incurred

by the depository institution as a result

of its failure to properly follow our

procedures.

§ 358.14 What happens when securities

are accepted for conversion?

(a) After processing and initial

verification, we will transfer the

securities accepted to the depository

institution’s book-entry account,

establishing a securities entitlement in

TRADES according to 31 CFR part 357

subpart B.

(b) We will do the final verification

within twenty (20) business days of

initial receipt of the bearer corpora and

detached bearer coupons.

(c) If at any time after this twenty (20)

day period we determine that the

security was improperly credited to the

BECCS or CUBES account of the

depository institution, such as in the

case of a previously undetected,

counterfeit security, we reserve the right

to adjust the BECCS or CUBES account.

§ 358.15 What happens if securities are

adjusted?

(a) If we make an adjustment to all or

part of the submitted securities, we will

instruct the depository institution to

transfer BECCS or CUBES securities of

the same payment date and face amount

from the depository institution’s

account to an account that we designate.

(b) If no such BECCS or CUBES

securities exist in the depository

institution’s account, we will instruct

the depository institution as to how the

adjustment will be made.

(c) If the depository institution fails to

comply with our instructions within

five (5) business days of receipt of the

instructions, we reserve the right to

debit the master account of the

depository institution for the face value

of the adjusted bearer corpora and

detached bearer coupons. By the

submission of the bearer corpora and

detached bearer coupons, the depository

institution is deemed to agree to this

debit.

§ 358.16 Are BECCS and CUBES accounts

maintained separately from the STRIPS

program?

BECCS and CUBES accounts are

maintained separately from accounts

maintained in Treasury’s STRIPS

(Separate Trading of Registered Interest

and Principal of Securities) program.

§ 358.17 Can BECCS and CUBES

securities be reconstituted to physical

form?

After bearer corpora and detached

bearer coupons have been converted to

book-entry form, reconversion to

physical form is prohibited. The

reconstitution of a BECCS security with

CUBES securities or any combination of

Treasury obligations is prohibited.

§ 358.18 What limitations exist on liability?

(a) Except as otherwise provided by

regulation, circular, or written

agreement, any fiscal agent designated

to act on our behalf is liable for its

action or omission only if it failed to

exercise ordinary care.

(b) We do not assume any

responsibility to any party except the

sending and receiving depository

institutions involved in a BECCS or

CUBES transaction.

(c) We do not assume any

responsibility in connection with a

BECCS or CUBES transaction for the

insolvency, neglect, misconduct,

mistake, or default of another bank or

person, including the immediate

participants.

65704 Federal Register / Vol. 65, No. 212 / Wednesday, November 1, 2000 / Rules and Regulations

§ 358.19 Who is responsible for any loss

resulting from the conversion of a bearer

corpus missing callable coupons?

The submitting depository institution

shall indemnify the United States

against any loss resulting from the

conversion of a bearer corpus that is

missing one or more associated callable

coupons.

§ 358.20 Can these regulations be waived?

We reserve the right to waive or

modify any provision of the regulations

in this part for the convenience of the

United States or to relieve any person of

unnecessary hardship, if such action is

not inconsistent with law, does not

impair existing rights, and does not

subject the United States to any

substantial expense or liability.

§ 358.21 Can these regulations be

amended?

We may at any time supplement,

amend, or revise the regulations in this

part.

Dated: October 24, 2000.

Donald V. Hammond,

Fiscal Assistant Secretary.

[FR Doc. 00–27920 Filed 10–31–00; 8:45 am]

BILLING CODE 4810–39–M