Federal Register / Vol. 60, No. 43 / Monday, March 6, 1995 / Notices 12259

4 If a transfer agent employs a processor to

perform the transfer agent’s duties in ATS, the

transfer agent and processor must enter into a

separate agreement obligating the processor to

perform the duties described in the Agreement. The

transfer agent must notify MSTC if there is any

material changed to the terms of the agreement

between the transfer agent and processor, if there

is a termination or anticipated termination of the

agreement, or if there is a breach of the agreement

or an event that will affect or might reasonably be

expected to affect the processor’s ability to perform

any of its obligations under the agreement. MSTC

only will permit a transfer agent to employ a

processor as its agent if the transfer agent represents

and warrants that it will bear any and all liability

and responsibility for all securities held by, all

actions taken by, and all obligations assigned to the

processor with the same force and effect as if the

securities were held by, the actions were taken by,

or the obligations were those of the transfer agent.

5The transfer agent may limit, decrease, or cancel

the blanket bond protection upon thirty days prior

notice of such action to MSTC.

6Before delivering the MSTC certificates with an

aggregate current market value in excess of the

maximum amount of the blanket bond, the transfer

agent may not create or maintain certificates, other

than any balance certificate, having a value in

excess of the blanket bond.

7 15 U.S.C. 78q–1(b)(3)(A) (1988). 8 17 CFR 200.20–3(a)(12) (1994).

previous balance plus any securities

received from MSTC to be registered in

the name Kray & Co. minus any

transfers and issuance of certificates in

a name other than Kray & Co. The

transfer agent will confirm in writing,

on a daily or other periodic basis as

MSTC may reasonably request, the

number of securities evidenced by each

balance certificate.

The obligations of the ATS transfer

agents and MSTC will be set forth in a

Balance Certificate Agreement

(‘‘Agreement’’) executed by each ATS

transfer agent and MSTC.4 The

Agreement provides that all shares or

units or the amount of any obligations

evidenced by the balance certificate

which come into possession of the

transfer agent pursuant to ATS will be

the sole property of MSTC. The transfer

agent will not obtain any legal or

equitable right, title, or interest in or to

such securities evidenced by the

balance certificates.

The Agreement also provides that

upon request from MSTC, the transfer

agent will be obligated to deliver, within

twenty-four hours, all securities

evidenced by a balanced certificate. If

the transfer agent determines that any

security held by it is lost, destroyed,

stolen, or otherwise unaccounted for,

the transfer agent must notify MSTC

immediately and issue a replacement

certificate.

The Agreement provides that the

transfer agent must maintain an

insurance policy in the form of a

customary banker’s blanket bond to

cover any securities received from

MSTC or held by the transfer agent

pursuant to ATS. The bond must be in

the maximum amount of one hundred

million dollars. The Agreement further

states that the transfer agent must

provide annually to MSTC’s satisfaction

evidence that such blanket bond or

comparable plan of insurance is in full

effect.5 When the transfer agent is

responsible for the shipment of

securities, the Agreement requires that

the transfer agent provides adequate

insurance coverage or require coverage

from the carrier to cover losses that

occur while in transit to and until

received by MSTC. The amount of

coverage must be equal to or exceed

110% of the fair market value of the

securities shipped. The transfer agent is

not obligated to delivery shares

evidenced by balance certificates within

twenty four hours of such a request from

MSTC if the aggregate value of the

shares to be delivered exceeds the

amount of the bankers blanket bond.

The transfer agent will instead deliver

or make available the certificates as

promptly as possible.6

Instructions from MSTC to register the

transfer of securities evidenced by a

balance certificate in a name other than

Kray & Co. will constitute a presentation

of the balance certificate to the transfer

agent under applicable law. The same

warranties that would apply if MSTC

physically presented the balance

certificate to the transfer agent will be

applicable in this instance.

MSTC believes the proposed rule

change is consistent with section

17A(b)(3)(A) of the Act 7 in that it

enhances MSTC’s ability to facilitate the

prompt and accurate clearance and

settlement of securities transactions for

which it is responsible and to safeguard

securities and funds in its custody or

control or for which it is responsible.

MSTC also believes the rule change

will further MSTC’s goal of minimizing

the exposure of securities to loss in

transit between MSTC and transfer

agents. The program will eliminate

needless movement of securities. Under

ATS, securities will be maintained in a

form that will no longer permit the

ready negotiation of the securities in the

event of theft.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

MSTC does not believe that the

proposed rule change will impose an

inappropriate burden on competition.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants or Others

Written comments were neither

solicited nor received.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Within thirty-five days of the date of

the 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 find such longer period to be

appropriate and publishes its reasons

for so finding or (ii) as to which MSTC

consents, the Commission will:

(a) By order approve such proposed

rule change or

(b) Institute proceedings to determine

whether the proposed rule change

would be disapproved.

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views, and

arguments concerning the forgoing.

Persons making written submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, NW.,

Washington, DC 20549. 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 persons, 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 will also be available for

inspection and copying at the principal

office of MSTC. All submissions should

refer to File No. SR–MSTC–94–21 and

should be submitted by March 27, 1995.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.8

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–5374 Filed 3–3–95; 8:45 am]

BILLING CODE 8010–01–M