Federal Register / Vol. 65, No. 10 / Friday, January 14, 2000 / Notices 2449

1 15 U.S.C. 78s(b)(1).

will be reallocated to the corresponding

Substituted Portfolios. Contract owners

can always exercise their own judgment

as to the most appropriate alternative

investment and transfer their assets

from the Eliminated Portfolios to any

one or a mix of the remaining subaccounts available under their

Contracts. Applicants note that, even

after the Substitution, the Contracts will

continue to offer a wide array of

investment options having diverse

investment objectives. No sales load

deductions or other charges will be

assessed in connection with any

transfers among sub-accounts because of

the Substitution.

18. By way of sticker, the Schwab

Variable Annuity prospectuses have

disclosed the proposed Substitution for

several months. The stickers also

disclosed that the Eliminated Portfolios

will not accept additional premium

payments (i.e. new money or transfers)

on or after June 1, 1999, and that

contract values allocated to the

Eliminated Portfolios can be transferred

without assessment of any charges and

without such transfers counting toward

the twelve free transfers permitted each

calendar year. These stickers were

mailed to all Contract owners at or

around the time of filing of the initial

Application. After the Notice of

Application is issued, a second

notification will be provided to all

Contract owners who have amounts

allocated to the Eliminated Portfolios,

again advising them of the pending

Substitution and of their ability to

transfer free of charge to the remaining

sub-accounts of their choice (or remain

in the Eliminated Portfolios until the

automatic substitution on the Automatic

Selection Date).

19. The Contract owners also will be

mailed a confirmation of the

Substitution transaction within five

days of the Automatic Selection Date.

The confirmation will contain a

reminder of the Contract owner’s ability

to effect one transfer without incurring

any charges, and such transfer will not

be counted as one of the twelve free

transfers permitted in a calendar year so

long as the transfer is made within 30

days of the effective date of the

Substitution.

20. Applicants represent that the

proposed Substitution will be effected

by redeeming shares of the Eliminated

Portfolios on the Automatic Selection

Date at net asset value and using the

proceeds to purchase shares of the

corresponding Substituted Portfolio at

net asset value on the same date.

Contract owners will not incur any fees

or charges as a result of the transfer of

account values from the Eliminated

Portfolios. The Substitution will not

increase Contract or separate account

fees and charges after the Substitution.

Expenses incurred in connection with

the Substitution, including legal,

accounting and other expenses, will not

be borne by Contract owners. Contract

values will remain unchanged and fully

invested following the consummation of

the Substitution. In addition, Applicants

represent that, as of the date of filing of

the second amended Application, and to

Applicants’ best knowledge, the

Substitution will not result in any

adverse federal income tax impact on

owners. Following the Substitution, the

sub-accounts which invest in the

Eliminated Portfolios will be

terminated.

Applicant’s Legal Analysis and

Conditions

1. Section 26(b) of the 1940 Act

provides that it shall be unlawful for

any depositor or trustee of a registered

unit investment trust holding the

security of a single issuer to substitute

another security for such security unless

the Commission shall have approved

such substitution; and the Commission

shall issue an order approving such

substitution if the evidence establishes

that it is consistent with the protection

of investors and the purposes fairly

intended by the policies and provisions

of the 1940 Act.

2. Applicants request an order

pursuant to Section 26(b) of the 1940

Act approving the substitution of

securities.

3. Applicants represent that the

purposes, terms and conditions of the

Substitution are consistent with the

protections for which Section 26(b) was

designed and will not result in any of

the harms which Section 26(b) was

designed to prevent.

4. Any Contract owner who does not

want his or her assets allocated to the

Substituted Portfolio would be able to

transfer assets to any one of the other

investment divisions available under his

or her Contract without charge. Such

transfers could be made prior to or after

Automatic Selection Date.

5. The Substitution will be effected at

net asset value in conformity with

Section 22 of the 1940 Act and Rule

22c–1 thereunder. Contract owners will

not incur any fees or charges as a result

of the transfer of account values from

any Portfolio. There will be no increase

in the Contract or separate account fees

and charges after the Substitution. All

Contract values will remain unchanged

and fully invested. In addition,

Applicants represent that, as of the date

of filing the second amended

Application, and to Applicants’ best

knowledge, the Substitution will not

have any adverse federal income tax

impact on Contract owners. Contract

owners’, GWL&A’s, and FGWLA’s rights

and obligations under the Schwab

Contracts will not be affected in any

way by the Substitution.

Conclusion

In light of the foregoing facts and

representations, Applicants believe that

the request to allow the Substitution

meets the applicable standards of an

order under Section 26(b) of the 1940

Act.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–893 Filed 1–13–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–42323; File No. SR–DTC–

99–24]

Self-Regulatory Organizations; The

Depository Trust Company; Notice of

Filing of Proposed Rule Change

Relating to Collateralization

Procedures

January 7, 2000.

Pursuant to Section 19(b)(1) of the

Securities Exchange Act of 1934 1

(‘‘Act’’), notice is hereby given that on

October 27, 1999, The Depository Trust

Company (‘‘DTC’’) filed with the

Securities and Exchange Commission

(‘‘Commission’’) the proposed rule

change as described in Items I, II, and

III below, which items have been

prepared by DTC. The Commission is

publishing this notice to solicit

comments on the proposed rule change

from interested persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The proposed rule change would

revise DTC’s collateralization

procedures for situations where a

participant holds collateral associated

with the participant.

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

2450 Federal Register / Vol. 65, No. 10 / Friday, January 14, 2000 / Notices

2The Commission has modified the text of the

summaries prepared by DTC.

3 DTC’s current procedures relating to risk

management controls are set forth in memorandums

dated March 17, 1995, which are attached to Exhibit

3 to DTC’s filing.

4 DTC’s proposed collateralization procedures are

attached as Exhibit 2 to DTC’s filing.

comments it received on the proposed

rule change. The text of these statements

may be examined at the place specified

in Item IV below. DTC has prepared

summaries, set forth in sections (A), (B),

and (C) below, of the most significant

aspects of such statements.2

A. Self-Regulatory Organization’s

Statement of Purpose of, and Statutory

Basis for, the Proposed Rule Change

DTC employs risk management

controls to protect DTC and its

participants from the inability of one or

more participants to pay its settlement

obligation. One such control,

collateralization, is meant to ensure that

at all times a participant maintains

collateral in its account equal to or

greater than its net debit. If a participant

were to fail to pay its settlement

obligation, collateral in the failing

participant’s account would be used to

support any necessary borrowing and

potential liquidation.

On a small number of occasions, the

collateral in a participant’s account has

been associated with the participant (for

example, the participant’s own

commercial paper). In a situation where

a participant’s obligation is supported

partly or fully by its associated

securities, the risk that DTC would not

have sufficient collateral if that

participant were to fail to pay DTC its

settlement obligation is increased.

Although such incidents are infrequent,

DTC has reviewed its collateralization

procedures that it follows to protect

against a participant’s failure to settle

with DTC due to a financial or

operational problem with respect to

such situations.3 As a result of its

review, DTC is proposing to revise the

aforesaid procedures to provide for a

systemic monitor that will withhold

collateral value for collateral associated

with a participant.4

DTC believes that the proposed rule

change is consistent with the

requirements of Section 17A of the Act

and the rules and regulations

thereunder applicable to DTC because

the proposed rule change will facilitate

completion of daily money settlement at

DTC in the event of a participant’s

failure to settle with DTC. According to

DTC, the proposed rule change will be

implemented consistently with the

safeguarding of securities and funds in

DTC’s custody or control or for which

it is responsible because the

collateralization procedures supplement

DTC’s existing risk management

controls.

B. Self-Regulatory Organization’s

Statement on the Burden on

Competition

DTC perceives no adverse impact on

competition by reason of the proposed

rule change.

C. Self-Regulatory Organization’s

Statement Comments on the Proposed

Rule Change Received From Members,

Participants or Others

DTC discussed the proposed rule

change with several participants.

Written comments from DTC

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 Action

Within thirty-five 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.

Persons making written submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, NW,

Washington, DC 20549–0609. 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

Room in Washington, DC. Copies of

such filing will also be available for

inspection and copying at the principal

office of DTC. All submissions should

refer to File No. SR–DTC–99–24 and

should be submitted by February 4,

2000.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–980 Filed 1–13–00; 8:45 am]

BILLING CODE 8010–01–M

SOCIAL SECURITY ADMINISTRATION

Statement of Organization, Functions

and Delegations of Authority

This statement amends Part S of the

Statement of the Organization,

Functions and Delegations of Authority

which covers the Social Security

Administration (SSA). Notice is given

that Chapter S1 for the Office of the

Deputy Commissioner for Finance,

Assessment and Management (DCFAM)

is being amended to reflect a title

change and minor organizational

changes within the Office of Financial

Policy and Operations. The changes are

as follows:

Section S1N.10 The Office of Financial

Policy and Operations—

(Organization):

Retitle:

G. The Office of Systems Security

(S1NG) to the Office of Information

Systems Security (S1NG).

Section S1N.20 The Office of Financial

Policy and Operations—

(Functions):

Retitle and amend as follows:

G. The Office of Systems Security

(S1NG) to the Office of Information

Systems Security (S1NG).

The Office of Information Systems

Security directs, coordinates and

manages SSA’s overall information

systems security program. This includes

the development of SSA’s security

policy requirements and procedures, the

effective implementation of other

governing directives in the area of

security, the administration of an

effective access control program, an

onsite review program and a

comprehensive security compliance and

corrective action monitoring program. It

provides educational training and

awareness programs to management and

employees on security policy/

requirements; serves as the Agency focal

point for day-to-day contact with the

Office of Inspector General on matters of

fraud, waste and abuse; and provides

direction and guidance to the Agency’s

component and regional security

officers. The Office is also responsible