55432 Federal Register / Vol. 70, No. 182 / Wednesday, September 21, 2005 / Notices 

1Section 3(a)(34) defines ‘‘appropriate regulatory 

authority’’ when used in the context of transfer 

agents as generally (1) the Comptroller of the 

Currency, in the case of a national bank or a bank 

or a subsidiary of such bank; (2) the Board of 

Governors of the Federal Reserve System or 

subsidiary thereof, a bank holding company or a 

subsidiary of a bank holding company; (3) the 

Federal Deposit Insurance Corporation; and (4) the 

Commission in the case of all other transfer agents. 

Section 17A(c)(1) also requires that the Commission 

not object to the use of exemptive authority in 

instances where an appropriate regulatory authority 

other than the Commission is providing exemptive 

relief. 

II. Requested Authority 

Black Hills, therefore, requests the 

Commission to permit it: 

1. To extend Black Hills’ time for 

certain filings with the Commission, 

from October 1, 2005, through February 

8, 2006, the effective date of the Act’s 

repeal (describing accounting systems 

and cost allocation methodologies); 

2. To extend the time for Black Hills’

full implementation of Black Hills 

Service, from December 28, 2005, 

through February 8, 2006, the effective 

date of the Act’s repeal (accounting 

systems and cost allocation 

methodologies); and 

3. To extend the time for Black Hills’

conversions of non-exempt marketbased rate affiliate transactions to costbased transactions from December 28, 

2005, through February 8, 2006, the 

effective date of the Act’s repeal. 

For the Commission, by the Division of 

Investment Management, pursuant to 

delegated authority. 

Jonathan G. Katz, 

Secretary. 

[FR Doc. 05–18817 Filed 9–20–05; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release Nos. 52444/September 15, 2005 

and 27067/September 15, 2005] 

Securities Exchange Act of 1934 and 

Investment Company Act of 1940; 

Order Under Section 17a and Section 

36 of the Securities Exchange Act of 

1934 Granting Exemptions From 

Specified Provisions of the Exchange 

Act and Certain Rules Thereunder; 

Order Under Section 6(c) and Section 

38(a) of the Investment Company Act 

of 1940 Granting Exemptions From 

Specified Provisions of the Company 

Act and Certain Rules Thereunder 

Section 36 of the Securities Exchange 

Act of 1934 (the ‘‘Exchange Act’’) 

authorizes the Securities and Exchange 

Commission (the ‘‘Commission’’), by 

rule, regulation, or order, to exempt, 

either conditionally or unconditionally, 

any person, security, or transaction, or 

any class or classes of persons, 

securities, or transactions, from any 

provision or provisions of the Exchange 

Act or any rule or regulation thereunder, 

to the extent that such exemption is 

necessary or appropriate in the public 

interest, and is consistent with the 

protection of investors. 

Section 17A(c)(1) of the Exchange Act 

provides that the appropriate regulatory 

agency, by rule or by order, upon its 

own motion or upon application, may 

conditionally or unconditionally 

exempt any person or security or class 

of person or securities from any 

provision of that section or any rule or 

regulation prescribed under Section 

17A, if the appropriate regulatory 

agency finds that such exemption is in 

the public interest and consistent with 

the protection of investors and the 

purposes of this section, including the 

prompt and accurate clearance and 

settlement of securities transactions and 

the safeguarding of securities and 

funds.1

Section 6(c) of the Investment 

Company Act of 1940 (the ‘‘Company 

Act’’) provides that the Commission 

may exempt any person, security, or 

transaction, or any class or classes of 

persons, securities or transactions, from 

any provision of the Company Act, or 

any rule or regulation thereunder, if and 

to the extent that such exemption is 

necessary or appropriate in the public 

interest and consistent with the 

protection of investors and the purposes 

fairly intended by the policy and 

provisions of the Company Act. Section 

38(a) of the Company Act provides that 

the Commission may make, issue, 

amend and rescind such rules and 

regulations and such orders as are 

necessary or appropriate to the exercise 

of the powers conferred upon the 

Commission under the Act. 

Hurricane Katrina made landfall along 

the Gulf Coast on August 29, 2005, 

causing catastrophic damage to portions 

of Alabama, Louisiana and Mississippi. 

The storm and subsequent flooding 

displaced individuals and businesses 

and disrupted communications across 

the Gulf Coast region. We are issuing 

this Order to address the needs of 

companies and individuals located 

within the areas affected by Hurricane 

Katrina that must comply with the 

requirements of the federal securities 

laws. 

I. Filing Requirements for Registrants 

and Other Persons 

The lack of communications, facilities 

and available staff and professional 

advisors as a result of Hurricane Katrina 

could hamper the efforts of public 

companies and other persons in the 

affected areas in their compliance with 

filing deadlines. At the same time, 

investors have an interest in the timely 

availability of required information 

about these companies and the activities 

of persons required to file schedules and 

reports with respect to these companies. 

While the Commission believes that the 

relief from filing requirements provided 

by this Order is both necessary in the 

public interest and consistent with the 

protection of investors, we remind 

public companies and other persons 

who are the subjects of this Order to 

continue to evaluate their obligations to 

make materially accurate and complete 

disclosures in accordance with the antifraud provisions of the federal securities 

laws. 

Accordingly, it is ordered, pursuant to 

Section 36 of the Exchange Act, that a 

registrant (as defined in Exchange Act 

Rule 12b–2) subject to the reporting 

requirements of Exchange Act Section 

13(a) or 15(d), and any person required 

to make any filings with respect to such 

a registrant, is exempt from any 

requirement to file or furnish materials 

with the Commission under Exchange 

Act Sections 13(a), 13(d), 13(g), 14(a), 

14(c), 15(d) and 16(a), Regulations 13A, 

13D, 13G, 14A, 14C and 15D, and Rule 

16a–3, as applicable, for the period from 

and including August 29, 2005 to 

October 14, 2005, where the conditions 

below are satisfied. 

Conditions 

(a) With respect to registrants, the 

address of the registrant’s principal 

executive offices listed on the cover 

page of the most recent periodic report 

filed by the registrant on Form 10–Q, 

10–QSB, 10–K, or 10–KSB is within one 

of the counties or parishes designated as 

of this date to be within the 

Presidentially Declared Disaster Areas 

where Individual Assistance has been 

authorized by the Federal Emergency 

Management Agency as a result of 

Hurricane Katrina (the ‘‘Presidential 

Disaster Areas’’), which include the 

Louisiana parishes of: Acadia, 

Ascension, Assumption, Calcasieu, 

Cameron, East Baton Rouge, East 

Feliciana, Iberia, Iberville, Jefferson, 

Jefferson Davis, Lafayette, Lafourche, 

Livingston, Orleans, Pointe Coupee, 

Plaquemines, St. Bernard, St. Charles, 

St. Helena, St. James, St. John, St. Mary, 

St. Martin, St. Tammany, Tangipahoa, 

Terrebonne, Vermilion, Washington, 

West Baton Rouge, and West Feliciana; 

the Mississippi counties of: Adams, 

Amite, Attala, Claiborne, Choctaw, 

Clarke, Copiah, Covington, Forrest, 

Franklin, George, Greene, Hancock, 

Harrison, Hinds, Jackson, Jasper, 

Federal Register / Vol. 70, No. 182 / Wednesday, September 21, 2005 / Notices 55433 

2This order temporarily exempts transfer agents 

from the requirements of (1) Section 17A of the 

Exchange Act and Rules 17Ad–1 through 17Ad–21T 

Continued 

Jefferson, Jefferson Davis, Jones, 

Kemper, Lamar, Lauderdale, Lawrence, 

Leake, Lincoln, Lowndes, Madison, 

Marion, Neshoba, Newton, Noxubee, 

Oktibbeha, Pearl River, Perry, Pike, 

Rankin, Scott, Simpson, Smith, Stone, 

Walthall, Warren, Wayne, Wilkinson, 

Winston, and Yazoo; and the Alabama 

counties of Baldwin, Clarke, Choctaw, 

Mobile, Pickens, Greene, Hale, Sumter, 

Tuscaloosa, and Washington. 

(b) With respect to persons other than 

registrants, the address listed on the 

most recently filed schedule or form 

that the person had filed, or the address 

that the person would be required to list 

on any covered schedule or form 

required to be filed during the time 

period covered by this Order, is within 

one of the Presidential Disaster Areas; 

and 

(c) The registrant or person files with 

the Commission any report, schedule or 

form required to be filed during the 

period from and including August 29, 

2005 to October 14, 2005 on or before 

October 17, 2005. 

II. Furnishing of Proxy and Information 

Statements 

The conditions in the areas affected 

by Hurricane Katrina, including 

displacement of hundreds of thousands 

of individuals and the destruction of 

property, have prevented and will 

continue to prevent the delivery of mail 

to the region. In light of these 

conditions, we believe that relief is 

warranted for those seeking to comply 

with our rules imposing requirements to 

furnish materials to security holders 

when mail delivery is not possible. 

Accordingly, it is ordered, pursuant to 

Section 36 of the Exchange Act, that a 

registrant or any other person is exempt 

from the requirements to furnish proxy 

statements, annual reports and other 

soliciting materials, as applicable (the 

‘‘Soliciting Materials’’), under Exchange 

Act Rules 14a–3 and 14a–12, and the 

requirements to furnish information 

statements and annual reports, as 

applicable (the ‘‘Information 

Materials’’), under Exchange Act Rules 

14c–2 and 14c–3, where the conditions 

below are satisfied. 

Conditions 

(a) The registrant’s security holder has 

a mailing address located within a zip 

code where, as a result of Hurricane 

Katrina, the United States Postal Service 

has suspended mail service of the type 

or class customarily used by the 

registrant; 

(b) The registrant or other person 

making a solicitation has followed 

normal procedure when furnishing the 

Soliciting Materials to the security 

holder in order to ensure that the 

Soliciting Materials preceded or 

accompanied the proxy, as required by 

the rules applicable to the particular 

form of Soliciting Materials, or, in the 

case of Information Materials, the 

registrant has followed normal 

procedure when furnishing the 

Information Materials to the security 

holder in accordance with the rules 

applicable to Information Materials; and 

(c) If requested by the security holder, 

the registrant or other person provides 

the Soliciting Materials or Information 

Materials by a means reasonably 

designed to furnish the Soliciting 

Materials or Information Materials to the 

security holder. 

* * * * * 

Any registrant or other person unable 

to meet a deadline (including any 

shareholder who is unable to meet a 

deadline applicable to a shareholder 

proposal) or a delivery obligation as a 

result of Hurricane Katrina, or in need 

of other assistance related to their 

public filings, should contact the 

Division of Corporation Finance at (202) 

551–3500 or at cfhotline@sec.gov. The 

Division will consider any requests on 

a case-by-case basis. 

III. Relief Relating Specifically to 

Registered Investment Companies 

Regarding Transmittal of Annual and 

Semi-Annual Reports to Shareholders 

Required by the Company Act and the 

Rules Thereunder 

For reasons similar to those cited in 

Section II, we believe that relief is 

warranted for the transmittal by 

registered investment companies of 

annual and semi-annual reports to 

shareholders. 

Accordingly, it is ordered, pursuant to 

Sections 6(c) and 38(a) of the Company 

Act that, for 90 calendar days beginning 

on August 29, 2005, a registered 

management investment company is 

exempt from the requirements of 

Section 30(e) of the Company Act and 

Rule 30e–1 thereunder to transmit 

annual and semi-annual reports to 

shareholders; 

And, for 90 calendar days beginning 

on August 29, 2005, a registered unit 

investment trust is exempt from the 

requirements of Section 30(e) of the 

Company Act and Rule 30e–2 

thereunder to transmit annual and semiannual reports to shareholders, 

Provided that: 

(a) The shareholder or unitholder’s 

mailing address for transmittal as listed 

in the records of the registered 

investment company has a zip code for 

which the United States Postal Service 

has suspended mail service, as a result 

of Hurricane Katrina, of the type or class 

customarily used by the investment 

company for transmittal of reports; and 

(b) The registered investment 

company or other person promptly 

transmits the reports (i) if requested by 

the shareholder or unitholder, or (ii) at 

the earlier of the end of the 90-day 

period or the resumption of the 

applicable mail service. 

* * * * * 

Registered investment companies 

experiencing difficulties in complying 

with their obligations after the 90- 

calendar-day period, or in need of 

additional information or assistance 

regarding issues arising under the 

Company Act, should contact the 

Division of Investment Management, 

Office of Chief Counsel, at (202) 551–

6825 or imocc@sec.gov or use the 

contact information provided at the end 

of Section II of the Order. 

IV. Transfer Agent Compliance With 

Sections 17A and 17(f) of the Exchange 

Act 

Exchange Act Section 17A and 

Section 17(f), as well as the rules 

promulgated under Sections 17A and 

17(f), contain requirements for 

registered transfer agents relating to, 

among other things, processing 

securities transfers, safekeeping of 

investor and issuer funds and securities, 

and maintaining records of investor 

ownership. Following the events of 

Hurricane Katrina, registered transfer 

agents located in the affected region 

may have difficulty complying with 

some or all of their obligations as 

registered transfer agents. In addition, 

transfer agents located outside the 

affected region in many cases may be 

unable to conduct business with entities 

or securityholders inside the region, 

thereby making it difficult to process 

securities transactions and corporate 

actions in conformance with Section 

17A, Section 17(f) and the rules 

thereunder. 

While the national clearance and 

settlement system continues to operate 

well in light of this emergency, the 

Commission recognizes that securities 

transfers and payments to and from 

securityholders in the affected region 

may present compliance issues for many 

transfer agents. Therefore, the 

Commission is using its authority under 

Section 17A and Section 36 of the 

Exchange Act to relax temporarily 

certain regulatory provisions in order to 

provide transfer agents with flexibility 

in coping with the situation.2 The 

55434 Federal Register / Vol. 70, No. 182 / Wednesday, September 21, 2005 / Notices 

thereunder and (2) Section 17(f) of the Exchange 

Act and Rules 17f–1 and 17f–2 thereunder. 

Commission finds the following 

exemption to be in the public interest 

and consistent with the protection of 

investors and the purpose of Section 

17A of the Exchange Act, including the 

prompt and accurate clearance and 

settlement of securities transactions and 

the safeguarding of securities and funds. 

Accordingly, it is ordered, pursuant to 

Sections 17A and 36 of the Exchange 

Act, that any registered transfer agent 

located in the Presidential Disaster 

Areas that is unable to comply with 

Section 17A and Section 17(f) of the 

Exchange Act and the rules promulgated 

thereunder, as applicable, is hereby 

temporarily exempted from complying 

with such provisions for the period from 

and including August 29, 2005 to 

October 17, 2005, where the conditions 

below are satisfied. 

Conditions 

(a) Books and Records Maintained at 

Affected Locations. A registered transfer 

agent that maintained books and records 

at locations inside the Presidential 

Disaster Areas must notify the 

Commission in writing by October 17, 

2005, if such transfer agent knows or 

believes that the books and records it is 

required to maintain pursuant to 

Section 17A and the rules thereunder 

were lost, destroyed, or materially 

damaged. To the extent feasible, the 

transfer agent should include as much 

information as possible as to the type of 

books and records that were maintained, 

the names of the issuers for whom such 

books and records were maintained, and 

the extent of the loss of, or damage to, 

such books and records. 

(b) Securityholder Funds and 

Securities. A transfer agent registered 

with the Commission and holding 

securityholder or issuer funds or 

securities must notify the Commission 

in writing by October 17, 2005, if such 

transfer agent knows or believes that 

funds or securities belonging to either 

issuers or securityholders were lost, 

destroyed, stolen, or unaccountable for 

any reason. To the extent possible, the 

transfer agent should include 

information regarding the dollar amount 

of any such funds and the number of 

such securities. 

Transfer agents that have custody or 

possession of any securityholder or 

issuer funds or securities shall use all 

reasonable means available to ensure 

that all such securities are held in 

safekeeping and are handled, in light of 

all facts and circumstances, in a manner 

reasonably free from risk of theft, loss, 

or destruction and that all funds are 

protected against misuse. To the extent 

possible, all securityholder or issuer 

funds that remain in the custody of the 

transfer agent shall be maintained in a 

separate bank account held for the 

exclusive benefit of securityholders 

until such funds are properly remitted. 

The notifications required under (a) 

and (b) above shall be sent to: Securities 

and Exchange Commission, Office of 

Filings and Information Services, 100 F 

Street, NE., Washington, DC 20549. 

It is further ordered, pursuant to 

Sections 17A and 36 of the Exchange 

Act, that any registered transfer agent 

that is residing outside the Presidential 

Disaster Areas and is unable to comply 

with any provision of Section 17A or 

any provision of any rule thereunder 

due to an inability to conduct business 

with persons (entities or individuals) 

inside the Presidential Disaster Areas or 

an inability to remit funds or securities 

to securityholders residing in the 

Presidential Disaster Areas is hereby 

temporarily exempted from compliance 

with such provisions with respect to 

those specific transactions for the period 

from and including August 29, 2005, to 

October 17, 2005, on the condition that 

such transfer agent must make and keep 

a record of the extent of and the reason 

for noncompliance and retain those 

records for a period of no less than three 

years. As a further condition to this 

exemption, to the extent the transfer 

agent has not already done so, registered 

transfer agents shall maintain in a 

separate bank account held for the 

exclusive benefit of securityholders all 

securityholder funds to be remitted to 

securityholders until such funds are 

properly remitted to the securityholders. 

* * * * * 

The Commission encourages 

registered transfer agents and the issuers 

for whom they act to inform affected 

securityholders whom they should 

contact concerning their accounts, their 

access to funds or securities, and other 

shareholder concerns. If feasible, issuers 

and their transfer agents should 

consider placing a notice on their 

websites or providing toll free numbers 

to respond to inquiries. 

Transfer agents experiencing 

difficulties in complying with 

obligations after October 17, 2005, or in 

need of additional information, should 

contact the Division of Market 

Regulation, Office of Interpretation and 

Guidance, at (202) 551–5760 or 

marketreg@sec.gov or use the contact 

information provided at the end of 

Section II of the Order. 

V. Independence—Bookkeeping or 

Other Services Related to the 

Accounting Records or Financial 

Statements of the Audit Client 

The conditions in the areas affected 

by Hurricane Katrina, including 

displacement of hundreds of thousands 

of individuals, the destruction of 

property and loss or destruction of 

corporate records, may require massive 

and extraordinary efforts to reconstruct 

lost or destroyed accounting records. 

The Commission understands that in 

this unique situation an audit client 

may look to its auditor for assistance in 

reconstruction of its accounting records 

because of the auditor’s knowledge of 

the client’s financial systems and 

records. Under Section 10A(g)(1) of the 

Exchange Act and Rule 2–01(c)(4)(i) of 

Regulation S–X, auditors are prohibited 

from providing bookkeeping or other 

services relating to the accounting 

records of the audit client, and in Rule 

2–01(c)(4)(i) of Regulation S–X, these 

prohibited services are described as 

including ‘‘maintaining or preparing the 

audit client’s accounting records’’ or 

‘‘preparing or originating source data 

underlying the audit client’s financial 

statements.’’ In light of the conditions in 

areas affected by Hurricane Katrina, 

however, we believe that limited relief 

from these prohibitions is warranted for 

those registrants and other persons that 

are required to comply with the 

independence requirements of the 

federal securities laws and the 

Commission’s rules and regulations 

thereunder and that are affected by 

those conditions. 

Accordingly, it is ordered, pursuant to 

Section 36 of the Exchange Act, that 

independent certified public 

accountants engaged to provide audit 

services to registrants and other persons 

required to comply with the 

independence requirements of the 

federal securities laws and the 

Commission’s rules and regulations 

thereunder are exempt from the 

requirements of Section 10A(g)(1) of the 

Exchange Act and Rule 2–01(c)(4)(i) of 

Regulation S–X, where the conditions 

below are satisfied. 

Conditions 

(a) With respect to audit clients that 

are registrants, the address of the 

registrant’s principal executive offices 

listed on the cover page of the most 

recent periodic report filed by the 

registrant on Form 10–Q, 10–QSB, 10–

K, or 10–KSB is within one of the 

Presidential Disaster Areas; 

(b) With respect to audit clients other 

than registrants, the address listed on 

the most recently filed schedule or form 

Federal Register / Vol. 70, No. 182 / Wednesday, September 21, 2005 / Notices 55435 

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

2Securities Exchange Act Release No. 52403 (July 

15, 2005), 70 FR 42122. 

3The Federal Reserve, Office of the Comptroller 

of the Currency, and the Commission issued 

‘‘Interagency Paper on Sound Practices to 

Strengthen the Resilience of the U.S. Financial 

System.’’ [68 FR 17809 (April 11, 2003)]. This 

document provided guidelines that required core 

clearing and settlement organizations, such as DTC, 

FICC, and NSCC, and others in the financial 

industry to manage business continuity capabilities. 

DTC, FICC, and NSCC developed their testing of 

Top Tier firms based on the guidelines outlined in 

the white paper. 

4Pursuant to DTC Rule 2, ‘‘Participants and 

Pledgees,’’ participants must furnish, upon DTC’s 

request, information sufficient to demonstrate 

operational capability. In addition, DTC Rule 21, 

‘‘Disciplinary Sanctions,’’ allows DTC to impose 

fines on participants for any error, delay or other 

conduct detrimental to the operations of DTC. 

Pursuant to GSD Rule 3, ‘‘Responsibility, 

Operational Capability, and Other Membership 

Standards of Comparison-Only Members and 

Netting Members,’’ the GSD may require members 

to fulfill operational testing requirements as the 

GSD may at any time deem necessary. Pursuant to 

MBSD Rule 1, Section 3 of Article III, all MBSD 

applicants and members agree to fulfill operational 

testing requirements and related reporting 

requirements that may be imposed to ensure the 

continuing operational capability of the applicant. 

Pursuant to NSCC Rule 15, ‘‘Financial 

Responsibility and Operational Capability,’’

members must furnish to NSCC adequate 

assurances of their financial responsibility and 

operational capability as NSCC may at any time 

deem necessary. In addition, NSCC Rule 48, 

‘‘Disciplinary Procedures,’’ allows NSCC to impose 

a fine on participants for any error, delay, or other 

conduct that is determined to be detrimental to the 

operations of NSCC. 

5 15 U.S.C. 78q–1(b)(3)(F). 

that the audit client had filed, or the 

address that the audit client would be 

required to list on any covered schedule 

or form required to be filed, is within 

one of the Presidential Disaster Areas; 

(c) Services provided by the auditor 

are limited to reconstruction of 

previously existing accounting records 

that were lost or destroyed as a result of 

Hurricane Katrina and such services 

cease as soon as the client’s lost or 

destroyed records are reconstructed, its 

financial systems are fully operational 

and the client can effect an orderly and 

efficient transition to management or 

other service provider; and 

(d) With respect to issuers, the 

services provided by the issuer’s auditor 

pursuant to this Order are subject to preapproval by the issuer’s audit committee 

as required by Rule 2–01(c)(7) of 

Regulation S–X. 

* * * * * 

Auditors or audit clients with 

questions about this section of the Order 

or with other questions relating to 

auditor independence are encouraged to 

call the Office of the Chief Accountant 

directly at (202) 551–5300 or use the 

contact information provided at the end 

of Section II of the Order. 

By the Commission. 

Jonathan G. Katz, 

Secretary. 

[FR Doc. 05–18761 Filed 9–20–05; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–52446; File Nos. SR–DTC–

2005–04, SR–FICC–2005–10, and SR–

NSCC–2005–05] 

Self-Regulatory Organizations; The 

Depository Trust Company, Fixed 

Income Clearing Corporation, and 

National Securities Clearing 

Corporation; Order Approving 

Proposed Rule Change To Establish a 

Fine for Members Failing To Conduct 

Connectivity Testing 

September 15, 2005. 

I. Introduction 

On May 13, 2005, May 3, 2005, and 

on May 4, 2005, respectively, The 

Depository Trust Company (‘‘DTC’’), the 

Fixed Income Clearing Corporation 

(‘‘FICC’’), and the National Securities 

Clearing Corporation (‘‘NSCC’’) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’) proposed 

rule changes SR–DTC–2005–04, SR–

FICC–2005–10, and SR–NSCC–2005–05 

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

Securities Exchange Act of 1934 

(‘‘Act’’).1 On June 7, 2005, NSCC 

amended its proposed rule change. 

Notice of the proposals, as amended, 

was published in the Federal Register 

on July 21, 2005.2 No comment letters 

were received. For the reasons 

discussed below, the Commission is 

approving the proposed rule changes. 

II. Description 

DTC, FICC, and NSCC are imposing a 

fine on any member that is required to 

conduct connectivity testing for 

business continuity purposes and fails 

to do so. 

In the aftermath of September 11, 

2001, and in conjunction with a 

financial industry white paper, DTC, 

FICC, and NSCC require connectivity 

testing each year for critical (‘‘Top 

Tier’’) members.3 The criteria used by 

DTC, FICC, and NSCC to identify their 

respective Top Tier members were 

revenues, clearing fund contributions, 

settlement amounts, and trading 

volumes. Connectivity testing for the 

Top Tier members was initiated on 

January 1, 2004. Due to the critical 

importance of being able to assess 

whether a Top Tier member has 

sufficient operational capabilities, DTC, 

FICC, and NSCC have determined that 

they need the ability to fine any Top 

Tier member that does not test.4

Currently, each member of DTC, FICC, 

and NSCC that is designated as Top Tier 

is advised of this status and is provided 

with information on the testing 

requirements. Under DTC, FICC, and 

NSCC’s current procedures, if testing is 

not completed by a Top Tier member by 

the end of June, a reminder notice is 

sent to the member. Thereafter, another 

reminder notice is sent in October and, 

if necessary, again in December. 

The reminder notice sent in December 

will advise that if testing is not 

completed by December 31, a fine of 

$10,000 will be imposed. These fines 

will be collected from members in 

January of the following year. The 

Membership and Risk Management 

Committee will be notified of all 

members that were fined for failing to 

complete connectivity testing. 

In the event that any member fails to 

complete connectivity testing for two 

successive years, the fine that will be 

imposed at that time will be $20,000. 

Failure to complete testing for more 

than two successive years will result in 

disciplinary action, including potential 

termination of membership. 

III. Discussion 

Section 17A(b)(3)(F) of the Act 

requires that the rules of a clearing 

agency be designed to assure the 

safeguarding of securities and funds 

which are in the custody or control of 

the clearing agency or for which it is 

responsible.5 The Commission finds 

that DTC, FICC, and NSCC’s proposed 

rule changes are consistent with this 

requirement because the 

implementation of the fines should help 

DTC, FICC, and NSCC to enforce 

compliance with their connectivity 

testing rules for business continuity 

purposes and as a result should better 

enable them to ensure the safeguarding 

of securities and funds which are in 

their custody or control. 

IV. Conclusion 

On the basis of the foregoing, the 

Commission finds that the proposed 

rule changes are consistent with the 

requirements of the Act and in 

particular Section 17A of the Act and 

the rules and regulations thereunder. 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act, that the 

proposed rule changes (File Nos. SR–

DTC–2005–04, SR–FICC–2005–10, and 

SR–NSCC–2005–05) be and hereby are 

approved.