[Federal Register Volume 60, Number 49 (Tuesday, March 14, 1995)]
[Notices]
[Pages 13743-13744]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-6214]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35452; File No. SR-DTC-95-03]


Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Clarifying Exclusion of Money Market Instrument Programs From DTC's 
Charge Back and Return of Funds Procedures for Erroneous or Improper 
Payments of Dividends and Interest and Redemption Proceeds

March 7, 1995.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on January 31, 1995, 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 
primarily by DTC. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.

    \1\15 U.S.C. 78s(b)(1) (1988).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change.

    The proposed rule change clarifies that DTC's procedures for 
charging back from participants' accounts erroneous or improper 
payments of dividends and interest and redemption proceeds, as well as 
DTC's procedures for the subsequent return of such funds to payors,\2\ 
do not apply to such payments made for instruments in DTC's Money 
Market Instrument (``MMI'') programs.\3\

    \2\For a complete description of these procedures, refer to 
Securities Exchange Act Release Nos. 23219 (May 8, 1986), 51 FR 
17845 [SR-DTC-86-03] (notice of filing and immediate effectiveness 
on a temporary basis of a proposed rule change implementing 
procedures for charging back erroneous dividend and interest 
payments from participants' accounts), 23686 (October 7, 1986), 51 
FR 37104 [SR-DTC-86-04] (order approving proposed rule change 
implementing charge back procedures), and 26070 (September 9, 1988) 
53 FR 36142 [SR-DTC-88-17] (notice of filing and immediate 
effectiveness of proposed rule change clarifying that charge back 
procedures apply to DTC's same-day funds settlement system as well 
as its next-day funds settlement system).
    \3\For a complete description of DTC's MMI programs, refer to 
Securities Exchange Act Release No. 33958 (April 22, 1994), 59 FR 
22878 [SR-DTC-93-12] (notice of order temporarily approving a 
proposed rule change expanding the Money Market Instrument 
Settlement Program).
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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 comments it received on the proposed rule change. The 
text of these statements may be examined at the places 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.

(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    The purpose of the proposed rule change is to clarify that DTC's 
procedures for charging back from participants' accounts erroneous or 
improper payments of dividends and interest and redemption proceeds, as 
well as DTC's procedures for the subsequent return of funds to payors, 
do not apply to payments made for instruments in DTC's MMI programs. 
DTC's charge back and return of funds procedures do not apply to those 
instruments that are included in DTC's [[Page 13744]] MMI programs 
because MMIs are processed differently as discussed more fully below.
    DTC sweeps maturing MMIs from the accounts of ``presenting 
participants'' and initiates book-entry deliveries versus payment to 
paying agents' accounts on maturity date for inclusion in that day's 
same-day settlement system net settlement. Paying agents can refuse to 
accept maturity presentments of an issuer's MMIs so long as the paying 
agents notify DTC of their intention by 3:00 p.m. Eastern Standard Time 
on the day the MMI matures. If a paying agent refuses to accept 
maturity presentments, DTC will communicate this to all DTC 
participants and will reverse the maturity presentments by recrediting 
the participants' accounts with the maturing MMI, thus offsetting 
settlement credits in those accounts. DTC also will unwind any other 
maturity presentments, valued issuance, periodic income payments (e.g., 
interest or dividend), principal presentments, and reorganization 
presentments that it may have processed earlier that day in the same 
and other MMIs of a ``defaulting issuer.''
    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 proposal will improve the 
timeliness of dividend and redemption payments to DTC participants and 
will improve the processing and recordkeeping in the Dividends and 
Reorganization Departments of DTC and its participants. The proposed 
rule change also will improve the procedures for safeguarding funds in 
DTC's custody or control of for which it is responsible.

(B) Self-Regulatory Organization's Statement on Burden on Competition

    DTC does not believe that the proposed rule change will impose any 
burden on competition not necessary or appropriate in furtherance of 
the purposes of the Act.

(C) Self-Regulatory Organization's Statement on Comments on the 
Proposed Rule Change Received from Members, Participants or Others

    Written comments from DTC participants or others have not been 
solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregone rule change has become effective pursuant to Section 
19(b)(3)(A)(i)\4\ of the Act and Rule 19b-4(e)(1)\5\ promulgated 
thereunder because it constitutes a state policy, practice, or 
interpretation with respect to the meaning, administration, or 
enforcement of DTC's existing procedures for the payment of dividends, 
interest, and redemption proceeds. At any time within sixty days of the 
filing of this proposed rule change, the Commission summarily may 
abrogate the rule change if it appears to the Commission that such 
action is necessary or appropriate in the public interests, for the 
protection of investors, or otherwise in furtherance of the proposed of 
the Act.

    \4\15 U.S.C. 78s(b)(3)(A)(i) (1988).
    \5\17 CFR 240.19b-4(e)(1) (1994).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing. Persons making written submission 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 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 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 Section, 450 Fifth Street, N.W., 
Washington, D.C. 20549. Copies of such filing will also be available 
for inspection at DTC. All submissions should refer to File No. SR-DTC-
95-03 and should be submitted by April 13, 1995.

    For the Commission by the Division of Market Regulation, 
pursuant to the delegated authority.\6\

    \6\17 CFR 200.30-3(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-6214 Filed 3-13-95; 8:45 am]
BILLING CODE 8010-01-M