12258 Federal Register / Vol. 60, No. 43 / Monday, March 6, 1995 / Notices

6 17 CFR 200.30–3(a)(12) (1994).

1 15 U.S.C. 78s(b)(1) (1988).

2For the purpose of the ATS program, ‘‘balance

certificates’’ shall mean a certificate registered in

the name Kray & Co., which is MSTC’s nominee

name, which evidences (1) record ownership by

Kray & Co. of the number of shares or units of the

issue shown from time to time on the records of the

issuer thereof or (2) the duties of the issuer thereof

to perform the obligations shown from time to time

on the records of the issuer thereof, which records

are maintained by a transfer agent, as being

evidenced by such certificate, which certificate

shall be retained by a transfer agent.

3For the purpose of the ATS program, the term

‘‘nominee certificates’’ shall mean a certificate of an

issue registered in the name of Kray & Co. The term

‘‘non-nominee certificate’’ shall mean a certificate

of an issue registered in a name other than Kray &

Co.

not adversely affect the safeguarding of

securities or funds in MSTC’s custody

or control and does not significantly

affect the respective rights or obligations

of MSTC or persons using MSTC’s

services. At any time within sixty days

of the filing of such rule change, the

Commission may summarily abrogate

such rule change if it appears to the

Commission that such action is

necessary or appropriate in the public

interest, for the protection of investors,

or otherwise in furtherance of the

purposes of the Act.

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views, and

arguments concerning the foregoing.

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 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 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–95–01 and

should be submitted by March 27, 1995.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.6

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–5373 Filed 3–3–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–35424; File No. SR–MSTC–

94–21]

Self-Regulatory Organizations;

Midwest Securities Trust Company;

Notice of Filing of Proposed Rule

Change Seeking To Establish an

Automated Program for the Transfer of

Certain Securities Between the

Midwest Securities Trust Company and

Transfer Agents

February 28, 1995.

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

Securities Exchange Act of 1934

(‘‘Act’’),1 notice is hereby given that on

December 28, 1994, the Midwest

Securities Trust Company (‘‘MSTC’’)

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 MSTC.

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

MSTC proposes to establish an

automated program, to be known as

ATS, for the transfer of certain securities

between MSTC and transfer agents.

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission,

MSTC 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. MSTC 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 proposed rule change seeks to

establish an automated program for the

transfer of securities between MSTC and

transfer agents. Under MSTC’s proposed

program, MSTC and the transfer agents

participating in the program will use a

master balance certificate 2 to evidence

the number of securities of a particular

issue registered in MSTC’s nominee

name and transferred into or out of

MSTC through the transfer agents. The

transfer agents will have custody of the

securities in the form of balance

certificates registered in MSTC’s

nominee name. The balance certificates

will be adjusted daily to reflect MSTC’s

withdrawal and deposit activity.

Currently, if a participant requests the

withdrawal of one hundred shares of a

security from MSTC, MSTC will send a

written instruction to the transfer agent

followed by a physical surrender of the

shares to the transfer agent. The transfer

agent will reissue the shares in the

requested name and will send the shares

back to MSTC. Using the ATS program,

an electronic instruction will

immediately effectuate the withdrawal

transfer thus eliminating the extra step

of physically surrendering the security

from MSTC to the transfer agent.

For issues eligible for ATS, MSTC

will deliver to participating transfer

agents nominee and/or non-nominee

certificates 3 for each issue. The transfer

agent will cancel the certificates

delivered and issue one or more balance

certificates per issue. The transfer agent

will retain possession of the balance

certificates and hold them in a secured

area at all times.

In its normal course of business,

MSTC will continue to deliver to

participating transfer agents nominee

certificates and/or non-nominee

certificates with the instructions to

register the transfer of the non-nominee

certificates into the account of Kray &

Co. MSTC also will instruct the transfer

agent to include the securities

evidenced by the nominee and/or nonnominee certificates in the balance

certificate for the issue represented by

such balance certificate. MSTC also may

issue instructions to the transfer agent to

register the transfer of all or some of the

securities evidenced by a balance

certificate to a name other than Kray &

Co. or to issue a certificate to a name

other than Kray & Co. The transfer agent

will increase or decrease the number of

securities evidenced by the balance

certificate so that at the end of each day

the balance certificate will evidence the

number of securities equal to the
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