This section of the FEDERAL REGISTER

contains notices to the public of the proposed

issuance of rules and regulations. The

purpose of these notices is to give interested

persons an opportunity to participate in the

rule making prior to the adoption of the final

rules.

Proposed Rules Federal Register

11548

Vol. 66, No. 38

Monday, February 26, 2001

1Pub. L. No. 99–571, 100 Stat. 3208 (1986).

2See 17 CFR 403.5(a), (d)(1)(vi).

3 15 U.S.C. 78c(a)(42).

4 52 FR 27910 (July 24, 1987).

5 17 CFR 400.3(m).

6 Gramm-Leach-Bliley Act sec. 208; Pub. L. No.

106–102, 113 Stat. 1338 (1999).

7U.S. Canada Free Trade Agreement sec. 308;

Pub. L. No. 100–449, 102 Stat. 1877 (1988).

8S. Rep. No. 100–509, at 67 (1988) reprinted in

1988 U.S.C.C.A.N. 2395, 2462.

DEPARTMENT OF THE TREASURY

Office of the Under Secretary for

Domestic Finance

17 CFR Part 450

RIN 1505–AA82

Government Securities Act

Regulations: Definition of Government

Securities

AGENCY: Office of the Under Secretary

for Domestic Finance, Treasury.

ACTION: Proposed rule.

SUMMARY: The Department of the

Treasury (‘‘Treasury,’’ ‘‘We,’’ or ‘‘Us’’) is

publishing for comment a proposed

amendment to the regulations issued

under the Government Securities Act of

1986, as amended (‘‘GSA’’). Section 208

of the Gramm-Leach-Bliley Act

amended the definition of the term

‘‘government securities’’ in the

Securities Exchange Act of 1934, as it

applies to a bank, to include qualified

Canadian government obligations. To

conform to this change in definition, we

are proposing a technical amendment to

Part 450 of the GSA regulations

governing depository institutions’

government securities holdings in

custody for customers.

DATES: Submit comments on or before

March 28, 2001.

ADDRESSES: You may send us hard copy

comments at: Government Securities

Regulations Staff, Bureau of the Public

Debt, 999 E Street NW., Room 315,

Washington, DC 20239–0001. You may

also send us comments by e-mail at

govsecreg@bpd.treas.gov. When sending

comments by e-mail, please use an

ASCII file format and provide your full

name and mailing address. Comments

received will be available for

downloading from the Internet and for

public inspection and copying at the

Treasury Department Library, Room

1428, Main Treasury Building, 1500

Pennsylvania Avenue, N.W.,

Washington, D.C. 20220. To visit the

library, call (202) 622–0990 for an

appointment. This proposed

amendment is also available for

downloading from Public Debt’s web

site at the following address:

www.publicdebt.treas.gov.

FOR FURTHER INFORMATION CONTACT: Lori

Santamorena (Executive Director), Lee

Grandy (Associate Director), or Deidere

Brewer (Government Securities

Specialist), Bureau of the Public Debt,

Government Securities Regulations

Staff, (202) 691–3632 or e-mail us at

govsecreg@bpd.treas.gov.

SUPPLEMENTARY INFORMATION: This

proposed rule deals with the recent

change in definition of ‘‘government

securities’’ in the Securities Exchange

Act of 1934 (‘‘the Exchange Act’’) to

include certain Canadian government

obligations, as applied to banks. This

statutory change affects two groups of

GSA regulations—Subchapter A (17

CFR Parts 400–449), issued under Title

I of the GSA, and Subchapter B (17 CFR

Part 450), issued under Title II of the

GSA—which we discuss separately.

Because the statutory change is picked

up automatically in Subchapter A, we

are not proposing any regulatory change

to Subchapter A. We are proposing a

technical and clarifying change to

Subchapter B.

Subchapter A

Title I of the Government Securities

Act of 1986 1 (Section 15C of the

Exchange Act) requires ‘‘government

securities brokers’’ and ‘‘government

securities dealers’’ (which may include

banks) to provide notice to their

regulators and comply with the

requirements prescribed by Treasury in

17 CFR, Subchapter A, Parts 400–449.

Among those requirements is

compliance with rules in Subchapter B

(Part 450).2

Part 401 provides a series of

exemptions for financial institutions.

These exemptions include limited

government securities brokerage and

government securities dealer activities

and certain repurchase transactions

with customers. Thus, even if a

financial institution does not provide

notice as a government securities broker

or dealer, it may be subject to

Subchapter A by virtue of its reliance on

the exemptions in Subchapter A. One of

the conditions of these exemptions is

that a financial institution must comply

with the requirements in Subchapter B

(Part 450).

The GSA amended the Exchange Act

by adding a definition of the term

‘‘government securities’’ at section

3(a)(42) of the Exchange Act.3 In

Subchapter A of the implementing

regulations for the GSA,4 we defined

‘‘government securities’’ at § 400.3(m)5

as having the meaning set out in section

3(a)(42) of the Exchange Act.

Section 208 of Title II, Subtitle A of

the Gramm-Leach-Bliley Act 6 (the ‘‘G–

L–B Act’’) amended the definition of

‘‘government securities’’ in the

Exchange Act by adding a new

subparagraph (E) at section 3(a)(42). The

amendment provides that ‘‘government

securities’’ means ‘‘for purposes of

section 15, 15C and 17A as applied to

a bank, a qualified Canadian

government obligation as defined in

section 5136 of the Revised Statutes of

the United States.’’ As background,

section 5136 of the National Banking

Act was amended as a result of the U.S.

Canada Free Trade Agreement.7 The

legislative history shows that the U.S.,

in return for certain commitments made

by Canada, agreed to permit U.S.,

Canadian and other foreign banks to

deal in, underwrite, and purchase

obligations backed by the Government

of Canada or its political subdivisions.8

Because section 400.3(m) of the

regulations currently defines

‘‘government securities’’ to have the

meaning set out at section 3(a)(42) of the

Exchange Act, the statutory change to

include certain Canadian government

obligations will now be automatically

incorporated without requiring a

technical change. Any U.S. banks that

transact business in qualified Canadian

government obligations, but not U.S.

government securities, may now be

subject to the GSA regulations

(including the exemptions). U.S. banks

currently transacting business in U.S.

government securities are already

subject to the GSA regulations. We

invite comments on the impact on banks

of this change in definition of the term

Federal Register / Vol. 66, No. 38 / Monday, February 26, 2001 / Proposed Rules 11549

‘‘government securities’’ to include

qualified Canadian government

obligations, specifically whether

particular requirements in the GSA

regulations would raise operational

issues of which we are unaware.

Subchapter B

As noted above, Subchapter A of the

regulations requires institutions subject

to Subchapter A (i.e., government

securities brokers and dealers and

exempt institutions) to also comply with

the rules in Subchapter B. In addition,

under Title II of the GSA (31 U.S.C.

3121(h), 9110) depository institutions

that are not government securities

brokers or dealers and that hold

government securities for the account of

customers must comply with the rules

prescribed by Treasury in 17 CFR,

Subchapter B, Part 450. Thus, there are

three categories of institutions that must

follow the rules in Subchapter B—(a) (as

required by the rules in Subchapter A),

financial institution government

securities brokers and dealers and (b)

(also as required by the rules in

Subchapter A), exempt financial

institutions, and (c) depository

institutions that are not government

securities brokers or dealers and that

hold government securities for the

account of customers.

Because two of these categories of

institutions ((a) and (b)) are based on

one statutory authority (Title I of the

GSA), and the third category ((c)) is

based on another statutory authority

(Title II of the GSA), we are proposing

a revised regulatory definition of

‘‘government securities’’ at section

450.2(e) that takes this into account.

Proposed § 450.2(e)(1), the definition

applicable to institutions that are

required under the rules in Subchapter

A to follow the Subchapter B rules, will

include qualified Canadian government

obligations. Proposed § 450.2(e)(2) of the

definition is narrower and does not

include qualified Canadian government

obligations. It would be applicable to

institutions that are required to follow

the Subchapter B rules solely because of

the requirements of Title II of the GSA.

Therefore, for institutions required to

follow the rules in Subchapter B as a

result of the requirements of Subchapter

A, proposed § 450.2(e)(1)(i) and (e)(1)(ii)

would extend the requirements of

Subchapter B to institutions holding

qualified Canadian government

obligations for customer accounts.

Based on our consultation with staff

of the bank regulatory agencies, we

understand this proposed change in the

definition of ‘‘government securities’’

would not have a material impact on

banks. They are not aware of situations

in which banks in the U.S. are handling

qualified Canadian government

obligations for customers. Therefore, we

believe this conforming amendment

would not have more than a minimal

effect on banks.

The G–L–B Act was enacted on

November 12, 1999. The effective date

of Subtitle A of Title II of the G–L–B Act

is 18 months after enactment, or May

12, 2001. Accordingly, after we consider

all comments received in response to

this proposed amendment, we intend to

issue a final amendment to the GSA

regulations that will be effective May

12, 2001.

Special Analysis

The proposed rule would only make

a technical amendment to the GSA

regulations to conform to a change in

definition of the term ‘‘government

securities’’ made by the G–L–B Act.

Based on the very limited impact of the

proposed amendment, it is our view that

the proposed regulations are not a

‘‘significant regulatory action’’ for the

purposes of Executive Order 12866.

For the same reasons, we certify

under the Regulatory Flexibility Act (5

U.S.C. 601, et seq.) that the proposed

regulations, if adopted, will not have a

significant economic impact on a

substantial number of small entities. As

a result, a regulatory flexibility analysis

is not required.

List of Subjects in 17 CFR Part 450

Banks, banking, Government

securities, Reporting and recordkeeping

requirements.

For the reasons stated in the

preamble, we propose to amend 17 CFR

Part 450 to read as follows:

PART 450—CUSTODIAL HOLDINGS

OF GOVERNMENT SECURITIES BY

DEPOSITORY INSTITUTIONS

1. The authority citation for Part 450

is revised to read as follows:

Authority: Sec. 201, Pub. L. 99–571, 100

Stat. 3222–23 (31 U.S.C. 3121, 9110); Sec.

101, Pub. L. 99–571, 100 Stat. 3208 (15 U.S.C.

78o–5(b)(1)(A), (b)(4), (b)(5)(B)).

2. Section 450.2 is amended by

revising paragraph (e) to read as follows:

§ 450.2 Definitions.

* * * * *

(e) Government securities means:

If . . . Then . . .

(1)(i) A depository institution is a government securities broker or dealer as defined in sections 3(a)(43) and 3(a)(44) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(43)–(44)).‘‘Government securities’’ means those obligations described in subparagraphs (A), (B), (C), or (E) of section 3(a)(42) of the Securities

Exchange Act of 1934 (15 U.S.C. 78c(a)(42)(A)–(C), (E)).

(ii) A depository institution is exempt under Part 401 of this chapter

from the requirements of Subchapter A.

‘‘Government securities’’ means those obligations described in subparagraphs (A), (B), (C), or (E) of section 3(a)(42) of the Securities

Exchange Act of 1934 (15 U.S.C. 78c(a)(42)(A)–(C), (E)).

(2) A depository institution is not a government securities broker or

dealer as defined in sections 3(a)(43) and 3(a)(44) of the Securities

Exchange Act of 1934 (15 U.S.C. 78c(a)(43)–(44)).

‘‘Government securities’’ means those obligations described in subparagraphs (A), (B), or (C) of section 3(a)(42) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(42)(A)–(C)).

* * * * *

Dated: February 21, 2001.

Donald V. Hammond,

Acting Under Secretary, Domestic Finance.

[FR Doc. 01–4647 Filed 2–23–01; 8:45 am]

BILLING CODE 4810–39–P

DEPARTMENT OF VETERANS

AFFAIRS

38 CFR Part 3

RIN 2900–AJ44

Well-Grounded Claims

AGENCY: Department of Veterans Affairs.

ACTION: Withdrawal of proposed rule.

SUMMARY: In a document published in

the Federal Register at 64 FR 67528 on

December 2, 1999, the Department of

Veterans Affairs (VA) proposed to

amend its adjudication regulations

concerning a claimant’s statutory

responsibility to support his or her