Document ID: SEC-2011-0340-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Depository Trust Co.
Posted Date: 2011-03-11T05:00Z

[Federal Register Volume 76, Number 48 (Friday, March 11, 2011)]
[Notices]
[Pages 13439-13440]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-5645]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64044; File No. SR-DTC-2011-04]

Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend the Dividends Service Guide as It Relates to the Domestic Tax 
Reporting Service and the U.S. Tax Withholding Service

March 7, 2011.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on February 22, 2011, The 
Depository Trust Company (``DTC'') filed with the Securities and 
Exchange Commission (``Commission'') the proposed rule change described 
in Items I and II below, which items have been prepared primarily by 
DTC.\2\ DTC filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) and Rule 19b-4(f)(4) thereunder so that the proposed 
rule change was effective upon filing with the Commission.\3\ The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested parties.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ The text of the proposed rule change is attached as Exhibit 
5 to DTC's filing, which is available at http://www.dtcc.com/downloands/legal/rule_filings/2010/dtc/2011-04.pdf.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii) and 17 CFR 240.19b-4(f)(4).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The proposed rule change will update DTC's Dividends Service Guide 
to clarify that: (1) The Domestic Tax Reporting Service (``DTax'') is 
no longer available on the Internet or as a computerized file, (2) 
DTC's tax withholding services that DTC performs relate exclusively to 
payments processed through DTC, and (3) DTC's U.S. Tax Withholding 
Service is available to all non-U.S. entities that are DTC 
participants.

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 these 
statements.\4\
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    \4\ The Commission has modified the text of the summaries 
prepared by the DTC.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    When an issuer makes a distribution on a security, the payment is 
classified for tax purposes as a particular type of income. Often such 
income is reclassified at the end of the year as a different type of 
income than originally designated, which may result in a different 
taxability characteristic than the original income announcement 
described.\5\ When an income reclassification occurs, DTC participants 
need to be aware of it so they can properly prepare the IRS Forms 1099 
they are required to provide to their customers. The Domestic Tax 
Reporting Service (``DTax'') provides participants with income 
classification information for assistance in completing those forms.
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    \5\ For example, some income may be reclassified at the end of 
the year as short or long term capital gains.
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    In 2005, for purposes of efficiency and enhanced customer service, 
DTax became a service offering of DTCC Solutions, a wholly-owned 
subsidiary of The Depository Trust & Clearing Corporation, DTC's parent 
company.\6\ At that time, DTCC Solutions partnered with ADP Investor 
Communication Services, Inc. to provide DTax on the Internet and as a 
computerized file. Recently, DTCC Solutions and Broadridge, formerly 
ADP Investor Communication Services, Inc., ended their strategic 
alliance. In an effort to enhance the utility of the DTC Dividends 
Service Guide (``Guide''), DTC is making updates to the Guide to 
reflect the fact that the strategic alliance no longer exists and to 
note that while DTax is still accessible through inquiry functions on 
DTC's Participant Terminal System and DTC's Participant Browser 
Service, DTax is no longer available on the Internet or as a 
computerized file.
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    \6\ Securities Exchange Release Act. No. 52977 (December 19, 
2005) [File No. SR-DTC-2005-20].
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    Additionally and as requested by its participants, DTC is making 
other minor updates to the Guide's information relating to DTC's U.S. 
Tax Withholding Service in order to clarify that the tax withholding 
services that DTC performs relate exclusively to payments processed 
through DTC and that DTC cannot and does not perform tax withholding 
for payments outside of its systems. The updates include clarifications 
to assure participants that DTC performs tax withholding services on 
the credits processed by its Stock Loan Income Tracking Service and 
Repo Tracking Service and on payments credited to the DTC accounts of 
non-U.S. participants.\7\ The Guide is also being updated to make clear 
that DTC's U.S. Tax Withholding Service is available to all non-U.S. 
entities that are participants of DTC and not just to entities that are 
qualified or nonqualified intermediaries (in tax parlance) for tax 
purposes.
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    \7\ DTC's Participants have requested that DTC clarify in its 
Procedures that it is currently performing this service because the 
IRS earlier this year published a notice on performing tax 
withholding on substitute dividend payments.
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    DTC believes that the proposed rule change is consistent with the 
requirements of Section 17A of the Act \8\ and the rules and 
regulations thereunder applicable to DTC because the proposed rule 
should facilitate the prompt and accurate clearance and settlement of 
securities transactions by

[[Page 13440]]

clarifying DTC's procedures as they relate to certain tax services 
offered by and through DTC, which should enhance the use of DTC's 
existing tax withholding services.
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    \8\ 15 U.S.C. 78q-1.
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(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 that is 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

    No written comments relating to the proposed rule change have been 
solicited or received. DTC will notify the Commission of any written 
comments received by DTC.

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

    The foregoing rule change has become effective upon filing pursuant 
to Section 19(b)(3)(A)(iii) of the Act \9\ and Rule 19b-4(f)(4) \10\ 
thereunder because it is a change in an existing service that does not 
adversely affect the safeguarding of securities or funds in the custody 
or control of the clearing agency and does not significantly affect the 
respective rights or obligations of the clearing agency or persons 
using the service. At any time within sixty days of the filing of such 
rule change, the Commission summarily may temporarily suspend 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.
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    \9\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \10\ 17 CFR 240.19b-4(f)(4).
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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. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml) or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-DTC-2011-04 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-DTC-2011-04. This file 
number should be included on the subject line if e-mail is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). 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 Web site viewing and 
printing in the Commission's Public Reference Section, 100 F Street, 
NE., Washington, DC 20549, on official business days between the hours 
of 10 a.m. and 3 p.m. Copies of such filings also will be available for 
inspection and copying at the principal office of DTC and on DTC's Web 
site, http://www.dtcc.com. All comments received will be posted without 
change; the Commission does not edit personal identifying information 
from submissions. You should submit only information that you wish to 
make available publicly. All submissions should refer to File Number 
SR-DTC-2011-04 and should be submitted on or before April 1, 2011.

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-5645 Filed 3-10-11; 8:45 am]
BILLING CODE 8011-01-P