Document ID: SEC-2006-0771-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Depository Trust Co.
Posted Date: 2006-06-16T04:00Z

[Federal Register: June 16, 2006 (Volume 71, Number 116)]
[Notices]               
[Page 34974-34976]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr16jn06-157]                         

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 SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53970; File No. SR-DTC-2006-08]

 
Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Establish a Mechanism by Which It Will Collect and Pass-Through Fees 
Owed by Participants to American Depository Receipt Agents for Certain 
Issues and To Collect a Charge for This Service

June 12, 2006.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on April 28, 2006, The 
Depository Trust Company (``DTC'') filed with the Securities and 
Exchange Commission (``Commission'') and on May 2, 2006, amended \2\ 
the proposed rule change described in Items I, II, and III below, which 
items have been prepared primarily by DTC. DTC filed the proposed rule 
change pursuant to section 19(b)(3)(A)(ii) of the Act \3\ and Rule 19b-
4(f)(2) \4\ thereunder so that the proposal was effective upon filing 
with the Commission. The Commission is publishing this notice to 
solicit comments on the rule change from interested parties.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ The amendment attached the comment letter from the 
Securities Operations Division of the Securities Industry 
Association that DTC had inadvertently omitted. Details of that 
comment letter are set forth later in this Notice.
    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b.4(f)(2).

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[[Page 34975]]

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The purpose of the rule change is to allow for the establishment of 
a mechanism by which DTC will collect and pass-through fees owed by its 
participants to American Depositary Receipt (``ADR'') agents for 
certain issues, and to implement a charge for this service.

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.\5\
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    \5\ The Commission has modified the text of the summaries 
prepared by DTC.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    Typically, an ADR agent is authorized under its agreement with the 
issuer to impose a custody fee on holders of the issue. A common 
practice for collection of this fee is for the ADR agent to subtract 
the amount of the fee from the gross dividend payable to the ADR 
holders. This practice is effectuated by DTC announcing to participants 
both the gross dividend rate and the net dividend rate after deduction 
of the ADR custody fee, the ADR agent paying DTC the net dividend, and 
DTC allocating the net dividend to participants. However, a number of 
ADR issues do not pay periodic dividends, which prevents the associated 
fees from being collected through the above-described mechanism.
    Pursuant to discussions with industry representatives and in order 
to facilitate a more efficient ADR fee collection process, DTC is 
proposing to introduce a mechanism by which it will collect from 
participants and will pass through to ADR agents custody fees for 
issues that do not pay periodic dividends as such fees are reported to 
DTC by the ADR agents. DTC has discussed this proposal with three 
divisions of the Securities Industry Association (``SIA''), the 
Corporate Actions Division, Dividends Division, and Securities 
Operations Divisions (``SOD''). The SOD Regulatory and Clearance 
Committee prepared and sent to DTC a memorandum on DTC's proposal. The 
memorandum concluded that DTC should collect such fees through its 
normal monthly billing process.\6\
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    \6\ Memorandum from Albert Howell, Chairman, Regulatory & 
Clearance Committee, Securities Operations Division, Securities 
Industry Association, to William Hodash, Managing Director, The 
Depository Trust and Clearing Company (March 7, 2006).
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    In order to cover costs incurred in collecting fees associated with 
ADR issues that do not pay periodic dividends, DTC will implement a 
collection charge equal to three percent (3%) of the ADR agent fee 
amount collected from each participant up to a maximum of $4,000. DTC 
will not retain a charge a collection fee if its computed collection 
charge is less than $50. This collection fee will appear in the DTC fee 
schedule as follows:

----------------------------------------------------------------------------------------------------------------
               Service                       Current fee              Proposed fee                 Per
----------------------------------------------------------------------------------------------------------------
Collection of ADR agent fees for      N/A.....................  Scaled fee (3% of ADR    Per CUSIP, per
 issues not paying periodic                                      agent fee); maximum of   participant position.
 dividends.                                                      $4,000; $0 if computed
                                                                 charge is less than
                                                                 $50.
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    DTC believes the proposed rule change is consistent with section 
17A of the Act,\7\ as amended, because it updates its fee schedule. As 
such, it provides for the equitable allocation of fees among its 
participants and aligns fees for services with the associated cost to 
deliver the service.
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    \7\ 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 have any 
impact or impose any burden on competition.

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

    A written memorandum supporting the proposed rule change was 
submitted by the Regulatory & Clearance Committee of the Securities 
Operations Division of the Securities Industry Association. No other 
written comments were solicited or received.

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

    The foregoing proposed rule change has become effective upon filing 
pursuant to section 19(b)(3)(A)(ii) of the Act \8\ and Rule 19b-4(f)(2) 
\9\ thereunder because the rule establishes a due, fee, or other 
charge. At any time within sixty days of the filing of the proposed 
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.
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    \8\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \9\ 17 CFR 240.19b-4(f)(2).
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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-2006-08 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-DTC-2006-08. 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

[[Page 34976]]

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, 100 F Street, NE., Washington, DC 20549. Copies of 
such filings also will be available for inspection and copying at the 
principal office of DTC and on DTC's Web site at https://login.dtcc.com/dtcorg/.
 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-2006-08 and should be submitted on or before July 7, 2006.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
[FR Doc. E6-9439 Filed 6-15-06; 8:45 am]

BILLING CODE 8010-01-P