Document ID: SEC-2009-0344-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Depository Trust Co.
Posted Date: 2009-03-16T04:00Z

[Federal Register: March 16, 2009 (Volume 74, Number 49)]
[Notices]               
[Page 11146-11147]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr16mr09-105]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59540; File No. SR-DTC-2009-05]

 
Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing of a Proposed Rule Change Relating To Expanding the 
Scope and Timing To Collect and Pass-Through Fees Owed by Participants 
to American Depositary Receipt Agents

March 9, 2009.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on February 25, 2009, 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.
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    \1\ 15 U.S.C. 78s(b)(1).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    DTC proposes to expand the scope and timing that DTC can collect 
and pass-through fees owed by participants to American Depositary 
Receipt (``ADR'') 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, 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

    On June 12, 2006, the Commission approved a rule filing for DTC to 
establish a mechanism for DTC to collect and pass through custody fees 
owed by DTC participants to ADR agents for issues that do not pay 
periodic dividends.\2\ Currently, DTC collects custody fees, called 
Depository Service Fees (``DSF''), from participants once a year per 
CUSIP. DTC collects DSFs at the request of the depositary bank and only 
for issues that have not paid a dividend in the last 12 months. In 
addition to collecting the DSF, DTC charges its participants three 
percent (3%) of the ADR agent fee up to a maximum of $10,000 per CUSIP 
(``collection charge'') in order to cover costs incurred in collecting 
and passing through DSFs.\3\
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    \2\ Securities Exchange Release Act No. 53970 (June 12, 2006), 
71 FR 34974 (June 16, 2006) (File No. SR-DTC-2006-08).
    \3\ See Securities Exchange Release Act No. 55306 (Feb. 15, 
2007) 72 FR 8217 (Feb. 23, 2007) (File No. SR-DTC-2006-21) 
(modifying the fees from the original filing).
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    Based on the experience to date and with increased challenges due 
to the rapid growth of unsponsored ADRs, the depositary banks and DTC 
have discussed expanding and refining the current DSF collection 
process. With this rule filing, DTC proposes to collect all allowable 
DSFs, dividend fees,\4\ pass-through expenses, or other special fees as 
governed by the ADR agreement.\5\ Additionally, DTC is proposing to 
increase the maximum collection charge to $20,000 per CUSIP. In order 
to collect

[[Page 11147]]

the ADR agent fees, the ADR depositary banks will be required to notify 
DTC thirty calendar days prior to the record date that a DSF or other 
fee is due and payable.\6\ Moreover, DTC will require that the ADR 
depositary bank submit an attestation that the specific fee(s) is 
allowable under the ADR agreement with the issuer. The attestation will 
be in a form prescribed by DTC and may be changed periodically to 
address operational issues. If a participant asks DTC to substantiate 
the fee, DTC may require the ADR depositary to provide DTC with a copy 
of the ADR agreement with the issuer and highlight the fee schedule. 
DTC may at its discretion provide copies of the agreement to its 
participants to substantiate the fee.
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    \4\ Dividend fees will continue to be collected through the 
current rate adjustment process. The dividend fee is incorporated 
into the final rate paid on the dividend by the agent on payment 
date and covers their cost for servicing the dividend payment.
    \5\ ADR agreements are filed with the Commission and are usually 
posted on the depositary bank's Web site. All fees discussed herein 
are collectively termed ``ADR agent fees.''
    \6\ Fees may be collected multiple times in any given calendar 
year depending on the terms of the ADR agreement.
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    As a result of this rule filing, the fee schedule for assessing ADR 
agent fees will be revised. First, ADR agent fees will apply to all 
fees permitted under the ADR agreement; the reference to ``issues not 
paying periodic dividends'' would be deleted. Second, as discussed 
above, the maximum ADR agent fee would be increased to $20,000 from 
$10,000.
    DTC has discussed this proposal with The Securities Industry and 
Financial Markets Association's (``SIFMA'') Operations Committee and 
Dividend Division and with various participants. The SIFMA Operations 
Committee endorsed DTC's plan to collect ADR agent fees, and the 
Dividend Division and DTC participants did not object to DTC moving 
forward. DTC states that the proposed ADR agent fee collection process 
will eliminate invoice and check processing for DTC participants and 
the depositary banks because ADR depositaries will no longer have to 
mail invoices and reminders to participants holding ADR securities at 
DTC. Participants will also have a more transparent view into upcoming 
ADR agent fees and a centralized source for information about the ADR 
agent fee and the collection process. DTC expects to begin collecting 
ADR agent fees as expanded by this rule filing in the first full month 
following the approval of this filing.
    DTC believes that the proposed rule change is consistent with the 
requirements of Section 17A of the Act \7\ and the rules and 
regulations thereunder because it updates DTC's fee schedule and 
provides for the equitable allocation of fees among its participants.
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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

    DTC has not solicited or received written comments relating to the 
proposed rule change. DTC will notify the Commission of any written 
comments it receives.

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

    Within thirty-five days of the date of 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 finds 
such longer period to be appropriate and publishes its reasons for so 
finding or (ii) as to which the self-regulatory organization consents, 
the Commission will:
    (A) By order approve such proposed rule change or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

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-comment@sec.gov. Please include 
File No. SR-DTC-2009-05 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 No. SR-DTC-2009-05. 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 inspection and copying 
in the Commission's Public Reference Room, 100 F Street, NE., 
Washington, DC 20549, on official business days between the hours of 10 
a.m. to 3 p.m. Copies of such filing also will be available for 
inspection and copying at DTC's principal office and on DTC's Web site 
at http://www.dtc.org/impNtc/mor/index.html. 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 No. SR-DTC-2009-05 and should be submitted on or 
before April 6, 2009.

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-5567 Filed 3-13-09; 8:45 am]

BILLING CODE 8011-01-P