Document ID: SEC-2007-1641-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Depository Trust Co.
Posted Date: 2007-12-06T05:00Z

[Federal Register: December 6, 2007 (Volume 72, Number 234)]
[Notices]               
[Page 68920-68922]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr06de07-99]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56863; File No. SR-DTC-2007-06]

 
Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing of Proposed Rule Change To Amend the Hearing 
Procedures Afforded to an Interested Person and Harmonize Them With 
Similar Rules of Its Affiliates

November 29, 2007.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on April 30, 2007, The Depository Trust Company (``DTC'') filed with 
the Securities and Exchange Commission (``Commission'') the proposed 
rule change 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 
parties.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-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 seeks (1) to modify DTC's rules regarding 
hearing procedures afforded to Interested Persons \3\ and (2) where 
practicable or beneficial, to harmonize them with similar rules of 
DTC's affiliates, the National Securities Clearing Corporation

[[Page 68921]]

(``NSCC'') and the Fixed Income Clearing Corporation (``FICC'').
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    \3\ ``A Participant or Pledgee, [or] applicant to become a 
Participant or Pledgee or issuer of a Security.'' Rule 22, Section 
1.
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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 DTC.
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A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Minor Rule Violation Plan
    In 1984, the Commission adopted amendments to Rule 19d-1(c) under 
the Act \5\ that allow self-regulatory organizations to adopt with 
Commission approval plans for the disposition of minor violations of 
rules.\6\
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    \5\ 17 CFR 240.19d-1(c).
    \6\ Securities Exchange Act Release No. 21013 (June 1, 1984), 49 
FR 23828 (June 8, 1984) [File No. S7-983A].
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    Currently under DTC's rules, an Interested Person subject to 
disciplinary action has a right to a hearing before a member or members 
of a panel selected by the Chairman of the Board from a pool of persons 
employed by or partners of participants. Because some rule violations 
are not sufficiently serious to merit Board review, DTC is proposing to 
adopt a Minor Rule Violation Plan within the meaning of Rule 19d-
1(c)(2) of the Act for those rule violations DTC deems minor. 
Consistent with Rule 19d-1(c)(2) of the Act, DTC would designate those 
rule violations for which a fine may be assessed in an amount not to 
exceed $5,000 as minor rule violations. If a member were to dispute a 
fine imposed by DTC by filing a written request for hearing and a 
written statement, DTC management would have the authority to waive the 
fine. DTC management would notify the Board of Directors (or a 
Committee authorized by the Board of Directors) of its determination to 
waive the fine and would provide the reasons for the waiver. The Board 
or Committee could in its discretion decide to reinstate any fine 
waived by DTC management. If DTC management were not to waive the fine, 
the member could appeal the decision to a panel comprised of DTC 
officers (``Minor Rule Violation Panel'').
2. Hearings for All Other Violations and Minor Rule Violation Appeals
    For matters involving (i) an alleged violation of a DTC rule or 
procedure for which a fine in an amount of over $5,000 is assessed, 
(ii) applicants for participation, or (iii) other disciplinary actions 
to which the Minor Rule Violation Plan would not apply or for appeals 
from a Minor Rule Violation Panel decision adverse to an Interested 
Person, the Interested Person would be entitled to a hearing before a 
panel comprised of three individuals selected by the Chairman of the 
Board from a pool of persons employed by or partners of participants. 
Persons shall be appointed members of the pool by the Board. Decisions 
of the panel would be final; however, the full Board of Directors would 
retain the right to modify any sanction or reverse any decision of the 
Board panel that is adverse to the Interested Person.
    Currently with respect to hearings, an Interested Person is 
afforded the opportunity to be heard and may be represented by counsel 
if desired. A record is kept of the hearing, and at the discretion of 
the Board panel, the associated cost may be charged in whole or part to 
the Interested Person in the event that the decision is adverse to the 
Interested Person. The Interested Person is advised of the Board 
panel's decision within ten business days after the conclusion of the 
hearing. These procedures would also apply with respect to the Minor 
Rule Violation Plan.
3. Administrative Changes: Uniformity of Time Frames
    The proposed rule changes seek to implement uniform time periods 
among DTC, NSCC, and FICC governing actions an Interested Person would 
be required to take in order to request a hearing. The deadlines an 
Interested Person must adhere to in order to request a hearing 
currently vary between DTC, NSCC, and FICC. Under the proposed rule 
change, an Interested Person would have five business days from the 
date on which DTC first informed it of a sanction or a denial of 
membership by which to request a hearing.
    Within seven business days, or three days in the case of a summary 
action taken against the Interested Person, after filing a request for 
a hearing with DTC, the Interested Person would be required to submit 
to DTC a clear and concise written statement setting forth the action 
or proposed action of DTC with respect to which the hearing is 
requested, the basis for objection to such action, whether the 
Interested Person intends to attend the hearing, and whether the 
Interested Person chooses to be represented by counsel at the hearing. 
The proposed time frames would be consistent with time frames being 
proposed by FICC and NSCC.
    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 the adoption of a Minor Rule Violation 
Plan furthers the statutory objective of providing a fair procedure for 
disciplining Participants and will provide DTC with the ability to 
impose a meaningful sanction for those rule violations that do not 
necessarily rise to a level of meriting a full disciplinary proceeding. 
Accordingly, the proposed rule change promotes the prompt and accurate 
clearance and settlement of securities transactions.
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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

    Written comments relating to the proposed rule change have not 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

    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.

[[Page 68922]]

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-2007-06 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-2007-06. 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 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 at http://www.dtcc.com/downloads/legal/rule_filings/2007/dtc/2007-06.pdf.
 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-
2007-06 and should be submitted on or before December 21, 2007.

    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. E7-23591 Filed 12-5-07; 8:45 am]

BILLING CODE 8011-01-P