Document ID: SEC-2009-1343-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; The Depository Trust Company, Fixed Income Clearing Corporation, and National Securities Clearing Corporation; Notice of Filing and Immediate Effectiveness of Proposed Rule Changes Relating to Economic Sanctions and Embargo Programs Administered and Enforced by the Office of Foreign Assets Control
Posted Date: 2009-09-22T04:00Z

[Federal Register: September 22, 2009 (Volume 74, Number 182)]
[Notices]               
[Page 48333-48335]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr22se09-141]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60660; File Nos. SR-DTC-2009-14, SR-NSCC-2009-07, SR-
FICC-2009-09]

 
Self-Regulatory Organizations; The Depository Trust Company, 
Fixed Income Clearing Corporation, and National Securities Clearing 
Corporation; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Changes Relating to Economic Sanctions and Embargo Programs 
Administered and Enforced by the Office of Foreign Assets Control

September 11, 2009.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on August 26, 2009, The 
Depository Trust Company (``DTC''), the National Securities Clearing 
Corporation (``NSCC''), and the Fixed Income Clearing Corporation 
(``FICC'') 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 FICC, NSCC, 
and DTC (collectively, ``Clearing Agencies''). The Clearing Agencies 
filed the proposed rule changes pursuant to Section 19(b)(3)(A)(iii) of 
the Act \2\ and Rule 19b-4(f)(4) thereunder \3\ so that the proposals 
were effective upon filing with the Commission. The Commission is 
publishing this notice to solicit comments on the proposed rule changes 
from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \3\ 17 CFR 240.19b-4(f)(4).
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I. Self-Regulatory Organizations' Statement of Terms of Substance of 
the Proposed Rule Changes

    The Clearing Agencies are revising their rules to refine the 
obligations of their members or participants concerning the economic 
sanctions and embargo programs administered and enforced by the Office 
of Foreign Assets Control (``OFAC'') of the U.S. Department of the 
Treasury.

[[Page 48334]]

II. Self-Regulatory Organizations' Statement of Purpose of, and 
Statutory Basis for, the Proposed Rule Changes

    In their filings with the Commission, the Clearing Agencies 
included statements concerning the purpose of and basis for the 
proposed rule changes and discussed any comments they received on the 
proposed rule changes. The text of these statements may be examined at 
the places specified in Item IV below. The Clearing Agencies have 
prepared summaries, set forth in Sections A, B, and C below, of the 
most significant aspects of such statements.

A. Self-Regulatory Organizations' Statement of Purpose of, and 
Statutory Basis for, the Proposed Rule Changes

    On March 31, 2009, April 1, 2009, and April 22, 2009, FICC, NSCC, 
and DTC, respectively, filed proposed rule changes with the Commission 
to establish new OFAC compliance obligations.\4\ Specifically, the rule 
changes established a new requirement that certain members or 
participants subject to the jurisdiction of the U.S. submit a 
``Confirmation of an OFAC Program'' Letter (``OFAC Letter'') every two 
years. The OFAC Letter is intended to document that the U.S. member or 
participant has implemented a program to conduct appropriate risk-based 
OFAC screening and that the U.S. member or participant confirms that 
activity subject to OFAC sanctions regulations has been excluded from 
business conducted through the Clearing Agencies. The Clearing Agencies 
and Commission received two comment letters in response to those rule 
changes.\5\
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    \4\ Securities Exchange Act Release No. 59917 (May 14, 2009), 74 
FR 23907 (May 21, 2009).
    \5\ NSCC received one comment letter from the American Bankers 
Association (``ABA'') and one comment letter issued jointly by the 
Securities Industry and Financial Markets Association (``SIFMA'') 
and The Clearing House.
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    Under this set of rule changes, the Clearing Agencies are revising 
the text of the OFAC Letter to address the concerns expressed in the 
comment letters. In addition, NSCC is amending the language of Rule 2, 
Section 4, of NSCC's Rules and Procedures to exclude Third Party 
Administrator Members and Investment Manager/Agent Member from the 
requirement to submit an OFAC Letter, and FICC is amending Article III, 
Rule 1, Section 7, of FICC's Mortgage Backed Securities Division's 
rules to exclude EPN-Only Members from the requirement to submit an 
OFAC Letter.
1. Certification of OFAC Screening
    Both comment letters asserted that paragraph two of the OFAC Letter 
imposed additional obligations that were inconsistent with OFAC 
guidance and industry standards. After consultation with OFAC and the 
Commission and after further discussions with the commenters, the 
Clearing Agencies have agreed to modify the language of this provision 
in order to clarify that all Clearing Agencies' members or participants 
subject to the jurisdiction of the U.S. (``U.S. Members'') are required 
to screen customer information for OFAC compliance but that the 
screening of customers alone may not be sufficient to address the U.S. 
Member's OFAC obligations.
2. Certification of Exclusion from Business
    Both commentators indicated that the language within the third 
paragraph of the OFAC Letter was too broad and was inconsistent with 
the requirement that U.S. members or participants implement a risk-
based OFAC program. The Clearing Agencies intended this provision to be 
consistent with the U.S. member's or participant's risk-based OFAC 
program; it was not the Clearing Agencies' intent to impose a greater 
burden. Accordingly, the Clearing Agencies, in consultation with OFAC 
and the Commission, have modified the language in the third paragraph 
to clarify that U.S. members or participants will not submit 
transactions they know are subject to OFAC sanctions regulations. When 
determining the U.S. members' or participants' knowledge of activity 
that is subject to OFAC sanctions regulations, the Clearing Agencies 
will utilize standards established pursuant to the OFAC Economic 
Sanctions Enforcement Guidelines.\6\ These guidelines include willfully 
or recklessly violating OFAC sanctions regulations where the U.S. 
member or participant had actual knowledge or reason to know of the 
violation. The Clearing Agencies will rely on determinations made by 
OFAC or other competent authorities to determine whether members or 
participants are in compliance with this obligation.
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    \6\ The OFAC Economic Sanctions Enforcement Guidelines are set 
forth in 31 CFR Part 501 Appendix A. OFAC has proposed revisions to 
the Economic Sanctions Enforcement Guidelines which are available 
online at http://www.ustreas.gov/offices/enforcement/ofac/policy/
enf_guide_09082008.pdf.
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3. Filing the OFAC Letter and the Associated Fine
    The commenters indicated that the time period for when U.S. members 
or participants must file the OFAC Letter was unclear. In an effort to 
clarify the time period, the Clearing Agencies will make the OFAC 
Letter available for execution by U.S. members or participants on or 
before October 1, 2009. NSCC must receive a validly executed OFAC 
Letter from all U.S. members or participants on or before March 31, 
2010, in order for U.S. members or participants to satisfy the 
obligations imposed under these proposed rules. U.S. members or 
participants that fail to provide the Clearing Agencies with the OFAC 
Letter by March 31, 2010, will be subject to a $5,000 fine for failure 
to provide the initial OFAC Letter. This fine is imposed for failure to 
provide documentation required under the Clearing Agencies' rules and 
the Clearing Agencies reserve the right to impose further fines or 
penalties up to and including ceasing to act on behalf of the member or 
participant for violation of the rules relating to the obligation of 
the member or participant to comply with OFAC sanctions regulations.
    The OFAC Letter must be executed every two years from the date on 
which the current OFAC Letter was executed. Therefore, if the OFAC 
Letter executed by the member or participant is dated March 1, 2010, 
the U.S. member or participant must execute and provide the Clearing 
Agencies with an updated OFAC Letter on or before March 1, 2012. 
Because of the potential for different renewal dates, the Clearing 
Agencies will remind each individual U.S. member or participant of the 
expiration of its current OFAC Letter approximately ninety (90) days 
prior to the date due for the updated OFAC Letter. Additionally, the 
Clearing Agencies will send out an Important Notice every two years 
that will remind U.S. members or participants of this obligation 
generally. Although the combination of the Important Notice and the 
individual reminders are intended to remind U.S. members or 
participants about the obligation to execute the updated OFAC Letter, 
it is ultimately the responsibility of the U.S. member or participant 
to satisfy the requirements of the Clearing Agencies' rules regarding 
the OFAC Letter.
    The execution of the OFAC Letter is the legal responsibility of the 
U.S. member or participant and not the responsibility of the Chief 
Compliance Officer, OFAC Compliance Officer, or other representative 
responsible for managing the OFAC compliance program (``Authorized OFAC 
Officer'') of the U.S. member or participant. Therefore, the fine is 
imposed against the U.S. member or participant and is

[[Page 48335]]

the legal obligation of the U.S. member or participant and not the 
Authorized OFAC Officer. To clarify this point, the OFAC Letter has 
been updated to indicate that the Authorized OFAC Officer is signing on 
behalf of the U.S. member or participant.
    The Clearing Agencies believe that proposed rule changes are 
consistent with the requirements of Section 17A of the Act \7\ and the 
rules and regulations thereunder because they will enhance the Clearing 
Agencies' compliance with applicable laws thereby reducing risks and 
associated costs to the Clearing Agencies and their members and 
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

    The Clearing Agencies believe that the proposed rule change will 
not 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

    As part of the process of amending the OFAC Letter, the Clearing 
Agencies solicited and received comments from representatives of the 
industry groups that submitted comments to SR-NSCC-2009-03. The 
Clearing Agencies will notify the Commission of any additional written 
comments they receive.

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

    The foregoing rule changes have become effective upon filing 
pursuant to Section 19(b)(3)(A)(iii) of the Act \8\ and Rule 19b-
4(f)(4) \9\ thereunder because each of the proposed rule changes 
effects a change in an existing service of one of the Clearing Agencies 
that (i) does not adversely affect the safeguarding of securities or 
funds in the custody or control of the Clearing Agencies or for which 
it is responsible and (ii) does not significantly affect the respective 
rights of the clearing agencies or persons using the service. At any 
time within sixty days of the filing of such rule changes, the 
Commission may summarily abrogate such rule changes 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)(iii).
    \9\ 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 
changes are 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 No. SR-DTC-2009-14, SR-NSCC-2009-07, or SR-FICC-2009-09 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-2009-14, SR-NSCC-2009-
07, or SR-FICC-2009-09. At least one of these file numbers 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 
DTC's, NSCC's, and FICC's principal offices and on DTC's, NSCC's, and 
FICC's Web sites, respectively at <http://ficc.com/gov/gov.docs. 
jsp?NS-query=#rf>, <http://www.dtcc.com/legal/rule_filings/nscc/
2009.php>, and <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-2009-14, SR-NSCC-2009-07, 
or SR-FICC-2009-09 and should be submitted on or before October 13, 
2009.

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-22730 Filed 9-21-09; 8:45 am]

BILLING CODE 8010-01-P