Document ID: SEC-2013-1205-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Depository Trust Co.
Posted Date: 2013-07-03T04:00Z

[Federal Register Volume 78, Number 128 (Wednesday, July 3, 2013)]
[Notices]
[Pages 40250-40252]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-15897]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69864; File No. SR-DTC-2013-08]

Self-Regulatory Organizations; The Depository Trust Company 
(``DTC''); Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change To Implement a Fee Associated With the Expansion of DTC's 
Ability To Collect and Pass Through Fees Owed by Participants to 
American Depositary Receipt Agents

 June 26, 2013.
    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 June 13, 2013, 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. DTC filed 
the rule change pursuant to Section 19(b)(3)(A) \3\ of the Act 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\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The purposed of the proposed rule change is to implement a fee 
associated with the expansion of DTC's ability to collect and pass 
through fees owed by DTC participants (``Participants'') to American 
Depositary Receipt 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 these 
statements.\5\
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    \5\ The Commission has modified the text of the summaries 
prepared by DTC.

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[[Page 40251]]

(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

(a) Proposal Overview
    On June 12, 2006, the Commission approved a rule filing for the 
establishment of a mechanism by which DTC could collect and pass 
through Depositary Service Fees (``DSFs'') owed by Participants to 
American Depositary Receipt (``ADR'') agents for issues that did not 
pay periodic dividends.\6\ In 2009, DTC expanded the scope and timing 
by which DTC could collect and pass through fees owed by Participants 
to ADR agents so that DTC now collects all allowable DSFs, dividend 
fees, pass-through expenses and other special fees governed by the ADR 
agreement.\7\ DTC collects such fees at the request of the depositary 
bank. In order to cover the costs incurred in collecting and passing 
through these fees, DTC retains a collection charge equal to three 
percent (3%) of the ADR agent fee amount collected from each 
Participant up to a maximum of $20,000 per CUSIP.\8\
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    \6\ Release No. 34-53970 (June 12, 2006) 71 FR 34974 (June 16, 
2006) (SR-DTC-2006-08).
    \7\ Release No. 34-59821 (April 24, 2009) 74 FR 20513 (May 4, 
2009) (SR-DTC-2009-05).
    \8\ See Release No. 34-59821 (March 23, 2009) 74 FR 13490 (March 
27, 2009) (SR-DTC-2009-05) which modified 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 held discussions on expanding and refining the current DSF 
collection process in order to include unsponsored ADR programs. 
Unsponsored ADR programs differ from sponsored ADR programs in two 
primary ways. First, multiple depositary banks can file a registration 
statement in respect of the same foreign private issuer, and, second, 
there is no contractual relationship between the foreign private issuer 
and the ADR depositary that establishes an unsponsored ADR program. In 
the case of an unsponsored ADR program, the terms and conditions are 
between the depositary bank and the investor and are contained in the 
form of an ADR receipt, which is filed as an exhibit to a Depositary's 
Form F-6 registration statement.
    In order to streamline the process associated with collecting DSFs 
on unsponsored ADRs, DTC has agreed to collect and pass through the 
fees from Participants to ADR agents. In order to make this possible, 
the ADR depositary banks have agreed that the depositary bank that 
first files an F-6 registration statement for a particular unsponsored 
ADR program (``First Filer'') will establish the record date and rate 
at which the DSF will be assessed on all Participants holding 
depositary receipts.\9\ DTC will require the ADR depositary banks to 
notify DTC thirty calendar days prior to the ``record date'' that a DSF 
is due and payable. In addition, DTC will require the First Filer to 
submit an attestation that (i) under the terms and conditions of the 
ADR receipt with the investor, the specific fee is allowable and that 
(ii) all depositaries have been contacted and have confirmed they are 
likewise entitled to charge the shareholder the same depositary 
servicing fee in accordance with the respective terms and conditions 
applicable to the ADRs issued by them for this unsponsored program.\10\ 
The attestation will be in a form prescribed by DTC, and may be changed 
periodically to address operational issues. In the event that a 
Participant asks DTC to substantiate the fee, DTC may require the ADR 
depositary to provide DTC with a copy of its fee schedule. DTC may, at 
its discretion, provide copies of the fee schedule to its Participants 
to substantiate the fee.
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    \9\ This process mirrors the process established for the payment 
of dividends on unsponsored depositary receipts whereby the First 
Filer establishes a uniform dividend distribution rate paid by each 
depositary with an outstanding issued ADR position at DTC.
    \10\ In their ADR terms and conditions applicable to investors 
some depositaries have decided, for some issues, not to have 
depositary servicing fees. Since shares held at Cede & Co, DTC's 
nominee name, are held in fungible mass, DTC will not collect a DSF 
fee for an issue if one or more of the ADR depositary banks do not 
charge a fee or charge different fees.
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    DTC states that it has discussed this proposal with the Securities 
Industry and Financial Markets Association (``SIFMA'') Securities 
Operation Division (``SOD''). DTC states that SIFMA's SOD endorses 
DTC's plan to collect such fees through its monthly billing process. 
According to DTC, this process will eliminate invoice and check 
processing for Participants and the depositary banks and ADR 
depositaries will no longer have to mail invoices and reminders to 
Participants holding ADR securities at DTC. Furthermore, according to 
DTC, Participants will have a transparent view into upcoming ADR fees, 
and a centralized source for information about the ADR fee and the 
collection of the fees. DTC expects to begin collecting ADR agent fees 
as expanded by this proposed rule change filing on August 1, 2013. DTC 
will charge a service fee associated with this expansion, the details 
of which are contained in Exhibit 5 to this proposed rule change 
filing.
 (b) Statutory Basis
    DTC states the proposed rule change is consistent with the 
provisions of the Act, and the rules and regulations thereunder 
applicable to DTC and in particular Section 17A(b)(3)(D) \11\ because 
it implements a fee associated with the collection of unsponsored ADRs 
and as such it clarifies and updates DTC's Fee Schedule in order to 
facilitate a more efficient fee collection process for unsponsored ADRs 
and provides for an equitable allocation of fees.
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    \11\ 15 U.S.C. 78q-1(b)(3)(D).
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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

    The foregoing proposed rule change has become effective upon filing 
pursuant to Section 19(b)(3)(A) \12\ of the Act and Rule 19b-
4(f)(2).\13\ At any time within 60 days of the filing of the proposed 
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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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 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

[[Page 40252]]

     Send an email to rule-comments@sec.gov. Please include 
File Number SR-DTC-2013-08 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-2013-08. This file 
number should be included on the subject line if email 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 Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 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/2013/dtc/SR_DTC_2013_08.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-2013-08 and should be submitted on or before July 24, 2013.

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-15897 Filed 7-2-13; 8:45 am]
BILLING CODE 8011-01-P