Document ID: SEC-2008-0988-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Depository Trust Co.
Posted Date: 2008-07-16T04:00Z

[Federal Register: July 16, 2008 (Volume 73, Number 137)]
[Notices]               
[Page 40888-40890]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr16jy08-106]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58122; File No. SR-DTC-2007-07]

 
Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing of Proposed Rule Change To Amend the Applicant 
Disqualification Criteria Contained in Its Rules

July 9, 2008.
    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''), and on 
February 7, 2008, and March 18, 2008, amended, 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 to amend the applicant 
disqualification criteria contained in DTC's rules in an effort to 
harmonize them with similar rules of DTC's affiliates, National 
Securities Clearing Corporation

[[Page 40889]]

(``NSCC'') and Fixed Income Clearing Corporation (``FICC'').

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.\3\
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    \3\ 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) Statutory Disqualification
    DTC Rule 2 sets forth the basic standards for the admission of DTC 
Participants and defines certain criteria that may disqualify an 
applicant from participation. While the factors that may disqualify an 
applicant are generally consistent among DTC, FICC, and NSCC rules, 
DTC's rules do not specifically reference an order of statutory 
disqualification as defined in Section 3(a)(39) of the Act \4\ among 
its disqualification criteria.\5\ To promote uniformity among the rules 
of DTC and its affiliates, DTC is proposing to add such a provision to 
its rules.
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    \4\ 15 U.S.C. 78c(a)(39).
    \5\ As a clearing agency registered under the Act, DTC must 
evaluate those members subject to an order of statutory 
disqualification as defined in the Act.
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(2) Associated Persons
    DTC rules include applicant disqualification criteria for persons 
and/or entities ``associated'' with the applicant firm. Because it is 
not easily ascertainable as to what entities or individuals are 
``associated'' with a particular entity, DTC is proposing to amend 
these provisions in its rules so that they are consistent with internal 
surveillance procedures. DTC proposes to change references to persons 
``associated'' with the applicant to references to ``controlling 
management,'' which shall be defined to mean the Chief Executive 
Officer, Chief Financial Officer, and Chief Operating Officer, or their 
equivalents. These are the officers that are currently screened by 
DTC's risk management pursuant to internal procedures. Finally, DTC 
proposes to add language to its rules that would require applicants to 
inform DTC as to any member of its controlling management that is or 
becomes subject to statutory disqualification.
(3) Amendment to Willful Violation
    DTC rules currently include as a disqualification criterion the 
applicant's or an associated person's ``willful'' violation of the 
Securities Act of 1933,\6\ the Act, the Investment Company Act of 
1940,\7\ the Investment Advisors Act of 1940,\8\ or any rule or 
regulation promulgated thereunder. DTC proposes to remove the word 
``willful'' from this provision because DTC believes that any violation 
of these provisions should be a disqualification criterion.
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    \6\ 15 U.S.C. 77a et seq.
    \7\ 15 U.S.C. 80a-1 et seq.
    \8\ 15 U.S.C. 80b-1 et seq.
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    Changes similar to those outlined in sections (1), (2), and (3) 
above will be made to DTC Rule 10, ``Discretionary Termination.''
    DTC believes that the proposed rule change is consistent with the 
requirements of Section 17A of the Act \9\ and the rules and 
regulations thereunder because the proposed changes provide 
transparency with respect to the applicant and member disqualification 
criteria in DTC rules and uniformity with NSCC and FICC rules and 
thereby promote the prompt and accurate clearance and settlement of 
securities transactions.
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    \9\ 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. 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-2007-07 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-DTC-2007-07. 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/
2007-07.pdf, http://www.dtcc.com/downloads/legal/rule_filings/2007/
dtc/2007-07-amendment.pdf, and http://www.dtcc.com/downloads/legal/
rule_filings/2007/dtc/2007-07-amendment2.pdf. All comments received 
will be posted without change; the Commission does not edit personal 
identifying information from

[[Page 40890]]

submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Number SR-DTC-
2007-07 and should be submitted on or before August 6, 2008.

    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,
Acting Secretary. 6
[FR Doc. E8-16227 Filed 7-15-08; 8:45 am]

BILLING CODE 8010-01-P