Document ID: SEC-2009-0606-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; The Depository Trust Company; Order Approving 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
Posted Date: 2009-05-04T04:00Z

[Federal Register Volume 74, Number 84 (Monday, May 4, 2009)]
[Notices]
[Pages 20513-20514]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-10117]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59821; File No. SR-DTC-2009-05]

Self-Regulatory Organizations; The Depository Trust Company; 
Order Approving 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

April 24, 2009.

I. Introduction

    On February 25, 2009, The Depository Trust Company (``DTC'') filed 
with the Securities and Exchange Commission (``Commission'') a proposed 
rule change pursuant to Section 19(b)(1) of the Securities Exchange Act 
of 1934 (``Act'').\1\ On March 16, 2009, the Commission published 
notice of the proposed rule change in the Federal Register to solicit 
comments from interested persons.\2\ The Commission received no comment 
letters in response to the proposed rule change. For the reasons 
discussed below, the Commission is approving the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ Securities Exchange Act Release No. 59540 (Mar. 9, 2009), 74 
FR 11146.
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II. Description

    Prior to this rule change, DTC collected custody fees, called 
Depository Service Fees (``DSF''), from

[[Page 20514]]

participants once a year per CUSIP. DTC collected 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 
charged its participants three percent (3%) of the ADR agent fee, which 
includes all fees under the ADR agreement, 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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    \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).
    \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.
    \6\ Fees may be collected multiple times in any given calendar 
year depending on the terms of the ADR agreement.
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    With this rule filing, DTC will collect all allowable DSFs, 
dividend fees,\4\ pass-through expenses, or other special fees as 
governed by the ADR agreement.\5\ Additionally, DTC will increase the 
maximum collection charge to $20,000 per CUSIP. In order to collect 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 (are) 
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.
    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 that DTC would collect would be 
increased to $20,000 from $10,000.
    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.

III. Discussion

    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to DTC. In particular, the Commission believes 
the proposal is consistent with Section 17A(b)(3)(F) of the Act,\7\ 
which requires that the rules of a registered clearing agency are 
designed to, among other things, remove impediments to the perfection 
of the mechanism of a national system for the prompt and accurate 
clearance and settlement of securities transactions. For example, 
further automating and centralizing information to effect DTC's ADR 
agent fee collection process should eliminate invoice and check 
processing for DTC participants and depositary banks because ADR 
depositaries will no longer have to mail invoices and reminders to 
participants holding ADR securities at DTC. In addition, DTC 
participants will 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. These refinements to the ADR fee collection 
process should therefore remove impediments to the perfection of the 
mechanism of a national system for the prompt and accurate clearance 
and settlement of securities transactions.
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    \7\ 15 U.S.C. 78q-1(b)(3)(F).
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IV. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposed rule change is consistent with the requirements of the Act and 
in particular Section 17A of the Act \8\ and the rules and regulations 
thereunder.
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    \8\ 15 U.S.C. 78q-1.
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\9\ that the proposed rule change (File No. SR-DTC-2009-05) be and 
hereby is approved.\10\
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    \9\ 15 U.S.C. 78s(b)(2).
    \10\ In approving the proposed rule change, the Commission 
considered the proposal's impact on efficiency, competition and 
capital formation. 15 U.S.C. 78c(f).

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-10117 Filed 5-1-09; 8:45 am]
BILLING CODE 8010-01-P