Document ID: SEC-2011-1292-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Depository Trust Co.
Posted Date: 2011-08-30T04:00Z

[Federal Register Volume 76, Number 168 (Tuesday, August 30, 2011)]
[Notices]
[Pages 53987-53988]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-22098]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65186; File No. SR-DTC-2011-06]

Self-Regulatory Organizations; The Depository Trust Company; 
Order Granting Approval of a Proposed Rule Change To Amend Rules 
Relating to the Early Redemption of Certificates of Deposit

August 23, 2011.

I. Introduction

    On July 1, 2011, The Depository Trust Company (``DTC'') filed 
proposed rule change SR-DTC-2011-06 with the Securities and Exchange 
Commission (``Commission'') pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act'').\1\ Notice of the proposed 
rule change was published in the Federal Register on July 18, 2011.\2\ 
The Commission received no comment letters. For the reasons discussed 
below, the Commission is granting approval of the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ Securities Exchange Act Release No. 64864 (July 12, 2011), 
76 FR 42149 (July 18, 2011). A technical correction to this notice 
was made on July 18, 2011. 76 FR 45309 (July 28, 2011).
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II. Description

    Recently, several issuers of Certificates of Deposit (``CDs'') have 
contacted DTC in an attempt to redeem or ``call'' their CDs prior to 
the maturity date. The master certificate of these CDs did not 
expressly specify that they were callable or subject to early 
redemption. In some instances, the issuer offered to pay DTC 
participants the principal plus interest through the date of maturity. 
In other instances, the issuer offered to pay principal plus interest 
only through the date of redemption. Because the master certificates 
did not expressly indicate the CDs could be redeemed early, a number of 
DTC participants expressed their concerns that the CDs had been sold to 
investors without disclosing the possibility of early redemption.
    Over the past several months, DTC has worked with industry 
representatives, including the Retail Fixed Income Committee of The 
Securities Industry and Financial Markets Association (``SIFMA''), to 
better understand the issues related to the early redemption of CDs 
that do not contain express early redemption provisions. As a result, 
DTC is amending its Redemption Service Guide to state that DTC will not 
process early redemptions or calls on CDs unless (1) There is an 
explicit provision in the master certificate that permits early 
redemption by the issuer and specifies the payment to be made in 
connection therewith or (2) written consent to an early redemption in a 
form designated by DTC is obtained by the issuer from all of the 
holders of the CD. Furthermore, in the event that an issuer sends such 
payment to DTC in contravention of the rule, DTC will return the 
payment, less any costs associated with facilitating the attempted 
redemption and return of funds, to the issuer.

III. Discussion

    Section 17A(b)(3)(F) of the Act requires, among other things, that 
the rules of a clearing agency be designed to promote the prompt and 
accurate clearance and settlement of securities transactions and to 
remove impediments to and perfect the mechanism of a national system 
for the prompt and accurate clearance and settlement of securities 
transactions.\3\ The Commission finds that DTC's rule change should 
clarify the terms and conditions under which DTC will process the early 
redemption of certain CDs and thus should facilitate the prompt and 
accurate clearance and settlement of transactions involving

[[Page 53988]]

these CDs and should remove impediments to and perfect the mechanism of 
a national system for the prompt and accurate clearance and settlement 
of securities transactions, and, in general, to protect investors and 
the public interest.
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    \3\ 15 U.S.C. 78q-1(b)(3)(F).
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    Accordingly, for the reasons stated above the Commission believes 
that the proposed rule change is consistent with DTC's obligation under 
Section 17A of the Act and the rules and regulations thereunder.\4\
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    \4\ In approving this proposal, the Commission has considered 
its impact on efficiency, competition, and capital formation. 15 
U.S.C. 78c(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, 
particularly with the requirements of Section 17A of the Act, and the 
rules and regulations thereunder.
    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change (File No. SR-DTC-2011-06) be and hereby 
is approved.

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\5\
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    \5\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-22098 Filed 8-29-11; 8:45 am]
BILLING CODE 8011-01-P