[Federal Register Volume 68, Number 120 (Monday, June 23, 2003)]
[Notices]
[Pages 37182-37183]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-15776]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-48008; File No. SR-DTC-2002-08]
Self-Regulatory Organizations; The Depository Trust Company;
Order Approving a Proposed Rule Change Relating to Unitary Action
Procedures
June 10, 2003.
On June 13, 2002, The Depository Trust Company (``DTC'') filed with
the Securities and Exchange Commission (``Commission'') a proposed rule
change
[[Page 37183]]
(File No. SR-DTC-2002-08) pursuant to section 19(b)(1) of the
Securities Exchange Act of 1934 (``Act'').\1\ Notice of the proposal
was published in the Federal Register on December 6, 2002.\2\ No
comment letters were received. 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. 46930 (Nov. 27, 2002);
67 FR 72713.
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I. Description
DTC's rule change will clarify the procedures under which DTC's
nominee, Cede & Co., will exercise certain rights as the recordholder
of securities on deposit at DTC where Cede & Co. is required to act
with respect to 100% of the securities on deposit or not act at all.
Such an event is known as a ``Unitary Action.''
When involved in a situation that requires a Unitary Action under
applicable law, DTC will attempt to follow its normal procedures for
actions that are not Unitary Actions. Specifically, for solicitations
when an issuer has announced an annual or special shareholders meeting
or consent solicitation and where a record date has been established,
DTC will assign applicable Cede & Co. voting rights or consenting
rights to its participants that have securities credited to their
accounts on the record date, will issue an omnibus proxy, and will
forward it to the issuer or trustee. DTC also will assist its
participants in exercising other rights available to Cede & Co. as the
recordholder of securities on deposit at DTC. Examples of the rights
that participants may exercise through DTC are the right to dissent and
seek an appraisal of stock, the right to inspect a stock ledger, and
the right to accelerate a bond. Participants may seek DTC's assistance
in exercising such rights on their own behalf or on behalf of their
customers. DTC will act in these matters only upon written instructions
from participants with securities credited in their DTC free accounts.
However, if, for example, a foreign bankruptcy court stated that it
would accept votes for approval of a plan of bankruptcy from
bondholders holding through DTC but only in the form of a 100% yes or
no vote or not at all, DTC will attempt to assign its voting rights to
its participants or otherwise act in accordance with its participants'
instructions.
DTC will not be liable for any losses arising from actions it takes
or fails to take in connection with Unitary Actions other than those
losses that are directly caused by DTC's gross negligence or willful
misconduct.
In Unitary Action situations, DTC may incur unusual expenses (e.g.,
hiring outside counsel) that are specifically attributable to the
securities that are subject to the Unitary Action. Under DTC Rule 20,
DTC may charge each participant holding a position in a Unitary Action
security such participant's pro rata share (based on the number of
shares or the principal amount of bonds or notes) of DTC's expenses
related to DTC's taking or not taking an action in connection with a
Unitary Action.
II. Discussion
Section 17A(b)(3)(F) \3\ of the Act requires that the rules of a
clearing agency be designed, among other things, to remove impediments
to and perfect the mechanism of a national system for the prompt and
accurate clearance and settlement of securities transactions. The
Commission finds that the proposed rule change is consistent with DTC's
obligations under section 17A(b)(3)(F) because it preserves DTC's
participants' ability to exercise their individual rights in corporate
actions while continuing to hold their positions in a book-entry
environment in situations involving Unitary Actions. This clarification
should also add more certainty to the allocation of voting rights and
the costs involved in Unitary Action situations.
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\3\ 15 U.S.C. 78q-1(b)(3)(F).
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III. Conclusion
On the basis of the foregoing, the Commission finds that the
proposal is consistent with the requirements of the Act and in
particular 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-2002-08) be, and hereby
is, approved.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\4\
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\4\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-15776 Filed 6-20-03; 8:45 am]
BILLING CODE 8010-01-P