[Federal Register Volume 76, Number 48 (Friday, March 11, 2011)]
[Notices]
[Pages 13439-13440]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-5645]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-64044; File No. SR-DTC-2011-04]
Self-Regulatory Organizations; The Depository Trust Company;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend the Dividends Service Guide as It Relates to the Domestic Tax
Reporting Service and the U.S. Tax Withholding Service
March 7, 2011.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on February 22, 2011, The
Depository Trust Company (``DTC'') filed with the Securities and
Exchange Commission (``Commission'') the proposed rule change described
in Items I and II below, which items have been prepared primarily by
DTC.\2\ DTC filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) and Rule 19b-4(f)(4) thereunder so that the proposed
rule change was effective upon filing with the Commission.\3\ 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\ The text of the proposed rule change is attached as Exhibit
5 to DTC's filing, which is available at http://www.dtcc.com/downloands/legal/rule_filings/2010/dtc/2011-04.pdf.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii) and 17 CFR 240.19b-4(f)(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 will update DTC's Dividends Service Guide
to clarify that: (1) The Domestic Tax Reporting Service (``DTax'') is
no longer available on the Internet or as a computerized file, (2)
DTC's tax withholding services that DTC performs relate exclusively to
payments processed through DTC, and (3) DTC's U.S. Tax Withholding
Service is available to all non-U.S. entities that are DTC
participants.
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.\4\
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\4\ The Commission has modified the text of the summaries
prepared by the DTC.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
When an issuer makes a distribution on a security, the payment is
classified for tax purposes as a particular type of income. Often such
income is reclassified at the end of the year as a different type of
income than originally designated, which may result in a different
taxability characteristic than the original income announcement
described.\5\ When an income reclassification occurs, DTC participants
need to be aware of it so they can properly prepare the IRS Forms 1099
they are required to provide to their customers. The Domestic Tax
Reporting Service (``DTax'') provides participants with income
classification information for assistance in completing those forms.
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\5\ For example, some income may be reclassified at the end of
the year as short or long term capital gains.
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In 2005, for purposes of efficiency and enhanced customer service,
DTax became a service offering of DTCC Solutions, a wholly-owned
subsidiary of The Depository Trust & Clearing Corporation, DTC's parent
company.\6\ At that time, DTCC Solutions partnered with ADP Investor
Communication Services, Inc. to provide DTax on the Internet and as a
computerized file. Recently, DTCC Solutions and Broadridge, formerly
ADP Investor Communication Services, Inc., ended their strategic
alliance. In an effort to enhance the utility of the DTC Dividends
Service Guide (``Guide''), DTC is making updates to the Guide to
reflect the fact that the strategic alliance no longer exists and to
note that while DTax is still accessible through inquiry functions on
DTC's Participant Terminal System and DTC's Participant Browser
Service, DTax is no longer available on the Internet or as a
computerized file.
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\6\ Securities Exchange Release Act. No. 52977 (December 19,
2005) [File No. SR-DTC-2005-20].
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Additionally and as requested by its participants, DTC is making
other minor updates to the Guide's information relating to DTC's U.S.
Tax Withholding Service in order to clarify that the tax withholding
services that DTC performs relate exclusively to payments processed
through DTC and that DTC cannot and does not perform tax withholding
for payments outside of its systems. The updates include clarifications
to assure participants that DTC performs tax withholding services on
the credits processed by its Stock Loan Income Tracking Service and
Repo Tracking Service and on payments credited to the DTC accounts of
non-U.S. participants.\7\ The Guide is also being updated to make clear
that DTC's U.S. Tax Withholding Service is available to all non-U.S.
entities that are participants of DTC and not just to entities that are
qualified or nonqualified intermediaries (in tax parlance) for tax
purposes.
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\7\ DTC's Participants have requested that DTC clarify in its
Procedures that it is currently performing this service because the
IRS earlier this year published a notice on performing tax
withholding on substitute dividend payments.
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DTC believes that the proposed rule change is consistent with the
requirements of Section 17A of the Act \8\ and the rules and
regulations thereunder applicable to DTC because the proposed rule
should facilitate the prompt and accurate clearance and settlement of
securities transactions by
[[Page 13440]]
clarifying DTC's procedures as they relate to certain tax services
offered by and through DTC, which should enhance the use of DTC's
existing tax withholding services.
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\8\ 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 impose any
burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act.
(C) Self-Regulatory Organization's Statement on Comments on the
Proposed Rule Change Received from Members, Participants, or Others
No written comments relating to the proposed rule change have 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 rule change has become effective upon filing pursuant
to Section 19(b)(3)(A)(iii) of the Act \9\ and Rule 19b-4(f)(4) \10\
thereunder because it is a change in an existing service that does not
adversely affect the safeguarding of securities or funds in the custody
or control of the clearing agency and does not significantly affect the
respective rights or obligations of the clearing agency or persons
using the service. At any time within sixty days of the filing of such
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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\9\ 15 U.S.C. 78s(b)(3)(A)(iii).
\10\ 17 CFR 240.19b-4(f)(4).
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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
Send an e-mail to [email protected]. Please include
File Number SR-DTC-2011-04 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-2011-04. 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 Web site viewing and
printing 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, http://www.dtcc.com. 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-2011-04 and should be submitted on or before April 1, 2011.
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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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-5645 Filed 3-10-11; 8:45 am]
BILLING CODE 8011-01-P