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Self-Regulatory Organizations; Government Securities Clearing Corporation; Order Approving Proposed Rule Change to Institute Informal Hearing Procedures for Fine Disputes

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Information about this document as published in the Federal Register.

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Start Preamble October 22, 2003.

I. Introduction

On June 28, 2002, the Government Securities Clearing Corporation (“GSCC”) filed with the Securities and Exchange Commission (“Commission”) and on August 19, 2003, amended proposed rule change SR-GSCC-2002-04 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 September 2, 2003.[2] For the reasons discussed below, the Commission is approving the proposed rule change.

II. Description

Since 1998, GSCC has had the authority to impose fines in order to promote greater compliance with its funds settlement debit and clearing fund deposit deficiency call deadlines.[3] GSCC Rule 37 contains procedures whereby a member can dispute any fine assessment through a formal hearing process. Rule 37 also permits GSCC to establish procedures for a hearing not otherwise provided for in the rules.[4] GSCC seeks authority to specifically incorporate into its rules informal hearing procedures with respect to disputed fines.

Pursuant to GSCC's new procedures, if a member disputes a fine and asks for a formal hearing in the manner already specified in the rules, GSCC's management will automatically conduct a review of the disputed fine. Based on the documentation already required in the rules and/or a meeting arranged with the member, management may determine that the fine should be waived. If management determines that the fine should be waived, it must inform the Membership and Risk Management Committee of its determination and the reasons for that determination. The Committee has the ability to accept or reject management's determination. If the Committee accepts management's determination, the fine will be waived. However, if the Committee chooses not to accept management's determination or if management had not determined in its review that the fine should be waived, the member has the right to the formal hearing already provided for in Rule 37.

In addition, GSCC's rules are being amended to require that if a fine is assessed, the member must pay the fine within 30 calendar days (currently 90 days) after it receives the fine imposition letter. If the member requests a hearing in accordance with GSCC's rules to dispute the fine, the fine will not be owing while the hearing is pending.

III. Discussion

Section 17A(b)(3)(F) of the Act requires that the rules of a clearing agency be designed to perfect the mechanism of a national system for the Start Printed Page 61508prompt and accurate clearance and settlement of securities transactions.[5] The Commission finds that GSCC's proposed rule change is consistent with this requirement because it clearly sets forth in GSCC's rules its procedures for management's review and possible waiver of fines and should provide members with a more efficient and less burdensome method for the possible resolution of disputed fines before a full hearing takes place. This added efficiency should contribute to the perfection of the national system for clearance and settlement.

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 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-GSCC-2002-04) be and hereby is approved.

For the Commission by the Division of Market Regulation, pursuant to delegated authority.[6]

Start Signature

Margaret H. McFarland,

Deputy Secretary.

End Signature End Preamble

Footnotes

2.  Securities Exchange Act Release No. 48411 (August 26, 2003), 68 FR 52256.

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3.  Securities Exchange Act Release No. 39746 (March 12, 1998), 63 FR 13439 (March 19, 1998) [File No. SR-GSCC-97-04].

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4.  Government Securities Clearing Corporation Rule 37, Section 7.

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5.  15 U.S.C. 78q-1(b)(3)(F).

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[FR Doc. 03-27136 Filed 10-27-03; 8:45 am]

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