On April 30, 2007, the Depository Trust Company (“DTC”) filed with the Securities and Exchange Commission (“Commission”) and on February 7, 2008, and March 18, 2008, amended proposed rule change SR–DTC–2007–07 pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”).
The proposed rule change amends the applicant disqualification criteria contained in DTC's rules in order to harmonize them with similar rules of DTC's affiliates, National Securities Clearing Corporation (“NSCC”) and Fixed Income Clearing Corporation (“FICC”).
DTC Rule 2 sets forth the basic standards for the admission of DTC Participants and defines certain criteria that may disqualify an applicant from participation. While the factors that may disqualify an applicant are generally consistent among DTC, FICC, and NSCC rules, DTC's rules do not specifically reference an order of statutory disqualification as defined in Section 3(a)(39) of the Act
DTC rules include applicant disqualification criteria for persons and/or entities “associated” with an applicant. Because it is not easily ascertainable as to what entities or individuals are “associated” with a particular entity, DTC is amending these provisions in its rules so that they are consistent with internal surveillance procedures. DTC is changing references to persons “associated” with the applicant to references to “controlling management,” which shall be defined to mean the Chief Executive Officer, Chief Financial Officer, and Chief Operating Officer, or their equivalents. These are the officers that are currently screened by DTC's risk management pursuant to internal procedures. DTC is also adding language to its rules that would require applicants to inform DTC as to any member of its controlling management that is or becomes subject to statutory disqualification.
DTC rules currently include as a disqualification criterion the applicant's or an associated person's “willful” violation of the Securities Act of 1933,
Changes similar to those outlined in Sections A, B, and C above will be made to DTC Rule 10, “Discretionary Termination.”
The Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a registered clearing agency. In particular, the Commission believes the proposal is consistent with the requirements of Section 17A(b)(3)(F),
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
For the Commission by the Division of Trading and Markets, pursuant to delegated authority.