Rules of the Securities Investor Protection Corporation

1 17 CFR 300.300 (1996). Rule 300 sets out the definitions of certain terms used in SIPC’s rules. 2 17 CFR 300.301 (1996). Rule 301 governs contracts to be closed out or completed in a liquidation. 3 17 CFR 300.100–300.503 (1996). SECURITIES AND EXCHANGE COMMISSION 17 CFR Part 300 [Release No. SIPA–160; File No. SIPC–96– 1] Rules of the Securities Investor Protection Corporation AGENCY: Securities and Exchange Commission. ACTION: Proposed rule change. SUMMARY: The Securities Investor Protection Corporation (‘‘SIPC’’) filed a proposed rule change with the Securities and Exchange Commission (‘‘Commission’’). The proposed rule change amends SIPC Rules 300 1 and 301,2 which relate to the closeout and completion of contracts for the purchase or sale of securities made by debtors in liquidation under the Securities Investor Protection Act of 1970 (‘‘SIPA’’). The Commission is publishing the proposed rule change for public comment. Within thirty-five days of publication of notice, the Commission must (absent an extension) by order approve the proposed rule change or institute disapproval proceedings. Because SIPC rules have the force and effect as if promulgated by the Commission, those rules are published in Title 17 of the Code of Federal Regulations.3 DATES: Comments are to be received on or before November 22, 1996. ADDRESSES: Interested persons are invited to submit written data, views, and arguments concerning the foregoing. Persons making written submissions should file six copies thereof with the Secretary, Securities and Exchange Commission, 450 Fifth Street, N.W., Washington D.C. 20549. Copies of the submissions, 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 inspection and copying in the Commission’s Public Reference Room, 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of such filings will also be available for inspection and copying at the principal

56486 Federal Register / Vol. 61, No. 213 / Friday, November 1, 1996 / Proposed Rules 4 15 U.S.C. 78ccc(e)(2)(A) (1995). 5The Commission has modified the language in this section. 6 15 U.S.C. 78ccc(8)(e) (1995). 7 17 CFR 240.15c6–1 (1996). 8See Securities Exchange Act Release No. 33023 (October 6, 1993), 58 FR 52891 (October 13, 1993). 9Specifically, Rule 15c6–1 provides, among other things, that a broker-dealer shall not effect or enter into a contract for the purchase or sale of a security that provides for payment of funds and delivery of securities later than the third business day after the date of the contract unless otherwise expressly agreed to by the parties at the time of the transaction. Prior to the effective date of Rule 15c6– 1, the settlement cycle for securities transactions was five business days. See Release No. 33023, supra note 8. 10 In order to remain consistent with the Commission’s three business day settlement timeframe, SIPC proposes to amend the term ‘‘open contractual commitment’’ in Rule 300(c) by replacing the reference to five business days with three business days. Specifically, Rule 300(c) is proposed to be amended, in part, to provide that the term ‘‘open contractual commitment’’ means a failed to receive or a failed to deliver which had a settlement date prior to the filing date and the respective obligations of the parties remained outstanding on the filing date or had a settlement date which occurs on or within three business days subsequent to the filing date. In addition, SIPC proposes to amend Rule 301 by replacing the references to five business days with three business days. 11SIPC proposes to amend Rule 300(a) by replacing the reference to section 16(8) of SIPA with
section 16(7) of SIPA.
12U.S.C. 78ccc(3)(e) (1995). 13 17 CFR 200.30–3(f)(3) (1996). office of SIPC. All submissions should refer to file number SIPC–96–1. Comments also may be submitted electronically at the following E–Mail address: rule-comments@sec.gov. All comment letters should refer to file number SIPC–96–1. This rule number should be included on the subject line if E-mail is used. Electronically submitted comment letters will be posted on the Commission’s Internet web site (http://www.sec.gov). FOR FURTHER INFORMATION CONTACT:
Michael A. Macchiaroli, Associate Director, 202/942–0131, Peter R. Geraghty, Assistant Director, 202/942– 0177, or Louis A. Randazzo, Special Counsel, 202/942–0191, Division of Market Regulation, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549. SUPPLEMENTARY INFORMATION: Pursuant to Section 3(e)(2)(A) of SIPA,4 notice is hereby given that SIPC filed with the Securities and Exchange Commission on October 10, 1996, the proposed rule change as described in Item I below, which item has been prepared primarily by SIPC. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons.
I. SIPC’s Statement of the Purpose of,
and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, SIPC 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 above. SIPC has prepared the following summary of the purpose of and statutory basis for the proposed rule change.5
Section 8(e) of SIPA requires SIPC to
adopt rules with respect to the closeout of contracts with a debtor for the purchase or sale of securities in the ordinary course of its business.6 The purpose of the proposed rule change is to amend SIPC’s Series 300 Rules, which address the closeout or completion of contracts for the purchase or sale of securities made by debtors in a liquidation under SIPA with other brokers or dealers, to be consistent with Commission Rule 15c6–1.7 Rule 15c6–1, which became effective in June of 1995,8 establishes three business days as the standard settlement timeframe for most securities transactions.9 The adoption of a three business day settlement timeframe affected SIPC Rules 300 and 301, which currently refer to a five business day settlement timeframe.10 Because Rule 15c6–1 does not affect SIPC Rules 302 through 307, SIPC does not propose to amend these rules. The proposed rule change also makes a technical correction to conform a statutory citation in Rule 300 to the correct section SIPA.11
II. Date of Effectiveness of the Proposed
Rule Change and Timing for Commission Action Within thirty-five days of the date of publication of this notice in the Federal Register, or within such longer period (i) as the Commission may designate up to ninety days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which SIPC consents, the Commission will:
(A) By order approve such proposed rule change or (B) Institute proceedings to determine whether the proposed rule change should be disapproved. To allow public access to SIPC’s rules, SIPC rules that are approved by the Commission are published under Part 300 of 17 CFR Chapter II.
III. Statutory Analysis
Pursuant to SIPA and particularly
Section 3(e),12 SIPC proposes to amend
300.300 and 300.301 of Title 17 of the
Code of Federal Regulations in the manner set forth below.
IV. List of Subjects in 17 CFR Part 300
Brokers, Securities, Securities Investor Protection Corporation. In accordance with the foregoing, Title 17, Chapter II of the Code of Federal Regulations is proposed to be amended as follows:
PART 300—RULES OF THE
SECURITIES INVESTOR PROTECTION CORPORATION

1. The authority citation for part 300
   continues to read as follows:
   Authority: Section 3, 84 Stat. 1636, as amended; 15 U.S.C. 78ccc. § 300.300 [Amended]
2. Section 300.300 is proposed to be
   amended by removing the reference to ‘‘section 16(8)’’ and adding ‘‘section 16(7)’’ in paragraph (a), and removing the reference to ‘‘five business days’’ and adding ‘‘three business days’’ in paragraph (c). § 300.301 [Amended]
3. Section 300.301 is proposed to be
   amended by removing the references to ‘‘five business days’’ and adding ‘‘three business days’’ in paragraphs (a)(2)(i) and (a)(2)(ii). For the Commission by the Division of Market Regulation, pursuant to delegated authority.13 Dated: October 25, 1996. Margaret H. McFarland, Deputy Secretary. [FR Doc. 96–28007 Filed 10–31–96; 8:45 am] BILLING CODE 8010–01–M