Commission Note and Order:
Request for Comment and Order Granting Request for Withdrawal from and Cancellation of Registration as Clearing Agency (Philadelphia Depository Trust Company)
SECURITIES AND EXCHANGE COMMISSION
(Release No. 34-47061; File No. 600-19)
December 20, 2002
Philadelphia Depository Trust Company; Notice of Request for Comment and Order Granting Request for Withdrawal from and Cancellation of Registration as Clearing Agency
On September 23, 1983, pursuant to Section 17A of the Securities Exchange Act of 1934 (Exchange Act)1 and Rule 17Ab2-1,2 the Securities and Exchange Commission (Commission) registered the Philadelphia Depository Trust Company (Philadep) as a clearing agency.3 Philadep is a wholly-owned subsidiary of the Philadelphia Stock Exchange, Inc. (Phlx). As a regional depository facility and limited purpose trust company organized under the laws of Pennsylvania, it offered its participants, among other services, automated, book-entry transfer of securities positions, vault facilities, and securities lending services.4
On June 18, 1997, Philadep, Phlx, the Stock Clearing Corporation of Philadelphia (SCCP),5 the National Securities Clearing Corporation (NSCC) and The Depository Trust Company (DTC) entered into an Agreement in connection with Philadep's withdrawal from the securities depository business and SCCP's restructured and limited clearance and settlement business. In the Agreement, Philadep and SCCP agreed to certain provisions, including that: (i) Philadep would cease providing securities depository services; (ii) SCCP would make available to its participants access to the facilities of one or more other organizations providing depository services; (iii) SCCP would make available to SCCP participants access to the facilities of one or more other organizations providing securities clearing services; and (iv) SCCP would transfer to the books of such other organizations the CNS system open positions of SCCP participants on the books of SCCP. On August 11, 1997, the Commission instituted public administrative and cease-and-desist proceedings pursuant to Sections 19(h) and 21C of the Exchange Act against Philadep and SCCP (Administrative Order).6 On December 11, 1997, the Commission approved a proposed rule change which gave effect to the Agreement and which reflected Philadep's withdrawal from the depository business and SCCP's restructured and limited clearance and settlement business.7
In a letter dated October 1, 2002, Philadep requested that the Commission permit Philadep to withdraw its registration as a clearing agency.8 Philadep stated that its request for withdrawal of its clearing agency registration was being made pursuant to the remedial sanctions imposed in the Order Instituting Administrative Proceedings. Philadep requested that its withdrawal as a registered clearing agency be made effective as of December 31, 2002, in order to coincide with its dissolution as a trust company under the laws of the Commonwealth of Pennsylvania.
As a condition of Philadep's withdrawal as a registered clearing agency, Phlx represents that it will "maintain all documents, books and records in Philadep's possession as required by Rule 17a-1 under the Exchange Act for a period of 5 years following the Effective Date [of the cancellation of Philadep's registration as a clearing agency]."9 In addition, Phlx represents that all known outstanding claims against Philadep as of the effective date of its withdrawal will have been researched and, where appropriate, paid.10
Philadep represents that it has been diligent and thorough in researching and where appropriate has paid, all known outstanding claims. Philadep has represented that it has sent letters to all former Philadep participants and known creditors giving notice of its dissolution and that notice of the dissolution was published in the Philadelphia Daily News and the Legal Intelligencer.11
Section 19(a)(3) of the Exchange Act provides in part that a self-regulatory organization may "withdraw from registration by filing a written notice of withdrawal with the Commission." Section 19(a)(3) also provides that in the event any self-regulatory organization is no longer in existence or has ceased to do business in the capacity specified in its application for registration, "the Commission, by order, shall cancel its registration." Based upon representations made by Philadep to the Commission and based upon the undertakings discussed herein, the Commission has determined that granting Philadep's request for withdrawal from registration would be consistent with the requirements of the Act. Furthermore, because Philadep has ceased to do business in the capacity specified in their registration application, the Commission is canceling its registration effective December 31, 2002.
The Commission believes that it is appropriate as a part of this registration cancellation to require Phlx to comply in substance with the recordkeeping provisions of Rule 17a-1(a) with respect to the records of Philadep.12 Specifically, Phlx, as it has consented to do, will maintain all documents, books, and records (collectively records) which are required to be maintained under Rule 17a-1(a) and which are in Philadep's possession, will produce such records at the request of any representative of the Commission, and will maintain such records for a period of 5 years from the effective date of the cancellation of Philadep's registration as a clearing agency.
The Commission believes that it would be appropriate and consistent with the policies expressed in Section 19 to notify interested persons about and to solicit public comment concerning the cancellation of Philadep's registration as a clearing agency. To assist the Commission in determining whether it should allow the cancellation to become effective as set forth in this order or whether it should modify this order, interested persons are invited to submit, until December 30, 2002, written data, views, and arguments concerning this order and the undertakings discussed herein. Comments should be submitted in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 450 5th Street, NW, Washington, DC 20549-0609. Comments may also be submitted electronically at the following e-mail address: firstname.lastname@example.org. All comment letters should refer to File No. 600-19. This file number should be included on the subject line if e-mail is used. Comment letters will be available for public inspection and copying in the Commission's Public Reference Room, 450 5th Street, NW, Washington, DC. Electronically submitted comment letters also will be posted on the Commission's web site (http://www.sec.gov).13
IT IS THEREFORE ORDERED that:
(1) Effective December 31, 2002, Philadep's registration as a clearing agency under Section 17A of the Exchange Act and Rule 17Ab2-1 thereunder is terminated and
(2) Phlx for a period of 5 years from the effective date of the termination of Philadep's registration as a clearing agency will maintain all the records required to be maintained pursuant to Rule 17a-1(a) which are in Philadep's possession and will produce such records upon the request of any representative of the Commission.
By the Commission.
Margaret H. McFarland
||15 U.S.C. 78q-1.|
||17 CFR 240.17Ab2-1.|
||Securities Exchange Act Release No. 20221 (September 23, 1983), 48 FR 45167 (October 3, 1983).|
||Id. at 45173.|
||SCCP is also a wholly-owned subsidiary of the Phlx. It is also registered as a clearing agency with the Commission.|
||Among other things, the Administrative Order required Philadep to file a Section 19(b) proposed rule change describing its withdrawal from the securities depository business and to file with the Commission a request to withdraw its clearing agency registration. Securities Exchange Act Release Nos. 38918 (August 11, 1997), (Administrative Proceeding File No. 3-9360); 39644 (February 11, 1998), (Administrative Proceeding File No. 3-9360) (Order modifying August 11, 1997, Order).|
||Securities Exchange Act Release No. 39444 (December 11, 1997), 62 FR 66703 (December 19, 1997).|
||Letter from Meyer S. Frucher, Chairman, Philadep, and Chairman, Phlx, to Jerry Carpenter, Assistant Director, Division of Market Regulation, Commission. (October 1, 2002).|
||In connection with Philadep's voluntary plan of dissolution, Philadep and Phlx entered into an Assumption and Guarantee Agreement dated February 21, 2001, whereby Phlx assumes certain obligations and liabilities of Philadep. As part of Philadep's request for withdrawal as a registered clearing agency, Phlx has reaffirmed to the Commission its undertakings under the Assumption and Guarantee Agreement. |
||E-mail from Murray L. Ross, Vice President and Secretary, Philadep, SCCP, and Phlx, to Jerry Carpenter, Assistant Director, Division of Market Regulation, Commission. (December 12, 2002).|
||Exchange Act Rule 17a-1 requires a clearing agency to: (1) "keep and preserve at least one copy of all documents, including all correspondence, memoranda, papers, books, notices, accounts, and other such records as shall be made or received by it in the course of its business as such and in the conduct of its self-regulatory activity;" (2) "keep all such documents for a period of not less than five years, the first two years in an easily accessible place;" and (3) "upon request of any representative of the Commission, promptly furnish to the possession of such representative copies of any documents required to be kept and preserved by it ...." 17 CFR 240.17a-1.|
||We do not edit personal, identifying information such as names, or e-mail addresses, from electronic submissions. Submit only information you wish to make publicly available.|