October 4, 2016
I am an attorney in private practice in Irvine, California. I am writing in my individual capacity and not on behalf of my law firm or any of my law firm's clients.
I previously served as California's Commissioner of Corporations and in that capacity administered and enforced California's securities laws. I have taught as an adjunct professor at the University of California, Irvine and Chapman School of Law. I have also served as Co-Chairman of the Corporations Committee of the Business Law Section of the California State Bar and Chairman of the Business and Corporate Law Section of the Orange County (California) Bar Association. As indicated above, this letter is written in my individual capacity and not on behalf of either of these groups.
The Commission has asked for comment with respect to its proposed definition of "securities settlement system". I believe that the definition is both unclear and unneeded.
As an initial matter, transactions or trades, not securities, are settled.
In addition, the reference to "multilateral rules" is unclear. It seems to me that "multilateral" refers to the basis on which transactions are netted, i.e., among multiple parties, and not the netting rules themselves.
Fundamentally, I question the need for a definition of "securities settlement system". As proposed to be amended, Rule 17Ad-22 would use the term "securities settlement system" only once - as part of the definition of "covered clearing agency". Further, the term "securities settlement system" does not appear in the Securities Exchange Act of 1934 or the SEC's existing rules. It would be far less convoluted to include a description of securities settlement system services in the definition of "covered clearing agency". Finally, the proposed definition of "central securities depository" is unnecessary surplusage as Rule 17Ad-22(a)(2) already defines "central securities depository services".