SECURITIES AND EXCHANGE COMMISSION

     17 CFR Parts 240 and 249

     [RELEASE NO.  34-39176; File No. S7-21-96]      

     RIN 3235-AG99

     LOST SECURITYHOLDERS

     AGENCY:   Securities and Exchange Commission 

     ACTION:   Final Rule

     SUMMARY:  The Securities and Exchange Commission is adopting Rule 17Ad-17

     and Rule 17a-24 under the Securities Exchange Act of 1934.  Rule 17Ad-17,

     which is designed to address the problem of "lost securityholders,"

     requires transfer agents to conduct searches in an effort to locate lost

     securityholders.  Rule 17a-24, which is designed to assist the Commission

     in monitoring the effects of Rule 17Ad-17, requires transfer agents to file

     information on lost securityholders with the Commission.  The rules are

     designed to reduce the number of lost securityholders.

     EFFECTIVE DATE:  240.17Ad-17 and 240.17Ad-7(i) will be effective [Insert

     date 60 days after publication in the Federal Register] and 240.17a-24

     and 249b.102, the amendments to Form TA-2 will be effective [Insert date

     120 days after publication in the Federal Register].

     FOR FURTHER INFORMATION CONTACT:  Jerry W. Carpenter, Assistant Director;

     Christine Sibille, Senior Counsel; Jeffrey Mooney, Attorney; or Theodore

     Lazo, Attorney at 202/942-4187, Office of Risk Management and Control, Mail

     Stop 5-1, Division of Market Regulation, Securities and Exchange

     Commission, 450 Fifth Street, N.W., Washington, D.C. 20549.

     SUPPLEMENTARY INFORMATION:

     I.   INTRODUCTION AND BACKGROUND







          Transfer agents serve as the custodians of securityholder records,

     including records of securityholders' addresses, for issuers.  In this

     capacity, transfer agents frequently are responsible for disseminating

     shareholder communications and dividend and interest payments.  For various

     reasons, transfer  agents occasionally have outdated or incorrect addresses

     for some securityholders ("lost securityholders").<(1)>  As a result,

     these shareholders do not receive dividend and interest payments to which

     they are entitled.  Generally, issuers retain custody of such dividend and

     interest payments, and if contact is not reestablished with a

     securityholder prior to the expiration of the appropriate state's escheat

     period, the issuer must turn the securityholder's assets over to the state

     unclaimed property administrator.  While various transfer agents attempt to

     locate lost securityholders, the extent and type of efforts used vary

     considerably from one transfer agent to another.<(2)>  The Securities

     and Exchange Commission ("Commission") believes that establishing minimum

     search requirements in this area will facilitate locating lost

     securityholders.  

          On August 22, 1996, the Commission issued for comment a release

     ("Proposing Release")<(3)> proposing Rule 17Ad-17<(4)> and Rule
                              

          <(1)>     For example, some securityholders do not provide a new
                    address when they move.  

          <(2)>     See Securities Exchange Act Release No. 37595 (August
                    22, 1996), 61 FR 44249 (release proposing Rule 17Ad-17
                    and Rule 17a-24), note 13 (discussing the methods
                    transfer agents currently use to locate lost
                    securityholders).

          <(3)>     Id.  The Commission later extended the comment period
                    contained in the Proposing Release.  Securities
                    Exchange Act Release No. 37949 (November 15, 1996), 61
                    FR 59046 (extending comment period). 

                              ======END OF PAGE 2======







     17a-24<(5)> under the Securities Exchange Act of 1934 ("Exchange Act")

     and proposing amendments to Rule 17Ad-7,<(6)> which were designed to

     address the problem of lost securityholders.  Proposed Rule 17Ad-17 would

     require that transfer agents exercise reasonable care, including conducting

     data base searches, in an effort to locate lost securityholders.<(7)> 

     The proposed amendment to Rule 17Ad-7 set forth the retention time periods

     for the records relating to compliance with proposed Rule 17Ad-17. 

     Proposed Rule 17a-24 would have required certain entities that hold assets

     for others (e.g., transfer agents and broker-dealers) to file annually with

     the Commission a list of the social security numbers of all lost

     securityholders contained in their records.  The Proposing Release also

     requested comment on whether either the Commission or a private entity

     should create and operate a lost securityholder data base.







                              

          <(4)>(...continued)
          <(4)>     17 CFR 240.17Ad-17.

          <(5)>     17 CFR 240.17a-24.

          <(6)>     17 CFR 240.17Ad-7.

          <(7)>     The Proposing Release also discussed transfer agents'
                    obligations under Rule 17Ad-10 to maintain and keep
                    current accurate master securityholder files (defined
                    below in note 10), which include information such as
                    securityholders' names and addresses.  The Proposing
                    Release concluded that maintaining accurate master
                    securityholder files is one of the most basic steps in
                    addressing the lost securityholder problem.  The
                    Commission believes that conducting data base searches
                    for lost securityholders pursuant to Rule 17Ad-17 will
                    enhance a transfer agent's fulfillment of its
                    responsibilities under Rule 17Ad-10.
                              ======END OF PAGE 3======







          The Commission received 57 comment letters from 52 commenters in

     response to the Proposing Release.<(8)>  The commenters in general

     expressed support for proposed Rule 17Ad-17 although several commenters

     expressed concerns about specific provisions of the proposed rule.  The

     commenters in general expressed concern about proposed Rule 17a-24.  The

     Commission is adopting Rule 17Ad-17 substantially as proposed but with some

     modifications to reflect commenters' views and is amending Rule 17Ad-7 as

     proposed.  The Commission is adopting proposed Rule 17a-24 with substantial

     revisions and is making related changes to Form TA-2.<(9)>  In

     addition, the Commission has directed its staff to review the operations of

     the adopted rules after three years and to report back to the Commission on

     its findings.   

     II.  DISCUSSION 

          A.   Rule 17Ad-17: Obligation to Search

          As adopted, Rule 17Ad-17 requires that transfer agents exercise

     reasonable care to ascertain the correct addresses of all lost

     securityholders in their records.  At a minimum, transfer agents must

     conduct two searches using an information data base.  In addition, transfer

     agents may not use any service designed to locate their lost
                              

          <(8)>     The Commission received comment letters from eighteen
                    transfer agents, five trade associations representing
                    transfer agents, five individuals, three corporations,
                    one broker-dealer, two professional search firms, and
                    eighteen government entities.  A summary of comments
                    has been prepared by the staff of the Division of
                    Market Regulation.  The summary is included along with
                    the comment letters in Public File No. S7-21-96, which
                    is available for inspection and copying in the
                    Commission's Public Reference Room, 450 Fifth Street,
                    N.W., Washington, D.C. 20549.

          <(9)>     Form TA-2 is referenced in 17 CFR 249b.102.

                              ======END OF PAGE 4======







     securityholders that results in a charge to a securityholder until after

     the two data base searches have been conducted.

          1. Definition of Lost Securityholder

          Rule 17Ad-17 generally defines a "lost securityholder" as a

     securityholder to whom an item of correspondence that was sent to the

     securityholder at the address in the transfer agent's master securityholder

     file has been returned as undeliverable.<(10)>  However, if a

     transfer agent re-sends the returned item to the securityholder within one

     month, the transfer agent has the option to delay classifying the

     securityholder as lost for purposes of Rule 17Ad-17 until the item is again

     returned to the transfer agent as undeliverable.  If and when a transfer

     agent receives a new address for a lost securityholder, either directly

     from the securityholder or through the transfer agent's own efforts, the

     securityholder will no longer be classified as lost.        Under the

     definition as proposed, a securityholder would have been classified as lost

     only after two separate items of correspondence mailed at least three

     months apart had each been returned as undeliverable.  Commenters in

     general were opposed to a requirement that three months elapse between the

     mailing of two undeliverable items of correspondence, stating that this

     approach would increase costs by requiring transfer agents to initiate new

     coding mechanisms.<(11)>  In addition, some commenters stated that

                              

          <(10)>    "Master securityholder file" is defined in Rule 17Ad-
                    9(b) as the official list of individual securityholder
                    accounts.

          <(11)>    The Proposing Release noted that the three month period
                    was intended to give transfer agents time to receive
                    any delayed change of address notifications prior to
                    having to conduct searches.   

                              ======END OF PAGE 5======







     continuing to mail distributions to an incorrect address increases risk of

     loss.  Commenters also noted that the proposed definition of lost

     securityholder could result in long delays before some shareholders are

     defined as lost.<(12)>  

          The Commission believes that the revised definition produces a more

     consistent result as to when shareholders are classified as

     lost.<(13)>  In addition, the Commission understands that some

     transfer agents have internal procedures whereby they promptly remail

     returned correspondence because they have found such remailing procedures

     to be beneficial in reducing the number of lost

     securityholders.<(14)>  Therefore, the revised definition gives

     transfer agents flexibility to delay coding a securityholder as lost until

     after the remailed item is returned as undeliverable.       In addition,

     the Commission is making minor technical amendments to the proposed

     definition of lost securityholder.  For example, to take into account

                              

          <(12)>    For example, if an issue does not pay dividends or
                    interest, the only securityholder correspondence may be
                    the annual report.  In such an instance, a
                    securityholder would not have been classified as lost
                    until a year after the first correspondence had been
                    returned as undeliverable.

          <(13)>    The revised definition avoids situations where
                    securityholders of issues with quarterly mailings would
                    have been defined as lost three months after a
                    correspondence was first returned as undeliverable
                    while securityholders of issues with only annual
                    mailings would not have been defined as lost until a
                    year after a correspondence was first returned as
                    undeliverable.  

          <(14)>    Transfer agents have found that some items are returned
                    as a result of the deliverer's error rather than an
                    incorrect address and that remailing will result in the
                    securityholder receiving the item.  

                              ======END OF PAGE 6======







     future developments in the methods used to disseminate shareholder

     communications, the rule no longer refers to returned correspondence that

     were "sent by first class mail."  

          2.   Transfer Agents' Search Requirements

               a.   Type of Search

          Rule 17Ad-17 requires every recordkeeping transfer agent whose master

     securityholder file includes accounts of lost securityholders to search for

     such securityholders' current address using at least one information data

     base.  The transfer agent's search for a lost securityholder must be based

     on the taxpayer identification number ("TIN") or on the name of the lost

     securityholder if a search based on TIN is not reasonably likely to locate

     the lost securityholder.  

          As originally proposed, the search could be based on a

     securityholder's name if such a search was reasonably likely to locate the

     lost securityholder.  Commenters were divided as to the advisability of

     such provision.  While most commenters agreed  that TIN searches are more

     effective, some commenters argued that transfer agents should have the

     flexibility to search by name when advisable (e.g., when the TIN is missing

     or incomplete).  By revising the requirement to permit name searches only

     when a TIN search is not reasonably likely to locate the lost

     securityholder (e.g., when the TIN is missing or incomplete), the

     Commission believes transfer agents are afforded sufficient flexibility to

     conduct the most effective search.

               b.   Time Frames for Search

          The rule as adopted also differs from the proposal with respect to the

     time frames in which the searches must be conducted.  As proposed, a


                              ======END OF PAGE 7======







     transfer agent would have had to conduct a search within three months of a

     securityholder being classified as lost.  If after the first search the

     securityholder had continued to be classified as lost, the proposal would

     have required another search between 12 and 18 months after the initial

     search.  Many commenters suggested that conducting an initial search three

     months after a securityholder was classified as lost was too soon for the

     data bases to be updated, and that conducting a second search between 12

     and 18 months after the first search was too long a period from loss of

     contact.

          As adopted, a transfer agent must conduct the initial search between

     three and 12 months of a securityholder being classified as

     lost.<(15)>  If the lost securityholder is not found, the transfer

     agent must conduct a second search between six and 12 months after the

     initial search.<(16)>  The second search is intended to take

     advantage of address changes that may have been added to the data base
                              

          <(15)>    As discussed in the Proposing Release, the Commission
                    encourages transfer agents to take immediate steps upon
                    learning a shareholder's address may not be correct. 
                    Proposing Release, note 16.  The Proposing Release
                    discusses several techniques that, while not required
                    by the rule, may be beneficial in reducing the number
                    of lost securityholders for which the transfer agent
                    must search.  Proposing Release, note 13.

          <(16)>    Demonstrated below are time frames in which the second
                    search would need to be conducted depending upon when
                    the first search occurred.

                               3    9     12    15    18    21    24
                         Lost Mos.  Mos.  Mos.  Mos.  Mos.  Mos.  Mos.
                          ³    ³ 1st Search ³
               1st search at:
                    3 mos.           ³  2d Search ³  
                    6 mos.                 ³ 2d Search ³
                    9 mos.                       ³ 2d Search ³ 
                    12 mos.                            ³ 2d Search ³

                              ======END OF PAGE 8======







     after the initial search.  The transfer agent must conduct these searches

     without charge to a lost securityholder.

          Under the proposed rule, the time in which transfer agents would have

     been required to conduct the first search would have depended on the

     frequency of mailings associated with an issue.  (The first search would

     have had to be conducted between three and 15 months after the return of

     the first correspondence based on whether the issue had quarterly or annual

     mailings.)<(17)>  Because the timing of the search requirements would

     have been dependent upon the frequency of issuers' mailings, commenters

     noted that transfer agents would not have had much flexibility in

     determining when to search for lost securityholders.  

          Under the adopted rule, the first search must be conducted between

     three to 12 months after the first correspondence is returned.  However,

     unlike the proposed rule, transfer agents may search at any time during

     this period.  As a result, transfer agents' search requirements are

     triggered within basically the same time frames whether there are quarterly

     or annual mailings, but transfer agents will be better able to use their

     discretion as to the most appropriate time to conduct the searches. 

     Additionally, this revision may permit transfer agents to conduct more

     cost-effective searches by allowing transfer agents to bundle together many

     lost securityholders for submission to a data base service which should

     lower internal costs and increase the likelihood that transfer agents will

     qualify for volume discounts from data base services.
                              

          <(17)>    Between three to 12 months would have elapsed between
                    the first and second returned items of correspondence,
                    and the first search would have had to be conducted
                    within three months after the return of the second item
                    of correspondence.  

                              ======END OF PAGE 9======







               c.   Exceptions to the Search Requirement

          In the Proposing Release, the Commission requested comment on whether

     the requirement to search for lost securityholders should apply only when a

     lost securityholder's account contained assets over some de minimis

     amount.<(18)>  Many commenters agreed that transfer agents should not

     be required to expend funds to search for a lost securityholder when the

     cost of a search could exceed the amount in the securityholder's account. 

     Although varying de minimis amounts were suggested, most commenters favored

     a de minimis threshold of $100 per account.   

          The Commission believes that there should be a de minimis exception

     from the search requirements that will allow transfer agents to forgo

     searches that would not be cost-effective.  Based on what the Commission

     understands to be the low cost of data base searches,<(19)> the

     Commission is amending the proposed rule to permit transfer agents to

     exclude from the search requirements any lost securityholder when the value

     of all dividend, interest, and other payments due to the securityholder

     plus the value of all assets listed in the lost securityholder's account is

     less than $25.  The Commission believes that this exemption will reduce the



                              

          <(18)>    In calculating this amount, all assets in that account
                    for which the transfer agent maintains records are
                    included regardless of whether the transfer agent is
                    actually in possession of the property.  Therefore, the
                    value of the assets in the securityholder's account
                    includes dividends, interest, and other payments due to
                    the securityholder and the value of any underlying
                    assets (e.g., the value of securities owned by the
                    shareholder as shown on the transfer agent's records).  

          <(19)>    Refer to Section IV below for a discussion of the cost
                    of data base searches.

                              ======END OF PAGE 10======







     economic impact of the rule on transfer agents while still affording

     sufficient protection to securityholders.<(20)>  

          In the Proposing Release, the Commission noted that data base searches

     generally are considered a cost-effective way to locate lost

     securityholders.  The Commission requested comment on the potential

     effectiveness of the rule in addressing the lost securityholder issue.  The

     request was intended to elicit comment on situations where data base

     searches would not be an appropriate method of locating lost

     securityholders.  One commenter requested that exemptions from the search

     requirement be created for certain categories of securityholders that will

     not be reached through an electronic data base search, specifically any

     lost securityholder (1) whose last known address is outside of the United

     States; (2) whose account has a missing or incomplete TIN; (3) which is not

     a natural person (e.g., a corporation); or (4) who is known to be deceased. 



          Based on this request and on additional research into the capabilities

     of existing commercial data bases, the Commission has decided to create an

     exemption from the search requirements for securityholders for whom the

     transfer agent has received documentation of their death<(21)> and an

     exemption for securityholders which are not natural persons.  The

     Commission understands that the data bases relied upon by most transfer

     agents do not contain information on estates or heirs and that there is no

                              

          <(20)>    Some commenters stated that for efficiency reasons some
                    transfer agents will search for all lost
                    securityholders.

          <(21)>    Such documentation may consist of a report received
                    from an information data base.

                              ======END OF PAGE 11======







     automated method by which such information can be obtained.<(22)> 

     Securityholders which are not natural persons likewise cannot be located

     easily through the use of information data bases and comprise a minuscule

     percentage of the total amount of lost securityholders.

          The Commission is not adopting the other suggested exemptions because

     data base searches for those categories of lost securityholders could in

     many cases be effective.  For example, although the Commission understands

     that most data bases currently do not contain the names of individuals

     living outside of the United States, it is possible that a securityholder

     with a foreign last known address was only temporarily living out of the

     country and that a data base search will provide an updated domestic

     address.  

          With respect to the commenter's request for an exemption for

     securityholders with missing or incomplete TINs, the adopted rule permits

     transfer agents to conduct a search based on a lost securityholder's name

     when a search based on a TIN is not reasonably likely to locate a lost

     securityholder.  Therefore, the Commission also believes that no exemption

     should be created for accounts with missing TINs.

               d.   Assessment of Procedures

          In the Proposing Release, the Commission requested comment on whether

     the rule should include (1) a requirement that transfer agents periodically

     assess the effectiveness and appropriateness of the search procedures and

                              

          <(22)>    The Commission has been informed that in the future
                    some information data bases may be updated to include
                    beneficiary data.  If a low cost method of determining
                    a deceased's beneficiary becomes available, the
                    Commission may reexamine the application of search
                    requirements to this category of securityholder.  

                              ======END OF PAGE 12======







     technology they employ, and/or (2) a requirement that transfer agents'

     search procedures meet a performance standard based on success in locating

     lost securityholders.  Most commenters that addressed the issue generally

     did not support adopting a strict application of this requirement.  For

     example, some commenters believe that transfer agents should not have an

     absolute requirement to locate a certain percentage of their shareholders

     because the results of the searches frequently were outside of their

     control.  While the adopted rule does not specifically contain such

     requirements, the Commission believes that transfer agents should bear

     these concepts in mind in determining whether they have met their

     obligation to exercise reasonable care under Rule 17Ad-17(a).  For example,

     if a transfer agent is using a data base service that routinely fails to

     locate any or that locates only a very small percentage of lost

     securityholders, the transfer agent should evaluate whether the use of such

     service constitutes the exercise of reasonable care.

          3.   Definition of Information Data Base

          As proposed, Rule 17Ad-17 would have defined an information data base

     as any automated data base service that (1) contains addresses of U.S.

     residents, including addresses in the geographic area in which the lost

     securityholder's last known address is located, (2) covers a reasonably

     broad geographic area, (3) is indexed by TIN or by name, and (4) is updated

     at least four times a year.  The Commission has revised the definition

     based on commenters' suggestions.  The first requirement has been revised

     to require that the data base contain addresses from the entire United

     States.  The second requirement has been revised to require that the data

     base contain names of at least 50% of the U.S. adult population.  The third


                              ======END OF PAGE 13======







     requirement also has been revised to clarify that an information data base

     must be indexed by TINs if a TIN search is used or by name if a name search

     is used.  The fourth requirement is adopted as proposed.  The revisions are

     intended to preclude the use of a data base that contains a small number of

     names but covers a broad geographic area or one that contains a large

     number of names but covers only a small geographic area. 

          The Commission also is adopting an alternative standard that will

     provide flexibility to transfer agents in fulfilling their obligations to

     search for lost securityholders.  The alternative will permit transfer

     agents to use any service to locate lost securityholders if that service

     produces comparable results to the information data base described above. 

     As part of their obligation to maintain records discussed below, a transfer

     agent relying on this alternative would be required to develop written

     procedures documenting and describing the alternative service used.

          4.   Use of Professional Search Firms 

          The Proposing Release discussed the current practice of some transfer

     agents to use professional search firms that charge a lost securityholder a

     fee for locating the lost securityholder's assets.  As proposed and as

     adopted, Rule 17Ad-17 will prohibit a transfer agent from using any service

     to locate a securityholder that results in a charge to the securityholder

     until after the two data base searches required by the rule have been

     conducted.  While a few commenters argued against the proposed prohibition,

     many commenters supported the provision with some arguing for additional

     restrictions.  

          Although the more extensive search techniques employed by professional

     search firms may locate some securityholders that the data base searches


                              ======END OF PAGE 14======







     will not locate, the charges of such firms can cost a securityholder a

     significant portion of his or her assets.  The Commission believes that

     transfer agents should make efforts (i.e., the search provisions of Rule

     17Ad-17(a)(1)) to locate lost securityholders before permitting services to

     charge them for reuniting them with their assets.  Therefore, the

     Commission is adopting Rule 17Ad-17(a)(2) as proposed to delay transfer

     agents' use of professional search firms where the charge is assessed to

     the securityholder until after a transfer agent has completed two searches

     under Rule 17Ad-17.<(23)> 

          5.   Verification of Securityholder

          In order to guard against delivery of distributions to an incorrect

     recipient, the Commission recommended in the Proposing Release that

     transfer agents should verify that the person at the newly obtained address

     is in fact its account holder before disbursing securities or funds.  One

     commenter expressed concern that requiring a transfer agent to confirm a

     securityholder's identity may restrict the transfer agent's ability to

     correct its master securityholder file because some shareholders may fail

     to return verification forms.  The language in the Proposing Release was

     not intended to mandate a particular procedure.  Instead, it was intended

     to highlight the need for transfer agents to use care prior to disbursement

     of securityholder funds.  Prior to disbursing funds or to updating their



                              

          <(23)>    Because a professional search firm that charges a fee
                    to the transfer agent rather than to lost
                    securityholders could qualify as an information data
                    base search under the rule, professional search firms
                    could be used to satisfy the transfer agent's search
                    obligation under Rule 17Ad-17.  

                              ======END OF PAGE 15======







     master securityholder files, transfer agents should determine whether such

     action is appropriate based on all relevant factors.   

          B.   Rules 17Ad-7 and 17Ad-17: Recordkeeping Requirements

          Rule 17Ad-17 requires that all recordkeeping transfer agents maintain

     records to demonstrate their compliance with the requirements under the

     rule.  Paragraph (i) is being added to Exchange Act Rule 17Ad-7 to require

     that transfer agents maintain the records required by Rule 17Ad-17 for a

     period of not less than three years and that transfer agents maintain these

     records in an easily accessible place during the first year.<(24)>  

          In the Proposing Release, the Commission suggested that transfer

     agents document the date each securityholder is classified as lost and the

     date the data base searches are conducted.  One commenter interpreted this

     discussion to be a requirement that such dates be recorded on each lost

     securityholder's individual account record.  This commenter stated that

     this requirement could require costly systems upgrades and that transfer

     agents instead should be allowed to demonstrate that data base searches

     have been conducted by referencing procedures that are in place and that

     reasonably assure that the searches are conducted on a timely basis.  The

     language in the Proposing Release was not intended to specify the

     recordkeeping method to be used by transfer agents.  Rather it was intended

     to provide flexibility to transfer agents to create systems that adequately

     demonstrate compliance with Rule 17Ad-17.  However, the Commission does not



                              

          <(24)>    Rule 17Ad-7 sets forth the lengths of time and the
                    methods by which transfer agents must maintain the
                    records which they are required to keep pursuant to
                    Exchange Act Rules 17Ad-6, 17f-2, and 17Ad-17.

                              ======END OF PAGE 16======







     believe that referencing procedures without any specific documentation

     demonstrating that searches have been appropriately conducted is adequate.

          The Commission also is adding language to Rule 17Ad-17 to clarify that

     transfer agents must maintain written procedures on how they will comply

     with the rule.  The amendment to the rule is intended to give transfer

     agents more guidance on what the minimum recordkeeping requirements are

     while still providing flexibility to determine the most efficient method of

     demonstrating compliance with the requirements of the rule.

          C.   Rule 17a-24: Lost Securityholder Data 

          In the Proposing Release, the Commission also discussed the creation

     of a data base that would contain information (e.g., TINs) on all lost

     securityholders.  Proposed Rule 17a-24 would have required certain entities

     that hold assets for others (e.g., transfer agents and broker-dealers) to

     file annually with the Commission a list of the TINs of all lost

     securityholders contained in their records.  The Commission also requested

     comment on whether the Commission or its delegee should create and operate

     a lost securityholder data base or whether the Commission should release

     the information it received under Rule 17a-24 to the public to permit

     private entities to create data bases.

          Most commenters were opposed to the creation of a lost securityholder

     data base.  Many commenters believed that the data base would result in a

     loss of privacy for securityholders.  Other commenters suggested that the

     data base could result in fraudulent claims.  Finally, some commenters

     opined that the data base would be of limited utility because it would

     require that securityholders take the initiative to discover whether they

     had any unclaimed assets.  


                              ======END OF PAGE 17======







          In response to concerns expressed by commenters, the Commission has

     determined to adopt proposed Rule 17a-24 with revisions that will only

     require the reporting of certain aggregate data.  As noted in the Proposing

     Release, the Commission believes that there is a need to gather data on

     lost securityholders in order to obtain better information as to the extent

     to which lost securityholders are not receiving assets to which they are

     entitled and to assess the effectiveness of search techniques employed by

     transfer agents.<(25)>  Similar to the proposed rule, the final rule

     will require each recordkeeping transfer agent to file annually with the

     Commission information on lost securityholders contained in the transfer

     agent's records.<(26)>  However, the Commission has determined to

     require transfer agents to submit only aggregate data regarding the

     accounts of lost securityholders instead of the individual data that would

     have been required by proposed Rule 17a-24.  This aggregate information

     would have been available by totaling the information that would have been

     required by proposed Rule 17a-24 or currently is readily accessible by

     transfer agents.

          Specifically, the Commission is revising proposed Rule 17a-24 to

     require registered transfer agents to disclose the aggregate number of lost

     securityholder accounts as of June 30 of each year and the percentage of

     total accounts represented by such lost securityholder accounts.  These

     figures would be reported for specified periods of time: one year or less,




                              

          <(25)>    61 FR at 44252-44253.

          <(26)>    61 FR at 44253.

                              ======END OF PAGE 18======







     three years or less, five years or less, or greater than five

     years.<(27)>  The Commission also is requiring information on lost

     securityholder accounts that escheat to state unclaimed property

     administrators on an annual basis.  To facilitate the reporting of this

     information, the Commission is amending Exchange Act Form TA-2,<(28)>

     the annual report of registered transfer agents.  The Commission believes

     that this will be the least burdensome and most efficient way for transfer

     agents to comply with the revised rule.  

          The Commission believes that revised Rule 17a-24 is preferable to the

     rule as proposed at this time.  The aggregate information required by the

     adopted rule should, as a result of Rule 17Ad-17, be readily available to

     transfer agents.  Moreover, the collection of aggregate data, rather than

     taxpayer identification numbers or other personal data, ameliorates privacy

     concerns raised by some commenters.  In addition to not requiring

     individual data, the revised rule will enable the Commission to better

     monitor the effectiveness of Rule 17Ad-17 over time and determine whether

     additional measures are necessary to find lost securityholders.  Finally,

     the Commission has narrowed the scope of the rule.  Unlike the proposed

     rule which would have applied to any recordkeeping broker-dealer or

     transfer agent, as adopted Rule 17a-24 applies only to recordkeeping


                              

          <(27)>    The Commission requested comment in the Proposing
                    Release on whether the filing requirement should
                    include information concerning the length of time
                    securityholders have been lost.  61 FR at 44253.

          <(28)>    Pursuant to Exchange Act Rule 17Ac2-2, registered
                    transfer agents are required to file an annual report
                    on Form TA-2 by August 31 of each calendar year.  17
                    CFR 240.17Ac2-2.

                              ======END OF PAGE 19======







     transfer agents.  The Commission believes that a narrower focus is

     preferable at this time.  

     III. REGULATORY FLEXIBILITY ANALYSIS

          The following discussion summarizes the Commission's Final Regulatory

     Flexibility Analysis ("FRFA") in accordance with the Regulatory Flexibility

     Act ("RFA")<(29)> in connection with Rule 17Ad-17, Rule 17a-24, and

     the related amendments to Rule 17Ad-7 adopted today.  A complete copy of

     the FRFA may be obtained by contacting Theodore Lazo, Attorney, Division of

     Market Regulation, U.S. Securities and Exchange Commission, 450 Fifth

     Street, N.W., Washington, D.C. 20549 at 202/942-4187.

          The FRFA explains both the need for and the objectives of the rules

     adopted by the Commission.  As set forth in greater detail in the FRFA, the

     adopted rules will establish minimum standards for all transfer agents with

     respect to lost securityholders and may help the Commission to monitor the

     effectiveness of these standards.  The FRFA further explains that the

     Commission believes that imposing an affirmative obligation on transfer

     agents to search for lost securityholders is in the public interest and

     will enhance investor protection.

          The FRFA also (i) summarizes the significant issues raised by public

     comments in response to the Commission's Initial Regulatory Flexibility

     Analysis ("IRFA"), (ii) summarizes the Commission's assessment of such

     issues, and (iii) states any changes made in the proposed rules as a result

     of such comments.  As noted in the FRFA, none of the comment letters

     received related directly to the IRFA, but seven commenters supplied data


                              

          <(29)>    5 U.S.C. 601-612.

                              ======END OF PAGE 20======







     on the costs of proposed Rule 17Ad-17.<(30)>  As discussed in the

     FRFA, the Commission believes that most of this cost data is overstated

     because it includes costs not created by the rule.  The Commission also

     believes that the revisions to proposed Rule 17Ad-17 (e.g., the extended

     time frames for conducting searches and the exceptions to the search

     requirements) will eliminate any excess costs of compliance with the rule

     that commenters contended would arise.  The FRFA also notes that Rule 17a-

     24 has been revised to minimize the costs to all transfer agents.

          The FRFA also provides a description of and an estimate of the number

     of small entities to which the rule will apply.  The FRFA states that the

     Commission estimates that 413 registered transfer agents qualify as "small

     entities" and will be subject to the requirements of the rule.

          As required by the RFA, the FRFA describes the projected reporting,

     recordkeeping, and other compliance requirements of the rule and includes

     an estimate of the classes of small entities that will be subject to the

     requirements and the type of professional skills necessary for preparation

     of the reports or records.  As discussed above, Rule 17Ad-17 does not

     require any specific type of recordkeeping other than that which is

     necessary to demonstrate compliance with the rule, including establishing

     written procedures with respect to compliance with the rule.  The FRFA

     states that the Commission believes that Rule 17Ad-17 as adopted provides

     sufficient flexibility for all transfer agents, including transfer agents

     which are small entities, to maintain records in the most cost-effective

     manner.  The FRFA also states that the Rule 17a-24 as adopted will require

                              

          <(30)>    The cost data that the Commission received is discussed
                    more fully in Section IV below.

                              ======END OF PAGE 21======







     transfer agents to report aggregate data regarding their lost

     securityholder accounts and that the Commission believes that such records

     will be readily available to transfer agents.

          The FRFA also describes the steps the Commission has taken to minimize

     the significant economic impact on small entities consistent with the

     stated objectives of applicable statutes (e.g., alternative standards for

     small entities).  As discussed further in the FRFA, the Commission has

     amended proposed Rule 17Ad-17 to provide additional flexibility to all

     transfer agents, including smaller transfer agents.  In addition, the

     Commission has attempted to devise the most reasonable and simplest

     approach that would afford transfer agents an effective means to reduce the

     number of lost securityholders.  The FRFA further explains that the

     Commission requested comment on the adoption of a requirement that transfer

     agents use search techniques based on their periodic assessment or a

     requirement that transfer agents' search procedures meet a performance

     based standard.  In light of the comments received on the issue, the

     Commission is not adopting a periodic assessment requirement or a

     performance based standard.  However, the Commission has revised the

     proposed rule to permit transfer agents to use any combination of services

     to locate lost securityholders that provides a comparable result to an

     information data base.

          As detailed in the FRFA, the Commission has decided not to create an

     exception to Rule 17Ad-17 for small entities.  The FRFA explains that the

     Commission believes that any increased costs incurred by small entities

     because of the rule will be reasonable and are justified by the necessity

     to ensure that all securityholders receive the same level of investor


                              ======END OF PAGE 22======







     protection.  While the Commission has decided not to create an exception to

     the rule for small entities, the adopted rule does provide a de minimis

     exception for lost securityholders whose accounts hold assets of less than

     $25.  The Commission believes that small transfer agents will likely rely

     on the de minimis exception more than large transfer agents.<(31)>

          With respect to Rule 17a-24, the FRFA notes that the Commission has

     amended the proposed rule to reduce the reporting burden on all transfer

     agents and to minimize the complexity and operational burden of the

     requirements.  Finally, the Commission states that any increased costs are

     justified by the need to monitor the effectiveness of Rule 17Ad-17.

          Based on the analysis contained in the FRFA, the Commission believes

     that the adopted rules will not adversely affect small entities and include

     sufficient regulatory flexibility for compliance to minimize the impact on

     small entities.  The FRFA is available for public inspection in File No.

     S7-21-96, and a copy may be obtained by contacting Theodore Lazo, U.S.

     Securities and Exchange Commission, 450 Fifth Street, N.W., Mail Stop 5-1,

     Washington, D.C. 20549.


                              

          <(31)>    The Commission understands that small transfer agents
                    tend to provide services to issuers with smaller prices
                    per share.  On occasion, when shareholders sell their
                    positions, they fail to completely close out their
                    account.  As a result, they may leave an account
                    holding only a few shares or the most recent dividend
                    payment.  Because a few shares of a smaller issuer is
                    more likely to be under the de minimis amount than a
                    few shares of a larger issuer, the Commission believes
                    that the de minimis exception may be more beneficial to
                    small transfer agents.  Some large transfer agents also
                    have stated that because it is more cost efficient to
                    search for all of their lost securityholders than to
                    segregate out the small accounts, they probably will
                    not use the exemption.

                              ======END OF PAGE 23======







     IV.  COSTS AND BENEFITS OF THE RULES AND THEIR EFFECTS ON COMPETITION,
          EFFICIENCY, AND CAPITAL FORMATION

          Section 23(a)(2) of the Exchange Act<(32)> requires the

     Commission, in adopting rules under the Exchange Act, to consider the

     competitive effects of such rules and to make a determination whether any

     burden on competition is necessary or appropriate in furthering the

     purposes of the Exchange Act.  Furthermore, Section 3 of the Exchange

     Act<(33)> as amended by the recently enacted National Securities

     Markets Improvement Act of 1996 ("Markets Improvement Act")<(34)>

     provides that whenever the Commission is engaged in rulemaking and is

     required to consider or determine whether an action is necessary or

     appropriate in the public interest, the Commission also shall consider, in

     addition to the protection of investors, whether the action will promote

     efficiency, competition, and capital formation.

          The Commission has considered Rule 17Ad-17 and Rule 17a-24 in light of

     the standards cited in Sections 3 and 23(a)(2) of the Exchange Act and

     believes that for the reasons stated herein, the adoption of the rules will

     (i) promote efficiency for securityholder recordkeeping by subjecting all

     transfer agents to the same flexible rules governing searches for lost

     securityholders and reporting information to the Commission related to such

     searches, (ii) not adversely affect capital formation because it relates

     solely to post-issuance activity, and (iii) not impose any burden on



                              

          <(32)>    15 U.S.C. 78w(a)(2).

          <(33)>    15 U.S.C. 78c.

          <(34)>    Pub. L. No. 104-290,  106, 110 Stat. 3416 (1996).

                              ======END OF PAGE 24======







     competition not necessary or appropriate in furtherance of the Exchange

     Act.

          In the Proposing Release, the Commission stated its view that the

     proposed Rule 17Ad-17 would not have a significant impact on transfer agent

     competition.  All transfer agents will be subject to the same specified

     minimum standard for reasonable care in attempting to locate

     securityholders with whom contact has been lost.  As discussed below, the

     cost of compliance with the proposed rule is minimal, and for many transfer

     agents that currently conduct securityholder searches using an information

     data base, the proposed rule will impose no additional cost.  Because a

     transfer agent's cost of compliance generally is based upon the number of

     securityholders it must attempt to locate, transfer agents, regardless of

     their size, should incur comparable relative costs in exercising comparable

     care.  On average, compliance costs should be roughly proportional to the

     number of securityholder records maintained by the transfer agent.  

          One commenter stated that the rule as proposed could have an

     anticompetitive effect because the costs could cause additional transfer

     agents to abandon an already contracting market.  However, this commenter

     did not provide any detail as to the burden created by the rule or why such

     burden should disproportionately affect certain transfer agents.  The

     Commission believes that the rule as adopted has been drafted so as to

     provide the maximum flexibility to transfer agents to meet their

     obligations in the most cost-effective manner possible.  After careful

     consideration of the commenter's views, the Commission has determined that

     Rule 17Ad-17 will not impose any burden on competition not necessary or

     appropriate in furtherance of the Exchange Act.


                              ======END OF PAGE 25======







          In the Proposing Release, the Commission estimated compliance costs to

     the industry of approximately $750,000, based on an estimated cost of $3.00

     per account and a total estimated 250,000 lost securityholder accounts. 

     Based on more recent data obtained from several large transfer agents, the

     Commission has revised its cost estimate per account to $3.38 the first

     year and $1.79 per account in the following years.  Significantly, based on

     its most recent information, the Commission now believes that there may be

     as many as 3 million lost securityholder accounts.  Due primarily to this

     change in estimated lost securityholder accounts, the Commission's revised

     estimate of the aggregate costs to the industry are one time compliance

     costs of $4.6 million and annual compliance costs of $5.2 million.

          The Commission received seven comment letters that provided specific

     cost estimates.  One commenter estimates (assuming one search and match)

     that the cost of locating an account will be approximately $6.00, which

     includes out-of-pocket postage, staff, and computer time.  A second

     commenter states that vendor prices for data base searches may vary widely

     and that the actual cost per account will range from $5.00 to

     $12.00.<(35)>  A third commenter estimates an aggregate cost of as

     much as $4.75 for each lost securityholder and total initial programming

     costs of $150,000.<(36)>  Two commenters estimate that charges from
                              

          <(35)>    The commenter's estimates include the cost of the data
                    base search itself plus such items as system processing
                    expenses to generate the search and to receive the
                    matched file from the data base vendor; printing and
                    mailing expenses; handling and other related charges
                    for returned items; and expenses for replacement of
                    uncashed checks and lost securities.

          <(36)>    The estimate of $4.75 is based on postage, data base
                    charges, and an increase in processing staff by two
                                                             (continued...)

                              ======END OF PAGE 26======







     firms for data base searches range from $2.00 per account to approximately

     $1.00 per account for tape files.  Another commenter anticipates that the

     costs of complying with the rule will exceed $100,000 in additional labor

     costs together with software and hardware costs each year.  Another

     commenter estimates that the cost per account for using an information data

     base ranges from less than $.10 when using a CD ROM to as much as $1.70 to

     use a third party vendor data base.

          The Commission believes that the estimates higher than the

     Commission's estimate of $3.38 per lost account overstate the costs

     involved because the figures include expenses not related to the rule or

     which are required already as a part of the transfer agent's duties (e.g.,

     the cost of shareholder mailings).  Furthermore, the Commission believes

     that compliance with the rule as it is being adopted will not require

     transfer agents to incur any substantial costs with respect to additional

     labor, hardware, or software because the rule's requirements regarding

     coding securityholders as lost are consistent with current state

     escheatment laws.  Such state laws also require transfer agents to be able

     to produce information on lost securityholders for annual filings with the

     state, and therefore transfer agents' computer systems currently should be

     capable of producing lists of lost securityholders to provide to the data

     bases.  Thus, the Commission believes that transfer agents' current

     computer systems should not require significant changes in order to comply

     with the rule.

                              

          <(36)>(...continued)
                    full time positions.  Currently, this commenter
                    conducts periodic searches for its lost
                    securityholders.

                              ======END OF PAGE 27======







          Further, the Commission has amended the proposal so as to lower the

     cost of compliance with the rule.  For example, the Commission has created

     a de minimis exception to the rule because searches for accounts with

     lesser values would not produce as great a benefit (i.e., the cost of

     locating such securityholders would be a much larger percentage of the

     assets to be returned).  In addition, the Commission has amended the rule

     to be more consistent with current state law requirements by eliminating

     the requirement that three months elapse between two mailings prior to

     coding a securityholder as lost.  Accordingly, the Commission is retaining

     its estimate of $3.38 per account in the first year and $1.79 per account

     in the following years. 

          The Commission believes that the cost of the rule will be outweighed

     by its benefits.  The rule will create a uniform standard applicable to all

     transfer agents thus ensuring that all investors have the opportunity to be

     reunited with their assets.<(37)>  In addition, the rule will

     guarantee that transfer agents make at least two attempts to locate lost

     securityholders before forwarding names to a search firm that may result in

     substantial charges to the securityholder.  Thus, the rule should help

     investors recover a greater percentage of their assets.

          Based on comments received, the Commission believes that the number of

     lost securityholders compared to total accounts held by transfer agents is
                              

          <(37)>    Some transfer agents currently attempt to locate lost
                    securityholders, but the extent and type of efforts
                    used vary greatly among transfer agents.  In some
                    cases, transfer agents forward the names of lost
                    securityholders directly to professional search firms,
                    in which case the securityholder must pay a fee to
                    regain its assets.  In other cases, the transfer agent
                    searches for lost securityholders only if the searches
                    are authorized and paid for by the issuer.

                              ======END OF PAGE 28======







     small, approximately 1.34%.  However, the actual dollar amount of those

     assets can be significant.  The Commission believes that the total value of

     assets held in accounts coded as "lost" may in fact exceed $450

     million.<(38)>  

          The Commission believes that Rule 17Ad-17 mandates a cost-effective

     means for locating lost securityholders.  Because of the de minimis

     exception, transfer agents are not required to search for lost

     securityholders unless their accounts are worth $25 or more.  The

     Commission believes that the rate of success for data base searches is at

     least 60%.<(39)>  Thus, even if every account of lost securityholders

     was worth only $25, the rule would provide an average benefit of $15 per

     lost securityholder account (i.e., 60% of $25).  This estimated benefit is

     larger than any commenter's estimate of the per account cost of data base












                              

          <(38)>    The data cited in this paragraph is based on a limited
                    informal survey of several large transfer agents.

          <(39)>    The Commission staff contacted several transfer agents
                    to obtain an estimated success rate.  Only one of the
                    transfer agents contacted currently uses data base
                    searches to find lost securityholders.  That transfer
                    agent, which has been conducting searches on a monthly
                    basis for over a year, stated that its success rate
                    using data base searches is never less than 75% and
                    sometimes is as high as 94%.  For purposes of the cost-
                    benefit analysis, the Commission is assuming a 60%
                    success rate in order to be conservative.

                              ======END OF PAGE 29======







     searches.<(40)>  Furthermore, because the value of many accounts will

     exceed $25, the Commission expects that the actual benefit will be higher.

          The Commission has considered the substantial likely benefits that

     investors will receive from adoption of the rule and the additional cost

     the rule will impose on transfer agents.  The Commission has decided to

     adopt the rule given the lack of consistent standards currently in effect

     with respect to lost securityholders and the relatively minor cost per

     account imposed by the rule.  In consideration of cost, the Commission has

     designed the final rule to give transfer agents maximum flexibility to

     comply with the rule's requirements and to minimize their search and

     recordkeeping expenses.

          Rule 17a-24 as adopted differs from the proposed rule.  Because the

     adopted rule requires that information be reported on a form that all

     transfer agents subject to the rule are required to file, the rule should

     not create an additional filing burden.  In addition, the information that

     the reporting transfer agents must file should be currently available to

     such transfer agents.<(41)>  Thus, because the rule should not create

     any significant costs to transfer agents, the Commission has determined


                              

          <(40)>    One commenter stated that the per account cost could be
                    as high as $12.00.  However, as discussed above, the
                    Commission believes that this estimate includes many
                    costs not created by the rule.  Also, as noted above,
                    the Division of Market Regulation estimates the average
                    cost of data base searches required by the rule will
                    total only $3.38 per account in the first year and
                    $1.79 per account in the following years.

          <(41)>    Transfer agents must record which of their
                    securityholders are lost and the date that such
                    securityholders become lost in order to comply with
                    state escheatment laws.

                              ======END OF PAGE 30======







     that Rule 17a-24 will not impose any burden on competition not necessary or

     appropriate in furtherance of the Exchange Act.

          In addition, the Commission believes that the benefits of the rule

     justify the costs.  The benefits of the rule are to provide the Commission

     with information to determine whether transfer agents are more successful

     in locating lost securityholders and, therefore, whether Rule 17Ad-17 is

     effective.  The costs of compliance with Rule 17a-24 should be limited to

     the costs involved in compiling the information required to be reported

     once a year.

     V.   PAPERWORK REDUCTION ACT

          As set forth in the Proposing Release, Rule 17Ad-17 and Rule 17a-24

     contain collections of information within the meaning of the Paperwork

     Reduction Act of 1995 ("PRA").<(42)>  Accordingly, the collection of

     information requirements contained in the rules and related amendments were

     submitted to the Office of Management and Budget ("OMB") for review and

     were approved by OMB which assigned the following control numbers:  Rule

     17Ad-17, control number 3235-0469; and Rule 17a-24, control number 3235-

     0470.<(43)>  The collection of information requirements are in

     accordance with Section 3507 of the PRA.<(44)>  An agency may not

     conduct or sponsor and a person is not required to respond to a collection

     of information unless the agency displays a valid OMB control number.  


                              

          <(42)>    44 U.S.C. 3501 et seq.

          <(43)>    Rule 17Ad-7 was previously submitted to OMB, which
                    approved the rule and assigned the following control
                    number 3235-0136.

          <(44)>    44 U.S.C. 3507.

                              ======END OF PAGE 31======







          The collections of information under Rule 17Ad-17, Rule 17a-24, and

     Rule 17Ad-7 are mandatory.  As described in more detail above and in the

     Proposing Release, the collections of information are necessary to enable

     recordkeeping transfer agents, as the usual custodians of the records that

     determine the ownership of securities and the entitlement to corporate

     distributions, to reduce significantly the number of lost securityholders

     and for the Commission to monitor compliance with the rule.  The Commission

     may review this information during periodic examinations or with respect to

     investigations.  The records required to be filed with the Commission and

     any records required to be kept pursuant to these rules that are requested

     by and submitted to the Commission will be kept confidential to the extent

     permitted by the Freedom of Information Act<(45)> and the Privacy Act

     of 1974.<(46)>

          Based upon further review of the disclosure and recordkeeping changes

     required by Rule 17Ad-7, the Commission is retaining its burden estimates

     for the collection of information under that rule.  Thus, the description

     and estimated burden of the collection of information requirement under

     Rule 17Ad-7 have not changed and are set forth in the Proposing Release.  

          Originally, the Commission estimated compliance costs of Rule 17Ad-17

     to the industry of approximately $750,000, based on an estimated cost of

     $3.00 per account and a total estimated 250,000 lost securityholder

     accounts.  Based on comments received questioning the Commission's original

     burden estimate, the Commission obtained more recent data from several

     large transfer agents.  As a result, the Commission has revised its cost
                              

          <(45)>    5 U.S.C. 552.

          <(46)>    5 U.S.C. 552a.

                              ======END OF PAGE 32======







     estimate per account to $3.38 the first year and $1.79 per account in the

     following years.  Significantly, based on its most recent information, the

     Commission now believes that there may be as many as 3 million lost

     securityholder accounts.  Due primarily to this change in estimated lost

     securityholder accounts, the Commission's revised estimate of the aggregate

     costs to the industry are one time compliance costs of $4.6 million and

     annual compliance costs of $5.2 million.

          Due to the changes in Rule 17a-24 as adopted and the corresponding

     changes on Form TA-2, the Commission will be resubmitting its collection of

     information requirement to OMB for review and approval.

     VI.  STATUTORY BASIS

          Pursuant to Section 17A(d)(1) of the Exchange Act, 15 U.S.C. 78q-

     1(d)(1), the Commission amends Rule 17Ad-7 and Form TA-2 and adopts Rule

     17Ad-17 and Rule 17a-24 in Chapter II of Title 17 of the Code of Federal

     Regulations. 

     List of Subjects in 17 CFR Parts 240 and 249

          Reporting and recordkeeping requirements; Securities; Transfer agents

     Text of the Amendments

          For the reasons set out in the preamble, the Commission amends Title

     17, Chapter II of the Code of Federal Regulations to read as follows:

     PART 240 -- GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF 1934

          1.    The authority citation for Part 240 continues to read in part as

     follows:

          Authority:  15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77eee, 77ggg,

     77nnn, 77sss, 77ttt, 78c, 78d, 78f, 78i, 78j, 78k, 78k-1, 78l, 78m, 78n,




                              ======END OF PAGE 33======







     78o, 78p, 78q, 78s, 78u-5, 78w, 78x, 78ll(d), 79q, 79t, 80a-20, 80a-23,

     80a-29, 80a-37, 80b-3, 80b-4 and 80b-11, unless otherwise noted.

                                   * * * * *

          2.   By adding  240.17a-24 to read as follows:

          240.17a-24    Reports of lost securityholders.

          (a)  Each recordkeeping transfer agent shall file with the Commission

     on Form TA-2 (17 CFR 249b.102) the following aggregate information with

     respect to lost securityholder accounts contained on such transfer agent's

     master securityholder files:  

          (1)  The total number of lost securityholder accounts and the

     percentage of lost securityholder accounts compared to total number of

     accounts contained on the transfer agent's master securityholder files.  

          (2)  The information required by paragraph (a)(1) of this section

     shall be provided separately for securityholders lost one year or less,

     three years or less, five years or less, and more than five years and for

     securityholders whose assets which have escheated to unclaimed property

     administrators within the last calendar year.

          (b) For purpose of this section, lost securityholder means a

     securityholder:

          (1) To whom an item of correspondence that was sent to the

     securityholder at the address contained in the transfer agent's master

     securityholder file has been returned as undeliverable; provided, however,

     that if such item is re-sent within one month to the lost securityholder,

     the transfer agent may deem the securityholder to be a lost securityholder

     as of the day the re-sent item is returned as undeliverable and 




                              ======END OF PAGE 34======







          (2) For whom the transfer agent has not received information regarding

     the securityholder's new address.

          3.   Section 240.17Ad-7 is amended by adding paragraph (i) to read as

     follows:

          240.17Ad-7 Record retention.

                                   * * * * *

          (i) The records required by 240.17Ad-17(c) shall be maintained for a

     period of not less that three years, the first year in an easily accessible

     place.

          4.   Section 240.17Ad-17 is added to read as follows:

          240.17Ad-17 Transfer agents' obligation to search for lost

     securityholders.

          (a)(1) Every recordkeeping transfer agent whose master securityholder

     file includes accounts of lost securityholders shall exercise reasonable

     care to ascertain the correct addresses of such securityholders.  In

     exercising reasonable care to ascertain for its master securityholder file

     such lost securityholders' current addresses, each recordkeeping transfer

     agent shall conduct two data base searches using at least one information

     data base service.  The transfer agent shall search by taxpayer

     identification number or by name if a search based on taxpayer

     identification number is not reasonably likely to locate the

     securityholder.  Such data base searches must be conducted without charge

     to a lost securityholder and with the following frequency: 

          (i) Between three and twelve months of such securityholder becoming a

     lost securityholder and 




                              ======END OF PAGE 35======







          (ii) Between six and twelve months after the transfer agent's first

     search for such lost securityholder.  

          (2)  A transfer agent may not use a search method or service to

     establish contact with lost securityholders that results in a charge to a

     lost securityholder prior to completing the searches set forth in paragraph

     (a)(1) of this section.

          (3)  A transfer agent need not conduct the searches set forth in

     paragraph (a)(1) of this section for a lost securityholder if:

          (i) It has received documentation that such securityholder is deceased

     or

          (ii) The aggregate value of assets listed in the lost securityholder's

     account, including all dividend, interest, and other payments due to the

     lost securityholder and all securities owned by the lost securityholder as

     recorded in the transfer agent's master securityholder files, is less than

     $25; or 

          (iii) The securityholder is not a natural person.

          (b) For purposes of this section:

          (1) Information data base service means either:

          (i) Any automated data base service that contains addresses from the

     entire United States geographic area, contains the names of at least 50% of

     the United States adult population, is indexed by taxpayer identification

     number or name, and is updated at least four times a year; or

          (ii) Any service or combination of services which produces results

     comparable to those of the service described in paragraph (b)(1)(i) of this

     section in locating lost securityholders.

          (2) Lost securityholder means a securityholder:


                              ======END OF PAGE 36======







          (i) To whom an item of correspondence that was sent to the

     securityholder at the address contained in the transfer agent's master

     securityholder file has been returned as undeliverable; provided, however,

     that if such item is re-sent within one month to the lost securityholder,

     the transfer agent may deem the securityholder to be a lost securityholder

     as of the day the re-sent item is returned as undeliverable; and 

          (ii) For whom the transfer agent has not received information

     regarding the securityholder's new address.

          (c) Every recordkeeping transfer agent shall maintain records to

     demonstrate compliance with the requirements set forth in this section

     which shall include written procedures which describe the transfer agent's

     methodology for complying with this section.

     PART 249b -- FURTHER FORMS, SECURITIES EXCHANGE ACT OF 1934

          5.   The authority citation for Part 249b continues to read in part as

     follows:

          15 U.S.C. 78a, et seq., unless otherwise noted;

                                      * * * * *

     Note: Form TA-2 does not and the amendments will not appear in the Code of

     Federal Regulations.

          6.    Form TA-2 (referenced in 249b.102) is amended by adding

     paragraph 8 to Instruction I.A. to read as follows:

          Form TA-2

                                   * * * * *

          I.   General Instruction for Filing and Amending Form TA-2. 

          A.   * * * 




                              ======END OF PAGE 37======







          8.   "Lost securityholder" is defined in Rule 17a-24(b)(1) (17 CFR

     240.17a-24(b)(1)).

                                      * * * * *

          7.    Form TA-2 (referenced in 249b.102) is amended by adding

     paragraph c to Question 4 to read as follows:



                                      Form TA-2

                                      * * * * *

          4.   * * *

          c.   (i) Number of lost securityholder accounts and (ii) percentage of
     total accounts represented by lost securityholder accounts as of June 30
     for:

          Accounts of securityholders lost one year or less:                     
                                                              
          Accounts of securityholders lost three years or less:                  
                                                              

          Accounts of securityholders lost five years or less:                   
                                                              
          Accounts of securityholders lost more than five years:                 
                                                              
          Accounts of securityholders which have escheated to states within the
     year ended June 30:                                                         
                                                   
                                      * * * * *

          By the Commission.




                              Jonathan G. Katz
                              Secretary



      Dated:  October 1, 1997






                              ======END OF PAGE 38======