-------------------- BEGINNING OF PAGE #1 ------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-35038; File No. S7-34-94 Transfer Agents Operating Direct Registration System AGENCY: Securities and Exchange Commission ACTION: Concept Release SUMMARY: The Securities and Exchange Commission is soliciting comment on the policy implications of, and the regulatory issues raised by, a transfer agent operated book-entry registration system (hereinafter referred to as the "direct registration system" or "DRS"). Investors who choose to participate in a direct registration system could have their securities registered in book-entry form directly on the books of the issuer and could receive a statement of ownership in lieu of a securities certificate. The direct registration system would extend book- entry registration to corporate equity and debt securityholders; book-entry registration is currently offered to dividend reinvestment plans and shares of registered investment companies. This system is being considered by issuers and transfer agents in preparation for faster trade settlements which will be required on June 7, 1995. DATES: Comments should be submitted on or before [insert date 60 days after publication date]. ADDRESSES: Interested persons should submit three copies of their written data, views, and opinions to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street, N.W., Mail Stop 6-9, Washington D.C. 20549. Comment letters should refer to File No. S7-34-94. All comment letters will be available for public inspection and copying at the Commission's Public Reference Room, 450 Fifth St., N.W., Washington D.C. 20549. FOR FURTHER INFORMATION CONTACT Ester Saverson, Jr., Senior Counsel, or Michele J. Bianco, Attorney, at 202/942-4187, Office of Market Supervision, Mail Stop 5-1, Division of Market Regulation, Securities and Exchange Commission, Washington, D.C. 20549. SUPPLEMENTARY INFORMATION: In October 1993, the Commission adopted Rule 15c6-1 under the Securities Exchange Act of 1934 ("Exchange Act") which, effective June 7, 1995, will shorten the standard timeframe for settling securities transactions from five to three business days. The shorter settlement period will, among other things, reduce the potential for systemic risk, promote efficient and liquid markets, and foster investor confidence in the U.S. securities markets. The Commission took this step recognizing that the implementation of faster settlement of securities transactions would require considerable effort, including other changes in the clearance and settlement process. Moreover, the Commission recognized that these changes would have wider implications for investors, securities markets, and financial intermediaries.-[1]- Even before the Commission proposed to require faster settlement of securities transactions, commenters overwhelmingly expressed concern that changes in the settlement cycle should not also result in mandatory elimination of the stock certificate.-[2]- In response to these concerns, the -[1]- See Securities Exchange Act Release No. 33023 (October 6, 1993), 58 FR 52891 (October 13, 1993) (hereinafter cited as "T+3 Adopting Release"). -[2]- See Securities Exchange Act Release No. 31904 (March 1, 1993), 58 FR 11806, 11808. The stock certificate evidences that the owner is registered on the books of the issuer as a shareholder. Because the certificate is (continued...) -------------------- BEGINNING OF PAGE #2 ------------------- Commission noted in the release proposing Rule 15c6-1 that "the proposed rule should not affect the ability of individual investors to obtain a physical certificate. Individual investors who desire to maintain record ownership in certificate form still will be able to do so."-[3]- Sparked by investor trends away from requesting physical certificates,-[4]- several corporations and transfer agents-[5]- -[2]-(...continued) a negotiable instrument under state commercial laws, it allows the registered owner to deliver the bundle of rights it represents to a third party without first having to change the registration on the books of the issuer. Guttman, Modern Securities Transfer, 1.01 at 1-2, (Warren, Gorham & Lamont 1987). State commercial laws specify rules concerning the transfer of the rights that constitute securities and the establishment of those rights against the issuer and other parties. Official comment to 8-101, The American Law Institute and National Conference of Commissioners of Uniform State Laws, Uniform Commercial Code, 1990 Official Text with Comments, Article Eight at 708 (West 1991). The American Law Institute and National Conference of Commissioners on Uniform State Laws recently approved a revision to Uniform Commercial Code ("UCC") Article Eight. See Mooney, Jr., Rocks, Schwartz, An Introduction to the Revised U.C.C. Article 8 and Review of Other Recent Developments with Investment Securities, 49 The Business Lawyer 1891 (August 1994). -[3]- Securities Exchange Act Release No. 31904 (February 23, 1993), 58 FR 11806. -[4]- Individual investors can choose to be registered directly on the issuer's register or they can engage a broker-dealer or bank to act as the custodian of their investment portfolios. The use of a broker-dealer or bank as a custodian typically is referred to as "street name" registration. See Final Report of the Securities and Exchange Commission on The Practices of Recording the Ownership of Securities in the Records of the Issuer in Other Than the Name of the Beneficial Owner of Such Securities (December 3, 1976); Report on Improving Communication Between Issuers and Beneficial Owners of Nominee Held Securities (June 1982). Securities held in street name typically are on deposit with a securities depository where the broker-dealer or bank (or its agent) participate. Securities depositories for corporate equity securities include The Depository Trust Company, The Depository Trust Company of Philadelphia, and The Midwest Securities Trust Company. These depositories are limited purpose trust companies, members of the Federal Reserve System, and registered clearing agencies under the Exchange Act. In addition to holding securities for their members (accepting deposits and processing withdrawals), depositories provide book-entry delivery and dividend and interest collection and payment services. In 1992, the ratio of book-entry deliveries to certificate withdrawals was 12.9:1, almost six times greater than the 1982 ratio (2.3:1). See U.S. Securities and Exchange Commission, 1993 Annual Report (1994) at 125. -------------------- BEGINNING OF PAGE #3 ------------------- that maintain their shareholder records want to expand their use of automated systems for recording ownership of securities and related transfer processing. As described below, they would offer shareholders who opt for direct registration the opportunity to receive an account statement instead of a negotiable certificate,-[6]- the opportunity to obtain a certificate upon demand, and the opportunity to direct the transfer of the underlying position to a broker-dealer upon request. For this system to be successful, broker-dealers, transfer agents and clearing agencies must cooperate to establish the systems and communication facilities to facilitate these services. The Commission is encouraged by these developments and believes that in general, the direct registration concept is consistent with Congressional objectives in Section 17A(a)(1) of the Exchange Act.-[7]- The Commission is soliciting comment on what steps are necessary to further such initiatives, including whether it would be appropriate to establish turnaround, audit, or other standards to foster investor confidence in the safety and efficiency of resulting systems. I. The Direct Registration Concept A. Historical Background Over the past ten years, regulators, representatives of private industry, and the transfer agent community have worked together to explore alternatives to maintaining ownership interest in securities without reliance on negotiable securities certificates. For example, on February 25 and 26 and March 8, 1985, the Division of Market Regulation ("Division") held "Securities Immobilization Workshops" to discuss the use of -[5]-(...continued) -[5]- Transfer agents are an integral component of the clearance and settlement process. There are approximately 1,576 registered transfer agents that maintain, on behalf of the issuers of securities, the official register of stockholders or bondholders. Transfer agents issue negotiable certificates evidencing security ownership, communicate on behalf of issuers with securityholders, and record changes in security ownership as a result of securities transactions. -[6]- The use of account statements instead of negotiable instruments is commonplace for investment products, such as securities issued by open-ended investment companies, and is mandatory for investors who own U.S. Treasury bills, bonds, and notes. Many open-end investment companies deal directly with investors. They or their transfer agents maintain automated ownership records and issue periodic statements to the owners indicated on those records. Most of these companies also have broker-dealers and other financial intermediaries as registered owners who act as nominees for their customers. Under this arrangement, the ultimate investor receives a statement reflecting his or her portfolio from the nominee. The U.S. Department of the Treasury no longer issues negotiable certificates evidencing ownership of negotiable bonds, bills, and notes. Instead, individual investors seeking direct registration can open accounts under the "Treasury Direct" program. See Department of the Treasury Direct Program, 31 CFR 357. -[7]- See 15 USC 78q-1(a)(1). -------------------- BEGINNING OF PAGE #4 ------------------- central depositories to immobilize securities certificates and the development of book-entry systems to register securities ownership. Workshop participants were of the view that an alternative to street name registration was needed to allow direct registration evidenced by a negotiable securities certificate.-[8]- Among other things, workshop participants recognized the desirability of issuing uncertificated securities through issuer or transfer agent operated book-entry systems. On November 27, 1990, the Commission held a Roundtable on Clearance and Settlement to discuss the implementation of, and the status reports of, the recommendations of the Group of Thirty U.S. Working Committee regarding clearance and settlement.-[9]- Participants at the Roundtable discussed, among other things, ways in which investors could obtain the benefits of direct registration without the issuance of securities certificates and without street name registration. Participants noted that the pressure to have securities available for settlement in a three- days after trade date ("T+3") environment will increase the need for immobilizing securities certificates and the use of book- entry transfer at the retail level. Thus, participants recognized the value of developing a transfer agent operated book-entry registration system as an alternative to street name registration. In August 1991, the U.S. Working Committee, Group of Thirty Clearance and Settlement Project, issued a report which, among other things, identified the DRS as an alternative to owning certificated securities.-[10]- The report was promulgated by a Subcommittee of the U.S. Working Committee of the Group of Thirty, the T+3 Direct Registration Subcommittee, co-chaired by -[8]- Progress and Prospects: Depository Immobilization of Securities and Use of Book-Entry Systems, Draft Staff Report, Division of Market Regulation, U.S. Securities and Exchange Commission (June 14, 1985) (hereinafter cited as "Immobilization Report"). -[9]- In March 1989, the Group of Thirty released a report which offered nine recommendations for reducing risk and improving efficiency in the clearance and settlement systems in the world's corporate securities markets. Clearance and Settlement Systems in the World's Securities Markets, Group of Thirty New York and London (1989). Those recommendations are described in an appendix to the T+3 Adopting Release. Supra note 1, at Appendix 2 at n.6, 58 FR 52905 n.6. Subsequently, U.S. Steering and Working Committees were formed to study the existing systems in the United States and to recommend appropriate changes based upon the Group of Thirty's nine recommendations. In November 1990, the U.S. Working Committee, Group of Thirty, Clearance and Settlement Project issued a report, entitled Implementing The Group of Thirty Recommendations in the United States. In that report, the U.S. Working Group concluded that the U.S. corporate clearance and settlement systems were not in compliance with two of the recommendations, moving to a three business day settlement period and adopting a same-day funds payment system, and that the these two recommendations should be implemented in the U.S. -[10]- Providing Alternatives to Certificates For the Retail Investor, U.S. Working Committee, Group of Thirty, Clearance and Settlement Project (August 1991). -------------------- BEGINNING OF PAGE #5 ------------------- representatives of the Securities Transfer Association ("STA") and the American Society of Corporate Secretaries ("ASCS"). This subcommittee viewed the DRS as offering investors an additional choice of security ownership in the form of an account statement, in which the securities would be registered in the name of the investor and maintained on the books of the issuer in a book- entry format.-[11]- Although the U.S. Working Committee of the Group of thirty views DRS as an alternative form of securities ownership, it decided that elimination of certificates was not necessary at that time to achieve a shorter settlement cycle, and thus did not endorse the DRS or any specific book-entry system. The U.S. Working Committee, however, encouraged the securities transfer agent community to continue its work on developing a book-entry registration system. In 1992, the STA, the Corporate Transfer Agents Association ("CTAA"), and the Securities Industry Committee of ASCS formed the Investor Registration Option Implementation Committee ("IRO/IC") to develop an issuer/transfer agent operated book- entry registration system. The IRO/IC developed the concept of a book-entry direct registration system operated by transfer agents ("DRS Concept"), modeling it after the systems used in dividend reinvestment and stock purchase programs ("DRSPPs")-[12]- which are currently offered by many issuers or their transfer agents. This concept would allow any retail investor who wants his or her securities to be registered directly on the books of the issuer, but does not necessarily want to receive a certificate, to register those securities in book-entry form directly on the books of the issuer. -[11]- As described in the subcommittee report, the DRS would allow individual investors to hold securities in electronic form, without putting those securities in street name at a financial intermediary, by providing those investors who choose to be registered on the books of the issuer with an optional custody arrangement with the transfer agent. Under DRS, if a security is registered on the books of the issuer, the investor would receive a statement reflecting his or her ownership interest. An investor would retain the option of selling securities through the broker of his or her choice by notifying the transfer agent to move the securities from the books of the issuer to the books of a broker-dealer. Certificates also would be available on request. -[12]- DRSPPs are programs offered by corporations or closed- end investment companies that allow participants to purchase additional shares of common stock by reinvesting their cash dividends and, in many cases, by making optional cash payments. Certain DRSPPs permit dividends on preferred stock and interest earned on debt securities to be reinvested in shares of common stock. The earliest DRSPPs were dividend reinvestment plans ("DRIPS") in which participation was limited to issuers' shareholders and employees and through which additional shares could be purchased only with reinvested dividends. Since the first DRIPs were introduced in the late 1960s, the greatest changes have been in the method by which participants can accumulate shares (i.e., optional cash payments), and the types of persons that are permitted to participate (e.g., non- shareholders of the corporation). -------------------- BEGINNING OF PAGE #6 ------------------- B. The DRS Concept and Cross-Industry Consensus After a series of discussions, the IRO/IC and the Securities Industry Association ("SIA") agreed in 1994 to the basic structure of the DRS Concept.-[13]- Agreement among transfer agents, corporations, broker-dealers, and banks regarding the basic structure and operational flows is critical because its implementation and operation must be efficient, safe, and largely transparent to investors. At the same time, issuers and transfer agents would be free to decide for themselves whether they wanted to offer investors the services that comprise DRS. The agreement between the IRO/IC and the SIA calls for the formation of a joint advisory committee to work with the registered securities depositories to develop an electronic communication system between transfer agents and depositories.-[14]- This proposed system will allow a broker- -[13]- Letter from Raymond J. Riley, Co-Chair, IRO/IC and James J. Volpe, Director, IRO/IC (February 16, 1994), to Jonathan Kallman, Associate Director, Division of Market Regulation, Commission; Letter from George McNamee, Chairman of Clearance and Settlement Committee, and John Sanders, Chairman of Operations Committee, SIA to Al DeMaio, et al (October 18, 1994). -[14]- The IRO/IC and the SIA agreed to the following six points: 1. Customers will be able directly or through their broker-dealers to request a certificate electronically or otherwise at the time of initial purchase. 2. Electronic acknowledgment that the securities have been registered in book-entry form will be provided to the broker-dealer with a written record of ownership forwarded to the customer. Electronic communications between the issuer/transfer agent and the depositories must be standardized. 3. Investor direct movement of securities will be provided in electronic form from the books of the issuer to the books of the investor's broker- dealer (which may not be the same broker-dealer that initially purchased the shares on behalf of the customer). 4. Transfer agents will not use the shareholder list of one issuer to solicit those shareholders to buy shares of other issuers for which they act as transfer agent. 5. The IRO/IC and the SIA will form a joint advisory group to work with the depositories to identify and design a process that will allow the investor to instruct the transfer agent, through the broker-dealer, to register shares on the books of the issuer in book-entry form or to request a certificate. If an investor fails to choose an option, the transfer agent will register the (continued...) -------------------- BEGINNING OF PAGE #7 ------------------- dealer to deliver electronically to a transfer agent a customer's request that the securities be registered on the books of the issuer in book-entry form. The proposed electronic system also will allow the transfer agent to send an electronic acknowledgment to the broker-dealer that the securities have been registered in the customer's name on the books of the issuer in book-entry form. Under the DRS Concept, assuming the issuer and transfer agent elect to offer DRS services, an investor may instruct the broker-dealer at the time of purchase to register the securities directly on the books of the issuer, to leave the securities with his broker in street name, or to request a certificate.-[15]- If an investor does not choose an option, the securities will be registered on the books of the issuer in book-entry form as the default form of registration. Assuming DRS services are offered, an investor also may establish a DRS account, or credit additional securities to his or her DRS account, by submitting physical certificates to the transfer agent. In addition, issuers and transfer agents could offer an option to non- shareholders to make initial cash payments to the transfer agent thereby allowing an investor with no prior relationship to the issuer to purchase shares and participate in the DRS.-[16]- Under the DRS Concept the broker-dealer would communicate its customers' registration option to the transfer agent through an electronic communication link (e.g., computer to computer -[14]-(...continued) securities on the books of the issuer in book- entry form. 6. The IRO/IC and the SIA will develop educational materials and the programs to inform the brokerage community and customers about the various forms of registration options, e.g., direct registration evidenced by negotiable certificates, direct registration evidenced by account statements, and indirect registration through a broker-dealer. The Commission invites comment as to whether the terms of the agreement are consistent with the Exchange Act and whether any of these terms impose a burden on competition. If commenters believe one or more of these terms imposes a burden on competition, please describe whether that burden is nonetheless necessary or appropriate to achieve the goals of the Exchange Act. -[15]- If the issuer and transfer agent determine not to provide DRS services, investors could still choose between street name and direct registration. Investors who choose direct registration would receive negotiable certificates as a matter of course. -[16]- Where an issuer or affiliate is offering securities, compliance with the registration provisions of the Securities Act of 1933 ("Securities Act") is required absent an exemption (e.g., Section 5 of the Securities Act [15 U.S.C. 77e (1993)]), as is compliance with such other requirements as Section 15(a) of the Exchange Act [15 U.S.C. 78o(a) (1993)] and Rule 10b-6 under Section 10(b) of the Exchange Act [17 CFR 240.10b-6]. See also Letter re: The Securities Transfer Association, Inc. (December 1994) Letter re: First Chicago Trust Company of New York (December 1994). -------------------- BEGINNING OF PAGE #8 ------------------- transmissions) established with the depositories. Once the transfer agent registers the securities on the books of the issuer, the transfer agent would send an electronic acknowledgement of the registration to the broker-dealer through the depository and would send an account statement directly to the investor reflecting the number of securities purchased. All subsequent securityholder communications, including proxy solicitations, would be sent directly to the investor from the transfer agent. The transfer agent would vote the securities in accordance with the instructions received from the DRS participant. DRS participants would have the option of either receiving their cash dividends, or, if the issuer offers a DRSPP, reinvesting their cash dividends in the purchase of new securities. Any dividends in the form of securities, or any securities resulting from a stock split owed to a DRS participant, would be credited to the DRS participant's account. As with other DRSPPs today, no certificates would be issued unless the DRS participant makes a specific request for certificates by phone, facsimile, or mail. II. Discussion In light of the faster settlement processing standards that will be imposed on retail customers in the T+3 environment, the Commission believes that investors should have the choice to register their securities in book-entry form directly on the books of the issuer evidenced by an account statement.-[17]- The Commission believes that such an alternative is consistent with Congressional objectives in Section 17A(a)(1)(C) of the Exchange Act;-[18]- new data processing and communication techniques create the opportunity for more efficient, effective, and safe procedures for clearance and settlement. Although the SIA and the transfer agent community have agreed on the general design of the electronic communication system, the Commission understands that they have technical issues to resolve before the securities depositories can provide the specifications to build the electronic communication system that would allow the movement of -[17]- Subject to an issuer's determination of whether to make certificates available to shareholders, the Commission believes investors should be able to obtain negotiable certificates on request. [State corporate laws generally entitle shareholders to obtain certificates evidencing their investment. See e.g. 8 Del. Code Ann. General Corporation Law 158 (1991); N.Y. Bus. Corp. Law 508 (McKinney 1986)]. The Commission continues to believe that faster trade settlements should not require investors to forego the benefits of direct registration or the opportunity to receive a negotiable certificate evidencing their investment. The Commission notes that Rule 15c6-1 does not require customers to leave funds, securities, or both subject to the broker-dealers' possession or control. Although in announcing the adoption of Rule 15c6-1, the Commission noted that broker-dealers "could encourage clients to deposit funds or securities . . . upon placing an order, or to send funds and securities that day," and although financial management accounts have gained in popularity for various reasons, the Commission advises broker-dealers to be careful not to represent to their customers that the rule requires customers to leave securities or funds with broker- dealers after trade settlement. -[18]- See 15 USC 78q-1(a)(1)(C). -------------------- BEGINNING OF PAGE #9 ------------------- securities between transfer agents and broker-dealers.-[19]- The Commission urges the SIA, the transfer agent community, and the issuer community, in cooperation with the depositories, to design the electronic communication system, to build and test that system, and to implement the DRS prior to the June 7, 1995 implementation date for T+3 settlement.-[20]- The Commission believes that the proposed agreement on the DRS concept and the electronic link between transfer agents and depositories necessary for timely and effective communication with broker-dealers should enhance the efficiency of the clearance and settlement system. Because the Commission is concerned about the parties' ability to implement the system promptly and to follow through on their commitments, the Commission invites commenters to address whether the Commission or the self-regulatory organizations should take a more active role in facilitating education regarding the registration and safekeeping alternatives available to investors. Comments are also requested as to whether the Commission should require broker-dealers to disclose to customers at the time an account is opened that direct registration is available as an alternative to street name registration; what that disclosure might include; and whether additional periodic disclosures should be required after the account is opened. In addition, the Commission requests comment as to whether transfer agents that provide the DRS or other uncertificated recordkeeping functions should be subject to increased regulatory oversight to minimize any disruption of the marketplace and to provide greater efficiency to the clearance and settlement system. For example, is there a need for a Commission rule to prevent transfer agents from using shareholder lists without issuer consent for any purpose other than the transfer of that company's securities? To foster the efficient operation of the DRS and to minimize any adverse effects on the secondary market and the national clearance and settlement system, should transfer agents that participate in the DRS be required to join at least one of the registered securities depositories for the purposes of performing the DRS functions? The Commission believes that safe and efficient transfer agent performance is critical to efforts by the securities industry to provide alternative registration options. Transfer agent operated book-entry systems, including the DRS, pose different and potentially increased risks to investors. For example, increased reliance on the records of transfer agents may place additional burdens on transfer agents and could increase the risks to investors arising from substandard transfer agent performance. Accordingly, commenters are urged to review the companion release issued today, which invites comment on the need -[19]- The SIA stated that while there are unresolved technical questions, none appear insurmountable. Letter from John J Sanders, Jr., Chairman, Operations Committee, SIA, and George C. McNamee, Chairman, Clearance and Settlement Committee, SIA, to Al DeMaio, The Midwest Securities Trust Company; Ron Burns, The Depository Trust Company; and Keith Kessel, Philadelphia Depository Trust Company (October 18, 1994). -[20]- The Commission notes that Division staff today have issued correspondence regarding a proposed expansion of shareholder services that incorporates some of the DRS features. See Letter re: First Chicago Trust Company of New York (December 1994). -------------------- BEGINNING OF PAGE #10 ------------------- for new and revised rules governing transfer agent activities in light of the proposed DRS Concept, DRSPPs, and custodial arrangements with registered securities depositories to hold securities registered in the name of those depositories in book- entry form ("uncertificated recordkeeping functions").-[21]- For -[21]- See Securities Exchange Act Release No. 35040 (December 1, 1994) (hereinafter referred to as "companion release"). This discussion is limited to transfer agent regulation and does not address the application of the broker-dealer registration provisions of the Exchange Act to the DRS or DRSPPs. Some of the activities in connection with the DRS or DRSPPs may raise broker-dealer registration issues under Section 15(a) of the Exchange Act. Section 15(a) of the Exchange Act generally provides that a "broker" or "dealer" that uses the mails or any means of interstate commerce to effect transactions in, or to induce or attempt to induce the purchase or sale of, any security must register with the Commission, unless an exemption applies. Section 3(a)(4) of the Exchange Act defines a "broker" as any person (other than a bank) engaged in the business of effecting transactions in securities for the account of others. A "dealer" is defined in Section 3(a)(5) of the Exchange Act as any person (other than a bank) engaged in the business of buying and selling securities for its own account, whether through a broker or otherwise. Broker-dealer registration serves to minimize the risks typically associated with the execution of securities orders and the handling and custody of funds and securities. The Commission's financial responsibility rules applicable to registered broker-dealers, for example, are designed to provide safeguards with respect to customer funds and securities held by broker-dealers by ensuring the accountability of those funds and securities and by requiring the maintenance of accurate books and records and sufficient liquid assets. See, e.g., 17 CFR 240.15c3-3 (prohibiting a broker-dealer from using customer funds to finance its business, except as related to customer transactions); 17 CFR 240.15c3-1 (prescribing minimum capital standards for broker-dealers). In general, registered broker-dealers also must become members of the Securities Investor Protection Corporation ("SIPC"). SIPC was established by Congress as a means to protect investors' funds and securities held by broker- dealers that undergo liquidation. In addition, registered broker-dealers are subject to the rules of the self- regulatory organizations ("SROs") of which they are required to be members under Section 15(b)(8) of the Exchange Act. SRO rules, among other things, are designed to ensure the maintenance of high standards of ethical conduct and the observance of just and equitable principles of trade. In instances where an issuer performs some of the functions discussed above in connection with its DRSPP, the staff has determined that registration as a broker-dealer is not necessary if the issuer limits its activities as described in Letter re: Securities Transfer Association (December 1994) or if the issuer delegates such functions to a (continued...) -------------------- BEGINNING OF PAGE #11 ------------------- example, the companion release invites comment on whether the Commission should develop additional processing, bookkeeping, net worth, and insurance requirements for transfer agents that perform uncertificated recordkeeping functions. -[21]-(...continued) registered broker-dealer or to a "bank," as that term is defined in Section 3(a)(6) of the Exchange Act. Questions concerning broker-dealer registration should be directed to the Office of Chief Counsel, Mail Stop 7-10, Division of Market Regulation, Securities and Exchange Commission, Washington, D.C. 20549. -------------------- BEGINNING OF PAGE #12 ------------------- III. Request for Comment The Commission is interested in receiving comment on all aspects of the DRS Concept in addition to the specific requests for comment made in this release. By the Commission. Jonathan G. Katz Secretary Dated: December 1, 1994