Processing Requirements for Cancelled Security Certificates

SECURITIES AND EXCHANGE COMMISSION

17 CFR Part 240

[Release No. 34-48931; File No. S7-18-00]

RIN 3235-AH94

Processing Requirements for Cancelled Security Certificates

Agency: Securities and Exchange Commission ("Commission").

Action: Final rule.

Summary: The Commission is revising its rules governing
cancelled securities certificates to improve the processing of securities
certificates by transfer agents. The Commission is adopting a new rule
under the Securities Exchange Act of 1934 that will require every transfer
agent to establish and implement written procedures for the cancellation,
storage, transportation, destruction, or other disposition of securities
certificates. This rule will require transfer agents to: mark each
cancelled securities certificate with the word "cancelled"; maintain a
secure storage area for cancelled certificates; maintain a retrievable
database of all of its cancelled, destroyed, or otherwise disposed of
certificates; and have specific procedures for the destruction of
cancelled certificates. Additionally, the Commission is amending its lost
and stolen securities rule and its transfer agent safekeeping rule to make
it clear that these rules apply to unissued and cancelled
certificates.

Effective Date: The amendments will become effective on January
22, 2004.

For Further Information Contact: Jerry W. Carpenter, Assistant
Director, or Thomas C. Etter, Jr., Special Counsel, at (202) 942-0178,
Division of Market Regulation, Securities and Exchange Commission, 450
Fifth Street, NW, Washington, DC 20549-1001.

Supplementary Information: The Commission is today
adopting new Rule 17Ad-19 and adopting amendments to existing Rules 17f-1,
17Ad-7, and 17Ad-12.

I. Introduction
A. The Proposal

On October 2, 2000, the Commission published for comment a release
("Proposing Release") that proposed Rule 17Ad-19 under the Securities
Exchange Act of 1934 ("Exchange Act")1 and proposed amendments to Exchange Act Rules
17f-1 and 17Ad-12.2 The proposed rule and rule amendments
principally were designed to address problems associated with cancelled
securities certificates. Rule 17Ad-19 as proposed would have required
every transfer agent that handles, processes, or stores securities
certificates to establish and implement written procedures for the
cancellation, storage, transportation, and destruction of retired
securities certificates. The rule would require transfer agents to: mark
each cancelled securities certificate with the word "cancelled;" maintain
a secure storage area for cancelled certificates; maintain a retrievable
database of all of its cancelled and destroyed certificates; and have
specific procedures for the destruction of cancelled certificates.
Additionally, proposed amendments to Rule 17f-1 (the lost and stolen
securities rule) would have: required the tracking of securities
certificates, cancelled or otherwise, in transit between reporting
institutions; established time frames for making required "inquiries"
about lost, stolen, missing, or counterfeit securities under Rule17f-1;
and defined certain terms for purposes of the rules. Finally, proposed
amendments to Rule 17f-1 and Rule 17Ad-12 (the transfer agent safekeeping
rule) would have made clear that unissued and cancelled securities
certificates must be safeguarded under Rule 17Ad-12 and that they fall
within the Commission's Lost and Stolen Securities Program under Rule
17f-1.

We are adopting the proposed new rule and rule amendments, with minor
modifications as discussed below, substantially as they were proposed.
Further, as discussed below, we have modified Rule 17Ad-19 from the
proposal in response to comments to address situations where cancelled
securities are "otherwise disposed of."

B. The Commission's Goals

The new rule and rule amendments promote several fundamental Commission
goals: improving the safety and efficiency in processing and transferring
securities; reducing or eliminating the physical movement of securities
certificates; and reducing the potential for fraudulent use of cancelled
securities certificates.3 The rules primarily relate to problems and costs
associated with cancelled securities certificates.

In particular, we address the problem that, until properly destroyed or
disposed of, cancelled securities certificates can resurface in the
marketplace and can be and have been used to defraud members of the public
or financial institutions. Requiring better procedures for processing and
destroying cancelled certificates will reduce this potential for harm.

C. Comment Letters

The Commission received 13 comment letters on the proposed rule and
proposed rule amendments.4 Ten commenters generally expressed support for
proposed Rule 17Ad-19 and the proposed amendments to Rules 17f-1 and
17Ad-12 and for the Commission's efforts to address cancelled certificate
fraud, and offered suggestions for modification or requests for
clarification with respect to specific provisions of the proposal. As
discussed below, we have adopted some of the suggestions. The
remaining three commenters addressed only the issue of certificate
destruction, arguing that because securities certificates are culturally
important due to their historical, aesthetic, and collectors' values, they
should be preserved and not destroyed.

We discuss these comments below.

II. Background
A. History

When a security certificate is retired, such as when a bond is redeemed
or ownership of stock is transferred, the certificate is cancelled by the
transfer agent. Cancellation normally involves both an accounting entry on
the books of the transfer agent and an alteration of the certificate
itself, though either by itself is an act of cancellation. After
cancellation of a registered certificate,5 the Exchange Act's record retention rules for
transfer agents require that the certificate or appropriate record of the
certificate be retained for not less than six years.6 In recent years, many corporate bond issues
have been called for redemption and cancelled decades before their
maturities.7 These bond redemptions and an active stock
market have generated vast amounts of cancelled securities certificates
that must be processed, stored, and safeguarded. Certificate processing of
retired certificates can involve significant costs and risks. The
following examples illustrate some of these risks.

In a 1992 case, cancelled bond certificates with a face amount of
approximately $111 billion disappeared after being delivered from a
transfer agent's warehouse to a certificate destruction vendor. The
certificates, issued by many well-known public companies, later began to
resurface worldwide. A number of banks and brokers as well as individuals
were defrauded through sales of the cancelled certificates for cash or
through use of the cancelled certificates as loan collateral. The bulk of
these cancelled certificates still remain unaccounted for and continue to
resurface in the marketplace.8

In a similar case in 1994, cancelled bonds with a face amount of
approximately $6 billion disappeared after being delivered from a transfer
agent's record center to two certificate destruction vendors. The
cancelled certificates, issued by well-known companies, later began to
resurface worldwide. Again, the bulk of these cancelled certificates
remain unaccounted for and continue to resurface in the
marketplace.9

In another instance, a transfer agent's shipping bags filled with
cancelled certificates were stolen while in commercial air transit. The
transfer agent regularly shipped cancelled certificates from the West
Coast to a New York bank for processing. The transfer agent, however, did
not record the contents of its shipments and, in effect, relied on its New
York bank processing agent to do its bookkeeping. When the shipping bags
were stolen, neither the transfer agent nor its bank processing agent
realized that the certificates were missing. A number of the certificates
later resurfaced in off-market transactions.10

Other instances have involved bulk thefts of cancelled certificates
from warehouses. In some cases, the records of the certificate numbers of
the stored certificates also were stolen because they were stored with the
certificates. Even in cases where certificate records for stolen
securities were available, they generally were of limited value in
identifying the stolen securities because the records were organized
chronologically by cancellation dates rather than by certificate numbers.
As a result, the necessary information was not easily retrievable from the
records.

A common transfer agent practice contributed to this widespread
problem. In physically cancelling certificates, many transfer agents
marked the certificates only with pinhole-sized perforations. These tiny
perforations were intended to indicate cancelled status without defacing
the certificates and impairing their usefulness as records. The pinholes,
which usually show the cancellation date and the initials of the transfer
agent within a space about the size of a quarter, often have been barely
noticeable. In some cases, they have been mistaken for notary or
authentication markings. Even more problematic has been the practice by
some transfer agents of not marking certificates at all to indicate that
the certificates have been cancelled.

In many cases, the stolen certificates have reentered the marketplace
either through sales or as collateral for loans, resulting in substantial
fraud on public investors, public companies, creditors, broker-dealers,
and transfer agents. Not only do situations such as these present
potential liability for the transfer agents responsible, but they consume
the resources of regulatory and criminal law enforcement agencies.

As discussed below, the Commission hopes that these unfortunate
practices have been or are being eliminated by the transfer agents
themselves through improved trade practices. But without standards and
verification, there is no way to be certain. The new rule and rule
amendments address these practices and will permit the Commission's
examiners to verify compliance as a routine part of their examination
schedules.

B. The Commission's Authority

Sections 17(f) and 17A of the Exchange Act provide the Commission with
authority and responsibility to protect investors and securities industry
participants from the dangers associated with the fraudulent use of
cancelled certificates.11 Section 17(f)(1), in fact, is designed to
curtail the profitability of and the unlawful trafficking in lost and
stolen securities certificates.12 Section 17(a)(3) of the Act expressly provides
the Commission with rulemaking authority over transfer agent recordkeeping
matters.13 In Section 17A(a), Congress directs the
Commission to carry out certain objectives including the safeguarding of
securities and funds that are related to securities transfers and the
elimination of inefficient securities processing that imposes unnecessary
costs on investors.14 The Commission has broad discretion in
carrying out these mandates.15 We believe that most situations where
cancelled securities certificates resurfaced in the marketplace have
resulted from a lack of good internal control systems for the processing,
storage, transportation, or destruction of the certificates. The rules
that we adopt today are intended to provide for more efficient and secure
certificate processing, particularly of cancelled certificates.

III. Final Rules
A. Rule 17Ad-19: Processing of Cancelled Certificates

Currently, the processing of cancelled certificates is largely governed
by industry practices. For example, in 1994, the Securities Transfer
Association ("STA"), the largest transfer agent trade association,16 adopted guidelines for its members which,
among other things, called for marking cancelled certificates with the
word "cancelled" and for greater security measures in certificate storage
and destruction.17 However, these guidelines are not mandatory,
and not all transfer agents follow them. Therefore, because cancellation
is the critical first step in the processing of retired securities
certificates, we believe that rulemaking is necessary to strengthen and
standardize this process.

1. Discussion of Text

Rule 17Ad-19 requires each transfer agent to have and implement written
procedures for the cancellation, storage, transportation, destruction, or
other disposition of securities certificates. At a minimum, the written
procedures must provide: (1) for controlled access to any cancelled
certificate facility; (2) that the transfer agent clearly apply to the
face of each cancelled certificate the word "cancelled" unless the
transfer agent's procedures will cause the certificate to be destroyed in
accordance with other Commission rules within three business days of its
cancellation; (3) that the transfer agent keep a readily retrievable
record of each cancelled certificate with identifying data consisting of
CUSIP number, certificate number including prefix or suffix, denomination,
registration, issue date, and cancellation date; (4) that the
transportation of cancelled certificates be made in a secure manner with a
record of the certificates in transit kept separately; (5) that the
transfer agent keep a readily retrievable record of each destroyed
certificate or certificate otherwise disposed of;18 and (6) that authorized personnel of the
transfer agent, supervise, witness and document the destruction of
certificates.

We are modifying proposed Rule 17Ad-19 to require that transfer agents
maintain records not only of the certificates that they or their agents
destroy but also of those certificates that they dispose of by any other
means and which may, for example, become the property of collectors or
dealers in collectibles. In this regard, we note that cancelled
certificates, after a period in transfer agent storage, are generally
destroyed by the transfer agent or destroyed by some other party acting at
the direction of the transfer agent or the issuer. However, a small amount
of cancelled certificates may find their way from transfer agents to
collectors or perhaps to other places currently unknown to us.
Accordingly, to make the rule as complete as possible, we are inserting in
paragraph (b) the words "or other disposition" into the phrase
"destruction of securities certificates." The term "otherwise disposed of"
requires that a record be maintained of how (as by sale or gift) and to
whom (with name and address) the certificates were disposed of and the
date of disposition. In the text of Rule 17Ad-19, minor changes have been
made to paragraphs (a)(2) and (a)(4) for clarification and specificity.
Rule 17Ad-19 also includes procedures for the Commission to provide
conditional or unconditional exemptions from any of these provisions of
the rule in appropriate cases upon written request or upon its own motion.
A related amendment to Rule 17Ad-7(i) requires transfer agents to maintain
records to demonstrate compliance with the requirements of Rule 17Ad-19
for not less than three years, the first year in an easily accessible
place.19

2. Comment letters

Many comments received in reply to the Proposing Release addressed
particular aspects of proposed Rule 17Ad-19.

Three commenters,20 objected to the proposed requirement that
certificates must be "cancelled" unless existing procedures would cause
their destruction "within 72 hours of their cancellation." They each
recommended that "72 hours" be changed to "three business days" to avoid
problems with weekends and holidays. We agreed that this change would
achieve our goal, while avoiding problems with weekends and holidays and,
therefore, we made this modification.

ChaseMellon asked for clarification whether the provision in the rule
concerning certificates in transit would apply to shipments between a
transfer agent's own offices and affiliates or only to shipments between
unaffiliated reporting institutions, vendors, and others. The
transportation provision of the rule is intended to apply only to
shipments between a reporting institution and unaffiliated parties. We
have modified the rule to reflect this point.21

ChaseMellon asked whether having written procedures that are consistent
with STA's recommended guidelines would constitute compliance with Rule
17Ad-19. Because some requirements of Rule 17Ad-19 may differ from those
of the STA's guidelines, transfer agents must be sure they are in
compliance with the requirements of Rule 17Ad-19.

ChaseMellon also requested clarification whether the records required
by Rule 17Ad-19 for cancelled certificates require retrievable information
both for certificates that are (1) cancelled but not destroyed and (2)
cancelled and destroyed. The rule requires that the applicable information
be kept for both types of cancelled certificates.

ChaseMellon asked whether maintaining cancelled certificate data based
solely on cancellation dates would be adequate under Rule 17Ad-19.
Cancellation date recordkeeping has led to identification problems in the
past when cancelled certificates were lost or stolen. Data organized by
cancellation date, rather than by CUSIP and certificate number, has proved
to be of little value when there is a need for prompt identification of
lost, missing, or stolen certificates. It is important that CUSIP numbers
and certificate numbers are readily available for the prompt reporting of
lost, missing, or stolen certificates to the Lost and Stolen Securities
Program and for the prompt alerting of law enforcement authorities and
other financial institutions. Accordingly, this requirement is contained
in Rule 17Ad-19.

ICI asked whether the new recordkeeping provisions applicable to
cancelled certificates would apply retroactively (i.e., apply to
certificates previously cancelled), in which case ICI suggested the
provisions would be burdensome on transfer agents. The new recordkeeping
provisions will apply only prospectively, becoming effective sixty days
after the date of adoption of the rule.

B. Rule 17f-1: Lost and Stolen Securities Program
1. Background of Lost and Stolen Securities Program

Section 17(f)(1) of the Exchange Act requires the Commission to operate
a Lost and Stolen Securities Program ("LSSP" or "Program").22 Congress directed the establishment of the
Program in 1975 to curtail trafficking in lost, stolen, missing, and
counterfeit securities certificates.23 Rule 17f-1 under the Exchange Act governs LSSP
operations. The Program consists mainly of a database for securities that
have been reported lost, stolen, missing, or counterfeit. Operationally,
the Program has two essential parts: "reports" and "inquiries." Most
financial institutions (including exchanges, banks, brokers, clearing
agencies, and transfer agents), which Rule 17f-1 designates "reporting
institutions,"24 are required to report any certificates that
they discover to be lost, stolen, missing, or counterfeit.25 These institutions also must inquire of the
Program about any securities certificate valued at more than $10,000 that
comes into their "possession or keeping."26 These financial institutions also may
voluntarily report or inquire about other certificates.27

The Program is operated by the Securities Information Center ("SIC") as
the Commission's designee pursuant to a contract. SIC receives all reports
and inquiries, responds to inquiries, and maintains the Program's
database. As of December 31, 2002, the Program's database reflected
securities with a value of approximately $672 billion. There were 26,011
reporting institutions.28 During the year 2002, reports were made on
926,475 certificates (an average of 3,676 certificates per business day);
inquiries were made on 5,231,310 certificates (an average of 20,759
certificates per business day); and matches or "hits" resulting from
inquiries occurred on 224,338 certificates, which had a value of
approximately $36.5 billion.29 The hits essentially warned the inquirers that
the certificates had been reported as lost, stolen, missing, or
counterfeit and were not eligible for transfer.

2. Rule 17f-1 "Requirements for reporting and inquiry with respect to
missing, lost, counterfeit or stolen securities"
a. "Securities Certificate"

We have amended Rule 17f-1 by adding subparagraph (a)(6), which defines
"securities certificate" to clarify that the scope of Rule 17f-1 covers
the life span of a certificate from the time it is printed until the time
it is destroyed. Accordingly, the rule covers: (1) certificates that have
been printed but not issued; (2) certificates that have been issued and
remain outstanding; (3) certificates that have been issued and reacquired
by the issuer; and (4) certificates that have been cancelled.30 It likewise includes certificates that are
counterfeit or reasonably believed to be counterfeit. As discussed below,
we also have incorporated this definition of "securities certificate" into
Rules 17Ad-12(b) and 17Ad-19(a)(8).31

We received several comments on this proposal. ICI and Otter Tail
requested clarification of the term "printed but not issued."
Specifically, they asked what identifying information must be included on
certificates to qualify such certificates for reporting to LSSP. Under
Rule 17f-1, as amended, a securities certificate is "printed but not
issued" when it sets forth: the name of the issuer, the CUSIP number, the
certificate number, and the authenticating signatures of the issuer.
Therefore, a securities certificate to be considered "printed but not
issued" does not have to set forth: the name of the registrant, the number
of units, or the countersignature of the transfer agent.

U.S. Bank asked whether the proposed definition of "securities
certificate" would include both registered and bearer certificates, noting
that including bearers and their coupons would be burdensome on transfer
agents. U.S. Bank suggested that if coupons are to be included, they
should be subject to cancellation practices at the transfer agent's
discretion which could include such methods as "hole punching" of coupons
as an acceptable means of cancellation. In the rule as amended, the
definition of "securities certificate" in subparagraph (a)(6) of Rule
17f-1 includes both registered and bearer certificates. Although
processing bearer certificates may in some ways be more onerous to
transfer agents than processing registered certificates, we do not believe
that bearer certificates can reasonably be excluded from a definition of
securities certificates. We note, too, that any burden caused by bearer
certificates is diminishing year-by-year due to the Tax Equity and Fiscal
Responsibility Act of 1982, which essentially eliminated the issuance of
bearer certificates.32

Moreover, the definition of "securities certificate" of Rule
17f-1(a)(6) does not contemplate bond coupons, which are expressly
exempted from the reporting and inquiry provisions of Rule 17f-1 by its
subparagraph (f)(2). We note, however, that while, due to the exemption,
coupons are not securities certificates or reportable within the meaning
of Rule 17f-1, they are not exempted from Rule 17Ad-12 and, accordingly,
they do come within the "funds and securities" safeguarding provisions of
Rule 17Ad-12(a). In any case, Rule 17Ad-19 does not establish specific
cancellation practices for coupons. We believe that it is appropriate for
coupon cancellation to be governed by accepted, reasonable industry
practices at this time.

b. "Missing" Securities Certificates

The term "missing" is used in Section 17(f)(1) of the Exchange Act and
in Rule 17f-1 thereunder, but until now it was not defined.33 The term generally has been used to describe
certificates that cannot be located, such as certificates that are not
found during a count or audit, but that are thought to be misfiled rather
than lost or stolen.

There are other circumstances, however, where a transfer agent does not
have possession of a certificate though it believes, but cannot be
certain, that it knows what happened to the certificate, i.e., that
it was destroyed. Some would claim that such a certificate is not
"missing" but is more accurately described as "destroyed," and that
accordingly a reporting institution is not required to report the
certificate under Rule 17f-1 as being missing, lost, or stolen. For
example, if cancelled certificates are stored by a transfer agent in a
warehouse that is destroyed by a fire, the transfer agent may reasonably
believe but cannot be certain (i.e., to the point of providing a
guarantee) that all the stored certificates were destroyed.34 In such a situation, especially where arson
is found, there is a risk that some of the certificates may not have been
destroyed and may resurface in the marketplace.

We are amending Rule 17f-1(a)(7), as proposed, to define the term
"missing" for purposes of Rule 17f-1 as any certificate that: (1) cannot
be located but which is not believed to be lost or stolen or (2) the
transfer agent believes was destroyed but was not destroyed according to
the certificate destruction procedures required by Rule 17Ad-19. We
received no comments on this proposal.

As a result, it will be clear that reporting institutions are required
to report the above-described types of missing certificates to LSSP. Then,
if such certificates later resurface, there will be a high degree of
likelihood that they will be promptly identified and interdicted through
LSSP.

3. LSSP Reports of Cancelled Certificates

The Commission has brought enforcement actions for violations of Rule
17f-1 where cancelled securities certificates that were lost or stolen
were not reported to LSSP.35 Nevertheless, there appears to be some
uncertainty about whether this rule applies to cancelled
certificates.36 We believe clarification would be useful.

We believe that cancelled certificates are within the meaning and
purpose of Rule 17f-1. Like counterfeit certificates, cancelled
certificates have no investment value, but they can be used to
defraud.37 The inclusion of the definition of
"securities certificate" in Rule 17f-1(a)(6) as discussed above clarifies
that cancelled certificates are reportable to LSSP.

4. LSSP Inquiries

In Rule 17f-1, paragraph (c) governs reports and paragraph (d) governs
inquiries about lost, stolen, missing, and counterfeit securities. While
the rule specifies time frames for making reports, it specifies no time
frames for making the inquiries.38

When Rule 17f-1 was adopted in 1976, requirements for making inquiries
were intended to accommodate business practices and to avoid commercial
disruptions.39 The time frames for making inquiries were
left to the business judgment of inquiring companies.40 Since then, business conditions have changed
substantially, in large part due to improvements in automation and
communications. Inquiries to LSSP by financial institutions have become
quite routine and automated. In addition, the lack of any time limit for
making required inquiries has made compliance with the rule difficult to
monitor, and it has produced judicial comment.41 No public comment was received in response to
our Proposing Release concerning the time frames for inquiries.

Accordingly, we are adding subparagraph (d)(3), as proposed, to Rule
17f-1 which provides that inquiries must be made by the end of the fifth
business day after a certificate comes into the "possession or keeping" of
a reporting institution.42 The amendment also provides that inquiries
shall be made before the certificate is sold, used as collateral, or sent
to another reporting institution if occurring sooner than the end of the
fifth business day.

5. Securities Shipments

We proposed to add to Rule 17f-1(c)(2)(ii) a requirement that transfer
agents track shipments of securities certificates, including cancelled
certificates, between reporting institutions. When such a shipment becomes
unaccounted for (for example, when the delivering institution fails to
receive notice of receipt of the shipment), the delivering institution
would be required to investigate to determine the facts. If the
certificates cannot be located, under the proposed amendment, the
delivering institution would be required to report to LSSP that the
certificates are missing, stolen, or lost within a reasonable time not
exceeding ten business days after the shipment was sent.

We received five comments on this proposal.43 The commenters said that the proposed time
frame of ten business days was too short a period for transfer agents to
verify the non-delivery, to investigate the cause, and to report such
matters to LSSP. Alternative suggestions were 15, 20, and 30 business
days. In response to these suggestions, and upon consideration of the time
we believe is reasonably needed to verify and investigate such
non-deliveries, we have increased the time frame to 20 business days.

EquiServe also commented that inasmuch as the overall purpose of the
rule package is to address problems with retired or cancelled
certificates, the securities shipment proposal in question should not
apply to "live" certificates.44 EquiServe noted that, as proposed, the rule
would appear to apply to all shipments of securities certificates, both
live certificates and retired certificates, but it noted that live
certificates tend to be shipped (1) in small amounts and perhaps only as
single certificates and (2) in protected ways, such as by certified mail,
that reflect their asset value. It also commented that it would be
expensive for transfer agents to monitor the receipt of each such small
mailing. EquiServe stated that retired certificates, however, tend to be
shipped in bulk, and since they have no investment value there is less
economic incentive to record and track such certificates. Thus, EquiServe
suggests, the coverage of the rule proposal could be limited to retired
certificates.

We agree with EquiServe's reasoning on this matter. The proposed rule
appears unnecessary for live certificates, which generally are carefully
safeguarded by the securities industry and where the rule would impose
higher expenses due to the small shipments usually involved.45 But we believe the proposal is necessary with
respect to retired certificates where there is less financial incentive
for the industry to safeguard the certificates and where shipments tend to
be fewer and in bulk amounts so that the tracking expenses per certificate
would be less. Accordingly, the proposed rule has been modified to apply
only to shipments containing retired certificates.

C. Rule 17Ad-12: Safeguarding of Funds and Securities

Rule 17Ad-12 governs the safekeeping of funds and securities by
transfer agents.

It requires that securities be handled in a manner that is reasonably
free from the risk of destruction, theft, or other loss. We proposed an
amendment to Rule 17Ad-12 to make clear that cancelled certificates come
within the meaning and purpose of Rule 17Ad-12.46 As we observed earlier, a cancelled
certificate has no intrinsic value but, like a counterfeit certificate, it
can be used to defraud. Accordingly, we have amended Rule 17Ad-12 as
proposed to provide that the term "securities" used in that rule will have
the same meaning as the term "securities certificate" defined in Rule
17f-1. As such, cancelled certificates will be expressly included in the
coverage of Rule 17Ad-12, and transfer agents will be responsible for
safeguarding cancelled certificates under their control.47

D. Other Comments

Discussed below are other comments we received in response to the
Proposing Release.

1. Exceptions for Certain Transfer Agents

Paragraph (b) of proposed Rule 17Ad-19 would have applied only to those
transfer agents involved in the "keeping, handling, or processing of
securities certificates." We requested comment on whether the proposal
should apply to all registered transfer agents (approximately 900) or only
to the approximately 800 registered transfer agents that maintain
securityholder records for one or more securities issues and are directly
involved with the keeping, handling, or processing of securities
certificates. Excluded from the larger group would be "named transfer
agents" (transfer agents that contract their transfer agent functions to
transfer agent "service Companies") and transfer agents that conduct a
specialty business not involving securities certificates.48 We received two comments.

CTA recommended that proposed Rule 17Ad-19 apply only to the transfer
agents that maintain securityholder records, with an exception for issuers
registered as transfer agents that act only for their own issues
("issuer-only transfer agents") with average monthly volumes of 100
transfer items or less. Secondly, Otter Tail, an issuer-only transfer
agent, said it averages only 30 certificates per month and that
maintaining retrievable records and witnessing the destruction of
certificates would require more staff and equipment and would be unduly
expensive.

As Rule 17Ad-19 is written, it is applicable only to transfer agents
that are involved in the handling, processing, or storage of securities
certificates.49 Therefore, a number of transfer agents, such
as named transfer agents, are not subject to the provisions of Rule
17Ad-19, which includes the requirement to prepare written procedures.
Nevertheless, a transfer agent that outsources its transfer agent work,
which consists of handling, processing, or storage of securities
certificates, to another transfer agent (i.e., a service company
transfer agent) is legally responsible for ensuring that the provisions of
Rule 17Ad-19 are followed with respect to the securities for which it is
the named transfer agent. Therefore, both named transfer agents and
service company transfer agents have responsibilities for complying with
Rule 17Ad-19.

Regarding the provisions of Rule 17Ad-19 dealing with the recordkeeping
of the destruction of retired securities certificates, we do not believe
that these requirements become burdensome simply because the number of
certificates being destroyed is small. Even a small transfer agent, for
example, can designate a person to destroy certificates under specific
procedures. We also believe that these limited burdens are justified by
the rule's value as an antifraud measure. We do not think it is prudent,
with recordkeeping rules that are linked to antifraud rules, to establish
different standards based on the number of certificates processed, the
number of transfers made, or the number of issuers serviced. We believe
that the requirements of Rule 17Ad-19 are appropriate for all transfer
agents that process certificates, regardless of their size or volume.

2. Cancelled-in-Error Notations

We requested comments in the Proposing Release on whether we should
prohibit the use of "cancelled-in-error" notations,50 as some members of the securities industry
previously had suggested. PFPC Inc. commented that such notations should
be permitted provided they are used with a medallion signature
guarantee.51 PFPC Inc. observed that cancelled-in-error
notations can be useful when a certificate is mistakenly cancelled,
especially when quick processing is essential or where resubmission is
impossible because the endorsing party has died or is otherwise unable to
act. U.S. Bank, however, recommended that transfer agents be prohibited
from using cancelled-in-error stamps for registered certificates but be
permitted to use them for bearer certificates, especially bearer bonds
with coupons attached, because such certificates are not usually available
in transfer agents' inventories. Inasmuch as these comment letters have
specified uses for the practice that were not previously identified, the
Commission has decided not to adopt any rule amendments with respect to
prohibiting the use of "cancelled-in-error" notations until there is
further study of the matter.

3. Data Retention

CTA and PFPC Inc. commented that transfer agents should be given leeway
concerning the data that they choose to maintain for the purpose of
identifying securities certificates. CTA noted that instead of CUSIP
numbers some transfer agents may prefer to use, for example, issuer
identification numbers. We believe, however, that the use of CUSIP
numbers, which is currently the most widely-used securities issue
identification system, provides for uniformity and that it substantially
aids the Commission, LSSP, and law enforcement programs. We also note that
since 1979, Rule 17f-1(c)(6) has expressly required the inclusion of CUSIP
numbers for purposes of securities certificate identification when making
a report to LSSP.

4. Consideration of Additional Reporting Obligations

Raymond James & Associates recommended that Rule 17f-1 be amended
to include the additional reporting category of escheated securities (in
addition to lost, stolen, missing, and counterfeit securities). The
commenter also recommended that the reporting time frames under paragraph
(c) of Rule 17f-1 be shortened.

We note that Section 17(f)(1) expressly addresses only lost, stolen,
missing, and counterfeit securities. From time to time, we have received
recommendations to add to the reporting categories of Rule 17f-1,
including among others: securities certificates that have escheated, have
been called for redemption, are restricted, are the subject of litigation,
or whose issuers are in bankruptcy. The subject of adding reporting
categories to Rule 17f-1 has been studied periodically by securities
industry groups, but no clear consensus has developed concerning either
the scope of or the support for such a rule proposal. Therefore, at this
time we are not expanding the number of reporting categories. However,
there is nothing to prevent voluntary reporting of more categories if
individual reporting companies choose to do so.52 Regarding the recommendation to shorten the
reporting time frames in paragraph (c) of Rule 17f-1, the Commission
believes that this issue requires further study.

5. Perforations and the Word "Cancelled"

Regarding Rule 17Ad-19(b)(2), which requires that cancelled
certificates be marked "cancelled" by stamp or perforation, PFPC Inc.
recommended that the Commission specifically set forth the dimensions for
the word "cancelled" and where it should be placed on a certificate.
EquiServe questioned the Commission's criticism in the Proposing Release
of the use of pin-hole sized perforation markings, which were previously
used to indicate cancelled status, and asked "the what type of
perforation" would be deemed sufficient.53 At least for the present, we are leaving to
securities industry practices,54 rather than to Commission action, the details
of size of the word "cancelled" and how it should be marked on securities
certificates (e.g., by stamp or by perforation). For the present,
we believe it is sufficient to state that the term "cancelled" should be
"clear and conspicuous." But if it should appear at a later time that
further rulemaking or interpretations are necessary or appropriate to
clarify these matters, we will provide them.

6. Maintaining Certificates as Collectors' Items

The Proposing Release requested comments on whether the Commission
should mandate the destruction of cancelled certificates within thirty
days of their cancellation. Three commenters, a finance professor, a
non-public corporation, and the president of a securities certificate
collectors' organization,55 argued against destroying old securities
certificates because of their importance to financial history, their
aesthetic merits, and their value to collectors in a field known as
scripophily.

We are sensitive to these interests. We believe that the adoption of
sound recordkeeping, safeguarding, and destruction procedures will greatly
reduce the risk of improper use of cancelled certificates. Therefore, we
do not believe it is necessary at this time to mandate destruction.

In this regard, we note that cancelled securities certificates, after a
period in transfer agent storage, are generally destroyed by the transfer
agent or destroyed by some other party at the direction of the transfer
agent or the issuer. However, a small amount of cancelled securities
certificates find their way from transfer agents into collectors' markets.
Accordingly, to make the rule as complete as possible, we are modifying
proposed Rule 17Ad-19 to require that transfer agents maintain records not
only of the certificates that they or their agents destroy but also of
those certificates that they dispose of by any other means, such as by
sale to collectors or to dealers for collectors. For certificates disposed
of by such other means, transfer agents are required to maintain records
of how the certificates were disposed and to whom, with such party's name
and address, and the date of disposition.

7. Destruction of Certificates by Transfer Agents

One transfer agent, PFPC Inc., recommended that questions of
certificate retention or destruction be discretionary matters for
individual transfer agents, and that transfer agents be given the option
to destroy certificates within 72 hours of their cancellation, which it
said would reduce fraud and storage expenses. Another transfer agent,
Otter Tail, took a different position and said that the Commission should
mandate certificate destruction at the end of the required six-year
retention period. ICI and Mellon recommended that the Commission explore
new overall requirements for cancelled securities certificates including
(1) the use of electronic media and microfiche for recordkeeping purposes,
and (2) the destruction of cancelled certificates, perhaps after they are
scanned, imaged, and electronically stored.56 As noted above in footnote 6, the Commission
is proposing amendments to Exchange Act Rule 17Ad-7, 17 CFR 240.17Ad-7,
which if adopted would make clear that transfer agents could use certain
alternative means to store cancelled securities certificates provided that
the cancelled certificates first were electronically preserved in
conformity with the terms of that rule.

IV. Paperwork Reduction Act

Certain provisions of the proposed rule and proposed amendments contain
"collection of information" requirements within the meaning of the
Paperwork Reduction Act of 1995 ("PRA").57 The Commission published a notice soliciting
comments on the collection of information requirements in the proposing
release and submitted them to the Office of Management and Budget ("OMB")
for review in accordance with 44 USC 3507(d) and 5 CFR 1320.11. The title
for the collection of information is: "Record Retention Requirements for
Registered Transfer Agents." OMB approved the collection and assigned it
OMB Control No. 3235-0136. The collection requirements are necessary to
ensure the integrity of transfer agents' records and the safeguarding of
securities certificates.

Rule 17Ad-19 contains collection of information requirements that are
intended to ensure the integrity and completeness of transfer agents'
records regarding physical securities certificates, in particular,
cancelled securities certificates. Rule 17Ad-19 requires each registered
transfer agent to: (1) have a written statement setting forth its
procedures for the cancellation, storage, transportation, destruction, or
other disposition of securities certificates; (2) mark each cancelled
certificate with the word "cancelled" on the face of the certificate; (3)
supervise, witness and document the destruction of certificates; an (4)
keep an easily retrievable record of each cancelled, destroyed, or
otherwise disposed of certificate with identifying certificate data. The
amendments to Rules 17f-1 and 17Ad-12 involve no additional paperwork
requirements.

Rule 17Ad-19 incorporates the three-year record retention requirement
of Rule 17Ad-7(i), but the amendments to Rules 17f-1 and 17Ad-12 do not
add any retention periods for recordkeeping requirements. The maintenance
of written procedures by transfer agents under Rule 17Ad-19 would be
mandatory. The written procedures are confidential and will not be
available to the public, although they will be subject to examination by
the Commission or other appropriate regulatory agencies. We note that an
agency may not conduct or sponsor, and a person is not required to respond
to, a collection of information unless it displays a currently valid
control number.

When the Commission proposed the rule and rule amendment, approximately
1,100 transfer agents were registered with the Commission. The Commission
staff estimated that the average amount of time per transfer agent needed
to comply with the collection of information requirements of proposed Rule
17Ad-19 would be 40 hours per transfer agent for developing the written
procedures. The Commission staff further estimated that the average amount
of time per transfer agent per year to comply with the collection of
information associated with recording and tracking cancelled securities
certificates would be 50 hours per transfer agent per year, a figure that
would vary greatly depending on the size of an entity and the volume of
its business. Thus, assuming 1,100 registered transfer agents, it was
estimated that the start-up collection of information requirements would
require about 44,000 hours (40 - 1,100), and the annual collection of
information requirements would be about 55,000 hours (50 - 1,100). Thus,
in October of 2000, the Commission staff estimated that the combined total
during the first year would be about 99,000 hours.

At this time, in contrast with the 1,100 transfer agents at the
proposing stage, approximately 900 transfer agents are registered with the
Commission, of which about 800 are actively involved in transfer agent
activities.58 After further review and staff conversations
with representative transfer agents, as discussed below in Section V, the
Commission staff has lowered its estimate of the amount of time per
transfer agent needed to comply with the collection of information
requirements of Rule 17Ad-19. The lower staff estimates, as compared with
the higher estimates in the Proposing Release, result from (1) lower than
anticipated cost estimates in a survey of small transfer agents and (2)
reports from both small transfer agents and large transfer agents (the
latter group as represented by the Securities Transfer Association) that
most of the proposed rule changes have already been put into effect over
the past few years at most transfer agents. The Commission staff now
estimates the time needed will range from about two hours for the smallest
transfer agents to about 40 hours for the largest transfer agents. The
staff believes that the average time per transfer agent to develop written
procedures will be about 20 hours. The Commission staff further estimates
that the average amount of time per transfer agent per year to comply with
the collection of information associated with recording and tracking
cancelled securities certificates will be 20 hours per transfer agent per
year, a combined 40 hours for the first year, all of which are figures
that would vary greatly depending on the size of an entity and the volume
of its business. Thus, assuming 800 registered transfer agents actively
involved in transfer agent activities, the start-up collection of
information requirements will require about 16,000 hours (20 - 800), and
the annual collection of information requirements will be about 16,000
hours (20 - 800). Thus, the estimated combined total during the first year
will be about 32,000 hours.

Additionally, as discussed above in Sections III.A and III.D.7, the
Commission is modifying proposed Rule 17Ad-19 to include securities
certificates that are disposed of in some way other than by destruction
as, for example, by sale to collectors. The purpose of this modification
is to make the rule complete with respect to all dispositions of cancelled
securities certificates, but we believe that the number of certificates
disposed of by transfer agents by means other than by destruction will be
de minimis and will not affect the PRA numbers.

V. Costs and Benefits of Proposed Amendments

The Commission has considered the costs and benefits of Rule 17Ad-19
and the amendments to Rules 17f-1 and 17Ad-12. The Commission identified
certain costs and benefits relating to the proposals, which are discussed
below. We requested public comment in our Proposing Release. In
particular, we requested comment on the potential costs for any necessary
modifications to information gathering, management, and record-keeping
systems or procedures, as well as any potential benefits resulting from
the proposals for issuers, transfer agents, banks, brokers, regulators, or
others.

In general, the comment letters did not address costs or benefits in
financial terms, and none provided cost or benefit data. One transfer
agent, Otter Tail, commented that because of its small size it would be
burdensome to witness the destruction of its cancelled certificates and to
keep automated records of its cancelled certificates. This comment letter
was discussed above in Section III.D.2,59 where we stated that it would be imprudent to
exempt certain transfer agents from recordkeeping rules linked to
antifraud rules simply because their volume of business is small.
Additionally, Otter Tail has provided us with no financial or other
information to support its claim that the new requirements would be unduly
burdensome on itself or on other small transfer agents.

To supplement our information on small transfer agents for cost and
benefit purposes, Commission staff conducted a survey of six small
transfer agents. Staff provided them with a written summary of the rule
proposals and later contacted them by telephone to discuss in detail the
costs and benefits of the proposals. The small transfer agents reported
that, in general, they already were in compliance with the proposed rules.
That is, they generally were already marking retired securities
certificates with the word "cancelled;" they were already maintaining the
certificates in a secure environment; and they were destroying the
certificates on-premises and witnessing their destruction. All but one
transfer agent reported that they already had their data on certificate
cancellation and destruction available in electronically retrievable
format, and the one remaining transfer agent said it had plans to modify
its computer to provide such data. As discussed in the PRA analysis, the
one item in the rule proposal that would generally involve an added
expense is the requirement to draft "written procedures" for processing
cancelled securities. The transfer agents estimated that drafting written
procedures would involve a one-time outlay of between 15 minutes and four
hours, costs they variously estimated (based on the number of hours times
their relevant expenses per hour) at between $15 and $500. Two of the
small transfer agents suggested that it is the larger transfer agents that
would tend to have problems with these rules because the large transfer
agents are more apt to engage outside vendors for the transportation,
warehousing, and destruction of cancelled certificates whereas the small
transfer agents tend to perform these services within their own premises.
One small transfer agent questioned the need for certain of the
recordkeeping requirements, but another described the rule proposals as
"nice and clean, with no problems."

Commission staff also surveyed the Securities Transfer Association
("STA") as a proxy for large transfer agents. The STA, at the staff's
request, reviewed the rule proposals and later reported that its review
had revealed "no problems" with the proposals and that it would not be
submitting formal comments on the proposals. The STA advised that the
large transfer agents are already in compliance with the rule proposals
and that, in its opinion, the rule proposals in large part codify existing
STA rules. As discussed in the PRA analysis, the STA further reported that
the one new item in the rule proposals that would involve new costs is the
requirement to have "written procedures" for cancellation procedures,
which would take a large transfer agent about 40 work hours to draft the
procedures or about $3,000. The STA emphasized its view that most of the
proposed rule changes are already in effect at transfer agents.

A. Benefits

The new rule and rule amendments will provide specific benefits to U.S.
investors, issuers, transfer agents, and other financial intermediaries.
Some of these benefits are not readily quantifiable in terms of dollar
value. However, the proposals are designed to reduce the fraudulent use of
securities certificates, particularly cancelled certificates, by requiring
improved safeguarding and recordkeeping by transfer agents. In recent
years, the fraudulent resale and fraudulent collateralization of cancelled
certificates (certificates with no investment value) cost private
individuals and financial institutions many millions of dollars. We expect
the costs of the described forms of certificate fraud on public investors
and on market participants to be substantially reduced by the requirements
related to adequate safeguarding, recordkeeping, and destruction
procedures for these certificates by transfer agents.

B. Costs

The rule changes require transfer agents to have written procedures for
the cancellation, storage, transportation, destruction, or other
disposition of retired securities certificates; to mark cancelled
securities certificates as "cancelled;" to supervise, witness, and
document the destruction of certificates; and to keep an easily
retrievable record of each cancelled, destroyed, or otherwise disposed of
certificate. The preparation of these written procedures required by the
new rules will be a cost to transfer agents, and we have discussed the
paperwork costs above in Section IV, estimating the combined total
paperwork burden during the first year will be about 32,000 hours.

Regarding the required use of the word "cancelled" on cancelled
certificates, we reiterate that, with the encouragement of the STA's
published guidelines,60 most transfer agents already are marking
their cancelled certificates with the word "cancelled" to designate their
cancelled status.61 We believe the new requirement to use the
word "cancelled" to a large extent codifies existing business practices
with little additional cost to the industry.

As noted, the requirements to supervise, witness, and record the
destruction of certificates and to keep easily retrievable records of the
cancelled certificates will mean additional costs to some transfer agents.
However, the additional costs are justified. As the Commission discussed
above, its experience has been that securities certificates records that
are not easily retrievable are not appropriate for investor protection,
securities processing, or law enforcement purposes. In addition, the
existing rules of the Exchange Act have since 1983 required registered
transfer agents to maintain "appropriate certificate detail"62 for purposes of their master securityholder
files concerning "every security transferred, purchased, redeemed, or
issued,"63 which includes records of cancelled
certificates.64 These new requirements also will apply only
on a going forward basis, i.e., no transfer agent will have to
provide easily retrievable records for certificates cancelled prior to the
Rule's effective date. Moreover, the newly-adopted recordkeeping
requirements are consistent with good business practices, such as the STA
guidelines.

VI. Consideration of the Burden on Competition, and Promotion of
Efficiency, Competition, and Capital Formation

Section 3(f) of the Exchange Act requires the Commission, when engaged
in rulemaking and required to consider whether an action is necessary or
appropriate in the public interest, to consider whether the action would
promote efficiency, competition, and capital formation.65 In adopting rules under the Exchange Act,
Section 23(a)(2) requires the Commission to consider the impact any rule
would have on competition.66 Further, the law requires that the Commission
not adopt any rule that would impose a burden on competition not necessary
or appropriate in furtherance of the Exchange Act. We believe the new rule
and amendments should improve market efficiency by reducing a source of
fraud and its associated costs (i.e., the fraudulent introduction
of cancelled and worthless securities into the marketplace). In addition,
the new rule and amendments should have no material anticompetitive
effects because they would apply equally to all transfer agents and should
have no material effect on capital formation.

VII. Summary of Final Regulatory Flexibility Analysis

A Final Regulatory Flexibility Analysis ("FRFA") has been prepared in
accordance with the Regulatory Flexibility Act ("RFA").67 This analysis relates to a rule and two rule
amendments adopted under the Exchange Act that primarily address the
processing of cancelled securities certificates by transfer agents. New
Rule 17Ad-19 under the Exchange Act requires every transfer agent to
establish and implement written procedures for the cancellation, storage,
transportation, destruction, or other disposition of securities
certificates. The rule requires transfer agents to mark each cancelled
securities certificate with the word "cancelled;" maintain a secure
storage area for cancelled certificates; maintain an easily retrievable
database of all of its cancelled certificates, including cancelled,
destroyed, or otherwise disposed of certificates; and have specific
procedures for the destruction of cancelled certificates. Additionally,
the Commission has amended Rules 17f-1 (the lost and stolen securities
rule) and 17Ad-12 (the transfer agent safekeeping rule) to make it clear
that these rules apply to unissued and cancelled certificates.

A. Need for Rule and Rule Amendments

The rule and rule amendments address problems involving cancelled
securities certificates. In particular, they address the problem that,
until properly destroyed, or properly disposed of, cancelled securities
certificates can resurface in the marketplace where they can and have been
used to defraud public investors and financial institutions. The rule and
rule amendments provide better procedures for processing and destroying
cancelled certificates that will reduce this potential for harm.

The case history of fraud involving cancelled certificates includes
several major cases. In one case, approximately $111 billion of cancelled
bond certificates were stolen after being delivered from a transfer
agent's warehouse to a certificate destruction vendor. Many of these
stolen certificates resurfaced worldwide where they were reintroduced into
the marketplace or were used as loan collateral at financial institutions.
In many cases, even security professionals were misled because the
certificates appeared to be in pristine condition with little or no
evidence of having been cancelled. While a number of trade practices have
since been formulated by transfer agents to help address these problems,
Commission rulemaking will require universal compliance among all transfer
agents concerning the proper processing of cancelled certificates.

B. Significant Issues Raised by Public Comment

One commenter, CTA, a trade association, suggested that Rule 17Ad-19
should apply only to transfer agents that maintain securityholder records
and suggested an exemption from the rule for transfer agents that act only
for their own issuers (i.e., issuer-only transfer agents) and have
average monthly volumes of 100 transfer items or less. Another commenter,
Otter Tail Power Co., a transfer agent, noted that it processes less than
30 certificates per month and that maintaining retrievable records and
witnessing the destruction of certificates would be unduly expensive.

We note that Rule 17Ad-19 does, in fact, exempt certain registered
transfer agents (about 100 out of a total transfer agent population of
about 900) that do not maintain securityholder records. These are "named
transfer agents" that outsource their transfer agent functions to other
transfer agents known as "service company" transfer agents.68 But we do not believe that the requirements
of Rule 17Ad-19, which deal with recordkeeping and the cancellation,
storage, transportation, destruction, or other disposition of retired
certificates, are inappropriately burdensome simply because the number of
certificates that a transfer agent is processing or destroying is small.
Even a small transfer agent can designate a person to destroy certificates
under specific procedures. Moreover, we also believe that these limited
burdens are justified by the rule's value as an antifraud measure. We do
not believe it would be prudent, especially in an antifraud provision, to
establish different standards for transfer agents based on the number of
certificates they process or the number of transfers they make within a
given period, particularly when, as noted below in Section VII.C,
approximately one-half of the transfer agents may be viewed as small
entities. Considering that the underlying concern here is the protection
of public investors from certificate fraud, we believe that the
requirements of Rule 17Ad-19 are appropriate for all transfer agents that
are in the business of processing securities certificates.

C. Small Entities Subject to the Rule

A transfer agent is a small entity if it: (1) received less than 500
items for transfer and less than 500 items for processing during the
preceding six months (or in the time that it has been in business, if
shorter); (2) transferred items only of issuers that would be deemed
"small business" or "small organizations" as defined in Exchange Act Rule
0-10; (3) maintained master shareholder files that in the aggregate
contained less than 1,000 shareholder accounts or was the named transfer
agent for less than 1,000 shareholder accounts at all times during the
preceding fiscal year (or the time that it has been in business, if
shorter); and (4) is not affiliated with any person (other than a natural
person) that is not a small business or small organization under Exchange
Act Rule 0-10.69 We note that approximately 470 registered
transfer agents out of a population of about 900 apparently qualify as
"small entities" for purposes of the RFA and will be subject to the
requirements of Rule 17Ad-19.

In the Proposing Release, the Commission summarized, and requested
comment on, the Initial Regulatory Flexibility Analysis ("IRFA"). We did
not receive any comments specifically responding to the IRFA. However, we
did receive comments related to small business, which are summarized above
in Section VII.B.

D. Projected Reporting, Recordkeeping, and Other Compliance
Requirements

Rule 17Ad-19 requires all transfer agents to establish and implement
written procedures for the cancellation, storage, transportation,
destruction, or other disposition of securities certificates. Such written
procedures and their implementation are subject to examination by each
transfer agent's appropriate regulatory agency. Additionally, the
amendments to Rules 17f-1 and 17Ad-12 clarify that these two rules apply
broadly to securities certificates, including cancelled securities
certificates.

E. Agency Action to Minimize Effect on Small Entities

As required by Section 603 of the RFA, the Commission has considered
the following alternatives to minimize impact of the proposed rules and
rule amendments on small entities: (1) the establishment of differing
compliance or reporting requirements or timetables that take into account
the resources available to small entities; (2) the clarification,
consolidation, or simplification of compliance and reporting requirements
under the rules for small entities; (3) the use of performance rather than
design standards; and (4) an exemption from coverage of the rule, or any
part thereof, for small entities.70 As part of our consideration of the proposed
rules, the staff conducted a survey of a few small transfer agents. The
consensus among small transfer agents is that Rule 17Ad-19 will
essentially codify their existing practices (based to some extent on trade
association guidelines in effect since the mid-1990s) and will have
minimal effect on them as transfer agents. We also considered alternatives
that would exempt small transfer agents from some portions of the rule,
but given that the rule is designed in large measure to protect public
investors from certificate fraud, we do not believe a size exemption for
transfer agents would be appropriate.

The Commission has considered significant alternatives to the proposed
rules that would adequately address the problem posed by cancelled
securities certificates. The Commission believes that the establishment of
different requirements for small entities is neither necessary nor
practical because the proposal is designed to provide general standards
that will protect the public and members of the financial community from
certain types of securities fraud, and the proposal will include an
exemption procedure that will be available to small entities on a case by
case basis. Moreover, the FRFA concludes that the Commission believes that
the proposal, if adopted, will not adversely affect small entities.
Finally, the FRFA addresses each of the other requirements set forth under
5 USC 603. A copy of the FRFA may be obtained by contacting Jerry W.
Carpenter or Thomas C. Etter, Jr., at (202) 942-0178, Division of Market
Regulation, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-1001.

VIII. Statutory Basis and Text of Amendments
Statutory Basis

Pursuant to the Securities Exchange Act of 1934 and particularly
Sections 3(b), 17(a), 17(f)(1), 17A(d), and 23(a) thereof, 15 USC 78q-1(d)
and 78w(a), the Commission is adopting §240.17Ad-19 and amendments to
Rules 17f-1, 17Ad-7, and 17Ad-12 of Title 17 of the Code of Federal
Regulation in the manner set forth below.

List of Subjects in 17 CFR Part 240

Reporting and recordkeeping requirements; Securities.

Text of Rules

In accordance with the foregoing, the Commission is amending Part 240
of Chapter II of Title 17 of the Code of Federal Regulations 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, 77z-3, 77eee,
77ggg, 77nnn, 77sss, 77ttt, 78c, 78d, 78e, 78f, 78g, 78i, 78j, 78j-1, 78k,
78k-1, 78l, 78m, 78n, 78o, 78p, 78q, 78s, 78u-5, 78w, 78x,
78ll, 78mm, 79q, 79t, 80a-20, 80a-23, 80a-29, 80a-37, 80b-3, 80b-4,
80b-11, 7202, 7241, 7262, and 7263; and 18 U.S.C. 1350, unless otherwise
noted.

* * * * *

2. Section 240.17f-1 is amended by:

a. Adding paragraphs (a)(6), (a)(7) and (a)(8);

b. Revising the phrase "lost in transit" to read "lost, missing, or
stolen while in transit" in paragraph (c)(2)(i);

c. Redesignating paragraphs (c)(2)(ii) and (c)(2)(iii) as paragraphs
(c)(2)(iii) and (c)(2)(iv);

d. Adding new paragraph (c)(2)(ii); and

e. Adding paragraph (d)(3) to read as follows:

§ 240.17f-1 Requirements for reporting and inquiry with respect to
missing, lost, counterfeit or stolen securities.

(a) * * *

(6) The term securities certificate means any physical
instrument that represents or purports to represent ownership in a
security that was printed by or on behalf of the issuer thereof and shall
include any such instrument that is or was:

(i) Printed but not issued;

(ii) Issued and outstanding, including treasury securities;

(iii) Cancelled, which for this purpose means either or both of the
procedures set forth in § 240.17Ad-19(a)(1); or

(iv) Counterfeit or reasonably believed to be counterfeit.

(7) The term issuer shall include an issuer's:

(i) Transfer agent(s), paying agent(s), tender agent(s), and person(s)
providing similar services; and

(ii) Corporate predecessor(s) and successor(s).

(8) The term missing shall include any securities certificate
that:

(i) Cannot be located or accounted for, but is not believed to be lost
or stolen; or

(ii) A transfer agent claims or believes was destroyed in any manner
other than by the transfer agent's own certificate destruction procedures
as provided in § 240.17Ad-19.

* * * * *

(c) * * *

(2) * * *

(ii) Where a shipment of retired securities certificates is in transit
between any transfer agents, banks, brokers, dealers, or other reporting
institutions, with no affiliation existing between such entities, and the
delivering institution fails to receive notice of receipt or non-receipt
of the certificates, the delivering institution shall act to determine the
facts. In the event of non-delivery where the certificates are not
recovered by the delivering institution, the delivering institution shall
report the certificates as lost, stolen, or missing to the Commission or
its designee within a reasonable time under the circumstances but in any
event within twenty business days from the date of shipment.

* * * * *

(d) * * *

(3) A reporting institution shall make required inquiries by the end of
the fifth business day after a securities certificate comes into its
possession or keeping, provided that such inquiries shall be made before
the certificate is sold, used as collateral, or sent to another reporting
institution.

* * * * *

3. Section 240.17Ad-7, paragraph (i), is amended by revising the phrase
"§240.17Ad-17(c)" to read "§§240.17Ad-17(c) and 240.17Ad-19(c)".

4. Amend §240.17Ad-12, paragraph (a)(1), by revising the phrase "risk
of destruction, theft or other loss;" to read "risk of theft, loss or
destruction (other than by a transfer agent's certificate destruction
procedures pursuant to §240.17Ad-19);" and adding paragraph (b) to read as
follows:

§ 240.17Ad-12 Safeguarding of funds and securities.

* * * * *

(b) For purposes of this section, the term securities shall have the
same meaning as the term securities certificate as defined in §
240.17f-1(a)(6).

5. Section 240.17Ad-19 is added to read as follows:

§ 240.17Ad-19 Requirements for cancellation, processing, storage,
transportation, and destruction or other disposition of securities
certificates.

(a) Definitions. For purposes of this section:

(1) The terms cancelled or cancellation means the process
in which a securities certificate:

(i) Is physically marked to clearly indicate that it no longer
represents a claim against the issuer; and

(ii) Is voided on the records of the transfer agent.

(2) The term cancelled certificate facility means any location
where securities certificates are cancelled and thereafter processed,
stored, transported, destroyed or otherwise disposed of.

(3) The term certificate number means a unique identification or
serial number that is assigned and affixed by an issuer or transfer agent
to each securities certificate.

(4) The term controlled access means the practice of permitting
the entry of only authorized personnel to areas where securities
certificates are cancelled and thereafter processed, stored, transported,
destroyed or otherwise disposed of.

(5) The term CUSIP number means the unique identification number
that is assigned to each securities issue.

(6) The term destruction means the physical ruination of a
securities certificate by a transfer agent as part of the certificate
destruction procedures that make the reconstruction of the certificate
impossible.

(7) The term otherwise disposed of means any disposition other
than by destruction.

(8) The term securities certificate has the same meaning that it
has in § 240.17f-1(a)(6).

(b) Required procedures for the cancellation, storage,
transportation, destruction, or other disposition of securities
certificates. Every transfer agent involved in the handling,
processing, or storage of securities certificates shall establish and
implement written procedures for the cancellation, storage,
transportation, destruction, or other disposition of securities
certificates. This requirement applies to any agent that the transfer
agent uses to perform any of these activities.

(c) Written procedures. The written procedures required by
paragraph (b) of this section at a minimum shall provide that:

(1) There is controlled access to any cancelled certificate
facility;

(2) Each cancelled certificate be marked with the word "CANCELLED" by
stamp or perforation on the face of the certificate unless the transfer
agent has procedures adopted pursuant to this rule for the destruction of
cancelled certificates within three business days of their
cancellation;

(3) A record that is indexed and retrievable by CUSIP and certificate
number that contains the CUSIP number, certificate number with any prefix
or suffix, denomination, registration, issue date, and cancellation date
of each cancelled certificate;

(4) A record that is indexed and retrievable by CUSIP and certificate
number of each destroyed securities certificate or securities certificate
otherwise disposed of, the records must contain for each destroyed or
otherwise disposed of certificate the CUSIP number, certificate number
with any prefix or suffix, denomination, registration, issue date, and
cancellation date, and additionally for any certificate otherwise disposed
of a record of how it was disposed of, the name and address of the party
to whom it was disposed, and the date of disposition;

(5) The physical transportation of cancelled certificates be made in a
secure manner and that the transfer agent maintain separately a record of
the CUSIP number and certificate number of each certificate in
transit;

(6) Authorized personnel of the transfer agent or its designee
supervise and witness the intentional destruction of any cancelled
certificate and retain copies of all records relating to certificates
which were destroyed; and

(7) Reports to the Lost and Stolen Securities Program be effected in a
timely and complete manner, as provided in § 240.17f-1 of any cancelled
certificate that is lost, stolen, missing, or counterfeit.

(d) Recordkeeping. Every transfer agent subject to this section
shall maintain records that demonstrate compliance with the requirements
set forth in this section and that describe the transfer agent's
methodology for complying with this section for three years, the first
year in an easily accessible place.

(e) Exemptive authority. Upon written application or upon its
own motion, the Commission may grant an exemption from any of the
provisions of this section, either unconditionally or on specific terms
and conditions, to any transfer agent or any class of transfer agents and
to any securities certificate or any class of securities certificates.

By the Commission.

 

Margaret H. McFarlandDeputy Secretary

 

Dated: December 16, 2003

1
15 U.S.C. 78a et seq.2
17 CFR 240.17f-1 and 240.17Ad-12; Securities Exchange Act
Release No. 43401 (October 2, 2000), 65 FR 59766 (October 6,
2000).3
See, generally, Exchange Act Section 17A(a), 15
U.S.C. 78q-1(a); Section 17(f)(1), 15 U.S.C. 78q(f)(1);
Securities Act Amendments of 1975, Senate Comm. on Banking,
housing & Urban Affairs, S. Rep. 94 to accompany S.249, 58-59
(1975); Securities Industry Study, H.R. Report of the Subcom.
on Commerce & Finance, House Rep. No. 92-1519, pp. 68-70, 75-76
(1972).4
The Commission received comment letters from five transfer
agents, one broker-dealer, one bank, one business corporation, one
trade group representing transfer agents, one trade group
representing investment companies, the president of an organization
representing collectors of securities certificates, a finance
professor, and a group of business students at Florida State
University. Letters from James J. Angel, Ph.D., George Washington
University (October 19, 2000); Loren Hanson, Manager, Shareholder
Relations, Otter Tail Power Co. (October 24, 2000); Frank
Hammelbacher, Norrico, Inc. (October 30, 2000); John E. Nolan,
Senior Vice President, Raymond James & Associates, Inc.
(November 2, 2000); Charles V. Rossi, Division President, EquiServe
(December 4, 2000); Steven Turowski, Senior Regulatory Counsel, PFPC
Inc. (December 4, 2000); Kathleen C. Joaquin, Director, Transfer
Agency & International Operations, Investment Company Institute
("ICI")(December 5, 2000); Daniel M. Hill, Assistant Vice President,
U.S. Bank Trust National Association (December 6, 2000); John F.
Kuntz, Vice President and Assistant General Counsel, Chase-Mellon
Shareholder Services (December 14, 2000); Keith G. Berkheimer,
President, CTA (December 14, 2000); Robert A. Kerstein, President,
Scripophily.com (March 5, 2001); and Robert Serrano et al,
business students at Florida State University (dated November 29,
2000, received at the Commission February 19, 2002). These comment
letters are available for inspection and copying in the Commission's
Public Reference Room, 450 Fifth Street, NW, Washington, DC
20549.5
The term "registered" as used in 17 CFR 240.17Ad-6(c) with
reference to cancelled certificates means certificates registered in
the name of an owner, as distinct from bearer certificates that were
in wide circulation when this rule was promulgated in 1977.6
17 CFR 240.17Ad-6(c) and 240.17Ad-7(d). See also 17 CFR
240.17Ad-7(f). It has been suggested that transfer agents should
have the option to destroy cancelled certificates shortly after
cancellation. See comment letter from Steven Turowski, Chief
Regulatory Counsel, PFPC, Inc, (December 4, 2000). While current
practices are changing and some transfer agents may want to select
alternative means, such as electronic imaging, to satisfy the
recordkeeping requirements for cancelled certificates, many transfer
agents may prefer to satisfy these recordkeeping requirements by
maintaining the physical certificates themselves. Nevertheless, in
the Proposing Release, we invited commenters to address this issue,
and their comments are summarized below.We note that we have
also proposed amendments to Securities Exchange Act Rule 17Ad-7, 17
CFR240.17Ad-7, which if adopted would make clear that transfer
agents may use certain alternative means to store cancelled
securities certificates provided that the certificates are
electronically stored in conformity with the terms of Rule 17Ad-7.
Because these electronic records satisfy the recordkeeping
obligations, the paper certificates would not be required to be kept
by Rule 17Ad-7. Securities Exchange Act Release No. 48036 (June 16,
2003), 68 FR 36951.7
Among the reasons for these bond redemptions has been the
decline in long-term interest rates since the early 1980s.8
The Commission brought an action against this transfer agent for
its failure to report stolen certificates pursuant to Rule 17f-1, 17
CFR 240.17f-1, and for its failure to safeguard securities in its
possession pursuant to Rule 17Ad-12, 17 CFR 240.17Ad-12. The
transfer agent agreed to pay a civil penalty of $750,000 and to
cease and desist from future violations of Sections 17(f)(1) and 17A
of the Exchange Act and Rules 17f-1 and 17Ad-12 thereunder. SEC
v. Citibank, N.A., Civil Action No. 92-2833 (USDC, DC, 1992).
See also Securities Exchange Act Release No. 31612 (December
17, 1992).9
The Commission and the Comptroller of the Currency brought a
joint action against this transfer agent for its failure to report
as stolen the cancelled certificates pursuant to Rule 17f-1 and its
failure to safeguard securities in its possession pursuant to Rule
17Ad-12. The transfer agent agreed to pay a civil penalty of
$100,000 and to cease and desist from future violations of Sections
17(f)(1) and 17A of the Exchange Act and Rules 17f-1 and 17Ad-12
thereunder. As remedial measures, the transfer agent also agreed to
mark cancelled certificates with the word "cancelled" and to adopt
other safeguards. The Chase Manhattan Bank, Securities
Exchange Act Release No. 34784 (October 4, 1994)10
Seattle-First National Bank, Securities
Exchange Act Release No. 34293 (July 1, 1994).11
15 U.S.C. 78q(f) and 78q-1.12
Section 17(f)(1), 15 U.S.C. 78q(f)(1).

13
15 U.S.C. 78q(a)(3).14
15 U.S.C. 78q-1(a). See Securities Acts Amendments of
1975, Comm. on Banking, Housing and Urban Affairs, Sen. Rep. No. 75
to Accompany S.249, 56-58 (1975).15
"The Commission is empowered with broad rulemaking authority
over all aspects of a transfer agent's activities as a transfer
agent." Id. at 57.16
STA has over 400 members, the majority of whom are registered
transfer agents. For STA's website, see www.stai.org.17
Rules of the STA, Section 1.26 (Recommended Procedures for
Cancelled Securities).18
Required certificate detail is: CUSIP number, certificate number
including prefix or suffix, denomination, registration, issue date,
and cancellation date. See 17 CFR 240.17Ad-9(a) and
240.17f-1(c)(6). The term "certificate otherwise disposed of" is
intended to include the small minority of certificates that are not
destroyed by transfer agents or other agents and may, for example,
become the property of collectors or of dealers in
collectibles.19
17 CFR 240.17Ad-7(i).20
EquiServe, ICI, and PFPC, Inc. PFPC, Inc. is a member of the
PFPC Financial Services Group, Inc.21
This provision is intended to address shipments between
unaffiliated financial institutions. We believe that less risk of
this type of loss exists in intrafirm shipments where the same firm
controls both the sending and receiving offices. We note, however,
that a transfer agent's general obligation to safeguard funds and
securities applies to intrafirm shipments. See Exchange Act
Rule 17Ad-12, 15 CFR 240.17Ad-12.22
17 U.S.C. 78q(f)(1).23
See Lost and Stolen Securities Program, Hearings before
the Permanent Subcommittee on Investigations of the Senate Committee
on Government Operations, 93d Cong., 1st Sess. (1973), 2d Sess.
(1974). S.249, which became the Securities Acts Amendments of 1975,
was amended on the floor of the Senate to add legislation concerning
lost, stolen, missing, and counterfeit securities. 121 Cong. Rec.
6186 (April 17, 1975). See also Conference Report to
Accompany S.249, 94th Cong., 1st Sess. 103-104 (1975).24
The term "reporting institution" is defined in 17 CFR
240.17f-1(a)(1).25
CFR 240.17f-1(c) and (d).26
CFR 240.17f-1(d)(iv). The rule's inquiry requirement applies to
any securities certificate received as part of a transaction whose
aggregate value (face value in the case of debt or market value in
the case of stocks) exceeds $10,000. Required inquiries under
existing Rule 17f-1(d) would not be changed by the amendment.27
E.g., inquiries on securities certificates valued at less
than $10,000. 17 CFR 17f-1(e).28
Reporting instructions were comprised of 13,948 banks, 11,116
securities organizations, and 947 non-bank transfer agents.
"Securities organizations" are: (1) national securities exchanges,
(2) national securities exchange members, (3) national securities
exchange member firms, (4) registered securities associations, (5)
registered securities association members, (6) securities brokers,
(7) securities dealers, and (8) municipal securities dealers.29
Securities Information Center, "Annual Statistics for the Period
January 1, 2002, through December 31, 2002."30
For purposes of market value under the inquiry requirements of
Rule 17f-1(d), the cancelled certificates would be given the market
value of "live" securities of the same issue.31
17 CFR 240.17Ad-12(b) and 240.17Ad-19(a)(8).32
Pub.L. 97-248 (September 9, 1982), 26 U.S.C. 309 et seq.
While not prohibiting bearer securities, TEFRA imposes financial
disadvantages on both their issuers and their holders. See,
e.g., 26 U.S.C. 6049.33
While parallel terms (lost, stolen, and counterfeit) also are
not defined by the statute or the rule, we believe that their
meanings are clear from the context.34
On March 9, 1997, a major warehouse fire, believed to have been
caused by arson, apparently destroyed a large number of cancelled
securities certificates held in storage by a transfer agent.
See "A Burning Question: How Safe Are Your Records,"
Business Week, June 23, 1997, at page 130E4.35
Supra notes 8, 9 and 10.36
For example, one court has found that because "cancelled
securities" were not expressly included in Rule 17f-1, they were not
subject to the reporting requirements of that rule. A.G. Edwards
& Sons, Inc. v. Centocor, Inc., Civil Action No. 91-6133
(E.D. PA, 1992).37
In United States v. Jackson, 576 F.2d. 749, 757 (8th Cir.
1978), the court recognized that stolen blank stock certificates
have no intrinsic value as investments but that they have a
"thieves' market value" as demonstrated by an FBI undercover
operation, which was part of the case, where the certificates were
purchased at 40% of their apparent market value.38
See Section III.B.1 above for description of
inquiries.39
When enacting the underlying statute, Congress stated that the
Commission should carefully weigh the benefits of mandating
inquiries against the costs and effects on efficient business
practices. Conference Report on S.249, Securities Acts Amendments of
1975, 94th Cong., 1st Sess. 104 (1975). In 1976, the Commission
observed that the system for inquiries should avoid undue
disruptions to commercial transactions and chose not to set time
limits for inquiries. Securities Exchange Act Release No. 12030
(January 20, 1976), 41 FR 04834.40
In 1979, when the Commission asked for comments from the
industry, reporting institutions said they favored a policy of
leaving to their own business judgment the time frames for valuing
and inquiring of LSSP about securities that came into their
possession. The Commission accepted that position. See
"Inquiry Time Frames," Securities Exchange Act Release No. 15683
(March 29, 1979), 44 FR 20614.41
The Seventh Circuit Court of Appeals observed that the addition
of a precise time frame for making required inquiries would improve
the operation of the rule. First National Bank of Cicero v. Lewco
Securities Corp., 860 F.2d 1407, 1416, n.14 (7th Cir. 1988). The
court also said that whether an institution meets the test of "good
faith" required for bona fide purchaser status with respect to
securities certificates may depend on whether it has met the inquiry
requirements of Rule 17f-1. Id. at 1413-1415. See also
Yadley and Ilkson, "Bona Fide Purchasers of Lost and Stolen
Securities: Meeting the 'Good Faith' and 'Notice' Requirements," 5
George Mason U.L. Rev. 101, 127-133 (1982).42
The term "reporting institution" is defined in 17 CFR
240.17f-1(a)(1).43
The five commenters were: CTA, EquiServe, ICI, PFPC, Inc., and
U.S. Bank.44
We are using the term "retired certificate" in a slightly
broader sense that the term "cancelled certificate." A certificate
is "retired" at the time it is taken out of circulation, often by
transfer or redemption, regardless of whether it has yet been
cancelled.45
See Rule 17Ad-12, 17 CFR 240.17Ad-12.46
We have brought enforcement actions for violations of Rule
17Ad-12 that involved cancelled securities certificates. See,
e.g., SEC v. Citibank, N.A., supra at note 8.47
The only comment received concerning Rule 17Ad-12 concerned the
new definition of "securities certificate" of Rule 17f1-(a)(6),
which is being incorporated by reference into Rule 17Ad-12.
See Section III.B.2.a above.48
For the definitions of "named transfer agent" and "service
company" refer to 17 CFR 240.17Ad-9(j) and (k).49
The new language of "handling, processing, or storage of
securities certificates" more appropriately describes the procedure
in question than the previously proposed language of "keeping,
handling, and processing of securities certificates."50
This refers to an industry practice of using hand stamps that
state "cancelled in error" or similar language to avoid the time and
expense of replacing certificates that are marked "cancelled" by
mistake.51
The use of a medallion signature guarantee would mean that the
"cancelled-in-error" notation is guaranteed by a guarantor financial
institution under a signature guarantee program pursuant to Exchange
Act Rule 17Ad-15, 17 CFR 240.17Ad-15. Accordingly, the financial
risk of the cancelled-in-error procedure would not be imposed on the
transfer agent but on the guarantor or the surety for the
guarantor.52
See paragraph (e) of 17 CFR 240.17f-1, which
permits "permissive reports and inquiries."53
The cancellation pinholes, as used by some major transfer
agents, usually spelled out a certificate's cancellation date and
the transfer agent's initials in a small circle. Such markings were
intended to indicate that the certificates no longer had value as a
security while preserving the certificates' form as a record. Except
for the small circle of pin-holes, the certificates usually appeared
entirely presentable. The pinholes, however, often were not noticed
by subsequent recipients of the certificates and, if noticed, their
meaning was not necessarily clear.54
Some transfer agents have advised that they currently are
stamping or perforating certificates with an abbreviation of the
word "cancelled." This is because they use older equipment that
lacks the necessary space for nine letters. Typically, in these
cases, one or two apostrophes or similar characters are used in
place of up to four letters. To avoid the need for immediate
purchase of new equipment, the Commission will interpret the use of
such abbreviations as consistent with the requirement in Rule
17Ad-12(c) that written procedures shall "[r]equire that each
cancelled certificate be marked with the work `cancelled'...."
However, this interpretation shall apply only until a transfer agent
using such older equipment acquires new equipment by purchase or
other means that replaces the older equipment in question.
Thereafter, the transfer agent must use all nine letters of the word
"cancelled" in cancelling securities certificates.55
James J. Angel, Ph.D., Georgetown Univ.; Frank Hammelbacher,
Norrico Inc.; and Robert A. Kerstein, President, Scripology,
Inc.56
For a recent Commission rule that authorized the use of optical
storage, refer to 15 CFR 240.17Ad-7(f). See Securities
Exchange Act Release No. 44227 (April 27, 2001), 66 FR 21648 (May 1,
2001).57
44 U.S.C. 3501 et seq.58
The Commission notes that there is relative ease of entrance
into and exit out of the transfer agent business, and the numbers of
transfer agents at a given time are affected by the circumstances of
the securities industry and the general economy.59
See, supra, in text accompanying notes
48-50.60
Supra, note 17.61
We believe that most transfer agents are properly marking their
retired certificates with the word "cancelled," as STA has
recommended. However, because doing so is not a Commission
requirement, it currently is not a part of the Commission's
examination module for transfer agents. Thus, we have no systematic
data on the subject.62
17 CFR 240.17Ad-9(a). The existing requirements for "certificate
detail" include the certificate number, number of units, owner's
name and address, the issue date, the cancellation date, etc.63
17 CFR 240.17Ad-10(a).64
See 17 CFR 240.17Ad-6(c) and 240.17Ad-9(a).65
15 U.S.C. 78c(f).66
15 U.S.C. 78w.67
15 U.S.C. 601 et sec.68
17 CFR 240.17Ad-9 (j)-(k).69
17 CFR 240.0-10.70
5 U.S.C. 603(c).