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8000 - Miscellaneous Statutes and Regulations


§ 240.17Ad-12  Safeguarding of funds and securities.

(a)  Any registered transfer agent that has custody or possession of any funds or securities related to its transfer agent activities shall assure that: (1) All such securities are held in safekeeping and are handled, in light of all facts and circumstances, in a manner reasonably free from risk of theft, loss or destruction (other than by a transfer agent's certificate); and (2) all such funds are protected, in light of all facts and circumstances, against misuse. In evaluating which particular safeguards and procedures must be employed, the cost of the various safeguards and procedures as well as the nature and degree of potential financial exposure are two relevant factors.

(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).

[Codified to 17 C.F.R. § 240.17Ad-12]

[Section 240.17Ad-12 added at 48 Fed. Reg. 27248, June 21, 1983, effective July 25, 1983; amended at 68 Fed. Reg. 74401, December 23, 2003, effective January 22, 2004]

§ 240.17Ad-13  Annual study and evaluation of internal accounting control.

(a)  Accountant's Report.Every registered transfer agent, except as provided in paragraph (d) of this section, shall file annually with the Commission and the transfer agent's appropriate regulatory agency in accordance with § 240.17Ad-2(h), a report specified in paragraph (a)(1) of this section prepared by an independent accountant concerning the transfer agent's system of internal accounting control and related procedures for the transfer of record ownership and the safeguarding of related securities and funds. That report shall be filed within 90 calendar days of the date of the study and evaluation set forth in paragraph (a)(1).

(1)  The accountant's report shall:

(i)  State whether the study and evaluation was made in accordance with generally accepted auditing standards using the criteria set forth in paragraph (a)(3) of this section;

(ii)  Describe any material inadequacies found to exist as of the date of the study and evaluation and any corrective action taken, or if no material inadequacy existed, the report shall so state;

(iii)  Comment on the current status of any material inadequacy described in the immediately preceding report; and

(iv)  Indicate the date of the study and evaluation.

(2)  The study and evaluation of the transfer agent's system of internal accounting control for the transfer of record ownership and the safeguarding of related securities and funds shall cover the following:

(i)  Transferring securities related to changes of ownership (i.e., cancellation of certificates or other instruments evidencing prior ownership and issuance of certificates or instruments evidencing current ownership);

(ii)  Registering changes of ownership on the books and records of the issuer;

(iii)  Transferring record ownership as a result of corporate actions (e.g., issuance, retirement, redemption, liquidation, conversion, exchange, tender offer or other types of reorganization);

(iv)  Dividend disbursement or interest paying-agent activities;

(v)  Administering dividend reinvestment programs; and

(vi)  Distributing statements respecting initial offerings of securities.

(3)  For purposes of this report, the objectives of a transfer agent's system of internal accounting control for the transfer of record ownership and the safeguarding of related securities and funds should be to provide reasonable, but not absolute, assurance that securities and funds are safeguarded against loss from unauthorized use or disposition and that transfer agent activities are performed promptly and accurately. For purposes of this report, a material inadequacy is a condition for which the independent accountant believes that the prescribed procedures or the degree of compliance with them do not reduce to a relatively low level the risk that errors or irregularities, in amounts that would have a significant adverse effect on the transfer agent's ability promptly and accurately to transfer record ownership and safeguard related securities and funds, would occur or not be detected within a timely period by employees in the normal course of performing their assigned functions. Occurrence of errors or irregularities more frequently than in isolated instances may be evidence that the system has a material inadequacy. A significant adverse effect on a transfer agent's ability promptly and accurately to transfer record ownership and safeguard related securities and funds could result from any condition or conditions that individually, or taken as a whole, would reasonably be expected to:

(i)  Inhibit the transfer agent from promptly and accurately discharging its responsibilities under its contractual agreement with the issuer;

(ii)  Result in material financial loss to the transfer agent; or

(iii)  Result in a violation of § § 240.17Ad--2, 17Ad--10 or 17Ad--12(a).

(b)  Notice of Corrective Action.  If the accountant's report describes any material inadequacy, the transfer agent shall, within sixty calendar days after receipt of the report, notify the Commission and its appropriate regulatory agency in writing regarding the corrective action taken or proposed to be taken.

(c)  Record Retention.  The accountant's report and any documents required by paragraph (b) of this section shall be maintained by the transfer agent for at least three years, the first year in an easily accessible place.

(d)  Exemptions.  The requirements of § 240.17Ad--3 shall not apply to registered transfer agents that qualify for exemptions pursuant to this paragraph, 17Ad--3(d).

(1)  A registered transfer agent shall be exempt if it performs transfer agent functions solely for:

(i)  Its own securities;

(ii)  Securities issued by a subsidiary in which it owns 51% or more of the subsidiary's capital stock; and

(iii)  Securities issued by another corporation that owns 51% or more of the capital stock of the registered transfer agent.

(2)  A registered transfer agent shall be exempt if it:

(i)  Is an exempt transfer agent pursuant to § 240.17Ad--(b); and

(ii)  In the case of a transfer agent that performs transfer agent functions for redeemable securities issued by companies registered under section 8 of the Investment Company Act of 1940, maintains master securityholder files consisting of fewer than 1000 shareholder accounts, in the aggregate, for each of such issues for which it performs transfer agent functions.

(3)  A registered transfer agent shall be exempt if it is a bank or financial institution subject to regulation by the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency or the Federal Deposit Insurance Corporation, provided that it is not notified to the contrary by its appropriate regulatory agency and provided that a report similar in scope to the requirements of § 240.17Ad--13(a) is prepared for either the bank's board of directors or an audit committee of the board of directors.

[Codified to 17 C.F.R. § 240.17Ad--13]

[Section 240.17Ad--13 added at 48 Fed. Reg. 27248, June 21, 1983, effective September 30, 1983]

§ 240.17Ad--14  Tender agents.

(a)  Establishing book-entry depository accounts.  When securities of a subject company have been declared eligible by one or more qualified registered securities depositories for the services of those depositories at the time a tender or exchange offer is commenced, no registered transfer agent shall act on behalf of the bidder as a depositary, in the case of a tender offer, or an exchange agent, in the case of an exchange offer, in connection with a tender or exchange offer, unless that transfer agent has established, within two business days after commencement of the offer, specially designated accounts. These accounts shall be maintained throughout the duration of the offer, including protection periods, with all qualified registered securities depositories holding the subject company's securities, for purposes of receiving from depository participants securities being tendered to the bidder by book-entry delivery pursuant to transmittal letters and other documentation and for purposes of allowing tender agents to return to depository participants by book-entry movement securities withdrawn from the offer.

(b)  Exclusions.  The rule shall not apply to tender or exchange offers (1) that are made for a class of securities of a subject company that has fewer than (i) 500 security holders of record for that class, or (ii) 500,000 shares of that class outstanding; or (2) that are made exclusively to security holders of fewer than 100 shares of a class of securities.

(c)  Definitions.  For purposes of this rule, (1) the terms "subject company," "business day," "security holders," and "transmittal letter" shall be given the meanings provided in § 240.14d--1(b); (2) unless the context otherwise requires, a tender or exchange offer shall be deemed to have commenced as specified in § 240.14d--2; (3) the term "bidder" shall mean any person who makes a tender or exchange offer or on whose behalf a tender or exchange offer is made; (4) a "qualified registered securities depository" shall mean a registered clearing agency having rules and procedures approved by the Commission pursuant to section 19 of the Securities Exchange Act of 1934 to enable book-entry delivery of the securities of the subject company to, and return of those securities from, the transfer agent through the facilities of that securities depository; and (5) the term "depositary" refers to that agent of the bidder receiving securities from tendering depository participants and paying those participants for shares tendered. The term "exchange agent" refers to the agent performing like functions in connection with an exchange offer.

(d)  Exemptions.  The Commission may exempt from the provisions of this rule, either unconditionally or on specified terms and conditions, any registered transfer agent, tender or exchange offer, or class of tender or exchange offers, if the Commission determines that an exemption is consistent with the public interest, the protection of investors, the prompt and accurate clearance and settlement of securities transactions, the maintenance of fair and orderly markets, or the removal of impediments to a national clearance and settlement system.

[Section 240.17Ad--14 added at 48 Fed. Reg. 3071, January 25, 1984, effective March 1, 1984]

§ 240.17Ad--15 Signature guarantees.

(a)  Definitions. For purposes of this section, the following terms shall mean:

(1)  Act means the Securities Exchange Act of 1934;

(2)  Eligible Guarantor Institution means:

(i)  Banks (as that term is defined in section 3(a) of the Federal Deposit Insurance Act [12 U.S.C. 1813(a)]);

(ii)  Brokers, dealers, municipal securities dealers, municipal securities brokers, government securities dealers, and government securities brokers, as those terms are defined under the Act;

(iii)  Credit unions (as that term is defined in Section 19 (b)(1)(A) of the Federal Reserve Act [12 U.S.C. 461(b)]);

(iv)  National securities exchanges, registered securities associations, clearing agencies, as those terms are used under the Act; and

(v)  Savings associations (as that term is defined in section 3(b) of the Federal Deposit Insurance Act [12 U.S.C. 1813(b)]).

(3)  Guarantee means a guarantee of the signature of the person endorsing a certificated security, or originating an instruction to transfer ownership of a security or instructions concerning transfer of securities.

(b)  Acceptance of Signature Guarantees. A registered transfer agent shall not, directly or indirectly, engage in any activity in connection with a guarantee, including the acceptance or rejection of such guarantee, that results in the inequitable treatment of any eligible guarantor institution or a class of institutions.

(c)  Transfer agent's standards and procedures. Every registered transfer agent shall establish:

(1)  Written standards for the acceptance of guarantees of securities transfers from eligible guarantor institutions; and

(2)  Procedures, including written guidelines where appropriate, to ensure that those standards are used in determining whether to accept or reject guarantees from eligible guarantor institutions. Such standards and procedures shall not establish terms and conditions (including those pertaining to financial condition) that, as written or applied, treat different classes of eligible guarantor institutions inequitably, or result in the rejection of a guarantee from an eligible guarantor institution solely because the guarantor institution is of a particular type specified in paragraphs (a)(2)(i)--(a)(2)(v) of this section.

(d)  Rejection of items presented for transfer. (1)  No registered transfer agent shall reject a request for transfer of a certificated or uncertificated security because the certificate, instruction, or documents accompanying the certificate or instruction includes an unacceptable guarantee, unless the transfer agent determines that the guarantor, if it is an eligible guarantor institution, does not satisfy the transfer agent's written standards or procedures.

(2)  A registered transfer agent shall notify the guarantor and the presentor of the rejection and the reasons for the rejection within two business days after rejecting a transfer request because of a determination that the guarantor does not satisfy the transfer agent's written standards or procedures. Notification to the presentor may be accomplished by making the rejected item available to the presentor. Notification to the guarantor may be accomplished by telephone, facsimile, or ordinary mail.

(e)  Record retention. (1)  Every registered transfer agent shall maintain a copy of the standards and procedures specified in paragraph (c) of this section in an easily accessible place.

(2)  Every registered transfer agent shall make available a copy of the standards and procedures specified in paragraph (c) of this section to any person requesting a copy of such standards and procedures. The registered transfer agent shall respond within three days of a request for such standards and procedures by sending the requesting party a copy of the requested transfer agent's standards and procedures.

(3)  Every registered transfer agent shall maintain, for a period of three years following the date of the rejection, a record of transfers rejected, including the reason for the rejection, who the guarantor was and whether the guarantor failed to meet the transfer agent's guarantee standards.

(f)  Exclusions. Nothing in this section shall prohibit a transfer agent from rejecting a request for transfer of a certificated or uncertificated security:

(1)  For reasons unrelated to acceptance of the guarantor institution;

(2)  Because the person acting on behalf of the guarantor institution is not authorized by that institution to act on its behalf, provided that the transfer agent maintains a list of people authorized to act on behalf of that guarantor institution; or

(3)  Because the eligible guarantor institution of a type specified in paragraph (a)(2)(ii) of this section is neither a member of a clearing corporation nor maintains net capital of at least $100,000.

(g)  Signature guarantee program. (1)  A registered transfer agent shall be deemed to comply with paragraph (c) of this section if its standards and procedures include:

(i)  Rejecting a request for transfer because the guarantor is neither a member of nor a participant in a signature guarantee program; or

(ii)  Accepting a guarantee from an eligible guarantor institution who, at the time of issuing the guarantee, is a member of or participant in a signature guarantee program.

(2)  Within the first six months after revising its standards and procedures to include a signature guarantee program, the transfer agent shall not reject a request for transfer because the guarantor is neither a member of nor participant in a signature guarantee program, unless the transfer agent has given that guarantor ninety days written notice of the transfer agent's intent to reject transfers with guarantees from non-participating or non-member guarantors.

(3)  For purposes of paragraph (g) of this section, the term "signature guarantee program," means a program, the terms and conditions of which the transfer agent reasonably determines:

(i)  To facilitate the equitable treatment of eligible guarantor institutions; and

(ii)  To promote the prompt, accurate and safe transfer of securities by providing:

(A)  Adequate protection to the transfer agent against risk of financial loss in the event persons have no recourse against the eligible guarantor institution; and

(B)  Adequate protection to the transfer agent against the issuance of unauthorized guarantees.

[Codified to 17 C.F.R. § 240.17Ad--15]

[Section 240.17Ad--15 added at 57 Fed. Reg. 1095, January 10, 1992, effective February 24, 1992]

§ 240.17Ad--16 Notice of Assumption or Termination of Transfer Agent Services.

(a)  A registered transfer agent that ceases to perform transfer agent services on behalf of an issuer of securities, including a registered transfer agent that ceases to perform transfer agent services on behalf of an issuer of securities because of a merger or acquisition by another transfer agent, shall send written notice of such termination to the appropriate qualified registered securities depository on or before the later of ten calendar days prior to the effective date of such termination or the day the transfer agent is notified of the effective date of such termination. Such notice shall include the full name, address, telephone number, and Financial Industry Number Standard ("FINS") number of the transfer agent ceasing to perform the transfer agent services for the issuer; the issuer's name; the issue or issues handled and their CUSIP number(s); and if known, the name, address, and telephone number of the transfer agent that thereafter will provide transfer services for the issuer. If no successor transfer agent is known, the notice shall include the name and address of a contact person at the issuer.

(b)  A registered transfer agent that changes its name or address or that assumes transfer agent services on behalf of an issuer of securities, including a transfer agent that assumes transfer agent services on behalf of an issuer of securities because of a merger or acquisition of another transfer agent, shall send written notice of such to the appropriate qualified registered securities depository on or before the later of ten calendar days prior to the effective date of such change in status or the day the transfer agent is notified of the effective date of such change in status. A notice regarding a change of name or address shall include the full name, address, telephone number, and FINS number of the transfer agent and the location where certificates are received for transfer. A notice regarding the assumption of transfer agent services on behalf of an issuer of securities, including assumption of transfer agent services resulting from the merger or acquisition of another transfer agent, shall include the full name, address, telephone number, and FINS number of the transfer agent assuming the transfer agent services for the issuer; the issuer's name; and the issue or issues handled and their CUSIP number(s).

(c)  The notice described in paragraphs (a) and (b) of this section shall be delivered by means of secure communication. For purposes of this section, secure communication shall include telegraph, overnight mail, facsimile, or any other form of secure communication.

(d)(1)  The appropriate qualified registered securities depository that receives notices pursuant to paragraphs (a) and (b) of this section shall deliver within 24 hours a copy of such notices to each qualified registered securities depository. A qualified registered securities depository that receives notice pursuant to this section shall deliver a copy of such notices to its own participants within 24 hours.

(2)  A qualified registered securities depository may comply with its notice requirements under paragraph (d)(1) of this section by making available the notice of all material information from the notice within 24 hours in a manner set forth in the rules of the qualified registered securities depository.

(3)  A qualified registered securities depository shall maintain such notices for a period of not less than two years, the first six months in an easily accessible place. Such notice shall be made available to the Commission or other persons as the Commission may designate by order.

(4)  A registered transfer agent that provides notice pursuant to paragraphs (a) and (b) of this section shall maintain such notice for a period of not less than two years, the first six months in an easily accessible place.

(e)  For purposes of this section, a qualified registered securities depository shall mean a clearing agency registered under section 17A of the Act (15 U.S.C. 78q--1) that performs clearing agency functions as described in Section 3(a)(23)(A)(i) of the Act (15 U.S.C. 78c(a)(23)(A)(i)) and that has rules and procedures concerning its responsibility for maintaining, updating, and providing appropriate access to the information it receives pursuant to this section.

(f)  For purposes of this section, an appropriate qualified registered securities depository shall mean the qualified registered securities depository that the Commission so designates by order or, in the absence of such designation, the qualified registered securities depository that is the largest holder of record of all qualified registered securities depositories as of the most recent record date.

[Codified to 17 C.F.R. § 240.17Ad--16]

[Section 240.17Ad--16 added at 59 Fed. Reg. 63661, December 8, 1994, effective February 6, 1995]

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

(a)(1)  Every recordkeeping transfer agent whose master securityholder file includes accounts of lost securityholders shall exercise reasonable care to ascertain the correct addresses of such securityholders. In exercising reasonable care to ascertain for its master securityholder file such lost securityholders' current addresses, each recordkeeping transfer agent shall conduct two data base searches using at least one information data base service. The transfer agent shall search by taxpayer identification number or by name if a search based on taxpayer identification number is not reasonably likely to locate the securityholder. Such data base searches must be conducted without charge to a lost securityholder and with the following frequency:

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

(ii)  Between six and twelve months after the transfer agent's first search for such lost securityholder.

(2)  A transfer agent may not use a search method or service to establish contact with lost securityholders that results in a charge to a lost securityholder prior to completing the searches set forth in paragraph (a)(1) of this section.

(3)  A transfer agent need not conduct the searches set forth in paragraph (a)(1) of this section for a lost securityholder if:

(i)  It has received documentation that such securityholder is decreased or

(ii)  The aggregate value of assets listed in the lost securityholder and all securities owned by the lost securityholder as recorded in the transfer agent's master securityholder files, is less than $25; or

(iii)  The securityholder is not a natural person.

(b)  For purposes of this section:

(1)  Information data base service means either:

(i)  Any automated data base service that contains addresses from the entire United States geographic area, contains the names of at least 50% of the United States adult population, is indexed by taxpayer identification number or name, and is updated at least four times a year; or

(ii)  Any service or combination of services which produces results comparable to those of the service described in paragraph (b)(1)(i) of this section in locating lost securityholders.

(2)  Lost securityholder means a securityholder:

(i)  To whom an item of correspondence that was sent to the securityholder at the address contained in the transfer agent's master securityholder file has been returned as undeliverable; provided, however, that if such item is re-sent within one month to the lost securityholder, the transfer agent may deem the securityholder to be a lost securityholder as of the day the resent item is returned as undeliverable; and

(ii)  For whom the transfer agent has not received information regarding the securityholder's new address.

(c)  Every recordkeeping transfer agent shall maintain records to demonstrate compliance with the requirements set forth in this section which shall include written procedures which describe the transfer agent's methodology for complying with this section.

[Codified to 17 C.F.R. § 240.17Ad--17]

[Section 240.17Ad--17 added at 62 Fed. Reg. 52237, October 7, 1997, effective December 8, 1997; amended at 68 Fed. Reg. 14316, March 25, 2003, effective March 31, 2003]

§ 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.

[Section 240.17Ad-19 added at 68 Fed. Reg. 74401, December 23, 2003, effective January 22, 2004]

§ 240.17Ad--20  Issuer restrictions or prohibitions on ownership by securities intermediaries.

(a)  Except as provided in paragraph (c) of this section, no registered transfer agent shall transfer any equity security registered pursuant to section 12 or any equity security that subjects an issuer to reporting under section 15(d) of the Act (15 U.S.C. 78l or 15 U.S.C. 78o(d)) if such security is subject to any restriction or prohibition on transfer to or from a securities intermediary in its capacity as such.

(b)  The term securities intermediary means a clearing agency registered under section 17A of the Act (15 U.S.C. 78q--1) or a person, including a bank, broker, or dealer, that in the ordinary course of its business maintains securities accounts for others in its capacity as such.

(c)  The provisions of this section shall not apply to any equity security issued by a partnership as defined in rule 901(b) of Regulation S--K (§ 229.901(b) of this chapter).

[Section 240.17Ad--20 added at 69 Fed. Reg. 70862, December 7, 2004, effective March 7, 2005]

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

(a)  Definitions.  For purposes of this section:

(1)  The term "reporting institution" shall include every national securities exchange, member thereof, registered securities association, broker, dealer, municipal securities dealer, government securities broker, government securities dealer, registered transfer agent, registered clearing agency, participant therein, member of the Federal Reserve System and bank whose deposits are insured by the Federal Deposit Insurance Corporation;

(2)  The term "uncertificated security" shall mean a security not represented by an instrument and the transfer of which is registered upon books maintained for that purpose by or on behalf of the issuer;

(3)  The term "global certificate securities issue" shall mean a securities issue for which a single master certificate representing the entire issue is registered in the nominee name of a registered clearing agency and for which beneficial owners cannot receive negotiable securities certificates;

(4)  The term "customer" shall mean any person with whom the reporting institution has entered into at least one prior securities-related transaction; and

(5)  The term "securities-related transaction" shall mean a purpose, sale or pledge of investment securities, or a custodial arrangement for investment securities.

(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.

(b)  Every reporting institution shall register with the Commission or its designee in accordance with instructions issued by the Commission except:

(1)  A member of a national securities exchange who effects securities transactions through the trading facilities of the exchange and has not received or held customer securities within the last six months;

(2)  A reporting institution that, within the last six months, limited its securities activities exclusively to uncertificated securities, global securities issues or any securities issue for which neither record nor beneficial owners can obtain a negotiable securities certificate; or

(3)  A reporting institution whose business activities, within the last six months, did not involve the handling of securities certificates.

(c)  Reporting requirements--(1)  Stolen securities.

(i)  Every reporting institution shall report to the Commission or its designee, and to a registered transfer agent for the issue, the discovery of the theft or loss of any securities certificates where there is substantial basis for believing that criminal activity was involved. Such report shall be made within one business day of the discovery and, if the certificate numbers of the securities cannot be ascertained at that time, they shall be reported as soon thereafter as possible.

(ii)  Every reporting institution shall promptly report to the Federal Bureau of Investigation upon the discovery of the theft or loss of any securities certificate where there is substantial basis for believing that criminal activity was involved.

(2)  Missing or lost securities.  Every reporting institution shall report to the Commission or its designee, and to a registered transfer agent for the issue, the discovery of the loss of any securities certificate where criminal actions are not suspected when the securities certificate has been missing or lost for a period of two business days. Such report shall be made within one business day of the end of such period except that:

(i)  Securities certificates lost, missing, or stolen while in transit to customers, transfer agents, banks, brokers or dealers shall be reported by the delivering institution by the later of two business days after notice of nonreceipt or as soon after such notice as the certificate numbers of the securities can be ascertained.

(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.

(iii)  Securities certificates considered lost or missing as a result of securities counts or verifications required by rule, regulation or otherwise (e.g., dividend record date verification made as a result of firm policy or internal audit function report) shall be reported by the later of ten business days after completion of such securities count or verification or as soon after such count or verification as the certificate numbers of the securities can be ascertained.

(iv)  Securities certificates not received during the completion of delivery, deposit or withdrawal shall be reported in the following manner:

(A)  Where delivery of the securities certificates is through a clearing agency, the delivering institution shall supply to the receiving institution the certificate number of the security within two business days from the date of request from the receiving institution. The receiving institution shall report within one business day of notification of the certificate number;

(B)  Where the delivery of securities certificates is in person and where the delivering institution has a receipt, the delivering institution shall supply the receiving institution the certificate numbers of the securities within two business days from the date of request from the receiving institution. The receiving institution shall report within one business day of notification of the certificate number;

(C)  Where the delivery of securities certificates is in person and where the delivering institution has no receipt, the delivering institution shall report within two business days of notification of nonreceipt by the receiving institution; or

(D)  Where delivery of securities certificates is made by mail or via draft, if payment is not received within ten business days, the delivering institution shall confirm with the receiving institution the failure to receive such delivery; if confirmation shows nonreceipt, the delivering institution shall report within two business days of such confirmation.

(3)  Counterfeit securities.  Every reporting institution shall report the discovery of any counterfeit securities certificate to the Commission or its designee, to a registered transfer agent for the issue, and to the Federal Bureau of Investigation within one business day of such discovery.

(4)  Transfer agent reporting obligations.  Every transfer agent shall make the reports required above only if it receives notification of the loss, theft or counterfeiting from a non-reporting institution or if it receives notification other than on a Form X--17F--1A or if the certificate was in its possession at the time of the loss.

(5)  Recovery.  Every reporting institution that originally reported a lost, missing or stolen securities certificate pursuant to this Section shall report recovery of that securities certificate to the Commission or its designee and to a registered transfer agent for the issue within one business day of such recovery or finding. Every reporting institution that originally made a report in which criminality was indicated also shall notify the Federal Bureau of Investigation that the securities certificate has been recovered.

(6)  Information to be reported.  All reports made pursuant to this Section shall include, if applicable or available, the following information with respect to each securities certificate:

(i)  Issuer;

(ii)  Type of security and series;

(iii)  Date of issue;

(iv)  Maturity date;

(v)  Denomination;

(vi)  Interest rate;

(vii)  Certificate number, including alphabetical prefix or suffix;

(viii)  Name in which registered;

(ix)  Distinguishing characteristics, if counterfeit;

(x)  Date of discovery of loss or recovery;

(xi)  CUSIP number;

(xii)  Financial Industry Numbering System ("FINS") Number; and

(xiii)  Type of loss.

(7)  Forms.  Reporting institutions shall make all reports to the Commission or its designee and to a registered transfer agent for the issue pursuant to this section on Form X--17F--1A. Reporting institutions shall make reports to the Federal Bureau of Investigation pursuant to this Section on Form X--17F--1A, unless the reporting institution is a member of the Federal Reserve System or a bank whose deposits are insured by the Federal Deposit Insurance Corporation, in which case reports may be made on the form required by the institution's appropriate regulatory agency for reports to the Federal Bureau of Investigation.

(d)  Required inquiries.  (1) Every reporting institution (except a reporting institution that, acting in its capacity as transfer agent, paying agent, exchange agent or tender agent for an equity issue, or registrar for a bond or other debt issue, compares all transactions against a shareholder or bondholder list and a current list of stop transfers) shall inquire of the Commission or its designee with respect to every securities certificate which comes into its possession or keeping, whether by pledge, transfer or otherwise, to ascertain whether such securities certificate has been reported as missing, lost, counterfeit or stolen, unless:

(i)  The securities certificate is received directly from the issuer or issuing agent at issuance;

(ii)  The securities certificate is received from another reporting institution or from a Federal Reserve Bank or Branch;

(iii)  The securities certificate is received from a customer of the reporting institution; and

(A)  is registered in the name of such customer or its nominee; or

(B)  was previously sold to such customer, as verified by the internal records of the reporting institution;

(iv)  The securities certificate is received as part of a transaction which has an aggregate face value of $10,000 or less in the case of bonds, or market value of $10,000 or less in the case of stocks; or

(v)  The securities certificate is received directly from a drop which is affiliated with a reporting institution for the purposes of receiving or delivering certificates on behalf of the reporting institution.

(2)  Form of inquiry.  Inquiries shall be made in such manner as prescribed by the Commission or its designee.

(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.

(e)  Permissive reports and inquiries.  Every reporting institution may report to or inquire of the Commission or its designee with respect to any securities certificate not otherwise required by this section to be the subject of a report or inquiry. The Commission on written request or upon its own motion may permit reports to and inquiries of the system by any other person or entity upon such terms and conditions as it deems appropriate and necessary in the public interest and for the protection of investors.

(f)  Exemptions.  The following types of securities are not subject to paragraphs (c) and (d) of this section:

(1)  Security issues not assigned CUSIP numbers;

(2)  Bond coupons;

(3)  Uncertificated securities;

(4)  Global securities issues; and

(5)  Any securities issue for which neither record nor beneficial owners can obtain a negotiable securities certificates.

(g)   Recordkeeping.   Every reporting institution shall maintain and preserve in an easily accessible place for three years copies of all Forms X-17F-1A filed pursuant to this section, all agreements between reporting institutions regarding registration or other aspects of this section, and all confirmations or other information received from the Commission or its designee as a result of inquiry.

[Codified to 17 C.F.R. § 240.17f-1]

[Section 240.17f-1 added at 42 Fed. Reg. 41025, August 12, 1977, effective October 3, 1977; amended at 44 Fed. Reg. 31503, May 31, 1979, effective July 1, 1979; 45 Fed. Reg. 14022, March 4, 1980, effective February 27, 1980; 53 Fed. Reg. 37289, September 26, 1988, effective December 27, 1988; 53 Fed. Reg. 40721, October 18, 1988; 68 Fed. Reg. 74400, December 23, 2003, effective January 22, 2004]

§ 240.17f-2  Fingerprinting of securities industry personnel.

(a)  Exemptions for the fingerprinting requirement. Except as otherwise provided in paragraph (a)(1) or (a)(2) of this section, every member of a national securities exchange, broker, dealer, registered transfer agent and registered clearing agency shall require that each of its partners, directors, officers and employees be fingerprinted and shall submit, or cause to be submitted, the fingerprints of such persons to the Attorney General of the United States or its designee for identification and appropriate processing.

(1)  Permissive exemptions. Every member of a national securities exchange, broker, dealer, registered transfer agent and registered clearing agency may claim one or more of the exemptions in paragraph (a)(1)(i), (ii) (iii) or (iv) of this section; Provided, That all the requirements of paragraph (e) of this section are also satisfied.

(i)  Member of a national securities exchange, broker, dealer or registered clearing agency. Every person who is a partner, director, officer or employee of a member of a national securities exchange, broker, dealer, or registered clearing agency shall be exempt if that person:

(A)  Is not engaged in the sale of securities;

(B)  Does not regularly have access to the keeping, handling or processing of (1) securities, (2) monies, or (3) the original books and records relating to the securities or the monies; and

(C)  Does not have direct supervisory responsibility over persons engaged in the activities referred to in paragraphs (a)(1)(i)(A) and (B) of this section.

(ii)  Registered Transfer Agents. Every person who is a partner, director, officer or employee of a registered transfer agent shall be exempt if that person:

(A)  Is not engaged in transfer agent functions (as defined in section 3(a)(25) of the Securities Exchange Act of 1934) or activities incidental thereto; or

(B)  Meets the conditions in paragraphs (a)(1)(i)(B) and (C) of this section.

(iii)  Registered broker-dealers engaged in sales of certain securities. Every partner, director, officer and employee of a registered broker or dealer who satisfies paragraph (a)(1)(i)(B) of this section shall be exempt if that broker or dealer:

(A)  Is engaged exclusively in the sale of shares of registered open-end management investment companies, variable contracts, or interests in limited partnerships, unit investment trusts or real estate investment trusts; Provided, That those securities ordinarily are not evidenced by certificates;

(B)  Is current in its continuing obligation under §§ 240.15b1-1 and 15b3-1(b) to update item 10 of Form BD to disclose the existence of any statutory disqualification set forth in sections 3(a)(39), 15(b)(4) and 15(b)(6) of the Securities Exchange Act of 1934;

(C)  Has insurance or bonding indemnifying it for losses to customers caused by the fraudulent or criminal acts of any of its partners, directors, officers or employees for whom an exemption is being claimed under paragraph (a)(1)(iii) of this section; and

(D)  Is subject to the jurisdiction of a state insurance department with respect to its sale of variable contracts.

(iv)  Illegible fingerprint cards. Every person who is a partner, director, officer or employee shall be exempt if that member of a national securities exchange, broker, dealer, registered transfer agent or registered clearing agency, on at least three occasions:

(A)  Attempts in good faith to obtain from such person a complete set of fingerprints acceptable to the Attorney General or its designee for identification and appropriate processing by requiring that person to be fingerprinted, by having that person's fingerprints rolled by a person competent to do so and by submitting the fingerprint cards for that person to the Attorney General of the United States or its designee in accordance with proper procedures;

(B)  Has that person's fingerprint cards returned to it by the Attorney General of the United States or its designee without that person's fingerprints having been identified because the fingerprints were illegible; and

(C)  Retains the returned fingerprint cards and any other required records in accordance with paragraph (d) of this section and §§ 240.17a-3(a)(13), 17a-4(e)(2) and 17Ad-7(e)(1) under the Securities Exchange Act of 1934.

(2)  Other exemptions by application to the Commission. The Commission, upon specified terms, conditions and periods, may grant exemptions to any class of partners, directors, officers or employees of any member of a national securities exchange, broker, dealer, registered transfer agent or registered clearing agency, if the Commission finds that such action is not inconsistent with the public interest or the protection of investors.

(b)  Fingerprinting pursuant to other law. Every member of a national securities exchange, broker, dealer, registered transfer agent and registered clearing agency may satisfy the fingerprinting requirement of section 17(f)(2) of the Securities Exchange Act of 1934 as to any partner, director, officer or employee, if:

(1)  The person, in connection with his or her present employment with such organization, has been fingerprinted pursuant to any other law, statute, rule or regulation of any state or federal government or agency thereof;

(2)  The fingerprint cards for that person are submitted, or are caused to be submitted, to the Attorney General of the United States or its designee for identification and appropriate processing, and the Attorney General or its designee has processed those fingerprint cards; and

(3)  The processed fingerprint cards or any substitute records, together with any information received from the Attorney General or its designee, are maintained in accordance with paragraph (d) of this section.

(c)  Fingerprinting plans of self-regulatory organizations. The fingerprinting requirement of section 17(f)(2) of the Securities Exchange Act of 1934 may be satisfied by submitting appropriate and complete fingerprint cards to a registered national securities exchange or to a registered national securities association which, pursuant to a plan filed with, and declared effective by, the Commission, forwards such fingerprint cards to the Attorney General of the United States or its designee for identification and appropriate processing. Any plan filed by a registered national securities exchange or a registered national securities association shall not become effective, unless declared effective by the Commission as not inconsistent with the public interest or the protection of investors; and, in declaring any such plan effective, the Commission may impose any terms and conditions relating to the provisions of the plan and the period of its effectiveness as it may deem necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Securities Exchange Act of 1934.

(d)  Record maintenance--(1) Maintenance of processed fingerprint cards and other related information. Every member of a national securities exchange, broker, dealer, registered transfer agent and registered clearing agency shall maintain the processed fingerprint card or any substitute record when such card is not returned after processing, together with any information received from the Attorney General or its designee, for every person required to be fingerprinted under section 17(f)(2) of the Securities Exchange Act of 1934 and for persons who have complied with this section pursuant to paragraphs (b) or (c) of this section. Every substitute record shall state the name of the person whose fingerprint card was submitted to the Attorney General of the United States, the name of the member of a national securities exchange, broker, dealer, registered transfer agent or registered clearing agency that submitted the fingerprint card, the name of the person or organization that rolled the fingerprints, the date on which the fingerprints were rolled, and the date the fingerprint card was submitted to the Attorney General of the United States. The processed fingerprint card and every other substitute record containing the information required by this paragraph, together with any information received from the Attorney General of the United States, shall be kept in an easily accessible place at the organization's principal office and shall be made available upon request to the Commission, the appropriate regulatory agency (if not the Commission) or other designated examining authority. The organization's principal office must provide to the regional, branch or satellite office actually employing the person written evidence that the person's fingerprints have been processed by the FBI, and must provide to that office a copy of any criminal history record information received from the FBI. All fingerprint cards, records and information required to be maintained under this paragraph shall be retained for a period of not less than three years after termination of that person's employment or relationship with the organization.

(2)  Record maintenance by designated examining authorities. The records required to be maintained and preserved by a member of a national securities exchange, broker, or dealer pursuant to the requirements of paragraph (d)(1) of this section may be maintained and preserved on behalf of that member, broker, or dealer by a self-regulatory organization that is also the designated examining authority for that member, broker or dealer, Provided That the self-regulatory organization has filed in accordance with § 240.17f-2(c) a fingerprinting plan or amendments to an existing plan concerning the storage and maintenance of records and that plan, as amended, has been declared effective by the Commission, and Provided Further That:

(i)  Such records are subject at any time, or from time to time, to reasonable periodic, special or other examinations by representatives of the Commission; and

(ii)  The self-regulatory organization furnishes to the Commission, upon demand, at either the principal office or at the regional office complete, correct and current hard copies of any and all such records.

(3)  Reproduction of records on microfilm. The records required to be maintained pursuant to paragraph (d)(1) of this section may be produced or reproduced on microfilm and preserved in that form. If such microfilm substitution for hard copy is made by a member of a national securities exchange, broker, dealer, registered transfer agent or registered clearing agency, or by a self-regulatory organization maintaining and storing records pursuant to paragraph (d)(2) of this section, it shall at all times:

(i)  Have available for examination by the Commission, the appropriate regulatory agency (if not the Commission) or other designated examining authority, facilities for the immediate, easily readable projection of the microfilm and for the production of easily readable and legible facsimile enlargements;

(ii)  File and index the films in such a manner as to permit the immediate location and retrieval of any particular record;

(iii)  Be ready to provide, and immediately provide, any facsimile enlargement which the Commission, the appropriate regulatory agency (if not the Commission) or other designated examining authority by their examiners or other representatives may request; and

(iv)  For the period for which the microfilm records are required to be maintained, store separately from the original microfilm records a copy of the microfilm records.

(e)  Notice requirement. Every member of a national securities exchange, broker, dealer, registered transfer agent and registered clearing agency that claims one or more of the exemptions in paragraph (a)(1) of this section shall make and keep current a statement entitled "Notice Pursuant to Rule 17f-2" containing the information specified in paragraph (e)(1) below.

(1)  Contents of statement. The notice required by paragraph (e) of this section shall:

(i)  State the name of the organization and state whether it is a member of a national securities exchange, broker, dealer, registered transfer agent, or registered clearing agency;

(ii)  Identify by division, department, class, or name and position within the organization all persons who are claimed to have satisfied the fingerprinting requirement of section 17(f)(2) of the Securities Exchange Act of 1934 pursuant to paragraph (b) of this section;

(iii)  Identify by division, department, class, title or position within the organization all persons claimed to be exempt under paragraphs (a)(1)(i)-(iii) of this section, and identify by name all persons claimed to be exempt under paragraph (a)(1)(iv). Persons identified under this paragraph (e)(1)(iii) shall be exempt from the requirement of section 17(f)(2) of the Securities Exchange Act of 1934 unless notified to the contrary by the Commission;

(iv)  Describe, in generic terms, the nature of the duties of the person or classes of persons, and the nature of the functions and operations of the divisions and departments, identified as exempt in paragraph (e)(1)(iii) above; and

(v)  Describe the security measures utilized to ensure that only those persons who have been fingerprinted in accordance with the fingerprinting requirement of section 17(f)(2) of the Securities Exchange Act of 1934 or who are exempt under paragraph (a)(1)(iv) of this section have access to the keeping, handling or processing of securities or monies or the original books and records relating thereto.

(2)  Record maintenance. A copy of the notice required to be made and kept current under paragraph (e) of this section shall be kept in an easily accessible place at the organization's principal office and at the office employing the persons for whom exemptions are claimed and shall be made available upon request for inspection by the Commission, appropriate regulatory agency (if not the Commission) or other designated examining authority.

(3)  Exemption from the notice requirement. A registered transfer agent that performs transfer agent functions only on behalf of itself as an issuer and that receives fewer than 500 items for transfer and fewer than 500 items for processing during any six consecutive months shall be exempt from the notice requirement of paragraph (c) of this section.

[Codified to 17 C.F.R. § 240.17f-2]

[Section 240.17f-2 added at 41 Fed. Reg. 13596, March 31, 1976, effective July 1, 1976; amended at 42 Fed. Reg. 754, January 4, 1977; 47 Fed. Reg. 54060, December 1, 1982, effective November 22, 1982]


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