1 See Memorandum to SEC Rules Members No. 75-95, State Securities Members No. 45-95, Unit Investment Trust Members No. 54-95, and One Per Complex No. 94-95, dated November 1, 1995.
March 4, 1996
TO: SEC RULES COMMITTEE No. 16-96
STATE LIAISON COMMITTEE No. 5-96
UNIT INVESTMENT TRUST COMMITTEE No. 7-96
RE: UPDATE ON THE SECURITIES REGISTRATION DEPOSITORY (""SRD"")
______________________________________________________________________________
As we last advised you, by letter dated October 20, 1995, the Industry Advisory Group
("IAG") to the SRD wrote to the Board of Directors of the SRD to suggest various amendments
to the SRDs bylaws and proposed contract with users, the Filer Service Agreement ("FSA"), to
address industry concerns with pricing and governance issues.1 By letter dated February 1,
1996, the SRD Board responded to the IAGs letter. Rather than providing specific responses to
the IAGs proposed amendments, however, the letter expresses the Boards intent to propose
certain amendments to the bylaws and FSA. The Boards letter recommends that persons be
appointed from the Board and the IAG to work together to draft the amendments. The Boards
letter also suggests (1) adopting a definition of "materiality" that the Board has proposed, (2)
including a provision for assessing arbitration costs for frivolous or bad faith arbitration claims,
and (3) specifying the timing and mechanics for submitting pricing and contractual proposals
to a Pricing Committee, comprised of NASAA members and industry filers. A copy of the
Boards letter is attached.
In response, the IAG has written to the Board to request copies of the actual
amendments the Board intends to propose. The IAGs letter further recommends a delay in
appointing a drafting group until such time as the IAG has had an opportunity to review and
discuss the amendments. With respect to the specific issues raised by the Boards letter, the
IAGs letter expresses concern with the proposed definition of materiality in that it is too vague
and ambiguous and may not address all of the issues the IAG believes to be material. The IAG
has requested clarification of how the proposed provision assessing costs for frivolous or bad
faith arbitration claims would be applied. Finally, the IAG concurs with adding a provision
relating to submitting pricing and contractual changes to a Pricing Committee and recommends
that the Board proffer what it believes to be an adequate mechanism for such submission. A
copy of the IAGs letter is attached.
The SRD Board has scheduled its quarterly meeting for March 15-16. The IAG plans to
attend this meeting to discuss these matters and related issues in more detail. The Board is also
expected to decide at this meeting the price that will be charged for maintaining and processing
renewal permits through the SRD. The last price announced by the Board, which was
contained in a letter to the IAG dated August 23, 1995, was $1.65 to $1.95 per permit per state
per month, depending on total number of permits maintained on the SRD.
Tamara K. Cain
Assistant Counsel
Attachments