Federal Register, Volume 65 Issue 112 (Friday, June 9, 2000)

[Federal Register Volume 65, Number 112 (Friday, June 9, 2000)]
[Rules and Regulations]
[Pages 36602-36615]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-14594]

=======================================================================
-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 240 and 249b

[Release No. 34-42892; File No. S7-11-99]
RIN 3235-AH44

Revised Transfer Agent Form and Related Rule

AGENCY: Securities and Exchange Commission.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Securities and Exchange Commission is adopting amendments
to Rule 17Ac2-2 and to related Form TA-2 and rescinding Rule 17a-24
under the Securities Exchange Act of 1934. The amendments are designed
to clarify filing requirements and instructions; eliminate or change
ambiguous terms and phrases; delete certain redundant or unnecessary
questions; and add questions that will help the Commission to more
effectively monitor the transfer agent industry.

EFFECTIVE DATE: July 10, 2000.

FOR FURTHER INFORMATION CONTACT: Jerry W. Carpenter, Assistant
Director, Lori R. Bucci, Special Counsel, or Michael G. Rae, Staff
Attorney, at 202/942-4187, Office of Risk Management and Control,
Division of Market Regulation, Securities and Exchange Commission,
Washington, D.C. 20549-1001.

SUPPLEMENTARY INFORMATION:

I. Introduction

A. Rule 17Ac2-2 and Form TA-2

In 1986, the Securities and Exchange Commission (Commission)
adopted Rule 17Ac2-2 \1\ under the Securities Exchange Act of 1934
(Exchange Act), which requires all registered transfer agents to file
an annual report of their business activities on Form TA-2.\2\ Rule
17Ac2-2 and Form TA-2 have not been revised since their adoption.
---------------------------------------------------------------------------

\1\ 17 CFR 240.17Ac2-2.
\2\ Securities Exchange Act Release No. 23084 (March 27, 1986),
51 FR 12124. Form TA-2 is referenced in 17 CFR 249b.102.
---------------------------------------------------------------------------

On March 23, 1999, as part of the Commission's continuing efforts
to improve and simplify rules and forms, the Commission proposed for
comment amendments to Rule 17Ac2-2 and Form TA-2.\3\ The Commission and
the other appropriate regulatory agencies (ARA) have direct oversight
responsibility for transfer agents, and there is no self-regulatory
organization for transfer agents.\4\ The receipt by ARAs of annual
information about transfer agent activities is therefore an essential
component of their oversight of transfer agents. The proposed
amendments were intended to allow the Commission to obtain clearer and
more comprehensive information from transfer agents about their
activities.
---------------------------------------------------------------------------

\3\ Securities Exchange Act Release No. 41204 (March 23, 1999),
64 FR 15310 (March 31, 1999).
\4\ ``ARA'' is defined in Section 3(a)(34) of the Securities
Exchange Act of 1934, 15 U.S.C. 78c(a)(34), and includes the
Commission, the Board of Governors of the Federal Reserve System,
the Federal Deposit Insurance Corporation, and the Office of the
Comptroller of the Currency.
---------------------------------------------------------------------------

B. Lost Securityholders

To help address the problem of lost securityholders, on October 1,
1997, the Commission adopted Rules 17Ad-17 and 17a-24.\5\ Rule 17Ad-17
requires transfer agents to conduct database searches in an effort to
locate lost securityholders. Rule 17a-24 requires

[[Page 36603]]

transfer agents to submit on Form TA-2 aggregate data regarding the
accounts of lost securityholders.\6\ The purpose of Rule 17a-24 is to
gather data to assess the effectiveness of the search requirements of
Rule 17Ad-17. As a result of its continuing review of the lost
securityholder issue, the Commission is reviewing the information that
transfer agents must submit to help the Commission assess the
effectiveness of the search requirements of Rule 17Ad-17. Therefore,
the Commission proposed to require transfer agents to report on Form
TA-2 specific information about the results of the required database
searches for lost securityholders and proposed to rescind Rule 17a-24
and its reporting requirements.
---------------------------------------------------------------------------

\5\ Securities Exchange Act Release No. 39176 (October 1, 1997),
62 FR 52229. ``Lost securityholder,'' as defined in Rule 17Ad-17,
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 re-sent item is returned as undeliverable; and (ii) for whom the
transfer agent has not received information regarding the
securityholder's new address. The Commission also adopted amendments
to Rule 17Ad-7 incorporating the time periods for retention of
records required by Rule 17Ad-17.
\6\ Rule 17a-24 requires registered transfer agents to report
the number of lost securityholder accounts as of June 30 of each
year and the percentage of total accounts represented by such lost
securityholder accounts. These figures are broken down by the length
of time the securityholder was classified as lost: one year or less;
three years or less; five years or less; or more than five years.
Rule 17a-24 also requires that transfer agents annually report
information on lost securityholder accounts that were remitted to
state unclaimed property administrators.
---------------------------------------------------------------------------

II. Discussion

The Commission received 12 comment letters on the proposal, most of
which were favorable.\7\ As discussed below, the Commission has decided
to adopt the amendments to Rule 17Ac2-2 and Form TA-2 and to rescind
Rule 17a-24 substantially as proposed but with certain modifications
suggested by the commenters.
---------------------------------------------------------------------------

\7\ Letters from Lynette M. States, Assistant Director, Arizona
Department of Revenue (May 14, 1999); Scott Muirhead, Vice
President, Bankers Trust (May 17, 1999); Robert E. Smith, President,
Corporate Transfer Agents Association, Inc. (CTA) (July 29, 1999);
Charles V. Rossi, President, EquiServe (May 17, 1999); Nancy C.
Ashcom, Corporate Secretary, FirstEnergy (May 14, 1999); Kathleen C.
Joaquin, Director--Transfer Agency & International Operations,
Investment Company Institute (May 17, 1999); Jessie Baker,
President, National Association of Unclaimed Property Administrators
(NAUPA) (May 17, 1999); Thomas L. Montrone, President and Chief
Executive Officer, Registrar and Transfer Company (RTC) (May 5,
1999); Robert Dietz, President, Securities Transfer Association,
Inc. (STA) (May 17, 1999); James R. Alden, Manager and Assistant
Secretary, Shareholder Services (April 27, 1999); and James R.
Alden, Assistant Secretary and Manager of Shareholder Services,
Southern California Edison (April 27, 1999). The comment letters and
a Commission staff summary of the comments are contained in File No.
S7-11-99 and are available for inspection in the Commission's Public
Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549.
---------------------------------------------------------------------------

A. Rule 17Ac2-2

1. Elimination of Filing Exception
The Commission proposed several modifications to Rule 17Ac2-2. Rule
17Ac2-2 currently provides that a transfer agent that engages a service
company to perform all of its transfer and processing functions is not
required to file Form TA-2.\8\ As a consequence, in processing Form TA-
2 filings, the Commission's staff frequently cannot determine whether a
transfer agent that did not file Form TA-2 is properly using the
exception or has simply neglected to file. To address this problem, we
proposed to eliminate the exception and to require a transfer agent
that engaged a service company to perform all of its transfer and
processing functions to answer four questions on Form TA-2 about the
service company relationship.\9\
---------------------------------------------------------------------------

\8\ ``Named transfer agent'' is defined in Rule 17Ad-9(j) as the
registered transfer agent that is engaged by an issuer to perform
transfer agent functions for an issue of securities but has engaged
a service company to perform some or all of those functions. 17 CFR
240.17Ad-9(j).
``Service company'' is defined in Rule 17Ad-9(k) as the
registered transfer agent engaged by a named transfer agent to
perform transfer agent functions for that named transfer agent. 17
CFR 240.17Ad-9(k).
\9\ As proposed, the portion of Form TA-2 such a transfer agent
would be required to complete would provide basic information such
as the transfer agent's name, its use of a service company, the name
of its ARA, whether it filed any amendments to its registration, and
the number of items it received for transfer and processing during
the reporting period.
---------------------------------------------------------------------------

Two comment letters received on the elimination of the filing
exception were favorable.\10\ Three commenters, however, expressed
concern that asking for information other than the service company's
name was redundant.\11\ One commenter argued that if the service
company and the transfer agent for which it acts as the service agent
both are required to submit data about the number of items it received
for transfer, the Commission will receive duplicative information.\12\
---------------------------------------------------------------------------

\10\ Letters from CTA and RTC.
\11\ Letters from CTA, EquiServe, and STA.
\12\ Letter from EquiServe.
---------------------------------------------------------------------------

The Commission has decided that in order to strike a balance
between obtaining more comprehensive information from transfer agents
about their activities and not imposing unnecessary burdens on transfer
agents that outsource all of their transfer agent functions, the
Commission is adopting this provision with several changes.\13\ As
adopted, transfer agents that hire service companies to perform all of
their transfer agent functions will not be required to provide the
number of items it received for transfer during the reporting period.
In addition, in order to obtain the most current and complete
information regarding a transfer agent's use of a service company, the
Commission is adopting an additional question that requires the
transfer agent to state whether it has been engaged as a service
company during the reporting period.
---------------------------------------------------------------------------

\13\ Rule 17Ac2-2 requires a named transfer agent that engages a
service company to perform some but not all of its transfer and
processing functions to file a Form TA-2 and to enter zero for those
questions that relate to transfer agent activities performed by the
service company on behalf of the named transfer agent. These
requirements would not be changed.
---------------------------------------------------------------------------

2. Reporting Period
Current Rule 17Ac2-2 states that every registered transfer agent
shall file an annual report on Form TA-2 in accordance with the
instructions contained therein by August 31 of each calendar year. Most
of the data reported on the pre-amended Form TA-2 is as of June 30, but
some of the data reported is as of December 31. In order to have a
uniform annual reporting period, the Commission proposed that the term
``reporting period'' mean the 12 months ended June 30 of the year for
which the form was filed. The June 30 date was chosen to avoid
increasing the year-end reporting burden on transfer agents.
No commenters supported June 30 as the reporting period. Three
commenters suggested that it made more sense for Rule 17Ac2-2 to
require that data be reported on Form TA-2 as of the end of the
calendar year, or December 31.\14\ For example, one commenter explained
that year-end reporting would not only ``coincide with the usual
corporate accounting standards, it should make the information more
accurate and consistent and would likely lessen the burden of creating
reports from mid-stream data.'' \15\ This commenter pointed out that
because the employees that prepare Form TA-2 are usually different from
those that prepare other general corporate reporting, compiling data
for Form TA-2 reporting at year-end would not create significant
additional work. In response to these comments, the Commission has
modified the definition of the reporting period to require that,
beginning with the reporting period for the Year 2000, each transfer
agent registered on December 31 must file a report on Form TA-2 by
March 31 \16\ covering the prior calendar year.\17\
---------------------------------------------------------------------------

\14\ Letters from CTA, FirstEnergy, and STA.
\15\ Letter from CTA.
\16\ While some transfer agents have said they prefer a later
reporting date because of other year-end processing, the Commission
believes that a reporting date past March 31 would make the data
less useful.
\17\ As a transition measure, transfer agents' next required
From TA-2 filing will be on March 31, 2001, which will cover their
activities during calendar Year 2000. This will eliminate the filing
for the period ending June 30, 2000 (which would have been due on
August 31, 2000).

---------------------------------------------------------------------------

[[Page 36604]]

3. Clarification on Filing Requirements
The Commission proposed that Rule 17Ac2-2 be amended to require
every transfer agent that is registered on June 30 to file Form TA-2 by
August 31 of that calendar year. The Commission received no comment
letters on this provision. We are adopting this provision with
modifications to conform it to the new reporting period. As adopted,
Rule 17Ac2-2 states that every transfer agent registered on December 31
must file Form TA-2. Therefore, a transfer agent that withdraws from
registration prior to December 31 is not required to file Form TA-2 for
the portion of the year that it was registered.
4. Items Received for Transfer and Processing
Current Rule 17Ac2-2 provides that a registered transfer agent is
required to complete only Items 1 through 4 of Form TA-2 if it:
Received fewer than 500 items for transfer and fewer than 500 items for
processing in the six months ending June 30 and did not maintain master
securityholder files for more than 1,000 individual securityholder
accounts as of June 30. The Commission proposed to revise this partial
exception to conform it to the full 12 month reporting period so that
it applied to a registered transfer agent that received fewer than
1,000 items for transfer and fewer than 1,000 items for processing in
the 12 months ending June 30 of the year for which the form is being
filed.\18\
---------------------------------------------------------------------------

\18\ As proposed, the matter securityholder account element did
not change. In addition, as proposed, low volume transfer agents
were still required to complete a partial Form TA-2.
---------------------------------------------------------------------------

No commenters objected to this change, although two commenters said
that ``the receipt of 1,000 items for processing is not adequately
defined.'' \19\ The ``processing'' term refers to transfer agents
acting as a registrar. However, today transfer agents are rarely hired
to act solely as a registrar. Therefore, the rule as adopted omits the
reference to processing but includes the other proposed changes.
---------------------------------------------------------------------------

\19\ Letters from RTC and STA.
---------------------------------------------------------------------------

B. Form TA-2

This section describes major proposed modifications to Form TA-2,
the comments received, and the changes we are adopting.
1. CUSIP Number
Currently, in determining the number of investment company
securities for which they act as transfer agents, transfer agents are
instructed to count each prospectus as one issue. The Commission
proposed that transfer agents count investment company securities as
one issue per CUSIP number rather than by prospectuses. We received one
favorable comment on this proposal, and are adopting the change.\20\
---------------------------------------------------------------------------

\20\ Letter from CTA.
---------------------------------------------------------------------------

2. Amendments to Form TA-1
The Commission proposed adding a new question to Form TA-2 which
would ask if the transfer agent had amended Form TA-1 as required by
existing transfer agent rules. \21\ The new question would also require
the transfer agent to provide an explanation if it had failed to file a
required amendment. The Commission received no comments regarding this
provision. We are adopting this provision as proposed.
---------------------------------------------------------------------------

\21\ Transfer agents registered with the Commission are required
by Rule 17Ac2-1(c) to amend Form TA-1 or the SEC Supplements to Form
TA-1 within 60 calendar days following the date on which information
reported therein became inaccurate, incomplete, or misleading. 17
CFR 240.17Ac2-1(c). Federal bank regulators (FBRs) also require
their registrants to amend their Form TA-1 within 60 calendar days
following the date on which the reported information became
inaccurate, incomplete, or misleading. FBRs send copies of the
submitted filings to the Commission on behalf of their registrants.
---------------------------------------------------------------------------

3. Direct Purchase and Dividend Reinvestment Plans
Currently, Form TA-2 elicits information regarding dividend
reinvestment plans for which a transfer agent provides services. The
Commission proposed revising Form TA-2 to require transfer agents to
include data about direct purchase plans as well.
The Commission received five comments on this proposed change. One
commenter stated that it had no objection to the proposed change that
would require transfer agents to report separately the number of direct
purchase and dividend reinvestment plan accounts.\22\ One commenter
noted that the question that requests the combined total of the number
of direct purchase and dividend reinvestment plan accounts can be
interpreted ``to mean the number of accounts in issues that have open
enrollment plans or the issues that have optional cash investment
features included with dividend reinvestment plans.'' \23\ The
commenter suggested that in order to clarify what information is
requested, the section should be divided into two distinct categories,
one for dividend reinvestment plans and one for direct purchase
facilities.\24\ Three commenters essentially stated that it is common
for a dividend reinvestment plan and a direct purchase plan to be the
same plan. As a result, there is no need, for recordkeeping purposes,
to segregate a dividend reinvestment plan from a direct purchase
plan.\25\ One commenter also highlighted that Direct Registration
System (DRS) \26\ shares are also not distinguished from plan
shares.\27\
---------------------------------------------------------------------------

\22\ Letter from EquiServe.
\23\ Letter from RTC.
\24\ Id. The commenter suggested that the categories should
include one dealing with dividend reinvestment plans, whether or not
they have an optional cash contribution for current participants,
and a second for issues that have the open availability/direct
purchase functionality. Issues in the later category usually have
dividend reinvestment and optional cash features for participants.
The commenter further recommended that the questions on dividend
reinvestment plans should include only those plans that are not
listed under the direct purchase responses.
\25\ Letters from CTA, FirstEnergy, and STA.
\26\ ``Direct Registration System'' means the system, as
administered by The Depository Trust Company, that allows investors
to hold their securities in electronic book-entry from directly on
the books of the issuer or its transfer agent. Securities Exchange
Act Release No. 37931 (November 7, 1996), 61 FR 58600. DRS
securityholdings are growing. Currently, 11 transfer agents service
292 DRS eligible issues.
\27\ Letter from CTA.
---------------------------------------------------------------------------

In response to the commenters' concerns, Form TA-2 has been
modified to elicit information regarding the number of issues for which
dividend reinvestment plan and/or direct purchase plan services are
provided. We are requiring that transfer agents provide the number of
individual securityholder dividend reinvestment plan and/or direct
purchase plan accounts. In addition, Form TA-2 has been modified to
elicit information regarding the number of issues for which DRS
services are provided. We are also requiring that transfer agents
provide the number of individual securityholder DRS accounts.
4. Securityholder Accounts
Currently, Form TA-2 requires transfer agents to set forth the
percentage of individual securityholder accounts they maintain broken
down into six categories: corporate equity securities, corporate debt
securities, investment company securities, limited partnership
securities, municipal debt securities, and other securities. For
clarification purposes, we proposed that the category of investment
company securities be renamed as ``open-end investment company
securities.'' In addition, we proposed that closed-end investment
company securities be included in the corporate equity category. No
comments were received on these proposed changes. We are adopting these
changes as proposed.

[[Page 36605]]

5. Securities Record Differences Upon Change of Transfer Agents
Form TA-2 requires transfer agents to provide information about the
number and aggregate market value of (1) securities record differences
that the current transfer agent received as an out of balance issue
from the prior transfer agent and (2) securities record differences
resulting from the current transfer agent.\28\ The Commission proposed
requiring transfer agents to report the number and aggregate market
value of securities aged record differences with no detail as to
whether the securities differences occurred before or after the change
in transfer agents. Several commenters expressed concern that the
Commission would not be able to differentiate between differences for
which the current agent is or may be responsible versus those created
by a former agent.\29\ In light of these comments, we have determined
not to adopt the proposed change.
---------------------------------------------------------------------------

\28\ ``Record difference,'' as defined in Rule 17Ad-9(g), occurs
when either (1) the total number of shares or total principal dollar
amount of securities in the master securityholder file does not
equal the number of shares or principal dollar amount in the control
book, or (2) the security transferred or redeemed contains
certificate detail different from the certificate detail currently
on the master securityholder file, which difference cannot be
immediately resolved.
\29\ Letters from EquiServe, RTC, and STA.
---------------------------------------------------------------------------

6. Buy-Ins and Turnaround Time
We proposed to add two sections dealing with buy-ins and turnaround
time to Form TA-2. The first section would require the number of
quarterly reports of aged record differences that were filed and that
should have been filed by the registrant with its ARA during the
reporting period pursuant to Rule 17Ad-11(c)(2).\30\ These reports
contain information such as the size and dollar value of the record
difference, the reason for the record difference, and the size and
dollar value of any buy-ins executed to remedy the record difference.
The second section would require transfer agents to report the number
of months during the reporting period in which the registrant was not
in compliance with the specified turnaround time for routine items
pursuant to Rule 17Ad-2.\31\ This section also would require transfer
agents to report the number of written notices the transfer agent filed
and should have filed during the reporting period documenting its
noncompliance with turnaround time for routine items pursuant to Rule
17Ad-2. Lastly, the proposed section would require transfer agents to
respond to the same questions with respect to compliance with
turnaround times for when the transfer agent acted as an outside
registrar.
---------------------------------------------------------------------------

\30\ 17 CFR 240.17Ad-11(c)(2). Generally, Rule 17Ad-11(c)(2)
requires a transfer agent to file a report at the end of each
quarter during which it has an aged record difference (i.e., where
the number of shares on the securityholder file does not equal the
number of shares authorized and issued by the issuer). A buy-in is
required when a registered transfer agent overissues shares. The
registered transfer agent within 60 days of the discovery of such
overissuance buys-in securities equal to the number of shares in the
case of equity securities or equal to the principal dollar amount in
the case of debt securities. 17 CFR 240.17Ad-10(g).
\31\ Turnaround times for routine items are set forth in Rule
17Ad-2. 17 CFR 240.17Ad-2.
---------------------------------------------------------------------------

Three commenters argued that the proposed sections regarding buy-
ins and turnaround time seemed unnecessary and redundant, as the
Commission or other appropriate regulatory agencies have received and
should know the number of reports made to it by a transfer agent.\32\
One commenter, however, stated that the additional information
requested regarding transfer turnarounds is relevant and easy to
report.\33\
---------------------------------------------------------------------------

\32\ Letters from EquiServe, RTC, and STA.
\33\ Letter from Bankers Trust.
---------------------------------------------------------------------------

While these proposals will elicit information regarding buy-ins and
turnaround time that are required to be reported to the Commission or
to other appropriate regulatory agencies, the Commission believes that
it will be helpful to both issuers and the Commission to have this
self-reported information included on the annual summary report, Form
TA-2. These reporting elements will assist the ARAs in fulfilling their
oversight responsibilities for transfer agents. The annual report would
provide a better picture of patterns of a transfer agent's activity,
and also would alert the ARA to instances where a transfer agent failed
to file required reports. We are adopting these sections as proposed
with one change. Consistent with the other changes to the proposal
regarding registrar activities, we are not adopting the proposal
pertaining to compliance with turnaround time by a transfer agent that
acted as an outside registrar.
7. Technical Changes
The proposal also included numerous technical and conforming
changes. For example, we proposed: changing the format of the box at
the top of Form TA-2 that reflects the reporting period; adding
definitions; requesting that the actual amounts be reported instead of
abbreviated amounts; eliminating the collection of information about
transfer agent custodian (TAC) arrangements; \34\ and eliminating
requests for certain percentages and figures. We received two comments
supporting the changes to these provisions.\35\ No negative comments
regarding these provisions were received. We are adopting these
modifications as proposed.
---------------------------------------------------------------------------

\34\ TAC arrangements, which are more commonly referred to as
fast automated securities transfer (FAST) arrangements, exist
between large transfer agents and The Depository Trust Company.
\35\ Letters from CTA and Banker Trust.
---------------------------------------------------------------------------

C. Rule 17a-24

Rule 17a-24 requires registered transfer agents to report the
aggregate number of lost securityholder accounts as of June 30 of each
year and the percentage of total accounts represented by such lost
securityholder accounts. These figures currently must be reported for
lost securityholder accounts outstanding for: one year or less, three
years or less, five years or less, or more than five years. Rule 17Ad-
17 requires transfer agents to conduct periodic searches of databases
to obtain current addresses for lost securityholders. We adopted Rule
17a-24 to obtain information on aged lost securityholder accounts in
order to assess the effectiveness of searches. Rule 17a-24 also
requires information on lost securityholder accounts that were
escheated to state unclaimed property administrators. Frequently,
transfer agent representatives have told our staff that they have
difficulty compiling information on the aging of lost securityholder
accounts.
In the proposal, we intended to refine transfer agents' reporting
requirements so that the reported information would give a better
indication of the effectiveness of the database searches and be less
burdensome to compile. We proposed that: (1) Transfer agents be
required to report on Form TA-2 the number of lost securityholder
accounts for which a first and a second database search has been
conducted, and the number of lost securityholder accounts for which a
correct address has been obtained as a result of each of these
searches; (2) transfer agents continue, as required by Rule 17a-24, to
report on Form TA-2 the current number of lost securityholder accounts
and the number of lost securityholder accounts that were remitted to
the states during the last year; (3) the remaining information (i.e.,
aging of lost securityholder accounts) would no longer be required to
be reported; and (4) Rule 17a-24 would be rescinded.
Several commenters stated that the proposed reporting requirements
would not be easier to comply with than the current reporting
requirements. Most of the commenters pointed out that, while

[[Page 36606]]

they can determine the number of different addresses generated by
database searches for lost securityholder accounts, it is virtually
impossible to determine the number of lost securityholder accounts for
which a correct address has been obtained during any specific database
search.\36\ For example, address changes are received from account
holders continuously without the transfer agent knowing the cause or
the source of the change. Therefore, transfer agents would have to
manually research every address received from an account holder in
order to determine if the address change resulted from the transfer
agent's actions following a database search or from some other cause.
---------------------------------------------------------------------------

\36\ Letters from Bankers Trust, CTA, EquiServe, RTC,
Shareholder Services, Southern California Edison, and STA.
---------------------------------------------------------------------------

A few commenters expressed concern that the proposed requirement
that transfer agents report the number of lost securityholder accounts
that have been remitted to the states needs to be clarified as to
whether the Commission wanted information on remittance of funds or
securities.\37\ These commenters also pointed out that with respect to
state escheatment laws some transfer agents do not distinguish between
lost and dormant accounts.
---------------------------------------------------------------------------

\37\ Letters from CTA, RTC, and STA.
---------------------------------------------------------------------------

Two commenters also essentially argued that the Commission should
prohibit a transfer agent from using any service that results in the
lost securityholders not receiving the full value of their
property.\38\ These commenters believe that often the securityholder
becomes lost as a result of poor recordkeeping on the transfer agent's
books rather than the neglect of the owner. The commenters further
suggested that to the extent that search firms are used, the
requirements of fee limits and full disclosure to the securityholder
would be reasonable.
---------------------------------------------------------------------------

\38\ Letters from Arizona Department of Revenue and NAUPA. 17Ad-
17 provides in pertinent part that every recordkeeping transfer
agent whose master securityholder file includes accounts of lost
securityholders shall exercise reasonable care to ascertain such
lost securityholders' current addresses. Each recordkeeping transfer
agent shall conduct two database searches without charge to a lost
securityholder.
---------------------------------------------------------------------------

In response to the comments, we are simplifying the reporting
requirements. As adopted, transfer agents will be required to provide
the date of each database search for lost securityholders during the
reporting period, the number of lost securityholder accounts submitted
for each database search, and the number of lost securityholder
accounts for which a different address was obtained as a result of each
database search. Transfer agents will continue to report on Form TA-2
the number of lost securityholder accounts that were remitted to the
states during the reporting period, but will not be required to report
aging of lost securityholder accounts. For purposes of clarification,
transfer agents should only report those accounts held by
securityholders that are defined as lost by Rule 17Ad-17 \39\ and
should only report those accounts where the underlying securities have
been remitted to the states. These reporting requirements should
provide the Commission with useful information about the number of lost
securityholders and the efficiency of the searches, but should not be
burdensome for transfer agents to implement.
---------------------------------------------------------------------------

\39\ Supra, note 4.
---------------------------------------------------------------------------

III. Paperwork Reduction Act

Certain provisions of the amendments to Rule 17Ac2-2 and Form TA-2
contain ``collection of information'' requirements within the meaning
of the Paperwork Reduction Act of 1995,\40\ and the Commission has
submitted them to the Office of Management and Budget for review in
accordance with 44 U.S.C. 3507(d) and 5 CFR 1320.11. The Commission
notes that it is rescinding Rule 17a-24. However, the Commission is
keeping two questions generated by Rule 17a-24 on Form TA-2 and is
adding a question to Form TA-2 about the results of the required
database searches for lost securityholders. The title for the
collection of information is: ``Transfer Agents Annual Report 17 CFR
240.17Ac2-2, Form TA-2.'' The OMB control number for the collection of
information is 3235-0337.
---------------------------------------------------------------------------

\40\ 44 U.S.C. 3501 et seq.
---------------------------------------------------------------------------

In the proposing release, the Commission requested comment on the
proposed collections of information. No comments were received that
addressed the PRA submission. In the proposing release, the Commission
based its estimates of the collection of information on statistics
gathered from 1998. Because transfer agent statistics gained from
various filings are now available for the year 1999, the Commission has
revised the figures it used in the proposing release to update the
collections of information required under the rules, as discussed
below.
Under the amendments, Rule 17Ac2-2 requires the collection of
additional information on amended Form TA-2. First, the amendments
eliminate the filing exception for named transfer agents and require
every named transfer agent using a service company for all of its
transfer agent functions to complete only the first three questions
(which request only simple information) and the signature section of
Form TA-2. Second, registered transfer agents that meet the criteria
based on volume of transfer business and number of shareholder accounts
are required to answer Questions 1 through 5, 11, and the signature
section of Form TA-2. Finally, registered transfer agents that file a
complete Form TA-2 are required to respond to new questions regarding
the use of service companies, amendments to Form TA-1, direct purchase
and dividend reinvestment plan accounts, buy-ins, DRS, lost
securityholders, and turnaround time for routine items.
The Commission uses the information on Form TA-2 to monitor the
annual business activities of registered transfer agents. The proposed
collection of information under amended Rule 17Ac2-2 and Form TA-2 is
intended to facilitate greater accuracy of transfer agents' records.
Furthermore, the information elicited from the additional questions
regarding lost securityholder accounts should help the Commission to
assess the effectiveness of the search requirements of Rule 17Ad-17 and
the scope of the lost securityholder problem.
The collection of information required by the amendments to Rule
17Ac2-2 and Form TA-2 should not result in any new significant burden
to transfer agents. All information required by Form TA-2 is available
in the internal files of the transfer agents and a large portion of the
information is already required to be calculated or maintained by
existing Commission transfer agent rules.
The amount of time needed to comply with the requirements of
amended Rule 17Ac2-2 and Form TA-2 will vary. There are approximately
1,093 registered transfer agents.\41\ From this total number,
approximately 270 registrants will be required to complete only
Questions 1 through 3 and the signature section of amended Form TA-2,
which the Commission estimates will take each registrant about 30
minutes, for a total of 135 hours (270 x .5 hours). Approximately 371
registrants will be required to answer Questions 1 through 5, 11, and
the signature section, which the Commission estimates will take about 1
hour and 30 minutes, for a total of 557 hours (371 x 1.5 hours). The
remaining registrants, approximately 452, will be required to complete
the entire Form TA-2, which the Commission estimates will take about 6

[[Page 36607]]

hours, for a total of 2,712 hours (452 x 6 hours). The Commission
estimates that the total burden will be 3,404 hours (135 + 557 +
2712).\42\
---------------------------------------------------------------------------

\41\ Since the proposing release, the total number of registered
transfer agents has decreased.
\42\ Based on an estimated average administative labor cost of
$31.50 per hour, the Commission's staff estimates that the labor
cost to the transfer agent industry for complying with Rule 17Ac2-2
and Form TA-2 would be $107,226 annually ($31.50 x 3,404).
---------------------------------------------------------------------------

The collection of information pursuant to the amendments to Form
TA-2 and Rule 17Ac2-2 does not contain any additional burdensome
recordkeeping requirements. Providing the information will be
mandatory. Responses to the collection of information will not be kept
confidential. 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 Office of Management and Budget control number.

IV. Costs and Benefits of the Proposed Amendments

The Commission believes that significant benefits will result from
the amendments to Rule 17Ac2-2 and Form TA-2 and the rescission of Rule
17a-24. To assist the Commission in its evaluation of the costs and
benefits that may result from the new rules, commenters were requested
to provide analysis and data, if possible, relating to costs and
benefits associated with the proposed rule changes. In particular, the
Commission requested comment on the potential costs for any necessary
modifications to information gathering, management, and recordkeeping
systems or procedures. The Commission received three comments that
touched on this issue.\43\
---------------------------------------------------------------------------

\43\ Letters from Bankers Trust (``amendments * * * do not pose
significant modifications to procedures or systems''), RTC and STA
(``costs cannot be accurately estimated'').
---------------------------------------------------------------------------

Since the proposing release was issued, we have made a few changes
to the proposed amendments to further improve the information obtained
from the Form TA-2. In particular, we changed the reporting period to
year end; shortened the questions on turnaround time; and further
simplified the reporting requirements pertaining to lost securityholder
information.

A. Benefits

The Commission believes that the rules will provide the following
benefits:
The elimination of the filing exception will help the
Commission to keep complete records on all registered transfer agents.
The additional questions to Form TA-2, including those
regarding the use of service companies, amendments to Form TA-1, direct
purchase and dividend reinvestment plan accounts, DRS, buy-ins, and
turnaround time, will provide more accurate information about transfer
agent business activities.
The uniform reporting period at year-end should eliminate
confusion from varying reporting periods.
The simplification of the reporting requirements regarding
lost securityholder accounts and the associated database searches
should be less burdensome for transfer agents to report. This
information should enable the Commission to assess the scope of the
lost securityholder problem and to assess the effectiveness of the
search requirements of Rule 17Ad-17 more effectively.

B. Costs

The simplification of Rule 17Ac2-2 and Form TA-2 through the
amendments will most likely lead to a reduction of costs to transfer
agents. The majority of information required by Form TA-2 is available
in the internal files of the transfer agents, and a large portion of
the information is already required to be calculated or maintained by
other Commission rules.
The primary cost associated with the rule and Form TA-2 is the time
that it will take transfer agent personnel to complete the form and
file it with the Commission. The Commission estimates that because
there is no increase in complexity to Form TA-2, there will be no
increase in costs imposed on transfer agents over the amount previously
spent in complying with the pre-amended versions of Rule 17Ac2-2 and
Form TA-2. The amount of time needed to comply with the requirements of
amended Rule 17Ac2-2 and Form TA-2 will vary depending on a particular
transfer agent's activity. There are approximately 1,093 transfer
agents who are registered with the Commission. Of this number,
approximately 270 registrants would be required to complete only
Questions 1 through 3 and the signature section of amended Form TA-
2.\44\ Approximately 371 registrants will be required to answer only
Questions 1 through 5, 11 and the signature section due to their low
volume of transfer business and number of shareholder accounts. The
remaining registrants, approximately 452, would be required to complete
the entire Form TA-2.
---------------------------------------------------------------------------

\44\ Registrants that hire service companies to perform all of
their transfer agent functions will be required to complete
questions one through three and the signature section.
---------------------------------------------------------------------------

Additionally, the Commission sought comment and empirical data on
the cost associated with modifying computer systems to report all items
for a twelve month reporting period, instead of for a six month period.
The Commission estimated that this likely would require a simple, one-
time change to database reporting functions and would have a negligible
cost on transfer agents. Only one commenter directly addressed the
Commission's request for information regarding the cost required to
modify transfer agents' systems to comply with the reporting changes on
Form TA-2. The commenter wrote that the proposed amendments to Rule
17Ac2-2 and Form TA-2 do not pose significant modifications to
procedures or systems.\45\ The Commission believes that the rule
changes are necessary to improve information regarding transfer agent
business activities and lost securityholder information.
---------------------------------------------------------------------------

\45\ Letter from Bankers Trust.
---------------------------------------------------------------------------

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

Section 23(a)(2) of the Exchange Act requires that the Commission,
when adopting or amending rules under the Exchange Act, consider the
anticompetitive effects of those rules, if any, and refrain from
adopting a rule that would impose a burden on competition not necessary
or appropriate in furthering the purposes of the Exchange Act.\46\
Moreover, Section 3(f) of the Exchange Act as amended by the National
Securities Markets Improvement Act of 1996 provides that whenever the
Commission is engaged in rulemaking and is required to consider or
determine whether an action is necessary or appropriate in the public
interest, the Commission shall consider, in addition to the protection
on investors, whether the action will promote efficiency, competition,
and capital formation. In the proposing release, the Commission
solicited comment on the effects of the proposed amendments to Rule
17Ac2-2 and Form TA-2 on competition, efficiency and capital formation
as cited in Sections 3(f) and 23(a)(2). The Commission received no
comments in direct response to this solicitation. However, several
commenters did suggest that calendar year-end reporting would be more
efficient than would a reporting period ending in June.\47\
---------------------------------------------------------------------------

\46\ 15 U.S.C. 78w(a)(2).
\47\ Letters from FirstEnergy, STA, and CTA.
---------------------------------------------------------------------------

The Commission has considered the amendments to Rule 17Ac2-2 and
Form TA-2 in light of the comments received and the standards cited in
Sections 3(f)

[[Page 36608]]

and 23(a)(2) of the Exchange Act.\48\ The Commission proposed these
amendments not only to enhance the Commission's ability to monitor more
effectively the transfer agent industry, but to make the Form TA-2 more
efficient for both the Commission and transfer agents. Because transfer
agents of a similar size and with similar business are required to
complete the Form in the same manner, there should be no negative
impact on competition.
---------------------------------------------------------------------------

\48\ See 15 U.S.C. 78w(a)(2).
---------------------------------------------------------------------------

VI. Final Regulatory Flexibility Analysis

This Final Regulatory Flexibility Analysis (``FRFA'') has been
prepared in accordance with the provisions of the Regulatory
Flexibility Act (``RFA''), as amended by Public Law No. 104-121, 110
Stat. 847, 864 (1996), 5 U.S.C. 604. The FRFA relates to the adoption
of the amendments to Rule 17Ac2-2 and Form TA-2 and to the rescission
of Rule 17a-24 under the Exchange Act.
An Initial Regulatory Flexibility Analysis (IRFA) summary regarding
the proposed amendments to Rule 17Ac2-2 and Form TA-2 and the proposed
rescission of Rule 17a-24 appeared in Securities Exchange Act Release
No. 41204 (March 23, 1999).

A. Need for and Objectives of Amendments to Rule 17Ac2-2 and Form TA-2
and Rescission of Rule 17a-24

The purpose of the amendments to Rule 17Ac2-2 and Form TA-2 and the
rescission of Rule 17a-24 is to allow the Commission to obtain more
comprehensive information from transfer agents about their activities
while making Form TA-2 clearer and easier for transfer agents to
complete. The objectives of the amendments are to: Elicit information
regarding transfer agent business activities, such as direct purchase
and dividend reinvestment plan accounts, buy-ins, and turnaround time
for routine items; obtain more comprehensive lost securityholder
information; enhance service company information; eliminate the filing
exception; clarify the filing requirements and instructions; conform
reporting periods; delete unnecessary questions; and make technical
changes.
Prior to being amended, Rule 17Ac2-2 and Form TA-2 required
transfer agents to submit information regarding the number of issues
for which they provided dividend reinvestment plan services. Because
many dividend reinvestment plans can now include, or can be separate
from, a direct stock purchase plan, the Commission is now requesting
the number of issues and individual securityholder accounts with
dividend reinvestment plans and/or direct stock purchase plans on Form
TA-2.
In addition, the Commission is now requiring registrants to report
the number of Direct Registration System (DRS) accounts that they
maintain for securityholders. Because DRS is relatively new in the
securities industry, Form TA-2 did not address transfer agent activity
concerning it. By requiring registrants to report their involvement
with DRS, the Commission will now be in a better position to monitor
this new system in the securities industry.
As amended, Rule 17Ac2-2 and Form TA-2 now require two sections
dealing with buy-ins and turnaround time. The first section requires
the transfer agent to report the number of quarterly reports that were
filed and that should have been filed by the transfer agent with its
ARA during the reporting period pursuant to Rule 17Ad-11(c)(2). The
second section requires transfer agents to report the number of months
during the reporting period in which the transfer agent was not in
compliance with the specified turnaround time for routine items
pursuant to Rule 17Ad-2. This section also requires transfer agents to
report the number of written notices the transfer agent filed and
should have filed during the reporting period documenting its
noncompliance with turnaround time for routine items pursuant to Rule
17Ad-2. The Commission added these sections to Form TA-2 because the
information requested will be helpful to issuers and to the Commission
in monitoring overissuance and buy-in activities and compliance with
turnaround time by registered transfer agents.
In addition, Form TA-2 now requires a registrant to state whether
it had amended Form TA-1 during the reporting period if it was required
to do so under existing transfer agent rules.\49\ The Commission
believes that the addition of this information in a year-end report
will enable the Commission to monitor more comprehensively transfer
agent business activities conducted during the course of a year.
---------------------------------------------------------------------------

\49\ 17 CFR 240.17Ac2-1(c).
---------------------------------------------------------------------------

Since 1998, registrants using Form TA-2 have been required to
submit information regarding the aging of lost securityholder
accounts.\50\ Since that time, transfer agent representatives have
informed Commission staff that compiling this information is extremely
difficult and burdensome and frequently is impossible. In an effort to
simplify the reporting requirements, the Commission proposed to
eliminate Rule 17a-24, which required the reporting of information on
aged lost securityholder accounts, and to require registrants to report
on the number of database searches conducted and the results of such
searches, and the number of lost securityholder accounts that were
remitted to the states during the reporting period. In response to the
near unanimity of comment letters opposing the format and content of
the requested information, the Commission decided to further simplify
the rule's lost securityholder reporting requirements by requiring
registrants to report the dates and number of lost securityholder
accounts submitted for each database search, and to report the number
of lost securityholder accounts for which a different address was
obtained as a result of each search. This information is needed for the
Commission to assess the effectiveness of transfer agents' efforts to
find lost securityholders. Transfer agents will continue to report on
Form TA-2 the number of lost securityholder accounts that were remitted
to the states during the reporting period.
---------------------------------------------------------------------------

\50\ 17 CFR 240.17a-24.
---------------------------------------------------------------------------

An additional component of the amended rule and Form TA-2 enhances
the Commission's collection of information about registrants' use of
service companies. Before the adoption of the amendments to Rule 17Ac2-
2 and Form TA-2, a transfer agent that engaged a service company to
perform all of its transfer and processing functions was exempt from
filing an annual TA-2 form. This exception had the unintended result of
making it difficult for the Commission to determine if a transfer agent
was actually engaging a service company or whether the transfer agent
was merely neglecting to file the TA-2 form as required by the rule.
Therefore, in adopting the new rule, the Commission eliminated the
filing exception for transfer agents that engage service companies to
perform all of their transfer functions. However, such transfer agents
must only complete the first three questions of the TA-2 form.
Additional changes to Rule 17Ac2-2 and Form TA-2 seek to clarify
the filing requirements and instructions. Before the amendments, some
transfer agents were unsure of whether they were required to file if
they withdrew during the filing period. The amended rule now clarifies
that if a transfer agent is registered as of December 31, then a Form
TA-2 must be filed by March 31 of the following calendar year.
Additionally, the pre-amended Form

[[Page 36609]]

TA-2 lacked definitions for several key terms. As amended, Form TA-2
adds several definitions.
Additionally, some technical changes that make reporting more
accurate and informative are incorporated into the amended Rule 17Ac2-2
and Form TA-2. These changes include counting investment company
securities by CUSIP number instead of by prospectus and using actual
numerical figures on Form TA-2 instead of omitting the zeroes at the
end. The Commission believes that these changes are necessary to avoid
confusion and to obtain a more accurate assessment of the types of
securities that are being serviced by transfer agents.
Another change which the Commission made concerns the reporting
period for the TA-2 which formerly ran from June 30 to June 29 of the
following year. The amended Rule 17Ac2-2 and Form TA-2 change the
reporting period to conform with current accounting and tax preparation
methods. This will make it easier for transfer agents to use the
information contained within their tax and accounting records for
purposes of filing Form TA-2.

B. Significant Issues Raised by Public Comments

The Commission requested comment with respect to the Initial
Regulatory Flexibility Analysis (``IRFA'') that was prepared when the
amendments to Rule 17Ac2-2 and form TA-2 were proposed. While no
comment letters were received that directly addressed the IRFA, one
commenter wrote that the proposed amendments do not pose significant
modifications to procedures or systems.\51\
---------------------------------------------------------------------------

\51\ See letter from Bankers Trust. In addition, the Bankers
Trust letter indicated that the proposed changes regarding the lost
securityholder accounts would cost Bankers Trust a total of forty
person-hours and $6,260 to comply with the rule. However, as the
Commission had decided to significantly simplify the reporting
requirements for lost securityholder account searches, the
Commission believes that the Bankers Trust cost estimate will be
greatly reduced.
---------------------------------------------------------------------------

C. Description and Estimate of the Number of Small Entities Subject to
the Amendments

The amended rule and form will affect transfer agents that are
small entities pursuant to Rule 0-10(h) under the Exchange Act.\52\
Rule 0-10(h) defines the term ``small business'' or ``small
organization'' to include any transfer agent that: (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) 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 in the time that it has been
in business, if shorter); (3) only transferred items of issuers with
total assets of $5 million or less; and (4) is not affiliated with any
person (other than a natural person) that is not a small business or
small organization under Rule 0-10.
---------------------------------------------------------------------------

\52\ 17 CFR 240.0-10(h). The Commission recently amended this
definition. Securities Exchange Commission Release No.s 33-7548, 34-
40122, IC-23272, and IA-1727 (June 24, 1998), 63 FR 35508.
---------------------------------------------------------------------------

When the Commission adopted the new definition of ``small entity''
with respect to transfer agents in 1998, the Commission estimated that
approximately 180 registered transfer agents would qualify as small
entities under Rule 0-10. Since that time, the total number of
registered transfer agents has fallen. As a result, the Commission is
revising its estimate of registered transfer agents that would qualify
as small entities under Rule 0-10 from 180 to 163. As a result of the
new rule, the Commission now estimates that 163 small entities would be
subject to the requirements of the proposed amendments to Rule 17Ac2-2
and Form TA-2.
The amendments to Rule 17Ac2-2 provide that a registered transfer
agent that received fewer than 1,000 items for transfer in the twelve
months ending December 31, and did not maintain master securityholder
files for more than 1,000 individual securityholder accounts as of
December 31, would have to complete only a portion of Form TA-2.
Therefore, all ``small entities'' as defined by Rule 0-10 would
continue to have reduced reporting requirements under the proposal.
In addition, the proposed amendments will impose different
reporting and compliance requirements on certain transfer agents
because it eliminates the filing exception for named transfer agents
using service companies and requires every registered transfer agent to
file Form TA-2 annually. The Commission estimates that the incremental
annual burden on all ``small entities'' will be approximately 73 hours
and $2,300.\53\
---------------------------------------------------------------------------

\53\ The FRFA arrives at this estimate, which is different then
the IRFA estimate, by using the latest available transfer agent
data. The IRFA, using the data available at that time, estimated
that the total burden to 180 small entity trasfer agents would be 81
hours (180 x .45) at a cost of $2,552 ($31.5 x 81 hours). The
FRFA, with a revised figure of 163 small entity transfer agents,
calculate the following burden: 163 x .45=73 hours; and $31.5 x
73 hours=$2300.
---------------------------------------------------------------------------

D. Description of Steps Taken to Minimize the Economic Impact on Small
Entities

The RFA directs the Commission to consider significant alternatives
to the amendments to Rule 17Ac2-2 and Form TA-2 that would accomplish
the stated objectives while minimizing any significant adverse economic
impact on small entities. Such alternatives include: (1) The
establishment of differing compliance or reporting requirements or
timetables that take into account the resources of small entities; (2)
the clarification, consolidation, or simplification of compliance and
reporting requirements under the proposed amendments for small
entities; (3) the use of performance rather than design standards; and
(4) an exception from coverage of the rule or any part thereof for
small entities.
Taking into account the burden that would be imposed on small
transfer agents, the Commission proposed that transfer agents that meet
the definition of a ``small entity'' still be required to respond to
only a portion of Form TA-2. Accordingly, the Commission has determined
that it is not feasible to further clarify, consolidate, or simplify
the rule for ``small entities'' beyond its current form. The Commission
also believes that it would be inconsistent with the purpose of the
Exchange Act to exempt ``small entities'' from the proposed amendments
or to use performance standards to specify different requirements for
small entities. Therefore, as adopted, the rule will not have an
additional significant economic impact on a substantial number of small
entities.

E. Description of the Projected Reporting, Recordkeeping, and Other
Compliance Requirements

The amendments to Rule 17Ac2-2 and Form TA-2 will not result in any
significant additional costs to transfer agents. The majority of
information required by Form TA-2 is available in the internal files of
the transfer agents, and a large portion of the information is already
required by the Commission to be calculated or maintained.
The primary cost associated with the rule and Form TA-2 is the time
that it will take transfer agent personnel to complete the form and
file it with the Commission. The Commission estimates that because
there is no increase in complexity to Form TA-2, there will be no
increase in costs imposed on transfer agents over the amount previously
spent in complying with Rule 17Ac2-2 and Form TA-2. The amount of time
needed to comply with the requirements of

[[Page 36610]]

amended Rule 17Ac2-2 and Form TA-2 would vary depending on a particular
transfer agent's activity. There are approximately 1093 registered
transfer agents.\54\ Of this number, approximately 270 registrants
would be required to complete only Questions 1 through 3 and the
signature section of amended Form TA-2. Based on their low volume of
transfer business and number of shareholder accounts, approximately 371
registrants would be required to answer only Questions 1 through 5, 11,
and the signature section. The remaining registrants, approximately
452, would be required to complete the entire Form TA-2.
---------------------------------------------------------------------------

\54\ This figure is different than the figure put forth in the
proposing release because data available since publication of the
proposing release has shown a decrease in the number of registered
transfer agents.
---------------------------------------------------------------------------

Additionally, in order to comply with the rule, transfer agents
will make minor modifications to computer systems to report all items
for the twelve months ending December 31, instead of the previous six
month reporting cycle. The Commission estimates that this likely would
require a simple, one-time change to database reporting functions and
would have a negligible cost on transfer agents. The only commenter who
directly addressed the Commission's request for information regarding
this cost agreed with the Commission's assessment and wrote that the
proposed amendments to Rule 17Ac2-2 and Form TA-2 do not pose
significant modifications to procedures or systems.\55\
---------------------------------------------------------------------------

\55\ Letter from Bankers Trust.
---------------------------------------------------------------------------

VII. Statutory Basis

Pursuant to the Exchange Act and particularly Sections 3(f), 17,
17A, and 23(a) thereof, 15 U.S.C. 78q, 78q-1, and 78w(a), the
Commission is adopting amendments to Sec. 240.17Ac2-2 and Form TA-2
(referenced in 17 CFR 249b.102) of Chapter II of Title 17 of the Code
of Federal Regulations in the manner set forth below.

List of Subjects in 17 CFR Parts 240 and 249b

Reporting and recordkeeping requirements, Securities.

Text of Amendment

In accordance with the foregoing, Title 17, Chapter II of the Code
of Federal Regulations is amended as follows:

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

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

Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77eee,
77ggg, 77nnn, 77sss, 77ttt, 78c, 78d, 78f, 78i, 78j, 78j-1, 78k,
78k-1, 78l, 78m, 78n, 78o, 78p, 78q, 78s, 78u-5, 78w, 78x, 78ll(d),
77mm, 79q, 79t, 80a-20, 80a-23, 80a-29, 80a-37, 80b-3, 80b-4 and
80b-11, unless otherwise noted.
* * * * *

Sec. 240.17a-24 [Removed]

2. Section 240.17a-24 is removed.

3. Section 240.17Ac2-2 is revised to read as follows:

Sec. 240.17Ac2-2 Annual reporting requirement for registered transfer
agents.

(a) Every transfer agent registered on December 31 must file a
report covering the reporting period on Form TA-2 (Sec. 249b.102 of
this chapter) by March 31 following the end of the reporting period.
Form TA-2 must be completed in accordance with the instructions
contained in the Form.
(1) A registered transfer agent that received fewer than 1,000
items for transfer in the reporting period and that did not maintain
master securityholder files for more than 1,000 individual
securityholder accounts as of December 31 of the reporting period must
complete Questions 1 through 5, 11, and the signature section of Form
TA-2.
(2) A named transfer agent that engaged a service company to
perform all of its transfer agent functions during the reporting period
must complete Questions 1 through 3 and the signature section of Form
TA-2.
(3) A named transfer agent that engaged a service company to
perform some but not all of its transfer agent functions during the
reporting period must complete all of Form TA-2 but should enter zero
(0) for those questions that relate to transfer agent functions
performed by the service company on behalf of the named transfer agent.
(b) For purposes of this section, the term reporting period shall
mean the calendar year ending December 31 for which Form TA-2 is being
filed. The term named transfer agent shall have the same meaning as
defined in Sec. 240.17Ad-9(j). The term service company shall have the
same meaning as defined in Sec. 240.17Ad-9(k).
(c) As a transition measure, transfer agents' next required Form
TA-2 filing will be on March 31, 2001, which will cover their
activities during calendar Year 2000. This will eliminate the filing
for the period ending June 30, 2000, which would have been due on
August 31, 2000.

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

4. The authority citation for Part 249b continues to read in part
as follows:

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

Sec. 249b.1202 [Amended]

5. Form TA-2 (referenced in Sec. 249b.102) is revised to read as
set forth in the attached appendix.

Note: Form TA-2 is attached as an Appendix.)

Dated: June 2, 2000.

By the Commission.
Margaret H. McFarland,
Deputy Secretary.

Note: This Appendix to the Preamble will not appear in the Code
of Federal Regulations.

United States Securities and Exchange Commission Washington, D.C.
20549

Instructions for Use of Form TA-2

Form TA-2 is to be used by transfer agents registered pursuant to
Section 17A of the Securities Exchange Act of 1934 for the annual
report of transfer agent activities.
Attention: Certain sections of the Securities Exchange Act of 1934
applicable to transfer agents are referenced below. Transfer agents are
urged to review all applicable provisions of the Securities Exchange
Act of 1934, the Securities Act of 1933, and the Investment Company Act
of 1940, as well as the applicable rules promulgated by the SEC under
those Acts.

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

A. Terms and Abbreviations. The following terms and abbreviations
are used throughout these instructions:
1. ``Act'' means the Securities Exchange Act of 1934, 15 U.S.C. 78a
et seq.
2. ``Aged record difference,'' as defined in Rule 17Ad-11(a)(2), 17
CFR 240.17Ad-11(a)(2), means a record difference that has existed for
more than 30 calendar days.
3. ``ARA'' means the appropriate regulatory agency, as defined in
Section 3(a)(34)(B) of the Act, 15 U.S.C. 78c(a)(34)(B).
4. ``Direct Registration System'' means the system, as administered
by The Depository Trust Company, that allows investors to hold their
securities in electronic book-entry form directly on the books of the
issuer or its transfer agent.
5. ``Form TA-2'' includes the Form TA-2 itself and any attachments.
6. ``Lost securityholder,'' as defined in Rule 17Ad-17, 17 CFR
240.17Ad-17, means a securityholder: (i) to whom an item of
correspondence that was sent to

[[Page 36611]]

the securityholder at the address contained in the transfer agent's
master securityholder file has been returned as undeliverable;
provided, however, that if such item is re-sent within one month to the
lost securityholder, the transfer agent may deem the securityholder to
be a lost securityholder as of the day the re-sent item is returned as
undeliverable; and (ii) for whom the transfer agent has not received
information regarding the securityholder's new address.
7. ``Named transfer agent'' is defined in Rule 17Ad-9(j), 17 CFR
240.17Ad-9(j), and means a registered transfer agent that has been
engaged by an issuer to perform transfer agent functions for an issue
of securities but has engaged a service company (another registered
transfer agent) to perform some or all of those functions.
8. ``Record difference'' means any of the imbalances described in
Rule 17Ad-9(g), 17 CFR 240.17Ad-9(g).
9. ``Registrant'' means the transfer agent on whose behalf the Form
TA-2 is filed.
10. ``Reporting period'' means the calendar year ending December 31
of the year for which Form TA-2 is being filed.
11. ``SEC'' means the United States Securities and Exchange
Commission.
12. ``Service company'' is defined in Rule 17Ad-9(k), 17 CFR
240.17Ad-9(k), and means the registered transfer agent engaged by a
named transfer agent to perform transfer agent functions for that named
transfer agent.
13. ``Transfer agent'' is defined in Section 3(a)(25) of the Act,
15 U.S.C. 78c(a)(25), and means any person who engages on behalf of an
issuer of securities or on behalf of itself as an issuer in at least
one of the functions enumerated therein.
B. Who Must File; When to File.
1. Every transfer agent that is registered on December 31 must file
Form TA-2 in accordance with the instructions contained therein by the
following March 31.
a. A registered transfer agent that received fewer than 1,000 items
for transfer during the reporting period and that did not maintain
master securityholder files for more than 1,000 individual
securityholder accounts as of December 31 of the reporting period is
required to complete Questions 1 through 5, 11, and the signature
section of Form TA-2.
b. A named transfer agent that engaged a service company to perform
all of its transfer agent functions during the reporting period is
required to complete Questions 1 through 3 and the signature section of
Form TA-2.
c. A named transfer agent that engaged a service company to perform
some but not all of its transfer agent functions during the reporting
period must complete all of Form TA-2 but should enter zero (0) for
those questions that relate to functions performed by the service
company on behalf of the named transfer agent.
2. The date on which any filing is actually received by the SEC is
the Registrant's filing date provided that the filing complies with all
applicable requirements. The SEC may reject a filing that does not
comply with applicable requirements. The SEC's receipt of a filing,
however, shall not constitute a finding that the filing has been filed
as required or that the information therein is accurate, current, or
complete.
C. Number of Copies; How and Where to File. The Registrant must
file the original and two copies of Form TA-2 with the SEC. The
original copy of Form TA-2 must be manually signed and any additional
copies may be photocopies of the signed original copy. All copies must
be legible and on good quality 8\1/2\ x 11 inch white paper. The
Registrant must keep an exact copy of any filing in its records. (For
recordkeeping rules see 17 CFR 240.17Ad-6 and 7).
The Registrant must file Form TA-2 directly with the SEC at:
Securities and Exchange Commission, 450 5th Street, N.W., Washington,
DC 20549-0013.

II. Special Instructions for Filing Form TA-2

A. Indicate the calendar year for which Form TA-2 is filed in the
box at the upper left hand corner. A transfer agent registered on
December 31 shall file Form TA-2 by the following March 31 even if the
transfer agent conducted business for less than the entire reporting
period.
B. In answering Question 4, indicate the number of items received
for transfer during the reporting period. Omit the purchase and
redemption of open-end investment company shares. Report those items in
response to Question 10.
C. In answering Questions 5 and 6, include closed-end investment
company securities in the corporate equity securities category.
In answering Question 5.a, include Direct Registration System,
dividend reinvestment plan and/or direct purchase plan accounts in the
total number of individual securityholder accounts maintained. In
Question 5.b., include dividend reinvestment plan and/or direct
purchase plan accounts only. In Question 5.c., include Direct
Registration System accounts only. In Question 5.d., include American
Depositary Receipts (ADRs) in the corporate equity or corporate debt
category, as appropriate, and include dividend reinvestment plan and/or
direct purchase plan accounts in the corporate equity or open-end
investment company securities category.
In answering Question 6, debt securities are to be counted as one
issue per CUSIP number. Open-end investment company securities
portfolios are to be counted as one issue per CUSIP number.
D. In answering Question 7.c., exclude coupon payments and
transfers of record ownership as a result of corporate actions.
E. In answering Question 10, exclude non-value transactions such as
name or address changes.
F. In answering Question 11.b., include only those accounts held by
securityholders that are defined as lost by Rule 17Ad-17 when the
underlying securities (i.e., not just dividends and interest) have been
remitted to the states.

III. Federal Information Law and Requirements

SEC's Collection of Information: 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. Under
Sections 17, 17A(c) and 23(a) of the Act and the rules and regulations
thereunder, the SEC is authorized to solicit from registered transfer
agents the information required to be supplied on Form TA-2. The filing
of this Form is mandatory for all registered transfer agents. The
information will be used for the principal purpose of regulating
registered transfer agents but may be used for all routine uses of the
SEC or of the ARAs. Information supplied on this Form will be included
routinely in the public files of the ARAs and will be available for
inspection by any interested person. Any member of the public may
direct to the SEC any comments concerning the accuracy of the burden
estimate on the application facing page of this Form, and any
suggestions for reducing this burden. The Office of Management and
Budget has reviewed this collection of information in accordance with
the clearance requirements of 44 U.S.C. 3507. The applicable Privacy
Act system of records is SEC-2. Form TA-2 is subject to the routine
uses set forth at 40 FR 39255 (Aug. 27, 1975) and 41 FR 5318 (Feb. 5,
1976).

[[Page 36612]]

----------------------------------------------------------------------------------------------------------------
File Number: OMB Approval
----------------------------------------------------------------------------------------------------------------
For the reporting period ended OMB Number: 3235-0337.
December 31. Expires: June 30, 2002.
Estimated average burden hours per full response: 6.00.
Estimated average burden hours per intermediate response: 1.50.
Estimated average burden hours per minimum response: .50.
----------------------------------------------------------------------------------------------------------------

United States Securities and Exchange Commission, Washington, D.C.
20549

Form TA-2--Form for Reporting Activities of Transfer Agents Registered
Pursuant to Section 17A of the Securities Exchange Act of 1934

Attention: Intentional misstatements or omissions of fact constitute
Federal criminal violations. See 18 U.S.C. 1001 and 15 U.S.C. 78ff(a)
1. Full name of Registrant as stated in Question 3 of Form TA-1:
(Do not use Form TA-2 to change name or address.)
----------------------------------------------------------------------
----------------------------------------------------------------------

2. a. During the reporting period, has the Registrant engaged a
service company to perform any of its transfer agent functions? (Check
appropriate box.)

{time} All {time} Some {time} None

b. If the answer to subsection (a) is all or some, provide the
name(s) and transfer agent file number(s) of all service company(ies)
engaged.

------------------------------------------------------------------------
Name: File No. (beginning with 84- or 85-):
------------------------------------------------------------------------
.....................................
------------------------------------------------------------------------
.....................................
------------------------------------------------------------------------

------------------------------------------------------------------------

c. During the reporting period, has the Registrant been engaged as
a service company by a named transfer agent to perform transfer agent
functions?

__Yes____No
d. If the answer to subsection (c) is yes, provide the name(s) and
file number(s) of the named transfer agent(s) for which the Registrant
has been engaged as a service company to perform transfer agent
functions: (If more room is required, please complete and attach the
Supplement to Form TA-2.)

----------------------------------------------------------------------------------------------------------------
Name: File No. (beginning with 84- or 85-):
----------------------------------------------------------------------------------------------------------------
....................................................................
----------------------------------------------------------------------------------------------------------------
....................................................................
----------------------------------------------------------------------------------------------------------------
....................................................................
----------------------------------------------------------------------------------------------------------------
....................................................................
----------------------------------------------------------------------------------------------------------------

3. a. Registrant's appropriate regulatory agency. (Check one box
only.)

__ Comptroller of the Currency
__ Federal Deposit Insurance Corporation
__ Board of Governors of the Federal Reserve System
__ Securities and Exchange Commission

b. During the reporting period, has the Registrant amended Form TA-
1 within 60 calendar days following the date on which information
reported therein became inaccurate, incomplete, or misleading? (Check
appropriate box.)

__ Yes, filed amendment(s)
__ No, failed to file amendment(s)
__ Not applicable

c. If the answer to subsection (b) is no, provide an explanation.
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------

If the response to any of questions 4-11 below is none or zero,
enter ``0.''

[[Page 36613]]

4. Number of items received for transfer during the reporting period............................
---------------
5. a. Total number of individual securityholder accounts, including accounts in the Direct
Registration System (DRS), dividend reinvestment plans and/or direct purchase plans as of
December 31....................................................................................
---------------
b. Number of individual securityholder dividend reinvestment plan and/or direct purchase
plan accounts as of December 31............................................................
---------------
c. Number of individual securityholder DRS accounts as of December 31.......................
---------------
d. Approximate percentage of individual securityholder accounts from subsection (a) in the
following categories as of December 31.....................................................

--------------------------------------------------------------------------------------------------------------------------------------------------------
Corporate equity Corporate debt Open-end investment Limited partnership Municipal debt
securities securities company securities securities securities Other securities
--------------------------------------------------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------------------------------------------------

6. Number of securities issues for which Registrant acted in the
following capacities, as of December 31:

----------------------------------------------------------------------------------------------------------------
Corporate equity & debt Open-end
securities investment Limited Municipal Other
-------------------------- company partnership debt securities
Equity Debt securities securities securities
----------------------------------------------------------------------------------------------------------------
a. Receives items for transfer and
maintains the master
securityholder files.............
----------------------------------------------------------------------------------------------------------------
b. Receives items for transfer but
does not maintain the master
securityholder files.............
----------------------------------------------------------------------------------------------------------------
c. Does not receive items for
transfer but maintains the master
securityholder files.............
----------------------------------------------------------------------------------------------------------------

7. Scope of certain additional types of activities performed:
a. Number of issues for which dividend reinvestment plan and/or direct purchase plan
services were provided, as of December 31..................................................
---------------
b. Number of issues for which DRS services were provided, as of December 31.................
---------------
c. Dividend disbursement and interest paying agent activities conducted during the reporting
period: ..................................................................................
i. number of issues.....................................................................
---------------
ii. amount (in dollars).................................................................
---------------

8. a. Number and aggregate market value of securities aged record
differences, existing for more than 30 days, as of December 31:

----------------------------------------------------------------------------------------------------------------
Prior transfer
agent (If Current transfer
applicable) agent
----------------------------------------------------------------------------------------------------------------
i. Number of issues......................................................... ................ ................
ii. Market value (in dollars)............................................... ................ ................
----------------------------------------------------------------------------------------------------------------

b. Number of quarterly reports regarding buy-ins filed by the Registrant with its ARA (including
the SEC) during the reporting period pursuant to Rule 17Ad-11(c)(2)............................
---------------
c. During the reporting period, did the Registrant file all quarterly reports regarding buy-ins
with its ARA (including the SEC) required by Rule 17Ad-11(c)(2)?...............................
---------------

__ Yes __ No

d. If the answers to subsection (c) is no, provide an explanation for
each failure to file.
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------

9. a. During the reporting period, has the Registrant always been in
compliance with the turnaround time for routine items as set forth in
Rule 17Ad-2?

[[Page 36614]]

__Yes __ No

If the answer to subsection (a) is no, complete subsections (i) through (ii).
i. Provide the number of months during the reporting period in which the Registrant was not
in compliance with the turnaround time for routine items according to Rule 17Ad-2..........
---------------
ii. Provide the number of written notices Registrant filed during the reporting period with
the SEC and with its ARA that reported its noncompliance with turnaround time for routine
items according to Rule 17Ad-2.............................................................
---------------
10. Number of open-end investment company securities purchases and redemptions
(``transactions'') excluding dividend, interest and distribution postings processed during the
reporting period:
a. Total number of transactions processed:..................................................
---------------
b. Number of transactions processed on a date other than date of receipt of order (``as
ofs''):....................................................................................
---------------
11. a. During the reporting period, provide the date of all database searches conducted for lost
securityholder accounts listed on the transfer agent's master securityholder files, the number
of lost securityholder accounts for which a database search has been conducted, and the number
of lost securityholder accounts for which a different address has been obtained as a result of
a database search.

----------------------------------------------------------------------------------------------------------------
Number of lost securityholder
Date of database search accounts submitted for database Number of different addresses
search obtained from database search
----------------------------------------------------------------------------------------------------------------
.................................... ....................................
----------------------------------------------------------------------------------------------------------------
.................................... ....................................
----------------------------------------------------------------------------------------------------------------
.................................... ....................................
----------------------------------------------------------------------------------------------------------------
.................................... ....................................
----------------------------------------------------------------------------------------------------------------

b. Number of lost securityholder accounts that have been remitted to states during the reporting
period.........................................................................................
---------------

SIGNATURE: The Registrant submitting this Form, and the person signing
the Form, hereby represent that all the information contained in the
Form is true, correct, and complete.

----------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------
Manual signature of Official responsible for Form................ Title:
Telephone number:
----------------------------------------------------------------------------------------------------------------
Name of Official responsible for Form: (First name, Middle name, Date signed
Last name). (Month/Day/Year):
----------------------------------------------------------------------------------------------------------------
File Number...................................................... Supplement to Form TA-2
----------------------------------------------------------------------------------------------------------------
For the reporting period ended December 31,--------.............. Full Name of Registrant
----------------------------------------------------------------------------------------------------------------

Use this schedule to provide the name(s) and file number(s) of the
named transfer agent(s) for which the Registrant has been engaged as a
service company to perform transfer agent functions:

--------------------------------------------------------------------------------------------------------------------------------------------------------
Name: File No. (beginning with 84- or 85-):
--------------------------------------------------------------------------------------------------------------------------------------------------------
...........................................................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
...........................................................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
...........................................................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
...........................................................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
...........................................................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
...........................................................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
...........................................................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
...........................................................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
...........................................................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
...........................................................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
...........................................................................
--------------------------------------------------------------------------------------------------------------------------------------------------------

[[Page 36615]]

...........................................................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
...........................................................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
...........................................................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
...........................................................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
...........................................................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
...........................................................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
...........................................................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
...........................................................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
...........................................................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
...........................................................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
...........................................................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
...........................................................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
...........................................................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
...........................................................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
...........................................................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
...........................................................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
...........................................................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
...........................................................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
...........................................................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
...........................................................................
--------------------------------------------------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------------------------------------------------

[FR Doc. 00-14594 Filed 6-8-00; 8:45 am]
BILLING CODE 8010-01-P