(a) Notice requirement. Any member bank or any of its subsidiaries
that is a registered clearing agency pursuant to section 17A(b) of
the Securities Exchange Act of 1934 (the act), and that—
(1) imposes any final disciplinary sanction
on any participant therein;
(2) denies participation to any applicant;
or
(3) prohibits or
limits any person in respect to access to services offered by the
clearing agency,
shall file with the Board
(and the appropriate regulatory agency, if other than the Board, for
a participant or applicant) notice thereof in the manner prescribed
in this section.
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(b) Notice of final disciplinary
actions.
(1) Any registered clearing agency for
which the Board is the appropriate regulatory agency that takes any
final disciplinary action with respect to any participant shall promptly
file a notice thereof with the Board in accordance with paragraph
(c) of this section. For the purposes of this paragraph (b), “final
disciplinary action” means the imposition of any disciplinary sanction
pursuant to section 17A(b)(3)(G) of the act, or other action of a
registered clearing agency which, after notice and opportunity for
hearing, results in final disposition of charges of—
(i) one
or more violations of the rules of the registered clearing agency;
or
(ii) acts or
practices constituting a statutory disqualification of a type defined
in paragraph (iv) or (v) (except prior convictions) of section 3(a)(39)
of the act.
(2) However, if a registered clearing agency fee schedule specifies
certain charges for errors made by its participants in giving instructions
to the registered clearing agency which are de minimis on a per-error
basis, and whose purpose is, in part, to provide revenues to the clearing
agency to compensate it for effort expended in beginning to process
an erroneous instruction, such error charges shall not be considered
a final disciplinary action for purposes of this paragraph (b).
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(c) Contents of final-disciplinary-action
notice. Any notice filed pursuant to paragraph (b) of this section
shall consist of the following, as appropriate:
(1) the name of the respondent and the
respondent’s last known address, as reflected on the records of the
clearing agency, and the name of the person, committee, or other organizational
unit that brought the charges. However, identifying information as
to any respondent found not to have violated a provision covered by
a charge may be deleted insofar as the notice reports the disposition
of that charge and, prior to the filing of the notice, the respondent
does not request that identifying information be included in the notice;
(2) a statement describing
the investigative or other origin of the action;
(3) as charged in the proceeding, the specific
provision or provisions of the rules of the clearing agency violated
by the respondent, or the statutory disqualification referred to in
paragraph (b)(2) of this section, and a statement describing the answer
of the respondent to the charges;
(4) a statement setting forth findings
of fact with respect to any act or practice in which the respondent
was charged with having engaged in or omitted; the conclusion of the
clearing agency as to whether the respondent violated any rule or
was subject to a statutory disqualification as charged; and a statement
of the clearing agency in support of its resolution of the principal
issues raised in the proceedings;
(5) a statement describing any sanction
imposed, the reasons therefor, and the date upon which the sanction
became or will become effective; and
(6) such other matters as the clearing
agency may deem relevant.
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(d) Notice of final denial, prohibition, termination,
or limitation based on qualification or administrative rules.
(1) Any registered clearing
agency, for which the Board is the appropriate regulatory agency,
that takes any final action that denies or conditions the participation
of any person, or prohibits or limits access, to services offered
by the clearing agency, shall promptly file notice thereof with the
Board (and the appropriate regulatory agency, if other than the Board,
for the affected person) in accordance with paragraph (e) of this section;
but such action shall not be considered a final disciplinary action
for purposes of paragraph (b) of this section where the action is
based on an alleged failure of such person to—
(i) comply
with the qualification standards prescribed by the rules of the registered
clearing agency pursuant to section 17A(b)(4)(B) of the act; or
(ii) comply with any
administrative requirements of the registered clearing agency (including
failure to pay entry or other dues or fees, or to file prescribed
forms or reports) not involving charges of violations that may lead
to a disciplinary sanction.
(2) However, no such action shall be considered
final pursuant to this paragraph (d) that results merely from a notice
of such failure to comply to the person affected, if such person has
not sought an adjudication of the matter, including a hearing, or
otherwise exhausted the administrative remedies within the registered clearing
agency with respect to such a matter.
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(e) Contents of notice required by paragraph
(d) of this section. Any notice filed pursuant to paragraph (d)
of this section shall consist of the following, as appropriate:
(1) the name of each person concerned and
each person’s last known address, as reflected in the records of the
clearing agency;
(2)
the specific grounds upon which the action of the clearing agency
was based, and a statement describing the answer of the person concerned;
(3) a statement setting
forth findings of fact and conclusions as to each alleged failure
of the person to comply with qualification standards or administrative
obligations, and a statement of the clearing agency in support of
its resolution of the principal issues raised in the proceeding;
(4) the date upon which
such action became or will become effective; and
(5) such other matters as the clearing
agency deems relevant.
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(f) Notice of final action based on prior adjudicated
statutory disqualifications. Any registered clearing agency for
which the Board is the appropriate regulatory agency that takes any
final action shall promptly file notice thereof with the Board (and
the appropriate regulatory agency, if other than the Board, for the
affected person) in accordance with paragraph (g) of this section,
where the final action—
(1) denies or conditions participation
to any person, or prohibits or limits access to services offered by
the clearing agency; and
(2) is based upon a statutory disqualification of a type defined
in paragraph (A), (B), or (C) of section 3(a)(39) of the act, consisting
of a prior conviction, as described in subparagraph (E) of section
3(a)(39) of the act. However, no such action shall be considered final
pursuant to this paragraph (f) that results merely from a notice of
such disqualification to the person affected, if such person has not
sought an adjudication of the matter, including a hearing, or otherwise
exhausted the administrative remedies within the clearing agency with
respect to such a matter.
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(g) Contents of notice required by paragraph (f)
of this section. Any notice filed pursuant to paragraph (f) of
this section shall consist of the following, as appropriate:
(1) the name of each person concerned and
each person’s last known address, as reflected in the records of the
clearing agency;
(2)
a statement setting forth the principal issues raised, the answer
of any person concerned, and a statement of the clearing agency in
support of its resolution of the principal issues raised in the proceeding;
(3) any description furnished
by or on behalf of the person concerned of the activities engaged
in by the person since the adjudication upon which the disqualification
is based;
(4) a copy
of the order or decision of the court, appropriate regulatory agency,
or self-regulatory organization that adjudicated the matter giving
rise to the statutory disqualification;
(5) the nature of the action taken and
the date upon which such action is to be made effective; and
(6) such other matters as
the clearing agency deems relevant.
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(h) Notice of summary suspension of participation. Any registered clearing agency for which the Board is the appropriate
regulatory agency that summarily suspends or closes the accounts of
a participant pursuant to the provisions of section 17A(b)(5)(C) of
the act shall, within one business day after such action becomes effective,
file notice thereof with the Board and the appropriate regulatory
agency for the participant, if other than the Board, of such action
in accordance with paragraph (i) of this section.
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(i) Contents of notice of summary suspension. Any notice pursuant to paragraph (h) of this section shall contain
at least the following information, as appropriate:
(1) the name of the participant concerned
and the participant’s last known address, as reflected in the records
of the clearing agency;
(2) the date upon which the summary action became or will become
effective;
(3) if the
summary action is based upon the provisions of section 17A(b)(5)(C)(i)
of the act, a copy of the relevant order or decision of the self-regulatory
organization, if available to the clearing agency;
(4) if the summary action is based upon
the provisions of section 17A(b)(5)(C)(ii) of the act, a statement
describing the default of any delivery of funds or securities to the
clearing agency;
(5)
if the summary action is based upon the provisions of section 17A(b)(5)(C)(iii)
of the act, a statement describing the financial or operating difficulty
of the participant based upon which the clearing agency determined
that the suspension and closing of accounts was necessary for the
protection of the clearing agency, its participants, creditors, or
investors;
(6) the
nature and effective date of the suspension; and
(7) such other matters as the clearing
agency deems relevant.
