The Securities and Exchange Commission has
approved1 amendments to Rule 409 (“Statements of Accounts
to Customers”) permitting institutional customers doing business
solely on a deliver versus payment/receive versus payment basis
(“DVP/RVP”) to opt out of receiving statements as otherwise required
by the rule, subject to prescribed requirements. The amendments are
effective immediately and are attached as Exhibit A.
Background
Rule 409(a) provides that, except with the permission
of the Exchange, member organizations must send customers statements
of account showing security and money positions and entries at least
quarterly to all accounts having an entry, money or security
position during the preceding quarter. This rule assures that
customers receive notice of such transactions, positions and
balances on a regular basis. In the case of institutional customers
doing business solely on a DVP/RVP basis, however, reliance tends to
be placed chiefly upon communications of the bank or other custodian
holding the positions and balances for the institution. The
amendments provide a means for such customers to avoid receipt of
unnecessary and duplicative reports and to mitigate the costs of
such communications.
Amendments
Rule 409(a) has been amended to provide that quarterly
statements need not be sent if:
1. The customer’s account is carried
solely for the purpose of settlement on a DVP/RVP
basis;
2. All transactions
effected for the account are done on a DVP/RVP basis in conformity
with Rule 387;
3. The account does
not show security or money positions at the end of the quarter
(provided however that positions of a temporary nature2 -
such as those arising from fails to receive or deliver, errors,
questioned trades, dividend or bond interest entries and other
similar transactions - shall not be deemed security or money
positions for the purpose of this rule);
4. The customer consents
to the suspension of such statements in writing.3 Such
consents must be maintained by the member organization in manner
consistent with Exchange Rule 440 and Rule 17a-44 under
the Securities Exchange Act of 1934 (the “Exchange
Act”);5
5. The member
organization must provide any particular statement or statements
to the customer upon
request;6 and
6. The
member organization must promptly reinstate the delivery of
statements to the customer upon request.
In addition, the amendments to the rule do not qualify
or condition the obligations of member organizations under Exchange
Act Rule 15c3-27 with regard to quarterly notices of free
credit balances.
Questions
regarding this Information Memo may be directed to Gregory Taylor at
(212) 656-2920.
|
