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The Dodd-Frank Act and SIC®

The Dodd-Frank Wall Street Reform and Consumer protection Act which was signed in to law by President Barack Obama on July 21, 2010 contains a section on the Lost & Stolen Program. This section expands the scope of the Lost & Stolen Securities Program (LSSP) to include all cancelled certificates. The Securities & Exchange Commission (SEC) is currently rewriting the rules and these new rules are expected to be in place by mid 2011.

Over the past 10 years the Securities Information Center (SIC®) who oversees the LSSP have encouraged transfer agents to submit cancelled certificates to the LSSP. Although the LSSP mandates reports and inquiries only as to lost, stolen, missing or counterfeit securities certificates (including cancelled), the current Rule 17f-1 permits institutions to file reports and make inquiries relating to escheated and other types of compromised certificates as well. Because they are often processed, shipped and stored in bulk, cancelled certificates pose a particular threat to the safety and soundness of the securities markets. Over the past fifteen years, there have been a number of spectacular mishaps involving billions of dollars of cancelled certificates that eventually resurfaced in the marketplace either through sales or as collateral for loans.

Recognizing this issue the SEC introduced rule 17ad-19 which regulated the processing and general handling of cancelled certificates. This rule mandated that all lost and stolen cancelled securities should be reported to the LSSP. As a result of these efforts approximately 75% by volume of the transfer agent community now submits cancelled certificate details to the LSSP.

The Dodd-Frank regulation will expand the existing rules to include all cancelled certificates not just the lost and stolen cancelled items.

In order to prepare for this forthcoming regulation SIC® would like to inform all users of the various reporting options available. There are several ways for SIC® users to submit cancelled certificates reports to the SIC® database. A user can key in the details via the web site www.secic.com. Also there are electronic file formats options that allow reporting to be fully automated. This is the most preferred method because it removes all manual intervention and as a result the reporting process becomes seamless. There is no additional charge for the use of electronic reporting.

For further information please call our Customer Service Center.

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