Home >  SECURITIES AND EXCHANGE COMMISSION 17 CFR Parts 240 and 249 [RELEASE NO. 34-39176; File No. S7-21-96] RIN 3235-AG99

SECURITIES AND EXCHANGE COMMISSION 17 CFR Parts 240 and 249 [RELEASE NO. 34-39176; File No. S7-21-96] RIN 3235-AG99













SECURITIES AND EXCHANGE COMMISSION



17 CFR Parts 240 and 249



[RELEASE NO. 34-39176; File No. S7-21-96]



RIN 3235-AG99



LOST SECURITYHOLDERS



AGENCY: Securities and Exchange Commission



ACTION: Final Rule



SUMMARY: The Securities and Exchange Commission is adopting Rule 17Ad-17



and Rule 17a-24 under the Securities Exchange Act of 1934. Rule 17Ad-17,



which is designed to address the problem of "lost securityholders,"



requires transfer agents to conduct searches in an effort to locate lost



securityholders. Rule 17a-24, which is designed to assist the Commission



in monitoring the effects of Rule 17Ad-17, requires transfer agents to file



information on lost securityholders with the Commission. The rules are



designed to reduce the number of lost securityholders.



EFFECTIVE DATE: 240.17Ad-17 and 240.17Ad-7(i) will be effective [Insert



date 60 days after publication in the Federal Register] and 240.17a-24



and 249b.102, the amendments to Form TA-2 will be effective [Insert date



120 days after publication in the Federal Register].



FOR FURTHER INFORMATION CONTACT: Jerry W. Carpenter, Assistant Director;



Christine Sibille, Senior Counsel; Jeffrey Mooney, Attorney; or Theodore



Lazo, Attorney at 202/942-4187, Office of Risk Management and Control, Mail



Stop 5-1, Division of Market Regulation, Securities and Exchange



Commission, 450 Fifth Street, N.W., Washington, D.C. 20549.



SUPPLEMENTARY INFORMATION:



I. INTRODUCTION AND BACKGROUND











Transfer agents serve as the custodians of securityholder records,



including records of securityholders' addresses, for issuers. In this



capacity, transfer agents frequently are responsible for disseminating



shareholder communications and dividend and interest payments. For various



reasons, transfer agents occasionally have outdated or incorrect addresses



for some securityholders ("lost securityholders").<(1)> As a result,



these shareholders do not receive dividend and interest payments to which



they are entitled. Generally, issuers retain custody of such dividend and



interest payments, and if contact is not reestablished with a



securityholder prior to the expiration of the appropriate state's escheat



period, the issuer must turn the securityholder's assets over to the state



unclaimed property administrator. While various transfer agents attempt to



locate lost securityholders, the extent and type of efforts used vary



considerably from one transfer agent to another.<(2)> The Securities



and Exchange Commission ("Commission") believes that establishing minimum



search requirements in this area will facilitate locating lost



securityholders.



On August 22, 1996, the Commission issued for comment a release



("Proposing Release")<(3)> proposing Rule 17Ad-17<(4)> and Rule





<(1)> For example, some securityholders do not provide a new

address when they move.



<(2)> See Securities Exchange Act Release No. 37595 (August

22, 1996), 61 FR 44249 (release proposing Rule 17Ad-17

and Rule 17a-24), note 13 (discussing the methods

transfer agents currently use to locate lost

securityholders).



<(3)> Id. The Commission later extended the comment period

contained in the Proposing Release. Securities

Exchange Act Release No. 37949 (November 15, 1996), 61

FR 59046 (extending comment period).



======END OF PAGE 2======











17a-24<(5)> under the Securities Exchange Act of 1934 ("Exchange Act")



and proposing amendments to Rule 17Ad-7,<(6)> which were designed to



address the problem of lost securityholders. Proposed Rule 17Ad-17 would



require that transfer agents exercise reasonable care, including conducting



data base searches, in an effort to locate lost securityholders.<(7)>



The proposed amendment to Rule 17Ad-7 set forth the retention time periods



for the records relating to compliance with proposed Rule 17Ad-17.



Proposed Rule 17a-24 would have required certain entities that hold assets



for others (e.g., transfer agents and broker-dealers) to file annually with



the Commission a list of the social security numbers of all lost



securityholders contained in their records. The Proposing Release also



requested comment on whether either the Commission or a private entity



should create and operate a lost securityholder data base.



















<(4)>(...continued)

<(4)> 17 CFR 240.17Ad-17.



<(5)> 17 CFR 240.17a-24.



<(6)> 17 CFR 240.17Ad-7.



<(7)> The Proposing Release also discussed transfer agents'

obligations under Rule 17Ad-10 to maintain and keep

current accurate master securityholder files (defined

below in note 10), which include information such as

securityholders' names and addresses. The Proposing

Release concluded that maintaining accurate master

securityholder files is one of the most basic steps in

addressing the lost securityholder problem. The

Commission believes that conducting data base searches

for lost securityholders pursuant to Rule 17Ad-17 will

enhance a transfer agent's fulfillment of its

responsibilities under Rule 17Ad-10.

======END OF PAGE 3======











The Commission received 57 comment letters from 52 commenters in



response to the Proposing Release.<(8)> The commenters in general



expressed support for proposed Rule 17Ad-17 although several commenters



expressed concerns about specific provisions of the proposed rule. The



commenters in general expressed concern about proposed Rule 17a-24. The



Commission is adopting Rule 17Ad-17 substantially as proposed but with some



modifications to reflect commenters' views and is amending Rule 17Ad-7 as



proposed. The Commission is adopting proposed Rule 17a-24 with substantial



revisions and is making related changes to Form TA-2.<(9)> In



addition, the Commission has directed its staff to review the operations of



the adopted rules after three years and to report back to the Commission on



its findings.



II. DISCUSSION



A. Rule 17Ad-17: Obligation to Search



As adopted, Rule 17Ad-17 requires that transfer agents exercise



reasonable care to ascertain the correct addresses of all lost



securityholders in their records. At a minimum, transfer agents must



conduct two searches using an information data base. In addition, transfer



agents may not use any service designed to locate their lost





<(8)> The Commission received comment letters from eighteen

transfer agents, five trade associations representing

transfer agents, five individuals, three corporations,

one broker-dealer, two professional search firms, and

eighteen government entities. A summary of comments

has been prepared by the staff of the Division of

Market Regulation. The summary is included along with

the comment letters in Public File No. S7-21-96, which

is available for inspection and copying in the

Commission's Public Reference Room, 450 Fifth Street,

N.W., Washington, D.C. 20549.



<(9)> Form TA-2 is referenced in 17 CFR 249b.102.



======END OF PAGE 4======











securityholders that results in a charge to a securityholder until after



the two data base searches have been conducted.



1. Definition of Lost Securityholder



Rule 17Ad-17 generally defines a "lost securityholder" as a



securityholder to whom an item of correspondence that was sent to the



securityholder at the address in the transfer agent's master securityholder



file has been returned as undeliverable.<(10)> However, if a



transfer agent re-sends the returned item to the securityholder within one



month, the transfer agent has the option to delay classifying the



securityholder as lost for purposes of Rule 17Ad-17 until the item is again



returned to the transfer agent as undeliverable. If and when a transfer



agent receives a new address for a lost securityholder, either directly



from the securityholder or through the transfer agent's own efforts, the



securityholder will no longer be classified as lost. Under the



definition as proposed, a securityholder would have been classified as lost



only after two separate items of correspondence mailed at least three



months apart had each been returned as undeliverable. Commenters in



general were opposed to a requirement that three months elapse between the



mailing of two undeliverable items of correspondence, stating that this



approach would increase costs by requiring transfer agents to initiate new



coding mechanisms.<(11)> In addition, some commenters stated that







<(10)> "Master securityholder file" is defined in Rule 17Ad-

9(b) as the official list of individual securityholder

accounts.



<(11)> The Proposing Release noted that the three month period

was intended to give transfer agents time to receive

any delayed change of address notifications prior to

having to conduct searches.



======END OF PAGE 5======











continuing to mail distributions to an incorrect address increases risk of



loss. Commenters also noted that the proposed definition of lost



securityholder could result in long delays before some shareholders are



defined as lost.<(12)>



The Commission believes that the revised definition produces a more



consistent result as to when shareholders are classified as



lost.<(13)> In addition, the Commission understands that some



transfer agents have internal procedures whereby they promptly remail



returned correspondence because they have found such remailing procedures



to be beneficial in reducing the number of lost



securityholders.<(14)> Therefore, the revised definition gives



transfer agents flexibility to delay coding a securityholder as lost until



after the remailed item is returned as undeliverable. In addition,



the Commission is making minor technical amendments to the proposed



definition of lost securityholder. For example, to take into account







<(12)> For example, if an issue does not pay dividends or

interest, the only securityholder correspondence may be

the annual report. In such an instance, a

securityholder would not have been classified as lost

until a year after the first correspondence had been

returned as undeliverable.



<(13)> The revised definition avoids situations where

securityholders of issues with quarterly mailings would

have been defined as lost three months after a

correspondence was first returned as undeliverable

while securityholders of issues with only annual

mailings would not have been defined as lost until a

year after a correspondence was first returned as

undeliverable.



<(14)> Transfer agents have found that some items are returned

as a result of the deliverer's error rather than an

incorrect address and that remailing will result in the

securityholder receiving the item.



======END OF PAGE 6======











future developments in the methods used to disseminate shareholder



communications, the rule no longer refers to returned correspondence that



were "sent by first class mail."



2. Transfer Agents' Search Requirements



a. Type of Search



Rule 17Ad-17 requires every recordkeeping transfer agent whose master



securityholder file includes accounts of lost securityholders to search for



such securityholders' current address using at least one information data



base. The transfer agent's search for a lost securityholder must be based



on the taxpayer identification number ("TIN") or on the name of the lost



securityholder if a search based on TIN is not reasonably likely to locate



the lost securityholder.



As originally proposed, the search could be based on a



securityholder's name if such a search was reasonably likely to locate the



lost securityholder. Commenters were divided as to the advisability of



such provision. While most commenters agreed that TIN searches are more



effective, some commenters argued that transfer agents should have the



flexibility to search by name when advisable (e.g., when the TIN is missing



or incomplete). By revising the requirement to permit name searches only



when a TIN search is not reasonably likely to locate the lost



securityholder (e.g., when the TIN is missing or incomplete), the



Commission believes transfer agents are afforded sufficient flexibility to



conduct the most effective search.



b. Time Frames for Search



The rule as adopted also differs from the proposal with respect to the



time frames in which the searches must be conducted. As proposed, a





======END OF PAGE 7======











transfer agent would have had to conduct a search within three months of a



securityholder being classified as lost. If after the first search the



securityholder had continued to be classified as lost, the proposal would



have required another search between 12 and 18 months after the initial



search. Many commenters suggested that conducting an initial search three



months after a securityholder was classified as lost was too soon for the



data bases to be updated, and that conducting a second search between 12



and 18 months after the first search was too long a period from loss of



contact.



As adopted, a transfer agent must conduct the initial search between



three and 12 months of a securityholder being classified as



lost.<(15)> If the lost securityholder is not found, the transfer



agent must conduct a second search between six and 12 months after the



initial search.<(16)> The second search is intended to take



advantage of address changes that may have been added to the data base





<(15)> As discussed in the Proposing Release, the Commission

encourages transfer agents to take immediate steps upon

learning a shareholder's address may not be correct.

Proposing Release, note 16. The Proposing Release

discusses several techniques that, while not required

by the rule, may be beneficial in reducing the number

of lost securityholders for which the transfer agent

must search. Proposing Release, note 13.



<(16)> Demonstrated below are time frames in which the second

search would need to be conducted depending upon when

the first search occurred.



3 9 12 15 18 21 24

Lost Mos. Mos. Mos. Mos. Mos. Mos. Mos.

� � 1st Search �

1st search at:

3 mos. � 2d Search �

6 mos. � 2d Search �

9 mos. � 2d Search �

12 mos. � 2d Search �



======END OF PAGE 8======











after the initial search. The transfer agent must conduct these searches



without charge to a lost securityholder.



Under the proposed rule, the time in which transfer agents would have



been required to conduct the first search would have depended on the



frequency of mailings associated with an issue. (The first search would



have had to be conducted between three and 15 months after the return of



the first correspondence based on whether the issue had quarterly or annual



mailings.)<(17)> Because the timing of the search requirements would



have been dependent upon the frequency of issuers' mailings, commenters



noted that transfer agents would not have had much flexibility in



determining when to search for lost securityholders.



Under the adopted rule, the first search must be conducted between



three to 12 months after the first correspondence is returned. However,



unlike the proposed rule, transfer agents may search at any time during



this period. As a result, transfer agents' search requirements are



triggered within basically the same time frames whether there are quarterly



or annual mailings, but transfer agents will be better able to use their



discretion as to the most appropriate time to conduct the searches.



Additionally, this revision may permit transfer agents to conduct more



cost-effective searches by allowing transfer agents to bundle together many



lost securityholders for submission to a data base service which should



lower internal costs and increase the likelihood that transfer agents will



qualify for volume discounts from data base services.





<(17)> Between three to 12 months would have elapsed between

the first and second returned items of correspondence,

and the first search would have had to be conducted

within three months after the return of the second item

of correspondence.



======END OF PAGE 9======











c. Exceptions to the Search Requirement



In the Proposing Release, the Commission requested comment on whether



the requirement to search for lost securityholders should apply only when a



lost securityholder's account contained assets over some de minimis



amount.<(18)> Many commenters agreed that transfer agents should not



be required to expend funds to search for a lost securityholder when the



cost of a search could exceed the amount in the securityholder's account.



Although varying de minimis amounts were suggested, most commenters favored



a de minimis threshold of $100 per account.



The Commission believes that there should be a de minimis exception



from the search requirements that will allow transfer agents to forgo



searches that would not be cost-effective. Based on what the Commission



understands to be the low cost of data base searches,<(19)> the



Commission is amending the proposed rule to permit transfer agents to



exclude from the search requirements any lost securityholder when the value



of all dividend, interest, and other payments due to the securityholder



plus the value of all assets listed in the lost securityholder's account is



less than $25. The Commission believes that this exemption will reduce the











<(18)> In calculating this amount, all assets in that account

for which the transfer agent maintains records are

included regardless of whether the transfer agent is

actually in possession of the property. Therefore, the

value of the assets in the securityholder's account

includes dividends, interest, and other payments due to

the securityholder and the value of any underlying

assets (e.g., the value of securities owned by the

shareholder as shown on the transfer agent's records).



<(19)> Refer to Section IV below for a discussion of the cost

of data base searches.



======END OF PAGE 10======











economic impact of the rule on transfer agents while still affording



sufficient protection to securityholders.<(20)>



In the Proposing Release, the Commission noted that data base searches



generally are considered a cost-effective way to locate lost



securityholders. The Commission requested comment on the potential



effectiveness of the rule in addressing the lost securityholder issue. The



request was intended to elicit comment on situations where data base



searches would not be an appropriate method of locating lost



securityholders. One commenter requested that exemptions from the search



requirement be created for certain categories of securityholders that will



not be reached through an electronic data base search, specifically any



lost securityholder (1) whose last known address is outside of the United



States; (2) whose account has a missing or incomplete TIN; (3) which is not



a natural person (e.g., a corporation); or (4) who is known to be deceased.







Based on this request and on additional research into the capabilities



of existing commercial data bases, the Commission has decided to create an



exemption from the search requirements for securityholders for whom the



transfer agent has received documentation of their death<(21)> and an



exemption for securityholders which are not natural persons. The



Commission understands that the data bases relied upon by most transfer



agents do not contain information on estates or heirs and that there is no







<(20)> Some commenters stated that for efficiency reasons some

transfer agents will search for all lost

securityholders.



<(21)> Such documentation may consist of a report received

from an information data base.



======END OF PAGE 11======











automated method by which such information can be obtained.<(22)>



Securityholders which are not natural persons likewise cannot be located



easily through the use of information data bases and comprise a minuscule



percentage of the total amount of lost securityholders.



The Commission is not adopting the other suggested exemptions because



data base searches for those categories of lost securityholders could in



many cases be effective. For example, although the Commission understands



that most data bases currently do not contain the names of individuals



living outside of the United States, it is possible that a securityholder



with a foreign last known address was only temporarily living out of the



country and that a data base search will provide an updated domestic



address.



With respect to the commenter's request for an exemption for



securityholders with missing or incomplete TINs, the adopted rule permits



transfer agents to conduct a search based on a lost securityholder's name



when a search based on a TIN is not reasonably likely to locate a lost



securityholder. Therefore, the Commission also believes that no exemption



should be created for accounts with missing TINs.



d. Assessment of Procedures



In the Proposing Release, the Commission requested comment on whether



the rule should include (1) a requirement that transfer agents periodically



assess the effectiveness and appropriateness of the search procedures and







<(22)> The Commission has been informed that in the future

some information data bases may be updated to include

beneficiary data. If a low cost method of determining

a deceased's beneficiary becomes available, the

Commission may reexamine the application of search

requirements to this category of securityholder.



======END OF PAGE 12======











technology they employ, and/or (2) a requirement that transfer agents'



search procedures meet a performance standard based on success in locating



lost securityholders. Most commenters that addressed the issue generally



did not support adopting a strict application of this requirement. For



example, some commenters believe that transfer agents should not have an



absolute requirement to locate a certain percentage of their shareholders



because the results of the searches frequently were outside of their



control. While the adopted rule does not specifically contain such



requirements, the Commission believes that transfer agents should bear



these concepts in mind in determining whether they have met their



obligation to exercise reasonable care under Rule 17Ad-17(a). For example,



if a transfer agent is using a data base service that routinely fails to



locate any or that locates only a very small percentage of lost



securityholders, the transfer agent should evaluate whether the use of such



service constitutes the exercise of reasonable care.



3. Definition of Information Data Base



As proposed, Rule 17Ad-17 would have defined an information data base



as any automated data base service that (1) contains addresses of U.S.



residents, including addresses in the geographic area in which the lost



securityholder's last known address is located, (2) covers a reasonably



broad geographic area, (3) is indexed by TIN or by name, and (4) is updated



at least four times a year. The Commission has revised the definition



based on commenters' suggestions. The first requirement has been revised



to require that the data base contain addresses from the entire United



States. The second requirement has been revised to require that the data



base contain names of at least 50% of the U.S. adult population. The third





======END OF PAGE 13======











requirement also has been revised to clarify that an information data base



must be indexed by TINs if a TIN search is used or by name if a name search



is used. The fourth requirement is adopted as proposed. The revisions are



intended to preclude the use of a data base that contains a small number of



names but covers a broad geographic area or one that contains a large



number of names but covers only a small geographic area.



The Commission also is adopting an alternative standard that will



provide flexibility to transfer agents in fulfilling their obligations to



search for lost securityholders. The alternative will permit transfer



agents to use any service to locate lost securityholders if that service



produces comparable results to the information data base described above.



As part of their obligation to maintain records discussed below, a transfer



agent relying on this alternative would be required to develop written



procedures documenting and describing the alternative service used.



4. Use of Professional Search Firms



The Proposing Release discussed the current practice of some transfer



agents to use professional search firms that charge a lost securityholder a



fee for locating the lost securityholder's assets. As proposed and as



adopted, Rule 17Ad-17 will prohibit a transfer agent from using any service



to locate a securityholder that results in a charge to the securityholder



until after the two data base searches required by the rule have been



conducted. While a few commenters argued against the proposed prohibition,



many commenters supported the provision with some arguing for additional



restrictions.



Although the more extensive search techniques employed by professional



search firms may locate some securityholders that the data base searches





======END OF PAGE 14======











will not locate, the charges of such firms can cost a securityholder a



significant portion of his or her assets. The Commission believes that



transfer agents should make efforts (i.e., the search provisions of Rule



17Ad-17(a)(1)) to locate lost securityholders before permitting services to



charge them for reuniting them with their assets. Therefore, the



Commission is adopting Rule 17Ad-17(a)(2) as proposed to delay transfer



agents' use of professional search firms where the charge is assessed to



the securityholder until after a transfer agent has completed two searches



under Rule 17Ad-17.<(23)>



5. Verification of Securityholder



In order to guard against delivery of distributions to an incorrect



recipient, the Commission recommended in the Proposing Release that



transfer agents should verify that the person at the newly obtained address



is in fact its account holder before disbursing securities or funds. One



commenter expressed concern that requiring a transfer agent to confirm a



securityholder's identity may restrict the transfer agent's ability to



correct its master securityholder file because some shareholders may fail



to return verification forms. The language in the Proposing Release was



not intended to mandate a particular procedure. Instead, it was intended



to highlight the need for transfer agents to use care prior to disbursement



of securityholder funds. Prior to disbursing funds or to updating their











<(23)> Because a professional search firm that charges a fee

to the transfer agent rather than to lost

securityholders could qualify as an information data

base search under the rule, professional search firms

could be used to satisfy the transfer agent's search

obligation under Rule 17Ad-17.



======END OF PAGE 15======











master securityholder files, transfer agents should determine whether such



action is appropriate based on all relevant factors.



B. Rules 17Ad-7 and 17Ad-17: Recordkeeping Requirements



Rule 17Ad-17 requires that all recordkeeping transfer agents maintain



records to demonstrate their compliance with the requirements under the



rule. Paragraph (i) is being added to Exchange Act Rule 17Ad-7 to require



that transfer agents maintain the records required by Rule 17Ad-17 for a



period of not less than three years and that transfer agents maintain these



records in an easily accessible place during the first year.<(24)>



In the Proposing Release, the Commission suggested that transfer



agents document the date each securityholder is classified as lost and the



date the data base searches are conducted. One commenter interpreted this



discussion to be a requirement that such dates be recorded on each lost



securityholder's individual account record. This commenter stated that



this requirement could require costly systems upgrades and that transfer



agents instead should be allowed to demonstrate that data base searches



have been conducted by referencing procedures that are in place and that



reasonably assure that the searches are conducted on a timely basis. The



language in the Proposing Release was not intended to specify the



recordkeeping method to be used by transfer agents. Rather it was intended



to provide flexibility to transfer agents to create systems that adequately



demonstrate compliance with Rule 17Ad-17. However, the Commission does not











<(24)> Rule 17Ad-7 sets forth the lengths of time and the

methods by which transfer agents must maintain the

records which they are required to keep pursuant to

Exchange Act Rules 17Ad-6, 17f-2, and 17Ad-17.



======END OF PAGE 16======











believe that referencing procedures without any specific documentation



demonstrating that searches have been appropriately conducted is adequate.



The Commission also is adding language to Rule 17Ad-17 to clarify that



transfer agents must maintain written procedures on how they will comply



with the rule. The amendment to the rule is intended to give transfer



agents more guidance on what the minimum recordkeeping requirements are



while still providing flexibility to determine the most efficient method of



demonstrating compliance with the requirements of the rule.



C. Rule 17a-24: Lost Securityholder Data



In the Proposing Release, the Commission also discussed the creation



of a data base that would contain information (e.g., TINs) on all lost



securityholders. Proposed Rule 17a-24 would have required certain entities



that hold assets for others (e.g., transfer agents and broker-dealers) to



file annually with the Commission a list of the TINs of all lost



securityholders contained in their records. The Commission also requested



comment on whether the Commission or its delegee should create and operate



a lost securityholder data base or whether the Commission should release



the information it received under Rule 17a-24 to the public to permit



private entities to create data bases.



Most commenters were opposed to the creation of a lost securityholder



data base. Many commenters believed that the data base would result in a



loss of privacy for securityholders. Other commenters suggested that the



data base could result in fraudulent claims. Finally, some commenters



opined that the data base would be of limited utility because it would



require that securityholders take the initiative to discover whether they



had any unclaimed assets.





======END OF PAGE 17======











In response to concerns expressed by commenters, the Commission has



determined to adopt proposed Rule 17a-24 with revisions that will only



require the reporting of certain aggregate data. As noted in the Proposing



Release, the Commission believes that there is a need to gather data on



lost securityholders in order to obtain better information as to the extent



to which lost securityholders are not receiving assets to which they are



entitled and to assess the effectiveness of search techniques employed by



transfer agents.<(25)> Similar to the proposed rule, the final rule



will require each recordkeeping transfer agent to file annually with the



Commission information on lost securityholders contained in the transfer



agent's records.<(26)> However, the Commission has determined to



require transfer agents to submit only aggregate data regarding the



accounts of lost securityholders instead of the individual data that would



have been required by proposed Rule 17a-24. This aggregate information



would have been available by totaling the information that would have been



required by proposed Rule 17a-24 or currently is readily accessible by



transfer agents.



Specifically, the Commission is revising proposed Rule 17a-24 to



require registered transfer agents to disclose 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 would be reported for specified periods of time: one year or less,













<(25)> 61 FR at 44252-44253.



<(26)> 61 FR at 44253.



======END OF PAGE 18======











three years or less, five years or less, or greater than five



years.<(27)> The Commission also is requiring information on lost



securityholder accounts that escheat to state unclaimed property



administrators on an annual basis. To facilitate the reporting of this



information, the Commission is amending Exchange Act Form TA-2,<(28)>



the annual report of registered transfer agents. The Commission believes



that this will be the least burdensome and most efficient way for transfer



agents to comply with the revised rule.



The Commission believes that revised Rule 17a-24 is preferable to the



rule as proposed at this time. The aggregate information required by the



adopted rule should, as a result of Rule 17Ad-17, be readily available to



transfer agents. Moreover, the collection of aggregate data, rather than



taxpayer identification numbers or other personal data, ameliorates privacy



concerns raised by some commenters. In addition to not requiring



individual data, the revised rule will enable the Commission to better



monitor the effectiveness of Rule 17Ad-17 over time and determine whether



additional measures are necessary to find lost securityholders. Finally,



the Commission has narrowed the scope of the rule. Unlike the proposed



rule which would have applied to any recordkeeping broker-dealer or



transfer agent, as adopted Rule 17a-24 applies only to recordkeeping









<(27)> The Commission requested comment in the Proposing

Release on whether the filing requirement should

include information concerning the length of time

securityholders have been lost. 61 FR at 44253.



<(28)> Pursuant to Exchange Act Rule 17Ac2-2, registered

transfer agents are required to file an annual report

on Form TA-2 by August 31 of each calendar year. 17

CFR 240.17Ac2-2.



======END OF PAGE 19======











transfer agents. The Commission believes that a narrower focus is



preferable at this time.



III. REGULATORY FLEXIBILITY ANALYSIS



The following discussion summarizes the Commission's Final Regulatory



Flexibility Analysis ("FRFA") in accordance with the Regulatory Flexibility



Act ("RFA")<(29)> in connection with Rule 17Ad-17, Rule 17a-24, and



the related amendments to Rule 17Ad-7 adopted today. A complete copy of



the FRFA may be obtained by contacting Theodore Lazo, Attorney, Division of



Market Regulation, U.S. Securities and Exchange Commission, 450 Fifth



Street, N.W., Washington, D.C. 20549 at 202/942-4187.



The FRFA explains both the need for and the objectives of the rules



adopted by the Commission. As set forth in greater detail in the FRFA, the



adopted rules will establish minimum standards for all transfer agents with



respect to lost securityholders and may help the Commission to monitor the



effectiveness of these standards. The FRFA further explains that the



Commission believes that imposing an affirmative obligation on transfer



agents to search for lost securityholders is in the public interest and



will enhance investor protection.



The FRFA also (i) summarizes the significant issues raised by public



comments in response to the Commission's Initial Regulatory Flexibility



Analysis ("IRFA"), (ii) summarizes the Commission's assessment of such



issues, and (iii) states any changes made in the proposed rules as a result



of such comments. As noted in the FRFA, none of the comment letters



received related directly to the IRFA, but seven commenters supplied data









<(29)> 5 U.S.C. 601-612.



======END OF PAGE 20======











on the costs of proposed Rule 17Ad-17.<(30)> As discussed in the



FRFA, the Commission believes that most of this cost data is overstated



because it includes costs not created by the rule. The Commission also



believes that the revisions to proposed Rule 17Ad-17 (e.g., the extended



time frames for conducting searches and the exceptions to the search



requirements) will eliminate any excess costs of compliance with the rule



that commenters contended would arise. The FRFA also notes that Rule 17a-



24 has been revised to minimize the costs to all transfer agents.



The FRFA also provides a description of and an estimate of the number



of small entities to which the rule will apply. The FRFA states that the



Commission estimates that 413 registered transfer agents qualify as "small



entities" and will be subject to the requirements of the rule.



As required by the RFA, the FRFA describes the projected reporting,



recordkeeping, and other compliance requirements of the rule and includes



an estimate of the classes of small entities that will be subject to the



requirements and the type of professional skills necessary for preparation



of the reports or records. As discussed above, Rule 17Ad-17 does not



require any specific type of recordkeeping other than that which is



necessary to demonstrate compliance with the rule, including establishing



written procedures with respect to compliance with the rule. The FRFA



states that the Commission believes that Rule 17Ad-17 as adopted provides



sufficient flexibility for all transfer agents, including transfer agents



which are small entities, to maintain records in the most cost-effective



manner. The FRFA also states that the Rule 17a-24 as adopted will require







<(30)> The cost data that the Commission received is discussed

more fully in Section IV below.



======END OF PAGE 21======











transfer agents to report aggregate data regarding their lost



securityholder accounts and that the Commission believes that such records



will be readily available to transfer agents.



The FRFA also describes the steps the Commission has taken to minimize



the significant economic impact on small entities consistent with the



stated objectives of applicable statutes (e.g., alternative standards for



small entities). As discussed further in the FRFA, the Commission has



amended proposed Rule 17Ad-17 to provide additional flexibility to all



transfer agents, including smaller transfer agents. In addition, the



Commission has attempted to devise the most reasonable and simplest



approach that would afford transfer agents an effective means to reduce the



number of lost securityholders. The FRFA further explains that the



Commission requested comment on the adoption of a requirement that transfer



agents use search techniques based on their periodic assessment or a



requirement that transfer agents' search procedures meet a performance



based standard. In light of the comments received on the issue, the



Commission is not adopting a periodic assessment requirement or a



performance based standard. However, the Commission has revised the



proposed rule to permit transfer agents to use any combination of services



to locate lost securityholders that provides a comparable result to an



information data base.



As detailed in the FRFA, the Commission has decided not to create an



exception to Rule 17Ad-17 for small entities. The FRFA explains that the



Commission believes that any increased costs incurred by small entities



because of the rule will be reasonable and are justified by the necessity



to ensure that all securityholders receive the same level of investor





======END OF PAGE 22======











protection. While the Commission has decided not to create an exception to



the rule for small entities, the adopted rule does provide a de minimis



exception for lost securityholders whose accounts hold assets of less than



$25. The Commission believes that small transfer agents will likely rely



on the de minimis exception more than large transfer agents.<(31)>



With respect to Rule 17a-24, the FRFA notes that the Commission has



amended the proposed rule to reduce the reporting burden on all transfer



agents and to minimize the complexity and operational burden of the



requirements. Finally, the Commission states that any increased costs are



justified by the need to monitor the effectiveness of Rule 17Ad-17.



Based on the analysis contained in the FRFA, the Commission believes



that the adopted rules will not adversely affect small entities and include



sufficient regulatory flexibility for compliance to minimize the impact on



small entities. The FRFA is available for public inspection in File No.



S7-21-96, and a copy may be obtained by contacting Theodore Lazo, U.S.



Securities and Exchange Commission, 450 Fifth Street, N.W., Mail Stop 5-1,



Washington, D.C. 20549.









<(31)> The Commission understands that small transfer agents

tend to provide services to issuers with smaller prices

per share. On occasion, when shareholders sell their

positions, they fail to completely close out their

account. As a result, they may leave an account

holding only a few shares or the most recent dividend

payment. Because a few shares of a smaller issuer is

more likely to be under the de minimis amount than a

few shares of a larger issuer, the Commission believes

that the de minimis exception may be more beneficial to

small transfer agents. Some large transfer agents also

have stated that because it is more cost efficient to

search for all of their lost securityholders than to

segregate out the small accounts, they probably will

not use the exemption.



======END OF PAGE 23======











IV. COSTS AND BENEFITS OF THE RULES AND THEIR EFFECTS ON COMPETITION,

EFFICIENCY, AND CAPITAL FORMATION



Section 23(a)(2) of the Exchange Act<(32)> requires the



Commission, in adopting rules under the Exchange Act, to consider the



competitive effects of such rules and to make a determination whether any



burden on competition is necessary or appropriate in furthering the



purposes of the Exchange Act. Furthermore, Section 3 of the Exchange



Act<(33)> as amended by the recently enacted National Securities



Markets Improvement Act of 1996 ("Markets Improvement Act")<(34)>



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 also shall consider, in



addition to the protection of investors, whether the action will promote



efficiency, competition, and capital formation.



The Commission has considered Rule 17Ad-17 and Rule 17a-24 in light of



the standards cited in Sections 3 and 23(a)(2) of the Exchange Act and



believes that for the reasons stated herein, the adoption of the rules will



(i) promote efficiency for securityholder recordkeeping by subjecting all



transfer agents to the same flexible rules governing searches for lost



securityholders and reporting information to the Commission related to such



searches, (ii) not adversely affect capital formation because it relates



solely to post-issuance activity, and (iii) not impose any burden on











<(32)> 15 U.S.C. 78w(a)(2).



<(33)> 15 U.S.C. 78c.



<(34)> Pub. L. No. 104-290, 106, 110 Stat. 3416 (1996).



======END OF PAGE 24======











competition not necessary or appropriate in furtherance of the Exchange



Act.



In the Proposing Release, the Commission stated its view that the



proposed Rule 17Ad-17 would not have a significant impact on transfer agent



competition. All transfer agents will be subject to the same specified



minimum standard for reasonable care in attempting to locate



securityholders with whom contact has been lost. As discussed below, the



cost of compliance with the proposed rule is minimal, and for many transfer



agents that currently conduct securityholder searches using an information



data base, the proposed rule will impose no additional cost. Because a



transfer agent's cost of compliance generally is based upon the number of



securityholders it must attempt to locate, transfer agents, regardless of



their size, should incur comparable relative costs in exercising comparable



care. On average, compliance costs should be roughly proportional to the



number of securityholder records maintained by the transfer agent.



One commenter stated that the rule as proposed could have an



anticompetitive effect because the costs could cause additional transfer



agents to abandon an already contracting market. However, this commenter



did not provide any detail as to the burden created by the rule or why such



burden should disproportionately affect certain transfer agents. The



Commission believes that the rule as adopted has been drafted so as to



provide the maximum flexibility to transfer agents to meet their



obligations in the most cost-effective manner possible. After careful



consideration of the commenter's views, the Commission has determined that



Rule 17Ad-17 will not impose any burden on competition not necessary or



appropriate in furtherance of the Exchange Act.





======END OF PAGE 25======











In the Proposing Release, the Commission estimated compliance costs to



the industry of approximately $750,000, based on an estimated cost of $3.00



per account and a total estimated 250,000 lost securityholder accounts.



Based on more recent data obtained from several large transfer agents, the



Commission has revised its cost estimate per account to $3.38 the first



year and $1.79 per account in the following years. Significantly, based on



its most recent information, the Commission now believes that there may be



as many as 3 million lost securityholder accounts. Due primarily to this



change in estimated lost securityholder accounts, the Commission's revised



estimate of the aggregate costs to the industry are one time compliance



costs of $4.6 million and annual compliance costs of $5.2 million.



The Commission received seven comment letters that provided specific



cost estimates. One commenter estimates (assuming one search and match)



that the cost of locating an account will be approximately $6.00, which



includes out-of-pocket postage, staff, and computer time. A second



commenter states that vendor prices for data base searches may vary widely



and that the actual cost per account will range from $5.00 to



$12.00.<(35)> A third commenter estimates an aggregate cost of as



much as $4.75 for each lost securityholder and total initial programming



costs of $150,000.<(36)> Two commenters estimate that charges from





<(35)> The commenter's estimates include the cost of the data

base search itself plus such items as system processing

expenses to generate the search and to receive the

matched file from the data base vendor; printing and

mailing expenses; handling and other related charges

for returned items; and expenses for replacement of

uncashed checks and lost securities.



<(36)> The estimate of $4.75 is based on postage, data base

charges, and an increase in processing staff by two

(continued...)



======END OF PAGE 26======











firms for data base searches range from $2.00 per account to approximately



$1.00 per account for tape files. Another commenter anticipates that the



costs of complying with the rule will exceed $100,000 in additional labor



costs together with software and hardware costs each year. Another



commenter estimates that the cost per account for using an information data



base ranges from less than $.10 when using a CD ROM to as much as $1.70 to



use a third party vendor data base.



The Commission believes that the estimates higher than the



Commission's estimate of $3.38 per lost account overstate the costs



involved because the figures include expenses not related to the rule or



which are required already as a part of the transfer agent's duties (e.g.,



the cost of shareholder mailings). Furthermore, the Commission believes



that compliance with the rule as it is being adopted will not require



transfer agents to incur any substantial costs with respect to additional



labor, hardware, or software because the rule's requirements regarding



coding securityholders as lost are consistent with current state



escheatment laws. Such state laws also require transfer agents to be able



to produce information on lost securityholders for annual filings with the



state, and therefore transfer agents' computer systems currently should be



capable of producing lists of lost securityholders to provide to the data



bases. Thus, the Commission believes that transfer agents' current



computer systems should not require significant changes in order to comply



with the rule.







<(36)>(...continued)

full time positions. Currently, this commenter

conducts periodic searches for its lost

securityholders.



======END OF PAGE 27======











Further, the Commission has amended the proposal so as to lower the



cost of compliance with the rule. For example, the Commission has created



a de minimis exception to the rule because searches for accounts with



lesser values would not produce as great a benefit (i.e., the cost of



locating such securityholders would be a much larger percentage of the



assets to be returned). In addition, the Commission has amended the rule



to be more consistent with current state law requirements by eliminating



the requirement that three months elapse between two mailings prior to



coding a securityholder as lost. Accordingly, the Commission is retaining



its estimate of $3.38 per account in the first year and $1.79 per account



in the following years.



The Commission believes that the cost of the rule will be outweighed



by its benefits. The rule will create a uniform standard applicable to all



transfer agents thus ensuring that all investors have the opportunity to be



reunited with their assets.<(37)> In addition, the rule will



guarantee that transfer agents make at least two attempts to locate lost



securityholders before forwarding names to a search firm that may result in



substantial charges to the securityholder. Thus, the rule should help



investors recover a greater percentage of their assets.



Based on comments received, the Commission believes that the number of



lost securityholders compared to total accounts held by transfer agents is





<(37)> Some transfer agents currently attempt to locate lost

securityholders, but the extent and type of efforts

used vary greatly among transfer agents. In some

cases, transfer agents forward the names of lost

securityholders directly to professional search firms,

in which case the securityholder must pay a fee to

regain its assets. In other cases, the transfer agent

searches for lost securityholders only if the searches

are authorized and paid for by the issuer.



======END OF PAGE 28======











small, approximately 1.34%. However, the actual dollar amount of those



assets can be significant. The Commission believes that the total value of



assets held in accounts coded as "lost" may in fact exceed $450



million.<(38)>



The Commission believes that Rule 17Ad-17 mandates a cost-effective



means for locating lost securityholders. Because of the de minimis



exception, transfer agents are not required to search for lost



securityholders unless their accounts are worth $25 or more. The



Commission believes that the rate of success for data base searches is at



least 60%.<(39)> Thus, even if every account of lost securityholders



was worth only $25, the rule would provide an average benefit of $15 per



lost securityholder account (i.e., 60% of $25). This estimated benefit is



larger than any commenter's estimate of the per account cost of data base





























<(38)> The data cited in this paragraph is based on a limited

informal survey of several large transfer agents.



<(39)> The Commission staff contacted several transfer agents

to obtain an estimated success rate. Only one of the

transfer agents contacted currently uses data base

searches to find lost securityholders. That transfer

agent, which has been conducting searches on a monthly

basis for over a year, stated that its success rate

using data base searches is never less than 75% and

sometimes is as high as 94%. For purposes of the cost-

benefit analysis, the Commission is assuming a 60%

success rate in order to be conservative.



======END OF PAGE 29======











searches.<(40)> Furthermore, because the value of many accounts will



exceed $25, the Commission expects that the actual benefit will be higher.



The Commission has considered the substantial likely benefits that



investors will receive from adoption of the rule and the additional cost



the rule will impose on transfer agents. The Commission has decided to



adopt the rule given the lack of consistent standards currently in effect



with respect to lost securityholders and the relatively minor cost per



account imposed by the rule. In consideration of cost, the Commission has



designed the final rule to give transfer agents maximum flexibility to



comply with the rule's requirements and to minimize their search and



recordkeeping expenses.



Rule 17a-24 as adopted differs from the proposed rule. Because the



adopted rule requires that information be reported on a form that all



transfer agents subject to the rule are required to file, the rule should



not create an additional filing burden. In addition, the information that



the reporting transfer agents must file should be currently available to



such transfer agents.<(41)> Thus, because the rule should not create



any significant costs to transfer agents, the Commission has determined









<(40)> One commenter stated that the per account cost could be

as high as $12.00. However, as discussed above, the

Commission believes that this estimate includes many

costs not created by the rule. Also, as noted above,

the Division of Market Regulation estimates the average

cost of data base searches required by the rule will

total only $3.38 per account in the first year and

$1.79 per account in the following years.



<(41)> Transfer agents must record which of their

securityholders are lost and the date that such

securityholders become lost in order to comply with

state escheatment laws.



======END OF PAGE 30======











that Rule 17a-24 will not impose any burden on competition not necessary or



appropriate in furtherance of the Exchange Act.



In addition, the Commission believes that the benefits of the rule



justify the costs. The benefits of the rule are to provide the Commission



with information to determine whether transfer agents are more successful



in locating lost securityholders and, therefore, whether Rule 17Ad-17 is



effective. The costs of compliance with Rule 17a-24 should be limited to



the costs involved in compiling the information required to be reported



once a year.



V. PAPERWORK REDUCTION ACT



As set forth in the Proposing Release, Rule 17Ad-17 and Rule 17a-24



contain collections of information within the meaning of the Paperwork



Reduction Act of 1995 ("PRA").<(42)> Accordingly, the collection of



information requirements contained in the rules and related amendments were



submitted to the Office of Management and Budget ("OMB") for review and



were approved by OMB which assigned the following control numbers: Rule



17Ad-17, control number 3235-0469; and Rule 17a-24, control number 3235-



0470.<(43)> The collection of information requirements are in



accordance with Section 3507 of the PRA.<(44)> An agency may not



conduct or sponsor and a person is not required to respond to a collection



of information unless the agency displays a valid OMB control number.









<(42)> 44 U.S.C. 3501 et seq.



<(43)> Rule 17Ad-7 was previously submitted to OMB, which

approved the rule and assigned the following control

number 3235-0136.



<(44)> 44 U.S.C. 3507.



======END OF PAGE 31======











The collections of information under Rule 17Ad-17, Rule 17a-24, and



Rule 17Ad-7 are mandatory. As described in more detail above and in the



Proposing Release, the collections of information are necessary to enable



recordkeeping transfer agents, as the usual custodians of the records that



determine the ownership of securities and the entitlement to corporate



distributions, to reduce significantly the number of lost securityholders



and for the Commission to monitor compliance with the rule. The Commission



may review this information during periodic examinations or with respect to



investigations. The records required to be filed with the Commission and



any records required to be kept pursuant to these rules that are requested



by and submitted to the Commission will be kept confidential to the extent



permitted by the Freedom of Information Act<(45)> and the Privacy Act



of 1974.<(46)>



Based upon further review of the disclosure and recordkeeping changes



required by Rule 17Ad-7, the Commission is retaining its burden estimates



for the collection of information under that rule. Thus, the description



and estimated burden of the collection of information requirement under



Rule 17Ad-7 have not changed and are set forth in the Proposing Release.



Originally, the Commission estimated compliance costs of Rule 17Ad-17



to the industry of approximately $750,000, based on an estimated cost of



$3.00 per account and a total estimated 250,000 lost securityholder



accounts. Based on comments received questioning the Commission's original



burden estimate, the Commission obtained more recent data from several



large transfer agents. As a result, the Commission has revised its cost





<(45)> 5 U.S.C. 552.



<(46)> 5 U.S.C. 552a.



======END OF PAGE 32======











estimate per account to $3.38 the first year and $1.79 per account in the



following years. Significantly, based on its most recent information, the



Commission now believes that there may be as many as 3 million lost



securityholder accounts. Due primarily to this change in estimated lost



securityholder accounts, the Commission's revised estimate of the aggregate



costs to the industry are one time compliance costs of $4.6 million and



annual compliance costs of $5.2 million.



Due to the changes in Rule 17a-24 as adopted and the corresponding



changes on Form TA-2, the Commission will be resubmitting its collection of



information requirement to OMB for review and approval.



VI. STATUTORY BASIS



Pursuant to Section 17A(d)(1) of the Exchange Act, 15 U.S.C. 78q-



1(d)(1), the Commission amends Rule 17Ad-7 and Form TA-2 and adopts Rule



17Ad-17 and Rule 17a-24 in Chapter II of Title 17 of the Code of Federal



Regulations.



List of Subjects in 17 CFR Parts 240 and 249



Reporting and recordkeeping requirements; Securities; Transfer agents



Text of the Amendments



For the reasons set out in the preamble, the Commission amends Title



17, Chapter II of the Code of Federal Regulations to read 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, 78k, 78k-1, 78l, 78m, 78n,









======END OF PAGE 33======











78o, 78p, 78q, 78s, 78u-5, 78w, 78x, 78ll(d), 79q, 79t, 80a-20, 80a-23,



80a-29, 80a-37, 80b-3, 80b-4 and 80b-11, unless otherwise noted.



* * * * *



2. By adding 240.17a-24 to read as follows:



240.17a-24 Reports of lost securityholders.



(a) Each recordkeeping transfer agent shall file with the Commission



on Form TA-2 (17 CFR 249b.102) the following aggregate information with



respect to lost securityholder accounts contained on such transfer agent's



master securityholder files:



(1) The total number of lost securityholder accounts and the



percentage of lost securityholder accounts compared to total number of



accounts contained on the transfer agent's master securityholder files.



(2) The information required by paragraph (a)(1) of this section



shall be provided separately for securityholders lost one year or less,



three years or less, five years or less, and more than five years and for



securityholders whose assets which have escheated to unclaimed property



administrators within the last calendar year.



(b) For purpose of this section, lost securityholder means a



securityholder:



(1) 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









======END OF PAGE 34======











(2) For whom the transfer agent has not received information regarding



the securityholder's new address.



3. Section 240.17Ad-7 is amended by adding paragraph (i) to read as



follows:



240.17Ad-7 Record retention.



* * * * *



(i) The records required by 240.17Ad-17(c) shall be maintained for a



period of not less that three years, the first year in an easily accessible



place.



4. Section 240.17Ad-17 is added to read as follows:



240.17Ad-17 Transfer agents' obligation to search for lost



securityholders.



(a)(1) Every recordkeeping transfer agent whose master securityholder



file includes accounts of lost securityholders shall exercise reasonable



care to ascertain the correct addresses of such securityholders. In



exercising reasonable care to ascertain for its master securityholder file



such lost securityholders' current addresses, each recordkeeping transfer



agent shall conduct two data base searches using at least one information



data base service. The transfer agent shall search by taxpayer



identification number or by name if a search based on taxpayer



identification number is not reasonably likely to locate the



securityholder. Such data base searches must be conducted without charge



to a lost securityholder and with the following frequency:



(i) Between three and twelve months of such securityholder becoming a



lost securityholder and









======END OF PAGE 35======











(ii) Between six and twelve months after the transfer agent's first



search for such lost securityholder.



(2) A transfer agent may not use a search method or service to



establish contact with lost securityholders that results in a charge to a



lost securityholder prior to completing the searches set forth in paragraph



(a)(1) of this section.



(3) A transfer agent need not conduct the searches set forth in



paragraph (a)(1) of this section for a lost securityholder if:



(i) It has received documentation that such securityholder is deceased



or



(ii) The aggregate value of assets listed in the lost securityholder's



account, including all dividend, interest, and other payments due to the



lost securityholder and all securities owned by the lost securityholder as



recorded in the transfer agent's master securityholder files, is less than



$25; or



(iii) The securityholder is not a natural person.



(b) For purposes of this section:



(1) Information data base service means either:



(i) Any automated data base service that contains addresses from the



entire United States geographic area, contains the names of at least 50% of



the United States adult population, is indexed by taxpayer identification



number or name, and is updated at least four times a year; or



(ii) Any service or combination of services which produces results



comparable to those of the service described in paragraph (b)(1)(i) of this



section in locating lost securityholders.



(2) Lost securityholder means a securityholder:





======END OF PAGE 36======











(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.



(c) Every recordkeeping transfer agent shall maintain records to



demonstrate compliance with the requirements set forth in this section



which shall include written procedures which describe the transfer agent's



methodology for complying with this section.



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



5. The authority citation for Part 249b continues to read in part as



follows:



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



* * * * *



Note: Form TA-2 does not and the amendments will not appear in the Code of



Federal Regulations.



6. Form TA-2 (referenced in 249b.102) is amended by adding



paragraph 8 to Instruction I.A. to read as follows:



Form TA-2



* * * * *



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



A. * * *









======END OF PAGE 37======











8. "Lost securityholder" is defined in Rule 17a-24(b)(1) (17 CFR



240.17a-24(b)(1)).



* * * * *



7. Form TA-2 (referenced in 249b.102) is amended by adding



paragraph c to Question 4 to read as follows:







Form TA-2



* * * * *



4. * * *



c. (i) Number of lost securityholder accounts and (ii) percentage of

total accounts represented by lost securityholder accounts as of June 30

for:



Accounts of securityholders lost one year or less:



Accounts of securityholders lost three years or less:





Accounts of securityholders lost five years or less:



Accounts of securityholders lost more than five years:



Accounts of securityholders which have escheated to states within the

year ended June 30:



* * * * *



By the Commission.









Jonathan G. Katz

Secretary







Dated: October 1, 1997













======END OF PAGE 38======

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