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DTCC Launches Pilot Program On Corporate Actions Liability Notices

New York, December 13, 2004 - The Depository Trust & Clearing Corporation (DTCC) has launched a pilot program with 20 customer firms, including broker/dealers and custodian banks, for a new Web-based system that automates the creation, delivery and tracking of corporate actions liability notices.

The new service, offered through The Depository Trust Company (DTC), a subsidiary of DTCC, is called SMART/Track for Corporate Actions Liability Notification Service.  The pilot will run through Jan. 31, 2005 and go into full production Feb. 1.

"This new service represents an important straight-through processing initiative for corporate actions and will help streamline and standardize the communication process between senders and receivers of liability notifications," said Thomas Costa, DTCC managing director and general manager for Equity Clearance and Settlement. By a standardizing the process, the service will bring major benefits to the industry by boosting efficiencies, reducing cost and risk and eliminating the hours involved in manually sending and tracking notices." 

According to an industry survey, more than 15,000 voluntary corporate actions liability notices are sent out each month.

Corporate actions liability notices are sent when a firm owes securities to another firm or counterparty during a voluntary corporate action such as a tender offer.  The notification alerts the delivering broker/dealer or bank of its failure to deliver the securities and notifies it of its liability in a voluntary corporate action.

Among the 20 customer firms participating in the pilot are Fimat USA, Fortis Securities, Morgan Stanley Dean Witter, National Financial Services LLC, RBC Dain Rauscher, Stephens, Inc., and Wells Fargo.

"DTCC worked closely with the industry and the Securities Industry Association's (SIA) Corporate Action Liability Working Group in developing requirements for the new system," said John Binder, senior vice president of SIA's Corporate Actions Division. "There's broad support in the industry for this service among both broker/dealers and bankers. They see this as a way to speed up the process, boost efficiencies and eliminate many of steps involved in sending out corporate action liability notices."

"Corporate actions liability notices have been a paper-intensive, time-consuming, manual process without any standardization in either the terminology or communication process itself," said Margaret Koontz, vice president, DTCC's Product Management and Development.

"Traditionally, a firm will fax a liability notice to a counterparty and then follow up with a phone call to make sure they received the notice," said Koontz.  "The new notification system eliminates the manual process and replaces it with a single automated, standardized communication procedure."

Other advantages of the new notification system are that it:

• Provides a single point of entry for all customers, thereby replacing numerous multiple connections and multiple parties currently used for liability notifications.
• Establishes standards for the communication of liability notices so that all parties are speaking the same language.

Each notice has an audit trail that provides a record of actions taken regarding the notice, including the time, date and person taking the action.  Customers will have online access to archived notices for seven years.

About DTCC
The Depository Trust & Clearing Corporation (DTCC), through its subsidiaries, provides clearance, settlement and information services for equities, corporate and municipal bonds, government and mortgage-backed securities and over-the-counter derivatives. DTCC's depository also provides custody and asset servicing for more than two million securities issues from the United States and 100 other countries and territories. In addition, DTCC is a leading processor of mutual funds and insurance transactions, linking funds and carriers with their distribution networks. DTCC has operating facilities in multiple locations in the United States and overseas. For more information on DTCC, visit www.dtcc.com.