Interpretive Release Guidelines for Control Locations for Foreign Securities Pursuant to Subparagraphs (c)(4) and (c)(7) of Rule 15c3-3 Under the Securities Exchange Act of 1934 34-10429

~	I:~
I,
i;! i 	:1I;
I~
"I 	I
I 	1..1	SECURITIES EXCHANGE ACT OF 1934 	cation for such securities. 	1"1 	Ii	~il	Release No. 10428/0ctober 10, 1973 f:	Introduction i-~
The Securities and Exchange Commission announced pur 	'I': 	~i ii
;;I,
I
,	::
suant to Section 15(c) (5) of the Securities Exchange Act 	On January 30, 1973, in Securities Exchange Act Release 	l,
i ~
of 1934 ("Exchange Act") the temporary suspension of 	No. 9969, the Commission .indicated it had received numer- 	:!
over-the-counter trading in all securities. of Pennsylvania 	ous requests to designate certain entities as satisfactory con- t
Life Company, ("Pennsylvanian) located in Santa Monica, 	trollocations for customers' foreign sec~rities lodged in
California, for a ten day period commencing at 2:45 p.m. 	foreign locations (abroad) pursuant to subparagraphs (c) (4)
(EDT) on October 10, 1973 through midnight October 19, 	and (c) (7) of Rule 15c3-3 in order that brokers or dealers
1973. 	may comply with the requirements of that rule to reduce
such customer securities to their possession or 'control. The
The Commission initiated the trading suspension in the 	Commission anticipated that after reviewing the requests
securities of Penn:;ylvania pending clarification and dissemin 	and obtaining such additional information as may be ne
ation by Pennsylvania of information concerning its oper 	cessary it would publish guidelines for control locations for
ations, incluqing information concerning transactions bet 	foreign securities. The release stated that the Commission
ween subsidiaries of Pennsylvania and subsidiaries of Equity 	had determined that, "to the extent a broker-dealer has
Funding Corporation of America. 	utilized a foreign entity (e.g., a foreign custodian bank) for
holding customers' foreign securities in a foreign location,
The Commission cautions broker-dealers, shareholders and 	or a domestic entity which holds such broker's or dealer's
prospective purchasers that they should consider carefully 	customers' foreign securities in a foreign location, as of
the foregoing information along with all other currently 	January 15, 1973, or at any time within two years imme~
available information and any information subsequently 	diately preceding such date, such broker-dealer shall be
issued by the company. 	permitted to utilize such entity as a satisfactory control
location for such foreign securities under Rule 15c3-3 until
Furthermore, brokers and dealers should be alert to the 	May 31, 1973." On May 30, 1973, in Securities Exchange
fact that, pursuant to Rule 15c2-11 under the Exchange 	Act Release No. 10178 the Commission announced its in- 	,
Act, at the termination of the suspension. no quotation 	tention to continue the availability of these locations as 	i
., 	may be entered unless and until they have strictly com- 	permissible control locations for fore"ign securities and that 	fi
plied with all of the provisions of said rule. If any broker 	it wo~l.d publish guidelines for control locations for foreign 	ror dealer has any questions as to Whether or not he has 	seCUrities. 	.j~
complied with said rule, he should not enter any quotation 	ili
but immediately contact the staff of the Securities and Ex 	The Commission has now determined to establish the follow-It:
change Commission, Division of Enforcement in Washington, 	ing criteria for satisfactory control locations for foreign 	1[1
D. C. If any broker or dealer is uncertain as to what is re 	securities pursuant to subparagraphs (c) (4) and (c) (7) of 	)1:
quired by Rule 15c2-11, he should refrain from entering 	Rule 15c3-3. 	)1
quotations relating to the securities in question until such I	time as he has familiarized himself with said rule and is 	Criteria for Control Locations for Foreign Securities 	i
certain that all of its provisions have been met. If any bro 	i:l
ker or dealer enters any quotation which is in violation of 	The Commission has determined: 	1	1said rule, the Commission will consider the need for prompt 	Hi
enforcement action. 	(1) pursuant to subparagraphs (c) (4) and (c) (7) of Rule
15c3-3 that foreign securities lodged in the custody of 	n~foreign depositories, foreign clearing agencies, foreign cus
todian ba,nks or foreign brokers or dealers for the account 	f,jl
of customers of brokers or dealers shall be deemed to be IH,	:}~iSECURITIES EXCHANGE ACT OF 1934 	lodged in satisfactory control locations for brokers or deal 	i~ !;
j"	
if' Release No. 10429/0ctober 12, 1973 	ers su bject to Rule 15c3-3; and 	1'"
, '	,1%: GUIDELINES FOR CONTROL LOCATIONS FOR 	(2) pursuant to subparagraph (c) (7) of Rule 15c3-3 that 	:
f~ FOREIGN SECURITIES PURSUANT TO SUBPARA- 	foreign securities carried by registered brokers or dealers
. }~ GRAPHS (c) (4) AND (c) (7) OF RULE 15c3-3 UNDER 	for the account of customers of other brokers or dealers 	!:
THE SECURITIES EXCHANGE ACT OF 1934 	shall be deemed in satisfactory control locations for bro Ii'I' ;	kers or dealers subject to Rule 15c3-3,
RUle 15c3-3 under the Securities Exchange Act of 1934 i 	i	
requires a broker or dealer promptly to obtain possession 	provided, that: 	i~ I
or control of all fully paid and excess margin securities 	:1i:i :
"	
carried for the account of its customers and to take action 	(a) 	The foreign securities lodged abroad shall be con
within designated time frames where possession or control 	sidered to be in the control of the broker or dealer for
has not been established. Subparagraphs (c) (4) and (c) (7) 	whom they are held pursuant to subparagraphs (c) (4) and
of Rule 15c3-3 deem control of customer securities to have 	(c) (7), (1) to the extent that such securities are not sub
been established if such securities are in the custody of a 	ject to any right, charge, security interest, lien or claim of
f~reign depository, foreign clearing agency, foreign custo- 	any kind in favor of the foreign entity except for their safe
~ 	dian bank, or such other location which the Commission 	custody or administration and (2) to the extent that bene
uPon application shall designate as a satisfactory control 10- 	ficial ownership of such securities is freely transferable
SEC DOCKET/567
. ~
I,
!
:1
I i
,
i

without the payment of money or value other than for safe
custody or administration; 1J and
cations during any period that such applications are being
considered by the Commission.
undl
'Jil
(b) 	With respect to a registered broker or dealer carry
ing such foreign securities for another broker or dealer, (1)
such securities shall be carried by the carrying broker or
dealer in an account to be designated as a "Special Custody
Account for the Exclusive Benefit of Customers of (name
of the broker or dealer)" pursuant to subparagraph (c) (7).
(2) the account ,shall contain only the securities of cus
tomers of that particular broker or dealer and (3) the
particular broker or dealer for whose customers those securi
ties are carried shall have instructed the carrying broker or
dealer to maintain physical possession or control of such
securities free of any charge, lien, or claim of any kind in
favor of such carrying broker or dealer. Additionally,
security transactions shall not be effected through the ac
count; its purpose being exclusively for the custody of cus
tomers' foreign securities. The carrying broker or dealer
must also comply with the conditions set forth in (a) above.
The Commission has also determined in addition to the
above criteria that, within 120 days of the publication of
this release, any broker or dealer utilizing such locations
must submit to George A. Fitzsimmons, Secretary, Securi
ties and Exchange Commission, 500 North Capitol Street,
Washington, D. C. 20549 the name, address and principal
place of business of the foreign entity which serves as a
location for the lodgment of customers' foreign securities
and the 'name and address of the governmental agency or
other regulatory authority which supervises or regulates the
respective foreign entity or in the case where such securities
are carried in a "Special Custody Account" as described
above by another registered broker 0:' dealer, the name of
that broker or dealer must be submitted. V Such sub
missions shall be considered an application to utilize such
entities as satisfactory control locations pursuant to sub
paragraphs (c) (4) or (c) (7) of Rule 15c3-3 and shall con
tain a representation of the broker or dealer that such en
tities meet the criteria specified above. An application sub
mitted shall be considered accepted unless the Commission
rejects such application within 90 days of its receipt by the
Commission. During the 120 day period immediately
following publication of this release, or during any period
when an application is being considered by the Commission, '
to the extent a broker or dealer has utilized a foreign entity
I' 	(e.g., aforeign custodian bank) for holding customers' for
i· --: 	eign secu rities in a foreign location, or a domestic entity
which holds such broker's or dealer's customers' foreign
securities in a foreign location, as of January 15, 1973, or
at any time within two years immediately preceding such
date, such broker or dealer shall be permitted to continue
to utilize such entities as satisfactory control locations for
customers' foreign securities.
To the extent a broker or dealer wishes to utilize a new for
eign entity or registered broker or dealer as a controlloca
tion for customers' foreign securities and such entity meets
the criteria outlined above he shall be permitted to do so
provided he submits to the Secretary of the Commission the
information required above prior to commencing the use of
such locations. 'J.J An application submitted shall be con
sidered accepted unless the Commission rejects such appli
cation within 90 days of its receipt by the Commission.
Such new locations shall be deemed satisfactory control 10
568/SEC DOCKET
The above criteria are initial guidelines to be supplemented
or altered as the Commission gains further experience in
the operation of Rule 15c3-3. The Commission may find
that any specific entify, although meeting the above cri
teria, shall not be a satisfactory control location for cus
tomers' foreign securities if the Commission determines that
it would not be in the public interest or for the protection
of investors to permit such entity to continue as a satis
factory control location.
In establishing the above criteria the Commission wishes to
emphasize that these criteria are in no way intended to di
minish a broker's or dealer's responsibility to (1) period·
ically compare and verify in conformity with the require
ments of Rule 17a-13 under the Securities Exchange Act
of 1934 foreign securities for which he has accountability;
(2) be aware at all times of the amount of customers' fully
paid foreign securities required to be in possession or con
trol pursuant to Rule 15c3-3; and, (3) take prompt steps
to reduce fully paid foreign securities to the possession or
control of the broker or dealer where such possession or
control is required by Rule 15c3-3.
Definition of the term Customer
Paragraph (a) (1) of Rule 15c3-3 defines the term customer
for the purposes of that rule. The Commission has also
determined that the term customer shall be further inter
preted to include a broker or dealer to the extent he main
tains with another broker or dealer an account designated
as a "Special Custody Account for the Exclusive Benefit of
Customers of (name of the broker or dealer)" which meets
the criteria set forth above.
By the Commission.
George A. Fitzsimmons
Secretary
1J While the Commission recognizes that it is the practice
in many foreign countries for the foreign entity to main
tain a lien, claim, or other charge on customers' foreign
securities for custody and administration charges, it is the
broker's or dealer's responsibility to pay charges, claims,
etc., promptly and to be certain that the amount of such
charges, claims, etc., remain at all times minimal.
.1/ 	The submission shall be filed in duplicate and shall be
entitled" Application for Control Locations for Foreign
Securities" pursuant to subparagraphs (c) (4) or (c) (7). as
appropriate. The Commission has examined the question
of whether an "Application for Control Locations for
Foreign Securities"should be treated as confidential and is
satisfied that it may and should treat such applications as
confidential. Under Section 24(a) of the Securities Ex
change Act of 1934, 15 USC 78 x (a), the Commission is
forbidden to require disclosure of trade secrets. The i- 	.
dentity of these foreign entities is information that may faU
within that description. Even if it is not, the Commission :~
is satisfied that the identity' of these foreign entities is the ~:
type of sensitive commercial information exempt from the.
disclosure requirements of the Freedom of Information Ai;;
than
eustl
loca1
(e) (.
pursl
SECI
Rele:
Adm
In th
GEO
Cove
FIN[
WIT~
In thl
Exch
Baen
brokE
for t~
admi1
ceedil
of mi
an or,
or de.
Acco.
ceedir
1. Du
1970,
Securi
Rule'
of 60,
Syster
Securi
shares
withh
and pi
later s
sideral
2. Duo
willful
theE>!
partici
chased
intere!
chases
interes
3. Dur
1970,
Sectiol
tended

under 5 USC 552(b) (4).
'JJ If a broker or dealer wishes to utilize an entity other
than a foreign depository, foreign clearing agency, foreign
custodian bank or registered broker or dealer as a control
location for foreign securities pursuant to subparagraphs
(c) (4) and (c) (7) of Rule 15c3-3, it shall make application
pursuant to sUbparagr~ph (c) (7).
SECURITIES EXCHANGE ACT OF 1934
Release No. 10430/0ctober 11, 1973
~ 	Admin. Proc. File No. 3-2783
In the Matter of
GEORGE C. VAN AKEN
Cove Neck, New York
FINDINGS AND ORDER BARRING ASSOCIATION
WITH BROKER-DEALER
In these broker-dealer proceedings under the Securities
Exchange Act, George C. Van Aken, who was a partner of
Baerwald & Deboer ("registrant"), formerly a registered
broker-dealer,1J filed a stipulation and consent. Solely
for the purpose of settling this proceeding; and without
admitting or denying the alh~gationsin the order for pro
ceedings as amended, Van Aken consents to certain findings
of misconduct as alleged in that order, and to the entry of
an order barring him from being associated with a broker
or dealer subject to Commission regulation.
Accordingly, on the basis of the amended order for pro
ceedings and Van Aken's consent, it is found that:
1. During the period from about June 1969 to January
1970, Van Aken willfully violated Section 17(a) of the
Securities Act and Section 10(b) of the Exchange Act and
Rule 101>-5 thereunder in connection with a public offering
of 60,000 shares of common stock of Health Evaluation
Systems, Inc. ("HES") pursuant to Regulation A under the
Securities Act, and a registered public offering of1 00,000
shares of common stock of Bic-Derivatives Corp. Van Aken
withheld shares of those securities from the public offerings
and placed them in nominee accounts which he controlled,
later selling the shares for a substantial profit at prices con
siderably in excess of the offering prices.
2. During the same period, Van Aken willfully violated and
willfUlly aided and abetted violations of Section 10(b) of
the Exchange Act and Rule 10b-6 thereunder in that, while
participating in the HES distribution, he bid for and pur
chased the stock for accounts in which he had a beneficial
interest, aided and abetted other participants' bids and pur
~hases for accounts in which he and they had a beneficial
Interest, and induced others to purchase the stock.
3. During the period from about October 1967 to January
1970, Van Aken willfully aided and abetted violations of
Section 7(c) (1) of the Exchange Act in that registrant ex
tended and arranged for the extension of credit to cus-
I
L
tomers in violation of Sections 3 and 4 of Regulation T
adopted by the Board of Governors of the Federal Reserve
System.
4. During the period from March 1965 to about February
1970, Van Aken failed to exercise reasonable supervision
with a view to preventing violations of the Securities Act
and the Exchange Act, and the rules and regulations there
under, by persons under his supervision.
In view of the foregoing, it is in the public interest to im
pose the sanction to which respondent has consented.
Accordingly, IT IS ORDERED that George C. Van Aken
be, and he hereby is, barred from being associqtedwith
any broker or dealer subject to Commission regulation.
For the Commission, by the Office of Opinions and Re
view, pursuant to delegated authority.
_r.eorge A. Fitzsimmons
;;)ecretary
11 Registrant's broker-dealer registration was revoked pur
suant to the consent of its liquidator. Baerwald & DeBoer,
Securities Exchange Act Release No. 9273 (August 2, 1971).
\	SECURITIES EXCHANGE ACT OF 1934
Release No. 10431/0ctober 11, 1973
Admin. Proc. File No. 3·4234
In the Matter of
RIDGWAY, MCLEOD & ASSOCIATES
203 Park Avenue
Plainfield, New Jersey
(8-10940)
WILLIAM MCLEOD
FINDINGS AND ORDER IMPOSING REMEDIAL SANC
TIONS
Ridgway, McLeod & Associates ("registrant"), a registered
broker-dealer, and its preside-nt, William McLeod, res
pondents in these proceedings pursuant to Sections 15(b)
and 15A of the Securities Exchange Act, have consented,
without admitting ordenying the allegations in the order
for proceedings, to findings of violations as alleged in that
order and to the entry of an order revoking registrant's bro
ker-dealer registration and barring McLeod from associa
tion with any broker, dealer, investment company, or invest
ment adviser. 11
On the basis of the order for proceedings and respondents'
consent, it is found that registrant, willfully aided and
abetted by McLeod, willfully violated:
1. Sections 15(c) and 17(a) of the Exchange Act and Rules
15c3-1, 17a-3, 17a-4, and 17a-5 thereunder in that during
the period from about November 1, 1971 to March 28,
SEC DOCKET/569
\:I
,I
t:
~
!
I I
I
l~ 	I
!"1
i