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444 31 CFR Ch. II (7–1–05 Edition) Pt. 358 place in the following fashion. Bank A could have Dealer A instruct Participant A to de- posit securities to a pledge account specified by the Federal Reserve Bank. The Federal Reserve Bank likely would create an account on its books and specify that account to Bank A as the account to receive Bank A’s interest in Treasury book-entry securities. Participant A, upon receiving Dealer A’s in- structions, would then instruct the Federal Reserve Bank to debit its account at the Federal Reserve Bank and credit the account created by the Federal Reserve Bank. The second way the transaction could take place is by any method permitted by the law of Dealer A’s (Bank A’s Securities Inter- mediary) jurisdiction. This could involve a tri-party agreement among the Federal Re- serve Bank, Dealer A, and Bank A. As set forth in § 357.11(b)(1), that agreement likely would specify which jurisdiction’s law is to govern the transaction and could specify that such choice of law supersedes any other choice of law agreement previously entered into by Dealer A and Bank A. If Dealer A’s jurisdiction has not adopted Revised Article 8, the applicable law would be the law of Dealer A’s jurisdiction as it would be amend- ed by Revised Article 8. [61 FR 43631, Aug. 23, 1996, as amended at 62 FR 43284, Aug. 13, 1997; 63 FR 69191, Dec. 16, 1998] PART 358—REGULATIONS GOV- ERNING BOOK-ENTRY CONVER- SION OF BEARER CORPORA AND DETACHED BEARER COUPONS Sec. 358.0 What does this part cover? 358.1 What special terms apply to this part? 358.2 What regulations cover these securi- ties? 358.3 Are there any bearer corpora or de- tached bearer coupons that are not eligi- ble for conversion? 358.4 Which bearer corpora or detached bearer coupons are eligible for conver- sion to transferable BECCS or CUBES se- curities? 358.5 Which bearer corpora or detached bearer coupons are eligible for conver- sion to non-transferable BECCS or CUBES securities? 358.6 What is the procedure for converting bearer corpora and detached bearer cou- pons to book-entry? 358.7 Where do I send my bearer corpora and detached bearer coupons to be converted? 358.8 Are there fees for the conversion of bearer corpora or detached bearer cou- pons? 358.9 Who is responsible for the cost and risks associated with the shipment of se- curities? 358.10 How are amounts of less than one dol- lar credited? 358.11 What is required to establish the au- thority of a depository institution to re- quest conversion? 358.12 What is Treasury’s liability if the de- pository institution does not have au- thority to convert securities? 358.13 What is Treasury’s liability if the de- pository institution incurs a loss because it does not follow required procedures? 358.14 What happens when securities are ac- cepted for conversion? 358.15 What happens if securities are ad- justed? 358.16 Are BECCS and CUBES accounts maintained separately from the STRIPS program? 358.17 Can BECCS and CUBES securities be reconstituted to physical form? 358.18 What limitations exist on liability? 358.19 Who is responsible for any loss result- ing from the conversion of a bearer cor- pus missing callable coupons? 358.20 Can these regulations be waived? 358.21 Can these regulations be amended? A UTHORITY: 12 U.S.C. 391, 31 U.S.C. Ch. 31. SOURCE: 65 FR 65701, Nov. 1, 2000, unless otherwise noted. § 358.0 What does this part cover? (a) This part applies to the conver- sion to book-entry of United States Treasury bearer corpora and detached bearer coupons. (b) These instruments are accepted from depository institutions for con- version under the Bearer Corpora Con- version System (BECCS) and Coupons Under Book Entry Safekeeping (CUBES) programs. (1) For coupons converted after No- vember 1, 2000, these regulations super- sede the terms and conditions gov- erning CUBES set forth in the written ‘‘Agreements to the Terms and Condi- tions Governing CUBES’’ signed by de- pository institutions that previously participated in the CUBES program. (2) Depository institutions that sub- mit bearer corpora and detached bearer coupons are deemed to agree to the terms and conditions in this part and any other requirements we may pre- scribe. § 358.1 What special terms apply to this part? Bearer security means a definitive se- curity payable to the bearer on its face at maturity or when called for redemp- tion before maturity in accordance VerDate Aug<04>2004 04:25 Aug 31, 2005 Jkt 205120 PO 00000 Frm 00456 Fmt 8010 Sfmt 8010 Y:\SGML\205120.XXX 205120
445 Fiscal Service, Treasury § 358.4 with its terms. Ownership of a bearer security is not recorded. Title to the security may pass by delivery without endorsement or notice. The only re- maining unmatured bearer securities are bearer bonds. BECCS means the Treasury’s Bearer Corpora Conversion System. BECCS security means a United States Treasury bearer security con- verted to book-entry form and held in BECCS. Callable means a United States Treas- ury security subject to call before ma- turity. Callable Coupons means the coupons associated with a callable security that are due after the date the security is subject to call. Conversion, as used in this part, means a change in the form of a secu- rity from definitive form to book-entry form. Corpus (plural corpora) means the principal portion of a United States Treasury bearer security. Coupon means a definitive bearer in- terest instrument associated with a United States Treasury bearer secu- rity. CUBES means the Treasury’s Coupon Under Book-Entry Safekeeping pro- gram. CUBES security means a definitive coupon detached from a United States Treasury security and held in CUBES. Definitive security means a security held in paper form. Depository institution means: (1) Any insured bank, mutual savings bank, or savings bank as defined in 12 U.S.C. 1813, or any institution eligible to become an insured bank under 12 U.S.C. 1815; (2) Any insured credit union as de- fined in 12 U.S.C. 1752, or any credit union eligible to become an insured credit union under 12 U.S.C. 1781; (3) Any member as defined in 12 U.S.C. 1422; and (4) Any savings association as defined in 12 U.S.C. that is an insured deposi- tory institution as defined in the Fed- eral Deposit Insurance Act, 12 U.S.C. 1811 et seq., or is eligible to become an insured depository institution under that Act. Non-callable means a United States Treasury bearer security not subject to call before maturity. Non-callable coupons means coupons associated with a non-callable bearer security or coupons associated with a callable bearer security that are due on or before the date on which the callable bearer security is subject to call. Non-transferable means the ownership of a security held in BECCS or CUBES may not be transferred. See § 358.5. Transferable means the ownership of a security held in BECCS or CUBES may be transferred. See § 358.4 of this part. We (or ‘‘us’’) refers to the Secretary of the Treasury and the Secretary’s delegates at the Treasury Department and the Bureau of the Public Debt. The term also extends to any fiscal or fi- nancial agent we designate to act on behalf of the United States. § 358.2 What regulations cover these securities? BECCS and CUBES securities are deemed to be securities for the pur- poses of 31 CFR part 357, subparts A, B, and D, and are governed by that part. Notwithstanding the provisions of 31 CFR part 357, certain BECCS and CUBES securities are non-transferable. See § 358.5. § 358.3 Are there any bearer corpora or detached bearer coupons that are not eligible for conversion? Bearer corpora and detached bearer coupons will not be accepted if they are submitted: (a) Within 30 days of their maturity date; or (b) If the call provision has been in- voked, within 30 days of their call date. § 358.4 Which bearer corpora or de- tached bearer coupons are eligible for conversion to transferable BECCS or CUBES securities? (a) For a callable corpus to be eligi- ble for conversion to a transferable BECCS security, all associated callable coupons must be submitted with the corpus. These callable coupons will be linked with the corpus within BECCS when converted. Once the coupons are linked to the corpus, they may not be transferred separately. VerDate Aug<04>2004 04:25 Aug 31, 2005 Jkt 205120 PO 00000 Frm 00457 Fmt 8010 Sfmt 8010 Y:\SGML\205120.XXX 205120
446 31 CFR Ch. II (7–1–05 Edition) § 358.5 (b) A corpus that is not subject to call will be converted to a transferable BECCS security. (c) Non-callable coupons will be con- verted to transferable CUBES securi- ties. § 358.5 Which bearer corpora or de- tached bearer coupons are eligible for conversion to non-transferable BECCS or CUBES securities? If all of the callable coupons associ- ated with the corpus are not submitted with the corpus, the corpus will be con- verted to a non-transferable BECCS se- curity. Any remaining callable coupons submitted with the corpus will be con- verted to individual non-transferable CUBES securities. § 358.6 What is the procedure for con- verting bearer corpora and de- tached bearer coupons to book- entry? Bearer corpora and detached bearer coupons must be submitted in accord- ance with our procedures. They must be accompanied by an approved form executed by an authorized officer of the submitting depository institution. Until we verify the submission, the bearer corpora and detached bearer coupons are subject to rejection or ad- justment. § 358.7 Where do I send my bearer corpora and detached bearer cou- pons to be converted? Send bearer corpora and detached bearer coupons to be converted to: Bu- reau of the Public Debt, Division of Customer Service, P. O. Box 426, Par- kersburg, WV 26106–0426. § 358.8 Are there fees for the conver- sion of bearer corpora or detached bearer coupons? We do not charge fees for the conver- sion of bearer corpora or detached bearer coupons to BECCS or CUBES se- curities. § 358.9 Who is responsible for the cost and risks associated with the ship- ment of securities? The following guidelines apply to the transportation of bearer corpora and detached bearer coupons: (a) Shipment from the depository in- stitution is at the risk and expense of the depository institution; (b) Shipment between our designated agent and the Department, if required, is at our risk and expense; and (c) Shipment of securities that are returned to the depository institution is at the risk and expense of the deposi- tory institution. § 358.10 How are amounts of less than one dollar credited? Only full dollar amounts can be held in CUBES; principal amounts that in- clude cents cannot be held in CUBES. Upon the conversion of coupons to CUBES, amounts of less than one dol- lar in aggregate per CUBES CUSIP will not be credited to the account of the depository institution. Example: A depository institution submits five coupons with face amount of $346.88 each, and a total dollar amount of $1,734.40. Upon conversion of these coupons to CUBES, only $1,734.00 will be credited to the deposi- tory institution’s account. § 358.11 What is required to establish the authority of a depository insti- tution to request conversion? By submitting bearer corpora and de- tached bearer coupons for conversion to BECCS and CUBES securities, a de- pository institution represents that it has the authority to request the con- version. § 358.12 What is Treasury’s liability if the depository institution does not have authority to convert securi- ties? We are not liable if the depository in- stitution has no authority to convert the bearer corpora and detached bearer coupons to book-entry form or to take other actions in respect to book-entry accounts in BECCS and CUBES. § 358.13 What is Treasury’s liability if the depository institution incurs a loss because it does not follow re- quired procedures? We are not liable for any loss in- curred by the depository institution as a result of its failure to properly follow our procedures. VerDate Aug<04>2004 04:25 Aug 31, 2005 Jkt 205120 PO 00000 Frm 00458 Fmt 8010 Sfmt 8010 Y:\SGML\205120.XXX 205120
447 Fiscal Service, Treasury § 358.21 § 358.14 What happens when securities are accepted for conversion? (a) After processing and initial verification, we will transfer the secu- rities accepted to the depository insti- tution’s book-entry account, estab- lishing a securities entitlement in TRADES according to 31 CFR part 357 subpart B. (b) We will do the final verification within twenty (20) business days of ini- tial receipt of the bearer corpora and detached bearer coupons. (c) If at any time after this twenty (20) day period we determine that the security was improperly credited to the BECCS or CUBES account of the depos- itory institution, such as in the case of a previously undetected, counterfeit security, we reserve the right to adjust the BECCS or CUBES account. § 358.15 What happens if securities are adjusted? (a) If we make an adjustment to all or part of the submitted securities, we will instruct the depository institution to transfer BECCS or CUBES securities of the same payment date and face amount from the depository institu- tion’s account to an account that we designate. (b) If no such BECCS or CUBES secu- rities exist in the depository institu- tion’s account, we will instruct the de- pository institution as to how the ad- justment will be made. (c) If the depository institution fails to comply with our instructions within five (5) business days of receipt of the instructions, we reserve the right to debit the master account of the deposi- tory institution for the face value of the adjusted bearer corpora and de- tached bearer coupons. By the submis- sion of the bearer corpora and detached bearer coupons, the depository institu- tion is deemed to agree to this debit. § 358.16 Are BECCS and CUBES ac- counts maintained separately from the STRIPS program? BECCS and CUBES accounts are maintained separately from accounts maintained in Treasury’s STRIPS (Separate Trading of Registered Inter- est and Principal of Securities) pro- gram. § 358.17 Can BECCS and CUBES secu- rities be reconstituted to physical form? After bearer corpora and detached bearer coupons have been converted to book-entry form, reconversion to phys- ical form is prohibited. The reconstitu- tion of a BECCS security with CUBES securities or any combination of Treas- ury obligations is prohibited. § 358.18 What limitations exist on li- ability? (a) Except as otherwise provided by regulation, circular, or written agree- ment, any fiscal agent designated to act on our behalf is liable for its action or omission only if it failed to exercise ordinary care. (b) We do not assume any responsi- bility to any party except the sending and receiving depository institutions involved in a BECCS or CUBES trans- action. (c) We do not assume any responsi- bility in connection with a BECCS or CUBES transaction for the insolvency, neglect, misconduct, mistake, or de- fault of another bank or person, includ- ing the immediate participants. § 358.19 Who is responsible for any loss resulting from the conversion of a bearer corpus missing callable cou- pons? The submitting depository institu- tion shall indemnify the United States against any loss resulting from the conversion of a bearer corpus that is missing one or more associated call- able coupons. § 358.20 Can these regulations be waived? We reserve the right to waive or mod- ify any provision of the regulations in this part for the convenience of the United States or to relieve any person of unnecessary hardship, if such action is not inconsistent with law, does not impair existing rights, and does not subject the United States to any sub- stantial expense or liability. § 358.21 Can these regulations be amended? We may at any time supplement, amend, or revise the regulations in this part. VerDate Aug<04>2004 04:25 Aug 31, 2005 Jkt 205120 PO 00000 Frm 00459 Fmt 8010 Sfmt 8010 Y:\SGML\205120.XXX 205120