Regulations Governing Book-Entry Treasury Bonds, Notes and Bills

DEPARTMENT OF THE TREASURY

Fiscal Service

31 CFR Part 357

Regulations Governing Book-Entry Treasury Bonds, Notes and Bills

AGENCY: Bureau of the Public Debt, Fiscal Service, Department of the

Treasury.

ACTION: Final rule.

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SUMMARY: This document amends the regulations governing book-entry

Treasury bills, bonds, and notes by changing the time period during

which the Department of the Treasury (Treasury) may delay the transfer

of a newly-purchased security from TreasuryDirect to an account in

TRADES. The previous rule provided that for Treasury bonds and notes

purchased on original issue or on the

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additional issue of an outstanding issue, transfer from or within

TreasuryDirect could be delayed for a period not to exceed 14 calendar

days. The potential delay was to ensure that payment, if made by check,

could be received and properly credited to Treasury's account. This

amendment permits Treasury to delay the transfer of a newly-purchased

security from TreasuryDirect to an account in TRADES for a period not

to exceed 30 days. The previous 14 day period is not appropriate if

using Pay Direct. With Pay Direct, investors purchase securities by

having the funds electronically deducted from their deposit account at

their financial institution and the 30 day period provides additional

time for the investor to become aware of any unauthorized debit. This

change benefits Treasury in preventing the transfer and sale of the

security before the investor has time to discover any unauthorized

debit that may have occurred.

DATES: Effective February 10, 1999.

FOR FURTHER INFORMATION CONTACT: Maureen Parker, Director, Division of

Securities Systems, Bureau of the Public Debt (304) 480-7761; Susan

Klimas, Attorney-Adviser, Office of the Chief Counsel, Bureau of the

Public Debt (304) 480-3688; Edward C. Gronseth, Deputy Chief Counsel,

Office of the Chief Counsel, Bureau of the Public Debt (304) 480-3692.

SUPPLEMENTARY INFORMATION: The previous rule permitted Treasury to

delay the transfer of a Treasury bond or note (but not a bill)

purchased on original issue or on the additional issue of an

outstanding issue. The delay could not exceed 14 calendar days from the

date of issue. The purpose of the delay was to protect Treasury from a

loss by providing enough time for a personal check written in payment

for the security to clear. The delay prevented an owner from

transferring the security into an account in TRADES and selling the

security before the check could clear, thus preventing a potential loss

to Treasury. Bills were not included in the securities subject to the

delay because a personal check cannot be used to pay for a bill.

Currently, an investor has the additional option of paying for a

security through Pay Direct, which is a debit to the investor's

checking or savings account at a financial institution. Pay Direct may

be used to purchase bills as well as notes or bonds. If the debit is

unauthorized, the investor may not discover the debit for a period of

time which may exceed the previous 14 day delay period. If the security

is transferred to an account in TRADES and sold on the market prior to

the discovery of an unauthorized debit, Treasury could sustain a loss

because Treasury would make a reimbursement to the account holder at

the depository financial institution. Therefore, this rule has been

amended to provide the investor a reasonable period of time to discover

any unauthorized debit. The 30 day time frame will now apply to bills,

since bills may be paid for by Pay Direct.

The time period of 30 days is considered a reasonable period of

time for an investor to discover an unauthorized debit. Of course, an

investor could discover an unauthorized debit after the 30 day period

of time. However, there is a need to balance the burden placed on an

investor and the risk to Treasury from an unauthorized debit. The 30

day time frame was considered a reasonable balance among various

interests.

Procedural Requirements

This final rule does not meet the criteria for a ``significant

regulatory action,'' pursuant to Executive Order 12866.

This final rule relates to matters of public contract and

procedures for U.S. securities. Accordingly, pursuant to 5 U.S.C. 553

(a) (2), the notice, public comment and delayed effective date

provisions of the Administrative Procedure Act do not apply.

As no notice of proposed rulemaking is required, the provisions of

the Regulatory Flexibility Act (5 U.S.C. 601, et seq.) do not apply.

There are no new collections of information contained in this final

rule., Therefore, the Paperwork Reduction Act does not apply.

List of Subjects in 31 CFR Part 357

Bonds, Electronic funds transfer, Federal Reserve System,

Government securities, Securities.

Dated: February 2, 1999.

Donald V. Hammond,

Fiscal Assistant Secretary.

For the reasons stated in the preamble, the Department of the

Treasury amends 31 CFR part 357 as set forth below:

PART 357--GENERAL REGULATIONS GOVERNING BOOK-ENTRY TREASURY BONDS,

NOTES AND BILLS

1. The authority citation for Part 357 continues to read as

follows:

Authority: 31 U.S.C. Chapters 31, 5 U.S.C. 301 and 12 U.S.C.

391.

2. Amend Sec. 357.22 by revising the introductory text of paragraph

(a) to read as follows:

Sec. 357.22 [Amended]

(a) General. A security may be transferred only as authorized by

this part. A security may be transferred from an account in

TreasuryDirect to an account in TRADES, or from an account in TRADES to

an account in TreasuryDirect. A security may also be transferred

between accounts in TreasuryDirect. The Department may delay transfer

of a newly purchased security from a TreasuryDirect account to an

account in TRADES for a period not to exceed (30) calendar days from

the date of issue. This provides time for the investor to become aware

of any unauthorized debits.

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[FR Doc. 99-3155 Filed 2-9-99; 8:45 am]

BILLING CODE 4810-39-P