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CFR-2005-title31-vol2-part358(1)

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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 
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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. 
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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. 
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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. 
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