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Important Information - Direct Registration System (DRS) Update
December 2006

As part of the industry’s goal to eliminate physical stock certificates while ensuring investors have alternatives available to them, the Direct Registration System is being expanded and mandated over the next two years. Through the efforts of the Securities Industry and Financial Markets Association’s Operations Legal & Regulatory Subcommittee, DTCC and others, the SEC approved and posted the AMEX, NASDAQ, and NYSE rule changes requiring all listed issues to be DRS eligible .These rule changes took effect on August 8, 2006. In addition, the regional exchanges have proposed similar rule changes for the SEC’s consideration.

Under the new rules:
- All new issues coming to market on or after January 1, 2007 must be DRS eligible.
- All currently listed issues must migrate to DRS by January 1, 2008.

DRS provides for book-entry ownership of securities, registered directly on the books of the transfer agent or issuer. Through DRS the assets of the registered holder can move electronically to and from the transfer agent and broker dealer.

Today, there are over 1,260 eligible DRS issues. The new rule change is expected to add over 9,000 listed issues to the program by January 1, 2008.

In advance of the January 1, 2007 implementation date, each firm should provide information about DRS to their Sales Force, Operations Associates and Customers.

For additional information on industry dematerialization efforts, please refer to the following sources of information: