[Federal Register Volume 63, Number 201 (Monday, October 19, 1998)]
[Notices]
[Pages 55910-55912]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-27909]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-40540; File No. SR-NSCC-98-07]
Self-Regulatory Organizations; National Securities Clearing
Corporation; Notice of Filing of a Proposed Rule Change Expanding the
Annuities Processing Service
October 9, 1998.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on June 24, 1998, the
National Securities Clearing Corporation (``NSCC'') filed with the
Securities and Exchange Commission (``Commission'') the proposed rule
change, as described in Items I, II, and III below, which items have
been prepared primarily by NSCC. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons.
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\1\ 15 U.S.C. 78s(b)(1).
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I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
The proposed rule change will amend NSCC's rules to implement the
second phase of its Annuity Processing Service (``APS'').
[[Page 55911]]
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, NSCC included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. NSCC has prepared summaries, set forth in sections (A),
(B), and (C) below, of the most significant aspects of such
statements.\2\
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\2\ The Commission has modified parts of these statements.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
On September 19, 1997, the Commission approved NSCC's rule filing
establishing APS.\3\ APS provides a centralized communication link that
connects participating insurance carriers with their multiple
distribution channels, including broker-dealers, banks, and the broker-
dealers' or banks' affiliated insurance agencies where appropriate
(collectively, ``distributors''). Phase one of APS provides NSCC's
participants with the ability to send and receive daily information
regarding underlying assets, and settlement of commission monies.\4\
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\3\ Securities Exchange Act Release No. 39096 (September 19,
1997), 62 FR 50416 [order approving the establishment of APS and the
implementation of phase I of APS].
\4\ Id.
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The purpose of the proposed rule change is to implement phase two
of APS. Phase two will provide distributors the ability to transmit to
insurance carriers information concerning annuity applications and
subsequent premium payments and to settle initial and subsequent
premiums. In addition, insurance carriers will be able to transmit to
distributors information relating to events and transactions occurring
with respect to existing annuity contracts that have been issued by the
insurance carriers.
The initial application and initial premium components of APS will
allow distributors to transmit information related to annuity
applications and will allow settlement of the initial premium payments
through NSCC's money settlement process. Distributors will submit
application information to NSCC, and NSCC will forward the application
information to the insurance carrier designated as recipient by the
distributor.
The subsequent premium component will allow distributors to
transmit to insurance carriers information related to subsequent
premium payments made by annuity contract owners. Distributors will
submit subsequent premium information to NSCC, and NSCC will forward
the subsequent premium information to the insurance carrier designated
as recipient by the distributor.
The proposed rule change will provide that a distributor who has
submitted application information or subsequent premium information to
NSCC may also include date with respect to the annuity contract owner's
initial premium payment or subsequent premium payment. If the
information regarding the initial or subsequent premium payment is
included with the application information or subsequent premium
information, distributors and carriers will settle these payments
through NSCC's money settlement system.
Distributors will initiate initial and subsequent premium payment
settlement by submitting instructions to NSCC. All initial and
subsequent premium payments submitted on a business day prior to that
day's cutoff time (2:00 pm Eastern time) will settle on that day.
Payments submitted on a business day after the cutoff time will settle
on the next business day. Distributors will have the ability to cancel
a previously submitted transaction on a business day as long as the
cancel instruction is initiated prior to 2:00 pm Eastern time.
If a distributor submits an instruction to NSCC to withdraw
application information and an initial premium payment had been
originally submitted with that application information, then NSCC will
not settle the initial premium payment. A distributor will not have the
ability to cancel a subsequent premium payment that has been included
with previously submitted subsequent premium information.
The financial activity reporting component will allow insurance
carriers to transmit to distributors information and details about
transactions and events that have occurred with respect to existing
annuity contracts. An example of a transaction that may occur with
respect to an annuity contract is a contract owner initiated transfer
of underlying annuity contract assets from one subaccount to another
subaccount. An example of an event is a dividend declared by an
underlying fund. Distributors often use financial activity information
for the monthly account statements they send to their customers.
The proposed rule change will provide that if the application
information submitted by a distributor to NSCC appears to contain the
information required by NSCC but does not appear to contain the
information required by the designated insurance carrier, NSCC will
nevertheless transmit the application information to the designated
insurance carrier but will not settle any initial premium payments
submitted with such information. However, if the information contains
four or more errors, NSCC will reject all of the submitted information
and will not settle any initial premium payments submitted with such
information.
NSCC believes the proposed rule change is consistent with Section
17A of the Act because phase two of APS will facilitate the prompt and
accurate clearance and settlement of securities transactions and will
in general protect investors and the public interest.
(B) Self-Regulatory Organization's Statement on Burden on Competition
NSCC does not believe that the proposed rule change will impact or
impose a burden on competition.
(C) Self-Regulatory Organization's Statement on Comments on the
Proposed Rule Change Received From Members, Participants, or Others
No written comments have been solicited or received. NSCC will
notify the Commission of any written comments received by NSCC.
III. Date of Effectiveness of the Proposed Rule Change and Timing
for Commission Action
Within thirty-five days of the date of publication of this notice
in the Federal Register or within such longer period (i) as the
Commission may designate up to ninety days of such date if it finds
such longer period to be appropriate and publishes its reasons for so
finding or (ii) as to which NSCC consents, the Commission will:
(A) By order approve such proposed rule change or
(B) Institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street NW., Washington, DC 20549. Copies
of the
[[Page 55912]]
submission, all subsequent amendments, all written statements with
respect to the proposed rule change that are filed with the Commission,
and all written communications relating to the proposed rule change
between the Commission and any person, other than those that may be
withheld from the public in accordance with the provisions of 5 U.S.C.
552, will be available for inspection and copying in the Commission's
Public Reference Room in Washington, DC. Copies of such filing will
also be available for inspection and copying at the principal office of
NSCC. All submissions should refer to the File No. SR-NSCC-98-07 and
should be submitted by November 9, 1998.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\5\
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\5\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-27909 Filed 10-16-98; 8:45 am]
BILLING CODE 8010-01-M
