[Federal Register Volume 61, Number 207 (Thursday, October 24, 1996)]
[Notices]
[Pages 55178-55180]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-27300]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37841; File No. SR-NSCC-96-16]
Self-Regulatory Organizations; National Securities Clearing
Corporation; Notice of Filing of Proposed Rule Change Relating to the
Fund/Serv Service
October 18, 1996.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ notice is hereby given that on August 15, 1996, 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. On September 10, 1996, and on
September 30, 1996, NSCC filed amendments to the proposed rule
change.\2\ The Commission is publishing this notice to solicit comments
on the
[[Page 55179]]
proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1) (1988).
\2\ Letters from Anthony H. Davidson, Associate Counsel, NSCC,
to Christine Sibille, Special Counsel, Division of Market
Regulation, Commission (September 6, 1996 and September 27, 1996).
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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 permit a member to initiate a request
to transfer retirement assets within an individual retirement account
(``IRA'') to another mutual fund through NSCC's Fund/Serv.\3\
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\3\ Fund/Serv, which is part of NSCC's Mutual Fund Services, is
an NSCC service that permits NSCC members to process and to settle
on an automated basis mutual fund purchase and redemption orders and
to transmit registration instructions.
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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.\4\
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\4\ The Commission has modified the text of the summaries
prepared by NSCC.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
The purpose of the proposed rule change is to modify NSCC's Rule
52, Part A to enable members, including mutual funds that are only
members of Fund/Serv, to transfer between each other the value of
mutual fund shares held in IRAs on an automated basis. The proposed
rule change is in response to a request by the Investment Company
Institute that NSCC develop a centralized automated system to
facilitate transfers of the value of mutual fund charges in IRAs.\5\
The proposed rule change will serve the industry goals of reducing the
current manually intensive process of telephonic and paper
communications as well as promoting standardization and timely
processing of transfers.
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\5\ Currently, the mutual fund industry relies on telephonic and
paper communications to process these transfers.
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Section 21 will be added to Part A of Rule 52 to set forth the
following process of transfer initiation, acknowledgment, rejection,
confirmation, reconfirmation, cancellation, and settlement. The member
to whom the value of IRA mutual funds shares is to be transferred
(``Receiving Fund Member'') will initiate a transfer by submitting a
transfer request to NSCC indicating the member from whom the value of
IRA mutual fund shares is to be transferred (``Delivering Fund
Member''). The transfer request should contain the CUSIP number, the
customer Tax I.D. number, the customer account number, the customer
account registration, and the plan type (e.g., IRA, IRA rollover, or
Simplified Employee Pension IRA) as established at the Receiving Fund
Member.
Upon receipt of the information from NSCC, the Delivering Fund
Member will compare the information contained in the transfer request
to its records and will either acknowledge or reject the transfer
request by submitting either an acknowledgment or rejection to NSCC. An
acknowledgment should contain the customer account information as the
information appears to the Delivering Fund Member. The acknowledgement
should also contain the customer's current dollar and share balance at
the time of the acknowledgement. A rejection should indicate the
reason(s) (e.g., stop code on account, invalid plan type, or invalid
percentage rate) that the Delivering Fund Member is rejecting the
transfer request. The Delivering Fund Member will have up to two days
from the submission of a transfer request to acknowledge or reject the
transfer request. A transfer request that is not responded to within
two days by a Delivering Fund Member will be deleted from Fund/Serv.
In order for a transfer to be scheduled for settlement, the
Delivering Fund Member will need to submit a confirmation to NSCC. Such
confirmation will provide information on the price at which the
position is liquidated as of two days after acknowledgment. The
Delivering Fund Member will need to submit the confirmation no earlier
than two days and no later than sixty days after the submission of an
acknowledgment. A transfer request that is not confirmed by a
Delivering Fund Member within sixty days from the submission of an
acknowledgment will be deleted from Fund/Serv. If a Delivering Fund
Member wants to change any information contained in the confirmation it
will be permitted to submit a reconfirmation. A Delivering Fund Member
must submit a reconfirmation prior to 11 a.m. on the day of settlement.
A Receiving Fund Member may cancel a transfer request by submitting
an exit instruction to NSCC prior to 11 a.m. on the day of settlement.
A transfer request that has been confirmed or reconfirmed and not
exited will settle on the next settlement cycle after such confirmation
or reconfirmation.\6\ On the settlement date, NSCC will debit the
Delivering Fund Member's account and credit the Receiving Fund Member's
account for the dollar value of the liquidated mutual fund shares.
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\6\ For example, the Receiving Fund Member could submit a
transfer request on Day 1. The Delivering Fund Member could also
acknowledge the transfer request on Day 1. The Delivering Fund
Member could confirm the value of the transfer on Day 3. Assuming
the transfer is confirmed on Day 3, then the transfer could settle
on Day 4.
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Members may also need to make adjustments after the transfer to
account for items such as dividend and commission payments. The
proposed rule change will modify Section 9 of Part A of Rule 52 to
enable a member to make adjustments with another member in the same
fashion as with other Fund/Serv orders. The proposed rule change also
will make technical modifications in order to reference this new
capability in Section 1 of Part A of Rule 52 and will move certain
general provisions to the end of Part A of Rule 52.\7\
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\7\ Section 22, regarding members' legal rights and obligations
arising out of Fund/Serv transactions, will be renumbered Section
46. Section 13, requiring both NSCC and its members to report
certain data, and Section 14, giving discretionary power to NSCC to
prohibit orders, will be renumbered Sections 47 and 48,
respectively. Section 18, regarding NSCC's right to delete
uncompleted Fund/Serv items, will be renumbered Section 49.
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NSCC will charge members the same fee for these transfer requests
as it charges for other Fund/Serv orders. Accordingly, the proposed
rule change will modify Addendum A of NSCC's rules to reflect a fee of
$.35 per side per transfer request.
NSCC believes that the proposed rule change is consistent with the
requirements of Section 17A of the Act \8\ in that it will facilitate
the prompt and accurate clearance and settlement of securities
transactions and, in general, protect investors and the public
interest.
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\8\ 15 U.S.C. 78q-1 (1988).
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(B) Self-Regulatory Organization's Statement on Burden on Competition
NSCC does not believe that the proposed rule change will have an impact
on 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 relating to the proposed rule change have been
solicited or received. NSCC will notify
[[Page 55180]]
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 the self-regulatory organization 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. 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 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
number SR-NSCC-96-16 and should be submitted by November 14, 1994.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-27300 Filed 6-23-96; 8:45 am]
BILLING CODE 8010-01-M
