[Federal Register Volume 63, Number 246 (Wednesday, December 23, 1998)]
[Notices]
[Pages 71175-71176]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-33981]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-40799; File No. SR-NSCC-98-07]
Self-Regulatory Organizations; National Securities Clearing
Corporation; Order Approving a Proposed Rule Change Expanding the
Annuities Processing Service
December 16, 1998.
On June 24, 1998, the National Securities Clearing Corporation
(``NSCC'') filed with the Securities and Exchange Commission
(``Commission'') a proposed rule change (File No. SR-NSCC-98-07)
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'').\1\ Notice of the proposal was published in the Federal
Register on October 19, 1998.\2\ No comment letters were received. For
the reasons discussed below, the Commission is approving the proposed
rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ Securities Exchange Act Release No. 40540 (October 9, 1998),
63 FR 55910.
---------------------------------------------------------------------------
I. Description
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 annuity contract positions, the value of each contract's
underlying assets, and settlement of commission monies.\4\
---------------------------------------------------------------------------
\3\ Securities Exchange Act Release No. 39096 (September 19,
1997), 62 FR 50416 [order approving the establishment of APS and the
implementation of phase one of APS].
\4\ Id.
---------------------------------------------------------------------------
The proposed rule change implements phase two of APS. Phase two
provides distributors with the ability to transmit to insurance
carriers information concerning annuity applications and subsequent
premium payments and to settle initial and subsequent premiums 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 allows 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 provides that a distributor that has
submitted application information or subsequent premium information to
NSCC may also include data 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 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 have the ability to cancel a
[[Page 71176]]
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
submitted with that application information, then NSCC will not settle
the initial premium payment. A distributor does not have the ability to
cancel a subsequent premium payment that has been included with
previously submitted subsequent premium information.
Phase two will also enable 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 existing 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 such financial information for the monthly account statements
they send to their customers.
The proposed rule change provides 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.
II. Discussion
The Commission finds that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder and particularly with the requirements of Section
17A(b)(3)(F).\5\ Section 17A(b)(3)(F) requires that the rules of a
clearing agency be designed to promote the prompt and accurate
clearance and settlement of securities transactions.
---------------------------------------------------------------------------
\5\ 15 U.S.C. 78q-1(b)(3)(F)(1988).
---------------------------------------------------------------------------
The Commission believes that NSCC's rule change meets this standard
because the implementation of the second phase of APS should provide
more centralized communications and settlement between insurance
carriers and distributors and should provide for more efficient
processing. Thus, the proposal promotes prompt and accurate clearance
and settlement of securities transactions.
III. Conclusion
On the basis of the forgoing, the Commission finds that the
proposal is consistent with the requirements of the Act and in
particular with the requirements of Section 17A(b)(3)(F) of the Act and
the rules and regulations thereunder.
It Is Therefore Ordered, pursuant to Section 19(b)(2) of the Act,
that the proposed rule change (File No. SR-NSCC-98-07) be and hereby is
approved.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\6\
---------------------------------------------------------------------------
\6\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-33981 Filed 12-22-98; 8:45 am]
BILLING CODE 8010-01-M
