98-2888. Self-Regulatory Organizations; National Securities Clearing Corporation; Order Approving a Proposed Rule Change Establishing a New Category of Fund Member for Investment Advisers in Mutual Fund Services

[Federal Register Volume 63, Number 24 (Thursday, February 5, 1998)]
[Notices]
[Pages 5986-5987]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-2888]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-39602; File No. SR-NSCC-97-10]


Self-Regulatory Organizations; National Securities Clearing 
Corporation; Order Approving a Proposed Rule Change Establishing a New 
Category of Fund Member for Investment Advisers in Mutual Fund Services

January 30, 1998.
    On August 25, 1997, the National Securities Clearing Corporation 
(``NSCC'') filed with the Securities and Exchange Commission 
(``Commission'') a proposed rule change (File No. SR-NSCC-97-10) 
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

[[Page 5987]]

on December 15, 1997.\2\ No comment letters were received. For the 
reasons discussed below, the Commission is approving the proposed rule 
change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ Securities Exchange Act Release No. 39416 (December 9, 
1997), 62 FR 65728.
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I. Description

    NSCC's mutual fund services (``MFS'') are designed to enable NSCC 
members to process and to settle on an automated basis mutual fund 
purchase and redemption orders and to transmit registration 
instructions. NSCC currently provides for two categories of fund member 
in MFS: (1) Principal underwriters which are registered broker-dealers 
under the Act and (2) investment companies which are registered under 
the Investment Company Act of 1940. Although the Commission previously 
approved amendments to NSCC's Addendum I(B)(2) of its Procedure to add 
standards of financial responsibility and operational capability for 
investment company fund members, the list of eligible fund members 
contained in Rule 51 was not amended to include investment 
companies.\3\ Rule 51, Section 1 is now amended to include this 
category of fund member.
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    \3\ Securities Exchange Act Release No. 33525 (January 26, 
1994), 59 FR 4959.
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    The proposed rule change also expands the category of eligible fund 
members to include registered investment advisers as defined in Section 
202(a)(11) of the Investment Advisers Act of 1940. To be eligible for 
membership in MFS, a nonguaranteed service of NSCC, investment advisers 
will need (a) to be registered with the Commission under the Investment 
Advisers Act of 1940 and (b) to have a minimum of $25 million in assets 
under management and $100,000 in total net worth.

II. Discussion

    Section 17A(b)(3)(F) of the Act \4\ requires that the rules of a 
clearing agency be designed to facilitate the prompt and accurate 
clearance and settlement of securities transactions. The Commission 
believes that the proposed rule change is consistent with NSCC's 
obligations under the Act because the proposed rule change allows 
families of self-distributed no-load funds to join MFS through an 
investment adviser rather than through each of their separate 
investment companies. As a result, these funds will now be able to take 
full advantage of the benefits of a single membership, such as net 
settlement, reduced costs, and operational efficiencies. Thus, the 
proposal should reduce the number of securities movements and 
settlement payments needed to settle trades and therefore is consistent 
with the Act's goal to promote the prompt and accurate clearance and 
settlement of securities transactions.
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    \4\ 15 U.S.C. 78q-1(b)(3)(F).
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III. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposal is consistent with the requirements of the Act and in 
particular with the requirements of Section 17A 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-97-10) be and hereby is 
approved.

    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. 98-2888 Filed 2-4-98; 8:45 am]
BILLING CODE 8010-01-M