[Federal Register Volume 59, Number 124 (Wednesday, June 29, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-15711]
[[Page Unknown]]
[Federal Register: June 29, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34246; File No. SR-NYSE-94-21]
June 22, 1994.
Self-Regulatory Organizations; New York Stock Exchange, Inc.;
Notice of Filing of a Proposed Rule Change Relating to NYSE's Customer
Account Transfer Contracts Rule and Its Related Interpretations.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on June 16, 1994, New York
Stock Exchange, Inc. (``NYSE'') 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
NYSE. 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. Sec. 78s(b)(1) (1988).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The primary purpose of NYSE's proposed rule change is to amend
Exchange Rule 412, Customer Account Transfer Contracts and its related
Interpretations. The proposed amendments are an effort to incorporate
into the account transfer process enhancements to the Automated
Customer Account Transfer System (``ACATS'') which have been developed
by the National Securities Clearing Corporation (NSCC) and other
registered clearing agencies.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, NYSE included statements
concerning the purpose of and basis for the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. NYSE has prepared summaries, set forth in sections A, B,
and C below, of the most significant aspects of such statements.
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 amend rule 412,
Customer Account Transfer Contracts, and its related Interpretations.
The proposed amendments are intended to increase the speed and
efficiency of the account transfer process by reducing the time period
for transferring customers' cash/margin and retirement accounts from
ten to seven business days. This will be accomplished by reducing the
five business day validation period for accounts to three business days
and reducing the delivery period from five business days to four
business days [Rule 412(b)]. The interpretation permitting a ten day
validation period for retirement accounts will be deleted [Rule 412,
Interpretation (f)/01].
NYSE's proposed rule change also will mandate the use of an
automated system for transferring mutual fund positions where a member
organization is a participant in a registered clearing agency which has
such a facility. This will provide a link between broker-dealer
participants and mutual fund participants for reregistration of mutual
fund positions and will reduce fails. It also will reduce manual
processing and the associated costs [Rule 412(e)(2)].
Under the proposed rule change, member organizations participating
in a registered clearing agency with automated residual credit
processing capabilities will be required to utilize such facilities to
transfer residual credit positions (e.g., dividends, interest, etc.)
which accrue to an account after transfer. Credit balances accruing in
a transferred account will have to be transferred within ten business
days for a six month period following transfer. The required time
periods will apply to all member organizations regardless of whether
they are participants in a clearing agency [Rule 412(e)(3)].
The proposed rule change will permit partial customer account
transfers to be accomplished through the existing automated transfer
system. Presently, partial transfers are accomplished outside of the
system. The time frames required by Rule 412 for transfer of entire
accounts will not apply to partial transfers. However, member
organizations are expected to expedite partial transfers of customer
accounts [Rule 412, Interpretation (a)/01)].
NYSE's proposed rule change will facilitate communication between
organizations and will improve exchange oversight by providing more
explicit reason codes for when accounts may be rejected [Rule 412,
Interpretation (b)(1)/02]. Member organizations that receive an account
transfer related claim letter will be required to resolve the claim
within five business days or respond in writing setting forth specific
reasons for denying the claim [Rule 412(d)].
The shortening of the time period for transferring accounts from
ten to seven days is appropriate in view of enhanced automation of the
process by member organizations and clearing agencies and will be
beneficial to both customers and member organizations. In addition, the
reduction of time allowable for account transfers is consistent with
the three day settlement period, which has been mandated by the
Commission for June 1995.
The development by registered clearing agencies of automated
systems to transfer mutual funds and residual credit balances and their
mandatory use will benefit both customers and member organizations by
increasing efficiency, reducing paperwork and providing significant
cost savings. Permitting partial account transfers to be accomplished
through existing automated account transfer systems will provide member
organizations with the ability to utilize these facilities where they
will provide the most efficient and expeditious transfer. The use of
more explicit reject codes will reduce unnecessary back office
operations functions and will allow the NYSE to be better able to
determine the exact reason for excessive rejects. The amendments to
require the resolution or denial of claim letters within five business
days will provide a regulatory framework in an area where no specific
requirements currently exist and will expedite resolution of such
claims.
The amendments relating to use of an automated system for
transferring mutual fund positions, Rule 412(e)(2), and residual credit
processing, Rule 412(e)(3), will become effective one hundred eighty
calendar days after Commission approval of the amendments. All other
amendments referred to above will become effective ninety days after
Commission approval.
The statutory basis for the proposed change is based upon Section
6(b)(5) of the Act in that it fosters cooperation and coordination with
persons engaged in facilitating transactions in securities. This is so
because the procedures contained in the proposed rule are intended to
expedite transfer of customer securities accounts between member
organizations. The change also generally protects investors and the
public interest by requiring expeditious transfer of accounts.
B. Self-Regulatory Organization's Statement on Burden on Competition
NYSE believes that the proposal does not impose any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received from Members, Participants, or Others
Statements were neither solicited nor received.
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 the 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, N.W., Washington, D.C. 10549.
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. Sec. 552, will be available for inspection and copying in
the Commission's Public Reference Section, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Copies of such filing will also be available
for inspection and copying at the principal office of the above-
referenced self-regulatory organization. All submissions should refer
to File No. SR-NYSE-94-21 and should be submitted by July 20, 1994.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-15711 Filed 6-28-94; 8:45 am]
BILLING CODE 8010-01-M
