[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