[Federal Register Volume 63, Number 201 (Monday, October 19, 1998)]
[Notices]
[Pages 55910-55912]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-27909]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-40540; File No. SR-NSCC-98-07]


Self-Regulatory Organizations; National Securities Clearing 
Corporation; Notice of Filing of a Proposed Rule Change Expanding the 
Annuities Processing Service

October 9, 1998.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on June 24, 1998, 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. 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. 78s(b)(1).
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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 amend NSCC's rules to implement the 
second phase of its Annuity Processing Service (``APS'').

[[Page 55911]]

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.\2\
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    \2\ The Commission has modified parts of these statements.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    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 underlying assets, and settlement of commission monies.\4\
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    \3\ Securities Exchange Act Release No. 39096 (September 19, 
1997), 62 FR 50416 [order approving the establishment of APS and the 
implementation of phase I of APS].
    \4\ Id.
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    The purpose of the proposed rule change is to implement phase two 
of APS. Phase two will provide distributors the ability to transmit to 
insurance carriers information concerning annuity applications and 
subsequent premium payments and to settle initial and subsequent 
premiums. In addition, insurance carriers will be able to transmit to 
distributors information relating to events and transactions occurring 
with respect to existing annuity contracts that have been issued by the 
insurance carriers.
    The initial application and initial premium components of APS will 
allow distributors to transmit information related to annuity 
applications and will allow settlement of the initial premium payments 
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 will allow 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 will provide that a distributor who has 
submitted application information or subsequent premium information to 
NSCC may also include date 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 will 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 will have the ability to cancel 
a 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 
originally submitted with that application information, then NSCC will 
not settle the initial premium payment. A distributor will not have the 
ability to cancel a subsequent premium payment that has been included 
with previously submitted subsequent premium information.
    The financial activity reporting component will allow 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 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 financial activity information 
for the monthly account statements they send to their customers.
    The proposed rule change will provide 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.
    NSCC believes the proposed rule change is consistent with Section 
17A of the Act because phase two of APS will facilitate the prompt and 
accurate clearance and settlement of securities transactions and will 
in general protect investors and the public interest.

(B) Self-Regulatory Organization's Statement on Burden on Competition

    NSCC does not believe that the proposed rule change will impact 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 have been solicited or received. NSCC will 
notify 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 NSCC 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, including whether the proposed rule 
change is consistent with the Act. 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

[[Page 55912]]

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 No. SR-NSCC-98-07 and 
should be submitted by November 9, 1998.

    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. 98-27909 Filed 10-16-98; 8:45 am]
BILLING CODE 8010-01-M