[Federal Register Volume 68, Number 243 (Thursday, December 18, 2003)]
[Notices]
[Pages 70553-70554]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-31213]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-48896; File No. SR-NSCC-2003-18]


Self-Regulatory Organizations; National Securities Clearing 
Corporation; Notice of Filing and Immediate Effectiveness of a Proposed 
Rule Change Relating to an Enhancement to the Insurance Processing 
Service

December 9, 2003.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on September 22, 2003, 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 modify NSCC's Rule 57, Section 1, to 
allow NSCC's members, insurance carrier members, and data services-only 
members to submit application information and to settle premium 
payments with respect to life insurance products by adding a new 
service called Portal.

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 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 enhance NSCC's 
Insurance Processing Service (``IPS'') by allowing NSCC's members, 
insurance carrier members, and data services only members to submit 
application information and to settle premium payments with respect to 
life insurance products.
    Unlike other parts of the financial services industry, the life 
insurance and annuity industries rely heavily on manual processing and 
one-off communications to process the sale of their products. The lack 
of technology, absence of standards, and resulting lengthy delays in 
the sales process contribute to a typical lag of 30 to 90 days between 
the initial sale by the sales person or distributor and the issuance by 
the insurance carrier of a life insurance policy.
    IPS currently offers many services that help automate and 
standardize certain aspects of the processing of annuities and life 
insurance. However, there are many aspects of this processing that fall 
outside of current IPS capabilities. For example, IPS currently allows 
its users to transmit information through IPS regarding annuities 
applications as part of the Initial Application Information (``APP'') 
function, but the APP function does not accommodate life insurance 
applications. In addition, not all potential users of IPS have 
programmed their systems to allow full access to existing IPS services.
    To remedy some of the problems outlined above, NSCC proposes to 
introduce a system called ``Portal'' that will handle annuities and 
life insurance applications through APP. Users will access Portal 
through a software package provided by NSCC that will allow users to 
more easily access certain IPS functions without undertaking all of the 
internal programming that they would otherwise have to do.
    In addition, because there are other functions that distributors of 
life insurance and annuity products must perform between the sale of 
the product and its issuance, NSCC is contracting with third party 
service providers that offer these functions. These functions include 
producer education (i.e., registered representatives who work for 
members or data services only members who help distributors and 
producers fulfill their educational requirements for offering products 
under state law); producer licensing (helps to streamline the licensing 
process for distributors to have their producers become licensed by 
states and facilitates the exchange of information relating to 
licensees); product profile repository (provides a database of generic 
details regarding individual life insurance and annuity products); 
electronic submission of new business (provides electronic application 
forms of various insurance carriers that can be filled out and 
transmitted electronically); call center (teleunderwriting that gathers 
data required for an annuity or life insurance application provided by 
applicants); requirements ordering (arranges with third parties for 
medical examinations, review of driving records, credit history check, 
etc.); and case management (manages the case, including obtaining all 
necessary information for the electronic application prior to the 
underwriting process, oversees the integration of information from the 
call center and requirements outsourcing processes, and performs 
quality assurance functions).
    NSCC will charge Portal users through the NSCC settlement 
system.\3\ The users will be subject to the service standards offered 
to NSCC by these service providers. Portal will be subject to the same 
liability standard as with other features of IPS.\4\
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    \3\ The proposed fee schedule for Portal users is being 
developed and will be filed with the Commission at a later date.
    \4\ NSCC's Rule 57, Section 6 states: ``[NSCC] will not be 
responsible for the completeness or accuracy of the IPS Data 
received from or transmitted to an Insurance Carrier Member, Member 
or Data Services Only Member through IPS nor for any errors, 
omissions or delays which may occur in the absence of gross 
negligence on [NSCC]'s part, in the transmission of such IPS Data to 
or from an Insurance Carrier Member, or Data Services Only Member.''
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    NSCC believes that the proposed rule change is consistent with the 
requirements of Section 17A of the Act and the rules and regulations 
thereunder since it will facilitate the prompt and accurate processing 
of transactions.

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 the Commission of any written 
comments received by NSCC.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section

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19(b)(3)(A)(iii) of the Act \5\ and Rule 19b-4(f)(6) thereunder \6\ 
because it effects a change that does not significantly affect the 
protection of investors or the public interest, does not impose any 
significant burden on competition, and does not become operative for 30 
days after the date of the filing. At any time within sixty days of the 
filing of such rule change, the Commission could have summarily 
abrogated such rule change if it appeared to the Commission that such 
action was necessary or appropriate in the public interest, for the 
protection of investors, or otherwise in furtherance of the purposes of 
the Act.
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    \5\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \6\ 17 CFR 240.19b-4(f)(6).
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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 5th Street NW., Washington, DC 20549-0069. 
Comments may also be submitted electronically at the following e-mail 
address: [email protected]. All comment letters should refer to 
File No. SR-NSCC-2003-18. This file number should be included on the 
subject line if e-mail is used. To help the Commission process and 
review your comments more efficiently, comments should be sent in 
hardcopy or by e-mail but not by both methods. Copies of the 
submission, all subsequent amendments, all written statements with 
respect to the rule filing that are filed with the Commission, and all 
written communications relating to the rule filing between the 
Commission and any person, other than those that may be withheld from 
the public in accordance with 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 NSCC's principal office and on 
NSCC's Web site at http://www.nscc.com/legal/. All submissions should 
refer to File No. SR-NSCC-2003-18 and should be submitted by January 8, 
2004.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-31213 Filed 12-17-03; 8:45 am]
BILLING CODE 8010-01-P