[Federal Register Volume 71, Number 141 (Monday, July 24, 2006)]
[Notices]
[Pages 41852-41853]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-11681]
[[Page 41852]]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-54163; File No. SR-NSCC-2006-06]
Self-Regulatory Organizations; National Securities Clearing
Corporation; Notice of Filing and Immediate Effectiveness of Proposed
Rule Change Relating to Enhancements to ACATS-Fund/SERV Processing
Capabilities
July 17, 2006.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on May 30, 2006, the National
Securities Clearing Corporation (``NSCC'') filed with the Securities
and Exchange Commission (``Commission'') the proposed rule change
described in Items I, II, and III below, which items have been prepared
primarily by NSCC. NSCC filed the proposed rule change pursuant to
Section 19(b)(3)(A)(iii) of the Act \2\ and Rule 19b-4(f)(4) thereunder
\3\ so that the proposal was effective upon filing with the Commission.
The Commission is publishing this notice to solicit comments on the
proposed rule change from interested parties.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78s(b)(3)(A)(iii).
\3\ 17 CFR 240.19b-4(f)(4).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The proposed rule change would modify NSCC's Rules to enhance the
Automated Customer Account Transfer Service (``ACATS'') processing
capabilities for NSCC members that outsource some or all of their
mutual fund processing services.
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 these
statements.\4\
---------------------------------------------------------------------------
\4\ The Commission has modified the text of the summaries
prepared by NSCC.
---------------------------------------------------------------------------
(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
The proposed rule change would modify NSCC's Rules to enhance the
ACATS processing capabilities for NSCC members that outsource some or
all of their mutual fund processing services.
ACATS enables members of NSCC to effect automated transfers of
customer accounts among themselves.\5\ In operation since 1985, ACATS
was designed to facilitate compliance with New York Stock Exchange
(``NYSE'') and National Association of Securities Dealers (``NASD'')
rules that require NYSE and NASD members to use clearing agency
automated customer account transfer services and to effect customer
account transfers within specified time frames.\6\ In 1989, ACATS was
enhanced to permit the automated transfer of book share mutual fund
assets for mutual funds associated with NSCC fund members and mutual
fund processors (``ACATS-Fund/SERV''). In an account transfer
containing eligible book share mutual fund assets, account
reregistration information is routed from the NSCC member through ACATS
to fund members through ACATS-Fund/SERV.
---------------------------------------------------------------------------
\5\ NSCC Rule 50.
\6\ NYSE Rule 412 and NASD Uniform Practice Code Section 11870.
---------------------------------------------------------------------------
The Current Process
In a standard ACATS transfer, the member receiving the customer
account initiates the account transfer by electronically submitting
data from the Transfer Initiation Form to NSCC. The account status then
moves to ``request'' status, during which time the member delivering
the customer account may validate the transfer by submitting to NSCC a
detailed listing of the account assets or may reject the transfer. By
submitting the asset listing, the delivering member acknowledges the
transfer, and the status changes from ``request'' to ``review.''
During the review status, the receiving member examines the
account/assets for creditworthiness, etc., while the delivering member
reviews the account to ensure the assets are properly listed. If mutual
fund assets are listed, the receiving member submits a fund
registration input record through ACATS. The purpose of this record is
to request that the delivering member reregister the mutual fund assets
in the name of the receiving member. During this process, the account
status then progresses to ``sett prep.''
At the beginning of sett prep, the fund registration input record
is sent through ACATS-Fund/SERV to the delivering member which must
either reject or acknowledge the reregistration request in accordance
with the provisions of NSCC's Rules. During the sett prep stage, the
account is frozen in ACATS (i.e., no adjustments or rejects are
permitted) and the following business day the transfer status moves to
``settle close,'' and the account transfer settles. At this time, NSCC
moves continuous net settlement (``CNS'')-eligible securities into CNS,
and for all non-CNS-eligible positions (such as mutual fund assets) and
cash balances, the asset value is debited to the delivering member and
credited to the receiving member.
Proposed Modification
NSCC understands that a number of its members outsource or are
seeking to outsource some or all of their mutual fund processing using
the services of some third party such as another broker-dealer or a
bank or trust company. NSCC believes that the outsourcing has or will
cause processing issues with regard to mutual fund assets that are part
of an ACATS transfer because it is the third party processing entity
and not the NSCC receiving member that has or will have the direct
contractual relationship with the delivering member. Currently, the
NSCC receiving member (and not its third party processing entity) is
identified on account transfer/registration instructions. Therefore, if
the receiving member uses a third party processing entity, the
delivering member will reject such request/instructions. In these
instances, all transfers of customer positions in eligible mutual funds
would need to be processed manually and affected members would be
unable to benefit from the efficiency of automated transfers through
ACATS.
To accommodate these members, NSCC proposes modifying Section 16 of
Rule 52 (Mutual Fund Services) to permit one NSCC member to appoint
another NSCC member or a Mutual Fund/Insurance Services Member as its
ACATS-Fund/SERV Agent with regard to the reregistration of eligible
mutual fund assets.
There will be no change to the ACATS process or to the requirements
and obligations of ACATS receiving members and delivering members. An
ACATS-Fund/SERV Agent must be another NSCC member or Mutual Fund/
Insurance Services Member. An ACATS-Fund/SERV Agent may act on behalf
of multiple NSCC members, but
[[Page 41853]]
each member may designate only one ACATS-Fund/SERV Agent.
A member must notify NSCC of its designation of an ACATS-Fund/SERV
Agent in such form and within such timeframe as is acceptable to NSCC,
and the ACATS-Fund/SERV Agent must acknowledge to NSCC its consent to
this designation. The receiving member must acknowledge to NSCC that
the receiving member shall at all times continue to be responsible for
all provisions of NSCC's Rules, specifically with regard to ACATS and
ACATS-Fund/SERV transactions, including any and all actions taken by
its ACATS-Fund/SERV Agent.
NSCC will maintain a relationship table of those members that
designate an ACATS-Fund/SERV Agent. In instances where an ACATS-Fund/
SERV Agent has been appointed, NSCC will substitute the receiving
member's clearing number and member name on registration/transfer
instructions transmitted to the delivering member with those of the
ACATS-Fund/SERV Agent. Conversely, on acknowledgements/instructions
from the delivering member, NSCC will replace the ACATS-Fund/SERV
Agent's clearing number and member name with those of the receiving
member. No additional ACATS or ACATS-Fund/SERV fees will be incurred in
connection with this process.
NSCC believes that the proposed rule change is consistent with the
requirements of Section 17A of the Act \7\ and the rules thereunder
because it will further automate and facilitate the customer account
transfer process, which can be expected to reduce processing errors and
delays that are typically associated with manual processes. These
changes would foster cooperation and coordination with persons engaged
in account transfers and furthers the protection of investors and the
public interest.
---------------------------------------------------------------------------
\7\ 15 U.S.C. 78q-1.
---------------------------------------------------------------------------
(B) Self-Regulatory Organization's Statement on Burden on Competition
NSCC does not believe that the proposed rule change would impose
any burden on competition.
(C) Self-Regulatory Organization's Statement on Comments on the
Proposed Rule Change Received From Members, Participants, or Others
Written comments relating to the proposed rule change have not yet
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 upon filing pursuant
to Section 19(b)(3)(A)(iii) of the Act \8\ and Rule 19b-4(f)(4) \9\
thereunder because the proposed rule effects a change in an existing
service of NSCC that (i) does not adversely affect the safeguarding of
securities or funds in the custody or control of the clearing agency or
for which it is responsible and (ii) does not significantly affect the
respective rights or obligations of the clearing agency or persons
using the service. At any time within sixty days of the filing of such
rule change, the Commission may summarily abrogate such rule change if
it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.
---------------------------------------------------------------------------
\8\ 15 U.S.C. 78s(b)(3)(A)(i).
\9\ 17 CFR 240.19b-4(f)(1).
---------------------------------------------------------------------------
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. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml) or
Send an e-mail to [email protected]. Please include
File Number SR-NSCC-2006-06 on the subject line.
Paper Comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NSCC-2006-06. 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,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). 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 Section, 100 F Street,
NE., Washington, DC 20549. Copies of such filing also will be available
for inspection and copying at the principal office of NSCC and on
NSCC's Web site at http://www.nscc.com.
All comments received will be posted without change; the Commission
does not edit personal identifying information from submissions. You
should submit only information that you wish to make available
publicly. All submissions should refer to File Number SR-NSCC-2006-06
and should be submitted on or before August 14, 2006.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\10\
---------------------------------------------------------------------------
\10\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Nancy M. Morris,
Secretary.
[FR Doc. E6-11681 Filed 7-21-06; 8:45 am]
BILLING CODE 8010-01-P