regulatory organizations; proposed rule changes: National Securities Clearing Corp.,
[Federal Register: October 19, 1998 (Volume 63, Number 201)]
[Notices]
[Page 55910-55912]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr19oc98-99]
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'') filedwith 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.
\1\ 15 U.S.C. 78s(b)(1).
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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'').
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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\
\2\ The Commission has modified parts of these statements.
(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\
\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.
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.
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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.
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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
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submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filedwith 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\
\5\ 17 CFR 200.30-3(a)(12).
Margaret H. McFarland, Deputy Secretary.
[FR Doc. 98-27909Filed10-16-98; 8:45 am]
BILLING CODE 8010-01-M
