[Federal Register: February 20, 2007 (Volume 72, Number 33)]
[Notices]
[Page 7791-7792]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr20fe07-34]
[[Page 7791]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-55267; File No. SR-NSCC-2006-16]
Self-Regulatory Organizations; National Securities Clearing
Corporation; Notice of Filing and Immediate Effectiveness of Proposed
Rule Change To Allow Retirement and Other Benefit Plans and Programs
Offered By Registered Broker/Dealers To Be Processed Through Its
Insurance Processing Service
February 9, 2007.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on December 13, 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.
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\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).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The purpose of the proposed rule change is to amend NSCC's Rules
related to the Insurance Processing Services (``IPS'') and Insurance
Carrier Members in order to allow retirement and other benefit plans
and programs offered by registered broker/dealers to be processed on
the IPS platform.
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\
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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 this filing is to amend NSCC's Rules related to IPS
and Insurance Carrier Members in order to allow retirement and other
benefit plans and programs offered by registered broker/dealers to be
processed on the IPS platform.
Background
NSCC's IPS is a non-guaranteed service, meaning that NSCC does not
function as a central counterparty or guarantor with respect to payment
obligations arising in connection with IPS transactions. IPS was
established in 1997 as the Annuities Processing Service, a centralized
communication link that connected participating insurance carriers with
broker/dealers and other entities that distributed annuities issued by
the participating insurance carrier.\5\ The service was later expanded
to accommodate processing of life insurance products in addition to
annuities, and its name was changed to IPS. Similarly, the name of the
participating insurance carriers using IPS was changed from ``Annuities
Carrier Members'' to ``Insurance Carrier Members.'' \6\
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\5\ Securities Exchange Act Release No. 39096 (September 19,
1997), 62 FR 50416 (September 25, 1997) [File No. SR-NSCC-96-21].
\6\ Securities Exchange Act Release Nos. 40634 (November 4,
1998), 63 FR 63096 (November 10, 1998) [File No. SR-NSCC-98-13] and
41477 (June 4, 1999), 64 FR 31666 (June 11, 1999) [File No. SR-NSCC-
99-04].
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Currently, IPS provides for the communication of data relating to
insurance products (both annuities and life insurance products) and for
the settlement of certain payments relating to insurance products, as
set forth in NSCC Rule 57, ``Insurance Processing Service.''
Participating insurance carriers that use IPS to communicate with their
distributors information regarding their insurance products are called
``Insurance Carrier Members.'' Their distributors are called
``Members'' or ``Mutual Fund/Insurance Services Members'' and use IPS
under authority of NSCC Rule 2, ``Members.'' The qualifications of
Insurance Carrier Members are set forth in Rule 56 and Addendum Q of
NSCC's Rules.
Certain retirement and other benefit plans and programs offered by
a broker/dealer are functionally similar to annuities in that the
broker/dealer (functioning as an administrator and/or custodian of the
program) offers multiple investment options (typically mutual funds or
annuities) within the ``wrap'' of the program for sale to plan sponsors
through distributing broker/dealer intermediaries. Current IPS
functionality that is used for annuities and other insurance products
is useful in the context of these programs. Examples of such
functionalities included the communication of customer positions and
activity among the investment options within the program, information
regarding the values of the various investment options included within
the program, data concerning program commissions and other compensation
due to the distributing broker/dealers, and the payment of such
commissions and compensation through NSCC's daily money settlement.
(A) Proposed Amendments to NSCC's Rules
Under the proposed amendments, the IPS is renamed the ``Insurance
and Retirement Processing Services'' (and is still referred to as
``IPS'') and the products processed through IPS are renamed ``IPS
Eligible Products.'' IPS Eligible Products now include, in addition to
insurance products, retirement and other benefit plans and programs.
``Insurance Carrier Member'' is renamed ``Insurance Carrier/
Retirement Services Member.'' Formerly, only insurance companies could
qualify under this membership category. Pursuant to the proposed rule
change, registered broker/dealers will also be eligible to qualify as
Insurance Carrier/Retirement Services Members. The membership
qualifications applicable to insurance companies in their capacity as
Insurance Carrier/Retirement Services Members are unchanged. The
membership qualifications applicable to a broker/dealer in its capacity
as an Insurance Carrier/Retirement Services Member will be the same as
the qualifications currently applicable to a broker/dealer which acts
as a Mutual Fund/Insurance Services Member processing transactions on
IPS today as a distributor of insurance products issued by an Insurance
Carrier Member. These qualifications, such as the requirement that the
broker/dealer maintain $50,000 in excess net capital over that required
by the Commission or the broker/dealer's designated examining authority
(``Excess Net Capital''), are also the same qualifications required of
a broker/dealer that participates in NSCC's Mutual Fund Services,
whether acting as a Fund Member (analogous to an Insurance Carrier/
Retirement Services Member on IPS) or as a Mutual Fund/Insurance
Services Member distributing
[[Page 7792]]
mutual funds and similar fund products on NSCC's mutual fund processing
platform, Fund/Serv.
Rule 1, ``Definitions and Descriptions'' The definition of
``Eligible Insurance Plan'' is deleted and has been replaced by the
term ``IPS Eligible Product'' in order to include retirement and other
benefit plans and programs as products that may be processed through
IPS. The defined term ``Insurance Carrier Member'' is changed to
``Insurance Carrier/Retirement Services Member, as discussed above.
Conforming changes are also made throughout NSCC's Rules.\7\
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\7\ References to ``Insurance Carrier Members'' and the
``Insurance Processing Service'' are replaced with the new terms
throughout NSCC's Rules; however, due to the extent of their use
throughout the Rules, these changes have not been reflected in
Exhibit 5 to the proposed rule change.
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An unrelated technical change is made to defined terms ``TPA'' and
``TPA Member'' to clarify that a TPA Member must be a third party
administrator. Although implied, this had not been expressly stated.
Rule 3, ``Lists to be Maintained'' Section 9 of Rule 3 is revised
to refer to ``IPS Eligible Products,'' rather than insurance plans, as
the subject of transactions processed on IPS.
Rule 50, ``Automated Customer Account Transfer Service''
(``ACATs'') Section 8 of Rule 50 is revised to delete references to an
``Insurance Company'' as the entity which would confirm or reject an
ACATs transfer of IPS Eligible Products. ``Insurance Carrier/Retirement
Services Member'' is substituted in its place. Similar changes are also
made to the description of ACATs for Eligible IPS Products in Section 6
of Rule 57.
Rule 56, ``Insurance Carrier Member'' Rule 56 is revised to include
broker/dealers as entities which can become Insurance Carrier/
Retirement Services Members.
Rule 57, ``Insurance Processing Service'' Rule 57 is revised to
refer to the ``Insurance and Retirement Processing Services'' in place
of the ``Insurance Processing Service.'' In addition, an error in
Section 2(a) is corrected to state that the service is offered by NSCC.
Addendum Q, ``Standards of Financial and Operational Capability for
Insurance Carrier Members'' Addendum Q is revised to reflect that
broker/dealers that are Insurance Carrier/Retirement Services Members
or are applicants must meet the general qualifications currently
applicable to Insurance Carrier Members (other than with respect to
financial qualifications that are applicable solely to insurance
companies). In addition, Addendum Q is revised to reflect that such
broker/dealers must also maintain $50,000 in Excess Net Capital.
The proposed rule change is consistent with the requirements of
Section 17A of the Act and the rules and regulations thereunder because
the addition of retirement and other benefit plans and programs offered
by registered broker/dealers will permit the processing of additional
financial products through NSCC and is designed to promote the prompt
and accurate clearance and settlement of transactions and to assure the
safeguarding of securities and funds in the custody and control of
NSCC.
(B) Self-Regulatory Organization's Statement on Burden on Competition
NSCC does not believe that the proposed rule change will have any
impact or 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)
thereunder \9\ 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 NSCC
and (ii) does not significantly affect the respective rights or
obligations of NSCC or those members 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.
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\8\ 15 U.S.C. 78s(b)(3)(A)(iii).
\9\ 17 CFR 240.19b-4(f)(4).
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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. 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 rule-comments@sec.gov. Please include
File Number SR-NSCC-2006-16 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-2006-16. 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. The text of the proposed rule change is
available at NSCC, the Commission's Public Reference Room, and http://www.nscc.com/legal/2006/2006-16.pdf.
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-2006-16 and should be submitted on
or before March 13, 2007.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\10\
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\10\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-2845 Filed 2-16-07; 8:45 am]
BILLING CODE 8011-01-P