[Federal Register Volume 75, Number 229 (Tuesday, November 30, 2010)]
[Notices]
[Pages 74117-74119]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-30088]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-63368; File No. SR-NSCC-2010-15]
Self-Regulatory Organizations; National Securities Clearing
Corporation; Notice of Filing of Proposed Rule Change Relating to
Establishing an Automated Service for the Processing of Transfers,
Replacements, and Exchanges of Insurance and Retirement Products
November 23, 2010.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ notice is hereby given that on November 18, 2010, the
National Securities Clearing Corporation (``NSCC'') filed with the
Securities and Exchange Commission (``Commission'') the proposed rule
change as described in Items I and II 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 would allow NSCC to add a new automated
service to process transfers, replacements, and exchanges of insurance
and retirement products through NSCC's Insurance and Retirement
Processing Service (``IPS'').
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.
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 allow NSCC to offer a
new automated service to transfer, replace, or exchange (collectively
referred to as a ``Replacement'') an existing insurance contract that
is eligible for NSCC's IPS.
[[Page 74118]]
1. Background
Currently, the Replacement process is not conducted through a
centralized or automated process and requires extensive manual
processing of paper forms and other documents. The insurance industry
currently utilizes Transfer of Assets forms, 1035 Exchange Forms, or
other similar paperwork (collectively referred to as ``TOA'') to
document the request and the authorization for a Replacement.
Currently, once an authorization has been obtained and the needed forms
have been executed, the documents are transmitted by facsimile, mail,
electronic mail, or other means. Because there is no centralized and
automated mechanism for processing Replacements, there is also no
centralized and automated settlement process for managing the movement
of funds associated with Replacements. This lack of centralized and
automated processing makes the overall Replacement process time
consuming and labor intensive.
2. Proposed Amendments
NSCC proposes to add a new Section 11 to Rule 57 (``Insurance and
Retirement Processing Services'') so that NSCC can provide a service
that will centralize and automate the processing of Replacements and
will decrease the administrative burden on and risk to NSCC Members,
Insurance Carrier/Retirement Service Members, Mutual Fund/Insurance
Services Members, and Data Services Only Members.
Under the proposal, an Insurance Carrier/Retirement Services Member
would be able to initiate a Replacement (``Receiving Carrier'') by
submitting an instruction to NSCC to process a Replacement (``Request
for Replacement''). NSCC would then transmit the Request for
Replacement to the designated Insurance Carrier/Retirement Services
Member (``Delivering Carrier''). The Delivery Member would have to
confirm, reject, or request modification to the Request for Replacement
in the format and by such time as established by NSCC. NSCC would
delete from the IPS transfers that are not confirmed or rejected. The
IPS would also incorporate and automate the settlement of confirmed
Replacements into NSCC's existing settlement process for IPS.
NSCC states that the proposed service would decrease the
operational risk inherent in the processing of paper documentation,
would provide a uniform platform for Replacements, and would provide
uniform rules and procedures for Replacements.
Under the proposed new Section 11, the Delivering Carrier waives
the obligation of the Receiving Carrier to submit a signed physical
copy of the TOA unless specifically required by state or local law. The
transfer of any physical documents related to Replacements that are
required under state law would continue to be transferred outside of
NSCC. It would be the sole obligation of the Insurance Carrier/
Retirement Services Members involved in the Replacement to confirm that
all legal requirements, including any requirement to obtain a signed
physical copy of the TOA imposed by applicable state or local law, are
satisfied prior to confirming a Request for Replacement. The
Replacement service would permit the transfer of documentation as an
attachment to the Request for Replacement, but this would not be a
requirement to utilize the Replacement service. The waiver of the
obligation to submit signed physical documents is intended to improve
the orderly processing of Replacements.
Finally, NSCC proposes to update the Fee Schedule to incorporate
the fees associated with processing a Request for Replacement. The fee
associated with a Request for Replacement, including submitting
incremental replacement status messages and money settlement would be
$5.00 per Request for Replacement. The cost would be divided between
the carriers associated with the transaction with the Receiving Carrier
responsible for $3.75 per transaction, which is three-fourths of the
cost of the Replacement service, and the Delivering Carrier responsible
for the remaining $1.25 fee, which is one-fourth of the cost. The fee
associated with obtaining the status of a pending Request for
Replacement, including incremental statuses, would be $1.00 per pending
status request. The cost would be divided evenly between the Receiving
Carrier and the Distributor, each of which would be responsible for
paying a fee of $0.50.
3. Implementation Timeframe
NSCC intends for the Replacement service to be implemented on or
after January 1, 2011. Members would be advised of the specific
implementation date through the issuance of an NSCC Important Notice.
NSCC states that the proposed rule change is consistent with the
requirements of Section 17A of the Act \2\ and the rules and
regulations thereunder because it will assist NSCC's Members in
processing Replacements in a timely and efficient manner. NSCC further
states that the proposed rule change is also consistent with
Recommendation 15 of the CPSS/IOSCO Recommendations for Securities
Settlement Systems in that the Replacement service should reduce manual
errors, lower costs, and increase the speed of processing Replacements
through the use of automation.
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\2\ 15 U.S.C. 78q-1.
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B. Self-Regulatory Organization's Statement on Burden on Competition
NSCC believes that the proposed rule change will not impose any
burden on competition not necessary or appropriate in furtherance of
the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received from Members, Participants, or Others
NSCC has not solicited or received written comments relating to the
proposed rule change. NSCC will notify the Commission of any written
comments it receives.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 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 90 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 the self-regulatory organization consents, the Commission will:
(A) By order approve or disapprove 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. Comments may be submitted by any of
the following methods:
Electronic comments may be submitted by using the
Commission's Internet comment form http://www.sec.gov/rules/sro.shtml,
or send an e-mail to [email protected]. Please include File No. SR-
NSCC-2010-15 on the subject line.
Paper comments should be sent in triplicate to Elizabeth
M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street,
NE., Washington, DC 20549-1090.
All submissions should refer to File No. SR-NSCC-2010-15. This file
[[Page 74119]]
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 Web site viewing and printing in
the Commission's Public Reference Room, 100 F Street, NE., Washington,
DC 20549, on official business days between the hours of 10 a.m. and 3
p.m. Copies of such filing also will be available for inspection and
copying at NSCC's principal office and NSCC's Web site http://www.dtcc.com/legal/rule_filings/nscc/2010.php. 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 submission
should refer to File No. SR-NSCC-2010-15 and should be submitted within
December 21, 2010 days after the date of publication.\3\
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\3\ 17 CFR 200.30-3(a)(12).
For the Commission by the Division of Trading and Markets,
pursuant to delegated authority.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2010-30088 Filed 11-29-10; 8:45 am]
BILLING CODE 8011-01-P