[Federal Register Volume 76, Number 70 (Tuesday, April 12, 2011)]
[Notices]
[Pages 20425-20426]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-8585]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-64196; File No. SR-NSCC-2010-15]
Self-Regulatory Organizations; National Securities Clearing
Corporation; Order Approving Proposed Rule Change Relating to
Establishing an Automated Service for the Processing of Transfers,
Replacements, and Exchanges of Insurance and Retirement Products
April 6, 2011.
I. Introduction
On November 18, 2010, the National Securities Clearing Corporation
(``NSCC'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change pursuant to Section 19(b)(1)
of the Securities Exchange Act of 1934 (the ``Act'').\1\ The proposed
rule change allows 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''). The proposed rule change was published for comment in the
Federal
[[Page 20426]]
Register on November 30, 2010.\2\ No comment letters were received.
This order approves the proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ Securities Exchange Act Release No. 63368 (Nov. 23, 2010),
75 FR 74117.
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II. Description of the Proposal
The proposed rule change will enable NSCC to offer a new automated
service for the transfer, replacement, or exchange (collectively
referred to as a ``Replacement'') of an existing insurance contract
that is eligible for NSCC's IPS. Specifically, NSCC will add new
Section 11 to Rule 57 (Insurance and Retirement Processing Services)
that will centralize and automate Replacement processing 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. Prior to this rule
change, the Replacement process was not conducted through a centralized
or automated process and requires extensive manual processing of paper
forms and other documents. The insurance industry utilized 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.
Under the new service, an Insurance Carrier/Retirement Services
Member will be able to initiate a Replacement (``Receiving Carrier'')
by submitting an instruction to NSCC to process a Replacement
(``Request for Replacement''). NSCC will then transmit the Request for
Replacement to the designated Insurance Carrier/Retirement Services
Member (``Delivering Carrier''). The Delivery Member will have to
confirm, reject, or request modification to the Request for Replacement
in the format and by such time as established by NSCC. NSCC will delete
from the IPS Requests for Replacement that are not confirmed or
rejected. The IPS will also incorporate and will automate the
settlement of confirmed Replacements into NSCC's existing IPS
settlement process.
Also under the new Section 11, the Delivering Carrier will waive
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 will 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 will permit the transfer of documentation as an
attachment to the Request for Replacement but this will 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 will 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, will be
$5.00 per Request for Replacement. The cost will 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, which is one-fourth of the cost. The fee
associated with obtaining the status of a pending Request for
Replacement, including incremental statuses, will be $1.00 per pending
status request. The cost will be divided evenly between the Receiving
Carrier and the Distributor, each of which will be responsible for
paying a fee of $0.50.
Members will be advised of the specific implementation date through
the issuance of an NSCC Important Notice.
III. Discussion
The Commission finds that the proposed rule change is consistent
with the requirements of the Act and the rules thereunder applicable to
NSCC. In particular, the Commission finds that the proposal is
consistent with Section 17A(b)(3)(F) of the Act,\3\ which requires,
among other things, that the rules of a registered clearing agency are
designed to promote the prompt and accurate clearance and settlement of
securities transactions. NSCC's new Replacement service is designed to
process Replacements in a more timely and efficient manner by reducing
manual errors, lowering costs, and providing a uniform platform for
Replacements processing. In addition, the new service should increase
the speed of processing Replacements through the use of automation,
which should also decrease NSCC's operational risk posed by processing
paper documentation. Accordingly, NSCC's proposal should promote the
prompt and accurate clearance and settlement of securities
transactions.
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\3\ 15 U.S.C. 78q-1(b)(3)(F).
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IV. Conclusion
On the basis of the foregoing, the Commission finds that the
proposed rule change is consistent with the requirements of the Act and
in particular Section 17A of the Act \4\ and the rules and regulations
thereunder.
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\4\ 15 U.S.C. 78q-1.
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It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\5\ that the proposed rule change (File No. SR-NSCC-2010-15) be and
hereby is approved.\6\
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\5\ 15 U.S.C. 78s(b)(2).
\6\ In approving the proposed rule change, the Commission
considered the proposal's impact on efficiency, competition and
capital formation. 15 U.S.C. 78c(f).
For the Commission by the Division of Trading and Markets,
pursuant to delegated authority.\7\
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\7\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-8585 Filed 4-11-11; 8:45 am]
BILLING CODE 8011-01-P