Self-Regulatory Organizations; National Securities Clearing Corporation; Notice of Filing of Proposed Rule Change To Amend the Membership Standards Required of Insurance Companies, 3413-3414 [E5-219]

Download as PDF Federal Register / Vol. 70, No. 14 / Monday, January 24, 2005 / Notices 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 No written comments were solicited or received with respect to the proposed rule change. should refer to File Number SR–ISE– 2005–05 and should be submitted on or before February 14, 2005. IV. Commission’s Findings and Order Granting Accelerated Approval of Proposed Rule Change After careful review, the Commission finds that the proposed rule change is consistent with the requirements of the III. Solicitation of Comments Act and the rules and regulations thereunder, applicable to a national Interested persons are invited to securities exchange,7 and, in particular, submit written data, views, and arguments concerning the foregoing, the requirements of Section 6(b)(5) of including whether the proposed rule the Act.8 Specifically, the Commission change is consistent with the Act. finds that the proposed rule change Comments may be submitted by any of should ensure that the Exchange’s the following methods: position limits and exercise limits on SPDR options provide its members with Electronic Comments sufficient flexibility to participate in the • Use the Commission’s Internet market for such options in a manner comment form (https://www.sec.gov/ that should provide greater depth and rules/sro.shtml); or liquidity for all market participants. • Send an e-mail to ruleThe Commission finds good cause for comments@sec.gov. Please include File Number SR–ISE–2005–05 on the subject approving this proposed rule change line. prior to the thirtieth day after publication of notice thereof in the Paper Comments Federal Register. Specifically, the • Send paper comments in triplicate Commission believes that granting to Jonathan G. Katz, Secretary, accelerated approval to the proposed Securities and Exchange Commission, rule change should permit greater depth 450 Fifth Street, NW., Washington, DC and liquidity in the SPDR options 20549–0609. market that should benefit all market All submissions should refer to File participants, including retail investors. Number SR–ISE–2005–05. This file Because the higher position limits and number should be included on the subject line if e-mail is used. To help the exercise limits mirror those that the Commission has previously approved Commission process and review your for like products, the Commission comments more efficiently, please use only one method. The Commission will believes it is consistent with Sections post all comments on the Commission’s 6(b)(5) 9 and 19(b)(2) 10 of the Act to approve the ISE’s proposed rule change Internet Web site (https://www.sec.gov/ on an accelerated basis. rules/sro.shtml). Copies of the submission, all subsequent V. Conclusion amendments, all written statements with respect to the proposed rule It is therefore ordered, pursuant to change that are filed with the Section 19(b)(2) of the Act,11 that the Commission, and all written proposed rule change (SR–ISE–2005–05) communications relating to the is hereby approved on an accelerated proposed rule change between the basis. Commission and any person, other than For the Commission, by the Division of those that may be withheld from the Market Regulation, pursuant to delegated public in accordance with the authority.12 provisions of 5 U.S.C. 552, will be Margaret H. McFarland, available for inspection and copying in the Commission’s Public Reference Deputy Secretary. Section, 450 Fifth Street, NW., [FR Doc. E5–255 Filed 1–21–05; 8:45 am] Washington, DC 20549. Copies of such BILLING CODE 8010–01–P filing also will be available for inspection and copying at the principal 7 In approving this proposal, the Commission has office of the ISE. All comments received considered its impact on efficiency, competition, will be posted without change; the and capital formation. 15 U.S.C. 78c(f). 8 15 U.S.C. 78f(b)(5). Commission does not edit personal 9 15 U.S.C. 78f(b)(5). identifying information from 10 15 U.S.C. 78s(b)(2). submissions. You should submit only 11 15 U.S.C. 78s(b)(2). information that you wish to make 12 17 CFR 200.30–3(a)(12). publicly available. All submissions VerDate jul<14>2003 18:04 Jan 21, 2005 Jkt 205001 PO 00000 Frm 00059 Fmt 4703 Sfmt 4703 3413 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–51035; File No. SR–NSCC– 2004–07] Self-Regulatory Organizations; National Securities Clearing Corporation; Notice of Filing of Proposed Rule Change To Amend the Membership Standards Required of Insurance Companies January 13, 2005. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 notice is hereby given that on October 26, 2004, 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. The Commission is publishing this notice to solicit comments on the proposed rule change from interested parties. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The purpose of this proposed rule change is to amend NSCC’s Rules regarding the membership standards required of insurance companies. 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.2 (A) Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change The proposed rule change amends NSCC’s Rules regarding the membership standards required of insurance companies. As a general matter, the current membership standards for insurance companies are based in part on ratings provided by rating agencies. The proposed rule replaces these standards in relevant part by a measure 1 15 U.S.C. 78s(b)(1). Commission has modified the text of the summaries prepared by NSCC. 2 The E:\FR\FM\24JAN1.SGM 24JAN1 3414 Federal Register / Vol. 70, No. 14 / Monday, January 24, 2005 / Notices based on Risk-Based Capital (‘‘RBC’’) ratios. The RBC model was developed by the National Association of Insurance Commissioners (‘‘NAIC’’), the organization of insurance regulators from the 50 states, the District of Columbia, and the four U.S. territories. State insurance regulators created the NAIC in 1871 to address the need to coordinate regulation of multistate insurers. The NAIC has developed uniform financial reporting by insurance companies and an RBC model to measure the minimum amount of capital that an insurer needs to support its overall business operations based on the degree of risk taken by the insurer and to protect the policyholders and business against adverse developments. Currently substantially all of the U.S. state insurance jurisdictions have adopted laws, regulations, or bulletins that are considered to be substantially similar to the NAIC’s RBC for Insurers Model Act for life insurers. The calculation of the RBC ratio is based on an insurer’s Total Adjusted Capital (‘‘TAC’’). TAC is comprised primarily of capital plus surplus divided by a capital level determined by the RBC formula called the Authorized Control Level Risk-Based Capital (‘‘ACL RBC’’). The ACL RBC is comprised of asset risk, credit risk, underwriting risk, and business risk. In general, state regulatory authorities require no corrective action so long as an insurance company maintains an RBC ratio over 200%. NSCC proposes that its membership requirement would be an RBC ratio of 250%, as derived from financial data reported by the insurance company to its state regulatory authority as part of its annual statutory financial statements. All current insurance company members of NSCC would meet the proposed 250% requirement. Insurance companies would be required to submit the relevant data to NSCC on an annual basis at which time their compliance with the minimum standard will be reviewed by NSCC. In addition, any insurance company that fell below the 250% ratio during the course of the year would be required to notify NSCC immediately of this fact. NSCC believes that the RBC standard is preferable to the existing NSCC requirements of using third-party ratings for the following reasons. First, the RBC standard accurately represents the financial strength of an insurer because the RBC system is based on statutory financial statements, taking into account asset risks, credit risks, underwriting and pricing risks, and the risk that the return from assets are not aligned with VerDate jul<14>2003 18:04 Jan 21, 2005 Jkt 205001 the requirements of the company’s liabilities and general business risk. Second, the RBC standard is the industry benchmark. Third, the information needed to calculate the RBC ratio is readily available in the statutory financial statements, which are to be provided to NSCC annually. NSCC’s membership standards are intended to protect NSCC and its members from undue risk while providing broad access to NSCC services. Because the proposed rule change relates to the standards of financial responsibility applicable to insurance companies, NSCC believes that it will assist NSCC in assuring the safeguarding of funds and securities in NSCC’s control or for which NSCC is responsible. For this reason, NSCC believes the proposed rule change is consistent with the requirements of Section 17A of the Act 3 and the rules and regulations thereunder applicable to NSCC. (B) Self-Regulatory Organization’s Statement on Burden on Competition NSCC believes that the proposed rule change will not impose a 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 No written comments relating to the proposed rule change have 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 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 the self-regulatory organization 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. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, PO 00000 3 15 U.S.C. 78q–1. Frm 00060 Fmt 4703 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 (https://www.sec.gov/ rules/sro.shtml) or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–NSCC–2004–07 on the subject line. Paper Comments • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549–0609. All submissions should refer to File Number SR–NSCC–2004–07. 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 (https://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, 450 Fifth Street, NW., 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 https://www.nscc.com/legal. 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–2004–07 and should be submitted on or before February 14, 2005. For the Commission by the Division of Market Regulation, pursuant to delegated authority.4 J. Lynn Taylor, Assistant Secretary. [FR Doc. E5–219 Filed 1–21–05; 8:45 am] BILLING CODE 8010–01–P 4 17 Sfmt 4703 E:\FR\FM\24JAN1.SGM CFR 200.30–3(a)(12). 24JAN1

Agencies

[Federal Register Volume 70, Number 14 (Monday, January 24, 2005)]
[Notices]
[Pages 3413-3414]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-219]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51035; File No. SR-NSCC-2004-07]


Self-Regulatory Organizations; National Securities Clearing 
Corporation; Notice of Filing of Proposed Rule Change To Amend the 
Membership Standards Required of Insurance Companies

 January 13, 2005.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on October 26, 2004, 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. 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).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The purpose of this proposed rule change is to amend NSCC's Rules 
regarding the membership standards required of insurance companies.

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.\2\
---------------------------------------------------------------------------

    \2\ 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 amends NSCC's Rules regarding the 
membership standards required of insurance companies. As a general 
matter, the current membership standards for insurance companies are 
based in part on ratings provided by rating agencies. The proposed rule 
replaces these standards in relevant part by a measure

[[Page 3414]]

based on Risk-Based Capital (``RBC'') ratios.
    The RBC model was developed by the National Association of 
Insurance Commissioners (``NAIC''), the organization of insurance 
regulators from the 50 states, the District of Columbia, and the four 
U.S. territories. State insurance regulators created the NAIC in 1871 
to address the need to coordinate regulation of multistate insurers. 
The NAIC has developed uniform financial reporting by insurance 
companies and an RBC model to measure the minimum amount of capital 
that an insurer needs to support its overall business operations based 
on the degree of risk taken by the insurer and to protect the 
policyholders and business against adverse developments. Currently 
substantially all of the U.S. state insurance jurisdictions have 
adopted laws, regulations, or bulletins that are considered to be 
substantially similar to the NAIC's RBC for Insurers Model Act for life 
insurers.
    The calculation of the RBC ratio is based on an insurer's Total 
Adjusted Capital (``TAC''). TAC is comprised primarily of capital plus 
surplus divided by a capital level determined by the RBC formula called 
the Authorized Control Level Risk-Based Capital (``ACL RBC''). The ACL 
RBC is comprised of asset risk, credit risk, underwriting risk, and 
business risk.
    In general, state regulatory authorities require no corrective 
action so long as an insurance company maintains an RBC ratio over 
200%. NSCC proposes that its membership requirement would be an RBC 
ratio of 250%, as derived from financial data reported by the insurance 
company to its state regulatory authority as part of its annual 
statutory financial statements. All current insurance company members 
of NSCC would meet the proposed 250% requirement.
    Insurance companies would be required to submit the relevant data 
to NSCC on an annual basis at which time their compliance with the 
minimum standard will be reviewed by NSCC. In addition, any insurance 
company that fell below the 250% ratio during the course of the year 
would be required to notify NSCC immediately of this fact.
    NSCC believes that the RBC standard is preferable to the existing 
NSCC requirements of using third-party ratings for the following 
reasons. First, the RBC standard accurately represents the financial 
strength of an insurer because the RBC system is based on statutory 
financial statements, taking into account asset risks, credit risks, 
underwriting and pricing risks, and the risk that the return from 
assets are not aligned with the requirements of the company's 
liabilities and general business risk. Second, the RBC standard is the 
industry benchmark. Third, the information needed to calculate the RBC 
ratio is readily available in the statutory financial statements, which 
are to be provided to NSCC annually.
    NSCC's membership standards are intended to protect NSCC and its 
members from undue risk while providing broad access to NSCC services. 
Because the proposed rule change relates to the standards of financial 
responsibility applicable to insurance companies, NSCC believes that it 
will assist NSCC in assuring the safeguarding of funds and securities 
in NSCC's control or for which NSCC is responsible. For this reason, 
NSCC believes the proposed rule change is consistent with the 
requirements of Section 17A of the Act \3\ and the rules and 
regulations thereunder applicable to NSCC.
---------------------------------------------------------------------------

    \3\ 15 U.S.C. 78q-1.
---------------------------------------------------------------------------

(B) Self-Regulatory Organization's Statement on Burden on Competition

    NSCC believes that the proposed rule change will not impose a 
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

    No written comments relating to the proposed rule change have 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

    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 the self-regulatory organization 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.

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 (https://
www.sec.gov/rules/sro.shtml) or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-NSCC-2004-07 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., 
Washington, DC 20549-0609.
    All submissions should refer to File Number SR-NSCC-2004-07. 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 (https://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, 450 Fifth 
Street, NW., 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 https://www.nscc.com/legal. 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-2004-07 and should be 
submitted on or before February 14, 2005.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\4\
---------------------------------------------------------------------------

    \4\ 17 CFR 200.30-3(a)(12).

J. Lynn Taylor,
Assistant Secretary.
 [FR Doc. E5-219 Filed 1-21-05; 8:45 am]
BILLING CODE 8010-01-P
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