Self-Regulatory Organizations; The National Securities Clearing Corporation; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Support the Processing of Instructions for the Transfer or Reallocation of Underlying Investment Options Within a Variable Insurance Contract, 38479-38481 [E8-15251]
Download as PDF
mstockstill on PROD1PC66 with NOTICES
Federal Register / Vol. 73, No. 130 / Monday, July 7, 2008 / Notices
disclosure of information that may be
necessary to price the Shares
appropriately and to prevent trading
when a reasonable degree of
transparency cannot be assured. The
Commission notes that the Exchange
will obtain a representation on behalf of
the Trusts that the per-Share net asset
values for the Trusts will be calculated
daily and made available to all market
participants at the same time.
Additionally, the Exchange will halt
trading in the Shares if the value of each
Trust or the per-share values of each of
the Up Trading Shares or the Down
Trading Shares are not disseminated
daily to all market participants at the
same time. The Commission also notes
that, pursuant to proposed Amex Rule
1402, the Exchange will remove from
listing the Up MacroShares or the Down
MacroShares under certain
circumstances, including if: (1) The
intraday level of the Applicable
Reference Price of Crude Oil is no
longer calculated or available on at least
a 15-second delayed basis during the
time the Shares trade on Amex from a
source unaffiliated with the sponsor,
custodian, depositor, Up Trading Trust,
Down Trading Trust or the Exchange
that is a major market data vendor; or
(2) the IIV of the Share is no longer
made available on at least a 15-second
delayed basis by a major market data
vendor during the time the shares trade
on the Exchange.
The Exchange has represented that
the Shares are equity securities subject
to the Exchange’s rules governing the
trading of equity securities. In support
of this proposal, the Exchange has made
the following representations:
(1) The Exchange’s surveillance
procedures are adequate to properly
monitor Exchange trading of the Shares
and to deter and detect violations of
Exchange rules and applicable federal
securities laws.
(2) Prior to the commencement of
trading, the Exchange will inform its
members and Member Organizations an
Information Circular of the special
characteristics and risks associated with
trading the Shares. Specifically, the
Information Circular will discuss the
following: (1) What the Shares are; (2)
the procedures for purchases and paired
optional redemptions of Shares; (3)
prospectus delivery requirements that
are applicable in connection with the
purchase of newly issued Shares by
investors; (4) applicable Amex rules; (5)
dissemination of information regarding
the underlying value of each Trust and
the share of that underlying value
allocable to one Up MacroShare and one
Down MacroShare; (6) trading
information; (7) suitability obligations of
VerDate Aug<31>2005
17:39 Jul 03, 2008
Jkt 214001
members with respect to recommended
transactions to customers in the Shares;
(8) that the Shares are subject to various
fees and expenses described in the
Registration Statement on Form S–1 for
the Up MacroShares or the Down
MacroShares, as applicable; 23 and (9)
any exemptive, no-action, and
interpretive relief granted by the
Commission from any rules under the
Act.
This approval order is based on the
Exchange’s representations.
For the foregoing reasons, the
Commission finds that the proposed
rule change is consistent with the Act
and the rules and regulations
thereunder applicable to a national
securities exchange, and, in particular,
with Section 6(b)(5) of the Act.24
C. Acceleration
The Commission finds good cause for
approving the proposed rule change
before the 30th day after the date of
publication of notice of filing thereof in
the Federal Register. The Commission
notes that the Shares are substantially
similar to another product previously
approved for listing and trading on the
Exchange.25
Therefore, the Commission finds good
cause, consistent with Section 19(b)(2)
of the Act, to approve the proposed rule
change on an accelerated basis.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,26 that the
proposed rule change (SR–Amex–2008–
36) be, and it hereby is, approved on an
accelerated basis.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.27
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8–15206 Filed 7–3–08; 8:45 am]
BILLING CODE 8010–01–P
PO 00000
38479
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–58053; File No. SR–NSCC–
2008–03]
Self-Regulatory Organizations; The
National Securities Clearing
Corporation; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Support the
Processing of Instructions for the
Transfer or Reallocation of Underlying
Investment Options Within a Variable
Insurance Contract
June 26, 2008.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 notice is hereby given that on
June 19, 2008, 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
NSCC proposes to amend its rule in
order to enhance its insurance services
to support the processing of instructions
for the transfer or reallocation of
underlying investment options within a
variable insurance contract.2
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.3
(A) Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of the proposed rule
change is to enhance NSCC’s insurance
23 See
supra note 15.
U.S.C. 78f(b)(5).
25 See supra note 20.
26 15 U.S.C. 78s(b)(2).
27 17 CFR 200.30–3(a)(12).
24 15
Frm 00091
Fmt 4703
Sfmt 4703
1 15
U.S.C. 78s(b)(1).
are to the rule text that appears in the
electronic manual of NSCC found at https://
www.nscc.com/legal/.
3 The Commission has modified the text of the
summaries prepared by the NSCC.
2 Changes
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Federal Register / Vol. 73, No. 130 / Monday, July 7, 2008 / Notices
mstockstill on PROD1PC66 with NOTICES
service in order to support the
processing of instructions for the
transfer or reallocation of underlying
investment options within a variable
insurance contract. Under the proposed
rule change, the new enhancement will
be referred to as ‘‘Fund Transfers’’ and
will be available within NSCC’s current
In-Force Transactions service of NSCC’s
Insurance and Retirement Processing
Service (‘‘IPS,’’ formerly called the
Insurance Processing Service). NSCC’s
current IPS provides a centralized
communication link that connects
participating insurance companies with
intermediaries such as broker-dealers,
banks and insurance agencies that
distribute their insurance products. The
current platform supports the exchange
of information and settlement of monies
at various points through the insurance
contract initiation and servicing cycle,
for both fixed and variable insurance
products.4
Development and implementation of
the new Fund Transfer process is the
second phase of automating and
standardizing a broad range of in-force
policy transactions, starting in 2005
with ACATS for insurance and
expanding later to the communication
of changes in internally registered
representatives and brokerage account
numbers.5 The automation of in-force
policy transactions is consistent with
the insurance industry’s straightthrough processing objectives and the
continued efforts to mainstream
insurance products with other financial
products.
A request for a fund transfer is
initiated by a distributor of the
insurance contract, on behalf of the
contract owner, and transmitted to the
insurance company. The transaction
requires validation by both the
distributor and the insurance company,
enabling each to review the transaction
request against its own legal and other
product and customer rules applicable
to the transaction.
Prior to initiating a fund transfer
request, the distributor generally must
access current contract information to
determine if the fund transfer request
can be made with respect to a particular
4 IPS also supports processing of non-insurance
retirement products that may be offered by a brokerdealer, in which case the funds transfer
functionality would support the communication of
changes in investment options offered within a
retirement or other benefit program for which a
broker-dealer is the plan administrator or custodian,
supporting communications between this brokerdealer and with the distributing broker-dealer.
5 See Securities Exchange Act Release Nos. 51753
(May 27, 2005), 70 FR 32859 (June 6, 2005) [File
No. SR–NSCC–2005–02], and 52343 (August 26,
2005), 70 FR 52461 (September 2, 2005) [File No.
SR–NSCC–2005–09].
VerDate Aug<31>2005
17:39 Jul 03, 2008
Jkt 214001
contract, including fund balances held
under the contract and applicable rules.
Accordingly, the fund transfer
functionality includes a real-time
inquiry and response transaction from
the distributor to the insurance
company that allows the insurance
company to provide a current
‘‘snapshot’’ of the contract. NSCC’s
Positions and Values (‘‘POV’’) service
may also be used in conjunction with
the fund transfer request. Receipt of the
current contract information from the
insurance company permits the
distributor to review the transfer in light
of suitability and compliance
requirements.
Following the values inquiry and
response, the distributor initiates a fund
transfer request transaction with the
insurance company through NSCC’s
Fund Transfer functionality. NSCC
performs industry-defined edits as to
transaction format and, once the
transaction passes NSCC edit process, it
is forwarded to the insurance company.
The insurance company has the
opportunity to review the requested
transfer against its rules and applicable
suitability and compliance requirements
and its arrangements with the
transmitting distributor. The insurance
company responds back to the
distributor through NSCC with an
acceptance or rejection of the fund
transfer request. This message is
checked against NSCC’s edits as to
transaction form and sent to the
distributor.
When the fund transfer is successfully
processed by the insurance company, it
sends a ‘‘success’’ message through the
fund transfer functionality to the
distributor. Alternatively, the insurance
company may send a failure message to
the distributor if the requested
transaction fails (for instance, if a price
change in an underlying fund results in
a value that is outside of the amount
allowed for a transfer, after the request
is initiated) or send a pending message.
The fund transfer functionality also
supports a cancellation transaction to
allow the distributor to request the
cancellation of a funds transfer request.
The insurance company can accept the
cancellation request, or it can reject it
(if, for example, the insurance company
does not allow the cancellation under
the reject reason code provided by the
distributor). Additional fund transfer
functionality may be developed as the
system is enhanced to accommodate
distributor and insurance company
requirements.
The fund transfer functionality is
intended to replace current processes
used by distributors today to request a
transfer of assets within the insurance
PO 00000
Frm 00092
Fmt 4703
Sfmt 4703
contract, such as on-line insurance
company website requests, telephone,
fax and e-mail. Automation of the
process will increase efficiency, create
an automated record of the transaction,
and facilitate monitoring compliance
with regulatory requirements.6 By
centralizing all fund transfer requests
initiated by registered representatives
through one application at NSCC, a
broker-dealer should be better able to
monitor the activity of its registered
representatives to assure compliance
with regulatory requirements. For
example, to facilitate compliance with
requirements under Rule 22c–1 of the
Investment Company Act of 1940
(‘‘Investment Company Act’’), the fund
transfer request message from the
distributor to the insurance company
must contain mandatory message fields
for the transaction date and transaction
time, including the date and time the
distributing broker-dealer received the
funds transfer request from its customer.
Pursuant to arrangements between a
distributing broker-dealer and the
insurance company that issued the
variable contract, the insurance
company may determine to accept the
broker-dealer’s receipt of the order from
its customer as the time the order was
received for purposes of Rule 22c–1.7
2. Statutory Basis
NSCC believes that the proposed rule
change is consistent with the
requirements of Section 17A of the Act 8
6 Variable insurance products are ‘‘securities’’ for
purposes of federal securities law, the sale of which
is subject to regulation by the Securities and
Exchange Commission and the Financial Industry
Regulatory Authority (‘‘FINRA’’, successor to the
National Association of Securities Dealers, or
NASD). In addition, investment options (or
‘‘funds’’) included within a variable insurance
contract are typically separate accounts that are,
absent an exemption, required to register as
investment companies under the Investment
Company Act. Fund transfers must therefore also
comply with relevant provisions of the Investment
Company Act and the regulations promulgated
thereunder.
7 Rule 22c–1 under the Investment Company Act,
often referred to as the ‘forward pricing rule’,
requires that orders in investment company shares
be priced based upon the current net asset value
(NAV) next computed after receipt of the order to
buy or redeem shares (17 CFR 270.22c–1(a)). The
receipt of an order for the purchase or redemption
of mutual fund shares by a distributing brokerdealer, from its customer, is generally deemed
receipt of the order in investment company shares
for purposes of Rule 22c–1. This practice is
generally subject to the provisions of the
distribution agreement between the fund and the
distributing broker-dealer. The NSCC funds transfer
working group has developed a model agreement
provision that can be adopted by the insurance
company and the broker-dealer, based on the
analogous provisions relating to the receipt of
orders contained in the distribution agreement
between a mutual fund company and a distributing
broker-dealer.
8 15 U.S.C. 78q–1.
E:\FR\FM\07JYN1.SGM
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Federal Register / Vol. 73, No. 130 / Monday, July 7, 2008 / Notices
and the rules and regulations
thereunder applicable to NSCC because
the proposed rule change should
promote processing efficiencies between
insurance companies and distributors of
variable insurance products, thereby
facilitating the prompt and accurate
processing of securities transactions.
(B) Self-Regulatory Organization’s
Statement on 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 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
The foregoing rule change has become
effective upon filing pursuant to Section
19(b)(3)(A)(iii) of the Act 9 and Rule
19b–4(f)(6) 10 thereunder in that it (1)
Does not significantly affect the
protection of investors or the public
interest; (ii) does not impose any
significant burden on competition; (iii)
by its terms, does not become operative
for 30 days after the date from which it
was filed (June 19, 2008), or such
shorter time as the Commission may
designate if consistent with the
protection of investors and the public
interest. 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.
IV. Solicitation of Comments
mstockstill on PROD1PC66 with NOTICES
• 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–2008–03 on the
subject line.
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:
I. Introduction
On May 14, 2008, NYSE Arca, Inc.
(‘‘NYSE Arca’’ or the ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
All submissions should refer to File
to Section 19(b)(1) of the Securities
Number SR–SCC–2008–03. This file
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
number should be included on the
subject line if e-mail is used. To help the 19b–4 thereunder,2 a proposed rule
change to amend NYSE Arca Rule 10.12
Commission process and review your
(Minor Rule Plan) (‘‘MRP’’) and related
comments more efficiently, please use
only one method. The Commission will rules that underlie the MRP. The
post all comments on the Commission’s proposed rule change was published for
comment in the Federal Register on
Internet Web site (https://www.sec.gov/
May 23, 2008.3 The Commission
rules/sro.shtml). Copies of the
received no comments on the proposal.
submission, all subsequent
This order approves the proposal.
amendments, all written statements
II. Description of the Proposal
with respect to the proposed rule
change that are filed with the
The Exchange proposed to amend its
Commission, and all written
Minor Rule Plan and related rules that
communications relating to the
underlie the MRP, including Rules
proposed rule change between the
9.2(c) (Customer Records), 11.1
Commission and any person, other than (Adherence to Law), and 11.18
those that may be withheld from the
(Supervision).
public in accordance with the
Rule 9.2(c)—Customer Records
provisions of 5 U.S.C. 552, will be
The Exchange proposed to change
available for inspection and copying in
Rule 9.2(c) by adding the word
the Commission’s Public Reference
‘‘current,’’ to clarify and reiterate the
Room, 100 F Street, NE., Washington,
obligation that firms with customer
DC 20549, on official business days
between the hours of 10 a.m. and 3 p.m. accounts must not only keep records of
their customer accounts, but also keep
Copies of such filings also will be
them current.
available for inspection and copying at
the principal office of NSCC and on
Rule 11.1—Adherence to Law and Good
NSCC’s Web site, https://www.nscc.com/ Business Practices
legal/. All comments received will be
The Exchange designated existing
posted without change; the Commission Rule 11.1 as Rule 11.1(a) and
does not edit personal identifying
substituted the word ‘‘fair’’ in the rule’s
information from submissions. You
requirement that certain actions of ‘‘any
should submit only information that
OTP Holder or OTP firm shall at all
you wish to make available publicly. All times comply with fair and equitable
submissions should refer to File
principles of trade’’ by the word ‘‘just.’’
Number SR–NSCC–2008–03 and should The Exchange also proposed new Rule
be submitted on or before July 28, 2008. 11.1(b), which would require all OTP
Holders and firms, their associated
For the Commission by the Division of
persons, and other participants to
Trading and Markets, pursuant to delegated
adhere to the principles of good
authority.11
business practice in the conduct of their
Florence E. Harmon,
business operations.4 Violations of Rule
Acting Secretary.
[FR Doc. E8–15251 Filed 7–3–08; 8:45 am]
BILLING CODE 8010–01–P
11 17
Jkt 214001
Self-Regulatory Organizations; NYSE
Arca, Inc.; Order Approving Proposed
Rule Change To Amend Minor Rule
Plan and Certain Underlying Rules
June 26, 2008.
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6).
17:39 Jul 03, 2008
[Release No. 34–58034; File No. SR–
NYSEArca–2008–49]
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street, NE.,
Washington, DC 20549–1090.
10 17
VerDate Aug<31>2005
SECURITIES AND EXCHANGE
COMMISSION
Paper Comments
NSCC does not believe that the
proposed rule change will impose any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
9 15
Electronic Comments
38481
PO 00000
Fmt 4703
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 57827
(May 15, 2008), 73 FR 30179 (‘‘Notice’’).
4 This rule is based on the current NYSE Rule
401(a).
2 17
CFR 200.30–3(a)(12).
Frm 00093
1 15
Sfmt 4703
E:\FR\FM\07JYN1.SGM
07JYN1
Agencies
[Federal Register Volume 73, Number 130 (Monday, July 7, 2008)]
[Notices]
[Pages 38479-38481]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-15251]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-58053; File No. SR-NSCC-2008-03]
Self-Regulatory Organizations; The National Securities Clearing
Corporation; Notice of Filing and Immediate Effectiveness of Proposed
Rule Change To Support the Processing of Instructions for the Transfer
or Reallocation of Underlying Investment Options Within a Variable
Insurance Contract
June 26, 2008.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on June 19, 2008, 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
NSCC proposes to amend its rule in order to enhance its insurance
services to support the processing of instructions for the transfer or
reallocation of underlying investment options within a variable
insurance contract.\2\
---------------------------------------------------------------------------
\2\ Changes are to the rule text that appears in the electronic
manual of NSCC found at https://www.nscc.com/legal/.
---------------------------------------------------------------------------
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.\3\
---------------------------------------------------------------------------
\3\ The Commission has modified the text of the summaries
prepared by the NSCC.
---------------------------------------------------------------------------
(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to enhance NSCC's
insurance
[[Page 38480]]
service in order to support the processing of instructions for the
transfer or reallocation of underlying investment options within a
variable insurance contract. Under the proposed rule change, the new
enhancement will be referred to as ``Fund Transfers'' and will be
available within NSCC's current In-Force Transactions service of NSCC's
Insurance and Retirement Processing Service (``IPS,'' formerly called
the Insurance Processing Service). NSCC's current IPS provides a
centralized communication link that connects participating insurance
companies with intermediaries such as broker-dealers, banks and
insurance agencies that distribute their insurance products. The
current platform supports the exchange of information and settlement of
monies at various points through the insurance contract initiation and
servicing cycle, for both fixed and variable insurance products.\4\
---------------------------------------------------------------------------
\4\ IPS also supports processing of non-insurance retirement
products that may be offered by a broker-dealer, in which case the
funds transfer functionality would support the communication of
changes in investment options offered within a retirement or other
benefit program for which a broker-dealer is the plan administrator
or custodian, supporting communications between this broker-dealer
and with the distributing broker-dealer.
---------------------------------------------------------------------------
Development and implementation of the new Fund Transfer process is
the second phase of automating and standardizing a broad range of in-
force policy transactions, starting in 2005 with ACATS for insurance
and expanding later to the communication of changes in internally
registered representatives and brokerage account numbers.\5\ The
automation of in-force policy transactions is consistent with the
insurance industry's straight-through processing objectives and the
continued efforts to mainstream insurance products with other financial
products.
---------------------------------------------------------------------------
\5\ See Securities Exchange Act Release Nos. 51753 (May 27,
2005), 70 FR 32859 (June 6, 2005) [File No. SR-NSCC-2005-02], and
52343 (August 26, 2005), 70 FR 52461 (September 2, 2005) [File No.
SR-NSCC-2005-09].
---------------------------------------------------------------------------
A request for a fund transfer is initiated by a distributor of the
insurance contract, on behalf of the contract owner, and transmitted to
the insurance company. The transaction requires validation by both the
distributor and the insurance company, enabling each to review the
transaction request against its own legal and other product and
customer rules applicable to the transaction.
Prior to initiating a fund transfer request, the distributor
generally must access current contract information to determine if the
fund transfer request can be made with respect to a particular
contract, including fund balances held under the contract and
applicable rules. Accordingly, the fund transfer functionality includes
a real-time inquiry and response transaction from the distributor to
the insurance company that allows the insurance company to provide a
current ``snapshot'' of the contract. NSCC's Positions and Values
(``POV'') service may also be used in conjunction with the fund
transfer request. Receipt of the current contract information from the
insurance company permits the distributor to review the transfer in
light of suitability and compliance requirements.
Following the values inquiry and response, the distributor
initiates a fund transfer request transaction with the insurance
company through NSCC's Fund Transfer functionality. NSCC performs
industry-defined edits as to transaction format and, once the
transaction passes NSCC edit process, it is forwarded to the insurance
company. The insurance company has the opportunity to review the
requested transfer against its rules and applicable suitability and
compliance requirements and its arrangements with the transmitting
distributor. The insurance company responds back to the distributor
through NSCC with an acceptance or rejection of the fund transfer
request. This message is checked against NSCC's edits as to transaction
form and sent to the distributor.
When the fund transfer is successfully processed by the insurance
company, it sends a ``success'' message through the fund transfer
functionality to the distributor. Alternatively, the insurance company
may send a failure message to the distributor if the requested
transaction fails (for instance, if a price change in an underlying
fund results in a value that is outside of the amount allowed for a
transfer, after the request is initiated) or send a pending message.
The fund transfer functionality also supports a cancellation
transaction to allow the distributor to request the cancellation of a
funds transfer request. The insurance company can accept the
cancellation request, or it can reject it (if, for example, the
insurance company does not allow the cancellation under the reject
reason code provided by the distributor). Additional fund transfer
functionality may be developed as the system is enhanced to accommodate
distributor and insurance company requirements.
The fund transfer functionality is intended to replace current
processes used by distributors today to request a transfer of assets
within the insurance contract, such as on-line insurance company
website requests, telephone, fax and e-mail. Automation of the process
will increase efficiency, create an automated record of the
transaction, and facilitate monitoring compliance with regulatory
requirements.\6\ By centralizing all fund transfer requests initiated
by registered representatives through one application at NSCC, a
broker-dealer should be better able to monitor the activity of its
registered representatives to assure compliance with regulatory
requirements. For example, to facilitate compliance with requirements
under Rule 22c-1 of the Investment Company Act of 1940 (``Investment
Company Act''), the fund transfer request message from the distributor
to the insurance company must contain mandatory message fields for the
transaction date and transaction time, including the date and time the
distributing broker-dealer received the funds transfer request from its
customer. Pursuant to arrangements between a distributing broker-dealer
and the insurance company that issued the variable contract, the
insurance company may determine to accept the broker-dealer's receipt
of the order from its customer as the time the order was received for
purposes of Rule 22c-1.\7\
---------------------------------------------------------------------------
\6\ Variable insurance products are ``securities'' for purposes
of federal securities law, the sale of which is subject to
regulation by the Securities and Exchange Commission and the
Financial Industry Regulatory Authority (``FINRA'', successor to the
National Association of Securities Dealers, or NASD). In addition,
investment options (or ``funds'') included within a variable
insurance contract are typically separate accounts that are, absent
an exemption, required to register as investment companies under the
Investment Company Act. Fund transfers must therefore also comply
with relevant provisions of the Investment Company Act and the
regulations promulgated thereunder.
\7\ Rule 22c-1 under the Investment Company Act, often referred
to as the `forward pricing rule', requires that orders in investment
company shares be priced based upon the current net asset value
(NAV) next computed after receipt of the order to buy or redeem
shares (17 CFR 270.22c-1(a)). The receipt of an order for the
purchase or redemption of mutual fund shares by a distributing
broker-dealer, from its customer, is generally deemed receipt of the
order in investment company shares for purposes of Rule 22c-1. This
practice is generally subject to the provisions of the distribution
agreement between the fund and the distributing broker-dealer. The
NSCC funds transfer working group has developed a model agreement
provision that can be adopted by the insurance company and the
broker-dealer, based on the analogous provisions relating to the
receipt of orders contained in the distribution agreement between a
mutual fund company and a distributing broker-dealer.
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2. Statutory Basis
NSCC believes that the proposed rule change is consistent with the
requirements of Section 17A of the Act \8\
[[Page 38481]]
and the rules and regulations thereunder applicable to NSCC because the
proposed rule change should promote processing efficiencies between
insurance companies and distributors of variable insurance products,
thereby facilitating the prompt and accurate processing of securities
transactions.
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\8\ 15 U.S.C. 78q-1.
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(B) Self-Regulatory Organization's Statement on Burden on Competition
NSCC does not believe that the proposed rule change will impose any
burden on competition that is 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
The foregoing rule change has become effective upon filing pursuant
to Section 19(b)(3)(A)(iii) of the Act \9\ and Rule 19b-4(f)(6) \10\
thereunder in that it (1) Does not significantly affect the protection
of investors or the public interest; (ii) does not impose any
significant burden on competition; (iii) by its terms, does not become
operative for 30 days after the date from which it was filed (June 19,
2008), or such shorter time as the Commission may designate if
consistent with the protection of investors and the public interest. 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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\9\ 15 U.S.C. 78s(b)(3)(A)(iii).
\10\ 17 CFR 240.19b-4(f)(6).
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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 (https://
www.sec.gov/rules/sro.shtml) or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-NSCC-2008-03 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-SCC-2008-03. 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 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 filings also will be available for
inspection and copying at the principal office of NSCC and on NSCC's
Web site, 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-2008-03 and should be submitted on
or before July 28, 2008.
For the Commission by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-15251 Filed 7-3-08; 8:45 am]
BILLING CODE 8010-01-P