Self-Regulatory Organizations; National Securities Clearing Corporation; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Provide for the Delivery of Certain Transaction Data Relating to Variable Annuity and Variable Life Insurance Subaccounts and Implement Fees Associated With This Proposed Feature, 39481-39483 [2018-17007]
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Federal Register / Vol. 83, No. 154 / Thursday, August 9, 2018 / Notices
to ensure that fund shareholders and
directors receive adequate information
to evaluate and approve a rule 12b–1
plan and, thus, are necessary for
investor protection. The requirement of
quarterly reporting to the board is
designed to ensure that the rule 12b–1
plan continues to benefit the fund and
its shareholders. The recordkeeping
requirements of the rule are necessary to
enable Commission staff to oversee
compliance with the rule. The
requirement that funds or their advisers
implement, and fund boards approve,
policies and procedures in order to
prevent persons charged with allocating
fund brokerage from taking distribution
efforts into account is designed to
ensure that funds’ selection of brokers to
effect portfolio securities transactions is
not influenced by considerations about
the sale of fund shares.
Commission staff estimates that there
are approximately 7,858 fund portfolios
that have at least one share class subject
to a rule 12b–1 plan and approximately
323 fund families with common boards
of directors that have at least one fund
with a 12b–1 plan. The Commission
further estimates that the annual hour
burden for complying with the rule is
425 hours for each fund family with a
portfolio that has a rule 12b–1 plan. We
therefore estimate that the total hourly
burden per year for all funds to comply
with current information collection
requirements under rule 12b–1 is
137,275 hours. Commission staff
estimates that approximately three
funds per year prepare a proxy in
connection with the adoption or
material amendment of a rule 12b–1
plan. The staff further estimates that the
cost of each fund’s proxy is $34,849.
Thus, the total annual cost burden of
rule 12b–1 to the fund industry is
$104,547.
Estimates of average burden hours
and costs are made solely for purposes
of the Paperwork Reduction Act and are
not derived from a comprehensive or
even representative survey or study of
the costs of Commission rules and
forms. The collections of information
required by Rule 12b–1 are necessary to
obtain the benefits of the rule. Notices
to the Commission will not be kept
confidential. An agency may not
conduct or sponsor, and a person is not
required to respond to a collection of
information unless it displays a
currently valid OMB control number.
The public may view the background
documentation for this information
collection at the following website,
www.reginfo.gov. Comments should be
directed to: (i) Desk Officer for the
Securities and Exchange Commission,
Office of Information and Regulatory
VerDate Sep<11>2014
18:11 Aug 08, 2018
Jkt 244001
Affairs, Office of Management and
Budget, Room 10102, New Executive
Office Building, Washington, DC 20503,
or by sending an email to: Shagufta_
Ahmed@omb.eop.gov; and (ii) Pamela
Dyson, Director/Chief Information
Officer, Securities and Exchange
Commission, c/o Candace Kenner, 100 F
Street NE, Washington, DC 20549 or
send an email to: PRA_Mailbox@
sec.gov. Comments must be submitted to
OMB within 30 days of this notice.
Dated: August 3, 2018.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–16998 Filed 8–8–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–83774; File No. SR–NSCC–
2018–005]
Self-Regulatory Organizations;
National Securities Clearing
Corporation; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Provide for the
Delivery of Certain Transaction Data
Relating to Variable Annuity and
Variable Life Insurance Subaccounts
and Implement Fees Associated With
This Proposed Feature
August 3, 2018.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934, as
amended (‘‘Act’’),1 and Rule 19b–4
thereunder,2 notice is hereby given that
on July 26, 2018, National Securities
Clearing Corporation (‘‘NSCC’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I, II and III below, which Items
have been prepared by the clearing
agency. NSCC filed the proposed rule
change pursuant to Section 19(b)(3)(A) 3
of the Act and subparagraphs (f)(2) 4 and
(f)(4) 5 of Rule 19b–4 thereunder. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Clearing Agency’s Statement of the
Terms of Substance of the Proposed
Rule Change
The proposed rule change consists of
modifications to NSCC’s Rules &
Procedures (‘‘Rules’’) in order to reflect
proposed enhancements to NSCC’s
Insurance and Retirement Processing
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A).
4 17 CFR 240.19b–4(f)(2).
5 17 CFR 240.19b–4(f)(4).
2 17
PO 00000
Frm 00080
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39481
Services (‘‘I&RS’’). The proposed rule
change would enhance existing I&RS
services to provide for the delivery of
certain transaction data relating to
variable annuity and variable life
insurance subaccounts (‘‘variable
product subaccounts’’) and implement
fees associated with this proposed
feature, as described in greater detail
below.6
II. Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
In its filing with the Commission, the
clearing agency 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. The
clearing agency has prepared
summaries, set forth in sections A, B,
and C below, of the most significant
aspects of such statements.
(A) Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
1. Purpose
The proposed rule change consists of
modifications to the Rules in order to
reflect proposed enhancements to I&RS
services. The proposed rule change
would enhance existing I&RS services to
provide for the delivery of certain
transaction data relating to variable
product subaccounts and implement
fees associated with this proposed
feature, as described in greater detail
below.
(i) Variable Product Subaccounts
An annuity is a contract between a
holder and an insurance carrier
pursuant to which the holder makes an
upfront payment to an insurance carrier
and the insurance carrier agrees to pay
the holder periodic payments at a future
date. A variable annuity is a type of
annuity that allows the holder to choose
from a selection of investment options,
or ‘‘subaccounts,’’ within the annuity
and the periodic payments paid by the
insurance carrier are determined, in
part, by the performance of the
subaccounts selected by the holder. A
variable life insurance contract operates
in a similar manner. The variable life
insurance carries a ‘‘cash value’’ and the
purchaser can choose from a selection of
investment subaccounts to invest the
cash value. The subaccounts for variable
6 Capitalized terms used herein and not otherwise
defined shall have the meaning assigned to such
terms in, available at https://dtcc.com/∼/media/
Files/Downloads/legal/rules/nscc_rules.pdf.
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sradovich on DSK3GMQ082PROD with NOTICES
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Federal Register / Vol. 83, No. 154 / Thursday, August 9, 2018 / Notices
products are frequently structured to be
similar to mutual funds and are
managed by mutual fund asset
managers.
Historically asset managers have
received certain information relating to
the affiliated subaccounts they manage
on an aggregate basis from insurance
carriers rather than on an individual
transactional basis with respect to each
subaccount. For instance, an insurance
carrier will send settlement amounts to
the asset manager reflecting the
aggregate amounts invested in each
subaccount at any given time but will
not send any individual transactional
data relating to how those amounts were
invested in each subaccount. As an
example, if two clients each invested in
a subaccount in one day and another
client transfers funds from the
subaccount on the same day, the
insurance carrier would provide the
asset manager the aggregate amount of
funds remaining in the subaccount at
the end of the day and will not specify
that two of its clients invested in the
subaccount and one client removed
funds from the subaccount or any
details relating to the individual
transactions.
Asset managers would like access to
the information specific to the
individual transactions for the
subaccounts that they manage to get a
better understanding of the business of
the subaccounts. The subaccount
transaction-specific information that the
asset managers would like to receive
with respect to each subaccount
transaction includes the name of the
insurance carrier, the date of the
transaction, the broker-dealer named on
the transaction, the individual advisor
listed on the transaction, the type of
transaction (e.g., new purchase, death
claim, rebalance, subaccount transfer to
or from the subaccount, etc.) and the
amount of the transaction. Asset
managers get this information, as
applicable, with respect to retail mutual
funds that they manage and such
information is useful to indicate the
investment advisors that are working
with clients purchasing their
subaccounts, activities between mutual
funds that they manage such as transfers
by clients between mutual funds that
they manage, individual transaction
amounts and the reason funds are being
moved from or to a particular account.
Such information provides asset
managers with a better understanding of
the accounts that they manage and the
reason that clients are investing within
certain products. This understanding
allows asset managers to better serve
clients by providing products to address
their requirements. Asset managers have
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18:11 Aug 08, 2018
Jkt 244001
indicated that such transaction-specific
information does not need to include
individual client information with
respect to the transactions, such as the
identity of the underlying clients.
This daily subaccount transactional
information is currently included
within the file that insurance carriers
send to distributors as part of the I&RS
Financial Activity Reporting (‘‘FAR’’)
service.7 FAR enables insurance carriers
to provide distributors with daily
individual and group annuity and life
insurance financial transaction
information, including information
relating to subaccounts. Distributors use
this information, including the
subaccount transactional information, to
manage their client’s accounts.
NSCC is proposing to take the
transaction-specific subaccount data
that it receives within the FAR files and
make it available to asset managers that
sign up for the feature. In connection
with sending the transaction-specific
subaccount data, NSCC may send the
data to third party service providers
who have been engaged by the asset
managers to take the data from NSCC
and organize it on behalf of the asset
managers and/or provide a central
repository pursuant to which asset
managers may retrieve such information
from NSCC. NSCC may enter into a
contract with such service providers to
ensure among other things that the data
is being used as contemplated by the
Rules and that there are proper
safeguards to ensure data security.
NSCC is proposing to charge the asset
managers that sign up for the feature
and gain access to the subaccount data
a monthly fee of $2,500. Asset managers
that are not Members or Limited
Members would also be required to
enter into an agreement relating to the
payment of the fees and such other
conditions as determined by NSCC to
gain access to the subaccount data,
including system requirements.
(ii) Proposed Rule Changes
The proposed rule change would
amend Rule 57 to provide that NSCC
would make available transactionspecific subaccount data to asset
managers and service providers engaged
by them to process the applicable data.
The proposed rule change would also
provide that asset managers which are
not Members or Limited Members
would be required to enter into such
7 Section 8 of Rule 57, supra note 6. FAR enables
Insurance Carrier/Retirement Services Members to
transmit IPS Data regarding financial transactions
and related activity specific to an IPS Eligible
Product to Members, Mutual Fund/Insurance
Services Members and Data Services Only
Members. Id.
PO 00000
Frm 00081
Fmt 4703
Sfmt 4703
agreements with the NSCC as
determined by NSCC to gain access to
the subaccount data which agreements
would include an agreement to pay the
fees set forth in in the Rules to access
the data and to set up any system
requirements necessary to access the
data. The proposed rule change would
also provide that service providers
receiving the subaccount data on behalf
of asset managers would also be
required to enter into such agreements
as determined by the Corporation in
order to gain access to such subaccount
data on behalf of such asset managers to
ensure the data is being sent to asset
managers as contemplated in the Rules
and that there are proper safeguards by
the service provider to ensure data
security
In addition, NSCC would amend
Addendum A of the NSCC Rules to
include the fees for subscription for the
subaccount data feature.
2. Statutory Basis
Section 17A(b)(3)(F) of the Act 8
requires, in part, that the Rules be
designed to foster cooperation and
coordination with persons engaged in
the clearance and settlement of
securities transactions. The proposed
rule change would enhance insurance
carriers’ ability to send, and asset
managers’ ability to access and retrieve,
daily transaction-specific subaccount
data relating to the assets and funds that
such asset managers manage that are
within variable annuities and variable
life insurance contracts. Currently, there
is not a structured method of providing
transaction-specific subaccount
information to asset managers, and
insurance carriers historically have not
consistently provided such information
to asset managers. The proposed rule
change would allow the transactionspecific subaccount information to be
shared by insurance carriers with asset
managers in a standardized format. As
such, NSCC believes that the proposed
rule change would foster cooperation
and coordination among persons
engaged in the clearance and settlement
of securities, consistent with the
requirements of Section 17A(b)(3)(F) of
the Act.9
Section 17A(b)(3)(D) of the Act 10
requires that the Rules provide for the
equitable allocation of reasonable dues,
fees, and other charges among its
participants. NSCC believes that the
proposed rule change to Addendum A
is consistent with this provision of the
Act because the proposed fees would
8 15
U.S.C. 78q–1(b)(3)(F).
9 Id.
10 15
E:\FR\FM\09AUN1.SGM
U.S.C. 78q–1(b)(3)(D).
09AUN1
Federal Register / Vol. 83, No. 154 / Thursday, August 9, 2018 / Notices
sradovich on DSK3GMQ082PROD with NOTICES
align with the cost of delivering the
proposed subaccount data feature, and
such fees would be allocated equitably
among the entities that subscribe for
access to the subaccount data.
Specifically, the costs to NSCC for
providing the feature would include
building the capability to separate the
subaccount data from the FAR files sent
by insurance carriers, segregating such
data by asset manager, drafting and
negotiating agreements with asset
managers relating to receiving the data
and drafting and negotiating agreements
with service providers who are
receiving and distributing subaccount
data on behalf of asset managers. NSCC
believes that the costs for adding and
operating the feature on behalf of asset
managers would be approximately equal
to the fees anticipated to be received by
NSCC from the asset managers for use
of this feature. In addition, such fees
would be charged only to those asset
managers that choose to subscribe to the
feature. Therefore, by establishing fees
that align with the cost of delivery of
this feature and allocating those fees
equitably among the subscribing asset
managers, the proposed rule change
would provide for the equitable
allocation of reasonable dues, fees and
other charges among its participants
consistent with the requirements of
Section 17A(b)(3)(D) of the Act.11
(B) Clearing Agency’s Statement on
Burden on Competition
NSCC does not believe that the
proposed rule change would have any
adverse impact, or impose any burden,
on competition because the proposed
rule change would add an optional
feature to NSCC’s services that would
provide access by asset managers to
transaction-specific subaccount data
that is included within the FAR files. As
an optional feature available for
subscription, the proposed rule change
would not disproportionally impact any
NSCC participants.
Moreover, because the proposed rule
change would allow asset managers to
receive transaction-specific subaccount
data and use that information to better
service the funds and assets within
variable products, NSCC believes the
proposed rule change would have a
positive effect on competition among
asset managers. The proposed feature
would provide these firms with a
method of receiving transaction-specific
subaccount data similar to the
information that such asset managers
currently receive with respect to retail
mutual funds. Receiving transactionspecific subaccount information with
respect to variable products would
provide asset managers a better
understanding of client requirements
and allow asset managers to adjust their
products so that they are better suited
for clients of variable annuities and
variable life insurance contracts. NSCC
believes this would enhance
competition among asset managers by
enabling each to more quickly provide
competing products meeting client
requirements.
(C) Clearing Agency’s Statement on
Comments on the Proposed Rule
Change Received From Members,
Participants, or Others
NSCC has not received or solicited
any written comments relating to this
proposal. 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 pursuant to Section
19(b)(3)(A) 12 of the Act and
subparagraphs (f)(2) 13 and (f)(4) 14 of
Rule 19b–4 thereunder. At any time
within 60 days of the filing of the
proposed rule change, the Commission
summarily may temporarily suspend
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
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 email to rule-comments@
sec.gov. Please include File Number SR–
NSCC–2018–005 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549.
All submissions should refer to File
Number SR–NSCC–2018–005. This file
12 15
U.S.C 78s(b)(3)(A).
CFR 240.19b–4(f)(2).
14 17 CFR 240.19b–4(f)(4).
number should be included on the
subject line if email 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 website (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 website 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
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of NSCC and on DTCC’s website
(https://dtcc.com/legal/sec-rulefilings.aspx). 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–
2018–005 and should be submitted on
or before August 30, 2018.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–17007 Filed 8–8–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Submission for OMB Review;
Comment Request
Upon Written Request, Copies Available
From: Securities and Exchange
Commission, Office of FOIA Services,
100 F Street NE, Washington, DC
20549–2736
Extension:
Form ADV–E, SEC File No. 270–318, OMB
Control No. 3235–0361
Notice is hereby given that, pursuant
to the Paperwork Reduction Act of 1995
(44 U.S.C. 3501 et seq.), the Securities
and Exchange Commission (the
13 17
11 Id.
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15 17
E:\FR\FM\09AUN1.SGM
CFR 200.30–3(a)(12).
09AUN1
]]>Agencies
[Federal Register Volume 83, Number 154 (Thursday, August 9, 2018)]
[Notices]
[Pages 39481-39483]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-17007]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-83774; File No. SR-NSCC-2018-005]
Self-Regulatory Organizations; National Securities Clearing
Corporation; Notice of Filing and Immediate Effectiveness of Proposed
Rule Change To Provide for the Delivery of Certain Transaction Data
Relating to Variable Annuity and Variable Life Insurance Subaccounts
and Implement Fees Associated With This Proposed Feature
August 3, 2018.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of
1934, as amended (``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is
hereby given that on July 26, 2018, National Securities Clearing
Corporation (``NSCC'') filed with the Securities and Exchange
Commission (``Commission'') the proposed rule change as described in
Items I, II and III below, which Items have been prepared by the
clearing agency. NSCC filed the proposed rule change pursuant to
Section 19(b)(3)(A) \3\ of the Act and subparagraphs (f)(2) \4\ and
(f)(4) \5\ of Rule 19b-4 thereunder. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 CFR 240.19b-4(f)(2).
\5\ 17 CFR 240.19b-4(f)(4).
---------------------------------------------------------------------------
I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change
The proposed rule change consists of modifications to NSCC's Rules
& Procedures (``Rules'') in order to reflect proposed enhancements to
NSCC's Insurance and Retirement Processing Services (``I&RS''). The
proposed rule change would enhance existing I&RS services to provide
for the delivery of certain transaction data relating to variable
annuity and variable life insurance subaccounts (``variable product
subaccounts'') and implement fees associated with this proposed
feature, as described in greater detail below.\6\
---------------------------------------------------------------------------
\6\ Capitalized terms used herein and not otherwise defined
shall have the meaning assigned to such terms in, available at
https://dtcc.com/~/media/Files/Downloads/legal/rules/nscc_rules.pdf.
---------------------------------------------------------------------------
II. Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
In its filing with the Commission, the clearing agency 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. The clearing agency has prepared summaries,
set forth in sections A, B, and C below, of the most significant
aspects of such statements.
(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
1. Purpose
The proposed rule change consists of modifications to the Rules in
order to reflect proposed enhancements to I&RS services. The proposed
rule change would enhance existing I&RS services to provide for the
delivery of certain transaction data relating to variable product
subaccounts and implement fees associated with this proposed feature,
as described in greater detail below.
(i) Variable Product Subaccounts
An annuity is a contract between a holder and an insurance carrier
pursuant to which the holder makes an upfront payment to an insurance
carrier and the insurance carrier agrees to pay the holder periodic
payments at a future date. A variable annuity is a type of annuity that
allows the holder to choose from a selection of investment options, or
``subaccounts,'' within the annuity and the periodic payments paid by
the insurance carrier are determined, in part, by the performance of
the subaccounts selected by the holder. A variable life insurance
contract operates in a similar manner. The variable life insurance
carries a ``cash value'' and the purchaser can choose from a selection
of investment subaccounts to invest the cash value. The subaccounts for
variable
[[Page 39482]]
products are frequently structured to be similar to mutual funds and
are managed by mutual fund asset managers.
Historically asset managers have received certain information
relating to the affiliated subaccounts they manage on an aggregate
basis from insurance carriers rather than on an individual
transactional basis with respect to each subaccount. For instance, an
insurance carrier will send settlement amounts to the asset manager
reflecting the aggregate amounts invested in each subaccount at any
given time but will not send any individual transactional data relating
to how those amounts were invested in each subaccount. As an example,
if two clients each invested in a subaccount in one day and another
client transfers funds from the subaccount on the same day, the
insurance carrier would provide the asset manager the aggregate amount
of funds remaining in the subaccount at the end of the day and will not
specify that two of its clients invested in the subaccount and one
client removed funds from the subaccount or any details relating to the
individual transactions.
Asset managers would like access to the information specific to the
individual transactions for the subaccounts that they manage to get a
better understanding of the business of the subaccounts. The subaccount
transaction-specific information that the asset managers would like to
receive with respect to each subaccount transaction includes the name
of the insurance carrier, the date of the transaction, the broker-
dealer named on the transaction, the individual advisor listed on the
transaction, the type of transaction (e.g., new purchase, death claim,
rebalance, subaccount transfer to or from the subaccount, etc.) and the
amount of the transaction. Asset managers get this information, as
applicable, with respect to retail mutual funds that they manage and
such information is useful to indicate the investment advisors that are
working with clients purchasing their subaccounts, activities between
mutual funds that they manage such as transfers by clients between
mutual funds that they manage, individual transaction amounts and the
reason funds are being moved from or to a particular account. Such
information provides asset managers with a better understanding of the
accounts that they manage and the reason that clients are investing
within certain products. This understanding allows asset managers to
better serve clients by providing products to address their
requirements. Asset managers have indicated that such transaction-
specific information does not need to include individual client
information with respect to the transactions, such as the identity of
the underlying clients.
This daily subaccount transactional information is currently
included within the file that insurance carriers send to distributors
as part of the I&RS Financial Activity Reporting (``FAR'') service.\7\
FAR enables insurance carriers to provide distributors with daily
individual and group annuity and life insurance financial transaction
information, including information relating to subaccounts.
Distributors use this information, including the subaccount
transactional information, to manage their client's accounts.
---------------------------------------------------------------------------
\7\ Section 8 of Rule 57, supra note 6. FAR enables Insurance
Carrier/Retirement Services Members to transmit IPS Data regarding
financial transactions and related activity specific to an IPS
Eligible Product to Members, Mutual Fund/Insurance Services Members
and Data Services Only Members. Id.
---------------------------------------------------------------------------
NSCC is proposing to take the transaction-specific subaccount data
that it receives within the FAR files and make it available to asset
managers that sign up for the feature. In connection with sending the
transaction-specific subaccount data, NSCC may send the data to third
party service providers who have been engaged by the asset managers to
take the data from NSCC and organize it on behalf of the asset managers
and/or provide a central repository pursuant to which asset managers
may retrieve such information from NSCC. NSCC may enter into a contract
with such service providers to ensure among other things that the data
is being used as contemplated by the Rules and that there are proper
safeguards to ensure data security.
NSCC is proposing to charge the asset managers that sign up for the
feature and gain access to the subaccount data a monthly fee of $2,500.
Asset managers that are not Members or Limited Members would also be
required to enter into an agreement relating to the payment of the fees
and such other conditions as determined by NSCC to gain access to the
subaccount data, including system requirements.
(ii) Proposed Rule Changes
The proposed rule change would amend Rule 57 to provide that NSCC
would make available transaction-specific subaccount data to asset
managers and service providers engaged by them to process the
applicable data. The proposed rule change would also provide that asset
managers which are not Members or Limited Members would be required to
enter into such agreements with the NSCC as determined by NSCC to gain
access to the subaccount data which agreements would include an
agreement to pay the fees set forth in in the Rules to access the data
and to set up any system requirements necessary to access the data. The
proposed rule change would also provide that service providers
receiving the subaccount data on behalf of asset managers would also be
required to enter into such agreements as determined by the Corporation
in order to gain access to such subaccount data on behalf of such asset
managers to ensure the data is being sent to asset managers as
contemplated in the Rules and that there are proper safeguards by the
service provider to ensure data security
In addition, NSCC would amend Addendum A of the NSCC Rules to
include the fees for subscription for the subaccount data feature.
2. Statutory Basis
Section 17A(b)(3)(F) of the Act \8\ requires, in part, that the
Rules be designed to foster cooperation and coordination with persons
engaged in the clearance and settlement of securities transactions. The
proposed rule change would enhance insurance carriers' ability to send,
and asset managers' ability to access and retrieve, daily transaction-
specific subaccount data relating to the assets and funds that such
asset managers manage that are within variable annuities and variable
life insurance contracts. Currently, there is not a structured method
of providing transaction-specific subaccount information to asset
managers, and insurance carriers historically have not consistently
provided such information to asset managers. The proposed rule change
would allow the transaction-specific subaccount information to be
shared by insurance carriers with asset managers in a standardized
format. As such, NSCC believes that the proposed rule change would
foster cooperation and coordination among persons engaged in the
clearance and settlement of securities, consistent with the
requirements of Section 17A(b)(3)(F) of the Act.\9\
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\8\ 15 U.S.C. 78q-1(b)(3)(F).
\9\ Id.
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Section 17A(b)(3)(D) of the Act \10\ requires that the Rules
provide for the equitable allocation of reasonable dues, fees, and
other charges among its participants. NSCC believes that the proposed
rule change to Addendum A is consistent with this provision of the Act
because the proposed fees would
[[Page 39483]]
align with the cost of delivering the proposed subaccount data feature,
and such fees would be allocated equitably among the entities that
subscribe for access to the subaccount data. Specifically, the costs to
NSCC for providing the feature would include building the capability to
separate the subaccount data from the FAR files sent by insurance
carriers, segregating such data by asset manager, drafting and
negotiating agreements with asset managers relating to receiving the
data and drafting and negotiating agreements with service providers who
are receiving and distributing subaccount data on behalf of asset
managers. NSCC believes that the costs for adding and operating the
feature on behalf of asset managers would be approximately equal to the
fees anticipated to be received by NSCC from the asset managers for use
of this feature. In addition, such fees would be charged only to those
asset managers that choose to subscribe to the feature. Therefore, by
establishing fees that align with the cost of delivery of this feature
and allocating those fees equitably among the subscribing asset
managers, the proposed rule change would provide for the equitable
allocation of reasonable dues, fees and other charges among its
participants consistent with the requirements of Section 17A(b)(3)(D)
of the Act.\11\
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\10\ 15 U.S.C. 78q-1(b)(3)(D).
\11\ Id.
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(B) Clearing Agency's Statement on Burden on Competition
NSCC does not believe that the proposed rule change would have any
adverse impact, or impose any burden, on competition because the
proposed rule change would add an optional feature to NSCC's services
that would provide access by asset managers to transaction-specific
subaccount data that is included within the FAR files. As an optional
feature available for subscription, the proposed rule change would not
disproportionally impact any NSCC participants.
Moreover, because the proposed rule change would allow asset
managers to receive transaction-specific subaccount data and use that
information to better service the funds and assets within variable
products, NSCC believes the proposed rule change would have a positive
effect on competition among asset managers. The proposed feature would
provide these firms with a method of receiving transaction-specific
subaccount data similar to the information that such asset managers
currently receive with respect to retail mutual funds. Receiving
transaction-specific subaccount information with respect to variable
products would provide asset managers a better understanding of client
requirements and allow asset managers to adjust their products so that
they are better suited for clients of variable annuities and variable
life insurance contracts. NSCC believes this would enhance competition
among asset managers by enabling each to more quickly provide competing
products meeting client requirements.
(C) Clearing Agency's Statement on Comments on the Proposed Rule Change
Received From Members, Participants, or Others
NSCC has not received or solicited any written comments relating to
this proposal. 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 pursuant to Section
19(b)(3)(A) \12\ of the Act and subparagraphs (f)(2) \13\ and (f)(4)
\14\ of Rule 19b-4 thereunder. At any time within 60 days of the filing
of the proposed rule change, the Commission summarily may temporarily
suspend 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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\12\ 15 U.S.C 78s(b)(3)(A).
\13\ 17 CFR 240.19b-4(f)(2).
\14\ 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 (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-NSCC-2018-005 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549.
All submissions should refer to File Number SR-NSCC-2018-005. This file
number should be included on the subject line if email 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 website (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 website 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 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of NSCC and on DTCC's website
(https://dtcc.com/legal/sec-rule-filings.aspx). 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-2018-005 and should be submitted on
or before August 30, 2018.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
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\15\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-17007 Filed 8-8-18; 8:45 am]
BILLING CODE 8011-01-P
