Self-Regulatory Organizations; National Securities Clearing Corporation; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Enhance National Securities Clearing Corporation Automated Customer Account Transfer Service, 49628-49631 [2022-17224]

Download as PDF 49628 Federal Register / Vol. 87, No. 154 / Thursday, August 11, 2022 / Notices Commission has considered the sufficiency and appropriateness of existing laws and rules applicable to government securities brokers, government securities dealers, and their associated persons in approving the proposal. The proposal will benefit investors and market participants by promoting greater transparency into the U.S. Treasury Securities market while also maintaining the confidentiality of individual market participants and transactions. IV. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,23 that the proposed rule change (SR–FINRA– 2022–017) is approved. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.24 J. Matthew DeLesDernier, Deputy Secretary. [FR Doc. 2022–17225 Filed 8–10–22; 8:45 am] BILLING CODE 8011–01–P 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 amendments to NSCC’s Rules & Procedures (‘‘Rules’’) in order to enhance NSCC’s Automated Customer Account Transfer Service (‘‘ACATS’’), as described in greater detail below.5 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 SECURITIES AND EXCHANGE COMMISSION 1. Purpose [Release No. 34–95437; File No. SR–NSCC– 2022–011] Self-Regulatory Organizations; National Securities Clearing Corporation; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Enhance National Securities Clearing Corporation Automated Customer Account Transfer Service lotter on DSK11XQN23PROD with NOTICES1 August 5, 2022. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that on July 26, 2022, National Securities Clearing Corporation (‘‘NSCC’’ or ‘‘Corporation’’) 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) of the Act 3 and Rule 19b–4(f)(4) thereunder.4 The Commission is publishing this notice to solicit 23 15 U.S.C. 78s(b)(2). CFR 200.30–3(a)(12). 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)(4). 24 17 VerDate Sep<11>2014 17:49 Aug 10, 2022 Jkt 256001 The proposed rule change consists of modifications to NSCC’s Rules to expand the ‘‘receiver delete’’ functionality in ACATS to additional products. (i) Background ACATS is a non-guaranteed service provided by NSCC that enables Members to effect transfers of customer accounts among themselves. ACATS complements Financial Industry Regulatory Authority (‘‘FINRA’’) Rule 11870 (‘‘FINRA Rule 11870’’) regarding customer account transfers, which requires FINRA members to use automated clearing agency customer account transfer services and to effect customer account transfers within specified time frames.6 ACATS automates and standardizes procedures for the transfer of assets in a customer account, allowing Members to efficiently and automatically enter, review, and generate instructions to settle customer account transfers. The 5 Terms not defined herein are defined in the Rules, available at https://dtcc.com/∼/media/Files/ Downloads/legal/rules/nscc_rules.pdf. 6 See FINRA Rule 11870, available at https:// www.finra.org/rules-guidance/rulebooks/finrarules/11870. NSCC also permits Qualified Securities Depositories (i.e., The Depository Trust Company (‘‘DTC’’)) to utilize ACATS on behalf of their participants (e.g., DTC member banks) on a voluntary basis. See Section 1 of Rule 50, id. PO 00000 Frm 00051 Fmt 4703 Sfmt 4703 timing and procedures with respect to customer account transfers are intended to be consistent with the timing and processes set forth in FINRA Rule 11870. Pursuant to NSCC Rule 50, an NSCC Member to whom a customer’s account will be transferred (the ‘‘Receiving Member’’) initiates the transfer by submitting a transfer initiation request to NSCC, which contains the customer detail information that the NSCC Member who currently has the account (the ‘‘Delivering Member’’) requires to transfer the account.7 The Delivering Member must either reject the customer account transfer request or submit detailed customer account asset data to NSCC. NSCC then provides a report detailing the customer account asset data to the Receiving Member,8 who has one Business Day after receipt of the report to review the account and: (i) accept all assets; (ii) reject (or ‘‘delete’’) one or more assets, to the extent such a rejection is permitted by the Receiving Member’s Designated Examining Authority (‘‘DEA’’) (i.e., FINRA),9 and allow the transfer of the remaining assets; (iii) request the Delivering Member to make adjustments to the customer account asset list; or (iv) reject the account, to extent such a rejection is permitted by NSCC or the Receiving Member’s DEA.10 Once a customer account has been accepted by the Receiving Member, ACATS facilitates the settlements associated with the account transfer at the appropriate asset settling location (e.g., through the Continuous Net Settlement system (‘‘CNS’’) for CNS-eligible securities, DTC for securities otherwise eligible for DTC settlement services, Fund/SERV for eligible mutual fund products, the Insurance Processing Service (‘‘IPS’’) for annuities, or The Options Clearing Corporation for listed options).11 FINRA Rule 11870 acknowledges that some customer assets may not be transferred within the specified time frames to the extent that those assets are not readily transferable (a ‘‘nontransferable asset’’). For purposes 7 See Section 2 of Rule 50, supra note 5. Section 7 of Rule 50, supra note 5. 9 As discussed in further detail below, NSCC Rule 50 currently limits the type of assets that a Receiving Member may delete from the customer account asset data list in ACATS to MF/I&RS Products. NSCC proposes to expand this functionality to other assets that may be deemed ‘‘nontransferable assets’’ under FINRA Rule 11870. 10 See Section 8 of Rule 50, supra note 5. Pursuant to FINRA Rule 11870(d)(8), a Receiving Member may reject a transfer of account assets in whole if the account is not in compliance with the Receiving Member’s credit policies or minimum asset requirements. See supra note 6. 11 See Section 14 of Rule 50, supra note 5. 8 See E:\FR\FM\11AUN1.SGM 11AUN1 Federal Register / Vol. 87, No. 154 / Thursday, August 11, 2022 / Notices lotter on DSK11XQN23PROD with NOTICES1 of FINRA Rule 11870, a nontransferable asset is any asset that is incapable of being transferred because it is: (i) an asset that is a proprietary product of the carrying member; 12 (ii) an asset that is a product of a third party (e.g., mutual fund/money market fund) with which the receiving 13 member does not maintain the relationship or arrangement necessary to receive/carry the asset for the customer’s account; (iii) an asset that may not be received due to regulatory limitations on the scope of the receiving member’s business; (iv) an asset that is a bankrupt issue for which the carrying member does not possess (which shall be deemed to include possession at a securities depository for the carrying member’s account) the proper denominations or quantity of shares necessary to effect delivery and no transfer agent is available to reregister the shares; (v) an asset that is an issue for which the proper denominations cannot be obtained pursuant to governmental regulation or the issuance terms of the product (e.g., foreign securities, baby bonds, etc.); or (vi) limited partnership interests in retail accounts.14 NSCC Rule 50 currently limits the type of assets that a Receiving Member may delete from the customer account asset data list in ACATS (the ‘‘receiver delete functionality’’) to ‘‘MF/I&RS Products,’’ 15 which are comprised of Fund/SERV Eligible Fund assets 16 and/ or I&RS Eligible Products.17 As a result, certain customer assets that may also be deemed ‘‘nontransferable assets’’ under FINRA Rule 11870 are not currently included in the receiver delete functionality in ACATS and must be handled by a manual process outside of the automated ACATS system. For example, nontransferable alternative investment products that are the product of a third party, such as hedge funds, fund of funds, private equity, non-traded real estate investment trusts, and business development companies, may be submitted by the Delivering Member in the customer account asset list but cannot be removed using the receiver delete functionality in ACATS even though those products cannot be 12 For purposes of Rule 50, a carrying member would be the Delivering Member. 13 See Section 5 of Rule 50, supra note 5. 14 See supra note 6. 15 See Section 8 of Rule 50, supra note 5. 16 Rule 1 defines the term ‘‘Fund/SERV Eligible Fund’’ to mean a fund or other pooled investment entity included in the list for which provision is made in Section 1.(c) of Rule 3, supra note 5. 17 Rule 1 defines the term ‘‘I&RS Eligible Product’’ to mean an insurance product or a retirement or other benefit plan or program included in the list for which provision is made in Section 1.(d) of Rule 3, supra note 5. VerDate Sep<11>2014 17:49 Aug 10, 2022 Jkt 256001 settled on an automated basis at one of the asset settling locations due to a lack of arrangements between the issuer of the product and the Receiving Member, which prevents such products from being held by at the Receiving Member. Instead, nontransferable alternative investment products included in an ACATS transfer generate a Receive and Deliver (‘‘R&D’’) ticket instructing firms to complete the transfer outside of the ACATS process. This generally involves the Delivering Member generating physical transfer paperwork and sending it to the Receiving Member, often via the Envelope Settlement Service (‘‘ESS’’),18 to deliver the asset. Some of these assets end up getting rejected by the Receiving Member because, for example, the necessary contracts are not in place with the issuer, or the asset is otherwise ineligible to be held in the receiving account. Depending on the operational structure of the firm, the manual process to return paperwork to the Delivering Member may involve multiple touchpoints and paperwork handoffs, resulting in processing delays. (ii) Proposed Rule Change NSCC proposes to modify Rule 50 to allow ACATS to process deletions for any customer assets that are (i) deemed to be nontransferable assets under FINRA Rule 11870 and (ii) permitted by NSCC. Specifically, NSCC would effectuate the proposed change by revising two statements in Section 8 of Rule 50 concerning the deletion process to replace references to ‘‘MF/I&RS Products’’ with the phrase ‘‘nontransferable assets as defined by the Receiving Member’s DEA and as permitted by the Corporation.’’ NSCC would also make non-substantive revisions to improve the clarity of Section 8 of Rule 50. Section 8 of Rule 50 currently provides, in part, that ‘‘[d]uring the one (1) Business Day time period, only the Delivering Member will be able to add, delete or change an item, provided that the Receiving Member did not accelerate the transfer . . . other than with respect to MF/I&RS Products, which can also be deleted by the Receiving Member’’ (emphasis added). NSCC proposes to delete the word ‘‘only’’ because, as noted in the current 18 ESS is a non-guaranteed service of NSCC that facilitates the processing and settlement of physical security deliveries and associated charges through the use of envelope deliveries. Under this service, physical certificates may be processed for delivery at specified NSCC locations through the use of sealed envelopes accompanied by appropriate documentation (which, among other items, identifies the security, the receiving Member and the money value (if any) associated with the delivery). See Rule 9, supra note 5. PO 00000 Frm 00052 Fmt 4703 Sfmt 4703 49629 and proposed rule, the Receiving Member may also utilize the receiver delete functionality for certain products within this one Business Day time period. NSCC would also replace the phrase ‘‘other than with respect to MF/ I&RS Products, which can also be deleted by the Receiving Member’’ with ‘‘however, the Receiving Member may delete nontransferable assets as defined by the Receiving Member’s DEA and as permitted by the Corporation during the one (1) Business Day time period.’’ NSCC believes these proposed changes would improve the clarity and readability of the Rule. NSCC would initially extend the receiver delete functionality to certain nontransferable alternative investment products that are the product of a third party, as discussed above. The proposed change would immediately address the need to delete alternative investment products directly within ACATS and provide necessary flexibility within NSCC’s Rules to apply the receiver delete functionality to other nontransferable assets beyond MF/I&RS Products in the future.19 NSCC would maintain a list of nontransferable assets for which the receiver delete functionality is permitted and make the list available to its Members.20 As discussed above, the ACATS service is intended to compliment FINRA Rule 11870 and provide timing and procedures for customer account transfers that are consistent with the timing and processes set forth in FINRA Rule 11870. NSCC Rule 50 currently limits the scope of assets that may be deleted from the customer account asset data list in ACATS to MF/I&RS Products, which prevents Members from processing the deletion of other nontransferable assets within the automated system. In the case of alternative investment products, this results in the need for manual and more lengthy processing of such assets through the R&D ticket process, which often involves generating physical transfer paperwork, the physical transmission of assets through ESS, and the ultimate rejection of nontransferable assets. Expanding the receiver delete functionality to additional nontransferable assets would reduce the cases in which transfer paperwork is mailed unnecessarily and enable the account owner to more immediately 19 NSCC would issue an Important Notice to inform Members of any new products eligible for the receiver delete functionality in ACATS. 20 NSCC would initially maintain this list in the ACATS User Guide, which is available through the DTCC Learning Center. See https:// dtcclearning.com/products-and-services/equitiesclearing/acats/acats-users.html. E:\FR\FM\11AUN1.SGM 11AUN1 49630 Federal Register / Vol. 87, No. 154 / Thursday, August 11, 2022 / Notices ascertain the transfer status of such assets. The proposed rule change would therefore eliminate the manual burdens and delays associated with transfers and rejections under the current R&D ticket process and would generally result in the same outcome (i.e., rejection) for those assets. Moreover, the proposed rule change would allow NSCC to apply the receiver delete functionality to any future assets determined by FINRA to be nontransferable under FINRA Rule 11870. NSCC therefore believes that the proposed rule change is designed to further the goals of standardizing customer account transfer procedures, reducing operating costs, and accelerating the timing for transaction settlements in the customer account transfer process. lotter on DSK11XQN23PROD with NOTICES1 2. Statutory Basis NSCC believes that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a registered clearing agency. Section 17A(b)(3)(F) of the Act 21 requires, in part, that the rules of a clearing agency be designed to promote the prompt and accurate clearance and settlement of securities transactions. The proposed rule change would provide necessary flexibility within NSCC’s Rules to expand the receiver delete functionality in ACATS to nontransferable assets beyond MF/I&RS Products. The proposed change would reduce the burdens and delays associated with nontransferable assets that fall within the current manual R&D ticket process and bring greater efficiency and expediency to the account transfer process for those products as set forth above. NSCC therefore believes the proposed rule change would promote the prompt and accurate clearance and settlement of securities transactions, consistent with the requirements of the Act, in particular Section 17A(b)(3)(F) of the Act.22 (B) Clearing Agency’s Statement on Burden on Competition NSCC does not believe that the proposed rule change would have any impact, or impose any burden, on competition. The proposed changes would bring greater efficiency to the account transfer process by allowing ACATS participants to process deletions of additional nontransferable assets in an automated and expedited fashion. Allowing ACATS participants to process account transfers in a more efficient manner would result in client 21 15 U.S.C. 78q–1(b)(3)(F). (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. If any written comments are received, they will be publicly filed as an Exhibit 2 to this filing, as required by Form 19b–4 and the General Instructions thereto. Persons submitting comments are cautioned that, according to Section IV (Solicitation of Comments) of the Exhibit 1A in the General Instructions to Form 19b–4, the Commission does not edit personal identifying information from comment submissions. Commenters should submit only information that they wish to make available publicly, including their name, email address, and any other identifying information. All prospective commenters should follow the Commission’s instructions on how to submit comments, available at https://www.sec.gov/regulatory-actions/ how-to-submit-comments. General questions regarding the rule filing process or logistical questions regarding this filing should be directed to the Main Office of the Commission’s Division of Trading and Markets at tradingandmarkets@sec.gov or 202– 551–5777. NSCC reserves the right not to respond to any comments received. 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) 23 of the Act and paragraph (f) 24 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, 23 15 22 Id. VerDate Sep<11>2014 assets being transferred to the appropriate Members and DTC participants more quickly. NSCC does not believe that the proposed rule change would have any impact on competition or materially affect the rights or obligations of NSCC Members because they would apply to all ACATS participants equally and effectively result in the same outcome as under the current manual process performed today. 24 17 17:49 Aug 10, 2022 Jkt 256001 PO 00000 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f). Frm 00053 Fmt 4703 Sfmt 4703 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–2022–011 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–2022–011. 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-rulefilings.aspx). All comments received will be posted without change. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–NSCC– 2022–011 and should be submitted on or before September 1, 2022. E:\FR\FM\11AUN1.SGM 11AUN1 Federal Register / Vol. 87, No. 154 / Thursday, August 11, 2022 / Notices For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.25 J. Matthew DeLesDernier, Deputy Secretary. [FR Doc. 2022–17224 Filed 8–10–22; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Investment Company Act Release No. 34665; File No. 812–15320] MSD Investment Corp., et al. August 5, 2022. Securities and Exchange Commission (‘‘Commission’’ or ‘‘SEC’’). ACTION: Notice. lotter on DSK11XQN23PROD with NOTICES1 AGENCY: Notice of application for an order (‘‘Order’’) under sections 17(d) and 57(i) of the Investment Company Act of 1940 (the ‘‘Act’’) and rule 17d–1 under the Act to permit certain joint transactions otherwise prohibited by sections 17(d) and 57(a)(4) of the Act and rule 17d–1 under the Act. SUMMARY OF APPLICATION: Applicants request an order to amend a previous order granted by the Commission that permits certain business development companies (‘‘BDCs’’) and closed-end management investment companies to co-invest in portfolio companies with each other and with certain affiliated investment entities. APPLICANTS: MSD Investment Corp., MSD Partners, L.P., MSD Credit Opportunity Master Fund, L.P., MSD Credit Opportunity Master Fund II, L.P., MSD Credit Opportunity Fund, L.P., MSD Credit Opportunity Fund (Cayman), L.P., MSD Credit Opportunity Fund, Ltd., MSD Debt REIT Holdings, L.P., MSDC EIV, LLC, MSD EIV Private, LLC, MSD RCOF TRS, LLC, MSD RCOF TRS (Cayman) LTD., MSD Real Estate Credit Opportunity Fund L.P., MSD Real Estate Credit Opportunity Fund-C L.P., RCOF–C Intermediate (Cayman), L.P., RCOF–C Intermediate, L.P., MSD Special Investments Fund, L.P., MSD SIF Holdings, L.P., MSD Special Investments Fund (Cayman), L.P., MSD SIF (Cayman), L.P., MSD Alpine Credit Opportunity Fund, LP, MSD SBAFLA Fund, L.P., MSD UK Holdings Limited, MSD UK Holdings Ltd, MSD UK Aggregator Fund, LLC, MSD PCOF SMA 1, LLC, MSD PCOF SMA 2, LLC, MSD RCOF SMA 1, LLC, MSD RCOF SMA 2, LLC, MSD Private Credit Opportunity Master (ECI) Fund 2, L.P., MSD Private Credit Opportunity Master Fund 2, L.P., MSD Private Credit Opportunity Fund 25 17 CFR 200.30–3(a)(12). VerDate Sep<11>2014 17:49 Aug 10, 2022 Jkt 256001 2, L.P., MSD Private Credit Opportunity Fund (Cayman) 2, L.P., MSD Private Credit Opportunity Fund (Cayman) II, L.P., Intermediate Fund PCOF 2, LLC, MSD PCOF Fund 2, Ltd, Onshore Intermediate Fund PCOF 2, LLC, MSD Onshore PCOF Fund 2, Ltd, MSD Private Credit Opportunity Master (ECI) Fund, L.P., MSD Private Credit Opportunity Master (ECI) Fund II, L.P., MSD Private Credit Opportunity Master Fund, L.P., MSD Private Credit Opportunity Fund, L.P., MSD Private Credit Opportunity Fund (Cayman), L.P., MSD Private Credit Opportunity Fund II, L.P., MSD BDC SPV I, LLC, MSD Real Estate Credit Opportunity Fund II–C, L.P., MSD Real Estate Credit Opportunity Fund II, L.P., MSD Credit REIT Holdings II, L.P., MSD Special Investments Fund (Cayman) II, L.P., and MSD Special Investments Fund II, L.P. FILING DATES: The application was filed on April 14, 2022, and amended on July 8, 2022. HEARING OR NOTIFICATION OF HEARING: An order granting the requested relief will be issued unless the Commission orders a hearing. Interested persons may request a hearing on any application by emailing the SEC’s Secretary at Secretarys-Office@sec.gov and serving the Applicants with a copy of the request by email, if an email address is listed for the relevant Applicant below, or personally or by mail, if a physical address is listed for the relevant Applicant below. Hearing requests should be received by the Commission by 5:30 p.m. on, August 30, 2022, and should be accompanied by proof of service on applicants, in the form of an affidavit or, for lawyers, a certificate of service. Pursuant to rule 0–5 under the Act, hearing requests should state the nature of the writer’s interest, any facts bearing upon the desirability of a hearing on the matter, the reason for the request, and the issues contested. Persons who wish to be notified of a hearing may request notification by emailing the Commission’s Secretary at Secretarys-Office@sec.gov. ADDRESSES: The Commission: Secretarys-Office@sec.gov. Applicants: Robert Simonds, MSD Partners, L.P., at bsimonds@msdpartners.com, and Steven B. Boehm, Esq., Anne G. Oberndorf, Esq., and Payam Siadatpour, Esq., Eversheds Sutherland (US) LLP, at anneoberndorf@evershedssutherland.us. FOR FURTHER INFORMATION CONTACT: Kieran G. Brown, Senior Counsel, or Terri Jordan, Branch Chief, at (202) 551– 6825 (Division of Investment Management, Chief Counsel’s Office). PO 00000 Frm 00054 Fmt 4703 Sfmt 4703 49631 For Applicants’ representations, legal analysis, and conditions, please refer to Applicants’ first amended and restated application, dated July 8, 2022, which may be obtained via the Commission’s website by searching for the file number at the top of this document, or for an Applicant using the Company name search field, on the SEC’s EDGAR system. The SEC’s EDGAR system may be searched at, https://www.sec.gov/ edgar/searchedgar/legacy/ companysearch.html. You may also call the SEC’s Public Reference Room at (202) 551–8090. SUPPLEMENTARY INFORMATION: For the Commission, by the Division of Investment Management, under delegated authority. J. Matthew DeLesDernier, Deputy Secretary. [FR Doc. 2022–17217 Filed 8–10–22; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–95434; File No. SR– NASDAQ–2022–015] Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Designation of Longer Period for Commission Action on Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change, as Modified by Amendment No. 1, To Exempt Non-Convertible Bonds Listed Under Rule 5702 From Certain Corporate Governance Requirements August 5, 2022. On February 4, 2022, The Nasdaq Stock Market LLC (‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to exempt non-convertible bonds listed under Rule 5702 from certain corporate governance requirements. The proposed rule change was published for comment in the Federal Register on February 23, 2022.3 On March 18, 2022, pursuant to Section 19(b)(2) of the Act,4 the Commission designated a longer period within which to approve the proposed rule change, disapprove the proposed rule change, or institute proceedings to determine whether to disapprove the 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 See Securities Exchange Act Release No. 94265 (February 16, 2022), 87 FR 10265 (‘‘Notice). 4 15 U.S.C. 78s(b)(2). 2 17 E:\FR\FM\11AUN1.SGM 11AUN1

Agencies

[Federal Register Volume 87, Number 154 (Thursday, August 11, 2022)]
[Notices]
[Pages 49628-49631]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-17224]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95437; File No. SR-NSCC-2022-011]


Self-Regulatory Organizations; National Securities Clearing 
Corporation; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change To Enhance National Securities Clearing Corporation 
Automated Customer Account Transfer Service

August 5, 2022.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on July 26, 2022, National Securities Clearing Corporation (``NSCC'' or 
``Corporation'') 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) of 
the Act \3\ and Rule 19b-4(f)(4) thereunder.\4\ The Commission is 
publishing this notice to solicit comments on the proposed rule change 
from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(4).
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I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    The proposed rule change consists of amendments to NSCC's Rules & 
Procedures (``Rules'') in order to enhance NSCC's Automated Customer 
Account Transfer Service (``ACATS''), as described in greater detail 
below.\5\
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    \5\ Terms not defined herein are defined in the Rules, available 
at https://dtcc.com/~/media/Files/Downloads/legal/rules/
nscc_rules.pdf.
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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 NSCC's Rules 
to expand the ``receiver delete'' functionality in ACATS to additional 
products.
(i) Background
    ACATS is a non-guaranteed service provided by NSCC that enables 
Members to effect transfers of customer accounts among themselves. 
ACATS complements Financial Industry Regulatory Authority (``FINRA'') 
Rule 11870 (``FINRA Rule 11870'') regarding customer account transfers, 
which requires FINRA members to use automated clearing agency customer 
account transfer services and to effect customer account transfers 
within specified time frames.\6\ ACATS automates and standardizes 
procedures for the transfer of assets in a customer account, allowing 
Members to efficiently and automatically enter, review, and generate 
instructions to settle customer account transfers. The timing and 
procedures with respect to customer account transfers are intended to 
be consistent with the timing and processes set forth in FINRA Rule 
11870.
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    \6\ See FINRA Rule 11870, available at https://www.finra.org/rules-guidance/rulebooks/finra-rules/11870. NSCC also permits 
Qualified Securities Depositories (i.e., The Depository Trust 
Company (``DTC'')) to utilize ACATS on behalf of their participants 
(e.g., DTC member banks) on a voluntary basis. See Section 1 of Rule 
50, id.
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    Pursuant to NSCC Rule 50, an NSCC Member to whom a customer's 
account will be transferred (the ``Receiving Member'') initiates the 
transfer by submitting a transfer initiation request to NSCC, which 
contains the customer detail information that the NSCC Member who 
currently has the account (the ``Delivering Member'') requires to 
transfer the account.\7\ The Delivering Member must either reject the 
customer account transfer request or submit detailed customer account 
asset data to NSCC. NSCC then provides a report detailing the customer 
account asset data to the Receiving Member,\8\ who has one Business Day 
after receipt of the report to review the account and: (i) accept all 
assets; (ii) reject (or ``delete'') one or more assets, to the extent 
such a rejection is permitted by the Receiving Member's Designated 
Examining Authority (``DEA'') (i.e., FINRA),\9\ and allow the transfer 
of the remaining assets; (iii) request the Delivering Member to make 
adjustments to the customer account asset list; or (iv) reject the 
account, to extent such a rejection is permitted by NSCC or the 
Receiving Member's DEA.\10\ Once a customer account has been accepted 
by the Receiving Member, ACATS facilitates the settlements associated 
with the account transfer at the appropriate asset settling location 
(e.g., through the Continuous Net Settlement system (``CNS'') for CNS-
eligible securities, DTC for securities otherwise eligible for DTC 
settlement services, Fund/SERV for eligible mutual fund products, the 
Insurance Processing Service (``IPS'') for annuities, or The Options 
Clearing Corporation for listed options).\11\
---------------------------------------------------------------------------

    \7\ See Section 2 of Rule 50, supra note 5.
    \8\ See Section 7 of Rule 50, supra note 5.
    \9\ As discussed in further detail below, NSCC Rule 50 currently 
limits the type of assets that a Receiving Member may delete from 
the customer account asset data list in ACATS to MF/I&RS Products. 
NSCC proposes to expand this functionality to other assets that may 
be deemed ``nontransferable assets'' under FINRA Rule 11870.
    \10\ See Section 8 of Rule 50, supra note 5. Pursuant to FINRA 
Rule 11870(d)(8), a Receiving Member may reject a transfer of 
account assets in whole if the account is not in compliance with the 
Receiving Member's credit policies or minimum asset requirements. 
See supra note 6.
    \11\ See Section 14 of Rule 50, supra note 5.
---------------------------------------------------------------------------

    FINRA Rule 11870 acknowledges that some customer assets may not be 
transferred within the specified time frames to the extent that those 
assets are not readily transferable (a ``nontransferable asset''). For 
purposes

[[Page 49629]]

of FINRA Rule 11870, a nontransferable asset is any asset that is 
incapable of being transferred because it is: (i) an asset that is a 
proprietary product of the carrying member; \12\ (ii) an asset that is 
a product of a third party (e.g., mutual fund/money market fund) with 
which the receiving \13\ member does not maintain the relationship or 
arrangement necessary to receive/carry the asset for the customer's 
account; (iii) an asset that may not be received due to regulatory 
limitations on the scope of the receiving member's business; (iv) an 
asset that is a bankrupt issue for which the carrying member does not 
possess (which shall be deemed to include possession at a securities 
depository for the carrying member's account) the proper denominations 
or quantity of shares necessary to effect delivery and no transfer 
agent is available to re-register the shares; (v) an asset that is an 
issue for which the proper denominations cannot be obtained pursuant to 
governmental regulation or the issuance terms of the product (e.g., 
foreign securities, baby bonds, etc.); or (vi) limited partnership 
interests in retail accounts.\14\
---------------------------------------------------------------------------

    \12\ For purposes of Rule 50, a carrying member would be the 
Delivering Member.
    \13\ See Section 5 of Rule 50, supra note 5.
    \14\ See supra note 6.
---------------------------------------------------------------------------

    NSCC Rule 50 currently limits the type of assets that a Receiving 
Member may delete from the customer account asset data list in ACATS 
(the ``receiver delete functionality'') to ``MF/I&RS Products,'' \15\ 
which are comprised of Fund/SERV Eligible Fund assets \16\ and/or I&RS 
Eligible Products.\17\ As a result, certain customer assets that may 
also be deemed ``nontransferable assets'' under FINRA Rule 11870 are 
not currently included in the receiver delete functionality in ACATS 
and must be handled by a manual process outside of the automated ACATS 
system. For example, nontransferable alternative investment products 
that are the product of a third party, such as hedge funds, fund of 
funds, private equity, non-traded real estate investment trusts, and 
business development companies, may be submitted by the Delivering 
Member in the customer account asset list but cannot be removed using 
the receiver delete functionality in ACATS even though those products 
cannot be settled on an automated basis at one of the asset settling 
locations due to a lack of arrangements between the issuer of the 
product and the Receiving Member, which prevents such products from 
being held by at the Receiving Member. Instead, nontransferable 
alternative investment products included in an ACATS transfer generate 
a Receive and Deliver (``R&D'') ticket instructing firms to complete 
the transfer outside of the ACATS process. This generally involves the 
Delivering Member generating physical transfer paperwork and sending it 
to the Receiving Member, often via the Envelope Settlement Service 
(``ESS''),\18\ to deliver the asset. Some of these assets end up 
getting rejected by the Receiving Member because, for example, the 
necessary contracts are not in place with the issuer, or the asset is 
otherwise ineligible to be held in the receiving account. Depending on 
the operational structure of the firm, the manual process to return 
paperwork to the Delivering Member may involve multiple touchpoints and 
paperwork handoffs, resulting in processing delays.
---------------------------------------------------------------------------

    \15\ See Section 8 of Rule 50, supra note 5.
    \16\ Rule 1 defines the term ``Fund/SERV Eligible Fund'' to mean 
a fund or other pooled investment entity included in the list for 
which provision is made in Section 1.(c) of Rule 3, supra note 5.
    \17\ Rule 1 defines the term ``I&RS Eligible Product'' to mean 
an insurance product or a retirement or other benefit plan or 
program included in the list for which provision is made in Section 
1.(d) of Rule 3, supra note 5.
    \18\ ESS is a non-guaranteed service of NSCC that facilitates 
the processing and settlement of physical security deliveries and 
associated charges through the use of envelope deliveries. Under 
this service, physical certificates may be processed for delivery at 
specified NSCC locations through the use of sealed envelopes 
accompanied by appropriate documentation (which, among other items, 
identifies the security, the receiving Member and the money value 
(if any) associated with the delivery). See Rule 9, supra note 5.
---------------------------------------------------------------------------

(ii) Proposed Rule Change
    NSCC proposes to modify Rule 50 to allow ACATS to process deletions 
for any customer assets that are (i) deemed to be nontransferable 
assets under FINRA Rule 11870 and (ii) permitted by NSCC. Specifically, 
NSCC would effectuate the proposed change by revising two statements in 
Section 8 of Rule 50 concerning the deletion process to replace 
references to ``MF/I&RS Products'' with the phrase ``nontransferable 
assets as defined by the Receiving Member's DEA and as permitted by the 
Corporation.'' NSCC would also make non-substantive revisions to 
improve the clarity of Section 8 of Rule 50. Section 8 of Rule 50 
currently provides, in part, that ``[d]uring the one (1) Business Day 
time period, only the Delivering Member will be able to add, delete or 
change an item, provided that the Receiving Member did not accelerate 
the transfer . . . other than with respect to MF/I&RS Products, which 
can also be deleted by the Receiving Member'' (emphasis added). NSCC 
proposes to delete the word ``only'' because, as noted in the current 
and proposed rule, the Receiving Member may also utilize the receiver 
delete functionality for certain products within this one Business Day 
time period. NSCC would also replace the phrase ``other than with 
respect to MF/I&RS Products, which can also be deleted by the Receiving 
Member'' with ``however, the Receiving Member may delete 
nontransferable assets as defined by the Receiving Member's DEA and as 
permitted by the Corporation during the one (1) Business Day time 
period.'' NSCC believes these proposed changes would improve the 
clarity and readability of the Rule.
    NSCC would initially extend the receiver delete functionality to 
certain nontransferable alternative investment products that are the 
product of a third party, as discussed above. The proposed change would 
immediately address the need to delete alternative investment products 
directly within ACATS and provide necessary flexibility within NSCC's 
Rules to apply the receiver delete functionality to other 
nontransferable assets beyond MF/I&RS Products in the future.\19\ NSCC 
would maintain a list of nontransferable assets for which the receiver 
delete functionality is permitted and make the list available to its 
Members.\20\
---------------------------------------------------------------------------

    \19\ NSCC would issue an Important Notice to inform Members of 
any new products eligible for the receiver delete functionality in 
ACATS.
    \20\ NSCC would initially maintain this list in the ACATS User 
Guide, which is available through the DTCC Learning Center. See 
https://dtcclearning.com/products-and-services/equities-clearing/acats/acats-users.html.
---------------------------------------------------------------------------

    As discussed above, the ACATS service is intended to compliment 
FINRA Rule 11870 and provide timing and procedures for customer account 
transfers that are consistent with the timing and processes set forth 
in FINRA Rule 11870. NSCC Rule 50 currently limits the scope of assets 
that may be deleted from the customer account asset data list in ACATS 
to MF/I&RS Products, which prevents Members from processing the 
deletion of other nontransferable assets within the automated system. 
In the case of alternative investment products, this results in the 
need for manual and more lengthy processing of such assets through the 
R&D ticket process, which often involves generating physical transfer 
paperwork, the physical transmission of assets through ESS, and the 
ultimate rejection of nontransferable assets. Expanding the receiver 
delete functionality to additional nontransferable assets would reduce 
the cases in which transfer paperwork is mailed unnecessarily and 
enable the account owner to more immediately

[[Page 49630]]

ascertain the transfer status of such assets. The proposed rule change 
would therefore eliminate the manual burdens and delays associated with 
transfers and rejections under the current R&D ticket process and would 
generally result in the same outcome (i.e., rejection) for those 
assets. Moreover, the proposed rule change would allow NSCC to apply 
the receiver delete functionality to any future assets determined by 
FINRA to be nontransferable under FINRA Rule 11870. NSCC therefore 
believes that the proposed rule change is designed to further the goals 
of standardizing customer account transfer procedures, reducing 
operating costs, and accelerating the timing for transaction 
settlements in the customer account transfer process.
2. Statutory Basis
    NSCC believes that the proposed rule change is consistent with the 
requirements of the Act and the rules and regulations thereunder 
applicable to a registered clearing agency. Section 17A(b)(3)(F) of the 
Act \21\ requires, in part, that the rules of a clearing agency be 
designed to promote the prompt and accurate clearance and settlement of 
securities transactions. The proposed rule change would provide 
necessary flexibility within NSCC's Rules to expand the receiver delete 
functionality in ACATS to nontransferable assets beyond MF/I&RS 
Products. The proposed change would reduce the burdens and delays 
associated with nontransferable assets that fall within the current 
manual R&D ticket process and bring greater efficiency and expediency 
to the account transfer process for those products as set forth above. 
NSCC therefore believes the proposed rule change would promote the 
prompt and accurate clearance and settlement of securities 
transactions, consistent with the requirements of the Act, in 
particular Section 17A(b)(3)(F) of the Act.\22\
---------------------------------------------------------------------------

    \21\ 15 U.S.C. 78q-1(b)(3)(F).
    \22\ Id.
---------------------------------------------------------------------------

(B) Clearing Agency's Statement on Burden on Competition

    NSCC does not believe that the proposed rule change would have any 
impact, or impose any burden, on competition. The proposed changes 
would bring greater efficiency to the account transfer process by 
allowing ACATS participants to process deletions of additional 
nontransferable assets in an automated and expedited fashion. Allowing 
ACATS participants to process account transfers in a more efficient 
manner would result in client assets being transferred to the 
appropriate Members and DTC participants more quickly. NSCC does not 
believe that the proposed rule change would have any impact on 
competition or materially affect the rights or obligations of NSCC 
Members because they would apply to all ACATS participants equally and 
effectively result in the same outcome as under the current manual 
process performed today.

(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. If any written comments are received, they will be 
publicly filed as an Exhibit 2 to this filing, as required by Form 19b-
4 and the General Instructions thereto.
    Persons submitting comments are cautioned that, according to 
Section IV (Solicitation of Comments) of the Exhibit 1A in the General 
Instructions to Form 19b-4, the Commission does not edit personal 
identifying information from comment submissions. Commenters should 
submit only information that they wish to make available publicly, 
including their name, email address, and any other identifying 
information.
    All prospective commenters should follow the Commission's 
instructions on how to submit comments, available at https://www.sec.gov/regulatory-actions/how-to-submit-comments. General 
questions regarding the rule filing process or logistical questions 
regarding this filing should be directed to the Main Office of the 
Commission's Division of Trading and Markets at 
[email protected] or 202-551-5777.
    NSCC reserves the right not to respond to any comments received.

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) \23\ of the Act and paragraph (f) \24\ 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.
---------------------------------------------------------------------------

    \23\ 15 U.S.C. 78s(b)(3)(A).
    \24\ 17 CFR 240.19b-4(f).
---------------------------------------------------------------------------

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-2022-011 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-2022-011. 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. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NSCC-2022-011 and should be submitted on 
or before September 1, 2022.


[[Page 49631]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
---------------------------------------------------------------------------

    \25\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-17224 Filed 8-10-22; 8:45 am]
BILLING CODE 8011-01-P
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