[Federal Register Volume 62, Number 240 (Monday, December 15, 1997)]
[Notices]
[Pages 65728-65729]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-32654]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-39416; File No. SR-NSCC-97-10]


Self-Regulatory Organizations; National Securities Clearing 
Corporation; Notice of Filing of a Proposed Rule Change Establishing a 
New Category of Fund Member for Investment Advisers in Mutual Fund 
Services

December 9, 1997.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on August 25, 1997, the 
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 primarily by NSCC. 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).
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The proposed rule will establish a new category of fund member in 
NSCC's mutual fund services (``MFS'') for registered investment 
advisers.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, NSCC included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. NSCC has prepared summaries, set forth in sections (A), 
(B), and (C) below, of the most significant aspects of such 
statements.\2\
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    \2\ The Commission has modified parts of these statements.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    NSCC's MFS is designed to enable NSCC members to process and to 
settle on an automated basis mutual fund purchase and redemption orders 
and to transmit registration instructions. Currently, NSCC's rules and 
procedures permit two categories of fund member in MFS: (1) principal 
underwriters

[[Page 65729]]

which are registered broker-dealers under the Act and (2) investment 
companies which are registered under the Investment Company Act of 
1940.\3\
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    \3\ See NSCC Rule 51, Section 1 (``Fund Member'') and Procedure 
Addendum I(B)(2) (``Standards of Financial Responsibility and 
Operational Capability for Fund Members'').
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    Although mutual funds which have no broker-dealer distributor may 
join MFS as individual fund members, it can be a cumbersome and 
inefficient process. For example, families of these self-distributed no 
load funds currently may only join MFS through each of their separate 
investment companies. To take full advantage of the benefits of a 
single membership, such as net settlement, reduced costs, operational 
efficiencies, and oversight by a single board of directors, these funds 
prefer to join MFS through an investment adviser.
    The proposed rule change will expand the fund member category to 
include registered investment advisers as defined in Section 202(a)(11) 
of the Investment Advisers Act of 1940. To be eligible for membership 
in MFS, a nonguaranteed service of NSCC, investment advisers will need 
to be registered with the Commission and to have a minimum of $25 
million in assets under management and $100,000 in total net worth.
    In addition, the proposed rule change will make a technical 
amendment to conform NSCC's procedures with its rules. Specifically, 
Procedure Addendum I(B)(2) sets forth the standards of financial 
responsibility and operational capability for the investment company 
fund member applicant. Because the list of eligible fund members 
contained in Rule 51 inadvertently omits investment companies, Rule 51 
Section 1 will be amended to include this existing category of fund 
member.\4\
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    \4\ Investment companies were permitted to join MFS as fund 
member pursuant to a rule change filing approved by the Commission. 
Securities Exchange Act Release No. 33525 (January 26, 1994), 59 FR 
4759.
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    NSCC believes that the proposed rule change is consistent with 
Section 17A of the Act and the rules and regulations promulgated 
thereunder because it will facilitate the prompt and accurate clearance 
and settlement of securities transactions and will protect investors 
and the public interest.\5\
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    \5\ 15 U.S.C. 78q-1.
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(B) Self-Regulatory Organization's Statement on Burden on Competition

    NSCC does not believe that the proposed rule change will have an 
impact on or impose a burden on competition.

(C) Self--Regulatory Organization's Statement on Comments on the 
Proposed Rule Change Received From Members, Participants, or Others

    No written comments relating to the proposed rule change have been 
solicited or received. NSCC will notify the Commission of any written 
comments received by NSCC.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within thirty-five days of the date of publication of this notice 
in the Federal Register or within such longer period (i) as the 
Commission may designate up to ninety days of such date if it finds 
such longer period to be appropriate and publishes its reason for so 
finding or (ii) as to which NSCC consents, the Commission will:
    (A) by order approve such rule filing
    (B) institute proceedings to determine whether the rule filing 
should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street N.W., Washington, D.C. 20549. 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the rule filing that are filed with the 
Commission, and all written communications relating to the rule filing 
between the Commission and any person, other than those that may be 
withheld from the public in accordance with provisions of 5 U.S.C. 552, 
will be available for inspection and copying in the Commission's Public 
Reference Room in Washington, D.C. Copies of such filing will also be 
available for inspection and copying at the principal office of NSCC. 
All submissions should refer to the File No. SR-NSCC-97-10 and should 
be submitted by January 5, 1998.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\6\
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    \6\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-32654 Filed 12-12-97; 8:45 am]
BILLING CODE 8010-01-M