63278 Federal Register / Vol. 65, No. 205 / Monday, October 23, 2000 / Notices

17 17 CFR 200.30–3(a)(12).

1 15 U.S.C. 78s(b)(1).

2A copy of NSCC’s proposed rule change, the

attached exhibits, and amendments are available at

the Commission’s Public Reference Section and the

principal office of NSCC.

3The Commission has modified the text of the

summaries prepared by NSCC.

believes that the proposed rule change

will provide non-institutional

customers, who may have margin

accounts with NASD members, with a

better understanding of the operation of

a margin account and the risks

associated with margin trading.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

NASD Regulation does not believe

that the proposed rule change will result

in any burden on competition that is not

necessary or appropriate in furtherance

of the purposes of the Act.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants or Others

No written comments were solicited

or received with respect to the proposed

rule change.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Within 35 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 90 days of such date if it finds such

longer period to be appropriate and

publishes its reasons for so finding; or

(ii) as to which the self-regulatory

organization consents, the Commission

will:

A. By order approve such proposed

rule change, or

B. Institute proceedings to determine

whether the proposed rule change

should be disapproved.

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views, and

arguments concerning the foregoing,

including whether the proposed rule

change is consistent with the Act. The

Commission is specifically soliciting

comments on whether the proposed

disclosure is sufficient and nonmisleading, or whether changes to the

disclosure statement should be made.

For example, the Commission is

concerned that the proposed rule

language would not require NASD

member firms to disclose to customers

that any and all assets, including

securities or any other property the

customer has on account at the member

firm and any of its affiliates, whether

carried individually or jointly with

others, may, depending on the margin

agreement, be used by the broker-dealer

to satisfy a maintenance margin call.

Should broker-dealer disclose this fact?

Are other changes to the proposed

disclosure merited? Persons making

written submissions should file six

copies thereof with the Secretary,

Securities and Exchange Commission,

450 Fifth Street, NW., Washington, DC

20549–0609. Copies of the submission,

all subsequent amendments, all written

statements with respect to the proposed

rule change that are filed with the

Commission, and all written

communications relating to the

proposed rule change between the

Commission and any person, other than

those that may be withheld from the

public in accordance with the

provisions of 5 U.S.C. 552, will be

available for inspection and copying the

Commission’s Public Reference Room.

Copies of such filing will also be

available for inspection and copying at

the principal office of the NASD. All

submissions should refer to File No.

SR–NASD–00–55 and should be

submitted by November 13, 2000.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.17

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–27138 Filed 10–20–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43447; File No. SR–NSCC–

00–05]

Self-Regulatory Organizations;

National Securities Clearing

Corporation; Notice of Filing of

Proposed Rule Change Related to

Mutual Fund Services

October 16, 2000.

Pursuant to section 19(b)(1) of the

Securities Exchange Act of 1934

(‘‘Act’’),1 notice is hereby given that on

April 7, 2000, National Securities

Clearing Corporation (‘‘NSCC’’) filed

with the Securities and Exchange

Commission (‘‘Commission’’) the

proposed rule change and on April 19,

2000, and May 8, 2000, amended the

proposed rule change as described in

Items I, II, and III below, which items

have been prepared primarily by

NSCC.2 The Commission is publishing

this notice to solicit comments on the

proposed rule change from interested

parties.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The proposed rule change will modify

NSCC’s rules to permit additional types

of investment products to be processed

through NSCC’s Mutual Fund Services.

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission,

NSCC included statements concerning

the purpose of and basis for the

proposed rule change and discussed any

comments it received on the proposed

rule change. The text of these statements

may be examined at the places specified

in Item IV below. NSCC has prepared

summaries, set forth in sections (A), (B),

and (C) below, of the most significant

aspects of these statements.3

(A) Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

1. Purpose

NSCC participants who utilize

NSCC’s Defined Contribution Clearance

and Settlement Service of NSCC’s

Mutual Fund Services and who

recognize the value of processing

investment product transactions

through NSCC have requested that

NSCC permit additional types of

investment products regulated under

state insurance laws or federal or state

banking laws to be eligible for

processing through NSCC’s Mutual

Fund Services. Examples of ‘‘Investment

Funds’’ include stable value funds,

separate account group guaranteed

investment contracts (which are

regulated as group annuities), and

collective bank investment trust. Asset

classes of these types are typically

included in defined contribution

retirement plans and thus their

inclusion in Mutual Fund Services will

benefit third party administrator

(‘‘TPA’’) members and other

participants by standardizing their

processing of these Investment Funds in

the same manner as mutual funds are

now processed under NSCC’s mutual

fund services. Standardized processing

will permit defined contribution plan

administrators to provide Investment

Fund products to defined contribution

plan clients without the systems or

manual processing infrastructure and

related costs required by the current

processing methods.

Federal Register / Vol. 65, No. 205 / Monday, October 23, 2000 / Notices 63279

4Addendum D of NSCC’s Rules and Procedures.

5Letter from Harold H. Morley, Chairman and

Chief Executive Officer, Morley Financial Services,

Inc., to Jonathan Katz, Secretary, Commission (May

16, 2000); and from Joan K. Hall, Senior Vice

President and Director, Morley Financial Services,

Inc., to Secretary of the Commission, Commission

(August 18, 2000). 6 17 CFR 200.30–3(a)(12).

To accommodate their participants’

request, NSCC proposes to create a new

class of eligible securities, defined as

Investment Funds, that may be

processed through its mutual fund

services. This rule filing will permit

NSCC to: (1) Add such class of

securities to those currently eligible for

processing through mutual fund

services; (2) make corresponding

changes to the categories of entities

eligible to process these transactions

through the mutual fund services; (3)

establish standards of financial

responsibility and operational capability

for those participants wishing to process

such Investment Funds through NSCC’s

mutual fund services; and, (4) make

technical conforming changes to the

existing rules where necessary.

Investment Funds will be defined as

any fund or investment entity that is

subject to regulation under applicable

federal and state banking and/or

insurance laws. Investment Funds will

include such things as bank collective

investment trusts, separate account

guaranteed investment contracts, and

other similar pooled investment

vehicles. All Investment Fund products

will be subject to regulation under

federal or state banking laws or state

insurance laws. Only Investment Funds

that have been assigned a CUSIP

number would be eligible for processing

through NSCC’s mutual fund services.

For the purpose of processing

transaction in Investment Funds, NSCC

also proposes expanding the types of

entities that may qualify as a Fund

Member under Rule 51 of NSCC’s Rules

to permit insurance companies, banks,

and trust companies as packagers and

sponsors of such funds to apply to

become a Fund Member. As with other

entities seeking to become a Fund

Member, an insurance company, bank,

or trust company seeking to process

Investment Fund transaction through

NSCC’s Mutual Fund Services will be

required to enter into an agreement

setting forth its rights and obligations as

a Fund Member, including that it will

limit its use of NSCC’s services to use

of Mutual Fund Services (or Insurance

Processing Services, as the case may be),

comply with NSCC’s rules and

procedures, and permit NSCC to inspect

its books and records. Moreover, as with

all other transactions in Mutual Fund

Services, transactions involving

Investment Funds will not be

guaranteed by NSCC. As currently

provided in NSCC’s Rules, if one side

fails to pay for a transaction, the contra

side will be required to return to NSCC

any funds received from NSCC.4

Under the proposed rule change, Rule

2 of NSCC’s Rules and Procedures will

be amended to permit an insurance

company to become a mutual fund

member or insurance services member

in order to transmit Investment Fund

purchases, exchanges, and redemption

orders to a fund member and engage in

other customer-related transactions with

a fund member. In addition to the

standards set forth in Addenda B and I

of NSCC’s Rules currently applicable to

mutual fund and insurance services

members and fund members

respectively, entities seeking to process

Investment Fund transactions through

Mutual Fund Services would be

required to meet the rating and capital

requirements set forth in new

Addendum V, Financial Standards for

Applicants and Participants Processing

Investment Funds Transactions Through

Mutual Fund Services, of NSCC’s Rules.

2. Statutory Basis

Since NSCC is proposing to make a

new category of securities eligible for

mutual fund services processing, the

proposed rule change will also make

technical conforming changes to certain

existing rules in order to include a

reference to Investment Funds as

applicable.

NSCC believes the proposed rule

change is consistent with Section 17A of

the Act because it will make a new class

of securities eligible for processing

through NSCC’s mutual fund services

and thereby should facilitate the prompt

and accurate clearance and settlement of

these transactions.

(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

The Commission received one

comment letter which was subsequently

withdrawn by the commenter.5

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Within 35 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

90 days of such date if it finds such

longer period to be appropriate and

publishes its reasons for so finding or

(ii) as to which the self-regulatory

organization consents, the Commission

will:

(A) By order approve such proposed

rule change, or

(B) Institute proceedings to determine

whether the proposed rule change

should be disapproved.

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views, and

arguments concerning the foregoing,

including whether the proposed rule

change is consistent with the Act.

Persons making written submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, NW.,

Washington, DC 20549–0609. Copies of

the submission, all subsequent

amendments, all written statements

with respect to the proposed rule

change that are filed with the

Commission, and all written

communications relating to the

proposed rule change between the

Commission and any person, other than

those that may be withheld from the

public in accordance with the

provisions of 5 U.S.C. 552, will be

available for inspection and copying in

the Commission’s Public Reference

Section, 450 Fifth Street, NW.,

Washington, DC 20549. Copies of such

filing also will be available for

inspection and copying at the principal

office of NSCC.

All submissions should refer to File

No. SR–NSCC–00–05 and should be

submitted by November 13, 2000.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.6

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–27137 Filed 10–20–00; 8:45 am]

BILLING CODE 8010–01–M