Document ID: SEC-2014-1267-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: National Securities Clearing Corp.
Posted Date: 2014-07-29T04:00Z

[Federal Register Volume 79, Number 145 (Tuesday, July 29, 2014)]
[Notices]
[Pages 44079-44080]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-17772]

[[Page 44079]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72657; File No. SR-NSCC-2014-07]

Self-Regulatory Organizations; National Securities Clearing 
Corporation; Order Approving Proposed Rule Change To Implement a New 
Scorecard Feature to the Mutual Fund Profile Service

July 23, 2014.
    On May 30, 2014, National Securities Clearing Corporation 
(``NSCC'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change SR-NSCC-2014-07 pursuant to 
Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ 
and Rule 19b-4 thereunder.\2\ The proposed rule change was published 
for comment in the Federal Register on June 12, 2014.\3\ The Commission 
did not receive any comments on the proposed rule change. This order 
approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 72344 (June 6, 2014), 79 
FR 33793 (June 12, 2014) (SR-NSCC-2014-07) (``Notice'').
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I. Description

    NSCC is adding a section to Rule 52.D of its Rules & Procedures \4\ 
to implement a new scorecard feature to its Mutual Fund Profile Service 
(``MFPS''). The purpose of the new scorecard feature is to encourage 
more reliable data in MFPS.
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    \4\ Rule 52.D is titled, ``Mutual Fund Profile Services.''
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    MFPS is a data repository that provides members with a way of 
transmitting and receiving information about funds and other pooled 
investment vehicles (``Funds'').\5\ MFPS includes a database, the 
``security issue profile database,'' which contains Fund information, 
including, security ID number, security name, fee structure, investment 
objectives, breakpoint schedule data, and blue sky eligibility 
(collectively, ``Security Issue Data'').\6\ Generally, Fund members 
populate the database (``Data Providers'') \7\ and the Funds' 
distribution partners receive and use the information in the database 
(``Data Receivers'').
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    \5\ See Securities Exchange Act Release No. 37171 (May 8, 1996), 
61 FR 24343 (May 14, 1996) (SR-NSCC-96-04) (establishing MFPS); 
Securities Exchange Act Release No. 40614 (October 28, 1998), 63 FR 
59615 (November 4, 1998) (SR-NSCC-98-09) (increasing the information 
available on MFPS); Securities Exchange Act Release No. 59321 
(January 30, 2009), 74 FR 6933 (February 11, 2009) (SR-NSCC-2008-08) 
(adding an agreement that requires fund members to have taken 
reasonable steps to validate the accuracy of the data they submit to 
the MFPS).
    \6\ See Notice, supra note 3, 79 FR at 33793.
    \7\ Data Providers also include a Fund's principal underwriter 
or other entities authorized to process transactions on behalf of 
the Funds.
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    Over the last several months, Data Receivers have expressed concern 
to NSCC that the Security Issue Data appears to be unreliable because 
of certain discrepancies. For example, the Security Issue Data does not 
always match information in the Data Providers' public filings. As a 
result, Data Receivers requested that NSCC implement a mechanism to 
encourage Data Providers to provide more reliable Security Issue Data.
    To respond to these concerns and encourage Data Providers to 
provide more reliable data, NSCC is amending Rule 52.D of its Rules & 
Procedures \8\ to implement a new scorecard feature to MFPS. NSCC will 
score each Data Provider based on the types and number of discrepancies 
between MFPS data and other information, such as, for example, the Data 
Provider's public filings (``Discrepancies''). NSCC will share this 
score with both the Data Providers and Data Receivers through a 
scorecard, which NSCC will distribute regularly.
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    \8\ Rule 52.D is titled ``Mutual Fund Profile Services.''
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    NSCC will score Data Providers in the following ways. NSCC will 
issue a perfect score to a Data Provider who either has no 
Discrepancies or who addressed all of its Discrepancies and will reduce 
a score if a Data Provider fails to take action on its Discrepancies. 
NSCC will regularly recalculate both the Data Providers' score as well 
as an industry average score as new Discrepancies are identified or 
addressed.
    Scorecards distributed to Data Providers will contain: (i) The Data 
Provider's score; (ii) the Data Provider's number of Discrepancies by 
category; and (iii) the combined average score of all Data Providers. 
Data Providers will not see individual, numerical scores issued to 
other Data Providers nor other Data Providers' Discrepancies.
    Scorecards distributed to Data Receivers will contain: (i) Each 
Data Provider's score; (ii) each Data Provider's number of 
Discrepancies by category; and (iii) the combined average score of all 
Data Providers.
    NSCC's rule will provide that NSCC makes no representation or 
warranty with respect to the value or usefulness of any score or 
scorecard, nor will NSCC be subject to any damages or liabilities 
whatsoever with respect to any person's use of or reliance upon any 
score or scorecard. According to NSCC, it is including this information 
because the scores are based solely on action or inaction of Data 
Providers.\9\
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    \9\ See Notice, supra note 3, 79 FR at 33793-4.
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    In addition, NSCC's rule will state that all information contained 
in the scorecards is copyrighted and any form of copying, other than 
for each NSCC member's personal reference, without the express written 
permission of NSCC, is prohibited, and further distribution or 
redistribution of the scorecard or any information contained therein by 
any means or in any manner is strictly prohibited. According to NSCC, 
it is including the information because the scorecards are intended 
solely for members' use and are not intended to be made public.\10\
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    \10\ See Notice, supra note 3, 79 FR at 33794.
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II. Discussion

    Section 19(b)(2)(C) of the Act \11\ directs the Commission to 
approve a proposed rule change of a self-regulatory organization if it 
finds that the proposed rule change is consistent with the requirements 
of the Act and the rules and regulations thereunder applicable to such 
organization.
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    \11\ 15 U.S.C. 78s(b)(2)(C).
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    The Commission finds that the proposed rule change is consistent 
with Section 17A(b)(3)(F) of the Act,\12\ which requires that the rules 
of a clearing agency be designed to, in part, foster cooperation and 
coordination with persons engaged in the clearance and settlement of 
securities transactions. NSCC's proposed rule is designed to foster 
cooperation and coordination with persons engaged in the clearance and 
settlement of securities transactions because it is designed to 
encourage reliable and accurate data about securities.
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    \12\ 15 U.S.C. 78q-1(b)(3)(F).
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III. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposal is consistent with the requirements of the Act and in 
particular with the requirements of Section 17A of the Act \13\ and the 
rules and regulations thereunder.
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    \13\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
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    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change (SR-NSCC-2014-07) be, and it hereby is, 
approved.

[[Page 44080]]

For the Commission, by the Division of Trading and Markets, pursuant 
to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-17772 Filed 7-28-14; 8:45 am]
BILLING CODE 8011-01-P