Document ID: SEC-2017-0597-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: National Securities Clearing Corp.
Posted Date: 2017-04-13T04:00Z

[Federal Register Volume 82, Number 70 (Thursday, April 13, 2017)]
[Notices]
[Pages 17916-17919]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-07459]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80404; File No. SR-NSCC-2017-003]

Self-Regulatory Organizations; National Securities Clearing 
Corporation; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change To Provide for a New Data Repository Feature Called 
``Insurance Profile'' for Transmission of Fee Data and Implement Fees 
in Connection With This Feature

April 7, 2017.
    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 March 31, 2017, 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

[[Page 17917]]

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.
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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)(2).
    \5\ 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 would amend NSCC's Rules & Procedures 
(``Rules'') to broaden the scope of the Insurance & Retirement 
Processing Services (``I&RS''). The proposed rule change would enhance 
existing I&RS services to provide for a new data repository feature 
called ``Insurance Profile'' for transmission of data relating to fees, 
expenses, and Commissions (``Fee Data'') and implement fees associated 
with this proposed feature.\6\
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    \6\ Capitalized terms not defined herein are defined in the 
Rules, available at http://www.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
    NSCC is proposing to provide certain NSCC Members (as defined 
below) with a centralized, automated and standardized data repository 
to transmit and receive Fee Data relating to IPS Eligible Products.\7\ 
Such NSCC Members would include (i) insurance companies that are 
Insurance Carrier/Retirement Services Members (``Carriers''); and (ii) 
Carriers' intermediaries, such as broker-dealers, banks and insurance 
agencies, that are Members, Mutual Fund/Insurance Services Members and 
Data Services Only Members that distribute participating Carriers' 
insurance products (collectively, Distributors,'' and, together with 
``Carriers,'' collectively referred to herein as ``NSCC Members'').
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    \7\ An ``IPS Eligible Product'' is defined in the Rules and 
includes such insurance products, retirement or other benefit plans, 
or programs that are identified by NSCC as eligible for processing 
through its I&RS. See Rule 1, supra note 6.
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(i) Background
    On April 6, 2016, the U.S. Department of Labor (``DOL'') issued new 
regulations (collectively, ``DOL Fiduciary Rule'') regarding conflicts 
of interest in retirement investment advice.\8\ The DOL Fiduciary Rule 
generally expands the type of investment advice that is subject to 
fiduciary standards under the Employee Retirement Income Security Act 
of 1974 (``ERISA'').\9\ Generally, under the new DOL Fiduciary Rule, 
advisors subject to fiduciary standards will be limited in receiving 
certain compensation for providing investment advice. In connection 
with the DOL Fiduciary Rule, the DOL also introduced a new exemption 
and modified existing exemptions to allow institutions to engage in 
certain compensation and fee practices that might otherwise violate 
fiduciary standards under ERISA rules if the institutions meet, among 
other things, certain disclosure requirements relating to Fee Data. To 
satisfy the disclosure requirements, Distributors will need to disclose 
to their customers to whom the Distributors provide covered investment 
advice certain Fee Data that is generated by Carriers. For example, 
Distributors may need to disclose certain direct Carrier fees and 
expenses, such as management fees, surrender charge rates, and standard 
commission schedule data (``Commission Schedule Data''),\10\ and 
certain indirect Carrier fees and expenses, such as third-party 
payments, revenue sharing, and marketing allowances.
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    \8\ See Definition of the Term ``Fiduciary''; Conflict of 
Interest Rule--Retirement Investment Advice, 29 CFR 2509, 2510, and 
2550 (2016).
    \9\ Public Law 93-406, 88 Stat. 829 (codified in part as amended 
at 29 U.S.C. 1001-1461 (1982)). On March 2, 2017, the DOL published 
a proposal that would extend the April 10, 2017 applicability date 
of the DOL Fiduciary Rule by 60 days. See Department of Labor, 
Definition of the Term ``Fiduciary''; Conflict of Interest Rule--
Retirement Investment Advice; Best Interest Contract Exemption 
((Prohibited Transaction Exemption 2016-01); Class Exemption for 
Principal Transactions in Certain Assets Between Investment Advice 
Fiduciaries and Employee Benefit Plans and IRAs (Prohibited 
Transaction Exemption 2016-02); Prohibited Transaction Exemptions 
75-1, 77-4, 80-83, 83-1, 84-24 and 86-128,'' Proposed Rule, 82. FR 
12319, (March 2, 2017), available at https://www.gpo.gov/fdsys/pkg/FR-2017-03-02/pdf/2017-04096.pdf.
    \10\ Carriers publish schedules that list commission rates for 
products that Distributors earn upon the sale of the products. For 
example, a Carrier may provide that for the sale of a certain whole 
life policy, the Distributors will earn a commission of 100 percent 
of the premium for the first year. Carriers set the rates and then 
publish this data periodically. Those rates are then reviewed and 
approved by state regulatory authorities.
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    Although I&RS currently provides communication links that connect 
participating Carriers and Distributors, these existing links do not 
provide Carriers with an efficient and centralized method to transmit 
Fee Data to Distributors. Through the existing links, Distributors 
would need to search for and retrieve information from multiple 
Carriers, and Carriers would need to respond to information requests 
from multiple Distributors, regarding the same IPS Eligible Products. 
In addition, Carriers would need to use multiple I&RS links to transmit 
all of the Fee Data required by the DOL Fiduciary Rule. As a result, 
such Fee Data would be transferred in different formats, depending on 
the method used to transmit the Fee Data. Further, in order to retrieve 
the Fee Data, Distributors would need to extract the Fee Data from 
multiple file types for each IPS Eligible Product.
    Therefore, NSCC developed the Insurance Profile functionality at 
the request of and in consultation with industry participants. The 
proposed Insurance Profile functionality would provide Carriers and 
Distributors with a secure, centralized portal to allow Carriers to 
place all of the requested Fee Data for each IPS Eligible Product into 
a new data repository in a standardized data format. In this regard, 
the Insurance Profile repository would enable Carriers to submit, and 
Distributors to retrieve, Fee Data relating to IPS Eligible Products in 
one centralized location. Having the Fee Data in a centralized 
repository would streamline the Fee Data transfer and retrieval process 
for Carriers and Distributors, and it would avoid the need to send and 
retrieve Fee Data to and from various sources and in different formats.
(ii) Proposed Rule Changes
    NSCC proposes to enhance existing I&RS services to create a new 
feature within I&RS, called Insurance Profile, that would enable 
Carriers to transmit Fee Data to Distributors, or to otherwise supply 
and provide access to Fee Data using a centralized repository.\11\ 
Insurance Profile would be an optional feature, and users would have 
access to

[[Page 17918]]

the repository through either a full data subscription (``Full Data 
Subscription'') or a limited data subscription (``Limited Data 
Subscription''). The Full Data Subscription would allow for multiple 
intraday loading, storage, and transmission of all available Fee Data 
in the data repository. A Limited Data Subscription would allow for 
multiple intraday loading, storage, and transmission of either (i) 
Commission Schedule Data, or (ii) all Fee Data other than Commission 
Schedule Data, at the user's choice. In addition, Distributors would 
have the ability to access the repository with a ``User Web Interface 
Only'' subscription. The User Web Interface Only subscription would 
allow Distributors to view and download Fee Data but would not include 
the ability to load, store, and transmit Fee Data using the data 
repository.\12\
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    \11\ Rule 57 generally provides that NSCC will not be 
responsible for the completeness or accuracy of any data transmitted 
between NSCC Members through I&RS, nor for any errors, omissions or 
delays which may occur in the absence of gross negligence on NSCC's 
part, in the transmission of such data between NSCC Members. See 
Rule 57, Section 1(j), supra note 6. The proposed changes to Rule 57 
would be subject to these limitations.
    \12\ Because Carriers would use the repository to load, 
transmit, and store Fee Data, Carriers would not have the option to 
subscribe to the User Web Interface Only, which only allows users to 
view and download Fee Data.
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    NSCC Members would be provided with access to the repository based 
on their subscription type and in order to permit them to carry out 
their respective roles in the distribution of Fee Data. For example, 
Distributors subscribing to the User Web Interface Only subscription 
will only be able to download through web-based portal file downloads, 
while all other users would be able to download using mainframe-based 
file downloads. The file downloads would be functionally equivalent 
whether through mainframe-based file downloads or web-based portal file 
downloads, however, the mainframe-based file downloads would permit the 
downloading of more data at one time as compared to web-based portal 
file downloads.
    NSCC also proposes to amend Addendum A of the Rules to include the 
fees for subscription to the Insurance Profile feature. The proposed 
fees would depend on whether the user has subscribed to a Full Data 
Subscription, a Limited Data Subscription, or a User Web Interface Only 
subscription. For a subscription that is not a User Web Interface Only 
Subscription, NSCC would charge (i) $3,000 per month for a Full Data 
Subscription; and (ii) $1,500 per month for a Limited Data 
Subscription. For a User Web Interface Only Subscription, NSCC would 
charge Distributors (i) $500 per month, plus a $1.25 per CUSIP download 
transaction charge for a Full Data Subscription; and (ii) $250 per 
month, plus a $1.25 per CUSIP download transaction charge for a Limited 
Data Subscription.
    In addition, because the Fee Data being placed in Insurance Profile 
is intended to be used to satisfy disclosure requirements and is not 
intended to be used to commercialize the Fee Data retrieved therefrom, 
the proposed rule change would make it clear that users may not use, 
distribute, transmit, or otherwise make available Fee Data retrieved 
from Insurance Profile as the basis for or as a part of a data product 
or service offered for commercial gain to any other person without the 
prior written consent of NSCC.
2. Statutory Basis
    Section 17A(b)(3)(F) of the Act \13\ 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 NSCC Members' ability to access and 
retrieve Fee Data information in a standardized and automated format 
and in a secure, centralized location. By streamlining the ability of 
NSCC Members to transmit and retrieve Fee Data between each other, NSCC 
believes that the proposed rule change would foster cooperation and 
coordination with NSCC Members engaged in the clearance and settlement 
of securities, consistent with the requirements of Section 17A(b)(3)(F) 
of the Act.\14\
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    \13\ 15 U.S.C. 78q-1(b)(3)(F).
    \14\ Id.
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    Section 17A(b)(3)(D) of the Act \15\ 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 align with the cost of delivering the 
proposed Insurance Profile feature to NSCC Members, and such fees would 
be allocated equitably among the NSCC Members that subscribe for 
Insurance Profile. Therefore, by establishing fees that align with the 
cost of delivery of this feature and allocating those fees equitably 
among the subscribing NSCC Members, 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.\16\
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    \15\ 15 U.S.C. 78q-1(b)(3)(D).
    \16\ 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 function to NSCC's services 
that would provide a more efficient method by which subscribing 
Carriers and Distributors may transmit and receive Fee Data. Therefore, 
as an optional feature available for subscription, the proposed rule 
change would not disproportionally impact any NSCC Members.
    Moreover, because the proposed rule change would improve the 
efficiency by which subscribing NSCC Members may transmit Fee Data and 
satisfy their disclosure requirements, the proposed rule change may 
have a positive effect on competition among Carriers and Distributors. 
The proposed feature would provide these firms with a faster, more 
streamlined method of transmitting and receiving Fee Data, and 
therefore would enable IPS Eligible Products to be marketed more 
quickly. Specifically, Distributors would have the ability to 
distribute IPS Eligible Products into the market to consumers more 
quickly because Distributors would have the ability to satisfy their 
Fee Data disclosure requirements with respect to such IPS Eligible 
Products on a timely basis using the proposed Insurance Profile.

(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 
it receives.

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) \17\ of the Act and subparagraphs (f)(2) \18\ and (f)(4) 
\19\ 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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    \17\ 15 U.S.C 78s(b)(3)(A).
    \18\ 17 CFR 240.19b-4(f)(2).
    \19\ 17 CFR 240.19b-4(f)(4).

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[[Page 17919]]

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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NSCC-2017-003 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-2017-003. 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 Web site (http://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 Web site 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 Web site (http://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-2017-003 and should be 
submitted on or before May 4, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-07459 Filed 4-12-17; 8:45 am]
 BILLING CODE 8011-01-P