Document ID: SEC-2008-1723-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: National Securities Clearing Corp.
Posted Date: 2008-12-29T05:00Z

[Federal Register: December 29, 2008 (Volume 73, Number 249)]
[Notices]               
[Page 79530-79531]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr29de08-103]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59105; File No. SR-NSCC-2008-08]

 
Self-Regulatory Organizations; National Securities Clearing 
Corporation; Notice of Filing of Proposed Rule Change to Amend Rules to 
Add an Agreement from Fund Members that Submit Mutual Fund Profile 
Information

December 16, 2008.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on September 30, 2008, 
National Securities Clearing Corporation (``NSCC'') filed with the 
Securities and Exchange Commission (``Commission'') proposed rule 
change File No. SR-NSCC-2008-08. The Commission is publishing this 
notice to solicit comments from interested parties on the proposed rule 
change as described in Items I, II, and III below, which items have 
been prepared primarily by the NSCC.\2\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ The exact text of the NSCC's proposed rule change can be 
found at http://www.dtcc.com/downloads/legal/rule_filings/2008/
nscc/2008-08.pdf.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NSCC is proposing to amend its rules to add an agreement that 
requires NSCC fund members to have taken reasonable steps to validate 
the accuracy of the data they submit to the Mutual Fund Profile Service 
database.

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

    In its filing with the Commission, the 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\
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    \3\ The Commission has modified portions of the text of the 
summaries prepared by the NSCC.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Mutual Fund Profile Service (``Profile'') is a central data 
source for comprehensive fund prospectus and operational information 
relating to mutual funds. The repository is a recognized industry 
standard for information critical to the distribution of mutual funds 
in the third-party market.
    Profile is organized into three databases: (1) Security Issue 
Database (containing information such as Security ID number, security 
name, fee structure, investment objectives, breakpoint schedule data, 
and blue sky eligibility); (2) Participant Database (containing contact 
information, NSCC processing capabilities and restrictions or 
requirements); and (3) Distribution Database (containing projected or 
actual distributions, capital gains and dividend amounts and details, 
and commission information). NSCC fund members input data regarding 
their mutual funds into the Security Issue and Participant Profile 
databases. Profile is then accessed by the NSCC members that are mutual 
fund distributors.
    NSCC has recently enhanced the Security Issue Database in Profile 
to include new data fields needed by distributors and to re-engineer 
the structure of the data hierarchy to be easier for fund members to 
populate their data. Some of the enhancements to the Profile database 
were initiated in response to a recommendation in the Report 
(``Report'') of The Joint NASD/Industry Task Force on Breakpoints 
(``Task Force'').\4\ NSCC has also adopted

[[Page 79531]]

measures to assist funds members in validating their data once it is in 
the Profile database by developing reports that note probable 
inconsistencies among related data fields, by arranging for free access 
by fund members to a vendor tool that verifies Profile data, and by 
reaching out to fund members in the form of personal contacts and an 
on-line web demonstration on populating data into the Profile database.
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    \4\ The Task Force was formed in 2003 by the National 
Association of Securities Dealers (``NASD'', now ``FINRA'') with the 
participation of major fund companies, broker-dealers, NSCC, the 
Securities Industries Association and the Investment Company 
Institute, in response to the NASD examination findings in which it 
was discovered that investors frequently failed to receive 
appropriate breakpoint discounts in front-end sales load mutual fund 
transactions. Recommendation (B) of the report stated that NSCC's 
Profile database should be expanded to include breakpoint 
aggregation terms and rules for all fund families and should include 
identification of both link-eligible products (for example, 
retirement plans, annuities, and insurance products and college 
savings plans with mutual fund holdings). The Report also noted that 
for this database to be effective, it must also be comprehensive. 
Accordingly, mutual funds must fully and accurately populate the 
database and must update the database on a timely basis.
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    Consistent with its efforts to expand Profile's capabilities as a 
comprehensive and accurate source for the mutual fund distribution 
industry, NSCC is now proposing to amend its rules to add an agreement 
that requires NSCC fund members to have taken reasonable steps to 
validate the accuracy of their data they submit to the Profile 
database. This agreement is not intended to be either a basis for 
independent legal rights against the fund member or is any third party 
intended or permitted to rely upon it as a representation to a third 
party or upon which a third-party can base any legal rights. NSCC 
requires similar agreements from its members elsewhere in its Rules and 
in its membership agreement, such as the agreement required of a fund 
member in Section 2 of Rule 51 to not submit a transaction through 
NSCC's Mutual Fund Services in contravention of any applicable 
regulatory requirements.
2. Statutory Basis
    NSCC believes the proposed rule change is consistent with the 
requirements of Section 17A of the Act, as amended,\5\ and the rules 
and regulations thereunder because the proposed rule change will 
promote the prompt and accurate clearance and settlement of securities 
transactions by modifying a NSCC service in order to reduce the 
inherent risks associated with securities certificates. Since NSCC's 
Profile database is widely used by mutual fund distributors in 
processing the distribution of mutual fund shares, the proposed rule 
change should facilitate the prompt and accurate clearance and 
settlement of securities transactions by assisting in the overall 
processing efficiency of mutual fund transactions and reducing 
processing difficulties resulting from incomplete or inaccurate 
information.
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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 impose 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

    NSCC has neither solicited nor received written comments on the 
proposed rule change.

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 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. 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 e-mail to rule-comments@sec.gov. Please include 
File Number SR-NSCC-2008-08 in the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-NSCC-2008-08. This file 
number should be included on the subject line if e-mail 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 inspection and 
copying in the Commission's Public Reference Section, 100 F Street, 
NE., Washington, DC 20549, on official business days between the hours 
of 10 a.m. and 3:30 p.m. Copies of such filings also will be available 
for inspection and copying at the principal office of NSCC and on 
NSCC's Web site, http://www.dtcc.com. 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-2008-08 and should be submitted on 
or before January 20, 2009.

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\6\
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    \6\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
 [FR Doc. E8-30783 Filed 12-24-08; 8:45 am]

BILLING CODE 8011-01-P