Document ID: SEC-2011-0484-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: National Securities Clearing Corp.
Posted Date: 2011-04-12T04:00Z

[Federal Register Volume 76, Number 70 (Tuesday, April 12, 2011)]
[Notices]
[Pages 20425-20426]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-8585]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64196; File No. SR-NSCC-2010-15]

Self-Regulatory Organizations; National Securities Clearing 
Corporation; Order Approving Proposed Rule Change Relating to 
Establishing an Automated Service for the Processing of Transfers, 
Replacements, and Exchanges of Insurance and Retirement Products

April 6, 2011.

I. Introduction

    On November 18, 2010, the National Securities Clearing Corporation 
(``NSCC'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change pursuant to Section 19(b)(1) 
of the Securities Exchange Act of 1934 (the ``Act'').\1\ The proposed 
rule change allows NSCC to add a new automated service to process 
transfers, replacements, and exchanges of insurance and retirement 
products through NSCC's Insurance and Retirement Processing Service 
(``IPS''). The proposed rule change was published for comment in the 
Federal

[[Page 20426]]

Register on November 30, 2010.\2\ No comment letters were received. 
This order approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ Securities Exchange Act Release No. 63368 (Nov. 23, 2010), 
75 FR 74117.
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II. Description of the Proposal

    The proposed rule change will enable NSCC to offer a new automated 
service for the transfer, replacement, or exchange (collectively 
referred to as a ``Replacement'') of an existing insurance contract 
that is eligible for NSCC's IPS. Specifically, NSCC will add new 
Section 11 to Rule 57 (Insurance and Retirement Processing Services) 
that will centralize and automate Replacement processing and will 
decrease the administrative burden on and risk to NSCC Members, 
Insurance Carrier/Retirement Service Members, Mutual Fund/Insurance 
Services Members, and Data Services Only Members. Prior to this rule 
change, the Replacement process was not conducted through a centralized 
or automated process and requires extensive manual processing of paper 
forms and other documents. The insurance industry utilized Transfer of 
Assets forms, 1035 Exchange Forms, or other similar paperwork 
(collectively referred to as ``TOA'') to document the request and the 
authorization for a Replacement.
    Under the new service, an Insurance Carrier/Retirement Services 
Member will be able to initiate a Replacement (``Receiving Carrier'') 
by submitting an instruction to NSCC to process a Replacement 
(``Request for Replacement''). NSCC will then transmit the Request for 
Replacement to the designated Insurance Carrier/Retirement Services 
Member (``Delivering Carrier''). The Delivery Member will have to 
confirm, reject, or request modification to the Request for Replacement 
in the format and by such time as established by NSCC. NSCC will delete 
from the IPS Requests for Replacement that are not confirmed or 
rejected. The IPS will also incorporate and will automate the 
settlement of confirmed Replacements into NSCC's existing IPS 
settlement process.
    Also under the new Section 11, the Delivering Carrier will waive 
the obligation of the Receiving Carrier to submit a signed physical 
copy of the TOA unless specifically required by state or local law. The 
transfer of any physical documents related to Replacements that are 
required under state law would continue to be transferred outside of 
NSCC. It will be the sole obligation of the Insurance Carrier/
Retirement Services Members involved in the Replacement to confirm that 
all legal requirements, including any requirement to obtain a signed 
physical copy of the TOA imposed by applicable State or local law, are 
satisfied prior to confirming a Request for Replacement. The 
Replacement service will permit the transfer of documentation as an 
attachment to the Request for Replacement but this will not be a 
requirement to utilize the Replacement service. The waiver of the 
obligation to submit signed physical documents is intended to improve 
the orderly processing of Replacements.
    Finally, NSCC will update the Fee Schedule to incorporate the fees 
associated with processing a Request for Replacement. The fee 
associated with a Request for Replacement, including submitting 
incremental replacement status messages and money settlement, will be 
$5.00 per Request for Replacement. The cost will be divided between the 
carriers associated with the transaction with the Receiving Carrier 
responsible for $3.75 per transaction, which is three-fourths of the 
cost of the Replacement service, and the Delivering Carrier responsible 
for the remaining $1.25, which is one-fourth of the cost. The fee 
associated with obtaining the status of a pending Request for 
Replacement, including incremental statuses, will be $1.00 per pending 
status request. The cost will be divided evenly between the Receiving 
Carrier and the Distributor, each of which will be responsible for 
paying a fee of $0.50.
    Members will be advised of the specific implementation date through 
the issuance of an NSCC Important Notice.

III. Discussion

    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules thereunder applicable to 
NSCC. In particular, the Commission finds that the proposal is 
consistent with Section 17A(b)(3)(F) of the Act,\3\ which requires, 
among other things, that the rules of a registered clearing agency are 
designed to promote the prompt and accurate clearance and settlement of 
securities transactions. NSCC's new Replacement service is designed to 
process Replacements in a more timely and efficient manner by reducing 
manual errors, lowering costs, and providing a uniform platform for 
Replacements processing. In addition, the new service should increase 
the speed of processing Replacements through the use of automation, 
which should also decrease NSCC's operational risk posed by processing 
paper documentation. Accordingly, NSCC's proposal should promote the 
prompt and accurate clearance and settlement of securities 
transactions.
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    \3\ 15 U.S.C. 78q-1(b)(3)(F).
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IV. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposed rule change is consistent with the requirements of the Act and 
in particular Section 17A of the Act \4\ and the rules and regulations 
thereunder.
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    \4\ 15 U.S.C. 78q-1.
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\5\ that the proposed rule change (File No. SR-NSCC-2010-15) be and 
hereby is approved.\6\
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    \5\ 15 U.S.C. 78s(b)(2).
    \6\ In approving the proposed rule change, the Commission 
considered the proposal's impact on efficiency, competition and 
capital formation. 15 U.S.C. 78c(f).

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-8585 Filed 4-11-11; 8:45 am]
BILLING CODE 8011-01-P