Document ID: SEC-2006-1128-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: National Securities Clearing Corp.
Posted Date: 2006-09-01T04:00Z

[Federal Register: September 1, 2006 (Volume 71, Number 170)]
[Notices]               
[Page 52199-52201]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr01se06-96]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54366; File No. SR-NSCC-2006-07]

 
Self-Regulatory Organizations; National Securities Clearing 
Corporation; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change Relating To Clarifying and Technical Changes to NSCC's 
Rules Regarding Its Fund/Serv Mutual Fund Processing System

 August 25, 2006.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on June 5, 2006, the National 
Securities Clearing Corporation (``NSCC'') filed with the Securities 
and Exchange Commission (``Commission'') the proposed rule change 
described in Items I, II, and III below, which items have been prepared 
primarily by NSCC. NSCC filed the proposed rule change pursuant to 
Section 19(b)(3)(A)(iii) of the Act \2\ and Rule 19b-4(f)(4) thereunder 
\3\ so that the proposal was effective upon filing with the Commission. 
The Commission is publishing this notice to solicit comments on the 
proposed rule change from interested parties.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \3\ 17 CFR 240.19b–4(f)(4).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The proposed rule change would make clarifying and technical 
changes to NSCC's Rules principally as they relate to funds which are 
eligible for processing on Fund/Serv, NSCC's mutual fund processing 
system.

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.\4\
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    \4\ The Commission has modified the text of the summaries 
prepared by NSCC.

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[[Page 52200]]

(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    The purpose of the proposed rule change is to make clarifying and 
technical changes to NSCC's Rules, principally as they relate to funds 
which are eligible for processing on Fund/Serv, NSCC's mutual fund 
processing system.
    Rule 52 of NSCC Rules addresses NSCC's mutual fund services. The 
types of funds which are eligible for NSCC's mutual fund services, 
including the processing on Fund/Serv, are referenced in Section 1 of 
Rule 52 with supplemental references in Rules 1 and 3.\5\
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    \5\ Settlement of Fund/Serv transactions is not guaranteed by 
NSCC.
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    Funds that are eligible for NSCC's mutual fund services currently 
include investment companies regulated under the Investment Company Act 
of 1940, as amended; \6\ bank and insurance funds such as guaranteed 
investment contracts, bank collective investments, and stable value 
funds; and certain offshore funds which are established under 
regulatory frameworks similar to the Investment Company Act (e.g., 
offshore funds established under the Undertaking for Collective 
Investment in Transferable Securities). Some of these fund types are 
explicitly mentioned in NSCC's Rules (e.g., funds defined as 
``management companies'' under section 4(3) of the Investment Company 
Act and funds regulated under bank and insurance law). Others have been 
added under NSCC's general authority regarding the designation of 
``Eligible Mutual Funds'' under Rule 3, Section 7 (e.g., unit 
investment trusts regulated under the Investment Company Act and 
certain offshore funds domiciled outside the United States.)
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    \6\ 15 U.S.C. 80a.
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    The proposed changes to NSCC's Rules will clarify the types of 
investment vehicles that are eligible for Fund/Serv processing, 
consolidate the operative provisions in Rule 3, and make technical 
changes to other rule provisions. The proposed amendment to Rule 3 
establishes the defined term ``Fund/Serv Eligible Fund'' that includes 
any fund or other pooled investment entity that is eligible for NSCC's 
mutual fund services, including processing on Fund/Serv,.under Rule 3, 
Section 7. (The defined terms ``Eligible Investment Fund'' and 
``Eligible Mutual Fund'' are being deleted.) The term is analogous to 
the term ``Cleared Securities'' under Rule 3 which is applicable to 
securities that are eligible for NSCC's clearance services. Rule 3 is 
also amended to include a description of the current criteria used by 
NSCC in determining eligibility for ``Fund/Serv Eligible Funds'' and 
NSCC's authority to establish additional criteria for eligibility from 
time to time using language consistent with that used for ``Cleared 
Securities'' in Rule 3.
    NSCC's current membership requirements applicable to Fund Members 
admitted under Rule 51 and Addendum I will continue to apply without 
change. The NSCC Fund Member is the entity that is responsible for 
settlement of NSCC transactions on behalf of the fund.
    Additional, unrelated technical changes are made to several 
definitions in Rule 1. First, the definitions of ``TPA'' (i.e., third-
party administrator) and ``TPA Member'' are amended to clarify that a 
``TPA Member'' may act as an administrator for retirement and other 
benefit plans in general and not just with respect to plans which are 
structured as defined contribution plans under the Internal Revenue 
Code (i.e., defined benefit plans and nonqualified plans). Second, the 
definitions of ``Insurance Entity'' and ``Fund Member'' are amended to 
clarify that an individual cannot qualify, and only entities organized 
as a corporation, partnership, or other legal entity are covered by the 
definitions.
    NSCC believes that the proposed rule change is consistent with the 
requirements of Section 17A of the Act \7\ and the rules thereunder 
because clarifying the types of funds which are eligible for processing 
on NSCC's Fund/Serv system will further facilitate the accurate 
clearance and settlement of Fund/Serv transactions.
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    \7\ 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 would impose 
any burden on competition.

(C) Self-Regulatory Organization's Statement on Comments on the 
Proposed Rule Change Received From Members, Participants, or Others

    Written comments relating to the proposed rule change have not yet 
been solicited or received. NSCC will notify the Commission of any 
written comments received by NSCC.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective upon filing pursuant 
to Section 19(b)(3)(A)(iii) of the Act \8\ and Rule 19b-4(f)(4) \9\ 
thereunder because the proposed rule effects a change in an existing 
service of NSCC that (i) does not adversely affect the safeguarding of 
securities or funds in the custody or control of the clearing agency or 
for which it is responsible and (ii) does not significantly affect the 
respective rights or obligations of the clearing agency or persons 
using the service. At any time within sixty days of the filing of such 
rule change, the Commission may summarily abrogate 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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    \8\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \9\ 17 CFR 240.19b-4(f)(4).
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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-2006-07 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NSCC-2006-07. 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

[[Page 52201]]

the Commission's Public Reference Section, 100 F Street, NE., 
Washington, DC 20549. Copies of such filing also will be available for 
inspection and copying at the principal office of NSCC and on NSCC's 
Web site at http://www.nscc.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-2006-07 and should be submitted on or before 
September 22, 2006.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
 [FR Doc. E6-14528 Filed 8-31-06; 8:45 am]

BILLING CODE 8010-01-P