[Federal Register Volume 79, Number 145 (Tuesday, July 29, 2014)]
[Notices]
[Pages 44079-44080]
From the Federal Register Online via the Government Publishing 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