March 2, 1993
TO: BOARD OF GOVERNORS NO. 17-93
ACCOUNTING/TREASURERS COMMITTEE NO. 10-93
BANK BROKER/DEALER ADVISORY COMMITTEE NO. 5-93
BROKER/DEALER ADVISORY COMMITTEE NO. 9-93
CLOSED-END FUND COMMITTEE NO. 5-93
INSURANCE BROKER-DEALER ADVISORY COMMITTEE NO. 3-93
OPERATIONS COMMITTEE NO. 8-93
SEC RULES COMMITTEE NO. 17-93
SMALL FUNDS COMMITTEE NO. 6-93
TRANSFER AGENT ADVISORY COMMITTEE NO. 16-93
UNIT INVESTMENT TRUST COMMITTEE NO. 11-93
RE: SEC PROPOSES THREE-DAY TIME FRAME FOR SETTLEMENT OF
SECURITIES TRANSACTIONS
__________________________________________________________
The Securities and Exchange Commission has published for
public comment proposed Rule 15c6-1 under the Securities Exchange
Act of 1934, which would establish three business days (T+3),
rather than five business days (T+5), as the standard settlement
period for broker-dealer transactions. As proposed, the rule
would apply to (among other things) securities issued by
investment companies. The purpose of the proposed rule, which is
based on the report of the Bachmann Task Force and on comments
the Commission received on that report, is to reduce risks in the
U.S. clearance and settlement system and to the U.S. securities
markets generally. A copy of the proposing release is attached.
Specifically, proposed Rule 15c6-1 would prohibit a broker
or dealer from entering into a contract for the purchase or sale
of a security that provides for payment of funds and delivery of
securities later than the third business day after the date of
the contract, unless the parties expressly agree to other
settlement terms at the time of the transaction. The release
notes that investment company securities would be covered by the
rule, and requests comments on whether any particular
characteristics of mutual fund shares will create difficulties
for either broker-dealers or investors if those securities are
included in or excluded from the rule. In this regard, the
release specifically points out that many mutual funds permit
purchases by telephone and that it therefore may be necessary for
funds and broker-dealers to make operational changes in order to
be able to confirm the sale to the investor, receive the proceeds
and settle the transaction within T+3.
Certain types of securities, including exempted securities,
governmentsecurities, municipal securities, commercial paper,
bankers' acceptances and commercial bills, would be specifically
excepted from the rule's requirements. However, the release
seeks comment on an appropriate time frame for eventually
bringing municipal securities under the rule.
The release also solicits comment on the proposed
implementation date for the rule, which is January 1, 1996.
Comments on proposed Rule 15c6-1 must be filed by June 30.
If there are any issues you would like the Institute to consider
addressing in a comment letter to the Commission, please call me
at (202) 955-3514 or Diane Butler at (202) 955-3547 by April 30,
1993.
Frances M. Stadler
Assistant Counsel
Attachment