January 24, 1996
TO: BANK BROKER/DEALER ADVISORY COMMITTEE No. 3-96
RE: OCTOBER 18, 1995 MEETING SUMMARY & FEBRUARY 9, 1996 MEETING
NOTICE
______________________________________________________________________________
Enclosed please find the summary of the October 18, 1995 Bank Broker/Dealer
Advisory Committee meeting and several attachments.
The next meeting of the Bank Broker/Dealer Advisory Committee and the Vendor
Advisory Group will take place on February 9, 1996 at the Belleview Mido Resort Hotel in
Clearwater, Florida. The February 9 meeting agenda, the draft prototype Fund/SERV legal
agreement and the draft addendum to the standard Networking agreement will be sent to you
shortly.
We look forward to seeing you in Florida.
Alan Halfenger Diane Butler
Chairman - Bank Broker/ Director - Operations
Dealer Advisory Committee & Fund Custody
Attachment
INVESTMENT COMPANY INSTITUTE
BANK BROKER/DEALER ADVISORY COMMITTEE
VENDOR ADVISORY GROUP
OCTOBER 18, 1995
MEETING SUMMARY
The major discussion points and actions agreed upon at the October 18, 1995 meeting of
the Bank Broker/Dealer Advisory Committee and the Vendor Advisory Group are summarized
below. The meeting agenda and list of attendees are attached.
1. Approval of June 27, 1995 Meeting Summary
The meeting summary was approved as written.
2. Trust Proposal for Fund/SERV and Networking
A. Processing for Trusts
Chris Hayes of NSCC distributed the attached draft document which
outlines the file format modifications needed to support the trust proposal. Chris
will supply activity record information as well. He indicated that NSCC could have
the necessary changes made to the Fund/SERV and Networking systems within
three months.
B. Commitment Letters - DTC Bank Participants
Lisa Dougan of DTC provided the attached list of 22 banks that have
committed to using the Fund/SERV system through DTC once the trust proposal
changes have been made. This level of commitment is sufficient for DTC to enable
processing across its computer-to-computer facility ("CCF"). DTC was to get CCF
development slotted in the two weeks following the meeting.
Based on the level of commitment from trust companies through DTC, the
trust proposal was approved for programming, testing and implementation by the
Committee. Each person at the table indicated when their respective organizations
could have the necessary programming completed. Based on this feedback, it was
agreed that organizations should plan to have programming completed by the
second quarter of 1996. Chris indicated that NSCC would begin coding at the
beginning of 1996.
Testing partners will be needed as soon as possible. Mark Kelley of First
Trust and Vito Limitone of Wells Fargo Bank indicated that they are ready to test
on behalf of trust companies.
C. Commitment Letters - Other Trusts/Trust System Vendors
Katie Sevcik of Norwest Bank and Ann Freidman of the ABA indicated that the
ABAs Mutual Funds Processing Task Force has put significant effort into
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gaining support for the system changes from trust companies and trust system
vendors that have not been involved in the process to date. A press release was put
out by the ABA in September 1995.
D. Trust Fund/SERV Legal Agreement/Trust Addendum to Standard Networking
Agreement
Katie Sevcik distributed a prototype Fund/SERV Legal Agreement which
will be available for use by trust companies and fund companies once it is finalized.
The finalized agreement will be distributed prior to the February 9, 1996 Bank
Broker/Dealer Advisory Committee meeting.
A draft addendum to the Standard Networking Agreement will be available
by the next Committee meeting.
E. SEC Approval of Trust Service
Chris Hayes indicated that the NSCC is reviewing whether it will be
necessary to seek SEC approval of the system change through a rule change
filing. If a rule change filing is necessary, Don Boteler of the ICI suggested
dovetailing it with a no-action request under Rule 10b-10 to relieve fund
companies of the requirement to deliver paper confirms to trust companies. Tom
Hamblin of American Funds indicated a preference for obtaining regulatory
relief prior to programming the systems changes.
3. Dealer, Branch & Rep Numbering
Franklin/Templeton recently conducted a survey of 12 fund companies on their
success in obtaining dealer, branch and rep numbers when a clearing firm is involved in
the transaction. The results indicate that fund companies consistently have difficulty
obtaining dealer, branch and rep information from clearing firms. Walt Knorr of BHC
indicated that while he is sympathetic to fund company needs, BHCs first
responsibility is to its clients, many of whom request this confidentiality. Bob Adams of
NFSC concurred with Walt. After some discussion, the Committee determined that an
industry solution to the numbering issue is not feasible at this time.
4. Fund/SERV & Networking Enhancements Task Force
Alan Halfenger of Alliance, and Chairman of the Committee, asked for a volunteer
to represent the Bank Broker/Dealer Advisory Committee on the Broker/Dealer Advisory
Committees ("BDAC") Fund/SERV and Networking Enhancements Task Force. Alan
indicated that the volunteer would need to faithfully attend the meetings of both groups
in order to properly represent the interests of the Bank Broker/Dealer Advisory
Committee. Walt Knorr volunteered for and was subsequently granted the assignment. The
next BDAC Fund/SERV and Networking Enhancements Task Force meeting was
scheduled for November 15, 1995.
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5. NSCC Update
A. Enhancements Status - Current & Future Plans
The NSCC is moving forward with development of the Daily Price/Rate
module of the Mutual Fund Profile which will be a mechanism for the input and
dissemination of daily fund NAVs (prices) and daily dividend factors (rates).
Completion of this module is tentatively scheduled for the first quarter of 1996. The
NSCC is also working on modifications to its Commission Settlement System.
The NSCC has been selected by the ICI and fund industry representatives
to develop a system to facilitate the movement of individuals retirement assets
between fund companies and other financial service providers.
B. Status Existing Systems
Same Day Funds Settlement ("SDFS") will become effective on February 22,
1996. Starting on February 22nd, there will be one net payment via fed wire for
activity from Fund/SERV, Networking and Commission Settlement. As of the
meeting date, very few fund companies had provided NSCC with settling bank
information which NSCC must have prior to the conversion to SDFS. Enclosed are
several documents relating to settling bank selection procedures.
Also enclosed is a list of the 45 no-load fund companies that are currently
participants of NSCC. Five of them are doing T+1 settlements in same day funds.
Greg Spero of NSCC will provide an updated list of all load and no-load funds that
have the capability to do trade date settlement for money market fund transactions.
6. DTC Update
Frank Petrillo of DTC reported on the upcoming BDUG Conference. He also
noted that DTC has the capability to support T+1 settlement in same day funds.
7. T+3 Settlement Follow-up
No issues were raised with respect to T+3 transaction processing.
8. ICI Update
A. Open Meeting of Broker/Dealer Advisory Committee
Kevin Farragher of the ICI indicated that the Broker/Dealer Advisory
Committee was inviting non-members to a portion of its next meeting which was
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held on November 27, 1995 in San Francisco, California, just prior to the ICIs
Operations Conference.
B. Banking Regulators Reversal of Position on
Confirmation Disclosure of Non-FDIC Insured Status
Dorothy Donohue of the ICI reported on the apparent reversal of position
by the federal banking agencies on disclosure of non-FDIC insured status on certain
confirms and account statements. The attached memo was distributed at the
meeting.
C. NASD Rules for Bank Broker/Dealers
Dorothy Donohue updated the group on the status of the NASDs proposed
rules for bank broker/dealers.
D. Indexing Cost Basis for Inflation
Keith Lawson of the ICI provided an update on the provision of current
legislation regarding indexing cost basis for inflation. A paper on the impact to
mutual funds should this legislation be enacted was provided in the meeting
materials.
9. Other Business
A. Next Meeting
The next meeting will take place on February 9, 1996 in Clearwater, Florida.
There will be a tour of Franklin/Templeton and a dinner on February 8th for
interested Committee members.
B. New Name for Committee
The meeting participants were asked to provide ideas for a new Committee
name that more appropriately reflects the focus of the group. A form was provided
for submissions. The new Committee name will be announced at the next meeting.