NSCC IMPORTANT NOTICE ANNOUNCING FUND/SERV FUNCTIONALITY FOR FUND-TO-FUND TRANSFERS OF IRA ACCOUNTS

September 10, 1996 TO: BROKER/DEALER ADVISORY COMMITTEE No. 17-96 BANK AND TRUST ADVISORY COMMITTEE No. 28-96 OPERATIONS MEMBERS No. 43-96 TRANSFER AGENT ADVISORY COMMITTEE No. 55-96 RE: NSCC IMPORTANT NOTICE ANNOUNCING FUND/SERV FUNCTIONALITY FOR FUND-TO-FUND TRANSFERS OF IRA ACCOUNTS ______________________________________________________________________________ The Investment Company Institute is pleased to note that, on August 20, 1996, the National Securities Clearing Corporation distributed an Important Notice and related documentation announcing (pending SEC approval) the November 18, 1996 implementation of functionality that will allow the Fund/SERV system to serve as a conduit for the initiation, acknowledgment, confirmation and settlement of Individual Retirement Accounts (IRAs) being transferred from one mutual fund company to another. This announcement signifies the near term completion of the first phase of a project which the NSCC undertook at the behest of the mutual fund industry, and represents a leap forward in the method by which IRA accounts are transferred. The Fund/SERV based IRA transfer functionality will allow for the paperless transfer of IRA accounts between mutual fund companies via a centralized, automated clearing facility that imposes a standardized, disciplined processing cycle upon its participants. In addition, the NSCC expects to broaden the extent of this functionality with the rewrite of its Automated Customer Account Transfer Services (ACATS) system, thereby enabling the automated transfer of IRA accounts between and among a variety of financial service institutions (mutual funds, brokerages, banks, and possibly insurance companies). A pilot group of 13 mutual fund companies (Alliance, American Funds, Colonial, Fidelity, Franklin, Janus, Keystone, MFS, Pioneer, Putnam, T Rowe Price, Van Kampen American Capital and Vanguard) is presently completing its development efforts, and is scheduled to begin testing this new functionality on the above mentioned November 18, 1996 effective date. Detailed test plans are currently being drafted by this pilot group, and will be made available for use by other mutual fund companies wishing to utilize this functionality once the pilot group has completed its testing and moves into production. To date, the highly coordinated efforts of this pilot group, in conjunction with the NSCC, has resulted in the successful development of a facility that will work to the advantage of the fund industry, and, ultimately the financial services industry as a whole. In addition, NSCC and the pilot group have generated a wealth of useful documentation which will only advantage the development and testing efforts of mutual fund companies who seek to make use of this transfer functionality in the future. To that end, the Investment Company Institute requests that the pilot group be allowed to complete testing and move into production in a controlled and self contained setting before other mutual fund companies seek to make use of this functionality. Updates will be furnished regarding the pilot group
s progress, and information relative to dates when other fund companies can expect to begin utilizing the functionality will be provided as they become available. The Institute believes that this course of action will result in the highest level of efficiency and the least occurrence of error for all parties seeking to utilize the NSCC
s new IRA transfer facilities. If you have any question or concerns regarding this correspondence, or if you simply wish to learn more about the NSCC new Fund/SERV fund-to-fund IRA transfer facility, please do not hesitate to contact the undersigned at 202/326-5848. Thank you. Kevin Farragher Director - Operations Distribution & Service