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Transfer Agent Rules Raise Industry Hackles


The mutual fund and securities industries are urging the SEC to delay and substantially revise proposed new rules which would set quality standards for transfer agents and broker/dealers.

The SEC rule proposal which would require transfer agents to provide "prompt and accurate" service is vague and subjective, said Barry Simmons, assistant counsel for the Investment Company Institute. The SEC should revise the rule and resubmit it with more detail for public comment, Simmons said in a letter to the SEC dated April 12.

"The proposed rule fails to describe with specificity what constitutes a violation" of the new rule, Simmons said. The rule should "include objective standards that are clearly defined" to explain requirements.

Last month, the SEC proposed rules which required that both transfer agents and broker/dealers promptly execute and process orders. The SEC said it was proposing the rules to guard against firms that consistently have operational problems such as computer failures.

Under the new rules, firms that failed to meet the SEC's standards would be required to stop doing business. The SEC also proposed standards which required firms that are not prepared to address the computer problems anticipated at the turn of the century, to stop doing business by Oct. 15.

There is no definite timetable for the SEC to act on the broker/dealer and transfer agent rules, said John Heine, an SEC spokesperson.

The ICI said it generally supported the Y2K rule proposal in Simmons' letter. If the SEC wants to go forward with the rule setting operational standards, however, the ICI recommended the agency revise the proposal and submit it next year after Y2K issues are resolved.

The Securities Industry Association, the trade group which represents broker/dealers, was sharper than the ICI in its criticism of the SEC proposal setting standards for broker/dealer operations. The rule for broker/dealers "is exceptionally broad ... and would represent an extraordinary grant of discretionary power," five SIA executives said in a letter to the SEC dated April 12.