December 23, 2003

Jonathan G. Katz
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549

Re: Response to SR-NSCC-2003-21

Dear Mr. Katz:

On behalf of PFPC, I hereby respectfully submit this letter in response to the request for comments to Release No. 34-48846: Notice of Filing of Proposed Rule Change Relating to the Separately Managed Accounts Service, SR-NSCC-2003-21.

A. Background on PFPC

PFPC, a subsidiary of the PNC Financial Services Group, is a leading provider of processing, technology and business solutions for the global investment industry. It is the nation's largest full-service mutual fund transfer agent and the second largest provider of mutual fund accounting services. PFPC also provides distribution, sub-accounting, managed account services, advanced output solutions, custody, securities lending, integrated banking transaction services and alternative investment services. PFPC clients include some of the worlds most successful financial services companies, including brokerage firms, pension and investment managers, insurance companies and banks.

With respect to managed account services, PFPC has provided managed account technology and service offerings for over 10 years. With its recent acquisition of AdvisorPort, PFPC established itself as one of largest providers of managed account services with over $18 billion of managed account assets held in over 50,000 accounts. Our current roster of enterprise type clients numbers over 60 firms and includes brokerage firms, banks, insurance companies, investment advisors, sponsors of wrap programs and money managers.

In order to support this book of business, PFPC Managed Account Services interfaces with over 50 third party money managers and 10 custodians. Therefore, on a daily basis PFPC manages hundreds of interfaces between custodians and money mangers using multiple operational methodologies and technical protocols.

B. PFPC's Comments on the Establishment of a Separately Managed Accounts Service (Rule 59)

With respect to the proposed Rule 59, PFPC is fully supportive of the development of standards that will enable the industry to look beyond its current operations platforms and processing methodologies to seek industry type standards, operational protocols, data formats and communication standards that would allow the SMA industry to achieve the type of standardized processing accomplished by the mutual fund industry over the last twenty years. In fact, we believe that much of the standardized processing in the mutual fund industry can be attributed to the NSCC and their varied initiatives to include the FundServ and Networking platforms. However, despite the rapid adoption of these platforms, there remained enough opportunity in the mutual fund industry and open sharing regarding processing methodologies and technology standards that private companies, such as PFPC, created alternatives to NSCC platforms, i.e. subaccounting. In fact, subaccounting by distributors of mutual funds has rapidly grown into a critical processing methodology and is currently utilized to process over 95 million mutual fund accounts. Subaccounting has also enabled significant efficiencies within the manufacturers of mutual funds who essentially delegate the processing of individual shareholder accounts to the distributor.

Therefore, we are supportive of the establishment of industry standards and the availability of an industry utility as an option to support these standards, if the following items are established as a component of this development. Some of these items have been included in the NSSC's proposal while others have yet to be defined.

    1) The NSCC should adopt the MMI Standards as open standards, available to entities that are not NSCC members and to entities that are not subscribers to NSCC services, as well as to NSCC members and subscribers. Given that many industry participants have contributed to the development of these standards it appears to be appropriate that they remain within the public domain.

    2) The NSCC should disclose the types of information services they are proposing, whether or not they will charge fees for the services, (and if fees are to be charged what is the proposed fee structure) and whether they intend to develop the services independently or with the assistance of industry participants.

    3) The NSCC should not seek to replace current vendors who provide services to the managed account industry. Existing vendors may continue to use their own communications platforms, and they also may access NSCC's communication platform on behalf of their customers who are NSCC members (i.e., Settling Members, Fund Members and Data Services Only Members) that elect to use NSCC's SMA Service.

    4) PFPC proposes an oversight committee of industry participants be established which would provide for input by the industry into the NSCC's development and implementation of the standards.

We appreciate the opportunity to provide our comments relative to Release No. 34-48846: Notice of Filing of Proposed Rule Change Relating to the Separately Managed Accounts Service, SR-NSCC-2003-21, and would welcome any further dialogue on this issue. Should you have any questions or require additional information please contact me at (412) 762-8274.


Thomas P. Sholes
Senior Vice President and Managing Director
PFPC Managed Account Services

cc: Steve DeAngelis
Salvatore Faia, Esquire, CPA
Eileen Gilfedder
Greg Horn
Richard Lucas