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As a result, the matter was shelved until early 1971 when the BASIC Task Force studied the matter again, suggested a modification to the structure of the number which would make it compatible with existing numbering schemes, and issued a draft report dated February 16, 1971, see Exhibit II. However, BASIC did not recommend that FINS be adopted. Current Developments

In December of 1971, the National Coordinating Group for Comprehensive Securities Depositories (NCG), consisting of banking and securities industry leaders in New York, Chicago, and on the Pacific Coast, and the NASD was formed to insure the depository developments in these areas were coordinated. NCG is actively considering the use of FINS to identify the membership within the national depository system.

In anticipation of the NCG needs, the BASIC Task Force opened new discussions with various people within the industry. Included were representatives of the Bank Administration Institute (BAI) who were working with the Bank Communications Committee on the subject of standards for interbank messages. The BAI provided an analysis (Exhibit III) of numbering systems planned or proposed which might be merged with FINS or substituted for FINS. This analysis was discussed with several industry leaders and the BAI people. The consensus was that FINS should not be consolidated with any of the other numbers because of its unique requirements, the difficulty in accomplishing any merger, and the fact that benefits (to banks using the numbers) from any merger were questionable at best.

Subsequently, a discussion was held with a member of the Bank Communications Committee who is also a member of the American National Standards Institute (ANSI) Committee working on industry numbering systems. It was his recommendation that the banking and securities industry approach ANSI to assign a block of numbers (e.g., 81) for use within the industry. The industry would control the assignment of numbers within the block to its organizations. Other similar blocks of numbers would be assigned by ANSI for use in nonsecurities types of financial transactions such as credit card transactions, so there is a cohesiveness to the total approach that would be taken here.

In conversations with representatives of the National Clearing Corporation (NCC), it was learned that NCC is now assigning four-digit numbers (as well as NASDAQ alpha mnemonics) to their broker-dealer members. Care is being taken to coordinate with the NYSE so that there are no conflicts or duplications between NCC assignments and NYSE's Stock Clearing Corporation assignments. The NCC numbering arrangement is compatible with FINS in that two digits would be added ahead of the NC number while the existing four digits would remain as now assigned.

It has been argued, convincingly, that a six digit (with an additional check digit possible) number is too long and error prone for use by clerks. Only three of the four digits in the NCC number are normally used when clerks route envelopes for deliveries and transfers. However, there is an awareness that with the gradual elimination of stock certificates more and more securities settlement will be done on an automated basis. (One example of this is the system being developed in New York to permit placing transfer instructions on magnetic tape—a system which calls for the use of the FINS number or some equivalent.) The need for FINS will increase as automation increases and as depositories interface with one another using electronic communications. The FINS arrangement proposed would permit the manual three digit number to co-exist side-by-side with the six digit number employed in automated systems. Thus FINS need not cause upheaval to the remaining manual processes especially those that are intra-region or intra-depository.

It is worth mentioning the alternative to an inter-depository numbering standard. If each depository had its own set of numbers to identify national firms every transaction for such a firm that crossed depositories would require the receiving depository to convert the incoming firm number to its own internal number. This could be expensive and error-prone. FINS Assignment and Maintenance

The question of funding the development and maintenance of FINS has been discussed with a number of industry organizations including the NASD, NCC, American Bankers Association, Stock Transfer Association and the American Society of Corporate Secretaries. From the NCC standpoint, they are already maintaining and enlarging their clearing member list and it seems reasonable to ask them to continue thus but on a FINS basis. From the banking side, the ABA indicated that Rand McNally, who handles the assignment of the eight-digit bank routing and transit numbers (which appear in the lower lefthand corner of checks), would be the logical organization to handle the assignment of bank FINS numbers. ABA personnel indicated that their organization would support a request to Rand McNally to incorporate this FINS number system within their current bank responsibility.

However, for other industry segments, especially transfer agents, the burden of FINS will probably fall on the depositories. It is suggested here that CCS (as the first and largest depository) take on responsibility for assigning numbers to transfer agents, insurance companies, and funds, and that the other depositories work out an arrangement for obtaining that portion of the FINS directory from CCS.

EXHIBIT I

SECTION D-FINANCIAL INDUSTRY NUMBER SYSTEM (FINS) Included among the original CUSIP objectives was the development of a standard number system which would uniquely identify all brokers. However, as the Committee did not consider it appropriate that the system be developed by persons outside the brokerage industry, it requested the National Association of Securities Dealers to form a special committee to work on this phase of the CUSIP standards program.

The Special Committee comprised of the persons set forth below held its initial meeting in September 1968.

Junius W. Peake_Shields & Co.-Chairman.
John S. Barker-McDonnell & Co., Inc.
Lee C. Monett-NASD.
Joseph F. Morley-ASEF.
Jack Quick-American Stock Exchange.
William Tuite-Burnham & Co.
Frank Zarb-Goodbody & Co.
John Nave—Goodbody & Co.
Philip Bernadeo-Goodbody & Co.
Norman Epstein-E. F. Hutton.
Lee Arning-New York Stock Exchange.
Carl Byham-American Stock Exchange.

The Committee developed specific guidelines for a Financial Industry Number System (FINS) from which the CUSIP Technical Sub-Committee then developed the recommended detailed specifications contained in this section of the report.

It should be noted that while a five (5) digit number could accommodate all the names which will be assigned numbers initially, it will not provide a reserve for future expansion sufficient to insure an acceptable life span for the system.

To date these specifications have not been formally accepted by the NASD.

SECTION D-RECOMMENDED SPECIFICATIONS FOR A FINANCIAL INDUSTRY NUMBER

SYSTEM (FINS)

A. Names to be Included in the System :

1. U.S. Broker-Dealers--All U.S. Broker-Dealers (firms) which are either NASD members or appear in the Standard & Poors Security Dealers of North America Directory.

2. All U.S. Banks assigned an ABA Transit Number including Foreign Bank agencies located in the U.S. and Federal Reserve Banks.

3. Nominees—Nominees of all Banks, Broker-Dealers, and other organizations. Initially this would be the approximately 5,000 listed by the American Society of Corporate Secretaries in their annual directory.

4. Non-Bank Transfer Agents—would include professional agents, e.g., Registrar and Transfer etc. and corporations doing their own transfer work. Companies which provide their own transfer facilities and also use a professional transfer agent could be excluded. However, to simplify the assignment it is recommended that a number be assigned to each non-banking corporation for which a CUSIP issuer number has been assigned.

5. Foreign Brokers--as designated by the NASD.

6. Foreign Banks-All Canadian Banks and other foreign banks-as designated by the NASD. This is in addition to the Foreign Bank agencies located in the U.S. which will be included in (1.) above.

7. Clearing Corporations—as designated by the NASD. 8. Regulatory Agencies—as designated by the NASD.

9. Statistical Service Organizations—as designated by the NASD. B. Number Format:

The basic number will be comprised of six (6) digits plus a Modulus 10 Double add Double Check Digit. The basic number will be blocked by type of organization as follows:

000001/099999—U.S. Broker-Dealers. 100000/199999—U.S. Banks, etc. 200000/299999Nominees. 300000/399999—Non-bank Transfer Agents. 400000/499999—Foreign Brokers. 500000/599999_Foreign Banks. 600000/699999—Clearing Corporations, Regulatory Agencies and Statistical

Service Organizations. 700000/799999—Open800000/899999—Open

900000/999999— Reserved for User. The number will be assigned to the eligible names sequentially without regard as to their alphabetic position within the block.

Numbers will be available for reassignment seven years after the organization ceases to exist. Changes in organizational title will not require assignment of a new number. In the event of a merger the number of the surviving entity will be the number to be retained. C. FINS Directory :

It is recommended that the numbers be assigned and published in directory form by Standard & Poors, the CUSIP Service Bureau, under a separate contract negotiated with the National Association of Securities Dealers. Continuing control of this phase of the CUSIP program, however, will be the responsibility of the CUSIP Board of Trustees.

While the numbers will be assigned sequentially within blocks, the directory will be published in alphabetic sequence within type. D. Special Considerations in Developing the FINS Number:

1. The purpose of the number is to provide a standard universal method of uniquely identifying the major holders and processors of securities and securities information. On this basis the original concept to provide for a suffix code to identify a Broker-Dealer clearance location and a Bank department i.e., Trust, Bond, etc. was discarded. The difficulty in gathering and maintaining this data and the problem of multiple numbers for an organizational entity far outweighed any nominal benefits which might result from including this information.

2. The desirability of retaining the original number assigned to an organization in the event of a change in name or merger precluded the design of a system which will provide alphabetic sequencing of the organizations on the basis of a sort of the number. Such alphabetic sequencing will only be necessary in the published directory.

3. The use of the block approach provides a fringe benefit in being able to identify the type of organization without any adverse effect on the total system.

EXHIBIT II

BANKING AND SECURITIES INDUSTRY COMMITTEE-FINANCIAL INDUSTRY

NUMBERING SYSTEM "FINS"

THE PROBLEM

There are many numbering systems being used today to identify individual members of the financial community. Securities clearing houses assign numbers to their clearing members. The Federal Reserve System uses codes to identify banks. Other systems are in use. None is compatible with the other.

It seems entirely probable that, ultimately, much of the processing of securities transactions among members of the financial community in this country will be automated. In the ultimate, this could involve wholesale interconnections of computers. Such a system would require a universally used method of identifying securities. CUSIP has already been developed to meet this need.

20-306 O - 74 - 6 -- pt. 5

The systems of the future will also need a uniform numbering system to identify the nation's financial institutions—a system under which a given number uniquely identifies a certain broker-dealer, bank, transfer agent, etc.—distinguishing him from any other financial institution in the country.

At present, however, there is no pressing need for a comprehensive national directory of FINS numbers. If such a directory were created today, it is most unlikely that its use would justify the cost and effort of developing and maintaining it.

Nonetheless, "pockets" within the nation's financial community are using financial industry numbering systems today. Each year sees the adoption or changing of some such systems. What is needed is some device by which these segments of numbering systems could be brought into synchronization with a uniform national FINS over a period of time.

POSSIBLE SOLUTION

A plan could be adopted for a uniform national financial industry numbering system to be used in connection with the processing of securities transactions. This plan would go as far as possible in embracing existing numbering systems. It would also provide a framework within which national or regional segments of the nation's financial community could develop numbering systems which would be compatible with an ultimate national FINS, without waiting for the entire numbering system to be implemented. Specifically, a six-digit code could be adopted, as follows:

1st digit-Identifies the industry.
2nd digit—Identifies one of five geographical areas in the U.S.

Last 4 digits-Identify institutions within the industry within the area. Possible codes to be used in the first- and second-digit positions are given later. A seventh check digit would be added when a nationwide system ultimately comes into use.

DISCUSSION History of FINS

The CUSIP Technical Subcommittee of the American Bankers Association pioneered the idea of FINS, and developed a specific proposed system consisting of six digits plus a check digit. One of these digits identified the industry, a concept which has been incorporated in the recommendation above. The other five digits were to be used to identify organizations within an industry.

The BASIC Task Force distributed approximately 100 copies of the ABA Committee's plan within the banking and securities industries in July 1970, soliciting comments. Seventeen replies were received. Many endorsed the proposal as is. Others had suggestions for variations most of which are discussed below.

However, it is significant that, while many agreed to the theory of a FINS, most said that they see no present use for it and would have trouble justifying a change from whatever numbering system they now use. Industry codes in the plan The first digit would identify the industry, as follows:

0_Broker-dealers.
1-Broker-dealer nominees.
2—Banks, including foreign bank agencies located in the U.S.
3–Bank nominees.
4Insurance companies.
5 Mutual funds.
6-Transfer agents.

7-Clearing corporations, regulatory agencies, statistical services, and miscellaneous.

8Open.

9 Reserved for user. These are the principal changes in the above from the ABA Committee's numbering plan :

1. Insurance companies and mutual funds have been added as separate categories. These may ultimately be required to be identified in a comprehensive securities depository, if not for other purposes.

2. Separate numbers are provided for a bank's transfer department and a bank as a trader in, or holder of, securities. The segregation of these activities of banks could be meaningful in the processing of securities transactions.

Geographical codes in the plan
The second digit would identify the geographical area, as follows:

New York City. 1-Eastern-Conn., Del., D.C., Me., Md., Mass., N.H., N.J., N.Y. (ex NYC), Penna., R.I., Vt., Va., W. Va.

2–Central-Ill., Ind., Ia., Kans., Ky., Mich., Minn., Mo., Neb., N.D., Ohio, S.D., Wisc.

3—Western-Alaska, Ariz., Calif., Colo., Hawaii, Idaho, Mont., Nev., Mex., Ore. Utah Wash. Wyo.

4Southern-Ala., Ark., Fla., Ga., La., Miss., N.C., Okla, S.C., Tenn., Tex.
5Open.
6—Open.
7-Open.
8Open.

9_Open. The foregoing plan provides the leeway to make FINS an international system if ultimately needed. For example, the remaining digits might be used somewhat as follows:

5 Canada.
6-Western Hemisphere south of U.S.
7-Europe and United Kingdom.
8Australia, Japan, Asia, Far East, Africa.

9/Open. However, the immediate objective is not to use the geographical codes for other than to make, after subdivision by industry, a further subdivision of the "universe” in the U.S. After these two subdivisions, the final four digits, providing a numbering capacity up to 9,999, should provide more than enough capacity for the largest industry group in any defined geographical area.

NOTE.—The ABA plan assigned each of banks and brokers abroad an "industry” code, within which each institution would have its sequential number. If the plan proposed herein became world-wide in use, these institutions would be segregated by the first two of the six digits, identifying industry and area abroad, respectively. In interim four-digit systems, banks and brokers abroad could either be assigned numbers within the U.S. bank and broker industry groups, or grouped together in the open industry series. Use of existing numbering systems

As in the ABA proposal, the plan contemplates no pattern in assigning the last four digits. No attempt would be made to maintain alphabetic sequence, for example. A directory in alphabetic order would, therefore, be necessary.

Presently assigned numbers could be maintained to a large extent. Brokerdealer numbers assigned by the New York, Midwest, and Pacific Coast Exchanges, for example, could each be retained. Moreover, no more than the present number of digits need be used—whether two, three or four.

It would only be when communications among units of the same industry using FINS numbers crossed geographical area lines that five digits would have to be used. Broker-dealer 125 in the Midwest could communicate with broker-dealer 150 in that same area using only those numbers. However, brokerdealer 125 in Chicago communicating to broker-dealer 150 in New York would become 20125 vs. 00150.

Communications crossing both industry and geographical lines would require all six digits. Thus, a message from broker-dealer 125 in Chicago to bank 150 in San Francisco would be from 020125 to 230150. New or revised numbering systems in the near-term

As has been said, there has not yet arisen a need for one national directory of the numbers of all the financial institutions in the U.S. There is also as yet no need for one central national authority to assign numbers to all such institutions.

At the same time, there may be need for coordinating the assignment of numbers within a geographical area for a given industry. Using the geographical areas defined hereinabove, a bank in Los Angeles, for example, should not have the same four-digit number as one in Phoenix, or Seattle. A broker in Boston should not use the same final four digits as one in Philadelphia.

The coordination to synchronize regional industry numbering systems, to the extent that it does not already exist, could be supplied by industry leaders, including securities exchanges. Or, it could be provided by organizations national

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