Year 2000 Investor Kit:
Frequently Asked Questions About The Year 2000As the Year 2000 quickly approaches, many investors have more and more questions about its potential impacts. We prepared Frequently Asked Questions About The Year 2000 to help investors learn more about the issues surrounding the coming century change. Updates to these questions are posted on www.nasd.com and www.nasdr.com. You can also contact: the Securities and Exchange Commission (SEC) Office of Investor Education and Assistance: (800) SEC-0330, www.sec.gov; the Securities Industry Association (SIA): (212) 608-1500, www.sia.com, or e-mail: info@sia.com.; the Investment Company Institute (ICI): (202) 326-5800, www.ici.org; or the National Association of Securities Dealers, Inc. (NASD): (888) 227-1330, www.nasd.com, www.nasdr.com, or e-mail: y2k@nasd.com.
What is the Year 2000 problem?
The Year 2000 problem stems from the fact that computers and other date-sensitive systems could malfunction or stop altogether before, on, or after January 1, 2000 as a result of the method used to identify dates. Many computer programs use a two-digit number, instead of a four-digit number, to represent a year. So, for example, "99" means 1999. Now that the Year 2000 is approaching, this system can create problems. To a computer, "00" may mean the year 1900, instead of the Year 2000. If this is not corrected, this problem could disrupt the calculation of bond interest payments, stock trade settlements, retirement benefits, and other financial transactions. Why is this a problem?
If not addressed, computers performing arithmetical operations, comparisons, or sorting of data fields may calculate incorrect results when working with years beyond 1999. Who does it impact?
This is a significant, worldwide challenge for all businesses, governments, and other organizations that rely on computerized systems to help run their operations. The Year 2000 can affect any system that uses computer software programs or computer chips, including automated equipment and machinery, such as elevators, faxes, phones, air conditioning, and security systems. What is the risk to the financial services industry?
According to the U.S. Senate Year 2000 Committee's February 24, 1999 Report on the Impact of the Year 2000 Problem: "As a result of an early and vigorous start, the securities industry is well positioned for the Year 2000...As a result of early attention to the problem and significant regulatory and Congressional oversight, the financial services sector ranks ahead of virtually all other industries in its remediation and testing efforts." What should I do to prepare?
There are simple activities you can do to be ready for 2000. Keep good records. Good recordkeeping makes sense at any time, but in the event that Year 2000 computer glitches create incorrect information in personal account records, keep copies of your bank and investment account statements, bill payment records, and confirmation information. Obtain any Year 2000 literature provided by your broker/dealer, mutual fund, investment adviser, or the public company in which you hold stock. Many firms and companies have Year 2000 information available upon request or on their Web Sites. The SEC has posted a searchable database on its Web Site, www.sec.gov, that gives investors instant access to the Year 2000 readiness reports that many broker/dealers, transfer agents, investment advisers, and mutual funds are required to file with the SEC. Who do I contact if I don't get the answers I need?
You can contact the National Association of Securities Dealers Year 2000 Program Office for assistance. We have a toll-free phone number - (888) 227-1330 - as well as an e-mail address - y2k@nasd.com - so you may reach us at your convenience. In addition, you may or visit the SEC Web Site: www.sec.gov What is the securities industry doing to prepare?
The SIA, www.sia.com, and the SEC have been leading the way in an industrywide effort to be Year 2000 ready. The NASD as well as the other securities self-regulatory organizations, and exchanges and stock markets is participating in this industry effort and also has its own Year 2000 program in place. The industry also instituted mandatory reporting requirements of brokerage firms. Broker/dealers, mutual funds, investment advisers, and transfer agents were required to complete two reports indicating their Year 2000 compliance and readiness. If firms' systems are not ready for the new year, they could be subject to disciplinary action. The firms' reports are available for investors to review via the SEC Web Site (www.sec.gov). Furthermore, more than 400 broker/dealers, markets, clearing and settlement organizations, and depository companies successfully participated in a test of Year 2000 preparedness from early March through mid-April. This test simulated a trading cycle-from order entry to settlement-between the end of 1999 and the start of the Year 2000. Firms were able to enter and settle trades with their systems reconfigured for December 29, December 30, and December 31, 1999, and January 3, 2000. The few Year 2000 problems that did arise were identified and fixed quickly. A report released in April by the President's Council on Year 2000 Conversion stated that, "financial institutions-from banks to securities firms-have been making excellent progress in preparing systems for Year 2000 and it is not expected that industry systems will experience widespread or prolonged Y2K-related problems." What did the industrywide test include?
Nine major product groups (equities, options, corporate bonds, municipal bonds, unit investment trusts, mutual funds, money markets, government securities, and mortgage-backed securities) were tested. The simulated trades were processed as if they were actual transactions-going to the securities markets, through the clearing and settlement process, and back to firms. Participants included the stock markets, securities firms, and the financial industry's utilities (those that do the "back office" processing of transactions, such as clearing and settling the trade). To review an on-line version of SEC Chairman Arthur Levitt's statement on Year 2000 testing, visit the SEC's Web Site, www.sec.gov. What about the banking industry?
The banking industry has been working on the problem for several years. Banks are checking their systems and adopting readiness and contingency plans. Bank regulators have been conducting examinations, and, at the end of 1998, 96 percent were rated as being on track for Year 2000 readiness by June 30, 1999. For more information visit the FDIC Web Site at www.fdic.gov. Where can I turn for Year 2000 information about other industries, as well as general information about being ready in our day-to-day lives?
Consumer information can be found at www.consumer.gov. General information about the federal government and all industry sectors can be found on the President's Council for Year 2000 Conversion Web Site, www.y2k.gov, or they can be reached at (888) USA-4-Y2K. The NASD's Year 2000 Web Pages include these and other relevant links to helpful Year 2000 information. For more information about the securities industry, there are frequently asked questions on the SIA Web Site (www.sia.com) and the SEC Web Site (www.sec.gov). While the U.S. may be well prepared, many foreign countries may not. What impact will their Year 2000 problems overseas have on my financial accounts?
In many countries, Year 2000 preparations are a top priority. Global financial institutions are working together with financial regulators and governments to identify the state of readiness in countries, to coordinate Year 2000 initiatives, and to facilitate communications among financial service companies, markets, and regulators over the transition into the new millennium. If you have investments in international mutual funds or foreign companies, follow the checklist that was outlined earlier and base your investment decisions on sound reasoning and long-term goals. How Could The Year 2000 Date Change Affect You? |
How Can You Prepare For The Year 2000? | Additional Information |
Year 2000 Tips | A Checklist To Get You Ready For The Year 2000 (11 KB) |
Year 2000 Investor FAQs | Be Ready For The Year 2000! | Introduction © Copyright 1999, National Association of Securities Dealers, Inc. All rights reserved.
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