[Federal Register Volume 59, Number 152 (Tuesday, August 9, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-19376]


[[Page Unknown]]

[Federal Register: August 9, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34479; File No. SR-NASD-94-34]

 

Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the National Association of Securities Dealers, Inc., 
Relating to Fees for the Late Payment of Service Charges

August 2, 1994.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''), 15 U.S.C. 78s(b)(1), notice is hereby given that on May 27, 
1994, the National Association of Securities Dealers, Inc. (``NASD'' or 
``Association'') filed with the Securities and Exchange Commission 
(``Commission'' or ``SEC'') the proposed rule change as described in 
Items I, II, and III below, which Items have been prepared by the NASD. 
On July 29, 1994, the NASD filed with the Commission Amendment No. 1 to 
the proposed rule change.\1\ The Commission is publishing this notice 
to solicit comments on the proposed rule change from interested 
persons.
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    \1\Amendment No. 1 to the proposal corrects a mathematical error 
in an example provided in the language of the proposed rule change, 
and explains that the new late fee established by the proposal will 
be assessed to accounts that are in arrears prior to the 
implementation of the new late fee charge. Letter from Joan Conley, 
Corporate Secretary, NASD, to Elizabeth MacGregor, Branch Chief, 
Commission, dated July 28, 1994.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The NASD proposes to adopt a uniform and consistent methodology for 
assessing fees for late payment of Nasdaq Stock Market service charges. 
(Additions are in italics; deletions are bracketed.)

Schedule D

Part IX

* * * * *

H. Late Fees

    All charges imposed by The Nasdaq Stock Market, Inc. that are 
past due 45 days or more will be subject to a late fee computed by 
taking the summation of one and one-half percent (1\1/2\%) of the 
amount past due for the first month plus one and one-half percent 
(1\1/2\%) of the amount past due for any month thereafter, 
compounded by late fees assessed for previous months.
    To illustrate how later fees are assessed, if an account is past 
due $1,000 for 45 days, the late fee would be $30.22. This charge 
reflects a charge of $15 for the first month past due ($1,000 x 1\1/
2\%) and $15.22 for the second month past due ($1,015 x 1\1/2\%).

[NASDAQ charges, except those for NASDAQ Level 1 and NASDAQ/NMS Last 
Sale services, that are past due for 60 days or more shall be 
subject to a late fee of ten percent (10%) of the amount past due.
    Charges for NASDAQ Level 1 and NASDAQ/NMS Last Sale services 
that are past due shall be subject to a late fee equal to one and 
one-half percent (1\1/2\%) per month of the unpaid balance 
commencing forty-five (45) days after the invoice date.]

II. Self-Regulatory Organization's Statement of the Purpose Of, and 
Statutory Basis For, the Proposed Rule Change

    In its filing with the Commission, the NASD included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The NASD has prepared summaries, set forth in Sections 
(A), (B), and (C) below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose Of, and 
Statutory Basis For, the Proposed Rule Change

1. Purpose
    In view of the NASD's implementation of a consolidated billing 
system for virtually all direct subscriber services provided by The 
Nasdaq Stock Market, Inc. (``NSM''), the NASD proposes to adopt a 
uniform and consistent methodology for assessing fees for the late 
payment of NSM charges. Specifically, for NSM charges that are past due 
45 days or more, the NASD proposes to assess late fees by taking the 
summation of one and one-half percent (1\1/2\%) of the amount past due 
for the first month plus one and one-half percent (1\1/2\%) of the 
amount past due for any month thereafter, compounded by late fees 
assessed for previous months.
    Currently, Section H of Part IX of Schedule D to the By-Laws 
provides that charges for Nasdaq Level 1 and Nasdaq/NMS Last Sale 
services which are past due 45 days will be assessed a fee equal to 
1\1/2\% per month of the unpaid balance. For all other Nasdaq charges, 
namely, charges for the Nasdaq Level 2/3 service, Over-the-Counter 
Bulletin Board (``OTCBB''), Mutual Fund Quotation Program, and Nasdaq 
Workstation service (collectively referred to hereinafter as ``Nasdaq 
charges''), the late payment fee presently is equal to 10% of the 
amount past due for 60 days or more. By eliminating the current 
practice of using these two different methods to assess late fees for 
various NSM charges, the NASD's operational efficiency will be enhanced 
and public confusion concerning the NASD's late fee policy likely will 
be diminished.
    The NASD also is proposing to amend Section H to provide that the 
section governs fees for the late payment of NSM charges instead of 
``NASDAQ charges.'' This amendment reflects the merger, effective June 
30, 1993, of two of the NASD's corporate subsidiaries, Nasdaq, Inc. and 
NASD Market Services, Inc. (``MSI''), into one consolidated subsidiary 
called The Nasdaq Stock Market, Inc. In addition, this amendment serves 
to subject charges for services provided by MSI (the NSM after the 
merger) to late payment fees (e.g., SOES, SelectNet, and ACT charges). 
Currently, other than for Nasdaq/NMS Last Sale service charges, there 
is no fee for the late payment of service charges that previously were 
assessed by MSI but now are assessed by the NSM after the merger. Thus, 
the proposal enhances the consistency and uniformity of late payment 
charges assessed by the NSM.
    The NASD notes that the current 10% late fee charge has produced 
revenues of approximately $35,000 annually. However, the NASD also 
notes that its implementation of a subscriber deposit policy in April 
1990 has been very effective in offsetting potential losses from 
subscribers with delinquent accounts.\2\ Therefore, the NASD believes 
the 10% fee for late payments is no longer necessary and that the 1\1/
2\% fee for amounts past due over 45 days is a reasonable way to impose 
fees for the late payment of service charges.
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    \2\See Securities Exchange Act Release No. 27924 (April 20, 
1990), 55 FR 17691 (File SR-NASD-90-25).
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2. Statutory Basis
    The NASD believes that the proposed rule change is consistent with 
Section 15A(b)(5) of the Act. Section 15A(b)(5) requires that the rules 
of a national securities association provide for the equitable 
allocation of reasonable dues, fees and other charges among members and 
issuers and other persons using any facility or system which the 
association operates or controls. Specifically, by instituting a 
uniform and consistent policy for assessing fees for the late payment 
of service charges imposed by the NSM, the NASD believes that the 
amount charged for the late payment of fees will be reasonable and 
equitably allocated. Moreover, the uniform late fee policy will enhance 
the efficiency of the NASA's new consolidated billing system and likely 
decrease confusion concerning the method by which fees for the late 
payment of NSF charges are determined.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The NASD believes that the proposed rule change will not result in 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Commerce on the Proposed 
Rule Change Received From Members, Participants, or Others

    Comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing 
for Commission Action

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the NASD consents, the Commission will:

    A. By order approve such proposed rule change, or
    B. Institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for inspection and copying in the 
Commission's Public Reference Room. Copies of such filing will also be 
available for inspection and copying at the principal office of the 
NASD. All submissions should refer to the file number in the caption 
above and should be submitted by August 30, 1994.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\3\
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    \3\17 CFR 200.30-3(a)(12) (1989).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-19376 Filed 8-8-94; 8:45 am]
BILLING CODE 8010-01-M