[Federal Register Volume 59, Number 165 (Friday, August 26, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-21062]


[[Page Unknown]]

[Federal Register: August 26, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34562; File No. SR-NASD-94-39]

 

Self-Regulatory Organizations; Order Approving Proposed Rule 
Change by the National Association of Securities Dealers, Inc., 
Relating to a Security Application Fee for The PORTAL Market

August 19, 1994.

I. Introduction

    On June 22, 1994, the National Association of Securities Dealers, 
Inc., (``NASD'' or ``Association''), filed with the Securities and 
Exchange Commission (``SEC'' or ``Commission''), pursuant to Section 
19(b)(1) of the Securities Exchange Act of 1934 (``ACT'')\1\ and Rule 
19b-4 thereunder,\2\ a proposed rule change to amend The PORTAL Market 
Rules, Schedule I to the NASD By-Laws (``PORTAL Rules''), to add a 
security application fee with respect to securities submitted for 
designation in The PORTAL Market.
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    \1\15 U.S.C. Sec. 78s(b)(1) (1988).
    \2\17 CFR 240.19b-4 (1991).
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    The proposed rule change was published for comment in Securities 
Exchange Act Release No. 34297 (July 1, 1994), 59 FR 35398 (July 11, 
1994). No comments were received on the proposal.

II. Description of the Proposal

    The present proposal amends the NASD's PORTAL Rules to add a 
security application fee that would be charged to PORTAL participants 
who apply to the NASD so that, when appropriate, a security may be 
designated in The PORTAL Market.
    The Nasdaq Stock Market, Inc., operates The PORTAL Market for the 
quotation of securities that are restricted securities, as defined in 
Rule 144(a)(3) under the Securities Act of 1933 (``Securities Act''), 
or are securities that are treated as if restricted.\3\ In order to 
qualify for inclusion in The PORTAL Market, a security that is 
restricted or treated as if restricted must be eligible to be sold 
pursuant to Rule 144A under the Securities Act,\4\ be in negotiable 
form, and be assigned a CUSIP or other security identification number 
that is different from any identification number assigned to any 
unrestricted securities of the same class. Designation of a security as 
a PORTAL security permits the security to be assigned a CUSIP number by 
Standard & Poor's Corporation and be cleared and settled through the 
Depository Trust Company.
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    \3\Part II, PORTAL Rules, provides that to qualify for initial 
designation and continued designation in the PORTAL Market, a 
security shall be either a restricted security, as defined in Rule 
144(a)(3) under the Securities Act, or a security that upon issuance 
and continually thereafter only can be sold pursuant to Regulation S 
under the Securities Act, Rule 144A, or Rule 144 under the 
Securities Act, or sold in a transaction exempt from the 
registration requirements of the Securities Act pursuant to Section 
4 and not involving any public offering.
    \4\This provision requires that the security meet the 
``fungibility'' and ``information delivery requirements'' of Rule 
144A(d) (3) and (4) under the Securities Act.
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    Pursuant to section 2 of the PORTAL Rules, any PORTAL participant 
may submit an application for security designation. ``PORTAL 
participants'' include PORTAL dealers, PORTAL brokers, and PORTAL 
investors. The first two categories of PORTAL participants are required 
to be brokers and dealers registered with the Commission under Section 
15 of the Exchange Act and members of the NASD. The third category of 
PORTAL participants are institutional investors that are not members of 
the NASD that meet the definition of ``qualified institutional buyer'' 
under Rule 144A.
    The PORTAL Market has processed over one thousand applications for 
designation as a PORTAL security. The NASD has operated The PORTAL 
Market since its initiation June 1990 without the imposition of any 
fees on users. Under the present proposal, the NASD will adopt a filing 
fee of $2,000 per security application submitted plus $200 for each 
security identification symbol assigned after the first symbol. The fee 
for each security identification symbol is being established because 
many private offerings involve securities that are sold in multiple 
tranches, each of which is treated as a separate security that is 
assigned a separate identification symbol, even though they are part of 
a single private offering.
    The NASD believes the imposition of a PORTAL filing fee will assist 
The Nasdaq Stock Market, Inc. to cover continuing costs associated with 
the operation of The PORTAL Market, including significant costs 
associated with the processing of security applications. The processing 
of security applications for The PORTAL Market requires an immediate 
review of all applications, as private placements are usually on a very 
short time schedule. Such review must ensure that the security meets 
all of the requirements in Part II of The PORTAL Rules, as discussed 
above. Given the efforts required by The Nasdaq Stock Market, Inc. 
staff, the NASD believes that the fees as proposed are appropriate.

III. Commission's Findings

    The Commission believes that the proposed rule change is consistent 
with the provisions of Section 15A(b)(5) of the Exchange Act,\5\ which 
requires that the rules of the 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. The Commission believes that the 
proposed rule change equitably applies a filing fee to all applications 
submitted by PORTAL dealers, PORTAL brokers, and PORTAL qualified 
investors for the designation of securities in The PORTAL Market. The 
Commission believes the imposition of a PORTAL filing fee is reasonable 
in that it should assist The Nasdaq Stock Market, Inc., in covering 
continuing costs associated with the operation of The PORTAL Market, 
including significant costs associated with the processing of security 
applications for the The PORTAL Market.
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    \5\ 15 U.S.C. Sec. 78o-3 (1988).
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\6\ that the proposed rule change (SR-NASD-94-39) is approved.

    \6\15 U.S.C. Sec. 78s(b)(2) (1988).
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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\7\
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    \7\17 CFR 200.30-3(a)(12) (1991).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-21062 Filed 8-25-94; 8:45 am]
BILLING CODE 8010-01-M