[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