[Federal Register Volume 60, Number 3 (Thursday, January 5, 1995)]
[Notices]
[Pages 1817-1818]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-194]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35170; File No. SR-NASD-94-74]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by National Association of 
Securities Dealers, Inc. Relating to Member Arbitration Surcharge

December 28, 1994.
    Pursaunt 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 December 
8, 1994, the National Association of Securities Dealers, Inc. (``NASD'' 
or ``Association'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I, II, and III below, which Items have been prepared by the NASD. 
The NASD has designated this proposal as one establishing or changing a 
fee under Section 19(b)(3)(A)(ii) of the Act, which renders the rule 
effective upon the Commission's receipt of this filing. The Commission 
is publishing this notice to solicit comments on the proposed rule 
change from interested persons.

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The NASD is proposing a rule change to the Code of Arbitration 
Procedure amending Section 45(a) to adjust the surcharge on members 
applied to all new case filings from a flat rate to a graduated rate 
based on the amount in dispute. Proposed new language is in 
[[Page 1818]] italics; proposed deletions are in brackets.

Part III--Uniform Code of Arbitration

* * * * *

Member Surcharge

    Sec. 45.
    (a) Each member who is named as a party to an arbitration 
proceeding, whether in a Claim, Counterclaim, Crossclaim or Third-Party 
claim, shall be assessed a [$200] non-refundable surcharge pursuant to 
the schedule below when the Arbitration Department perfects service of 
the claim naming the member on any party to the proceeding. For each 
associated person who is named, the surcharge shall be assessed against 
the member or members which employed the associated person at the time 
of the events which gave rise to the dispute, claim or controversy. No 
member shall be assessed more than a single surcharge in any 
arbitration proceeding. The surcharge shall not be subject to 
reimbursement under Subsections 43(c) and 44(c) of the Code.

------------------------------------------------------------------------
                      Amount in Dispute                        Surcharge
------------------------------------------------------------------------
$.01--$10,000................................................      $100 
$10,000.01--$50,000..........................................       200 
$50,000.01--$100,000.........................................       300 
$100,000.01--$500,000........................................       350 
Over $500,000................................................       500 
------------------------------------------------------------------------

    (b) For purposes of this Section, service is perfected when the 
Director of Arbitration properly serves the Respondents to such 
proceeding under Subsection 25(a) of the Code.

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

    In early 1994, the NASD added new Section 45 to the Code requiring 
any member named as a party to an arbitration proceeding to be assessed 
a non-refundable, flat $200 surcharge in order to offset significantly 
increasing resourcing needs resulting from, among other things, case 
growth and increased arbitrator recruitment and training. However, the 
NASD has long recognized that the amount in dispute in arbitration 
cases and controversies is generally directly proportional to the 
amount of resources the NASD needs to expend in order to resolve the 
case or controversy.
    In recognition of the fact that larger cases require greater 
resources, the NASD is proposing to replace the flat surcharge of $200 
in Section 45 with a graduated surcharge based on the amount in 
dispute, ranging from a low surcharge of $100 for amounts in dispute 
not exceeding $10,000 to surcharge of $500 for amounts in dispute 
exceeding $500,000.
    The NASD believes that the proposed rule change is consistent with 
the provisions of Section 15A(b)(5) of the Act,\1\ which require that 
the rules of the Association provide for the equitable allocation of 
reasonable dues, fees and other charges among members in that the 
proposed rule fairly adjusts the surcharge on members for new cases to 
more closely reflect the costs associated with resolving controversies 
involving varying amounts in dispute.

    \1\15 U.S.C. Sec. 78o-3.
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(B) Self-Regulatory Organization's Statement on Burden on Competition

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

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

    Written comments were neither solicited nor received.

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

    The foregoing rule change has become effective upon filing pursuant 
to Section 19(b)(3)(A)(ii) of the Act and subparagraph (e) of Rule 19b-
4 thereunder in that it constitutes a due, fee or other charge.
    At any time within 60 days of the filing of a rule change pursuant 
to Section 19(b)(3)(A) of the Act, the Commission may summarily 
abrogate the rule change if it appears to the Commission that such 
action is necessary or appropriate in the public interest, for the 
protection of investors, or otherwise in furtherance of the purposes of 
the Act.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing. Persons making submissions should 
file six copies thereof with the Secretary, Securities and Exchange 
Commission, 450 Fifth Street, NW., Washington, DC 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 January 26, 1995.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\2\

    \2\17 CFR 200.30-3(a)(12)
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-194 Filed 1-4-95; 8:45 am]
BILLING CODE 8010-01-M