[Federal Register Volume 64, Number 69 (Monday, April 12, 1999)]
[Notices]
[Pages 17707-17709]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-9009]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-41248; File No. SR-NASD-99-01]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change and Amendment Nos. 1 and 2 Thereto by the National Association 
of Securities Dealers, Inc.; Relating to the Filing Fees Under the 
Corporate Financing Rule

April 2, 1999.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on January 11, 1999, the National Association of Securities Dealers, 
Inc. (``NASD''), through its wholly owned subsidiary NASD Regulation, 
Inc. (``NASD Regulation''), 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 NASD Regulation. On March 18, 1999, and March 23, 1999, NASD 
Regulation submitted to the Commission Amendment Nos. 1 and 2, 
respectively, to the proposed rule change.\3\ The Commission is 
publishing this notice to solicit comments on the proposed rule change, 
as amended, from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ NASD Regulation filed Amendment No. 1 which superseded the 
original rule filing in its entirety. See Letter from Joan C. 
Conley, Secretary, NASD Regulation, to Katherine A. England, 
Assistant Director, Market Regulation, Commission, dated March 17, 
1999; Amendment No. 2 also superseded Amendment No. 1 and the 
original rule filing in its entirety. See Letter from Joan C. 
Conley, Secretary, NASD Regulation, to Katherine A. England, 
Assistant Director, Market Regulation, Commission, dated March 22, 
1999.
---------------------------------------------------------------------------

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

    NASD Regulation is proposing to amend Section 6 of Schedule A to 
the NASD By-Laws and NASD Conduct Rule 2710 to simplify the fee 
structure for public offerings filed under NASD Conduct Rules 2710, 
2720, and 2810. Below is the text of the proposed rule change. Proposed 
new language is in italics; proposed deletions are in brackets.
* * * * *

Schedule A to the NASD By-Laws

    Assessments and fees pursuant to the provisions of Article VI of 
the By-Laws of the Corporation, shall be determined on the following 
basis.

Section 1-Section 5
    No change.
Section 6--Fees for Filing Documents Pursuant to the Corporate 
Financing Rule
    (a) [The] There shall be a fee imposed for the filing of initial 
documents relating to any offering filed with the NASD pursuant to the 
Corporate Financing Rule [shall be accompanied by a filing fee] equal 
to $500 plus .01% of the [gross dollar amount of the offering,] 
proposed maximum aggregate offering price or other applicable value of 
all securities registered on an SEC registration statement or included 
on any other type of offering document (where not filed with the SEC), 
but shall not [to] exceed [a fee of] $30,500. The amount of filing fee 
may be rounded to the nearest dollar.
    (b) [Amendments] There shall be an additional fee imposed for the 
filing of any amendment or other change to the [initially filed 
documents which increase the number of securities being offered] 
documents initially filed with the NASD pursuant to the Corporate 
Financing Rule [shall be accompanied by an additional amount of filing 
fee] equal to .01% of the [per share offering price of the new or 
additional securities, multiplied by the number of new or additional 
securities being offered,] net increase in the maximum aggregate 
offering price or other applicable value of all securities registered 
on an SEC registration statement, or any related SEC Rule 462(b) 
registration statement, or reflected on any SEC Rule 430A prospectus, 
or included on any other type of offering document. However, the 
aggregate of all filing fees paid in connection with an SEC 
registration statement or other type of offering document shall not 
[to] exceed $30,500 [when aggregated with all fees previously paid].
    [(c) the provisions of Rule 457 adopted under the Securities Act of 
1933, as amended, shall govern the computation of filing fees for all 
offerings filed pursuant to this Section, including intrastate 
offerings, to the extent the terms of Rule 457 are not inconsistent 
with this Section.]

Section 7-Section 15
    No change.
* * * * *
2710. Corporate Financing Rule--Underwriting Terms and Arrangements
(a) Definitions
    For purposes of this Rule, the following terms shall have the 
meanings stated below. The definitions in Rule 2720 are incorporated 
herein by reference.
    [(1) Gross Dollar Amount of the Offering]
    [Public offering price of all securities offered to the public and 
securities included in any overallotment option, the registration price 
of securities to be paid to the underwriter and related persons, and 
the registration price of any securities underlying other securities;]

(2)-(6) renumbered (1)-(5)
(b) Filing Requirements
(1)-(9)
    No change.

[(10) Filing Fees]
    [(A) The initial documents relating to any offering filed with the 
Association pursuant to this Rule shall be accompanied by a filing fee 
equal to $500 plus .01% of the gross dollar amount of the offering, not 
to exceed a fee of $30,500. The amount of filing fee may be rounded to 
the nearest dollar.]

[[Page 17708]]

    [(B) Amendments to the initially filed documents which increase the 
number of securities being offered shall be accompanied by an 
additional amount of filing fee equal to .01% of the per share offering 
price of the new or additional securities, multiplied by the number of 
new or additional securities being offered, not to exceed $30,500 when 
aggregated with all fees previously paid.]
    [(C) The provisions of SEC Rule 457 adopted under the Securities 
Act of 1933, as amended, shall govern the computation of filing fees 
for all offerings filed pursuant to this Rule, including intrastate 
offerings, to the extent the terms of Rule 457 are not inconsistent 
with subparagraph (A), (B) or (C) above.]

(11)-(13) renumbered (10-(12)

(c) No change.
* * * * *

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

    In its filing with the Commission, NASD Regulation 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. NASD Regulation has prepared summaries, set 
forth in Sections A, B, 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
    NASD Conduct Rule 2710 (the ``Corporate Financing rule'') requires 
that NASD members file most proposed public offerings with the 
Corporate Financing Department (``Department'') of NASD Regulation. The 
Department reviews these filings in order to determine whether the 
underwriting terms and arrangements are fair and reasonable pursuant to 
standards set forth in NASD Conduct Rules 2710, 2720, and 2810 prior to 
the commencement of the offering.
    Certain aspects of the existing process by which Corporate 
Financing filing fees (as defined below) are calculated create 
unnecessary inefficiencies in the handling of such fees by NASD 
Regulation. NASD Regulation is proposing to amend its rules, as 
discussed below, to address these problems with respect to the 
Corporate Financing filing fees.
    Elimination of Duplicate Provision--Section 6 of Schedule A to the 
NASD By-Laws (``Section 6 of Schedule A'') and Paragraph (b)(10) of 
Conduct Rule 2710 include identical provisions that impose a fee on 
each filing, in the amount of $500 plus .01% of the value of 
securities, with a maximum filing fee limit of $30,500 (the ``Corporate 
Financing filing fee''). NASD Regulation now proposes to eliminate 
paragraph (b)(10) of Conduct Rule 2710 in its entirety because it 
duplicates Section 6 of Schedule A. NASD Regulation further believes 
that Schedule A is the more appropriate location for provisions that 
impose fees on NASD members.
    Method for Submission of Filing Fees--The language of Sections 6(a) 
and 6(b) of Schedule A currently specify that a filing fee will 
accompany an initial filing and amendments, in certain cases. NASD 
Regulation is proposing to eliminate this language so that it can have 
greater flexibility with respect to the manner in which filing fees are 
paid.\4\
---------------------------------------------------------------------------

    \4\ NASD Regulation recently deleted Subsection (6)(c) of 
Schedule A to the NASD By-Laws and Subparagraph (b)(10)(C) of 
Conduct Rule 2710, which had mandated that Corporate Financing 
filing fees be paid in the form of a check or money order. See 
Securities Exchange Act Release No. 40706 (November 24, 1998), 63 FR 
66618 (December 2, 1998).
---------------------------------------------------------------------------

    Application of Fee to All Securities on Offering Document--
Currently, offerings filed with the Department are charged a fee equal 
to $500, plus .01% of the gross dollar amount of the offering, not to 
exceed $30,500. The definition of the term ``gross dollar amount of the 
offering'' in Paragraph (a)(1) of Conduct Rule 2710 only allows NASD 
Regulation to collect a fee on ``all securities offered to the 
public.'' This language is often interpreted by NASD members to impose 
a fee only with respect to those specific securities currently offered 
by the NASD member filing a proposed offering, even when the issuer has 
included other securities on the same offering document for later 
public sale by the same or another member. Further in the case of 
securities registered with the SEC pursuant to Rule 415, NASD members 
have argued that the Department should recalculate the filing fee each 
time a shelf takedown is made so that the NASD member is only 
responsible for the Corporate Financing filing fee that relates to the 
NASD member's specific shelf takedown. Such a piecemeal calculation of 
filing fees would be time-consuming and cause accounting difficulties.
    NASD Regulation proposes to amend Section 6(a) to Schedule A to 
clarify that the Corporate Financing filing fee will be calculated on 
the proposed maximum aggregate offering price (or other applicable 
value) of all securities included on an SEC registration statement or 
any other type of offering document--regardless of whether the 
securities are to be currently ``offered to the public.'' The term 
``proposed maximum aggregate offering price'' is the same term used in 
the fourth column of the fee table on the cover of SEC registration 
statement forms to identify the total of the proposed public offering 
price of all securities to be registered on that registration 
statement. The inclusion of the words ``other applicable value'' is 
intended to cover debt securities or a situation in which the company 
only registers a dollar amount of securities without specifying the 
type of security. This is the same value that would also be included 
under the fourth column of the fee table titled ``proposed maximum 
aggregate offering price'' on the cover of SEC registration forms in 
the case where a debt issue or a dollar amount of securities is being 
registered with the SEC.
    The NASD believes that this clarification will facilitate the 
calculation of Corporate Financing filing fees and remove issues of 
dispute that currently occur over whether securities included on an 
offering document are being currently ``offered to the public.'' Since 
the calculation of the Corporate Financing filing fee will no longer be 
based on the ``gross dollar amount of the offering,'' this definition 
is proposed to be eliminated in Paragraph (a)(1) of NASD Conduct Rule 
2710.
    Calculation of Fee on Amendments--Section 6(b) of Schedule A 
currently requires that NASD Regulation collects an additional filing 
fee when an amendment to the offering document decreases the number of 
securities being registered, regardless of whether there is any 
increase in the aggregate value of the securities that were included on 
the original offering document. This additional fee is calculated by 
multiplying the number of additional securities times their new 
offering price, and charging a fee of .01% of this product (with a 
limitation of $30,500 in total fees with respect to any offering 
filed). When such an amendment decreases the maximum aggregate offering 
price for the whole offering (as well as increasing the number of 
securities offered), the collection of an additional fee by the 
Department is not always warranted. Conversely, the Department is 
currently prohibited from collecting an additional fee when the

[[Page 17709]]

amendment increases the maximum aggregate offering price of the 
securities offered, but does not increase the number of securities.
    NASD Regulation is proposing to amend Section 6(b) of Schedule A to 
impose an additional fee for amendments only when there is an increase 
in the maximum aggregate offering price or other applicable value of 
all securities included on the offering document. Thus, an additional 
filing fee would be imposed in the amount of .01% of the net increase 
in the maximum aggregate offering price or other applicable value of 
all securities registered on an SEC registration statement or included 
on any other type of offering document, with a maximum of $30,500 
charged for any offering. However, no refund will be made as a result 
of a net decrease in the maximum aggregate offering price or other 
applicable value.
    The proposed change to Section 6(b) of Schedule A clarifies that 
NASD Regulation recognizes that there can be a net increase in the 
maximum aggregate offering price or other applicable value of an 
offering registered with the SEC through an amendment to the 
registration statement or through ``any other change.'' The language 
also treats as an amendment a net increase in the maximum aggregate 
offering price or other applicable value that is reflected on an SEC 
Rule 430A prospectus \5\ or filed in a related registration statement 
pursuant to SEC Rule 462(b).\6\
---------------------------------------------------------------------------

    \5\ SEC Rule 430A permits a registrant to omit certain 
information from a prospectus that is filed as part of a 
registration statement declared effective by the SEC if the omitted 
information is contained in a prospectus filed with the SEC pursuant 
to SEC Rule 424(b) or SEC Rule 497(h) within 15 business days after 
effectiveness. If the omitted information is not contained in a 
prospectus filed with the SEC within fifteen business days after 
effectiveness, it must be contained in an effective post-effective 
amendment to the registration statement. SEC Rule 430A permits a 
registrant to reflect in the prospectus filed pursuant to SEC Rule 
424(b) or SEC Rule 497(h) or in a post-effective amendment to the 
registration statement a change in the volume of securities offered 
(if the total value of securities offered would not exceed that 
which was registered) or a change in the bona fide estimate of the 
maximum offering price range if the changes, in the aggregate, 
represent no more than a 20 percent change in the maximum aggregate 
offering price set forth in the fee table in the effective 
registration statement.
    \6\ SEC Rule 462(b) permits a registrant to file a registration 
statement that is effective upon filing if, among other things, the 
registration statement registers ``additional securities of the same 
class(es) as were included in an earlier registration statement for 
the same offering and declared effective with the Commission.''
---------------------------------------------------------------------------

    SEC Rule 457--Section 6(c) of Schedule A requires that Corporate 
Financing filing fees be computed according to SEC Rule 457, to the 
extent that SEC Rule 457 is not inconsistent with Section 6 of Schedule 
A. Originally, the Corporate Financing filing fee rule referenced SEC 
Rule 457 in order to calculate the Corporate Financing file fees in 
certain situations. The amendments proposed herein to the Corporate 
Financing filing fee rule would incorporate all necessary concepts for 
the calculation of such filing fees. Therefore, NASD Regulation 
proposes to eliminate Section 6(c), as the reference to SEC Rule 457 is 
no longer necessary.
2. Statutory Basis
    NASD Regulation believes that the proposed rule change is 
consistent with the provisions of Section 15A(b)(5) \7\ of the Act, 
which requires that the rules of a national securities association 
provide for the equitable allocation of reasonable dues, fee, and other 
charges among members. NASD Regulation believes that the proposed rule 
change provides for the equitable allocation of the fees paid by 
members in connection with the submission of proposed public offerings 
to the Department for review
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78o-3(b)(5).
---------------------------------------------------------------------------

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

    NASD Regulation 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.

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

    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 self-regulatory organization 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. Socilitation of Comments

    Interested persons are invited to submit written date, views, and 
arguments concerning the foregoing including whether the proposal is 
consistent with the Act. Persons making written submissions should file 
six copies thereof with the Secretary, Securities and Exchange 
Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. 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 file No. SR-NASD-99-01 and should be 
submitted by May 3, 1999.

    For the Commission, by the Division of Market Regulations, 
pursuant to delegated authority.\8\
---------------------------------------------------------------------------

    \8\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-9009 Filed 4-9-99; 8:45 am]
BILLING CODE 8010-01-M