[Federal Register Volume 68, Number 41 (Monday, March 3, 2003)]
[Notices]
[Pages 10058-10059]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-4833]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-47394; File No. SR-NASD-2003-18]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by National Association of 
Securities Dealers, Inc. Relating to a Proposed Rule Change to Section 
9 of Schedule A to the NASD By-Laws

February 24, 2003.
    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 February 12, 2003, the National Association of Securities Dealers, 
Inc. (``NASD'') 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. 
NASD has designated the proposed rule change as ``establishing or 
changing a due, fee, or other charge'' under section 19(b)(3)(A)(ii) of 
the Act \3\ and rule 19b-4(f)(2) thereunder,\4\ which renders the 
proposal effective upon receipt of this filing by the Commission. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NASD is proposing to amend section 9, Schedule A of the By-Laws of 
NASD to implement a fee schedule for NASD member firms that choose to 
use a secure Web-based electronic file transfer application to submit 
to the CRD or IARD systems multiple form filings in a single 
transaction or to download member firm data and processing results from 
Web CRD or IARD. Below is the text of the proposed rule change. The 
proposed fee becomes operative on March 24, 2003. 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 NASD shall be determined on the following basis.
* * * * *
Section 9--Subscription Charges for [Firm Access Query System (FAQS)] 
Registration Batch Filing/Data Download Via the Web CRD Electronic File 
Transfer (EFT) System

    (a) Each firm electing to subscribe to the [Firm Access Query 
System (FAQS)] Web CRD Electronic File Transfer (EFT) System for 
registration batch filing and/or data download will be assessed [a user 
fee consisting of three components (1) a monthly data base access 
charge, (2) an hourly usage fee, and (3) a charge per 1,000 characters 
(``kilocharacter'') of information sent or received.] an annual 
subscription fee based on the type of service that the firm uses. The 
fee schedule to be paid by each firm is as follows:
    (1) [Monthly Data Base Access Charge--$70.00] Data Download--
$1,800.00
    (2) [Hourly Usage Charge--$70.00 per hour; and] Form Filing--
$3,600.00
    (3) [Kilocharacter Transmission Charge--$0.70] Data Download and 
Form Filing--$4,800.00
    [Each firm which subscribes to the service will provide its own 
terminal and modem.]
* * * * *

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 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 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
    The purpose of the proposed rule change is to amend section 9 of 
Schedule A to the NASD By-Laws by deleting the Firm Access Query System 
(``FAQS'') subscription charges \5\ and, in its place, establishing a 
yearly subscription charge for NASD member firms that choose to use a 
new secure web-based electronic file transfer application (``Web EFT'') 
to submit multiple Form U-4 and Form U-5 filings in a single 
transaction to the CRD or IARD systems (hereinafter referred to as 
``batch filing'') or to download member firm data and processing 
results from the CRD or IARD systems.
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    \5\ The FAQS functionality enabled members to enter non-
disclosure-related amendments to the Form U-4, and full terminations 
(with or without disclosure) or partial terminations via the Form U-
5 directly onto the legacy CRD system via a dedicated (modem) line 
established by the member. Upon implementation of the Web CRD system 
in August 1999, NASD retired the legacy CRD system (which relied 
primarily on hard copy filing of uniform registration forms that 
were data-entered upon receipt) and the FAQS functionality. Since 
the implementation of Web CRD, members use the Internet as their 
primary method of filing forms into the CRD system.
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    Although NASD retired the legacy CRD system and the FAQS 
functionality in 1999, it did not retire a legacy electronic filing 
transfer (``Legacy EFT'') application. Legacy EFT gives participating 
firms the ability to interface electronically with the CRD system to 
(1) submit ``batch'' filings and (2) download registration data and 
accounting reports on a regular basis. Legacy EFT, which is based on 
older technology that provides limited batch filing and data download 
capabilities, is currently available to NASD members that choose to 
submit form filings and download data via a dedicated (modem) line 
established by the firm.
    In the first quarter of 2003, NASD plans to introduce Web EFT, a 
state-of-the-art application that will replace the current Legacy 
EFT.\6\ Web EFT will allow NASD firms to interface with NASD systems in 
an automated manner to submit batch filings to NASD and/or to download 
registration data (i.e., firm

[[Page 10059]]

data and processing results from Web CRD or IARD). Web-based form 
filing (on a single transaction basis) will remain available through 
Web CRD and IARD; therefore, member firms will not be required to use 
Web EFT.
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    \6\ NASD plans to deploy the Web EFT application in the first 
quarter of 2003, but it does not plan to retire the Legacy EFT 
application until the third quarter of 2003. This will give firms 
time to test and convert to Web EFT.
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    Member firms that elect to use the new Web EFT application will be 
charged a fee based on whether they choose to use the data download or 
form filing functionalities, or both. NASD is proposing annual 
subscription fees of $1,800.00 per year for data downloading; $3,600.00 
per year for form filing; and $4,800.00 per year for data downloading 
and form filing. The proposed fees would be effective upon full 
deployment of Web EFT, currently scheduled for March 24, 2003.\7\ The 
proposed fees are designed to recover the cost of developing and 
operating registration-related batch filing and data downloads via Web 
EFT.
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    \7\ Details on how a firm can sign up for Web EFT, payment 
schedules, and additional information on Web EFT are available on 
NASD's Web site at http://www.nasdr.com/3400_eft.asp.
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    Web EFT will benefit NASD and member firms by eliminating the costs 
and risks associated with maintaining Legacy EFT, enhancing security, 
and increasing efficiencies through the expanded batch filing and data 
download options that will be available. Further, the proposed Web EFT 
application and accompanying infrastructure will give firms a more 
secure interface to NASD systems, and it will enable firms that use the 
registration batch filing service to submit in batches additional 
filing types not currently available through the legacy system.\8\ For 
example, the new application will enable firms to batch file all forms 
for registered persons and all filings for non-registered personnel who 
are required to be fingerprinted. As with Legacy EFT, firms will not be 
able to submit filings that include Disclosure Reporting Pages 
(``DRPs''). The new application will also enable firms to download more 
reports than are currently available to firms through Legacy EFT.
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    \8\ Web EFT will add six additional filing types that were not 
available in Legacy EFT.
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    Web EFT should be especially attractive to larger member firms that 
process high volumes of filings (e.g., office of employment address 
changes for large numbers of registered individuals when there is a 
branch relocation), or that wish to download from Web CRD or IARD large 
amounts of data on their registered persons (e.g., to obtain a download 
of exam results for registered persons at the firm for a specified 
period) to populate their own internal systems. In this regard, large 
member firms that maintain such internal systems have expressed a 
desire for a more robust EFT application to support registration 
transactions because of the efficiencies it will provide them, 
including the elimination of duplicative data entry.
(2) Statutory Basis
    NASD believes that the proposed rule change is consistent with the 
provisions of section 15A(b)(5) of the Act, which requires, among other 
things, that NASD's rules provide for the equitable allocation of 
reasonable dues, fees, and other charges among members and issuers and 
other persons using any facility or system that NASD operates or 
controls. NASD believes that the proposed subscription charges are 
reasonable fees that fairly reflect the benefit to be gained by members 
from using a secure Web-based EFT application to submit batch filings 
in a single transaction or to download member firm data and processing 
results from Web CRD or IARD.

(B) Self-Regulatory Organization's Statement on Burden on Competition

    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

    NASD has designated the proposed rule change as ``establishing or 
changing a due, fee, or other charge'' under section 19(b)(3)(A)(ii) of 
the Act \9\ and rule 19b-4(f)(2) thereunder,\10\ which renders the 
proposal effective upon receipt of this filing by the Commission. The 
NASD will implement the fee on March 24, 2003. At any time within 60 
days of this filing, the Commission may summarily abrogate this 
proposal 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.
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    \9\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \10\ 17 CFR 240.19b-4(f)(2).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change 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 in Washington, DC. Copies of such 
filing will also be available for inspection and copying at the 
principal office of NASD. All submissions should refer to the file 
number in the caption above and should be submitted by March 24, 2003.


    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-4833 Filed 2-28-03; 8:45 am]
BILLING CODE 8010-01-P