[Federal Register Volume 68, Number 135 (Tuesday, July 15, 2003)]
[Notices]
[Pages 41852-41854]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-17786]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-48140; File No. SR-MSRB-2003-06]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Municipal Securities Rulemaking Board To Amend Rule A-14, 
on Annual Fees

July 8, 2003.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``the Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on July 3, 2003 the Municipal Securities Rulemaking Board 
(``Board'' or ``MSRB'') 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 Board. 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The MSRB is proposing to amend Rule A-14, which provides for an 
annual fee paid by dealers to the MSRB. The MSRB requests the MSRB 
requests that the proposed rule change become effective prior to the 
beginning of the Board's fiscal year of 2004 (October 1,

[[Page 41853]]

2003). Below is the text of the proposed rule change. Proposed new 
language is italicized, deletions are in brackets.
* * * * *

Rule A-14: Annual Fee

    In addition to any other fees prescribed by the rules of the Board, 
each broker, dealer and municipal securities dealer shall pay an annual 
fee to the Board of [$200] $300, with respect to each fiscal year of 
the Board in which the broker, dealer or municipal securities dealer 
conducts municipal securities activities. Such fee must be received at 
the office of the Board no later than October 31 of the fiscal year for 
which the fee is paid, accompanied by the invoice sent to the broker, 
dealer or municipal securities dealer by the Board, or a written 
statement setting forth the name, address and Commission registration 
number of the broker, dealer or municipal securities dealer on whose 
behalf the fee is paid.
* * * * *

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 Board 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 Board 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 help provide 
sufficient revenues to fund Board operations and to allocate fees among 
dealers in a manner that, compared to the current fee structure, more 
accurately reflects each dealer's involvement in the municipal 
securities market. The proposed rule change would accomplish these 
purposes by amending Rule A-14 to increase the annual fee assessed to 
dealers from $200 to $300 per dealer.
    The MSRB currently levies three types of fees that are generally 
applicable to dealers. Rule A-12 provides for a $100 initial fee paid 
once by a dealer when it enters the municipal securities business. Rule 
A-13 provides for an underwriting fee of $.03 per $1000 par value of 
bonds and $.01 per $1000 par value of notes, and a transaction fee of 
$.005 per $1000 par value. Rule A-14 provides for an annual fee of $200 
from each dealer who conducts municipal securities activities. The 
annual fee imposed by Rule A-14 was last increased from $100 to $200 in 
1996.
    The MSRB has reviewed its revenue structure on a number of 
occasions in the past to ensure that the fee structure reflects a 
firm's activity within the industry. The MSRB believes that its fees 
are not levied for a single purpose but for general purposes, since 
MSRB regulatory activities affect all participants in the dealer 
community. Over the last six years, the proportion of MSRB revenues 
derived from the underwriting assessment and the transaction fee has 
grown dramatically while the proportion from the annual fee has 
declined. A number of dealers that do not participate in traditional 
municipal securities underwriting activities or are not actively 
involved in the trading of traditional municipal securities effectively 
only pay a small annual fee of $200 to the MSRB. For example, firms 
that primarily effect transactions in a new product, municipal fund 
securities, only pay the annual fee because such transactions are 
exempt from underwriting and transaction fees. The MSRB believes that 
these firms should pay a higher proportion of the regulatory fees.
    To redress this imbalance, the MSRB has determined to raise the 
annual fee from $200 to $300. We anticipate that the proposed rule 
change will result in an increase of $250,000 to the MSRB's revenues in 
fiscal year 2004. The proposed rule change will enhance the equitable 
distribution of fees among dealers in the municipal securities market 
and increase the MSRB's revenue to accommodate the increased costs 
associated with regulating municipal fund securities activities.
2. Basis
    The Board has adopted the proposed rule change pursuant to section 
15B(b)(2)(J) of the Act, which requires, in pertinent part, that the 
Board's rules shall:

    Provide that each municipal securities broker and each municipal 
securities dealer shall pay to the Board such reasonable fees and 
charges as may be necessary or appropriate to defray the costs and 
expenses of operating and administering the Board. Such rules shall 
specify the amount of such fees and charges.

    The proposed rule change provides for reasonable fees, based on 
dealer involvement in the municipal securities market that are 
necessary to defray Board expenses.

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

    The Board does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act, since it would apply equally to 
all brokers, dealers and municipal securities dealers.

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

    Written comments were neither solicited not 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. 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 submissions, 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 the filing will also be 
available for inspection and copying at the Board's principal offices. 
All submissions should refer to File No. SR-MSRB-2003-06 and should be 
submitted by August 5, 2003.


[[Page 41854]]


    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\3\
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    \3\ 17 CFR 200.30-3(a)(12).

Jill M. Peterson,
Assistant Secretary.
[FR Doc. 03-17786 Filed 7-14-03; 8:45 am]
BILLING CODE 8010-01-P