[Federal Register Volume 68, Number 161 (Wednesday, August 20, 2003)]
[Notices]
[Pages 50204-50205]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-21253]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-48340; File No. SR-MSRB-2003-06]


Self-Regulatory Organizations; Order Granting Approval of a 
Proposed Rule Change Filing by the Municipal Securities Rulemaking 
Board to Amend Rule A-14, on Annual Fees

August 14, 2003.
    On July 3, 2003, the Municipal Securities Rulemaking Board 
(``Board'' or ``MSRB'') filed with the Securities & Exchange Commission 
(``Commission'' or ``SEC''), pursuant to section 19(b)(1) of the 
Securities Exchange Act of 1934 (``the Act'')\1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change (File No. SR-MSRB-2003-06) (the 
``proposed rule change''). The MSRB's proposed rule change amends Rule 
A-14, which provides for an annual fee paid to the MSRB.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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    The Commission published the proposed rule change for notice and 
comment in the Federal Register on July 15, 2003.\3\ The Commission 
received two comment letters on the proposed rule change.\4\ This order 
approves the proposed rule change.
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    \3\ See Release No. 34-48140 (June 8, 2003), 68 FR 41852 (July 
15, 2003).
    \4\ See letter from Erich Sokolower, Managing Director, Repex & 
Co., Inc., to MSRB, dated July 13, 2003; letter from Ying Cui, 
Winstrade, to MSRB, dated July 25, 2003.
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I. Description of the Proposed Rule Change

    The MSRB proposed to amend Rule A-14, on annual fees paid by 
brokers, dealers and municipal securities dealers (collectively 
``dealers''). In its filing, the MSRB requested that the proposed rule 
change become effective prior to the beginning of the Board's fiscal 
year of 2004 (October 1, 2003). The proposed rule change increases the 
annual fee, from $200 to $300, for each fiscal year a dealer conducts 
municipal securities activities. The effective date of the proposed fee 
change does not alter the date in which the fees must be received by 
the Board.\5\ Under Rule A-14, the fee must be received by the office 
of the Board no later than October 31 of the fiscal year of the Board.
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    \5\ See Release No. 34-48140.
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II. Summary of Comments

    The commission received two comment letters addressing the proposed 
rule change. Both comment letters expressed their opposition to the 
proposed rule change for an increase in annual fees. One commentator 
stated that the increasing fees drive out the smaller firms from 
engaging in municipal securities business.\6\ The other commentator 
suggested that the fees paid to the MSRB should be based on generated 
revenues from a firm's municipal securities activities.\7\
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    \6\ See letter from Repex & Co, Inc., note 4, supra.
    \7\ See letter from Winstrade, note 4, supra.
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III. Discussion and Commission Findings

    Section 19(b) of the Act \8\ requires the Commission to approve a 
proposed rule change filed by the MSRB if the Commission finds that the 
proposal is consistent with the requirements of the Act and the rules 
and regulations thereunder. After careful review of the proposed rule 
change and the related comments, the Commission finds that the proposed 
rule change is consistent with the requirements of the Act and the 
rules and regulations thereunder, which govern the MSRB,\9\ and, in 
particular, the requirements of section 15B(b)(2)(J) of the Act.\10\ 
Under section 15B(b)(2)(J) of the Act, in pertinent part, the Board's 
rules must provide that each municipal securities broker and each 
municipal securities dealer 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. The Commission 
believes that the annual fee, as described in the proposed rule change, 
is necessary and appropriate to defray Board expenses. Thus, the 
Commission believes that the MSRB's proposal meets the required 
statutory threshold.
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    \8\ 15 U.S.C. 78s(b).
    \9\ Additionally, in approving this rule the Commission notes 
that it has considered the proposed rule's impact on efficiency, 
competition and capital formation. 15 U.S.C. 78c(f).
    \10\ 15 U.S.C. 78o-4(b)(2)(J).
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    To address the comment letters, the Commission notes that the 
annual fee, levied under Rule A-14, is a flat rate that applies equally 
to all dealers conducting municipal securities

[[Page 50205]]

business regardless of the size or type of transactions. In Rule A-13, 
the MSRB sets forth a fee structure that assesses dealers based on 
dealers' underwriting and transaction amount.\11\
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    \11\ 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.
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    The Commission recognizes the difficulties inherent in assessing 
the MSRB's fee structure, and believes that the MSRB has made a good 
faith effort to do so in a manner that is fair and reasonable. The 
Commission agrees with the MSRB that the fees are not levied for a 
specific purpose but for general purposes, and that MSRB regulatory 
activities affect all participants in the dealer community.

IV. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\12\ that the proposed rule change (File No. SR-MSRB-2003-06) be 
and hereby is, approved.
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    \12\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-21253 Filed 8-19-03; 8:45 am]
BILLING CODE 8010-01-P