[Federal Register Volume 69, Number 207 (Wednesday, October 27, 2004)]
[Notices]
[Pages 62732-62735]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E4-2871]



[[Page 62732]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-50575; File No. SR-NASD-2004-145]


Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change and Amendment No. 1 Thereto Relating to Amendments to 
Section 4 of Schedule A to the NASD By-Laws (Fees for Qualification 
Examinations)

October 20, 2004.
    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 September 30, 2004, the National Association of Securities Dealers, 
Inc. (``NASD'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, and 
II below, which Items have been prepared by NASD. NASD has designated 
this proposal as one establishing or changing a due, fee or other 
charge imposed by the self-regulatory organization under Section 
19(b)(3)(A)(ii) of the Act \3\ and Rule 19b-4(f)(2) thereunder,\4\ 
which renders the rule effective upon filing with the Commission.\5\ 
The Commission is publishing this notice to solicit comments on the 
proposed rule change, as amended, 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).
    \5\ On October 13, 2004, the NASD filed Amendment No. 1 to the 
proposal. See letter from Shirley H. Weiss, Associate General 
Counsel, NASD, to Katherine A. England, Assistant Director, Division 
of Market Regulation, Commission, dated October 13, 2004 
(``Amendment No. 1''). Amendment No. 1 clarifies and makes minor 
edits to the purpose section and the proposed rule text.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NASD proposes to amend Section 4 of Schedule A to the NASD By-Laws, 
to establish examination fees that shall be assessed upon persons 
taking various qualification examinations as of January 1, 2005. The 
proposed rule change also lists the examination fees that NASD will 
publish in Schedule A regardless of whether the current examination fee 
will increase. Below is the text of the proposed rule change. Proposed 
new language is in italics. Deletions are in [brackets].
SCHEDULE A TO NASD BY-LAWS
* * * * *
Section 4--Fees
    (a) and (b) No change
    (c) [There shall be an examination fee of $60.00 assessed as to 
each individual who is required to take an examination for registration 
as a registered representative pursuant to the provisions of the Rule 
1030 Series, except that the examination fee for general securities 
representatives shall be $110.00.] The following fees shall be assessed 
to each individual who registers to take an examination as described 
below as of January 1, 2005. [This] These fees [is] are in addition to 
the registration fee described in [Item] paragraph (b). [Persons for 
whom an examination is waived pursuant to Rule 1070 shall pay a fee as 
set forth in paragraph (l) of this Section.]


Series 4.....................  Registered Options Principal          $80
Series 6.....................  Investment Company Products/          $70
                                Variable Contracts
                                Representative.
Series 7.....................  General Securities                   $225
                                Representative.
Series 9.....................  General Securities Sales              $60
                                Supervisor--Options Module.
Series 10....................  General Securities Sales              $95
                                Supervisor--General Module.
Series 11....................  Assistant Representative--            $60
                                Order Processing.
Series 17....................  Limited Registered                    $65
                                Representative.
Series 22....................  Direct Participation                  $70
                                Programs Representative.
Series 23....................  General Securities Principal          $75
                                Sales Supervisor Module.
Series 24....................  General Securities Principal          $85
Series 26....................  Investment Company Products/          $75
                                Variable Contracts
                                Principal.
Series 27....................  Financial and Operations              $85
                                Principal.
Series 28....................  Introducing Broker/Dealer             $75
                                Financial and Operations
                                Principal.
Series 37....................  Canada Module of S7 (Options         $150
                                Required).
Series 38....................  Canada Module of S7 (No              $150
                                Options Required).
Series 39....................  Direct Participation                  $75
                                Programs Principal.
Series 42....................  Registered Options                    $60
                                Representative.
Series 55....................  Limited Representative--              $80
                                Equity Trader.
Series 62....................  Corporate Securities Limited          $70
                                Representative.
Series 72....................  Government Securities                 $80
                                Representative.
Series 82....................  Limited Representative--              $75
                                Private Securities Offering.
Series 86....................  Research Analyst--Analysis..         $150
Series 87....................  Research Analyst--Regulatory         $105
 

    (1) Persons for whom any qualification examination is waived 
pursuant to Rule 1070 shall be assessed as an application fee the 
examination fee for each qualification examination so waived.
    (2) There shall be a service charge equal to the examination fee 
assessed to each individual who, having made an appointment for a 
specific time and place for computer-based administration of an 
examination, fails to timely appear for such examination or timely 
cancel such appointment.
    (3) There shall be a service charge fee of $15.00 in addition to 
those fees specified above for any examination taken in a foreign test 
center located outside the territorial limits of the United States.
    [(d) There shall be a New York Stock Exchange examination 
development fee of $90.00 assessed as to each individual who takes a 
Series 7 examination for registration as a general securities 
representative. This fee is in addition to the registration and 
examination fees described in paragraphs (b) and (c) respectively.]
    [(e) There shall be an examination fee of $105.00 assessed as to 
each individual who takes a Series 86 examination for registration as a 
research analyst pursuant to Rule 1050. There shall be an examination 
fee of $55.00 assessed as to each individual who takes a Series 87 
examination for registration as a research analyst pursuant to Rule 
1050. This fee is in addition to the registration fee described in 
paragraph (b). Persons for whom an

[[Page 62733]]

examination is waived pursuant to Rule 1070 shall pay a fee as set 
forth in paragraph (l) of this Section.]
    [(f) There shall be a New York Stock Exchange examination 
development fee of $45.00 assessed as to each individual who takes a 
Series 86 or Series 87 examination for registration as a research 
analyst pursuant to Rule 1050. This fee is in addition to the 
registration and examination fees described in paragraphs (b) and (e) 
respectively.]
    [(g) There shall be an examination fee of $110.00 assessed as to 
each individual taking the General Securities-Sales Supervisor 
Examination. There shall be an examination fee of $75.00 assessed as to 
each individual who is required to take any other examination for 
principals pursuant to the provisions of the Rule 1020 Series. Persons 
for whom an examination is waived pursuant to Rule 1070 shall pay a fee 
as set forth in paragraph (l) of this Section.] \6\
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    \6\ See Amendment No. 1, supra note 5.
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    [(h) There shall be a service charge fee of $15.00 in addition to 
those fees specified in (b), (c), (d), (e) and (f) above for any 
examination taken in a foreign test center located outside the 
territorial limits of the United States.] \7\
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    \7\ Id.
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    [(i) There shall be a service charge equal to the examination fee 
assessed as to each individual who, having made an appointment for a 
specific time and place for computer-based administration of an 
examination, fails to timely appear for such examination or timely 
cancel such appointment.] \8\
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    \8\ Id.
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    (j) and (k) are renumbered (d) and (e).\9\
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    \9\ Id.
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    [(l) Each individual who is granted a waiver(s) for any 
qualification examination specified in paragraphs (c), (e), or (g) of 
this section shall be assessed as an application fee the examination 
fee as set forth in paragraph (c), (e), (f), or (g) for each 
qualification examination so waived.] \10\
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    \10\ Id.
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    (m) through (o) are renumbered (f) through (h).\11\
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    \11\ Id.
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* * * * *

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 had 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
    NASD proposes to make certain changes in qualification examination 
fees. NASD also proposes to publish in Schedule A a list of all the 
qualification examinations that may be required and their corresponding 
fees, regardless of whether such fees are proposed to be changed or 
would remain the same under the proposed rule change.\12\
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    \12\ NASD states that Section 4 of Schedule A currently 
identifies NYSE examination development fees of $90.00 for the 
Series 7 examination and $45.00 per examination for the Series 86 
and 87 examinations. Under the proposed rule change, these 
development fees will continue to be part of the total examination 
fee charged to candidates, but they will no longer be separately 
identified in Schedule A. See Amendment No. 1, supra note 5.
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    Any person associated with a member firm who is engaged in the 
securities business of the firm must register with NASD. As part of the 
registration process, securities professionals must pass a 
qualification examination to demonstrate competence in each area in 
which they intend to work. Some of these examinations are sponsored 
(i.e., developed) by NASD, and others are sponsored by the North 
American Securities Administrators Association (``NASAA''), the New 
York Stock Exchange (``NYSE''), the Municipal Securities Rulemaking 
Board (``MSRB''), or other self-regulatory organizations 
(``SROs'').\13\ NASD administers these qualification examinations via 
computer through the PROCTOR[reg] system at test centers operated by 
vendors under contract with NASD. NASD charges an examination fee to 
candidates for NASD-sponsored examinations. For those examinations 
sponsored by an NASD client and administered/delivered by NASD, NASD 
charges a delivery fee that comprises either a part or all of the 
examination fee for these examinations.
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    \13\ For example, NASD administers and delivers the Series 6, 
24, and 27 examinations, which are sponsored by NASD. NASD also 
administers and delivers client examinations, such as the Series 7, 
which is sponsored by NYSE, and the Series 9 and 10, which are 
sponsored jointly by several SROs (AMEX, CBOE, MSRB, NASD, NYSE, 
PCX, and PHLX).
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    NASD has not adjusted current examination fees for NASD-sponsored 
examinations or delivery fees for client-sponsored examinations since 
1989. At present, these fees do not reflect the costs incurred by NASD 
for administering and delivering these examinations. These costs 
consist of operational, technology and delivery costs. Operational 
costs consist of salaries and overhead for NASD staff involved in test 
delivery technical support, customer support and service, and 
examination administration. Delivery costs vary based on the length of 
the examination because NASD pays its delivery vendors an hourly rate 
for seat time at test delivery centers.\14\
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    \14\ NASD provides a network of more than 400 test centers 
located throughout the United States and overseas operated by two 
commercial vendors.
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    Technology costs are the costs associated with the PROCTOR[supreg] 
system, including system maintenance and enhancements. The 
PROCTOR[supreg] system provides the following capabilities: importation 
and storage of items within examination banks; statistical analyses 
against the examination bank; tracking candidates' enrollment windows, 
appointments and result records; use of the delivery driver at the test 
delivery centers; and exporting raw data on item performance. 
Technology costs also include the significant expense being incurred 
over the next two years for the PROCTOR[supreg] system redesign/
rebuild. The current PROCTOR[supreg] system needs to be updated to 
incorporate more modern technology. The new system will be more 
reliable and will include many new features such as additional item 
(question) formats (short answer, matching, drag/drop), on-line 
exhibits, and advanced biometrics for greater security.
    NASD represents that this proposed rule change would eliminate 
existing provisions relating to specific examinations. Specifically, 
the proposed rule change would list in Schedule A all qualification 
examinations that may be required by NASD for its members, regardless 
of sponsor(s), and the corresponding fee that will be charged for each 
examination (whether the fee is proposed to be changed or remains the 
same). These fees represent the fees to be charged persons who register 
for one of these examinations beginning on January 1, 2005.\15\ NASD 
plans to conduct an annual review of its costs and adjust examination 
and delivery fees, if necessary, as of January 1 each year after making 
the appropriate rule filings.
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    \15\ The published fee represents the fee that will be charged 
at the time the individual registers for the examination. The 
individual then has 120 days to take the examination.

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[[Page 62734]]

Fee Changes

    NASD recently conducted an analysis of the costs of developing, 
administering, and delivering qualification examinations. The analysis 
showed that NASD's costs are rising, particularly, with respect to 
technology and delivery costs. Thus, NASD proposes to raise examination 
fees for certain NASD-sponsored examinations. In addition, NASD has 
advised its client examination sponsors of the impact of the higher 
costs on delivery fees for client-sponsored examinations. Accordingly, 
NASD is proposing to raise the examination fees for the following 
examinations.

Series 4.........................  Registered Options Principal       From $75 to $80.
                                    (Sponsored jointly by AMEX,
                                    CBOE, NASD, NYSE, PCX, and PHLX).
Series 6.........................  Investment Company Products/       From $60 to $70.
                                    Variable Contracts
                                    Representative (NASD-sponsored).
Series 7.........................  General Securities Representative  From $200 to $225.
                                    (NYSE-sponsored).
Series 9.........................  General Securities Sales           From $50 to $60.
                                    Supervisor--Options Module
                                    (Sponsored jointly by AMEX,
                                    CBOE, MSRB, NASD, NYSE, PCX, and
                                    PHLX).
Series 10........................  General Securities Sales           From $60 to $95.
                                    Supervisor--General Module
                                    (Sponsored jointly by AMEX,
                                    CBOE, MSRB, NASD, NYSE, PCX, and
                                    PHLX) \16\.
Series 22........................  Direct Participation Programs      From $60 to $70.
                                    Representative (NASD-sponsored).
Series 24........................  General Securities Principal       From $75 to $85.
                                    (NASD-sponsored).
Series 27........................  Financial and Operations           From $75 to $85.
                                    Principal (NASD-sponsored).
Series 55........................  Limited Representative--Equity     From $60 to $80.
                                    Trader (NASD-sponsored).
Series 62........................  Corporate Securities Limited       From $60 to $70.
                                    Representative (NASD-sponsored).
Series 72........................  Government Securities              From $60 to $80.
                                    Representative (NASD-sponsored).
Series 87........................  Research Analyst--Regulatory       From $100 to $105.
                                    (sponsored jointly by NASD and
                                    NYSE).
 

Publication of Fee Schedule in Schedule A to NASD By-Laws

    Notwithstanding whether the current examination fee will increase, 
NASD proposes to publish in Schedule A a schedule of all qualification 
examination fees that are delivered by NASD and that may be required by 
NASD for its members. NASD proposes to publish the following schedule:
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    \16\ See Amendment No. 1, supra note 5.

Series 4.....................  Registered Options Principal          $80
Series 6.....................  Investment Company Products/          $70
                                Variable Contracts
                                Representative.
Series 7.....................  General Securities                   $225
                                Representative.
Series 9.....................  General Securities Sales              $60
                                Supervisor--Options Module.
Series 10....................  General Securities Sales              $95
                                Supervisor--General Module.
Series 11....................  Assistant Representative--            $60
                                Order Processing.
Series 17....................  Limited Registered                    $65
                                Representative.
Series 22....................  Direct Participation                  $70
                                Programs Representative.
Series 23....................  General Securities Principal          $75
                                Sales Supervisor Module.
Series 24....................  General Securities Principal          $85
Series 26....................  Investment Company Products/          $75
                                Variable Contracts
                                Principal.
Series 27....................  Financial and Operations              $85
                                Principal.
Series 28....................  Introducing Broker/Dealer             $75
                                Financial and Operations
                                Principal.
Series 37....................  Canada Module of S7 (Options         $150
                                Required).
Series 38....................  Canada Module of S7 (No              $150
                                Options Required).
Series 39....................  Direct Participation                  $75
                                Programs Principal.
Series 42....................  Registered Options                    $60
                                Representative.
Series 55....................  Limited Representative--              $80
                                Equity Trader.
Series 62....................  Corporate Securities Limited          $70
                                Representative.
Series 72....................  Government Securities                 $80
                                Representative.
Series 82....................  Limited Representative--              $75
                                Private Securities Offering.
Series 86....................  Research Analyst--Analysis..         $150
Series 87....................  Research Analyst--Regulatory         $105
 

    NASD will announce the implementation of the proposed rule change 
in a Notice to Members to be published no later than 30 days from the 
date the proposed rule change is filed with the Commission. The new 
fees will become effective for ``120-day examination windows'' opened 
in the Central Registration Depository (CRD[supreg]) on or after 
January 1, 2005.
2. Statutory Basis
    NASD believes that the proposed rule change is consistent with the 
provisions of Section 15A of the Act,\17\ in general and with Section 
15A(b)(5) of the Act,\18\ in particular 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 rule change is consistent with Section 
15A(b)(5) of the Act \19\ in that the fee changes reflect NASD's 
increased costs in delivering the examinations and in maintaining and 
upgrading the examination delivery system.
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    \17\ 15 U.S.C. 78o-3.
    \18\ 15 U.S.C. 78o-3(b)(5).
    \19\ Id.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    NASD believes that the proposed rule change does not impose 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.

[[Page 62735]]

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

    The proposed rule change has become effective upon filing with the 
Commission, pursuant to Section 19(b)(3)(A)(ii) of the Act \20\ and 
subparagraph (f)(2) of Rule 19b-4 thereunder,\21\ because it 
establishes or changes a due, fee, or other charge imposed by NASD. At 
any time within 60 days of the filing of the proposed rule change, as 
amended, the Commission may summarily abrogate such 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.
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    \20\ 15 U.S.C. 78s(b)(3)(a)(ii).
    \21\ 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, as amended, is consistent with the Act. Comments may be 
submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to [email protected]. Please include 
File Number SR-NASD-2004-145 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., 
Washington, DC 20549-0609.
    All submissions should refer to File Number SR-NASD-2004-145. This 
file number should be included on the subject line if e-mail is used. 
To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). 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 the 
filing also will be available for inspection and copying at the 
principal offices of NASD. All comments received will be posted without 
change; the Commission does not edit personal identifying information 
from submissions. You should submit only information that you wish to 
make available publicly. All submissions should refer to File Number 
SR-NASD-2004-145 and should be submitted on or before November 17, 
2004.
    For the Commission, by the Division of Market Regulation, pursuant 
to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).

J. Lynn Taylor,
Assistant Secretary.
 [FR Doc. E4-2871 Filed 10-26-04; 8:45 am]
BILLING CODE 8010-01-P