[Federal Register Volume 70, Number 34 (Tuesday, February 22, 2005)]
[Notices]
[Pages 8649-8650]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-693]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51187; File No. SR-NASD-2005-021]


Self Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by National Association of 
Securities Dealers, Inc. To Provide Guidance Regarding Members' 
Regulatory Transaction Fees

February 10, 2005.
    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 4, 2005, 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, II, 
and III below, which Items have been prepared by NASD. NASD has 
designated the proposed rule change as constituting a stated policy, 
practice, or interpretation with respect to the meaning, 
administration, or enforcement of an existing rule of the self-
regulatory organization pursuant to Section 19(b)(3)(A)(i) of the Act 
\3\ and Rule 19b-4(f)(1) 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)(i).
    \4\ 17 CFR 240.19b-4(f)(1).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NASD is filing Notice to Members (``NtM'') 05-11, providing further 
guidance regarding members' obligations under Section 3 of Schedule A 
to the NASD By-Laws (Regulatory Transaction Fees) and a self-reporting 
form that is used by members to report trade data that is not captured.
    No changes to the text of NASD rules are required by this proposed 
rule change.

II. Self-Regulatory OrgChange

    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
    In August 2004, NASD issued NtM 04-63 (Transaction Fees: New SEC 
Procedures Relating to section 31 of the Securities Exchange Act of 
1934) informing member firms of the new Commission procedures governing 
the calculation, payment, and collection of fees and assessments on 
securities transactions owed by national securities exchanges and 
associations to the Commission pursuant to section 31 of the Act. NtM 
04-63 also discussed the obligations of member firms under section 3 of 
Schedule A to the NASD By-Laws in light of the new Commission 
procedures.
    Following the publication of NtM 04-63, NASD staff has received a 
significant number of questions from member firms regarding these 
obligations. Accordingly, NASD staff is providing further guidance 
regarding these obligations in NtM 05-11. In NtM 05-11, NASD staff is, 
among other things, providing guidance on what constitutes an away-
from-the-market sale and additional information regarding member firms' 
self-reporting obligations. NASD also is reminding members about the 
restrictions on the use of the Step-Out function in ACT for 
transferring NASD's regulatory transaction fee to correspondents or 
broker-dealer customers. In addition, NtM 05-11 is revoking prior 
guidance concerning the appropriate rounding methodology used by member 
firms when they choose to pass regulatory transaction fees to their 
customers. Specifically, the guidance in NtM 05-11 regarding rounding 
supersedes the rounding guidance provided in NtM 04-63 or any prior 
NtMs and Member Alerts.

[[Page 8650]]

    NASD believes that the guidance provided in NtM 05-11 constitutes 
an interpretation of section 3 of Schedule A to the NASD By-Laws that, 
due to its nature, should be filed as a proposed rule change. In 
addition, NASD also is filing its Permanent Self-Reporting Form with 
the Commission.\5\ A copy of the Permanent Self-Reporting Form will be 
attached to NtM 05-11. NASD has revised its Permanent Self-Reporting 
Form to: (1) Incorporate the new rate structure that became effective 
on January 7, 2005 (in conformity with the change to the Commission's 
Section 31 fee rate); (2) incorporate minor changes to the instructions 
section; and (3) create an obligation on certain member firms to file 
the Permanent Self-Reporting Form each month (regardless of whether 
they have any reportable transactions).
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    \5\ As noted in NtM 05-11, clearing and self-clearing member 
firms will now be required to file with NASD the Permanent Self-
Reporting Form each month, regardless of whether they have 
qualifying transactions for that month. NASD is requiring a monthly 
filing by all clearing and self-clearing member firms to ensure that 
they conduct the necessary review to determine that all qualifying 
transactions have been properly reported. Member firms that do not 
have any reportable transactions for a given month will be required 
to submit the blank form signed by an authorized representative, 
along with a statement that the firm had no reportable transactions 
for the month. While NASD is filing its Permanent Self-Reporting 
Form with the Commission in this instance, NASD does not intend to 
file its Permanent Self-Reporting Form with the Commission each time 
it makes a non-substantive change to the text of the form or changes 
that reflect adjustments in the amount or scope of the fee, where 
such adjustments are determined solely by reference to section 31 of 
the Act.
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2. Statutory Basis
    NASD believes that the proposed rule change is consistent with the 
provisions of section 15A(b)(6) of the Act,\6\ which requires, among 
other things, that NASD's rules must be designed to prevent fraudulent 
and manipulative acts and practices, to promote just and equitable 
principles of trade, and, in general, to protect investors and the 
public interest. In addition, NASD believes that the proposed rule 
change is consistent with the provisions of section 15A(b)(5) of the 
Act,\7\ 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, insofar as it is intended to 
assist members in complying with section 3 of Schedule A to the NASD 
By-Laws.
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    \6\ 15 U.S.C. 78o-3(b)(6).
    \7\ 15 U.S.C. 78o-3(b)(5).
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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.

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

    The proposed rule change has become effective pursuant to section 
19(b)(3)(A)(i) of the Act \8\ and Rule 19b-4(f)(1) thereunder.\9\ NASD 
asserts that the proposed rule change constitutes a stated policy, 
practice, or interpretation with respect to the meaning, 
administration, or enforcement of an existing rule of NASD. NASD will 
announce the implementation date of the proposed rule change in NtM 05-
11, which NASD expects to issue on the same date as the filing of the 
proposed rule change with the Commission. At any time within 60 days of 
the filing of the proposed rule change, 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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    \8\ 15 U.S.C. 78s(b)(3)(A)(i).
    \9\ 17 CFR 240.19b-4(f)(1).
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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. 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-2005-021 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-2005-021. 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 such 
filing also will be available for inspection and copying at the 
principal office 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 the File Number SR-NASD-2005-021 
and should be submitted on or before March 15, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. E5-693 Filed 2-18-05; 8:45 am]
BILLING CODE 8010-01-P