[Federal Register Volume 65, Number 5 (Friday, January 7, 2000)]
[Notices]
[Pages 1210-1211]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-391]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-42300; File No. SR-NASD-99-40]
Self-Regulatory Organizations; Order Approving Proposed Rule
Change by the National Association of Securities Dealers, Inc.,
Revising Its Fees for Listing Additional Shares
December 30, 1999.
I. Introduction and Background
On August 20, 1999, the National Association of Securities Dealers,
Inc. (``NASD''), through its wholly owned subsidiary the Nasdaq Stock
Market, Inc. (``Nasdaq''), filed with the Securities and Exchange
Commission (``Commission'') a proposed rule change pursuant to Section
19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ and Rule
19b-4 thereunder.\2\ The proposed rule change modifies the fee rate
structures and notification requirements applied by Nasdaq to issuers
listing additional shares on either the Nasdaq National Market
(``NNM'') or the Nasdaq SmallCap Market (``NSCM'').
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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Notice of the proposed rule change was published for a comment in
the Federal Register on November 12, 1999.\3\ The Commission received
no comments on the proposal. This order approves the proposed rule
change.
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\3\ Securities Exchange Act Release No. 42108 (Nov. 4, 1999), 64
FR 61678.
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II. Description of the Proposal
The NASD proposes to revise its current fee schedule for listing
additional shares. Currently, NNM issuers pay a fee of $0.02 per share
for all issuances, subject to a cap of $17,500 per issuance, and NSCM
issuers pay a fee of $0.01 per share for all issuances, subject to a
cap of $7,500 per issuance. The fees are assessed only on certain
transactions \4\ and are not subject to annual maximum caps.
Additionally, under the current administration, fees are assessed
discretely on each eligible issuance of shares, and fees on multiple
issuances cannot be combined. Under the revised fee schedule, multiple
discrete issuances could be combined on a single form, or notification,
to the NASD for the purpose of determining fees. Both NNM and NSCM
issuers would pay a flat fee of $0.01 per share for all issuances of
additional shares, subject to a cap of $17,500 per notification and
$35,000 per year. Under the proposal, the minimum fee per notification
will be $2,000. NSCM issuers are currently subject to a minimum fee of
$1,000 per issuance and NNM issuers to a minimum fee of $2,000 per
issuance.
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\4\ Generally, transactions involving the issuance of additional
shares which raise revenues for an issuer are currently assessed
fees, as distinguished from those transactions, such as the creation
of an employee stock option or benefit plan, that do not. The
proposal would eliminate this distinction and fees would be assessed
on all issuances.
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The NASD represents that these fees will be used to support issuer-
related initiatives such as surveillance, educational and training
programs.\5\ The NASD believes that the proposed revision of the fee
schedule will better spread the costs of these issuer-related
initiatives across the base of issuers benefiting from such
initiatives. Specifically, the revised fee structure recognizes that
Nasdaq does not distinguish between NNM issuers and NSCM issuers in
providing educational initiatives or surveillance measures.
Accordingly, the per-share fee for NNM issuers has been reduced to that
of NSCM issuers and the minimum and maximum fees payable by NSCM
issuers have been increased to the levels paid by NNM issuers.
Furthermore, the proposed revised fee structure would eliminate the
current fee structure's distinction between issuance of shares eligible
to be assessed fees. This distinction, based generally on whether or
not an issuance was deemed to raise revenue, caused confusion for
issuers as they attempted to interpret the fee criteria and thereby
create difficulty for the NASD in administering of the program for
listing additional shares.
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\5\ The NASD described in detail the intended uses for such fee
revenue when it established the additional shares program. See
Securities Exchange Act Release No. 31289 (Oct 5, 1992), 57 FR 46887
(Oct. 13, 1992), SR-NASD-99-27).
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The proposed fee structure also would allow issuers to file
notification of several issuances with the NASD on a single form and
aggregate the fees assessed on those issuances toward the $17,500
maximum fee per notification.\6\ Currently, issuers must file a
separate notification form with respect to each discrete transaction
that qualifies as a fee-assessable listing of additional shares, and
each such transaction is subject to the maximum fee per issuance.
Finally, the proposed $35,000 annual cap would limit the maximum fee an
issuer would be required to pay which should help to ensure that no
individual issuer will pay, as a result of frequent stock splits or
capital raising transactions, a disproportionate share of the total
costs of initiatives provided by
[[Page 1211]]
the Nasdaq to all NNM and NSCM issuers.
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\6\ Each issuance must still be filed no later than 15 days
prior to issuance of the underlying shares, as required by NASD Rule
4310(c)(17).
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III. Discussion
The Commission finds that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder applicable to the NASD. Specifically, the Commission finds
that the rule change is consistent with the provisions of Sections
15A(b) (5) and (6) of the Act.\7\ Section 15A(b)(5) requires that the
rules of the NASD provide for the equitable allocation of reasonable
dues, fees, and other charges among members, issuers and other persons
using any facility or system which the NASD operates or controls.
Section 15A(b)(6) requires in pertinent part that the rules of the NASD
be designed to promote just and equitable principles of trade and not
permit unfair discrimination between customers, issuers, brokers or
dealers. The Commission believes that the revised NNM and NSCM fee
structures, which affect the fees payable by issuers for listing
additional shares, are consistent with the Act because they should
serve to spread more evenly the costs of various issuer-related
surveillance and educational initiatives among the issuers who may
benefit from them.
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\7\ 15 U.S.C. 78o-3(b) (5) and (6).
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IV. Conclusion
The Commission finds that the rule change is consistent with the
Act, in general, and in particular with Sections 15A(b) (5) and (6) of
the Act.
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\8\ that the proposed rule change (SR-NASD-99-40) be, and hereby
is, approved.\9\
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\8\ 15 U.S.C. 78s(b)(2).
\9\ In approving the proposal, the Commission has considered the
rules' impact on efficiency, competition, and capital formation. 15
U.S.C. 78c(f).
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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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-391 Filed 1-6-00; 8:45 am]
BILLING CODE 8010-01-M
