[Federal Register Volume 63, Number 221 (Tuesday, November 17, 1998)]
[Notices]
[Pages 63950-63952]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-30717]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-40653; File No. SR-NASD-98-82]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the National Association of
Securities Dealers, Inc. Relating to Increase in Advertising Fee Rates
November 10, 1998.
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 November 2, 1998, NASD Regulation, Inc. (``NASD Regulation'') filed
with the Securities and Exchange Commission (``SEC'' or ``Commission'')
a proposed rule change as described in Items I, II, and III below,
which Items have been prepared by NASD Regulation. NASD Regulation has
designated this proposal as establishing or changing a fee under
Section 19(b)(3)(A)(ii), which renders the proposal effective upon
receipt of this filing by the Commission. The NASD, however, will make
the filing effective on January 1, 1999. 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
NASD Regulation is proposing to amend Section 13 of Schedule A of
the NASD By-Laws to increase the review charge for advertisements,
sales literature, and other such material filed or submitted. Set forth
below is the text of the proposed rule change. Proposed new language is
italicized and proposed deletions are in brackets.
* * * * *
Schedule A to the NASD By-Laws
Section 13--[Service] Review Charge for Advertisement, Sales
Literature, and Other Such Material Filed or Submitted
There shall be a [service] review charge for each and every item of
[[Page 63951]]
advertisement, sales literature, and other such material, whether in
printed, video, electronic or other form, filed with or submitted to
the Association, except for items that are filed or submitted in
response to a written request from the Association's Advertising
Regulation Department issued pursuant to the spot check procedures set
forth in the Association's Rules as follows: (1) for printed material
reviewed, [$50.00] $75.00, plus $10.00 for each page reviewed in excess
of 10 pages; and (2) for video or audio media, [$50.00] $75.00, plus
$10.00 per minute for each minute of tape reviewed in excess of 10
minutes.
Where a member requests expedited review of material submitted to
the Advertising Regulation department there shall be a [service] review
charge of $500.00 per item plus $25 for each page reviewed in excess of
10 pages. Expedited review shall be completed within three business
days, not including the date the item is received by the Advertising
Regulation Department, unless a shorter or longer period is agreed to
by the Advertising Regulation Department. The Advertising Regulation
Department may, in its sole discretion, refuse requests for expedited
review.
* * * * *
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 Regulation 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 Regulation 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
The Advertising/Investment Companies Regulation Department
evaluates member firms' advertisements and sales literature for
compliance with applicable rules of the NASD, SEC, Municipal Securities
Rulemaking Board and Securities Investor Protection Corporation. These
public communications include print, television and radio
advertisements, or electronic communications such as Web sites. They
also include brochures, form letters, mailers and telemarketing
scripts. The rules address investor protection concerns and require all
communications to be accurate and to provide a sound basis for making
an investment decision. The rules prohibit the use of exaggerated or
misleading statements.
The Department operates three principal programs: filings,
investigations and spot checks. The filings program is by far the
largest in terms of communications reviewed and resources used.
Approximately 1,450 member firms submitted sales material last year,
either voluntarily or pursuant to a rule requirement. The Department
also investigates misleading communications and provides expertise to
Enforcement and the District Offices concerning the complex provisions
of the SEC and NASD advertising rules. Finally, the Department conducts
targeted spot checks of member communications that may not be subject
to the filing requirements, but which must comply with the applicable
rules.
The Department needs additional resources to enhance its operations
and provide timely, high quality reviews. Significant increases in
filing volume and workload have hampered the Department's operations.
For example, between 1994 and 1997, the number of communications
reviewed in the filings and spot check programs increased 43%, from
42,681 to 61,096. The Department expects filing volume to continue to
increase in subsequent years.
NASD Regulation therefore intends to dedicate additional staff and
resources to the Department, as well as to the other departments whose
programs are related to the regulation of member communications with
the public. The Cost of the additional staff and resources will be
covered from the increase in advertising fee rates.
Basis
NASD Regulation believes that the proposed rule change is
consistent with the provisions of Section 15A(b)(5) \3\ of the Act,
which require that the rules of the Association provide for the
equitable allocation of reasonable dues, fees, and other charges. NASD
Regulation believes that the proposed rule change reasonably provides
for an increase in the regular filing fees for advertising to help
defray the costs associated with the significant increase in
advertising activities and possible advertising rule violations.
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\3\ 15 U.S.C. 78o-3.
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B. Self-Regulatory Organization's Statement on Burden on Competition
NSAD Regulation 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, 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.
III. Date of Effectiveness on the Proposed Rule Change And Timing
for Commission Action
The foregoing rule change has become effective upon filing pursuant
to Section 19(b)(3)(A)(ii) of the Act \4\ and subparagraph (e) of Rule
19b-4 thereunder in that it constitutes a due, fee or other charge.
However, the NASD has determined to implement the rule change on
January 1, 1999. 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 Act.\5\
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\4\ 15 U.S.C. 78s(b)(3)(A)(ii).
\5\ In reviewing this proposal, the Commission considered its
impact on efficiency, competition and capital formation. 15 U.S.C.
78c(f).
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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. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549. 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 will also be
available for inspection and copying at the principal office of the
NASD. All submissions should refer to File No.
[[Page 63952]]
SR-NASD-98-82 and should be submitted by December 8, 1998.
For the Commission, by the Division of Market Regulations,
pursuant to delegated authority.\6\
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\6\ 17 CFR 200-30-3(a)(2).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-30717 Filed 11-16-98; 8:45 am]
BILLING CODE 8010-01-M
