[Federal Register Volume 59, Number 49 (Monday, March 14, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-5808]
[[Page Unknown]]
[Federal Register: March 14, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-33731; File No. SR-NASD-94-11]
Self-Regulatory Organizations; Filing and Immediate Effectiveness
of Proposed Rule Change by National Association of Securities Dealers,
Inc. Relating to Assessments and Fees on Members
March 8, 1995.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''), 15 U.S.C. 78s(b)(1), notice is hereby given that on February
25, 1994, the National Association of Securities Dealers, Inc.
(``NASD'' or ``Association'') filed with the Securities and Exchange
Commission (``SEC'' or ``Commission'') the proposed rule change as
described in Items I, II, and III below, which Items have been prepared
by the NASD. The NASD has designated this proposal as one establishing
or changing a fee under section 19(b)(3)(A)(ii) of the Act, which
renders the rule effective upon the Commission's receipt of this
filing. The Commission is publishing this notice to solicit comments on
the proposed rule change from interested persons.
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The NASD is proposing to add new section 45 to the Code of
Arbitration Procedure to require that any member named as a party to an
arbitration proceeding shall be assessed a $200 non-refundable
surcharge when the Arbitration Department perfects service of the claim
naming the member on any party to the proceeding. Below is the text of
the proposed rule change. Proposed new language is italicized.
Part III. Uniform Code of Arbitration
* * *
Member Surcharge
Sec. 45. (a) Each member who is named as a party to an arbitration
proceeding, whether in a Claim, Counterclaim, Crossclaim or Third-Party
claim, shall be assessed a $200 non-refundable surcharge when the
Arbitration Department perfects service of the claim naming the member
on any party to the proceeding. For each associated person who is
named, the surcharge shall be assessed against the member or members
which employed the associated person at the time of the events which
gave rise to the dispute, claim or controversy. No member shall be
assessed more than a single surcharge in any arbitration proceeding.
The surcharge shall not be subject to reimbursement under Subsection
43(c) of the Code.
(B) For the purposes of this Section, service is perfected when the
Director of Arbitration properly serves the Respondents to such
proceeding under Subsection 25(a) of the Code.
II. Self-Regulatory Organization's Statement of the Purpose of and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the 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. The 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
The NASD is proposing to add new section 45 to the Code of
Arbitration Procedure to provide that any member named as a party to an
arbitration proceeding shall be assessed a $200 non-refundable
surcharge when the Arbitration Department perfects service of the claim
naming the member on any party to the proceeding. In addition, any firm
whose associated persons are named in an arbitration proceeding will be
assessed the surcharge.
Historically, the revenue-to-expense ratio of the NASD's
arbitration service has resulted in a deficit, which has been
subsidized by other revenues of the Association. Although the deficit
has declined in 1992, the NASD has determined in a recent review of the
arbitration process that the deficit will begin to rise in the
immediate future as a result of significantly increased resourcing
needs. The NASD anticipates such needs to be ongoing. The increased
resourcing needs result from a number of factors, including case
growth, more selective arbitrator recruitment, increased arbitrator
training, increased arbitrator compensation, and the anticipated
overhaul of the arbitration administrative systems. The NASD determined
that the time frame within which to initiate cost recovery for
impending resourcing needs should be the immediate future, and that
cost recovery should be directed at those member firms using the NASD's
arbitration service.
Proposed new subsection (a) would require each member who is named
as a party to an arbitration proceeding, whether in a claim,
counterclaim, crossclaim or third-party claim, to be assessed a $200
non-refundable surcharge when the Arbitration Department perfects
service of the claim naming the member on any party to the proceeding.
This fee would be in addition to fees assessed pursuant to section
43\1\ and 44\2\ of the Code. The fee applies both to members who file
as Claimants and to members who are served by the Arbitration
Department as Respondents. Therefore, in claims brought by members, the
$200 fee would be assessed in addition to the $500 claim filing fee
described in the current fee schedule. For an associated person who is
named as a party to an arbitration proceeding, the fee would be
assessed against the member firm or firms which employed the associated
person at the time of the events which gave rise to the claim. However,
no member will be assessed more than a single charge in any arbitration
proceeding. Finally, subsection (a) clarifies that the surcharge is not
subject to reimbursement under subsection 43(c) of the Code.
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\1\NASD Manual, Code of Arbitration Procedure, Article III, Sec.
43 (CCH) 3743.
\2\NASD Manual, Code of Arbitration Procedure, Article III, Sec.
44 (CCH) 3746.
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The NASD estimates that it will collect the $200 surcharge on 75
percent of the approximately 5700 arbitration cases expected to be
filed in 1994, which will result in over $800,000 of additional revenue
for the Arbitration Department in 1994. Thus, the surcharge will
effectively offset expenses to be incurred on arbitrator education
through 1994. The NASD expects the arbitrator education program to
reach over 3,000 new arbitrators and almost 500 chairpersons during the
period that began in the fourth quarter of 1993 and will end at the end
of 1994. This will add over $750,000 to the Arbitration Department
expenses, which will include costs for staff and travel time,
conference rooms, written materials, videotape production and mailing
costs.
The NASD 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 among members in that the
proposed rule equitably assesses a surcharge on each member that is
named or whose associated person is named and for which service is
perfected in an arbitration proceeding and applies such revenue to
additional costs resulting from increased arbitration resourcing needs.
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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
The 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, 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 of 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 and subparagraph (e) of rule 19b-
4 thereunder in that it constitutes a due, fee or other charge.
At any time within 60 days of the filing of a rule change pursuant
to section 19(b)(3)(A) of the Act, the Commission may summarily
abrogate the 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.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing. 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 SR-NASD-94-11 and should be
submitted by April 4, 1994.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority, 17 CFR 200.30-3(a)(12).
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-5808 Filed 3-11-94; 8:45 am]
BILLING CODE 8010-01-M
