[Federal Register Volume 60, Number 111 (Friday, June 9, 1995)]
[Notices]
[Pages 30622-30624]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-14121]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35795; File No. SR-NASD-95-23]
Self-Regulatory Organizations; Notice of Filing and Partial
Immediate Effectiveness of Proposed Rule Change by National Association
of Securities Dealers, Inc., Relating to Gross Assessments and
Continuing Education Fees
June 1, 1995.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''), 15 U.S.C. Sec. 78s(b)(1), notice is hereby given that on May
23, 1995, 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 the part of this proposal for
continuing education fees as on establishing or changing a fee under
Sec. 19(b)(3)(A)(ii) of the Act, which renders the rule effective upon
the Commission's receipt of this filing. The NASD is, however,
requesting that the fee be implemented on July 1, 1995.\1\ The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
\1\ The proposal was originally filed with the Commission on May
15, 1995. The NASD subsequently submitted Amendment No. 1 to the
filing which amends the proposed rule to publish under Section
19(b)(2) of the Act that portion of the proposed rule change that
amends Section 1 to Schedule A to the NASD By-Laws and to publish
under Section 19(b)(3)(A)(ii) of the Act that portion of the
proposed rule change that amends Section 2 to Schedule A of the NASD
By-Laws. Letter from Suzanne E. Rothwell, Associate General Counsel,
NASD, to Mark P. Barracca, Branch Chief, Over-the-Counter
Regulation, Division of Market Regulation, SEC, dated May 22, 1995.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The NASD is proposing a rule change to amend Sections 1 and 2 to
Schedule A of the By-Laws to clarify gross income filing requirements
and to assess a fee for continuing education requirements. Proposed new
language is italicized; proposed deletions are in brackets.
Schedule A
Assessments and fees pursuant to the provisions of Article VI of
the By-Laws of the Corporation, shall be determined on the following
basis.
Assessments
Sec. 1.
Each member shall pay an annual assessment composed of:
(a) An amount equal to the greater of $850.00 or the total of:
(i) 0.125% of the annual gross revenue [income] from state and
municipal securities transactions,
(ii) 0.125% of annual gross revenue [income] from other over-the-
counter securities transactions,
(iii) 0.125% of the annual gross revenue [income] from U.S.
Government securities transactions, and
(iv) with respect to members whose books, records, and financial
operations are examined by the NASD, 0.125% of annual gross revenue
[income] from securities transactions executed on an exchange.
Each member is to report annual gross revenue [income] as defined
in Section 5 of this Schedule, for [either] the preceding calendar
year. [or the member's fiscal year ending in the preceding calendar
year. The 12-month reporting period must be in accordance with the
member's previously written election. New members will be given an
opportunity to make this election after they become members. Members
wishing to change their reporting year must advise the Association, in
writing, of the change in dates and provide a reason for the change
(i.e., merger or other organizational change and/or change in tax or
fiscal year). If the change is from a fiscal year to the calendar year
or to a new fiscal year ending at a later date, the member is to
provide two reports of gross income covering the 12 consecutive months
of both the new and old years. In such case, the assessment in the year
of change will be the greater amount determined from the two reports.
If the change is from a calendar year or a fiscal year to a new fiscal
year ending at an earlier date, the member is to report gross income
for the 12 consecutive months to the end of its new fiscal year.]
* * * * *
Fees
Sec. 2.
* * * * *
(k) There shall be a session fee of $75.00 assessed as to each
individual who is required to complete the Regulatory Element of the
Continuing Education Requirements pursuant to the provisions of Part
XII of Schedule ``C'' of the By-Laws.
* * * * *
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
Recently, the NASD amended Section 5 of Schedule A to the By-Laws
to [[Page 30623]] define gross revenue for assessment purposes as
income reported on the FOCUS report, with certain limited exclusions
and deductions.\2\ The FOCUS report reports income on a calendar year
basis. However, Section 1 (a) of Schedule A was not amended when this
change was enacted and still gives members the election to report on
either a calendar year or fiscal year basis. The NASD is proposing to
amend Section 1(a) of Schedule A to require all member firms to report
annual gross revenue on a calendar year basis and to delete portions of
the section that are no longer applicable. The NASD believes that the
proposed amendment will simplify the data collection and reporting
process for the NASD, provide a consistent basis for assessments among
member firms and rectify the current inconsistency between Sections 1
and 5 of Schedule A.
\2\ See Securities Exchange At Release No. 35074 (December 9,
1994); 59 FR 64827 (December 15, 1994).
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Recently, the NASD also amended Schedule C to the By-Laws by adding
new Part XII prescribing requirements for the continuing education of
certain registered persons subsequent to their qualification and
registration with the NASD.\3\ The new rule established a formal two-
part Securities Industry Continuing Education Program for securities
industry professionals that would require uniform periodic training in
regulatory matters (the ``Regulatory Element'') and ongoing programs by
firms to keep employees informed of the products, services and
investment strategies of their firms (the ``Firm Elements''). Uniform
rules in this area have also been adopted by other self-regulatory
organizations, including the New York Stock Exchange, the American
Stock Exchange, the Philadelphia Stock Exchange, the Chicago Board
Options Exchange and the Municipal Securities Rulemaking Board
(``SROs''). The participating SROs have established a permanent
Securities Industry/Regulatory Council on Continuing Education
(``Council'') to make recommendations to SROs concerning the content of
the Regulatory Element and requirements for satisfying the Firm
Element.
\3\ See Securities Exchange Act Release No. 35341 (February 8,
1995); 60 FR 8426 (February 14, 1995).
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An important feature of the continuing education program is that it
would be operated on a cost recovery basis and generate modest reserves
for unanticipated future expenditures. The participating SROs will
begin administration of the Regulatory Element on July 1, 1995. This
will include tracking and follow-up by the NASD's Central Registration
Depository of persons subject to the program's requirements and
administering the computer-based training program through the NASD
PROCTOR system at PROCTOR centers or at newly-created mobile centers or
special sessions for on-site delivery of the program. The Firm Element
will be administered in two stages, with members required to complete
written training plans by July 1, 1995 and implement such plans no
later than January 1, 1996. The administration of this element will
involve on-site review by the SROs of compliance of the plans with the
Firm Element will be borne largely by the members, the NASD will
function as Program Administrator for the Regulatory Element and will
incur significant initial start-up and ongoing operational costs.
In order to cover the costs associated with the administration of
the program, the NASD is proposing to amend Section 2 to Schedule A by
adding a new provision to assess a $75.00 session fee against each
individual required to complete the Regulatory Element of the
continuing education program. The fee would apply to recoup the
expenses of the Council and to cover the development, start-up and on-
going operational costs of administering the Regulatory Element.
The NASD believes that the proposed rule change is consistent with
the provisions of Section 15A(b)(5) of the Act \4\ which require that
the rules of the Association provide for the equitable allocation of
reasonable dues, fees, and other changes in that the proposed rule
provides a consistent basis for assessments among member firms and
rectifies the current inconsistency between Sections 1 and 5 of
Schedule A, and fairly assesses a charge to cover the start-up and
ongoing costs incurred by the Association in the administration of the
Regulatory Element of the continuing education requirements.
\4\ 15 U.S.C. 78o3.
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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
Within 35 days of the date of publication of this notice of the
proposed rule change to Section 1 to Schedule A to the NASD By-Laws in
the Federal Register or within such longer period (i) as the Commission
may designate up to 90 days of such date if it finds such longer period
to be appropriate and publishes its reasons for so finding or (ii) as
to which the self-regulatory organization consents, the Commission
will:
A. By order approve such proposed rule change, or
B. Institute proceedings to determine whether the proposed rule
change should be disapproved.
The proposed rule change to Section 2 to Schedule A to the NASD By-
Laws has become effective pursuant to Section 19(b)(3)(A) of the Act
and subparagraph (e) of Rule 19b-4 thereunder because the NASD has
designated the part of the proposal for continuing education fees as
one establishing or changing a fee under Sec. 19(b)(3)(A)(ii), which
renders the rule effective upon the Commission's receipt of this
filing. At any time within 60 days of the filing of such 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.
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, D.C. 20549.
Copies of the submission, all subsequent amendments, all written
statement 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. SR-NASD-95-23 and should
be submitted by June 30, 1995.
[[Page 30624]] For the Commission, by the Division of Market
Regulation, pursuant to delegated authority, 17 CFR 200.30-3(a)(12).
Jonathan G. Katz,
Secretary.
[FR Doc. 95-14121 Filed 6-8-95; 8:45 am]
BILLING CODE 8010-01-M
