Alert June 26, 2012

SEC Approves Five Proposals by FINRA to Increase Fees

On June 22, 2012, the SEC issued separate orders of approval for four proposals by FINRA to increase various fees.  On June 25, the SEC approved a fifth fee proposal.  Following is a summary of the fee increases:

  • In Release No. 34-67241, the SEC approved, effective upon receipt of the filing, FINRA’s proposal (filed June 8, 2012) to amend Section 7 of Schedule A to the FINRA By-Laws to increase the fees for filing documents pursuant to FINRA Rule 5110 (Corporate Financing Rule – Underwriting Terms and Arrangements).  The amendment will (1) increase the rate from .01% to .015% of the offering amount, (2) increase the maximum fee from $75,500 to $225,500 for such filings and (3) increase the fee for an offering of securities on an automatically effective Form S-3 or F-3 registration statement filed as a shelf pursuant to Rule 415 by Well-Known Seasoned Issuers from $75,500 to $225,500.  This change will be implemented for filings and amendments made on or after July 2, 2012.
  • In Release No. 34-67239, the SEC approved, effective upon receipt of the filing, FINRA’s proposal (filed June 8, 2012) to amend Section 13 of Schedule A to the FINRA By-Laws governing the review charges for advertisements, sales literature, and other such material filed with or submitted to FINRA’s Advertising Regulation Department.  The amendment will (1) raise the fee charged for the review of printed material and video or audio media from $100 to $125, (2) raise the fee for expedited review from $500 to $600 per item and (3) raise the fee for pages in excess of 10 to $50 per page from $25.  This change will be implemented for filings made on or after July 2, 2012.
  • In Release No. 34-67240, the SEC approved, effective upon receipt of the filing, FINRA’s proposal (filed June 13, 2012) to amend Section 4 of Schedule A to the FINRA By-Laws to increase fees for branch office registration and new member applications and assess a new fee for continuing membership applications, and make corresponding amendments to NASD Rules 1012, 1013 and 1017.  The annual fee for registration of branch offices will change from $75 per branch office to a sliding fee scale of $175 per branch office up to 250, $150 for the next 250 up to 500 branch offices, $125 for the next 500 up to 1,000 branch offices, $100 for branch offices over 1,001 up to 2,000 and $75 for every branch office thereafter.  The new member application fee, currently either $3,000 or $5,000 depending on the net capital requirements for the business of the new member applicant, will increase to an amount ranging from $7,500 to $55,000 depending on the size of the new member applicant, with an additional $5,000 surcharge for a new member applicant that intends to engage in any clearing and carrying activities.  The new fee for continuing membership applications pursuant to NASD Rule 1017 will vary depending on the size of the applicant (measured by the number of registered persons associated with the applicant) and the nature of the change.  The fee for approval of a merger will range from $7,500 for the smallest firms to $100,000 for the largest firms; for approval of a material change will range from $5,000 to $75,000; and for approval of an ownership change, transfer of assets or acquisition will range from $5,000 to $15,000.  The fee changes for new member applications and continuing membership applications will be implemented on July 23, 2012.  The implementation date for fee changes to annual branch office registrations will be announced by FINRA but will be on or after January 1, 2013.
  • In Release No. 34-67242, the SEC approved, effective upon receipt of the filing, FINRA’s proposal to amend Section 1 of Schedule A to the FINRA By-Laws to adjust the rate of FINRA’S Trading Activity Fee (“TAF”) rate fee for transactions in covered equity securities.  The current TAF rate is $0.000095 per share for each sale of covered equity securities, with a maximum charge of $4.75 per trade.  Under the amendment, the TAF rate will increase to $0.000119 per share, with a per-transaction cap of $5.95.  FINRA intends to make the proposal effective on July 1, 2012.
  • In Release No. 34-67247, dated June 25, 2012, the SEC approved, effective upon receipt of the filing, FINRA’s proposal (filed June 11, 2012) to amend Sections 4 and 6 of Schedule A to the FINRA By-Laws to implement changes to certain fees relating to the Central Registration Depository (“CRD”).  The amendment will (1) increase the fee for each initial or transfer Form U4 filed by a member in the CRD system to register an individual from $85 to $100, (2) increase the disclosure event filing fee for Forms U4 and U5 from $95 to $110, (3) establish a new disclosure filing fee for Form BD of $110, (4) increase the annual system processing fee from $30 per registered individual to $45 per registered individual, (5) increase the fee for processing fingerprints from $13 to either $15 for fingerprints submitted electronically or $30 for fingerprints submitted in hard copy and also increase the fee for processing and posting fingerprints submitted by a member that have been  processed through another SRO from $13 to $30, (6) eliminate the exception to the payment of re-registration fees for successor members involved in mass transfers of registered representatives, and (7) increase the fee for late disclosure of a new disclosure event or the change in status of a previously reported disclosure event from $10 per day, up to a maximum of $300, to $100 for the first day that the disclosure event is not timely filed and $25 for each subsequent day, up to a maximum of 60 days, for a maximum amount of $1,575.

The comment period for the TAF rate amendment approved in Release No. 34-67242 ended prior to SEC approval.  There is a comment period for the other four proposals ending 21 days after publication of the order in the Federal Register (expected to occur in the next week).  Although the proposals other than the TAF rate proposal were effective upon filing, the SEC may, within 60 days after filing, summarily and temporarily suspend the rule change if it appears that such action is necessary or appropriate in the public interest, in which case the SEC will institute proceedings to determine whether the proposed rule should be approved or disapproved.