Document ID: SEC-2006-0191-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: New York Stock Exchange, Inc.
Posted Date: 2006-02-14T05:00Z

[Federal Register: February 14, 2006 (Volume 71, Number 30)]
[Notices]               
[Page 7820-7823]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr14fe06-108]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53235; File No. SR-NYSE-2005-92]

 
Self-Regulatory Organizations; New York Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
and Amendment No. 1 Thereto Relating to Increasing Certain Fees Charged 
by the Exchange to Its Members and Member Organizations

February 6, 2006.
    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 December 23, 2005, the New York Stock Exchange, Inc. (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the NYSE. On February 
2, 2006, the NYSE filed Amendment No. 1 to the proposed rule change.\3\ 
The Exchange has designated this proposal as one establishing or 
changing a due, fee, or other charge imposed by the NYSE under section 
19(b)(3)(A)(ii) of the Act,\4\ and Rule 19b-4(f)(2) thereunder,\5\ 
which renders the proposal effective upon filing with the Commission. 
The Commission is publishing this notice to solicit comments on the 
proposed rule change, as amended, from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ In Amendment No. 1, the NYSE made non-substantive changes to 
the text of the proposed rule change.
    \4\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \5\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The NYSE proposes to modify certain fees that the Exchange charges 
its members and member organizations. The proposed rule change 
increases the following fees: (1) Margin Extension Fees; (2) The Series 
7 (General Securities Registered Representative) Examination 
Development Fee; (3) Statutory Disqualification Fees; and (4) the 
session fee for the regulatory element of the continuing education 
requirements of NYSE Rule 345A (``Continuing Education for Registered 
Persons''). Below is the text of the proposed rule change. Proposed new 
language is in italics; proposed deletions are in [brackets].

NYSE 2005 Price List

* * * * *
    Pages 1-8 No changes.
Registration Fees
* * * * *
Credit Extensions
Amount per extension [$2.00]$4.00 \6\
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    \6\ The $4.00 fee is effective as of January 1, 2006. The fee 
was $2.00 prior to January 1, 2006.
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* * * * *
Statutory Disqualification Filing Fee [1,000.00]$1,500.00

Statutory Disqualification Review Fee $1,000.00 \7\
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    \7\ The $1,000.00 fee is effective as of January 1, 2006. There 
was no fee before for the review of statutory disqualification 
applications, prior to January 1, 2006.
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* * * * *

Regulatory Element Fee $75.00 \8\
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    \8\ The $75.00 fee is effective as of January 1, 2006. The fee 
was $60.00, prior to January 1, 2006.
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    Testing Fees: Please call 212.656.2578 for information.

Qualification Examinations

Series 7 Fee $100.00 \9\
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    \9\ The $100.00 fee is effective as of January 1, 2006. The fee 
was $90.00, prior to January 1, 2006.
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* * * * *

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, NYSE 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

[[Page 7821]]

may be examined at the places specified in Item IV below. NYSE 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

1. Purpose
    The Exchange proposes to increase certain qualification examination 
and regulatory fees \10\ it assesses on its members and member 
organizations.
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    \10\ The 2005 Price List delineates Regulatory Fees, except for 
Qualification Examinations. The Price List can be found at http://www.nyse.com/pdfs/2005pricelist_a.pdf.
 It will be updated in 2006 

to also include qualification examination fees.
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    Margin Extension Fees. Under Regulation T \11\ of the Federal 
Reserve System and Rule 15c3-3 \12\ under the Act, broker-dealers may 
file on behalf of customers requests to extend under ``exceptional 
circumstances'' the time period which customers have to pay for a 
security purchased or to deliver a security sold. Since January 1978, 
the Exchange has charged member organizations a $2 fee per extension 
request for processing these extensions of time through the Exchange's 
automated Margin Extension Systems (``MEX'').\13\ MEX maintains a 
history of Regulation T extensions submitted to the Exchange for each 
customer, and thus helps prevent excessive numbers of requests and 
customer abuses of the extension privilege.
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    \11\ 12 CFR 220.1-12.
    \12\ 17 CFR 240.15c3-3.
    \13\ See NYSE Information Memo 77-59, dated December 30, 1977 in 
which the Exchange announced a new fee schedule for charges for 
specific services, including extension charges, provided by the 
Exchange.
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    As a result of enhancements to the MEX systems, increasing costs 
associated with providing these services to broker-dealers on behalf of 
customers and expenses incurred in monitoring for compliance with 
applicable margin and sales practice rules the Exchange is proposing to 
increase this fee to $4 an extension request. The proposed fee increase 
would be effective January 1, 2006.
    Series 7 Examination Development Fee. The Series 7 (General 
Securities Registered Representatives Qualification Examination) is 
developed, maintained, and owned by the Exchange. It is intended to 
safeguard the investing public by helping to ensure that registered 
representatives are competent to perform their jobs. Given this 
purpose, the Series 7 examination seeks to measure accurately and 
reliably the degree to which each candidate possesses the knowledge, 
skills and abilities needed to perform the critical functions of a 
registered representative. The examination is 6 hours and consists of 
250 multiple-choice questions.
    Currently the fee for the Series 7 examination is $225. Of the 
$225, the NASD receives $135 and the Exchange receives $90. The NASD's 
fee is based on the cost to NASD to schedule and administer the 
examination, maintain records, and undertake systems changes.
    The Exchange development fee includes costs incurred to develop and 
implement the Series 7 examination as well as to monitor for compliance 
with applicable registration, reporting and sales practices rules. NASD 
has filed a proposed rule change increasing the administration fee to 
$150.\14\ This fee applies to all NYSE members and member organizations 
that are also members of NASD and to NYSE only members and member 
organizations.
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    \14\ See Securities Exchange Act Release No. 52981 (December 19, 
2005), 70 FR 76480 (December 27, 2005) (SR-NASD-2005-133). The 
actual change proposed in the filing is an increase in the Series 7 
fee from $225 to $250, of which $150 is the administration fee paid 
to the NASD.
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    The Exchange proposes to increase the development fee from $90 to 
$100. The total examination and development fees for each individual 
who takes the Series 7 examination for registration as a Registered 
Representative will be $250. The fee would be effective January 1, 
2006.
    Since the implementation of the Series 7 examination, the Exchange 
has continued to update, as necessary, the examination content and 
questions, maintain statistics and conduct various committee meetings. 
Accordingly, this fee will be reassessed on an on-going basis, as is 
the case with various other NYSE qualification examinations.
    Statutory Disqualification Fees. NYSE Rule 346(f) (Limitations-
Employment and Association with Members and Member Organizations) 
provides, in part, that except as otherwise permitted by the Exchange, 
no member, member organization, allied member, approved person, or 
employee shall have associated with it any person who is known to be 
subject to a statutory disqualification as defined in section 
3(a)(39)\15\ of the Act. NYSE Rule 346 further provides that any member 
organization seeking permission to have such person continue to be or 
become associated with it shall pay a fee in an amount to be determined 
by the Exchange.
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    \15\ 15 U.S.C. 78c(a)(39).
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    The Act prohibits a person (including broker-dealers) subject to a 
statutory disqualification (e.g., a suspension or bar by the Commission 
or another exchange or being convicted of certain criminal activities) 
from being associated with a broker-dealer unless specific application 
to the Commission for such association is made by a self-regulatory 
organization (``SRO'') on behalf of the person. The SRO makes such 
application after investigation of the facts surrounding the request. 
Specifically, Rule 19h-1\16\ under the Exchange Act provides, in part, 
that any SRO proposing to admit or continue any person's association 
with a member, notwithstanding a statutory disqualification, as defined 
in section 3(a)(39) under the Exchange Act,\17\ shall file a notice 
with the Commission of such proposed admission or continuance.\18\
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    \16\ 17 CFR 240.19h-1.
    \17\ As a result of the Sarbanes-Oxley Act, persons found to 
have violated certain state securities and insurance regulations and 
banking laws are also now subject to statutory disqualification.
    \18\ Under Rule 19h-1, a member organization willing to employ a 
person subject to a statutory disqualification makes an application 
to the Exchange for approval. If the Exchange approves the employing 
firm's application, it would submit it to the Commission.
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    In connection with a Rule 19h-1 filing made on behalf of an 
individual, the various Exchange Divisions, including Member Firm 
Regulation and Enforcement, review various documents, including a 
description of the individual's proposed duties and responsibilities. 
In conducting such reviews, the Exchange examines the circumstances 
surrounding the statutory disqualification and requests verification 
that all terms and conditions of the disqualification are met. Further, 
the Exchange reviews the firm's disciplinary and examination history, 
including any open matters before its Enforcement division. The purpose 
of the review is to ensure that adequate supervisory procedures are in 
effect. In connection with the Rule 19h-1 filing, the Exchange also 
responds to comments by Commission staff.\19\
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    \19\ In certain instances, the Commission may request additional 
information or recommend that additional supervisory controls be in 
place before approving an application.
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    When such filings are made on behalf of an entity (e.g., a member 
firm), the process is similar to what is described above. In addition, 
the Exchange will request information from a firm as to what procedures 
were put in place to prevent a recurrence, and/or verification of 
payment of fines and/or compliance with an undertaking. The Exchange's 
Enforcement Division reviews the filings/applications and documents in 
making an evaluation into the nature of

[[Page 7822]]

the crime and/or offense committed by the statutory disqualification, 
and where appropriate, conducts further background research, e.g., 
examining court decrees, in completing its review.
    Currently, pursuant to NYSE Rule 346(f), when a member organization 
seeks approval to remain or become associated with a person subject to 
any statutory disqualification, the Exchange imposes a $1,000 fee for 
filing the notice pursuant to Commission Rule 19h-1 under the Act.\20\ 
In instances, where the Exchange is not required to make such a notice 
filing (e.g., clerical and ministerial persons engaged in securities 
activities) but nevertheless reviews the request, it currently assesses 
no fee. Although no fees are currently charged for such reviews, the 
Exchange, as noted below, nevertheless incurs expenses in connection 
with such reviews.
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    \20\ See Securities Exchange Act Release No. 26674 (March 29, 
1989), 54 FR 13801 (April 5, 1989) (SR-NYSE-88-45).
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    As a result of costs associated with the development and 
maintenance of a new system \21\ to track statutory disqualifications, 
the increased cost of processing filings and the increased costs of 
conducting examination oversight of statutory disqualifications, the 
Exchange is proposing that a fee in the amount of $1,000 be charged in 
instances where reviews are performed but a Rule 9h-1 filing is not 
required.\22\ In instances where the Exchange is making the Rule 19h-1 
filing, it is proposing that such fee be increased from $1,000 to 
$1,500.\23\ The proposed fees of $1,000 and $1,500 are comparable to 
those charged by NASD.\24\ The proposed fee increase would be effective 
January 1, 2006.
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    \21\ In May 2005, Member Firm Regulation implemented its new 
Statutory Disqualification/Special Supervision (SD/SS) System to 
track statutory disqualifications.
    \22\ See Securities Exchange Act Release No. 25383 (February 23, 
1988), 53 FR 6046 (February 29, 1988) (SR-NASD-88-3)
    \23\ See Securities Exchange Act Release No. 34897 (October 26, 
1994), 59 FR 54648 (November 1, 1994) (SR-NASD-94-57).
    \24\ See supra notes 21 and 22.
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    Regulatory Element Fee. NYSE Rule 345A provides in part, that no 
member or member organization shall permit any registered person to 
continue to, and no registered person shall continue to perform duties 
as a registered person unless such person has complied with the 
Regulatory Element \25\ continuing education requirements of NYSE Rule 
345A.
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    \25\ See NYSE Rule 345A(a).
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    The Regulatory Element requires each subject registered person to 
complete a standardized, computer-based, interactive continuing 
education program within 120 days of their second registration 
anniversary date and every three years thereafter, or as otherwise 
prescribed by the Exchange. The purpose of this requirement is to help 
ensure that registered persons are kept up-to-date on regulatory, 
compliance, and sales practice-related industry rules and issues. There 
are three Regulatory Element programs: The S201 Supervisor Program, the 
S106 Series 6 Program, and the S101 General Program for Series 7 and 
all other registrations. Persons who fail to complete the Regulatory 
Element within the prescribed time frame are deemed inactive and may 
not perform, nor receive compensation for, functions requiring 
registration.
    The Regulatory Element is a component of the Securities Industry 
Continuing Education Program (``Program'') under NYSE Rule 345A. The 
Securities Industry/Regulatory Council on Continuing Education 
(``Council'')\26\ was organized in 1995 to facilitate cooperative 
industry and regulatory coordination of the administration and future 
development of the Program in keeping with applicable industry 
regulations and changing industry needs. Its roles include recommending 
and developing specific content and questions for the Regulatory 
Element, defining minimum core curricula for the Firm Element component 
of the Program, and developing and updating information about the 
Program for industry-wide dissemination.
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    \26\ The Council currently consists of 20 individuals, 14 of 
whom are securities industry professionals associated with NASD 
member firms and six of whom represent self-regulatory organizations 
(the American Stock Exchange LLC, the Chicago Board Options 
Exchange, Incorporated, the Municipal Securities Rulemaking Board, 
NASD, the New York Stock Exchange, Inc., and the Philadelphia Stock 
Exchange, Inc.).
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    It is the Council's responsibility to maintain the Program on a 
revenue neutral basis while maintaining adequate reserves for 
unanticipated future expenditures.\27\ In December 2003, the Council 
voted to reduce the Regulatory Element session fee from $65 to $60, 
effective January 1, 2004, in order to reduce the reserves to a level 
necessary to support current and expected programs and expenses. The 
Council decided to review the reserve level and evaluate the Regulatory 
Element session fee on an annual basis. The 2004 financial review and 
evaluation produced no change in the Regulatory Element session fee. In 
September 2005, the Council's annual financial review and evaluation 
revealed that unless the Regulatory Element session fee were adjusted, 
the Council's reserves were likely to be insufficient in 2006. The 
reasons for the declining surplus are: (1) Lower than projected session 
volume resulting in a significant decrease in actual revenue over 
projected revenue; (2) higher delivery-related expenses beginning in 
2006; and (3) costs associated with the rebuilding of 
PROCTOR[supreg].\28\ At its September 2005 meeting, the Council voted 
unanimously to increase the Regulatory Element session fee from $60 to 
$75 effective January 1, 2006, in order to meet costs and maintain an 
adequate reserve in 2006.\29\
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    \27\ The Regulatory Element session fee was initially set at $75 
when NASD established the continuing education requirements in 1995. 
The session fee was reduced in 1999 to $65 and again in 2004 to $60. 
The proposed increase returns the Regulatory Element session fee to 
its original 1995 level.
    \28\ PROCTOR[supreg] is an NASD technology system that supports 
computer-based testing and training. The Regulatory Element program 
uses PROCTOR[supreg] to package content, deliver, score and report 
results, and maintain and generate statistical data related to the 
Program.
    \29\ See Securities Exchange Act Release No. 52947 (December 13, 
2005), 70 FR 75517 (December 20, 2005) (SR-NASD-2005-132).
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    The proposed implementation date is January 1, 2006.
2. Statutory Basis
    The NYSE believes the proposed rule change is consistent with 
section 6(b) of the Act,\30\ in general, and furthers the objectives of 
section 6(b)(4)\31\ of the Act in particular, in that it is designed to 
provide for the equitable allocation of reasonable dues, fees and other 
charges among its members, and issuers and other persons using its 
facilities.
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    \30\ 15 U.S.C. 78f(b).
    \31\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    NYSE does not believe that the proposed rule change will impose any 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    NYSE has neither solicited nor received comments on the proposed 
rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to section 
19(b)(3)(A)(ii) of the Act \32\ and Rule

[[Page 7823]]

19b-4(f)(2) thereunder,\33\ because it establishes or changes a due, 
fee, or other charge imposed by the Exchange. Accordingly, the proposal 
will take effect upon filing with the Commission. 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 the Act.\34\
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    \32\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \33\ 17 CFR 240.19b-4(f)(2).
    \34\ The effective date of the original proposed rule change is 
December 23, 2005, and the effective date of Amendment No. 1 is 
February 2, 2006. For purposes of calculating the 60-day period 
within which the Commission may summarily abrogate the proposed rule 
change, as amended, under section 19(b)(3)(C) of the Act, the 
Commission considers the period to commence on February 2, 2006, the 
date on which the NYSE submitted Amendment No. 1. See 15 U.S.C. 
78s(b)(3)(C).
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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, as amended, is consistent with the Act. Comments may be 
submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml.
); or     Send an e-mail to rule-comments@sec.gov. Please include 

File Number SR-NYSE-2005-92 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.
    All submissions should refer to File Number SR-NYSE-2005-92. This 
file number should be included on the subject line if e-mail is used. 
To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml
). 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 the 
filing also will be available for inspection and copying at the 
principal offices of the NYSE. All comments received will be posted 
without change; the Commission does not edit personal identifying 
information from submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File Number SR-NYSE-2005-92 and should be submitted on or before March 
7, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\35\
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    \35\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. E6-2010 Filed 2-13-06; 8:45 am]

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