Document ID: SEC-2007-0330-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: National Association of Securities Dealers, Inc.
Posted Date: 2007-03-05T05:00Z

[Federal Register: March 5, 2007 (Volume 72, Number 42)]
[Notices]               
[Page 9813-9814]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr05mr07-92]                         

[[Page 9813]]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55360; File No. SR-NASD-2007-006]

 
Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change Relating to Fees for Filing Documents Pursuant to the 
Corporate Financing Rule

February 27, 2007.
    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 January 24, 2007, the National Association of Securities Dealers, 
Inc. (``NASD'') 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 substantially by NASD. 
NASD has designated this proposal as establishing or changing a due, 
fee, or other charge imposed by a self-regulatory organization pursuant 
to Section 19(b)(3)(A) of the Act,\3\ and Rule 19b-4(f)(2) 
thereunder,\4\ which renders the proposal effective upon filing with 
the Commission. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NASD is proposing to amend Section 7 of Schedule A to the NASD By-
Laws to adjust fees for filing documents pursuant to NASD Rule 2710 
(Corporate Financing Rule--Underwriting Terms and Arrangements). The 
text of the proposed rule change is available at NASD, the Commission's 
Public Reference Room, and http://www.nasd.com/RulesRegulation/RuleFilings
.

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 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 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
    Under Section 7 of Schedule A to the NASD By-Laws, the current fee 
for filing offering documents with NASD pursuant to Rule 2710 
(Corporate Financing Rule--Underwriting Term and Arrangements) is equal 
to $500 plus .01% of the proposed maximum aggregate offering price or 
other applicable value of all securities registered, but not to exceed 
$75,500.\5\ However, pursuant to the Commission's securities offering 
reform rulemaking (``Securities Offering Reform''),\6\ which became 
effective on December 1, 2005, Commission rules now permit, among other 
things, ``well-known seasoned issuers'' or ``WKSIs'' to file 
automatically effective shelf registration statements without 
specifying the amount or value of the securities that may be offered 
off the registration statement for up to three years. WKSIs are large 
issuers that generally must have either $700 million of worldwide 
equity market capitalization or an aggregate of $1 billion of non-
convertible securities issued within the past three years.\7\
---------------------------------------------------------------------------

    \5\ Thus, under Section 7 of Schedule A to the NASD By-Laws, 
fees are capped with respect to offerings with an aggregate offering 
price of $750 million or more.
    \6\ See Securities Exchange Act Release No. 52056 (July 19, 
2005), 70 FR 44722 (August 3, 2005).
    \7\ See Rule 405 under the Securities Act of 1933, 17 C.F.R. 
230.405.
---------------------------------------------------------------------------

    Most WKSIs are exempt from the shelf offering filing requirements 
under NASD Rule 2710(b)(7), which exempts an issuer that is eligible to 
use a Form S-3 or Form F-3 registration statement and has been a 
reporting company under Section 13(a) or 15(d) of the Act for at least 
36 months. In addition, NASD has proposed amendments to Rule 2710 to 
expressly exempt WKSI shelf registration statements from the filing 
requirements of Rule 2710.\8\ Thus, NASD intends that only those WKSIs 
with a conflict of interest as defined under Rule 2720 will be required 
to file shelf registration statements with NASD.\9\ For these issuers 
filing documents with NASD pursuant to Rule 2720, NASD will review the 
proposed underwriting terms and arrangements to determine whether they 
comply with the substantive requirements of the rule, including limits 
on underwriting compensation and use of a qualified independent 
underwriter to provide a pricing opinion and conduct due diligence. 
Upon completion of the review, if the terms and arrangements comply 
with the rule, NASD will issue an opinion that it has no objection to 
the filing.
---------------------------------------------------------------------------

    \8\ See SR-NASD-2004-022. Amendment No. 4 to SR-NASD-2004-022 
was filed with the Commission on April 28, 2006. See Securities 
Exchange Act Release No. 50749 (November 29, 2004), 69 FR 70735 
(December 7, 2004).
    \9\ See NASD Rule 2720(m). Pursuant to Rule 2720(m), all 
offerings that are within the scope of Rule 2720 are required to be 
filed with NASD and have the fee paid as required by Rule 2710, even 
if the offering would be otherwise exempt from Rule 2710.
---------------------------------------------------------------------------

    Section 7 of Schedule A to the NASD By-Laws provides that the fee 
imposed for filing documents required pursuant to Rule 2710 is based on 
the proposed maximum aggregate offering price or other applicable value 
of all securities registered on a Commission registration statement or 
included on any other type of offering document. However, because WKSIs 
are not required to specify a proposed maximum aggregate offering price 
or other applicable value on a registration statement, assessing NASD's 
fee has been problematic. In their filings pursuant to Rule 2710, most 
WKSIs provided a value of securities that will be offered at or above 
$750 million, corresponding with the maximum filing fee. Since the 
Commission's Securities Offering Reform has been in effect, NASD has 
received 71 WKSI filings, of which 62 (or 87%) have provided a value of 
$750 million or more.\10\ Nine (or 13%) have specified amounts of 
securities with an aggregate value of less than $750 million; however, 
these issuers are eligible to amend their registration during the three 
year effective period to increase the value of securities registered. 
Given this activity, and the fact that a WKSI shelf registration filing 
allows the issuer to offer securities on a registration statement for a 
three year period in amounts above $750 million, NASD is imposing the 
maximum filing fee on all WKSI filings.\11\
---------------------------------------------------------------------------

    \10\ As noted above, under Commission rules, a WKSI registration 
statement is not required to state a specific value of securities. 
Nevertheless, for purposes of NASD's filing requirements, a value 
must be provided, and most issuers have indicated that they intend 
to offer at least $750 million.
    \11\ NASD's electronic filing system does not track subsequent 
amendments to WKSI registration statements to determine whether new 
securities have been registered by an amendment, thereby increasing 
the size of the offering. Moreover, if multiple members participate 
in takedowns of securities off of a WKSI shelf registration 
statement over time, no one member would have the ability to track 
the aggregate value of the securities sold by the multiple members 
and ensure that the proper filing fee is paid in connection with the 
offerings.

---------------------------------------------------------------------------

[[Page 9814]]

    Accordingly, NASD proposes to amend Section 7 of Schedule A to the 
NASD By-Laws expressly to require that offering documents that are 
required to be filed with NASD relating to an automatically effective 
shelf registration statement by a WKSI (which would currently include 
all WKSIs not otherwise exempt from Rule 2710 and, if SR-NASD-2004-022 
is approved by the Commission, would only include WKSIs that are 
broker-dealers or affiliates of broker-dealers) \12\ must be 
accompanied by a $75,500 fee.
---------------------------------------------------------------------------

    \12\ Telephone conversation between Kathryn Moore, Assistant 
General Counsel, NASD, and Commission staff on February 26, 2007.
---------------------------------------------------------------------------

    NASD has filed the proposed rule change for immediate 
effectiveness. The implementation date will be February 26, 2007.
2. Statutory Basis
    NASD believes that the proposed rule change is consistent with 
Section 15A(b)(5) \13\ of the Act, which requires that NASD rules 
provide for the equitable allocation of reasonable dues, fees, and 
other charges among members and issuers and other persons using any 
facility or system that NASD operates or controls. NASD believes that 
the proposed rule change, which specifies the filing fee required for 
shelf offerings by WKSIs where no proposed maximum aggregate offering 
or other applicable value of all securities registered is required to 
be stated, is necessary to ensure the appropriate review of offerings 
by WKSIs under NASD rules.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78o-3(b)(5).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    NASD 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 NASD 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) of the Act \14\ and subparagraph (f)(2) of Rule 19b-4 
thereunder \15\ in that it establishes or changes a due, fee, or other 
charge imposed by NASD. 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 ct.\16\
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 17 CFR 240.19b-4(f)(2).
    \16\ See 15 U.S.C. 78s(b)(3)(C).
---------------------------------------------------------------------------

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. 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-NASD-2007-006 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-NASD-2007-006. 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 NASD. 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-
NASD-2007-006 and should be submitted on or before March 26, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\17\
---------------------------------------------------------------------------

    \17\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-3762 Filed 3-2-07; 8:45 am]

BILLING CODE 8010-01-P