Document ID: SEC-2005-0064-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: National Association of Securities Dealers, Inc.
Posted Date: 2005-10-03T04:00Z

[Federal Register: October 3, 2005 (Volume 70, Number 190)]
[Notices]               
[Page 57638-57640]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr03oc05-154]                         

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52515; File No. SR-NASD-2005-106]

 
Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Notice of Filing of Proposed Rule Change by National 
Association of Securities Dealers, Inc. Regarding Fees for Closed-End 
Funds Listing on The Nasdaq SmallCap Market

September 27, 2005.
    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 August 31, 2005, the National Association of Securities Dealers, 
Inc. (``NASD''), through its subsidiary, The Nasdaq Stock Market, Inc. 
(``Nasdaq''), 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 Nasdaq. 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.
---------------------------------------------------------------------------

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

    Nasdaq proposes to amend NASD Rules 4510 and 4520. The text of the 
proposed rule change is below. Proposed new language is italicized; 
proposed deletions are in [brackets].
* * * * *

4510. The Nasdaq National Market

    (a)-(c) No change.
    (d) Annual Fee--American Depositary Receipts (ADRs) and Closed-End 
Funds.
    (1)-(3) No change.
    (4) For the purpose of determining the total shares outstanding, 
fund sponsors may aggregate shares outstanding of all Closed-End Funds 
in the same fund family listed in The Nasdaq National Market or The 
Nasdaq SmallCap Market, as shown in the issuer's most recent periodic 
reports required to be filed with the appropriate regulatory authority 
or in more recent information held by Nasdaq. The maximum annual fee 
applicable to a fund family shall not exceed $75,000. For purposes of 
this rule, a ``fund family'' is defined as two or more Closed-End Funds 
that have a common investment adviser or have investment advisers who 
are ``affiliated persons'' as defined in Section 2(a)(3) of the 
Investment Company Act of 1940, as amended.
    (5)-(6) No change.
    (e) No change.

4520. The Nasdaq SmallCap Market

    (a) Entry Fee.
    (1)-(2) No change.
    (3) A closed-end management investment company registered under the 
Investment Company Act of 1940, as amended (a ``Closed-End Fund''), 
that submits an application for inclusion of securities in The Nasdaq 
SmallCap Market shall pay to the Nasdaq Stock Market, Inc. an entry fee 
of $5,000 (of which $1,000 represents a non-refundable, application 
fee).
    ([3]4) The Board of Directors of The Nasdaq Stock Market, Inc. or 
its designee may, in its discretion, defer or

[[Page 57639]]

waive all or any part of the entry fee prescribed herein.
    ([4]5) Total shares outstanding means the aggregate of all classes 
of equity securities to be included in The Nasdaq SmallCap Market as 
shown in the issuer's most recent periodic report or in more recent 
information held by Nasdaq or, in the case of new issues, as shown in 
the offering circular, required to be filed with the issuer's 
appropriate regulatory authority.
    ([5]6) An issuer that submits an application for inclusion of any 
class of rights in The Nasdaq SmallCap Market, shall pay, at the time 
of its application, a non-refundable application fee to The Nasdaq 
Stock Market of $1,000.
    ([6]7) The fees described in this Rule 4520(a) shall not be 
applicable with respect to any securities that (i) are listed on a 
national securities exchange but not listed on Nasdaq, or (ii) are 
listed on the New York Stock Exchange and Nasdaq, if the issuer of such 
securities transfers their listing exclusively to the Nasdaq SmallCap 
Market.
    ([7]8) The fees described in this Rule 4520(a) shall not be 
applicable to an issuer (i) whose securities are listed on the New York 
Stock Exchange and designated as national market securities pursuant to 
the plan governing New York Stock Exchange securities at the time such 
securities are approved for listing on Nasdaq, and (ii) that maintains 
such listing and designation after it lists such securities on Nasdaq.
    (b) No change.
    (c) Annual Fee.
    (1)-(2) No change.
    (3) Notwithstanding paragraph (1), a Closed-End Fund listed on The 
Nasdaq SmallCap Market shall pay to The Nasdaq Stock Market, Inc. an 
annual fee calculated based on total shares outstanding according to 
the following schedule:

Up to 5 million shares.......................................    $15,000
5+ to 10 million shares......................................    $17,500
10+ to 25 million shares.....................................    $20,000
25+ to 50 million shares.....................................    $22,500
50+ to 100 million shares....................................    $30,000
100+ to 250 million shares...................................    $50,000
Over 250 million shares......................................    $75,000

    ([3]4) The Board of Directors of The Nasdaq Stock Market, Inc. or 
its designee may, in its discretion, defer or waive all or any part of 
the annual fee prescribed herein.
    ([4]5) If a class of securities is removed from The Nasdaq SmallCap 
Market, that portion of the annual fees for such class of securities 
attributable to the months following the date of removal shall not be 
refunded, except such portion shall be applied to Nasdaq National 
Market fees for that calendar year.
    ([5]6) Total shares outstanding means the aggregate of all classes 
of equity securities included in The Nasdaq SmallCap Market as shown in 
the issuer's most recent periodic report required to be filed with the 
issuer's appropriate regulatory authority or in more recent information 
held by Nasdaq. In the case of foreign issuers, total shares 
outstanding shall include only those shares issued and outstanding in 
the United States.
    (7) Notwithstanding paragraph (6), for the purpose of determining 
the total shares outstanding, fund sponsors may aggregate shares 
outstanding of all Closed-End Funds in the same fund family listed in 
The Nasdaq National Market and The Nasdaq SmallCap Market, as shown in 
the issuer's most recent periodic reports required to be filed with the 
appropriate regulatory authority or in more recent information held by 
Nasdaq. The maximum annual fee applicable to a fund family shall not 
exceed $75,000. For purposes of this rule, a ``fund family'' is defined 
as two or more Closed-End Funds that have a common investment adviser 
or have investment advisers who are ``affiliated persons'' as defined 
in Section 2(a)(3) of the Investment Company Act of 1940, as amended.
    ([6]8) In lieu of the fees described in Rule 4510(c)(1), the annual 
fee shall be $15,000 for each issuer (i) whose securities are listed on 
the New York Stock Exchange and designated as national market 
securities pursuant to the plan governing New York Stock Exchange 
securities at the time such securities are approved for listing on 
Nasdaq, and (ii) that maintains such listing and designation after it 
lists such securities on Nasdaq. Such annual fee shall be assessed on 
the first anniversary of the issuer's listing on Nasdaq.
    (d) No change.
* * * * *

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

    In its filing with the Commission, Nasdaq 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. Nasdaq 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
    Currently, Closed-End Funds listing on The Nasdaq SmallCap Market 
(``SmallCap Market'') are required to pay entry and annual fees 
according to the applicable fee schedules set forth in NASD Rule 
4520.\3\ These entry fees range from $25,000 to $50,000 and the annual 
fees from $17,500 to $21,000.
---------------------------------------------------------------------------

    \3\ Closed-End Funds are evaluated for listing on the SmallCap 
Market under the general initial listing criteria contained in NASD 
Rules 4310 and 4320.
---------------------------------------------------------------------------

    Pursuant to the rule change, the entry fee for listing a Closed-End 
Fund on the SmallCap Market will decrease to $5,000 (of which $1,000 is 
a non-refundable application fee) per fund. Annual fees will be based 
on the total number of shares outstanding, with a minimum fee of 
$15,000 and a maximum fee of $75,000. For the purposes of determining 
the annual fee, fund sponsors will be permitted to aggregate the shares 
outstanding of all Closed-End Funds listed on either The Nasdaq 
National Market (``National Market'') or the SmallCap Market that are 
part of the same fund family. As a result, the annual fee may not 
exceed $75,000 per fund family. For the purposes of this rule, a ``fund 
family'' is defined as two or more Closed-End Funds that share a common 
investment adviser or investment advisers who are ``affiliated 
persons'' as defined in Section 2(a)(3) of the Investment Company Act 
of 1940, as amended.
    Nasdaq believes there are several reasons to adopt new fees 
applicable to Closed-End Funds listing on the SmallCap Market. First, 
the new annual fee schedule would accommodate the needs of fund 
sponsors more effectively than the current fee schedule because 
sponsors often choose to issue and list multiple funds in the same 
family. Currently, each fund that is listed on The SmallCap Market is 
assessed a separate annual fee. Under the proposed rules, fund families 
would be permitted to aggregate shares outstanding of listed funds to 
determine the annual fee, subject to an annual cap of $75,000 per fund 
family.
    Second, under the proposed rule change, funds listed on the 
SmallCap Market would be subject to a schedule of annual fees identical 
to that of funds listed on the National Market.\4\ Because

[[Page 57640]]

fund families would be permitted to aggregate shares outstanding across 
markets for the purposes of calculating the annual fee, Nasdaq believes 
that matching fee schedules would minimize problems that could arise if 
fund families listing funds on both the National Market and SmallCap 
Market were subject to conflicting fee schedules. Although an 
individual fund listing on the SmallCap Market with over 25 million 
total shares outstanding would be subject to an increase in annual fees 
under the proposed rules, Nasdaq believes the benefits of substantially 
lower entry fees and the ability of fund families to aggregate shares 
across markets outweigh the burden to funds of the limited fee 
increase.
---------------------------------------------------------------------------

    \4\ Nasdaq recently adopted new listing fees for Closed-End 
Funds listing on the National Market. See Securities Exchange Act 
Release No. 52277 (August 17, 2005), 70 FR 49347 (August 23, 2005) 
(SR-NASD-2005-096).
---------------------------------------------------------------------------

    Finally, in many cases where multiple funds are listed, the new fee 
schedule would lower fees payable by Closed-End Funds, thereby 
benefiting the fund investors that ultimately pay those expenses by 
reducing the costs associated with listing fund shares. In addition, 
Nasdaq believes that establishing lower fees for fund families would 
permit Nasdaq to compete more effectively for listings with other 
markets.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 15A of the Act,\5\ in general, and with 
Section 15A(b)(5) of the Act,\6\ in particular, in that it provides for 
the equitable allocation of reasonable fees, dues, and other charges 
among members and issuers and other persons using any facility or 
system which the NASD operates or controls. The proposed change to the 
entry and annual fees will apply equally to all Closed-End Funds 
listing on The Nasdaq SmallCap Market. Furthermore, Nasdaq believes 
that the proposed fees are reasonable and fall within the range of fees 
charged by other markets.
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78o-3.
    \6\ 15 U.S.C. 78o-3(b)(5).
---------------------------------------------------------------------------

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

    Nasdaq does not believe that the proposed rule change would 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

    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 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 NYSE 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.

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-2005-106 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-9303.

All submissions should refer to File Number SR-NASD-2005-106. 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 such 
filing also will be available for inspection and copying at the 
principal office of Nasdaq. 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 publicly available. All submissions should refer to 
File Number SR-NASD-2005-106 and should be submitted on or before 
October 24, 2005.\7\
---------------------------------------------------------------------------

    \7\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\7\
Jonathan G. Katz,
Secretary.
[FR Doc. E5-5354 Filed 9-30-05; 8:45 am]

BILLING CODE 8010-01-P