Document ID: SEC-2012-1015-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2012-06-28T04:00Z

[Federal Register Volume 77, Number 125 (Thursday, June 28, 2012)]
[Notices]
[Pages 38698-38699]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-15805]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67241; File No. SR-FINRA-2012-029]

Self-Regulatory Organizations; Financial Industry Regulatory 
Authority Inc.; Notice of Filing and Immediate Effectiveness of 
Proposed Rule Change To Adjust Fees for Filing Documents Pursuant to 
FINRA Rule 5110

June 22, 2012.
    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 June 8, 2012, Financial Industry Regulatory Authority (``FINRA'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change described in Items I, II and III below, which 
Items have been prepared by FINRA. FINRA has designated the proposed 
rule change as ``establishing or changing a due, fee or other charge'' 
under Section 19(b)(3)(A)(ii) of the Act \3\ and Rule 19b-4(f)(2) 
thereunder,\4\ which renders the proposal effective upon receipt of 
this filing by the Commission. The Commission is publishing this notice 
to solicit comments on the proposed rule change from interested 
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    FINRA is proposing to amend Section 7 of Schedule A to the FINRA 
By-Laws to adjust fees for filing documents pursuant to FINRA Rule 5110 
(Corporate Financing Rule--Underwriting Terms and Arrangements). The 
text of the proposed rule change is available at http://www.finra.org, 
at the principal office of FINRA, and at the Commission's Public 
Reference Room.

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

    In its filing with the Commission, FINRA 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. FINRA 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 purpose of the proposed rule change is to amend Section 7 of 
Schedule A to the FINRA By-Laws (``Section 7'') to (1) increase the 
rate from .01 percent to .015 percent for the fee for the filing of 
initial documents and amendments pursuant to the Corporate Financing 
Rule; (2) increase the maximum fee from $75,500 to $225,500 for such 
filings; and (3) increase the fee from $75,500 to $225,500 for an 
offering of securities on an automatically effective Form S-3 or F-3 
registration statement filed with the SEC and offered pursuant to 
Securities Act Rule 415 by a Well-Known Seasoned Issuer as defined in 
Securities Act Rule 405.
    FINRA's Corporate Financing Department (the ``Department'') is 
responsible for reviewing the proposed underwriting terms and 
arrangements of proposed public offerings of securities for compliance 
with the requirements of FINRA Rule 5110. The public offerings reviewed 
by the Department include initial and secondary offerings of unseasoned 
issuers, best efforts offerings of direct participation programs 
(``DPPs'') and real estate investment trusts (``REITs''), but generally 
exclude public offerings of seasoned issuers that are not broker-
dealers or their affiliates and offerings of investment grade 
securities.
    The Department's review is complementary to the SEC's registration 
process, which defers to FINRA to establish reasonable levels of 
underwriting compensation and adequate disclosure of the underwriting 
terms and conflicts. Pursuant to FINRA Rule 5110, no member or person 
associated with a member may participate in a public offering subject 
to the Rule, or to FINRA Rules 5121 (Public Offerings of Securities 
With Conflicts of Interest) and 2310 (Direct Participation Programs), 
unless the documents and information specified in the Rule have been 
filed with and reviewed by the Department. Typically, the book-running 
manager for the offering files the documents on behalf of the 
participating members. The fee charged to members for this review is 
set forth in Section 7.
    Under Section 7(a), the current fee for filings of initial 
documents relating to any offering pursuant to FINRA Rule 5110 is equal 
to (i) $500 plus .01 percent of the proposed maximum aggregate offering 
price or other applicable value of all securities registered on an SEC 
registration statement or included on any other type of offering 
document (where not filed with the SEC), but shall not exceed $75,500; 
or (2) $75,500 for an offering of securities on an automatically 
effective Form S-3 or F-3 registration statement filed with the SEC and 
offered pursuant to Securities Act Rule 415 by a Well-Known Seasoned 
Issuer as defined in Securities Act Rule 405.\5\ Similarly, under 
Section 7(b), the current fee for filings of any amendment or other 
change to documents initially filed pursuant to FINRA Rule 5110 is .01 
percent of the net increase in the maximum aggregate offering price or 
other applicable value of all securities registered on an SEC 
registration statement, or any related Securities Act Rule 462(b) 
registration statement, or reflected on any Securities Act Rule 430A 
prospectus, or included on any other type of offering document. Section 
7(b) also provides that the aggregate of all filing fees paid in 
connection with an SEC registration statement or other type of offering 
document shall not exceed $75,500. Thus, under Section 7, fees are 
currently capped with respect to offerings with an aggregate offering 
price of $750 million or more.
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    \5\ Section 7(a) provides that the amount of the filing fee may 
be rounded to the nearest dollar.
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    The rate of the filing fee rate has remained static since it was 
adopted in 1970, while the cap has been adjusted periodically, most 
recently in 2004.\6\ However, the nature and complexity of offerings 
filed with the Department have changed substantially since the most 
recent adjustment. Many filings seek expedited review or ``same day

[[Page 38699]]

clearance'' and FINRA has deployed (and continues to deploy) 
significant technology resources and process enhancements to 
accommodate those needs.\7\ The Department also has seen growth in 
filings of unlisted REITs, business development companies and other 
DPPs, which raise complex issues.
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    \6\ See Securities Exchange Act Release No. 50984 (Jan. 6, 
2005), 70 FR 2440 (Jan. 13, 2005) (Notice of Filing and Immediate 
Effectiveness of File No. SR-NASD-2004-177) (setting the maximum fee 
at $75,500). The fees for automatically effective Form S-3 or F-3 
offerings were added in 2007 without adjusting the existing rates. 
See Securities Exchange Act Release No. 55360 (Feb. 27, 2007), 72 FR 
9813 (Mar. 5, 2007) (Notice of Filing and Immediate Effectiveness of 
File No. SR-NASD-2007-006).
    \7\ See, e.g., Regulatory Notice 12-22 (April 2012).
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    In support of its reviews under FINRA Rule 5110 and other 
regulatory responsibilities, FINRA is proposing to increase the rate 
and the fee cap for filings pursuant to FINRA Rule 5110. This fee, 
which is assessed on members, though typically borne by issuers, funds 
the Department's reviews as well as FINRA's extensive regulatory 
programs and services that support the public capital markets being 
accessed by issuers through such member firms. The proposed fee would 
increase the rate of the filing fee from .01 percent to .015 percent of 
the proposed maximum aggregate offering price or other applicable value 
of the securities, and would increase the maximum fee from $75,500 to 
$225,500.
Implementation
    FINRA has filed the proposed rule change for immediate 
effectiveness. FINRA is proposing that the implementation date of the 
proposed rule change will be July 2, 2012. Specifically, the proposed 
adjusted fees and fee cap would become effective for filings and 
amendments made on or after July 2, 2012.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(5) of the Act,\8\ which requires, among 
other things, that FINRA 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 FINRA operates or 
controls. FINRA believes that the proposed fees are reasonable based on 
the nature and scope of the Department's review pursuant to FINRA Rule 
5110. The proposed fee also contributes to the general funding of 
FINRA's overall regulatory program and serves to ensure that FINRA is 
sufficiently capitalized to meet its regulatory responsibilities. The 
proposed fees are equitably allocated among members (or borne by 
issuers) as they are assessed as a percentage of the aggregate maximum 
offering proceeds in much the same way that SEC registration fees are 
assessed under Section 6(b) of the Securities Act of 1933. Moreover, 
the cap on offerings above $1.5 billion ensures that the fees collected 
from any particular member (or borne by any particular issuer) with 
respect to a filing are equitably allocated and not disproportionately 
borne by members (or issuers) participating in the very largest 
offerings.
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    \8\ 15 U.S.C. 78o-3(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    FINRA 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.

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(i) of the Act.\9\ At any time within 60 days of the filing 
of the proposed rule change, the Commission summarily may temporarily 
suspend 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. If the Commission takes such action, the Commission shall 
institute proceedings to determine whether the proposed rule should be 
approved or disapproved.] [sic]
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    \9\ 15 U.S.C. 78s(b)(3)(a)(i). [sic]
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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 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 email to rule-comments@sec.gov. Please include 
File Number SR-FINRA-2012-029 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-FINRA-2012-029. This 
file number should be included on the subject line if email 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 Web site 
viewing and printing in the Commission's Public Reference Room on 
official business days between the hours of 10:00 a.m. and 3:00 p.m. 
Copies of such filing also will be available for inspection and copying 
at the principal offices of FINRA. 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-FINRA-2012-029, and should be submitted on or before 
July 19, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-15805 Filed 6-27-12; 8:45 am]
BILLING CODE 8011-01-P