[Federal Register Volume 77, Number 126 (Friday, June 29, 2012)]
[Notices]
[Pages 38866-38869]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-15937]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-67247; File No. SR-FINRA-2012-030]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing and Immediate Effectiveness of
Proposed Rule Change To Amend Sections 4 and 6 of Schedule A to the
FINRA By-Laws Regarding Fees Relating to the Central Registration
Depository
June 25, 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 11, 2012, Financial Industry Regulatory Authority, Inc.
(``FINRA'') filed with the Securities and Exchange Commission (``SEC''
or ``Commission'') the proposed rule change as 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 proposed rule
change 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 Substance
of the Proposed Rule Change
FINRA is proposing 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[supreg]'' or ``CRD system'').
The text of the proposed rule change is available on FINRA's Web
site 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
As described in further detail below, FINRA is proposing to amend
Schedule A to the FINRA By-Laws (``Schedule A'') to implement changes
to certain fees relating to the CRD system.\5\
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\5\ The CRD system is the central licensing and registration
system for the U.S. securities industry. The CRD system enables
individuals and firms seeking registration with multiple states and
self-regulatory organizations (``SROs'') to do so by submitting a
single form, fingerprint card and a combined payment of fees to
FINRA. Through the CRD system, FINRA maintains the qualification,
employment and disciplinary histories of registered associated
persons of broker-dealers. Certain information reported to the CRD
system is displayed in BrokerCheck[supreg], an electronic system
that provides the public with information on the professional
background, business practices, and conduct of FINRA members and
their associated persons. Investors use BrokerCheck to help make
informed choices about the individuals and firms with which they
currently conduct or are considering conducting business.
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Initial/Transfer Registration Fee
Under Section 4(b)(1) of Schedule A, FINRA charges an $85 fee for
each initial or transfer Uniform Application for Securities Industry
Registration or Transfer (``Form U4'') filed by a member in the CRD
system to register an
[[Page 38867]]
individual. In those cases where a member is transferring the
registrations of individuals in connection with the acquisition of all
or part of another member's business, FINRA provides a discount to the
fee, ranging from 10 to 50 percent, based on the number of registered
personnel being transferred. FINRA is proposing to increase the
registration fee to $100; it is not proposing to make any changes to
the current discount schedule.
This fee has been static since 1995.\6\ Since 1995, FINRA has
regularly enhanced the CRD system by adding features and functionality
(e.g., work queues, standard reports, email notifications) designed to
make form filing more efficient for members, and to otherwise help
members meet their reporting and related regulatory obligations. FINRA
also has consistently made usability and navigational enhancements
since deploying the web-based CRD system in 1999. Finally, FINRA has
increased the number of registration categories available to
individuals, as well as the number of SROs and jurisdictions with which
individuals and firms may register.
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\6\ See Securities Exchange Act Release No. 36025 (July 26,
1995), 60 FR 39200 (August 1, 1995) (Notice of Filing and Immediate
Effectiveness of File No. SR-NASD-95-32).
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Disclosure Filing Fees
As part of the securities industry's licensing and registration
process, individuals and members are required to report certain
disclosure events or proceedings to the CRD system. These disclosure
matters include, for example, certain criminal charges and convictions,
regulatory actions, investment-related civil judgments and injunctions,
and financial events such as bankruptcies and unsatisfied liens.
Individuals report these disclosure events or proceedings through Form
U4 or Uniform Termination Notice for Securities Industry Registration
(``Form U5''), while members report disclosure matters in which they or
a control affiliate have been involved via the Uniform Application for
Broker-Dealer Registration (``Form BD'').
When a disclosure filing is made for either an individual or
member, FINRA must, among other things, confirm that the matter is
properly reported; review any documentation submitted and/or determine
whether additional documentation is required; conduct any necessary
independent research; and, depending on the matter reported, analyze
whether the event or proceeding subjects the individual or member to a
statutory disqualification pursuant to Section 3(a)(39) of the Act.\7\
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\7\ 15 U.S.C. 78c(a)(39).
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Under Section 4(b)(3) of Schedule A, FINRA assesses a $95 fee to
process an initial or amended Form U4 or Form U5 that includes the
initial reporting, amendment or certification of one or more disclosure
events or proceedings. FINRA currently does not charge a fee to process
a Form BD that contains a disclosure event or proceeding. FINRA is
proposing to increase the disclosure filing fee for Forms U4 and U5 to
$110 and to establish a disclosure filing fee for Form BD of $110.
Reviewing disclosure information has become more complex, in part
because Forms U4 and U5 have added further disclosure questions \8\ and
FINRA's By-Laws have been revised to expand the categories under which
an individual or member can be subject to a statutory
disqualification.\9\ As a result, while costs to administer the CRD
program have increased, those costs have not been offset by a
commensurate increase in the current disclosure filing fee, which has
remained static since 1995,\10\ or the establishment of a fee to cover
the costs associated with review of disclosure matters submitted on
Form BD.
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\8\ See Securities Exchange Act Release No. 59916 (May 13,
2009), 74 FR 23750 (May 20, 2009) (Order Approving File No. SR-
FINRA-2009-008).
\9\ See Securities Exchange Act Release No. 56145 (July 26,
2007), 72 FR 42169 (August 1, 2007) (Order Approving File No. SR-
NASD-2007-023).
\10\ See supra note 6.
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System Processing Fee
Under Section 4(b)(6) of Schedule A, FINRA currently charges an
annual $30 system processing fee for each member's registered
individuals. FINRA is proposing to increase the system processing fee
to $45. This fee has not been increased since January 2000.\11\ Since
2000, FINRA's costs to operate, develop, and maintain the CRD system
(e.g., investments in system infrastructure and data security) have
increased.
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\11\ See Securities Exchange Act Release No. 41937 (September
28, 1999), 64 FR 53762 (October 4, 1999) (Notice of Filing and
Immediate Effectiveness of File No. SR-NASD-99-43).
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Fingerprint Fees
FINRA processes fingerprints submitted by members on behalf of
their associated persons who are required to be fingerprinted pursuant
to Section 17(f)(2) of the Act \12\ and Rule 17f-2 thereunder.\13\
Under Section 4(b)(4) of Schedule A, FINRA currently charges a fee of
$13 to process each set of fingerprints submitted by a member, plus an
additional fee that FINRA collects on behalf of the Federal Bureau of
Investigation (``FBI''), consistent with FBI guidelines.\14\
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\12\ 15 U.S.C. 78q(f)(2).
\13\ 17 CFR 240.17f-2.
\14\ The current FBI fee is $14.50. See Revised User Fee
Schedule, 76 FR 78950 (December 20, 2011).
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Members submit fingerprints to FINRA either electronically or via a
hard copy fingerprint card. FINRA is proposing to increase the
processing fee for fingerprints submitted electronically to $15 and to
increase the fee for fingerprints submitted by a hard copy fingerprint
card to $30.
The fingerprint fee has not increased since 2003.\15\ FINRA is
proposing a two-tiered fingerprint processing fee structure in part to
reflect that the costs associated with processing fingerprints
submitted via a hard copy fingerprint card are much higher than those
that are submitted electronically. Specifically, fingerprints submitted
by a hard copy card require additional processing by FINRA, including
adding a barcode, if necessary, to the card for tracking purposes;
scanning the fingerprints and converting them to a digital image for
submission to the FBI; and, for first-time registrants, entering the
individual's personal and demographic information into the CRD system.
FINRA also believes that the two-tiered fingerprint fee structure will
incentivize firms to submit fingerprints electronically, making
processing less time-intensive for FINRA staff. FINRA notes that
members will be able to choose how they submit their associated
persons' fingerprints and therefore will have some control over the
fees they incur for fingerprint processing.
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\15\ See Securities Exchange Act Release No. 48379 (August 20,
2003), 68 FR 51622 (August 27, 2003) (Notice of Filing and Immediate
Effectiveness of File No. SR-NASD-2003-109).
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In addition to processing fingerprints submitted by members, FINRA
also processes and posts fingerprint results and identifying
information submitted by a member that have been processed through
another SRO. Pursuant to Section 4(b)(5) of Schedule A, FINRA charges a
fee of $13 for processing and posting these submissions. FINRA is
proposing to increase this fee to $30.
This fee has been static since 2003.\16\ FINRA notes there are
higher costs associated with the processing and posting of fingerprint
results and identifying information from other SROs. In this regard,
upon receipt of the fingerprint results and identifying information,
FINRA images and stores the documents received, verifies and matches
the fingerprint processing results to an existing record in the CRD
[[Page 38868]]
system, if available, and manually posts the results to the CRD system.
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\16\ See supra note 15.
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Mass Transfer Registration Fees
FINRA's Mass Transfer Program allows for the bulk transfer of
registration and fingerprint information within the CRD system when a
member is involved in a business combination such as a merger,
consolidation or reorganization with another member. Under Section 6(b)
of Schedule A, a member that FINRA determines to be a successor
organization to a predecessor member is not required to pay the fees
for the re-registration of branch offices and personnel of the
predecessor as part of the mass transfer. A non-successor member,
however, is required to pay these re-registration fees.
FINRA is proposing to eliminate the exception to the payment of re-
registration fees for successor members involved in a mass transfer.
FINRA notes that a mass transfer, which is an optional service that
FINRA makes available to member firms that engage in a business
combination, involves significant work on FINRA's part, including
reviewing transaction details; entering the mass transfer into the CRD
system; addressing questions from firm personnel or, in certain
circumstances, providing them with training; and post-mass transfer
troubleshooting. The elimination of the exception will result in all
members that participate in FINRA's Mass Transfer Program to be [sic]
assessed fees for the re-registration of branch offices and personnel
of the predecessor member.
Late Disclosure Fee
Under Section 4(h) of Schedule A, FINRA charges a fee of $10 per
day, up to a maximum of $300, for each day that a new disclosure event
or a change in the status of a previously reported disclosure event is
not timely filed on an initial or amended Form U5 or an amended Form
U4. This fee is assessed starting on the day following the last date on
which the event or change in status was required to be reported.
FINRA is proposing to increase the late disclosure fee to $100 for
the first day that an applicable disclosure event is not timely filed
and $25 for each subsequent day, up to a maximum of 60 days. Under the
proposal, the maximum amount of the late disclosure fee will increase
from $300 to $1,575.
The current late disclosure filing fee has been in effect and
remained static since 2004.\17\ Notwithstanding this fact, some members
and individuals still fail to timely report initial or updated
disclosure events.\18\ While FINRA continues to address the issue of
late disclosure filings through other avenues, including disciplinary
actions, FINRA believes that it is appropriate to increase the late
disclosure filing fee in part to help ensure that disclosure events are
reported and updated in a timely manner.
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\17\ See Securities Exchange Act Release No. 49224 (February 11,
2004), 69 FR 7833 (February 19, 2004) (Notice of Filing and
Immediate Effectiveness of File No. SR-NASD-2003-192).
\18\ See, e.g., MML Investors Services, LLC, FINRA AWC No.
2010020873501 (November 16, 2011); Goldman, Sachs & Co., FINRA AWC
No. 2010022473801 (November 9, 2010), available at http://www.finra.org/Industry/Enforcement/DisciplinaryActions/FDAS/.
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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 January 2, 2013. Specifically, the
proposed initial/transfer registration fee, disclosure filing,
fingerprint, and late disclosure fees would become effective for
filings or fingerprints submitted on or after January 2, 2013. The
proposed changes to the mass transfer registration fees would become
effective for mass transfers executed on or after January 2, 2013.
Lastly, the proposed system processing fee would become effective for
the 2013 Renewal Program.\19\
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\19\ As part of the 2013 Renewal Program, Preliminary Renewal
Statements reflecting the proposed $45 system processing fee will be
made available to members in the fourth quarter of 2012.
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2. Statutory Basis
FINRA believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(5) of the Act,\20\ 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.
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\20\ 15 U.S.C. 78o-3(b)(5).
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FINRA believes that the proposed fees are reasonable based on the
increased costs associated with operating and maintaining its
registration and disclosure programs, specifically the CRD system and
BrokerCheck. The proposed fees also contribute to the general funding
of FINRA's overall regulatory program and serve to ensure that FINRA is
sufficiently capitalized to meet its regulatory responsibilities. The
current fees have remained static for at least seven years and some of
the fees have not been increased in over 16 years. During this time,
several enhancements have been made to the CRD system, including: (1)
Incorporation of various uniform registration form changes; (2)
electronic fingerprint processing; (3) Web EFT\TM\, which allows
subscribing firms to submit batch filings to the CRD system; (4)
increases in the number and types of reports available through the CRD
system; and (5) significant changes to BrokerCheck, including making
BrokerCheck easier to use and expanding the amount of information made
available through the system.
FINRA further believes that the proposed fees are reasonable
because they help to ensure the integrity of the information in the CRD
system. The integrity of the information in the CRD system is very
important because the Commission, FINRA, other SROs and state
securities regulators use the CRD system to make licensing and
registration decisions, among other things. Furthermore, the
information displayed in BrokerCheck, which investors use to help make
informed choices about the individuals and firms with which they
currently conduct or are considering conducting business, is derived
from the CRD system.
FINRA also believes that the proposed fees are equitably allocated
in that they will apply equally to all individuals and members required
to report information to the CRD system. Thus, those members that
register more individuals or submit more filings through the CRD system
will generally pay more in fees than those members that use the CRD
system to a lesser extent.
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) of the Act \21\ and paragraph (f)(2) of Rule 19b-4
thereunder.\22\ 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
[[Page 38869]]
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.
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\21\ 15 U.S.C. 78s(b)(3)(A).
\22\ 17 CFR 240.19b-4(f)(2).
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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 [email protected]. Please include
File Number SR-FINRA-2012-030 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-2012-030. 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, 100 F Street NE.,
Washington, DC 20549, 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 office 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-2012-030 and should be
submitted on or before July 20, 2012.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\23\
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\23\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary .
[FR Doc. 2012-15937 Filed 6-28-12; 8:45 am]
BILLING CODE 8011-01-P