Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Order Approving Proposed Rule Change Relating to Amendments to FINRA's Gross Income Assessment and Technical Changes to Schedule A to FINRA's By-Laws, 14517-14519 [E8-5355]

Download as PDF Federal Register / Vol. 73, No. 53 / Tuesday, March 18, 2008 / Notices perfect the mechanism of, a free and open market and a national market system, and, in general, protect investors and the public interest by allowing the Exchange the flexibility to conduct background checks of staff, independent contractors and other persons using the means deemed most efficient by Exchange management. B. Self-Regulatory Organization’s Statement of Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition 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 No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Changes and Timing for Commission Action Within 35 days of the date of publication of this notice in the Federal Register or within such other 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 self-regulatory organization consents, the Commission will: (A) By order approve the 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 proposal is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments mstockstill on PROD1PC66 with NOTICES • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File No. SR–CHX–2008–03 on the subject line. All submissions should refer to File No. SR–CHX–2008–03. 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, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of such filing will also be available for inspection and copying at the principal office of the CHX. 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 No. SR–CHX–2008–03 and should be submitted on or before April 8, 2008. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.7 Florence E. Harmon, Deputy Secretary. [FR Doc. E8–5426 Filed 3–17–08; 8:45 am] BILLING CODE 8011–01–P [Release No. 34–57474; File No. SR–FINRA– 2008–001] Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Order Approving Proposed Rule Change Relating to Amendments to FINRA’s Gross Income Assessment and Technical Changes to Schedule A to FINRA’s By-Laws March 11, 2008. I. Introduction • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549–1090. On January 10, 2008, the Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’) (f/k/a National Association 17:39 Mar 17, 2008 Jkt 214001 of Securities Dealers, Inc. (‘‘NASD’’)) 1 filed with the Securities and Exchange Commission (‘‘Commission’’ or ‘‘SEC’’) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 2 and Rule 19b–4 thereunder,3 a proposed rule change to amend Schedule A to the FINRA By-Laws to amend the Gross Income Assessment (‘‘GIA’’) paid by each FINRA member and to update the references to NASD that appear in Schedule A to the FINRA By-Laws. The proposed rule change was published for comment in the Federal Register on February 7, 2008.4 The Commission received no comment letters on the proposed rule change. This order approves the proposed rule change. II. Description of the Proposed Rule Change On July 30, 2007, NASD and the NYSE consolidated their member firm regulation operations into a combined organization, FINRA. The proposed rule change seeks to consolidate certain regulatory fees imposed by NASD and NYSE that will be applied retroactively to January 1, 2008. FINRA will announce this fee change in a Regulatory Notice. FINRA’s member regulatory pricing structure currently consists primarily of the following fees: the GIA; The Trading Activity Fee (‘‘TAF’’); the Personnel Assessment (‘‘PA’’); and the Branch Office Assessment (‘‘BOA’’). As part of the consolidation, NYSE committed to transfer to FINRA certain regulatory revenues for the remainder of 2007.5 NYSE fees subject to the transfer agreement include a gross FOCUS (Financial and Operational Combined Uniform Single Report) fee (‘‘GFF’’) 6 SECURITIES AND EXCHANGE COMMISSION Paper Comments VerDate Aug<31>2005 14517 7 17 PO 00000 CFR 200.30–3(a)(12). Frm 00089 Fmt 4703 Sfmt 4703 1 On July 26, 2007, the Commission approved a proposed rule change filed by NASD to amend NASD’s Certificate of Incorporation to reflect its name change to the Financial Industry Regulatory Authority, Inc., or FINRA, in connection with the consolidation of the member firm regulatory functions of NASD and New York Stock Exchange Regulation, Inc. (‘‘NYSE’’). See Securities Exchange Act Release No. 56145 (July 26, 2007), 72 FR 42169 (August 1, 2007). 2 15 U.S.C. 78s(b)(1). 3 17 CFR 240.19b–4. 4 See Securities Exchange Act Release No. 57259 (February 1, 2008), 73 FR 7340 (‘‘Notice’’). 5 See Securities Exchange Act Release No. 56181 (August 1, 2007); 72 FR 44206 (August 7, 2007) (Notice of Filing and Immediate Effectiveness of SR–NYSE–2007–70). 6 The GFF is comparable to FINRA’s GIA. See Section 1(c) of Schedule A of FINRA By-Laws. E:\FR\FM\18MRN1.SGM 18MRN1 14518 Federal Register / Vol. 73, No. 53 / Tuesday, March 18, 2008 / Notices mstockstill on PROD1PC66 with NOTICES and registration fees for branch offices7 and registered representatives.8 FINRA now proposes to: (1) Eliminate NYSE’s legacy registration fees for branch offices and registered representatives, which totals approximately $18.6 million in fee reductions;9 (2) maintain FINRA’s fee structures and levels for the TAF, the BOA and the PA; and (3) consolidate, with certain adjustments, FINRA’s GIA rate structure with NYSE’s GFF rate structure.10 The GIA is currently assessed through a three-tier rate structure with a minimum GIA of $1,200.00. Under the current GIA, members are required to pay an annual GIA equal to the greater of $1,200.00 or the total of: (1) 0.125% of annual gross revenue less than or equal to $100 million; (2) 0.029% of annual gross revenue greater than $100 million up to $1 billion; and (3) 0.014% of annual gross revenue greater than $1 billion.11 In contrast, the legacy GFF was assessed at a flat rate of $0.42 per $1,000 of gross FOCUS revenue (or 0.042%). To consolidate these two legacy fees, FINRA proposes to retain the minimum assessment under the GIA of $1,200.00, with the ceiling increased from $960,000.00 to $1 million of annual assessable revenue. Because FINRA has committed to reduce the GIA by $1,200.00 per year for five years, subject to annual approval by FINRA’s Board of Directors, the proposal will effectively reduce the GIA to $0 for the first $1 million of annual assessable revenue. For annual gross revenue over $1 million, the regressive rate structure of the legacy GIA and the flat rate structure of the legacy GFF will be combined into a new seven-tiered rate structure. Under 7 See NYSE Rule 342, Supplementary Material .11. NYSE’s registration fee for branch offices is comparable to FINRA’s Branch Office System Processing Fee. See also Section 4(a) of Schedule A of FINRA By-Laws. 8 See NYSE Rule 345, Supplementary Material .14. NYSE’s registration fee for registered representatives is comparable to FINRA’s registration fees for the registration of representatives or principals. See also Section 4(b) of Schedule A of FINRA By-Laws. 9 See Securities Exchange Act Release No. 57093 (January 3, 2008), 73 FR 1654 (January 9, 2008) (Notice of Filing and Immediate Effectiveness of SR–NYSE–2007–127). 10 The NYSE will continue to charge its member organizations an annual gross FOCUS fee; however, the fee was reduced by 75 percent beginning in 2008. See Securities Exchange Act Release No. 56181, supra note 5. The reduced gross FOCUS fee charged by NYSE will be retained by NYSE and will not be forwarded to FINRA. 11 Gross revenue for assessment purposes is set out in Section 2 of Schedule A of FINRA’s By-Laws, which defines gross revenue as total income as reported on FOCUS form Part II or IIA excluding commodities income. VerDate Aug<31>2005 17:39 Mar 17, 2008 Jkt 214001 the proposed rule change, members will be assessed a GIA of: (1) $1,200 on annual gross revenue up to $1 million; (2) 0.1215% of annual gross revenue greater than $1 million up to $25 million; (3) 0.2599% of annual gross revenue greater than $25 million up to $50 million; (4) 0.0518% of annual gross revenue greater than $50 million up to $100 million; (5) 0.0365% of annual gross revenue greater than $100 million up to $5 billion; (6) 0.0397% of annual gross revenue greater than $5 billion up to $25 billion; and (7) 0.0855% of annual gross revenue greater than $25 billion. The new rate structure will be implemented over a three-year period beginning in 2008. During this period, the change in the GIA paid to FINRA by each member will be subject to a cap based on the fees that the member would have paid under the prior NASD and NYSE rate structures. In 2008, a member’s GIA will not be impacted by the new rate structure. In 2009, any increase or decrease to the member’s GIA resulting from the new rate structure will be capped at a five percent increase or decrease. In 2010, any increase or decrease to the member’s GIA resulting from the new rate structure will be capped at a ten percent increase or decrease. During this implementation period, a firm’s GIA may increase or decrease due to a change in the member’s assessable revenue from year to year; however, any changes to the firm’s GIA that result from the change in rate structure will be subject to the cap. For firms that were members of NASD only (not NYSE) as of July 30, 2007, the cap will be calculated based upon the GIA that the member firm would have paid under the prior NASD GIA rate structure. For firms that became, or become, FINRA members on or after July 30, 2007 (excluding those firms that were members of NYSE only as of July 30, 2007, and were subsequently required to become FINRA members pursuant to NYSE Rule 2), the cap will be calculated based upon the GIA that the member firm would have paid under the prior NASD GIA rate structure. For firms that were members of the NYSE only (not NASD) as of July 30, 2007, the cap will be calculated based upon the NYSE GFF that the member would have paid under the prior NYSE GFF rate PO 00000 Frm 00090 Fmt 4703 Sfmt 4703 structure.12 For firms that were members of both NASD and the NYSE as of July 30, 2007 (‘‘Dual Members’’), the cap will be calculated based upon the GIA and the GFF that the member would have paid under the prior NASD GIA rate structure and the prior NYSE GFF rate structure.13 III. Discussion After careful review, the Commission finds that the proposed rule change is consistent with the Act and the rules and regulations thereunder applicable to a national securities association.14 Specifically, the Commission finds that the proposed rule change is consistent with Section 15A(b)(5) of the Act 15 in that it provides 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. The proposed rule change creates a single fee structure for FINRA that avoids duplicative fees charged by both FINRA and NYSE. Specifically, the proposed rule change creates a seventiered rate structure that balances NASD’s legacy GIA tiered rate structure with NYSE’s legacy GFF flat rate structure. FINRA represents that the proposed rule change will result in aggregate fee reductions of approximately $25 million dollars in 2008 and forward. FINRA estimates that, under the proposed rate structure, 93 percent of member firms will have either no change to their GIA or a reduced GIA due to this new rate structure. In addition, to minimize the impact on members, the new rate structure will be implemented over a three-year period beginning in 2008. Despite the reduction in revenue that will result from the new rate structure, FINRA also represents that the revenue collected under the proposal will adequately fund its member regulatory programs, including the regulation of members through examination, policymaking, rulemaking and enforcement activities. Accordingly, the Commission believes that the proposed rule change is consistent with the Act. 12 In calculating the cap based upon the GFF that a member would have paid under the prior NYSE GFF rate structure, FINRA will use only that portion of the GFF that would have been transferred by the NYSE to FINRA (i.e., 75 percent of the GFF paid by the member firm). 13 For an example of how the fees are calculated, see Notice, supra note 4, at note 15. 14 In approving this proposed rule change, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 15 15 U.S.C. 78o–3(b)(5). E:\FR\FM\18MRN1.SGM 18MRN1 Federal Register / Vol. 73, No. 53 / Tuesday, March 18, 2008 / Notices IV. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,16 that the proposed rule change (SR–FINRA– 2008–001), be, and it hereby is, approved. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.17 Florence E. Harmon, Deputy Secretary. [FR Doc. E8–5355 Filed 3–17–08; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–57480; File No. SR–FINRA– 2008–008] Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 1013 (New Member Application and Interview) and the Manner in Which Membership Applicants Submit Their Applications to FINRA March 12, 2008. 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 February 29, 2008, the Financial Industry Regulatory Authority, Inc., (‘‘FINRA’’) (f/k/a 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 substantially prepared by FINRA. FINRA has designated this proposal as constituting a stated policy, practice, or interpretation with respect to the meaning, administration, or enforcement of an existing rule under Section 19(b)(3)(A)(i) of the Act 3 and Rule 19b–4(f)(1) 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. mstockstill on PROD1PC66 with NOTICES I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change FINRA proposes to amend NASD Rule 1013 (New Member Application and 16 15 U.S.C. 78s(b)(2). 17 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A)(i). 4 17 CFR 240.19b–4(f)(1). VerDate Aug<31>2005 17:39 Mar 17, 2008 Interview) to change the manner in which membership applicants submit their applications to FINRA. FINRA also proposes changes to online Form NMA to make it a more interactive, userfriendly document that applicants can use to submit application information. The text of the proposed rule change is available at http://www.finra.org, FINRA, and 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 In an effort to streamline the membership application process and make it more efficient, FINRA recently required membership applicants to complete and submit electronically via the Electronic Filing System (‘‘EFS’’) FINRA’s standardized membership application form, the Form NMA. NASD Rule 1013 requires that the Form NMA and other required application materials be filed with the Department of Member Regulation (‘‘Department’’) at the district office in the district in which the applicant intends to have its principal place of business. Although the Form NMA can be forwarded electronically to the district offices, applicants must submit certain required application materials, such as the Form BD, fingerprint cards of associated persons, the new member assessment report, CRD entitlement forms, and the membership application fee via first class mail, overnight courier, or hand delivery.5 The instant proposed rule change would amend NASD Rule 1013 to require that an application be filed directly with the Department. Pursuant 5 See NASD Rule 1012(a)(2) (requiring an applicant to file application documents and information by first class mail, overnight courier, or hand delivery where FINRA has not otherwise prescribed an electronic or alternative filing process). Jkt 214001 PO 00000 Frm 00091 Fmt 4703 Sfmt 4703 14519 to the proposed rule change, FINRA will require applicants to send all hard copy application materials to a central location within the Department, and EFS automatically will route the Form NMA to the same location within the Department. The proposed rule change also would amend NASD Rule 1013 to eliminate the requirement that applicants submit the membership application fee by physical check. Instead, FINRA will require applicants to pay the fees electronically. Further, FINRA proposes to change the Form NMA from a static electronic document to an interactive, userfriendly document that will provide a more tailored application experience. The revised Form NMA automatically will retrieve certain information (e.g., identification information, proposed business lines, etc.) from the applicants’ Forms U4 and the Form BD, which FINRA will require applicants to submit prior to completion of the Form NMA.6 The revised form also will have applicants provide a greater level of detail regarding the required application information. FINRA anticipates that these changes to the Form NMA will result in a more complete and accurate application that, in turn, will allow FINRA staff to conduct a more timely evaluation and make fewer information requests during the course of the review. The proposed rule change would alter the manner in which FINRA receives a membership application and revise the online Form NMA to make it more interactive; it would not change the information applicants must submit pursuant to NASD Rule 1013 during the application process or the standards set forth in NASD Rule 1014 for granting an applicant’s membership application. Additionally, the proposed changes are consistent with the FINRA By-Laws, which allow FINRA to require that new member applications be made ‘‘via electronic process or such other process as the Corporation may prescribe.’’ 7 Finally, the proposed rule change would amend the NASD Rule Series 1010 (Membership Proceedings) to reflect FINRA’s change in corporate name or to otherwise delete references to ‘‘the Association.’’ Prior to the proposed rule change becoming operative, FINRA will outline in a Regulatory Notice the details regarding the changes to the electronic 6 Although applicants submit their Form BD in hard copy, the revised Form NMA will be able to retrieve the information via an electronic database that FINRA staff currently populates with Form BD information. Applicants already submit Forms U4 in an electronic format accessible to the revised form. 7 FINRA By-Laws, Art. IV, Sec. 1(a). E:\FR\FM\18MRN1.SGM 18MRN1

Agencies

[Federal Register Volume 73, Number 53 (Tuesday, March 18, 2008)]
[Notices]
[Pages 14517-14519]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-5355]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57474; File No. SR-FINRA-2008-001]


Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Order Approving Proposed Rule Change Relating to 
Amendments to FINRA's Gross Income Assessment and Technical Changes to 
Schedule A to FINRA's By-Laws

March 11, 2008.

I. Introduction

    On January 10, 2008, the Financial Industry Regulatory Authority, 
Inc. (``FINRA'') (f/k/a National Association of Securities Dealers, 
Inc. (``NASD'')) \1\ filed with the Securities and Exchange Commission 
(``Commission'' or ``SEC'') pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act'') \2\ and Rule 19b-4 
thereunder,\3\ a proposed rule change to amend Schedule A to the FINRA 
By-Laws to amend the Gross Income Assessment (``GIA'') paid by each 
FINRA member and to update the references to NASD that appear in 
Schedule A to the FINRA By-Laws. The proposed rule change was published 
for comment in the Federal Register on February 7, 2008.\4\ The 
Commission received no comment letters on the proposed rule change. 
This order approves the proposed rule change.
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    \1\ On July 26, 2007, the Commission approved a proposed rule 
change filed by NASD to amend NASD's Certificate of Incorporation to 
reflect its name change to the Financial Industry Regulatory 
Authority, Inc., or FINRA, in connection with the consolidation of 
the member firm regulatory functions of NASD and New York Stock 
Exchange Regulation, Inc. (``NYSE''). See Securities Exchange Act 
Release No. 56145 (July 26, 2007), 72 FR 42169 (August 1, 2007).
    \2\ 15 U.S.C. 78s(b)(1).
    \3\ 17 CFR 240.19b-4.
    \4\ See Securities Exchange Act Release No. 57259 (February 1, 
2008), 73 FR 7340 (``Notice'').
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II. Description of the Proposed Rule Change

    On July 30, 2007, NASD and the NYSE consolidated their member firm 
regulation operations into a combined organization, FINRA. The proposed 
rule change seeks to consolidate certain regulatory fees imposed by 
NASD and NYSE that will be applied retroactively to January 1, 2008. 
FINRA will announce this fee change in a Regulatory Notice.
    FINRA's member regulatory pricing structure currently consists 
primarily of the following fees: the GIA; The Trading Activity Fee 
(``TAF''); the Personnel Assessment (``PA''); and the Branch Office 
Assessment (``BOA''). As part of the consolidation, NYSE committed to 
transfer to FINRA certain regulatory revenues for the remainder of 
2007.\5\ NYSE fees subject to the transfer agreement include a gross 
FOCUS (Financial and Operational Combined Uniform Single Report) fee 
(``GFF'') \6\

[[Page 14518]]

and registration fees for branch offices\7\ and registered 
representatives.\8\
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    \5\ See Securities Exchange Act Release No. 56181 (August 1, 
2007); 72 FR 44206 (August 7, 2007) (Notice of Filing and Immediate 
Effectiveness of SR-NYSE-2007-70).
    \6\ The GFF is comparable to FINRA's GIA. See Section 1(c) of 
Schedule A of FINRA By-Laws.
    \7\ See NYSE Rule 342, Supplementary Material .11. NYSE's 
registration fee for branch offices is comparable to FINRA's Branch 
Office System Processing Fee. See also Section 4(a) of Schedule A of 
FINRA By-Laws.
    \8\ See NYSE Rule 345, Supplementary Material .14. NYSE's 
registration fee for registered representatives is comparable to 
FINRA's registration fees for the registration of representatives or 
principals. See also Section 4(b) of Schedule A of FINRA By-Laws.
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    FINRA now proposes to: (1) Eliminate NYSE's legacy registration 
fees for branch offices and registered representatives, which totals 
approximately $18.6 million in fee reductions;\9\ (2) maintain FINRA's 
fee structures and levels for the TAF, the BOA and the PA; and (3) 
consolidate, with certain adjustments, FINRA's GIA rate structure with 
NYSE's GFF rate structure.\10\
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    \9\ See Securities Exchange Act Release No. 57093 (January 3, 
2008), 73 FR 1654 (January 9, 2008) (Notice of Filing and Immediate 
Effectiveness of SR-NYSE-2007-127).
    \10\ The NYSE will continue to charge its member organizations 
an annual gross FOCUS fee; however, the fee was reduced by 75 
percent beginning in 2008. See Securities Exchange Act Release No. 
56181, supra note 5. The reduced gross FOCUS fee charged by NYSE 
will be retained by NYSE and will not be forwarded to FINRA.
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    The GIA is currently assessed through a three-tier rate structure 
with a minimum GIA of $1,200.00. Under the current GIA, members are 
required to pay an annual GIA equal to the greater of $1,200.00 or the 
total of: (1) 0.125% of annual gross revenue less than or equal to $100 
million; (2) 0.029% of annual gross revenue greater than $100 million 
up to $1 billion; and (3) 0.014% of annual gross revenue greater than 
$1 billion.\11\ In contrast, the legacy GFF was assessed at a flat rate 
of $0.42 per $1,000 of gross FOCUS revenue (or 0.042%).
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    \11\ Gross revenue for assessment purposes is set out in Section 
2 of Schedule A of FINRA's By-Laws, which defines gross revenue as 
total income as reported on FOCUS form Part II or IIA excluding 
commodities income.
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    To consolidate these two legacy fees, FINRA proposes to retain the 
minimum assessment under the GIA of $1,200.00, with the ceiling 
increased from $960,000.00 to $1 million of annual assessable revenue. 
Because FINRA has committed to reduce the GIA by $1,200.00 per year for 
five years, subject to annual approval by FINRA's Board of Directors, 
the proposal will effectively reduce the GIA to $0 for the first $1 
million of annual assessable revenue. For annual gross revenue over $1 
million, the regressive rate structure of the legacy GIA and the flat 
rate structure of the legacy GFF will be combined into a new seven-
tiered rate structure. Under the proposed rule change, members will be 
assessed a GIA of:
    (1) $1,200 on annual gross revenue up to $1 million;
    (2) 0.1215% of annual gross revenue greater than $1 million up to 
$25 million;
    (3) 0.2599% of annual gross revenue greater than $25 million up to 
$50 million;
    (4) 0.0518% of annual gross revenue greater than $50 million up to 
$100 million;
    (5) 0.0365% of annual gross revenue greater than $100 million up to 
$5 billion;
    (6) 0.0397% of annual gross revenue greater than $5 billion up to 
$25 billion; and
    (7) 0.0855% of annual gross revenue greater than $25 billion.
    The new rate structure will be implemented over a three-year period 
beginning in 2008. During this period, the change in the GIA paid to 
FINRA by each member will be subject to a cap based on the fees that 
the member would have paid under the prior NASD and NYSE rate 
structures. In 2008, a member's GIA will not be impacted by the new 
rate structure. In 2009, any increase or decrease to the member's GIA 
resulting from the new rate structure will be capped at a five percent 
increase or decrease. In 2010, any increase or decrease to the member's 
GIA resulting from the new rate structure will be capped at a ten 
percent increase or decrease. During this implementation period, a 
firm's GIA may increase or decrease due to a change in the member's 
assessable revenue from year to year; however, any changes to the 
firm's GIA that result from the change in rate structure will be 
subject to the cap.
    For firms that were members of NASD only (not NYSE) as of July 30, 
2007, the cap will be calculated based upon the GIA that the member 
firm would have paid under the prior NASD GIA rate structure. For firms 
that became, or become, FINRA members on or after July 30, 2007 
(excluding those firms that were members of NYSE only as of July 30, 
2007, and were subsequently required to become FINRA members pursuant 
to NYSE Rule 2), the cap will be calculated based upon the GIA that the 
member firm would have paid under the prior NASD GIA rate structure. 
For firms that were members of the NYSE only (not NASD) as of July 30, 
2007, the cap will be calculated based upon the NYSE GFF that the 
member would have paid under the prior NYSE GFF rate structure.\12\ For 
firms that were members of both NASD and the NYSE as of July 30, 2007 
(``Dual Members''), the cap will be calculated based upon the GIA and 
the GFF that the member would have paid under the prior NASD GIA rate 
structure and the prior NYSE GFF rate structure.\13\
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    \12\ In calculating the cap based upon the GFF that a member 
would have paid under the prior NYSE GFF rate structure, FINRA will 
use only that portion of the GFF that would have been transferred by 
the NYSE to FINRA (i.e., 75 percent of the GFF paid by the member 
firm).
    \13\ For an example of how the fees are calculated, see Notice, 
supra note 4, at note 15.
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III. Discussion

    After careful review, the Commission finds that the proposed rule 
change is consistent with the Act and the rules and regulations 
thereunder applicable to a national securities association.\14\ 
Specifically, the Commission finds that the proposed rule change is 
consistent with Section 15A(b)(5) of the Act \15\ in that it provides 
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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    \14\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. 15 U.S.C. 78c(f).
    \15\ 15 U.S.C. 78o-3(b)(5).
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    The proposed rule change creates a single fee structure for FINRA 
that avoids duplicative fees charged by both FINRA and NYSE. 
Specifically, the proposed rule change creates a seven-tiered rate 
structure that balances NASD's legacy GIA tiered rate structure with 
NYSE's legacy GFF flat rate structure. FINRA represents that the 
proposed rule change will result in aggregate fee reductions of 
approximately $25 million dollars in 2008 and forward. FINRA estimates 
that, under the proposed rate structure, 93 percent of member firms 
will have either no change to their GIA or a reduced GIA due to this 
new rate structure. In addition, to minimize the impact on members, the 
new rate structure will be implemented over a three-year period 
beginning in 2008. Despite the reduction in revenue that will result 
from the new rate structure, FINRA also represents that the revenue 
collected under the proposal will adequately fund its member regulatory 
programs, including the regulation of members through examination, 
policymaking, rulemaking and enforcement activities. Accordingly, the 
Commission believes that the proposed rule change is consistent with 
the Act.

[[Page 14519]]

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\16\ that the proposed rule change (SR-FINRA-2008-001), be, and it 
hereby is, approved.
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    \16\ 15 U.S.C. 78s(b)(2).
    \17\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E8-5355 Filed 3-17-08; 8:45 am]
BILLING CODE 8011-01-P