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, 38866-38869 [2012-15937]

Download as PDF 38866 Federal Register / Vol. 77, No. 126 / Friday, June 29, 2012 / Notices SECURITIES AND EXCHANGE COMMISSION Submission for OMB Review; Comment Request Upon written request, copies available from: Securities and Exchange Commission, Office of Investor Education and Advocacy, Washington, DC 20549–0213. mstockstill on DSK4VPTVN1PROD with NOTICES Extension: Rule 17a–6, OMB Control No. 3235–0489, SEC File No. 270–433. Notice is hereby given that pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.), the Securities and Exchange Commission (‘‘Commission’’) has submitted to the Office of Management and Budget a request for extension of the previously approved collection of information discussed below. Rule 17a–6 (17 CFR 240.17a–6) under the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) permits national securities exchanges, national securities associations, registered clearing agencies, and the Municipal Securities Rulemaking Board (‘‘MSRB’’) (collectively, ‘‘SROs’’) to destroy or convert to microfilm or other recording media records maintained under Rule 17a–1, if they have filed a record destruction plan with the Commission and the Commission has declared such plan effective. There are currently 26 SROs: 15 national securities exchanges, 1 national securities association, the MSRB, and 9 registered clearing agencies. Of the 26 SROs, 2 SRO respondents have filed a record destruction plan with the Commission. The staff calculates that the preparation and filing of a new record destruction plan should take 160 hours. Further, any existing SRO record destruction plans may require revision, over time, in response to, for example, changes in document retention technology, which the Commission estimates will take much less than the 160 hours estimated for a new plan. Thus, the total annual compliance burden is estimated to be 60 hours per year. The approximate cost per hour is $305, resulting in a total cost of compliance for these respondents of $18,300 per year (30 hours @ $305 per hour). The Commission may not conduct or sponsor a collection of information unless it displays a currently valid control number. No person shall be subject to any penalty for failing to comply with a collection of information subject to the PRA that does not display a valid Office of Management and Budget (OMB) control number. VerDate Mar<15>2010 16:52 Jun 28, 2012 Jkt 226001 Background documentation for this information collection may be viewed at the following Web site, www.reginfo.gov. Comments should be directed to: (i) Desk Officer for the Securities and Exchange Commission, Office of Information and Regulatory Affairs, Office of Management and Budget, Room 10102, New Executive Office Building, Washington, DC 20503 or by sending an email to Shagufta_ Ahmed@omb.eop.gov and (ii) Thomas Bayer, Director/Chief Information Officer, Securities and Exchange Commission, c/o Remi Pavlik-Simon, 6432 General Green Way, Alexandria, VA 22312 or by sending an email to PRA_Mailbox@sec.gov. Comments must be submitted within 30 days of this notice. Dated: June 25, 2012. Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2012–15941 Filed 6–28–12; 8:45 am] BILLING CODE 8011–01–P 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 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A)(ii). 4 17 CFR 240.19b–4(f)(2). 2 17 PO 00000 Frm 00102 Fmt 4703 Sfmt 4703 proposed rule change from interested persons. 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®’’ or ‘‘CRD system’’). The text of the proposed rule change is available on FINRA’s Web site at https://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 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 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 selfregulatory 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®, 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. E:\FR\FM\29JNN1.SGM 29JNN1 Federal Register / Vol. 77, No. 126 / Friday, June 29, 2012 / Notices 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 webbased 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. mstockstill on DSK4VPTVN1PROD with NOTICES 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 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). VerDate Mar<15>2010 16:52 Jun 28, 2012 Jkt 226001 statutory disqualification pursuant to Section 3(a)(39) of the Act.7 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 ByLaws 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. 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. 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 7 15 U.S.C. 78c(a)(39). 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. 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). 12 15 U.S.C. 78q(f)(2). 13 17 CFR 240.17f–2. 8 See PO 00000 Frm 00103 Fmt 4703 Sfmt 4703 38867 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 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 twotiered 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. 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 14 The current FBI fee is $14.50. See Revised User Fee Schedule, 76 FR 78950 (December 20, 2011). 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). 16 See supra note 15. E:\FR\FM\29JNN1.SGM 29JNN1 38868 Federal Register / Vol. 77, No. 126 / Friday, June 29, 2012 / Notices system, if available, and manually posts the results to the CRD system. mstockstill on DSK4VPTVN1PROD with NOTICES 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 reregistration 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 postmass 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, 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). VerDate Mar<15>2010 16:52 Jun 28, 2012 Jkt 226001 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. 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 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. 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) 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 https://www.finra.org/Industry/Enforcement/ DisciplinaryActions/FDAS/. 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. 20 15 U.S.C. 78o–3(b)(5). PO 00000 Frm 00104 Fmt 4703 Sfmt 4703 Incorporation of various uniform registration form changes; (2) electronic fingerprint processing; (3) Web EFTTM, 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 21 15 22 17 E:\FR\FM\29JNN1.SGM U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(2). 29JNN1 Federal Register / Vol. 77, No. 126 / Friday, June 29, 2012 / Notices 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. should refer to File Number SR–FINRA– 2012–030 and should be submitted on or before July 20, 2012. prepared summaries, set forth in Sections A, B and C below, of the most significant aspects of such statements. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.23 Kevin M. O’Neill, Deputy Secretary . A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change [FR Doc. 2012–15937 Filed 6–28–12; 8:45 am] Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rulecomments@sec.gov. Please include File Number SR–FINRA–2012–030 on the subject line. mstockstill on DSK4VPTVN1PROD with NOTICES 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: Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Exchange’s Obvious Error Rule 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 (https://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 VerDate Mar<15>2010 16:52 Jun 28, 2012 Jkt 226001 38869 BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–67251; File No. SR–ISE– 2012–56] 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 14, 2012, the International Securities Exchange, LLC (the ‘‘Exchange’’ or the ‘‘ISE’’) 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 Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend ISE Rule 720 regarding Obvious Errors. The text of the proposed rule change is available on the Exchange’s Web site www.ise.com, at the principal office of the Exchange, 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, the Exchange 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. The self-regulatory organization has 23 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. PO 00000 Frm 00105 Fmt 4703 Sfmt 4703 1. Purpose The purpose of this proposed rule change is to amend ISE Rule 720 regarding Obvious Errors.3 Under the current rule, buyers of options with a zero bid may request that their execution be busted if at least the two strikes below (for calls) or above (for puts) in the same options class were quoted with a zero bid at the time of the execution.4 A zero bid option refers to an option where the bid price is $0.00. Series of options quoted zero bid are usually deep out-of-the-money series that are perceived as having little if any chance of expiring in-the-money. For this reason, relatively few transactions occur in these series and those that do are usually the result of a momentary pricing error. This proposed rule change will add additional criteria and clarifying language to the current rule. Specifically, under the revised rule, trades in series quoted no bid on the Exchange would be subject to nullification provided: (i) The bid in that series immediately preceding the execution was, and for five (5) seconds prior to the execution remained, zero and (ii) at least one strike below (for calls) or above (for puts) in the same option class was quoted no bid at the time of execution. Thus, for example, if a trade occurs in the ABC 45 call option series when the series was quoted $0.00–$0.10, the trade may be nullified if (i) the bid was $0.00 for at least five (5) seconds prior to the execution and (ii) at least one call option series in ABC with a strike below 45 (e.g., the ABC 30, 35 or 40 call option series) had a bid of $0.00 at the time of execution. The revised no bid provision would also provide that each group of series in an options class with a non-standard deliverable will be treated as a separate options class. Thus, for example, if due to a reorganization certain of the series in the ABC option class have a deliverable of 150 shares per options contract (as compared to the standard 100 shares per option contract), all ABC option series that are subject to the 150 contract delivery requirements would be considered separately from the ABC 3 The changes proposed to ISE Rule 720 are based on Chicago Board Option Exchange (‘‘CBOE’’) Rule 6.25. 4 See ISE Rule 720, Supplementary Material .05. E:\FR\FM\29JNN1.SGM 29JNN1

Agencies

[Federal Register Volume 77, Number 126 (Friday, June 29, 2012)]
[Notices]
[Pages 38866-38869]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-15937]


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

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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

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 https://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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

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 https://www.finra.org/Industry/Enforcement/DisciplinaryActions/FDAS/.
---------------------------------------------------------------------------

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).
---------------------------------------------------------------------------

    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).
---------------------------------------------------------------------------

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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. 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 (https://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
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