On December 23, 2005 the NYSE filed with the Securities
and Exchange Commission (“SEC” or “Commission”) a rule change to
increase certain fees that the Exchange charges its members and
member organizations.1 Specifically, the rule change
increases the following fees: (1) Margin Extension Fees – increased
from $2.00 to $4.00 per extension; (2) the Series 7 (“General
Securities Registered Representative Examination”) Development Fee –
increased from $90.00 to $100.00; (3) Statutory Disqualification
(“SD”) Fees – now $1000.00 for SD reviews and $1500.00 for SD
filings; and (4) the Session Fee for the Regulatory Element of the
continuing education requirements of Rule 345A (“Continuing
Education for Registered Persons”) – increased from $60.00 to $75.00
(see Exhibit A). The new fees are
effective January 1, 2006.
Margin Extension
Fees
Under Regulation T
of the Federal Reserve System and Rule 15c3-3 under the Securities
Exchange Act of 1934 (the “Exchange Act”), broker-dealers may file
requests on behalf of customers to extend, under "exceptional
circumstances," the time period which customers have to pay for a
security purchased or to deliver a security sold. Since January
1978, the Exchange has charged member organizations a $2 fee per
extension request for processing these extensions of time through
the Exchange's automated Margin Extension System ("MEX"). MEX
maintains a history of Regulation T extensions submitted for each
customer, and thus helps prevent excessive numbers of requests and
customer abuses of the extension privilege.
As a result of enhancements to the MEX system,
increasing costs associated with providing these services to
broker-dealers on behalf of customers, and expenses incurred in
monitoring for compliance with applicable margin and sales practice
rules, the fee for an extension request has been increased to
$4.
Series 7 Examination
Development Fee
The
Series 7 Examination is developed, maintained, and owned by the
Exchange. It is intended to safeguard the investing public by
helping to ensure that registered representatives are competent to
perform their jobs. Pursuant to this purpose, the Series 7
Examination is designed to accurately and reliably measure the
degree to which each candidate possesses the knowledge, skills and
abilities needed to perform the critical functions of a registered
representative.
Prior to the rule
change, the Exchange imposed an examination development fee of $90.
This fee includes costs incurred by the Exchange to develop and
implement the examination as well as to monitor for compliance with
applicable registration, reporting and sales practices rules. The
Series 7 Examination is administered at testing centers around the
world pursuant to a contract with the NASD.
The rule change increases the development fee from $90
to $100. The NASD has filed a proposed rule change increasing the
administration fee to $150. Therefore, the total fee for each
individual who takes the Series 7 Examination for registration as a
Registered Representative will be $250, effective January 1,
2006.
Statutory
Disqualification Fees
Section (f) of NYSE Rule 346 (“Limitations-Employment
and Association with Members and Member Organizations”) provides
that except as otherwise permitted by the Exchange no member, member
organization, allied member, approved person, or employee shall be
associated with any person who is known to be subject to a statutory
disqualification as defined in Section 3(a)(39) of the Exchange Act.
Rule 346 further provides that any member organization seeking
permission to have such person continue to be or become associated
with it shall pay a fee in an amount to be determined by the
Exchange.
The Exchange Act
prohibits a person (including broker-dealers) subject to a statutory
disqualification (e.g., a suspension or bar by the SEC, a state or another
exchange or being convicted of certain criminal activities) from
being associated with a broker-dealer unless specific application to
the SEC for such association is made by a self-regulatory
organization (“SRO”) on behalf of the person. The SRO makes such
application after investigation of the facts surrounding the
request. Specifically, Rule 19h-1 under the Exchange Act provides
that any SRO proposing to admit or continue any person’s association
with a member, notwithstanding a statutory disqualification, shall
file a notice with the Commission of such proposed admission or
continuance.
Prior to the rule
change, when a member organization sought approval to remain or to
become associated with a person subject to any statutory
disqualification, the Exchange imposed a $1,000 fee for filing the
notice pursuant to Rule 19h-1. In instances where the Exchange was
not required to make such a filing (e.g., persons engaged in
clerical and ministerial securities activities) but nevertheless
reviewed the request, no fee was assessed, notwithstanding the
expenses incurred in conducting the review.
Beginning January 1, 2006, as a result of costs
associated with the development and maintenance of a new system to
track statutory disqualifications, the increased cost of processing
filings, and the increased costs of conducting examination oversight
of statutory disqualifications, a fee in the amount of $1,000 will
be charged in instances where reviews are performed but a 19h-1
filing is not required. In instances where the Exchange makes the
Rule 19h-1 filing, the fee has been increased from $1,000 to
$1,500.
Regulatory Element
Fee
Exchange Rule 345A
provides, in part, that no member or member organization shall
permit any registered person to continue to, and no registered
person shall continue to, perform duties as a registered person
unless such person has complied with the Regulatory Element
continuing education requirements of the Rule.
The Regulatory Element requires each subject registered
person to complete a standardized, computer-based, interactive
continuing education program within 120 days of their second
registration anniversary date and every three years thereafter, or
as otherwise prescribed by the Exchange. The purpose of this
requirement is to help ensure that registered persons are kept
up-to-date on regulatory, compliance, and sales practice-related
industry rules and issues. There are three Regulatory Element
programs: The S201 Supervisor Program, the S106 Series 6 Program,
and the S101 General Program for Series 7 and all other
registrations. Persons who fail to complete the Regulatory Element
within the prescribed time frame are deemed inactive and may not
perform, nor receive compensation for, functions requiring
registration.
The Regulatory
Element is a component of the Securities Industry Continuing
Education Program (the “Program”) under NYSE Rule 345A. The
Securities Industry/Regulatory Council on Continuing Education
(“Council”) was organized in 1995 to facilitate cooperative industry
and regulatory coordination of the administration and future
development of the Program in keeping with applicable industry
regulations and changing industry needs. Its roles include
recommending and developing specific content and questions for the
Regulatory Element, defining minimum core curricula for the Firm
Element component of the Program, and developing and updating
information about the Program for industry-wide dissemination. It is
the Council’s responsibility to maintain the Program on a revenue
neutral basis while maintaining adequate reserves for unanticipated
future expenditures
At its
September 2005 meeting, the Council voted unanimously to increase
the Regulatory Element session fee from $60 to $75 effective January
1, 2006, in order to meet costs and maintain an adequate reserve in
2006. The Regulatory Element session fee was initially set at $75
when the program was established in 1995. The session fee was
reduced in 1999 to $65 and again in 2004 to $60. The increase
returns the Regulatory Element session fee to its original 1995
level.
Questions regarding this
Information Memo may be directed to your Finance
Coordinator. |
