[Federal Register: August 27, 2003 (Volume 68, Number 166)]
[Notices]
[Page 51622-51624]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27au03-120]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-48379; File No. SR-NASD-2003-109]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change and Amendment No. 1 Thereto by
the National Association of Securities Dealers, Inc. Relating to
Changes in Fingerprint Processing Fees Contained in Schedule A of the
NASD By-Laws
August 20, 2003.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'' or ``Exchange Act''),\1\ and Rule 19b-4 thereunder,\2\ notice
is hereby given that on July 10, 2003, the National Association of
Securities Dealers, Inc. (``NASD'') 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 NASD. On August 7, 2003, NASD filed an amendment to
the proposal.\3\ The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See letter from Shirley H. Weiss, Associate General Counsel,
Office of General Counsel, Regulatory Policy and Oversight, NASD, to
Jonathan G. Katz, Secretary, Commission, dated August 6, 2003.
(``Amendment No. 1''). In Amendment No. 1, NASD substituted in the
first paragraph of Section I of Exhibit 1 of the filing the word
``fingerprints'' for the phrase ``fingerprint images and identifying
information'' to make the introductory language of Section I
consistent with the proposed rule text. For purposes of calculating
the 60-day abrogation period, the Commission considers the period to
have commenced on August 7, 2003.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
NASD is proposing to amend Section (4)(b) of Schedule A of NASD's
By-Laws to: (1) Increase the $10.00 charge for each set of fingerprints
submitted by a member to NASD for processing to $13.00; (2) establish a
$13.00 charge to be paid to NASD for posting each set of fingerprint
results and identifying information that have been processed through
another self-regulatory organization (``SRO'') and submitted by a
member to NASD; and (3) substitute the term ``fingerprints'' for
``fingerprint cards.'' NASD intends for the fees to become operative on
July 15, 2003. Below is the text of the proposed rule change. Proposed
new language is in italics; proposed deletions are in brackets.\4\
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\4\ At the NASD's request, the Commission made certain non-
substantive, typographical changes to the proposed rule text to make
it consistent with the current NASD rule text. Telephone conference
between Shirley H. Weiss, Associate General Counsel, Office of
General Counsel, Regulatory Policy and Oversight, NASD, and
Christopher B. Stone, Special Counsel, Division of Market
Regulation, Commission (July 22, 2003).
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* * * * *
Schedule A to NASD By-Laws
Assessments and fees pursuant to the provisions of Article VI of
the By-Laws of NASD shall be determined on the following basis.
Sections 1 through 3 No change.
Section 4--Fees
(a) No change.
(b) NASD shall assess each member a fee of:
(1) through (3) No change.
(4) [$10.00] $13.00 for processing and posting to the CRD system
each set of fingerprints [each fingerprint card] submitted by the
member to NASD, plus any other charge that may be imposed by the United
States Department of Justice for processing [such] each set of
fingerprints [card; and].
(5) $13.00 for processing and posting to the CRD system each set of
fingerprint results and identifying information that have been
processed through another self-regulatory organization and submitted by
a member to NASD.
[(5)] (6) $30.00 annually for each of the member's registered
representatives and principals for system processing.
[(6)] (7) 10% of a member's final annual renewal assessment or
$100, whichever is greater, with a maximum charge of $5,000, if the
member fails timely to pay the amount indicated on its preliminary
renewal statement.
(c) through (l) No change.
* * * * *
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, NASD included statements
concerning the purpose of and the 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. NASD has prepared summaries, set forth in Sections A, B,
and C below, of the most significant aspects of such statements.
[[Page 51623]]
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change to Section 4(b) is to (1)
increase the $10.00 charge for each set of fingerprints submitted by a
member to NASD for processing to $13.00; and (2) establish a $13.00
charge to be paid to NASD for posting each set of fingerprint results
and identifying information processed by another SRO on the Central
Registration Depository (``CRD'' or ``Web CRD'').
NASD currently processes fingerprint cards submitted by member
firms on behalf of their associated persons who are required to be
fingerprinted pursuant to the Act. Among other things, NASD collects
the fingerprint cards, images them, links them to an associated
person's CRD record, and forwards them to the Federal Bureau of
Investigation (``FBI''). NASD tracks the status of these cards and
posts the results of the FBI's fingerprint check on the CRD system.\5\
NASD currently charges members $10.00 for processing each fingerprint
card and additionally collects $22.00 from members on behalf of the FBI
as appropriate, consistent with FBI guidelines.\6\ The $3.00 increase
proposed in the rule change will raise NASD's fingerprint processing
fee from $10.00 to $13.00 and, when the FBI's $22.00 fee is included,
will raise the total fingerprint processing fee from $32.00 to $35.00.
The additional $3.00 charge will help cover NASD costs associated with
its fingerprinting program.
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\5\ Generally speaking, results fall into one of three
categories: ``clear,'' ``criminal history record information,'' or
``illegible'' (if the FBI could not ``read'' the images submitted).
``Criminal history record information'' (``CHRI'') is defined in
Section 28 of the Code of Federal Regulations as ``information
collected by criminal justice agencies on individuals consisting of
identifiable descriptions and notations of arrests, indictments,
informations, or other formal criminal charges, and any disposition
arising therefrom, sentencing, correction supervision, and release.
The term does not include identification information such as
fingerprint records to the extent that such information does not
indicate involvement of the individual in the criminal justice
system.'' In general terms, CHRI is composed of the results of a
fingerprint check on a registered or associated person when
information received from the FBI reflects an arrest history.
\6\ The FBI determines when and on what basis it will charge the
$22.00 fee. For example, the FBI does not charge a fee on the
submission of a second card when it identifies both the first and
the second card as illegible for a particular individual.
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The proposed rule change also establishes a new $13.00 fee to be
charged by NASD to members that submit to NASD for posting to the CRD
system fingerprint results and identifying information that has been
processed through another SRO. Pursuant to Section 17(f)(2) of the Act
\7\ and Rule 17f-2 thereunder,\8\ other SROs may process fingerprint
cards for persons required to have their fingerprints processed through
the FBI, consistent with fingerprint plans submitted by those SROs to
the Commission. NASD currently accepts the results (i.e., the actual
disposition/record sent by the FBI) of fingerprints processed through
another SRO at no cost to the member. Consistent with Commission Rule
17f-2(b),\9\ members may, under certain enumerated circumstances,
submit such results in lieu of submitting fingerprint cards. Upon
receipt of the results, NASD staff images and stores the documents
received, verifies and matches the fingerprint processing results to an
existing CRD record if available, and manually posts the results to the
CRD system. In the event that the individual does not already have a
CRD record, NASD staff would be required to create a new base record in
the CRD system. NASD proposes charging members a $13.00 fee to perform
these activities. Because the FBI would have already processed these
fingerprints, the member would have already paid the FBI fee, and NASD
would not be charging the additional FBI fee under these circumstances.
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\7\ 15 U.S.C. 78q(f)(2).
\8\ 17 CFR 240.17f-2.
\9\ 17 CFR 240.17f-2(b). At the NASD's request, the Commission
added the subparagraph (b) to the rule reference to clarify the
``enumerated circumstances'' being referred to by the NASD.
Telephone conference between Richard E. Pullano, Associate Vice
President and Chief Counsel, Registration and Disclosure, NASD,
Shirley H. Weiss, Associate General Counsel, Office of General
Counsel, Regulatory Policy and Oversight, NASD, and Christopher B.
Stone, Special Counsel, Division of Market Regulation, Commission
(July 22, 2003).
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NASD also proposes substituting the term ``set of fingerprints''
for ``fingerprint cards.'' This proposed change describes the
traditional ink and paper fingerprint cards in current use, but in
recognition of the changing technology available for fingerprint
processing, would also describe the electronic transmission of
fingerprints.
The proposed fingerprint processing fees will be assessed starting
on July 15, 2003.
2. Statutory Basis
NASD believes that the proposed rule change is consistent with the
provisions of Sections 15A(b)(5) of the Act,\10\ which requires, among
other things, the equitable allocation of reasonable dues, fees, and
other charges among members and issuers and other persons using any
facility or system that NASD operates or controls. NASD believes that
the proposed fingerprint processing fees are reasonable and fairly
reflect NASD's costs incurred in processing fingerprints and posting
each set of fingerprint results and identifying information processed
by another SRO on CRD.
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\10\ 15 U.S.C. 78o-3(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
NASD 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 upon filing pursuant
to Section 19(b)(3)(A)(ii)\11\ of the Act and Rule 19b-4(f)(2)
thereunder \12\ as establishing or changing a due, fee, or other charge
paid solely by members of the NASD. NASD intends to implement this rule
change on July 15, 2003. At any time within 60 days of the filing of
such proposed rule change, the Commission may summarily abrogate such
rule change if it appears to the Commission that such action is
necessary or appropriate, in the public interest, for the protection of
investors, or otherwise in furtherance of the purposes of the Act.\13\
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\11\ 15 U.S.C. 78s(b)(3)(A)(ii).
\12\ 17 CFR 240.19b-4(f)(2).
\13\ See Section 19(b)(3)(C) of the Act, 15 U.S.C. 78s(b)(3)(C).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609.
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
[[Page 51624]]
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. Copies of such filing will also be available for
inspection and copying at the principal office of the NASD. All
submissions should refer to File No. SR-NASD-2003-109 and should be
submitted by September 17, 2003.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. 03-21944 Filed 8-26-03; 8:45 am]
BILLING CODE 8010-01-P