Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by the National Association of Securities Dealers, Inc. Relating to Increase in Advertising Fee Rates

[Federal Register Volume 63, Number 221 (Tuesday, November 17, 1998)]
[Notices]
[Pages 63950-63952]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-30717]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-40653; File No. SR-NASD-98-82]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the National Association of 
Securities Dealers, Inc. Relating to Increase in Advertising Fee Rates

November 10, 1998.
    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 November 2, 1998, NASD Regulation, Inc. (``NASD Regulation'') filed 
with the Securities and Exchange Commission (``SEC'' or ``Commission'') 
a proposed rule change as described in Items I, II, and III below, 
which Items have been prepared by NASD Regulation. NASD Regulation has 
designated this proposal as establishing or changing a fee under 
Section 19(b)(3)(A)(ii), which renders the proposal effective upon 
receipt of this filing by the Commission. The NASD, however, will make 
the filing effective on January 1, 1999. 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.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    NASD Regulation is proposing to amend Section 13 of Schedule A of 
the NASD By-Laws to increase the review charge for advertisements, 
sales literature, and other such material filed or submitted. Set forth 
below is the text of the proposed rule change. Proposed new language is 
italicized and proposed deletions are in brackets.
* * * * *

Schedule A to the NASD By-Laws

Section 13--[Service] Review Charge for Advertisement, Sales 
Literature, and Other Such Material Filed or Submitted
    There shall be a [service] review charge for each and every item of

[[Page 63951]]

advertisement, sales literature, and other such material, whether in 
printed, video, electronic or other form, filed with or submitted to 
the Association, except for items that are filed or submitted in 
response to a written request from the Association's Advertising 
Regulation Department issued pursuant to the spot check procedures set 
forth in the Association's Rules as follows: (1) for printed material 
reviewed, [$50.00] $75.00, plus $10.00 for each page reviewed in excess 
of 10 pages; and (2) for video or audio media, [$50.00] $75.00, plus 
$10.00 per minute for each minute of tape reviewed in excess of 10 
minutes.
    Where a member requests expedited review of material submitted to 
the Advertising Regulation department there shall be a [service] review 
charge of $500.00 per item plus $25 for each page reviewed in excess of 
10 pages. Expedited review shall be completed within three business 
days, not including the date the item is received by the Advertising 
Regulation Department, unless a shorter or longer period is agreed to 
by the Advertising Regulation Department. The Advertising Regulation 
Department may, in its sole discretion, refuse requests for expedited 
review.
* * * * *

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 Regulation 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. NASD Regulation 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

    The Advertising/Investment Companies Regulation Department 
evaluates member firms' advertisements and sales literature for 
compliance with applicable rules of the NASD, SEC, Municipal Securities 
Rulemaking Board and Securities Investor Protection Corporation. These 
public communications include print, television and radio 
advertisements, or electronic communications such as Web sites. They 
also include brochures, form letters, mailers and telemarketing 
scripts. The rules address investor protection concerns and require all 
communications to be accurate and to provide a sound basis for making 
an investment decision. The rules prohibit the use of exaggerated or 
misleading statements.
    The Department operates three principal programs: filings, 
investigations and spot checks. The filings program is by far the 
largest in terms of communications reviewed and resources used. 
Approximately 1,450 member firms submitted sales material last year, 
either voluntarily or pursuant to a rule requirement. The Department 
also investigates misleading communications and provides expertise to 
Enforcement and the District Offices concerning the complex provisions 
of the SEC and NASD advertising rules. Finally, the Department conducts 
targeted spot checks of member communications that may not be subject 
to the filing requirements, but which must comply with the applicable 
rules.
    The Department needs additional resources to enhance its operations 
and provide timely, high quality reviews. Significant increases in 
filing volume and workload have hampered the Department's operations. 
For example, between 1994 and 1997, the number of communications 
reviewed in the filings and spot check programs increased 43%, from 
42,681 to 61,096. The Department expects filing volume to continue to 
increase in subsequent years.
    NASD Regulation therefore intends to dedicate additional staff and 
resources to the Department, as well as to the other departments whose 
programs are related to the regulation of member communications with 
the public. The Cost of the additional staff and resources will be 
covered from the increase in advertising fee rates.
Basis
    NASD Regulation believes that the proposed rule change is 
consistent with the provisions of Section 15A(b)(5) \3\ of the Act, 
which require that the rules of the Association provide for the 
equitable allocation of reasonable dues, fees, and other charges. NASD 
Regulation believes that the proposed rule change reasonably provides 
for an increase in the regular filing fees for advertising to help 
defray the costs associated with the significant increase in 
advertising activities and possible advertising rule violations.
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    \3\ 15 U.S.C. 78o-3.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    NSAD Regulation 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, as amended.

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 on 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) of the Act \4\ and subparagraph (e) of Rule 
19b-4 thereunder in that it constitutes a due, fee or other charge. 
However, the NASD has determined to implement the rule change on 
January 1, 1999. At any time within 60 days of the filing of the 
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 Act.\5\
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    \4\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \5\ In reviewing this proposal, the Commission considered its 
impact on efficiency, competition and capital formation. 15 U.S.C. 
78c(f).
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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. 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. 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.

[[Page 63952]]

SR-NASD-98-82 and should be submitted by December 8, 1998.

    For the Commission, by the Division of Market Regulations, 
pursuant to delegated authority.\6\
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    \6\ 17 CFR 200-30-3(a)(2).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-30717 Filed 11-16-98; 8:45 am]
BILLING CODE 8010-01-M