Section 31 Fees

Correspondence

Letter to Omgeo Regarding Sec 31 Fee Label - pdf 5.0, March 1, 2005
Comment Letter to SEC Relating to Collection Practices of Section 31 Fees - October 27, 2004
Comment Letters to NASD, NYSE Relating to Uniform Methodology of Calculating Section 31 Fees - October 27, 2004
SIA Comments To The SEC On The Proposed Rule Regarding Collection Practices Under Section 31 Of The Securities Exchange Act - pdf 5.0, March 5, 2004
OCC Notice To All Clearing Members On Section 31 Transaction Fee Rate Change – pdf 5.0, March 7, 2003
SIA Letter to The Honorable Thomas A. Daschle urging him to schedule immediate floor action on the Investor and Capital Markets Fee Relief Act, H.R. 1088 - pdf 4.0 - June 28, 2001
SIA Letter to The Honorable W.J. “Billy” Tauzin Urging Support of the Investor and Capital Markets Fee Relief Act of 2001 (H.R. 1088) - pdf 4.0 - June 11, 2001
Letter to The Honorable Richard Shelby Urging Cosponsorship of the Competitive Market Supervision Act (S. 2107) - pdf 4.0 - April 12, 2001
SIA Letter to the US House of Representatives Urging Support of the Investor and Capital Markets Fee Relief Act of 2001 - pdf 4.0 - April 3, 2001
SIA Letter to The Honorable Michael G. Oxley Urging Support of the Investor and Capital Markets Fee Relief Act of 2001 - pdf 4.0 - March 26, 2001
SIA Letter to The Honorable John J. LaFalce Urging Support of the Investor and Capital Markets Fee Relief Act of 2001 - pdf 4.0 - March 26, 2001
SIA Letter to The Honorable Daniel K. Akaka Urging Support of the Competitive Market Supervision act of 2001 (S. 143) - pdf 4.0 - March 14, 2001
SIA Letter to The Honorable Thomas A. Daschle Urging Support of the Competitive Market Supervision Act of 2001 - pdf 4.0 - March 12, 2001
SIA Letter to The Honorable Christopher J. Dodd urging support of the Competitive Market Supervision Act of 2001 (S. 143) - pdf 4.0 - February 28, 2001

Legislative Alerts / Updates

SEC Fee Label Update - March 2005

Customer Confirmations: Avoiding the Use of "Section 31" as a Label for Fees

As stated in the June 28, 2004, SEC Release No. 34-49928; File No. S7-05-04:

“The Commission is concerned about the manner in which SROs label the fees that they pass to their members and the manner in which members label the fees passed to their customers. These are not "Section 31 Fees" or "SEC Fees." Section 31 places no obligation on members of covered SROs or their customers, and it is misleading to suggest that a customer or an SRO member incurs an obligation to the Commission under Section 31. Accordingly, the Commission believes that covered SROs and their members should take prompt action to correct any such misperceptions.”

It is the understanding of the SIA that some firms already have changed the language used to label such fees on customer confirmations, while other firms are waiting for additional guidance. The determination regarding the appropriate label for the fee on the customer confirmation is within the discretion of the firm but, as we understand it, firms cannot refer to the fee as a “Section 31 Fee,” “SEC Fee,” or any other variation that implies it is a fee charged by regulators directly to the customer. In this regard, Commission staff has stated that they would not be comfortable with firms referring to this fee as a “Regulatory Fee” or “Reg Fee” because all of the proceeds may not be used to fund regulation. Firms should consider this guidance when changing any language on the customer confirmation.

Commission staff also has stated that they would not take exception to the use of the terms “Transaction Fee” or “Fee,” which are terms that most SIA members prefer. Other labels can be used at the discretion of the individual firm, although SIA recommends consulting with counsel prior to making the applicable change.
SEC Fee Advisory Notice for FY 2005 - December 9, 2004
SEC Issues Fee Rate Advisory #7 For 2004 - January 2004
Fee Rate Advisory #12 for Fiscal Year 2003 - February 28, 2003
Fee Rate Advisory #11 for Fiscal Year 2003 - February 21, 2003
Calculating Section 31 Fees

In notices announcing the recent revision to the Section 31 Transaction Fee rate the NYSE and the NASD issued different guidelines for how to calculate the fee. Specifically, the NYSE, in Information Memo 10-51, stated:

In calculating the new fee for a transaction, one should multiply the sale or principal amount of the transaction by the fee rate, which will be truncated at the seventh place after the decimal point. The resulting figure should then be truncated at the fifth place after the decimal point and rounded up to the next cent (if there is any remainder you should round up).

NASDR, in Member Alert dated December 28, 2001, stated:

In calculating the new fee, one should multiply the aggregate dollar amount of sales of securities transacted by the fee rate (.0000150), which will be truncated at the seventh place after the decimal point. The resulting figure should then be rounded up to the next cent (if there is any remainder you should round up).

After discussions with the SROs, SIA has determined that it was not the intent of the SROs to change the methodologies currently in use for the calculation of the fees [with the caveat from the NYSE that firms should not truncate the result of the calculation at LESS THAN five places after the decimal point]. The intent of the Information Bulletins was to reiterate the particular SROs guidelines for calculating the Section 31 fees.