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91-10 Revised Entry and Annual Fees for Nasdaq Issuers — Approval of Amendments to Schedule D

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EXECUTIVE SUMMARY

The Securities and Exchange Commission has approved amendments to Part i of Schedule D to the NASD By-Laws that provide new and separate fee structures for Nasdaq issuers. The new fees went into effect January 2, 1991. They include a onetime entry fee for all issuers and a graduated entry fee for each issue listed on the Nasdaq National Market System. The text of the amendments to Part IV of Schedule D follows this notice.

BACKGROUND

On January 2, 1991, the Securities and Exchange Commission (SEC or "Commission") approved amendments to Part IV of Schedule D to the NASD By-Laws that establish new and separate fee structures for Nasdaq issuers effective January 2, 1991.

The NASD's prior fee structure for issuers under Part IV of Schedule D to the By-Laws governing inclusion in the Nasdaq system generally did not distinguish between issues listed on the Nasdaq National Market System (Nasdaq/NMS) and issues that were not listed on Nasdaq/NMS ("regular Nasdaq")(together referred to hereinafter as "The Nasdaq Stock MarketSM"). With the continued substantial growth in The Nasdaq Stock Market in the last decade, and especially the growth in the quality and competitiveness of Nasdaq/NMS, the NASD believes that changes to the fee structure are necessary and appropriate. The changes to the fee structure announced here more accurately reflect the competitive value that Nasdaq/NMS listings provide to issuers and differentiate between the two segments of The Nasdaq Stock Market.

SUMMARY OF AMENDMENTS

The NASD is, therefore, replacing the current provisions of Part IV of Schedule D to the NASD By-Laws with a new structure that distinguishes between Nasdaq/NMS fees in new Sections A and B and regular Nasdaq fees in new Sections C and D. The NASD has adopted a new Section A to charge a one-time entry fee for Nasdaq/NMS listing of $5,000 per issuer, plus a new graduated fee for each issue listed based on the total number of shares of the listed class of security outstanding. The total Nasdaq/NMS entry fee will not exceed $50,000 for each Nasdaq/NMS issuer (inclusive of the $5,000 one-time entry fee), compared with the previous maximum of $5,000 per issuer during any 24-month period. The Nasdaq/NMS annual fee in new Section B is a maximum of $8,000, including the participation fee, which is unchanged.

The NASD has also adopted the $5,000 onetime entry fee for regular Nasdaq and has raised the maximum entry fee from $5,000 to $10,000 per issuer (inclusive of the one-time $5,000 fee) in new Section C. In addition, the NASD has changed the regular Nasdaq entry and annual fee provisions to consolidate identical fees for different types of securities. New Subsections C.2.(i) and D.l.(i) impose fees on what are now referred to as "equity securities." Each section defines equity securities to mean all securities eligible for inclusion in regular Nasdaq and not otherwise covered by another subsection of each section. A footnote to each section also clarifies that, in the case of units, only the components of the units will be considered an equity security. The purpose of this change is to establish a single fee formula for all types of securities eligible for inclusion unless a unique formula is established for a particular type of security in another subsection of the section. Thus, the language of Subsections C.2.(ii) and D.l.(ii) retains the prior language specifying the calculation of the fee for convertible debentures.

The NASD has also adopted a new non-refundable $1,000 processing fee, which will be credited against the applicant issuer's minimum entry fee for applications to both Nasdaq/NMS and regular Nasdaq to cover the costs associated with processing these applications. Previously, issuers were not required to pay any fee to the NASD until their securities had been authorized for inclusion and were trading in The Nasdaq Stock Market.

Each year the NASD receives approximately 200 applications for inclusion in The Nasdaq Stock Market from issuers that are never included. The costs to the NASD of processing these applications are significant, given the number of applications and the complexity of issues that may require resolution. The NASD believes the processing fee will discourage applications by issuers that cannot meet The Nasdaq Stock Market initial inclusion requirements and will encourage all applicant issuers to determine, prior to applying for inclusion in The Nasdaq Stock Market, the likelihood that their securities will qualify for inclusion.

The NASD has also added a provision allowing the waiver of entry and annual fees for both Nasdaq/NMS and regular Nasdaq applicants if, in the discretion of the Board of Governors or its designee, such a waiver is justified. Previously, Part IV to Schedule D allowed for a waiver of entry fees if comparable fees had been paid in the previous 24 months, or if new securities that qualified for listing were issued as the result of the merger, consolidation, or reorganization of a listed company. When the prior waiver provisions were adopted, virtually all situations where a waiver might be justified fell into the standard categories covered by the provisions. The NASD has increasingly found situations in which granting a waiver under the prior provisions appeared unjustified and other situations where granting a waiver is justified but not permitted by the prior provisions. The new waiver provision allows the NASD more flexibility to waive fees on a case-by-case basis in situations that were not precisely covered by the prior waiver provisions or where other unforeseen considerations might warrant a waiver.

The NASD will consider granting waivers where the facts of the particular situation, including the following, appear to make imposition of a fee inequitable:

  • Where the issue currently trades in regular Nasdaq and is seeking inclusion in Nasdaq/NMS.

  • Where the company seeking a Nasdaq/NMS listing resulted from a business combination and one or more of the predecessor companies were previously listed on regular Nasdaq or Nasdaq/NMS.

  • Where the company has other issues already listed on Nasdaq/NMS.

  • Where the company was previously listed on Nasdaq/NMS.

  • Any other information deemed material to the company's listing application.

Finally, the NASD has eliminated the current section entitled Interim Inclusion Fee with respect to both Nasdaq/NMS and regular Nasdaq. Any need for a reduced fee for interim inclusion of a security can now be accommodated through the proposed waiver provisions.

Inquiries related to the amendments announced here may be directed to Perry Peregoy, Market Listing Qualifications, at (202) 728-8088, or Elliott R. Curzon, Office of the General Counsel, at (202) 728-8451.

TEXT OF RULE CHANGE

The following is the full text of amendments to Part IV of Schedule D to the NASD By-Laws.

(Note: New language is underlined; deleted language is in brackets.)

SCHEDULE D

PART IV

[NASDAQ ISSUER QUOTATION] LISTING FEES

THE NASDAQ STOCK MARKET — NATIONAL MARKET SYSTEM

A. Entry Fee
1. Each issuer that submits an application for inclusion of any of its securities in the National Market System shall pay a $1,000 non-refundable processing fee with respect to each application, to be credited against the issuer's entry fee.
2. The issuer of each class of security which is listed in the National Market System shall pay to the Corporation:
a. upon initial entry, a one-time company listing fee of $5,000; and
b. for each class of security listed, a fee calculated on a graduated rate of $.005 per share for the first 5 million shares, $.0025 per share for each share between 5,000,001 and 15 million, inclusive, and $.001 per share for each share over 15 million, based on the total number of shares outstanding Entry fees paid by a company for all classes of securities listed on the National Market System, regardless of the date those securities are listed, shall not exceed $50,000 (inclusive of the $5,000 company listing fee).1
3. The entry fee shall be based on the total number of outstanding securities of the class to be included in the National Market System as shown in the issuer's most recent periodic report or, in the case of new issues, as shown in the offering circular, required to be filed with the issuer's appropriate regulatory authority and received by the NASDAQ Stock Market.
4. The Board of Governors or its designee, may, in its discretion, waive all or any part of the entry fee prescribed herein.
B. Annual Fee
1. The issuer of each class of security which is listed in the National Market System shall pay annually to the Corporation an annual fee for each such class of security to be computed as follows with a maximum annual fee of $8,000 per issuer;
a. a $2,000 National Market System participation fee; and,
b. the sum of $500 or $.0005 per share out standing, whichever is higher, up to a maximum of $6,000 for each security listed in the National Market System.2
2. The annual fee shall be based on the total number of outstanding securities of the class included in the National Market System as shown in the issuer's most recent periodic report required to be filed with the issuer's appropriate regulatory authority and received by the NASDAQ Stock Market.
3. The Board of Governors, or its designee may, in its discretion, waive all or any part of the annual fee prescribed herein.
4. If a security is removed from the National Market System, that portion of the annual fees for such security attributable to the months following the date of removal shall not be refunded.

REGULAR NASDAQ SYSTEM

[A.] C. Entry Fee
1. Each issuer that submits an application for inclusion of any class of its securities in the Regular NASDAQ System shall pay a $1,000 non-refundable processing fee with respect to each application, to be credited against the issuer's entry fee.
[1.] 2. The issuer of each class of security which is [authorized for inclusion] listed in the Regular NASDAQ System shall pay to the Corporation upon initial entry of any of the issuer's securities into the Regular NASDAQ System [an entry] a one-time company listing fee of $5,000. In addition, for each class of securities listed in the Regular NASDAQ System, the issuer shall pay an entry fee to be computed as follows with a maximum entry fee [during any 24 month period] for all classes of securities listed, regardless of the date those securities are listed, of [$5,000] $10,000 per issuer (inclusive of the $5,000 company listing fee):
(i) Equity Securities — $1,000 or $.001 per share outstanding, whichever is higher. For purposes of this section, the term "equity securities" includes all securities eligible for inclusion in the Regular NASDAQ System not covered by sub-paragraph (ii) of this section.3
[a. Stock Issues — $1,000 or $.001 per share outstanding, whichever is higher;]
[b. Investment Company Shares — $1,000 or $.001 per share outstanding, whichever is higher;]
[c. Warrant Issues — $1,000 or $.001 per warrant outstanding, whichever is higher;]
[d. Unit Issues]
[i) Where one or more of the component securities in the unit is an authorized security in the NASDAQ System — $1,000;]
[ii) Where the component securities in the unit are not authorized securities in the NASDAQ System — $1,000 or $.001 per unit initially issued, whichever is higher;]
[e. Shares of Beneficial Interest — $1,000 or $.001 per share outstanding, whichever is higher;]
[f.] (ii) Convertible Debentures — $1,000 or $50 per million dollars face amount of debentures outstanding, whichever is higher[;].
[g. Securities of Foreign Issuers and American Depositary Receipts — $1,000.]
[2. The entry fee shall be waived for those securities reentering the NASDAQ System for which an entry fee for the same security has been paid to the Corporation during the twenty-four month period prior to reentry. For purposes of calculating the above-mentioned twenty-four (24) month period the date of reentry shall be the date of receipt of the application for reentry into the NASDAQ System.]
[3. In the case of a merger, consolidation, or reorganization involving at least one issuer of an authorized security, the entry fee shall be waived for the security issued to carry out such merger, consolidation or re-organization provided that such security is promptly authorized for inclusion in the NASDAQ System.]
3. The Board of Governors or its designee may, in its discretion, waive all or any part of the entry fee prescribed herein.
4. [Except for Unit Issues, Securities of Foreign Issuers, and American Depositary Receipts t]The entry fee shall be based on the total number of outstanding securities of the class to be included in the Regular NASDAQ System as shown [on] in the issuer's most recent [Form 10-K filed with the SEC] periodic report or, in the case of new issues, as shown in the [appropriate prospectus] offering circular, [. In the case of issuers which are not required to file a Form 10-K with the Commission, the entry fee shall be based on the annual report] required to be filed with the issuer's appropriate regulatory authority and received by the NASDAQ Stock Market.
[B.] D. Annual Fee
1. The issuer of each class of security which is [authorized for inclusion] listed in the Regular NASDAQ System shall pay annually to the Corporation an annual fee for each such class of security to be computed as follows with a maximum annual fee of $6,000 per issuer;
(i) Equity Securities — $500 or $.0005 per share outstanding, whichever is higher. For purposes of this section, the term "equity securities" includes all securities eligible for inclusion in the Regular NASDAQ System not covered by sub-paragraph (ii) provision of this section.4
[a. Stock Issues — $500 or $.0005 per share outstanding, whichever is higher;]
[b. Investment Company Shares — $500 or $.0005 per share outstanding, whichever is higher;]
[c. Warrant Issues — $500 or $.0005 per warrant outstanding, whichever is higher;]
[d. Unit Issues
[i) Where one or more of the component securities in the unit is an authorized security in the NASDAQ System — $500;]
[ii) Where the component securities in the unit are not authorized securities in the NASDAQ System — $500 or $.0005 per unit initially issued, whichever is higher;] [e. Shares of Beneficial Interest — $500 or $.0005 per share outstanding, whichever is higher;]
[f.] (ii) Convertible Debentures — $500 or $25 per million dollars face amount of debentures outstanding, whichever is higher[;].
[g. Securities of Foreign Issuers and American Depositary Receipts — $500.]
2. [Except for Unit Issues, Securities of Foreign Issuers, and American Depositary Receipts, t] The annual fee shall be based on the total [amount] number of outstanding securities of the class included in the Regular NASDAQ System as shown [on] in the issuer's most recent [Form 10-K annual report filed with the SEC. In the case of issuers which are not required to file a Form 10-K with the Commission, the annual fee shall be based on the annual] periodic report required to be filed with the issuer's appropriate regulatory authority and received by the NASDAQ Stock Market.
[3. In addition to the annual fee stated above, the issuer of each security designated for inclusion in the NASDAQ National Market System shall pay annually to the corporation a NASDAQ/National Market System participation fee of $2,000 except with respect to issuers whose annual fee is calculated pursuant to Section B.1.g. above.*]
3. The Board of Governors or its designee may, in its discretion, waive all or any part of the entry fee prescribed herein.
4. If a[n authorized] security is removed from the Regular NASDAQ [(or NASDAQ/National Market)] System, that portion of the annual fees for such security attributable to the months following the date of removal shall not be refunded.
[C. Interim Inclusion Fee]
[1. In the case of a new issue which is authorized for inclusion in the NASDAQ System and for which an application has been made for listing on a national securities exchange pursuant to Section 12(b) of the Securities Exchange Act of 1934, such issuer shall pay to the Corporation upon entry into the NASDAQ System an Interim Inclusion Fee to be computed as follows with a maximum Interim Inclusion Fee of $1,000:]
[a) Stock Issues — $200 or $.0005 per share outstanding, whichever is higher;]
[b) Warrant Issues — $200 or $.0005 per warrant outstanding, whichever is higher;]
[c) Unit Issues]
[i) where one or more of the component securities in the unit is an authorized security in the NASDAQ System — $200;] [ii) where the component securities in the unit are not authorized securities in the NASDAQ System — $200 or $.0005 per unit initially issued, whichever is higher;]
[d) Shares of Beneficial Interest — $200 or $.0005 per share outstanding, whichever is higher;]
[e) Convertible Debentures — $200 or $25 per million dollars face amount of debentures outstanding, whichever is higher;]
[f) Securities of Foreign Issuers and American Depositary Receipts — $200.]
[2. In the event the issue is not accepted for listing on a national securities exchange within 60 calendar days of inclusion in the NASDAQ System, the entry and annual fees set forth in Sections A and B above shall apply and the Interim Inclusion Fee shall be credited toward the entry and annual fees.]

[* This exception will expire December 31, 1990.]

1 For purposes of this Part, the term "shares" shall include common and preferred stock, American Depositary Receipts (ADRs), warrants, partnership interests, or any other security listed on the National Market System.

2 Id.

3 Id. In the case of units, each component, but not the unit itself, shall be considered separately as an "equity security" for fee purposes.

4 See supra notes 1 and 3.


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