Section 31 Fees Basic Information for Firms
Section 31 of the Securities Exchange Act of 1934
Section 31 of the Securities Exchange Act of 1934 ("Exchange Act") requires each SRO to pay the Commission twice annually a fee based on the aggregate dollar amount of certain sales of securities ("covered sales"). The fee rate may change annually as part of the Commissionís budget appropriation for a given fiscal year. The fee rate may also change on a mid-year basis (typically as of April 1), in accordance with certain provisions set forth in Section 31. Links to the statute, regulatory provisions, and recent releases relating to Section 31 are available at: http://www.sec.gov/divisions/marketreg/mrfreqreq.shtml.
Rule 31 under the Act and collection practices
In 2004, the Commission adopted Rule 31 under the Exchange Act, 17 CFR 240.31, which describes how Section 31 fees are calculated, charged, and collected. These practices (including whether liability for a covered sale accrues as of the trade date or settlement date) are discussed in detail in the adopting release for the rule, Exchange Act Release 34-49928, which is available at: http://www.sec.gov/rules/final/34-49928.htm.
SRO member fees and customer charges
Section 31 requires SROs to make certain payments to the Commission, but is silent on the manner in which SROs may obtain funds to make such payments. Section 31 imposes no obligations on broker-dealers or their customers. The SROs have adopted rules, however, that require their broker-dealer members to pay per-transaction charges that the SROs use to pay their Section 31 fees. Broker-dealers, in turn, generally charge their customers per-transaction charges. A broker-dealer that has questions about how its fees are calculated should contact its SRO, and a customer who has questions about how his or her fees are calculated should contact the broker-dealer.
Although such fees are frequently referred to by broker-dealers as "SEC fees" or "Section 31 fees," these labels are not accurate. As noted, Section 31 fee obligations apply to SROs only, and thus the provisions do not involve SEC assessments of, or charges to, other parties.
Consult with your compliance office or the SRO charging the fee
We receive numerous inquiries from trading desks, back office operations, and computer programmers at individual firms concerning fee rates and whether the trade or settlement date would apply for certain types of transactions. As noted, the transaction fees paid by broker-dealers are being charged by individual SROs, not by the SEC, and the SRO should be consulted if a question arises. Your firm's compliance or legal office should be familiar with the transaction charge collection practices of the various SROs. If you have questions, you should speak with your compliance or legal department. You may also contact the SRO that is assessing the fee. To the extent that compliance or legal offices of firms have questions, those inquiries should also be directed to the appropriate SRO.