May 3, 2010

The Price of Poker…er…Deals Going Up: SEC’s Filing Fees to Soar 63% for Fiscal Year 2011

On Friday, the SEC issued its first fee advisory for the year (along with this methodology). Right now, the filing fee rate for Securities Act registration statements is $71.30 million (the same rate applies under Sections 13(e) and 14(g)). Under the fee advisory, this rate will rise to $116.10 per million, a hefty 63% price hike – and the largest one-year rate hike in my experience. The new fees will not go into effect until five days after the date of enactment of the SEC’s 2011 appropriation – which often is delayed well beyond the October 1st start of the government’s fiscal year, as Congress and the President battle over the government’s budget.

You might be asking, “How are the SEC’s fees set?” Or more importantly, “Will the rate hike help the SEC’s push for more resources?”

The SEC sets its filing fees annually under the “Investor and Capital Markets Fee Relief Act of 2002.” The SEC’s budget is not dependent on its fees as it’s not a self-funded agency. All of the fees go to the US Treasury. But perhaps the higher fees could convince Congress to allow the SEC to receive the requested 12% increase in its budget. On Friday, SEC Chair Schapiro testified before a subcommittee of the Senate’s Appropriations Committee and she noted:

It is important to note that the proposed increase in spending would be fully offset by the fees we collect on transactions and registrations. In FY 2011, we estimate that we will collect $1.7 billion — an increase of $220 million over FY 2010.

It will be interesting to see if – and how – the higher level of fees impacts the SEC’s push for self-funding. Learn more how the filing rate-setting process works in this blog.

FINRA Issues FAQs for its New Same-Day Clearance Process for Shelf Filings

Last week, FINRA’s Corporate Financing Department supplemented its new “COBRADesk Same Day Clearance Guide” by issuing FAQs regarding the “Same-Day Clearance Option” with FAQs related to the process (the FAQs are at the end of the guide).

As you may recall, the new same-day option is for shelf takedowns that have an accelerated effective, pricing or launch date. At the recent ABA Business Law Section Spring Meeting, Paul Mathews, Director of FINRA’s Corporate Financing Department, stated that 60% of the Department’s shelf filings already were being submitted using the same day option and indicated that the process was working well for the companies seeking quickly access to the capital markets.

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