SEC Fees Reduced

Originally published on January 25, 2002

On January 16, 2001, President Bush signed the "Investor and Capital Markets Fee Relief Act" which substantially reduces filing fees and securities transaction fees paid to the Securities and Exchange Commission.

Filing fee rates are reduced from $239 per million to $92 per million under Section 6(b) of the Securities Act (registration statements) and Section 13(e) (going private transactions) and Section 14(g) of the Exchange Act (merger proxies). In addition, filing fees under Section 307(b) of the Trust Indenture Act (qualification of indenture when securities are not required to be registered) are eliminated.

The new reduced filing fee rates apply to all applicable filings made with the SEC after September 30, 2001. By March 18, 2002, the SEC will recalculate the appropriate fee for all filings made after September 30, 2001 based on the new rates and prepare an account statement for each company that made a filing with the SEC. The SEC will then allow companies to either apply the excess amount towards future SEC filings or request a refund of the excess amount. Instructions for requesting a refund will be included in the account statement.

A registrant that filed a "shelf" registration statement prior to October 1, 2001 and has not sold all of the registered securities may register additional securities without paying a filing fee. Rule 457(p) permits a registrant to carry forward the full amount of filing fees

associated with securities remaining unsold following the completion or termination of an offering or the withdrawal of a registration statement if the old registration statement was first filed within five years of the new registration statement. Fees may be carried forward to registration statements of successor issuers and majority parents or subsidiaries, as well as those of the same issuer. By filing a new shelf registration statement and terminating or withdrawing an existing registration statement, a registrant can take advantage of the reduced filing fees by bringing forward those unused fees from the older registration statement and applying them to the new filing.

For example, Company A filed a shelf registration statement on February 1, 2001 for $100 million of securities and paid a registration fee of $25,000. Assuming that no securities have been sold under that registration statement, Company A could terminate the registration statement, file a new shelf registration statement on February 1, 2002 registering approximately $271.7 million of securities using the $25,000 filing fee brought forward from the old registration statement. Using Rule 457(p), no additional filing fee would be due to the SEC for this new registration statement, yet Company A has increased the amount of securities it has registered with the SEC by approximately $171.7 million.

A potential detriment to this approach is that after the old registration statement has been terminated and before the new registration statement has been declared effective (which could be delayed by the SEC’s review process), a registrant will not have an effective registration statement under which it can sell securities. To avoid this dilemma, a new registration statement could be filed for a small amount of securities, and then be amended after its review status is determined (or after the review process is complete) and shortly before it becomes effective to bring forward the unused fee from the old registration statement and increase the amount of securities registered.

Securities transaction fee rates under Section 31 of the Exchange Act are reduced from $33.33 per million to $15 per million of the aggregate amount of securities sold. This is the fee charged to cover the government’s cost of regulation and supervision of the securities markets and securities professionals. The self-regulatory organizations collect these fees. Additional information on the new securities transaction fee rate is available at www.nyse.com/press/NT000682EA.html and www.nasdr.com/mem_ alert122801.htm.

The new reduced securities transaction fee rates apply to all transactions occurring after December 28, 2001. In addition, securities transaction fees will apply to sales of options on securities indexes only if the underlying securities index is a narrow-based securities index.

After consultation with the Congressional Budget Office and the Office of Management and Budget, the SEC will make an annual adjustment in the filing fee rate and the securities transaction fee rate that will be effective each year on the later of October 1 or the date on which the SEC’s fiscal appropriation for that year is enacted. In addition, after consultation with the Congressional Budget Office and the Office of Management and Budget, the SEC may make a mid-year adjustment to the securities transaction fee rat that would be effective beginning April 1, 2002.

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