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April 15, 2009

Section 31 Fees Jump

By Peter Chapman

Stock prices are down, so Section 31 fees are headed back up.

The Securities and Exchange Commission, citing a sharp drop in the traded value of stocks in the first four months of its fiscal year, has increased the Section 31 fee covering the second half of its fiscal year. The fee, a tax on stock and options trades, will be set at $25.70 per million dollars of transaction value beginning April 10.

That's up from $5.60 in the first half of the SEC's fiscal year. The federal government's fiscal year runs from October through September.

The Commission hopes to collect about $1 billion from the nation's securities exchanges and associations through the Section 31 tax during fiscal year 2009. To do so, it says, it must ask for more money than it is getting.

The SROs pay twice a year, in March and September. As Traders Magazine was going to press, the SEC was only expecting to receive about $190 million from the first payment.

The SEC is required to adjust the Section 31 fee at the midpoint of its fiscal year if it decides its original forecast of dollar volume of securities sales is off by plus or minus 10 percent. The Commission had estimated the dollar volume for fiscal year 2009 at $113 trillion. Now it believes it will only total $66 trillion.

The Commission based its calculations on data from the first four months of its fiscal year, showing dollar volume of only $24 trillion. It expects the aggregate dollar volume for the rest of the year will total only $42 trillion.

The Section 31 fee had been trending down since 2002, when Congress passed the Investor and Capital Markets Fee Relief Act. In January 2002, the rate was $33.33 per million dollars.

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