"SEC Fee" — Section 31 Transaction Fees

When you sell a stock, you may have noticed that a small transaction fee, often just a few pennies, appears on your confirmation slip. Although some broker-dealers have described this charge as an "SEC Fee," the SEC does not actually impose this fee on individual investors.

The SEC does not impose or set any of the brokerage fees that investors must pay. Instead, under Section 31 of the Securities Exchange Act of 1934, self-regulatory organizations (SROs) -- such as the NASD and all of the national securities exchanges (including the New York Stock Exchange and the American Stock Exchange) -- must pay transaction fees to the SEC based on the volume of securities that are sold on their markets. These fees recover the costs incurred by the government, including the SEC, for supervising and regulating the securities markets and securities professionals.

The SROs have adopted rules that require their broker-dealer members to pay their fair share of these fees. Broker-dealers, in turn, pass the responsibility of paying the fees to their customers. Thus, 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.

Section 31 requires the SEC to make annual and, in some cases, mid-year adjustments to the fee rate. These adjustments are necessary to make the SEC's total collection of transaction fees in a given year as close as possible to the amount stipulated for that year by Section 31. For example, in 2004, the target collection amount is $1.028 billion. If transaction volume in a given year increases, the SEC will lower the fee rate because each transaction has to contribute less to the target collection amount. But if transaction volume falls, each transaction will have to be charged a higher fee in order for the SEC to collect the target amount required by Section 31. Click here to see the last time the SEC adjusted the Section 31 fee rate.

The charges on most securities transactions are known as Section 31 "fees." But the charges imposed by Section 31 on transactions in security futures are termed "assessments." The assessment charge is $0.009 per round turn transaction (i.e., one purchase and one sale of a contract of sale for future delivery). Section 31 does not permit the SEC to adjust the assessment charge, so this charge is unaffected by any order issued by the SEC that changes the Section 31 fee rate.

http://www.sec.gov/answers/sec31.htm