In a letter, the Regional Bond Dealers Association is calling on the Securities and Exchange Commission to oppose unreasonable fees demanded by the CUSIP Service Bureau. The Bureau generates CUSIP identifiers, which are alpha numeric tags used to identify individual bonds and other securities and whose use is required by regulators and others in a variety of essential functions. The RBDA says the CUSIP Service Bureau has launched an aggressive campaign to extract new and unwarranted licensing fees from a wide variety of users, including securities dealers, issuers, information providers and others.
“The CUSIP Service Bureau’s campaign is an unfair and unjustified attempt to monetize a function that, while important, adds little tangible value to the job of raising capital or providing market liquidity,” said Michael Decker, RBDA Co-Chief Executive Officer. “To the extent the use of CUSIP identifiers is required by regulators, the SEC should, at a minimum, discourage the CUSIP Service Bureau from charging unreasonable fees.”
The American Bankers Association (ABA) formed the Committee on Uniform Security Identification Procedures, or CUSIP, in the early 1960s. Today, the ID codes are generated by the CUSIP Service Bureau which is operated by Standard & Poor’s under the direction of the ABA. The Bureau has always charged a fee for creating the codes but more recently has begun trying to coerce additional payments from market participants, such as issuers, dealers and investors.
Further, beyond mere fees, the CUSIP Service Bureau is now also attempting to insert restrictive language regarding the use of CUSIP identifiers into service agreements between information providers, vendors, dealers, investors, regulators and credit rating agencies. All of these activities have drawn the attention of the European Commission which has launched an investigation into the service bureau.
“The service bureau’s tactics are starting to have a chilling effect on the free flow of information,” said Mr. Decker. “This is absolutely contrary to the goals of transparency and investor protection and, if continued unchecked, they will ultimately raise costs for investors and all market participants.”
The CUSIP Service Bureau contends it needs large, annually recurring license fees to cover the cost of issuing and distributing CUSIP information. This contention is dubious at best. Issuing a CUSIP identifier is a simple administrative activity, requiring rather basic technology, and distribution is a normal, daily activity of all the leading information vendors, including Bloomberg, Reuters and Interactive Data Corporation, among others, thus requiring no effort and imposing no burden on the CUSIP Service Bureau.
For more information on the Regional Bond Dealers Association please contact Mike Nicholas at 202.509.9515 or go to www.regionalbonddealers.com.
