[Federal Register Volume 76, Number 172 (Tuesday, September 6, 2011)]
[Notices]
[Pages 55139-55148]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-22652]
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SECURITIES AND EXCHANGE COMMISSION
[Release Nos. 33-9255; 34-65231/August 31, 2011]
Order Making Fiscal Year 2012 Annual Adjustments to Registration
Fee Rates
I. Background
The Commission collects fees under various provisions of the
securities laws. Section 6(b) of the Securities Act of 1933
(``Securities Act'') requires the Commission to collect fees from
issuers on the registration of securities.\1\ Section 13(e) of the
Securities Exchange Act of 1934 (``Exchange Act'') requires the
Commission to collect fees on specified repurchases of securities.\2\
Section 14(g) of the Exchange Act requires the Commission to collect
fees on proxy solicitations and statements in corporate control
transactions.\3\
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\1\ 15 U.S.C. 77f(b).
\2\ 15 U.S.C. 78m(e).
\3\ 15 U.S.C. 78n(g).
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The Investor and Capital Markets Fee Relief Act of 2002 (``Fee
Relief Act'') \4\ has required the Commission to make annual
adjustments to the fee rates applicable under these sections for each
of the fiscal years 2003 through 2011 in an attempt to generate
collections equal to yearly targets specified in the statute.\5\ Under
the Fee Relief Act, each year's fee rate has been announced on the
preceding April 30, and has taken effect five days after the date of
enactment of the Commission's regular appropriation.
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\4\ Pub. L. 107-123, 115 Stat. 2390 (2002).
\5\ See 15 U.S.C. 77f(b)(5), 77f(b)(6), 78m(e)(5), 78m(e)(6),
78n(g)(5), and 78n(g)(6).
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The Dodd-Frank Wall Street Reform and Consumer Protection Act
(``Dodd-Frank Act'') changes many of the provisions related to these
fees. The
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Dodd-Frank Act created new annual collection targets for FY 2012 and
thereafter. It also changed the date by which the Commission must
announce a new fiscal year's fee rate (August 31) and the date on which
the new rate takes effect (October 1).
II. Fiscal Year 2012 Annual Adjustment to the Fee Rate
Section 6(b)(2) of the Securities Act, as amended by the Dodd-Frank
Act, requires the Commission to make an annual adjustment to the fee
rate applicable under Section 6(b).\6\ The annual adjustment to the fee
rate under Section 6(b) of the Securities Act also sets the annual
adjustment to the fee rates under Sections 13(e) and 14(g) of the
Exchange Act.\7\
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\6\ The annual adjustments are designed to adjust the fee rate
in a given fiscal year so that, when applied to the aggregate
maximum offering price at which securities are proposed to be
offered for the fiscal year, it is reasonably likely to produce
total fee collections under Section 6(b) equal to the ``target fee
collection amount'' specified in Section 6(b)(6)(A) for that fiscal
year.
\7\ See Sections 13(e)(6) and 14(g)(6) of the Exchange Act. On
October 1, 2011, Sections 13(e)(4) and 14(g)(6) of the Exchange Act,
as amended by the Dodd-Frank Act, will require an annual adjustment
to the fee rates under Sections 13(e) and 14(g) of the Exchange Act
to the same level as the new the fee rate under Section 6(b) of the
Securities Act.
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Section 6(b)(2) sets forth the method for determining the annual
adjustment to the fee rate under Section 6(b) for fiscal year 2012.
Specifically, the Commission must adjust the fee rate under Section
6(b) to a ``rate that, when applied to the baseline estimate of the
aggregate maximum offering prices for [fiscal year 2012], is reasonably
likely to produce aggregate fee collections under [Section 6(b)] that
are equal to the target fee collection amount for [fiscal year 2012].''
That is, the adjusted rate is determined by dividing the ``target fee
collection amount'' for fiscal year 2012 by the ``baseline estimate of
the aggregate maximum offering prices'' for fiscal year 2012.
Section 6(b)(6)(A) specifies that the ``target fee collection
amount'' for fiscal year 2012 is $425,000,000. Section 6(b)(6)(B)
defines the ``baseline estimate of the aggregate maximum offering
price'' for fiscal year 2012 as ``the baseline estimate of the
aggregate maximum offering price at which securities are proposed to be
offered pursuant to registration statements filed with the Commission
during [fiscal year 2012] as determined by the Commission, after
consultation with the Congressional Budget Office and the Office of
Management and Budget * * *.''
To make the baseline estimate of the aggregate maximum offering
price for fiscal year 2012, the Commission used a methodology similar
to that developed in consultation with the Congressional Budget Office
(``CBO'') and Office of Management and Budget (``OMB'') to project the
aggregate offering price for purposes of the fiscal year 2012 annual
adjustment.\8\ Using this methodology, the Commission determines the
``baseline estimate of the aggregate maximum offering price'' for
fiscal year 2012 to be $3,708,294,634,490.\9\ Based on this estimate,
the Commission calculates the fee rate for fiscal 2012 to be $114.60
per million. This adjusted fee rate applies to Section 6(b) of the
Securities Act, as well as to Sections 13(e) and 14(g) of the Exchange
Act.
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\8\ For the fiscal year 2011 estimate, the Commission used a
ten-year series of monthly observations ending in March 2010. For
fiscal year 2012, the Commission used a ten-year series ending in
July 2011.
\9\ Appendix A explains how we determined the ``baseline
estimate of the aggregate maximum offering price'' for fiscal year
2012 using our methodology, and then shows the purely arithmetical
process of calculating the fiscal year 2012 annual adjustment based
on that estimate. The appendix includes the data used by the
Commission in making its ``baseline estimate of the aggregate
maximum offering price'' for fiscal year 2012.
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III. Effective Dates of the Annual Adjustments
The fiscal year 2012 annual adjustments to the fee rates applicable
under Section 6(b) of the Securities Act and Sections 13(e) and 14(g)
of the Exchange Act will be effective on October 1, 2011, under the
changes made by the Dodd-Frank Act.\10\
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\10\ On October 1, 2011, Section 6(b)(4) of the Securities Act
and Sections 13(e)(6) and 14(g)(6) of the Exchange Act, as amended
by the Dodd-Frank Act, will require the fiscal year 2012 annual
adjustments to the fee rates applicable under Section 6(b) of the
Securities Act and Sections 13(e) and 14(g) of the Exchange Act to
be effective on October 1, 2011.
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IV. Conclusion
Accordingly, pursuant to Section 6(b) of the Securities Act and
Sections 13(e) and 14(g) of the Exchange Act,\11\
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\11\ 15 U.S.C. 77f(b), 78m(e), and 78n(g).
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It Is Hereby Ordered that the fee rates applicable under Section
6(b) of the Securities Act and Sections 13(e) and 14(g) of the Exchange
Act shall be $114.60 per million effective on October 1, 2011.
By the Commission.
Elizabeth M. Murphy,
Secretary.
Appendix A
With the passage of the Dodd-Frank Wall Street Reform and
Consumer Protection Act, Congress has, among other things,
established a target amount of monies to be collected from fees
charged to issuers based on the value of their registrations. This
appendix provides the formula for determining such fees, which the
Commission adjusts annually. Congress has mandated that the
Commission determine these fees based on the ``aggregate maximum
offering prices,'' which measures the aggregate dollar amount of
securities registered with the Commission over the course of the
year. In order to maximize the likelihood that the amount of monies
targeted by Congress will be collected, the fee rate must be set to
reflect projected aggregate maximum offering prices. As a
percentage, the fee rate equals the ratio of the target amounts of
monies to the projected aggregate maximum offering prices.
For 2012, the Commission has estimated the aggregate maximum
offering prices by projecting forward the trend established in the
previous decade. More specifically, an ARIMA model was used to
forecast the value of the aggregate maximum offering prices for
months subsequent to July 2011, the last month for which the
Commission has data on the aggregate maximum offering prices.
The following sections describe this process in detail.
A. Baseline Estimate of the Aggregate Maximum Offering Prices for
Fiscal Year 2012
First, calculate the aggregate maximum offering prices (AMOP)
for each month in the sample (July 2001-July 2011). Next, calculate
the percentage change in the AMOP from month to month.
Model the monthly percentage change in AMOP as a first order
moving average process. The moving average approach allows one to
model the effect that an exceptionally high (or low) observation of
AMOP tends to be followed by a more ``typical'' value of AMOP.
Use the estimated moving average model to forecast the monthly
percent change in AMOP. These percent changes can then be applied to
obtain forecasts of the total dollar value of registrations. The
following is a more formal (mathematical) description of the
procedure:
1. Begin with the monthly data for AMOP. The sample spans ten
years, from July 2001 to July 2011.
2. Divide each month's AMOP (column C) by the number of trading
days in that month (column B) to obtain the average daily AMOP
(AAMOP, column D).
3. For each month t, the natural logarithm of AAMOP is reported
in column E.
4. Calculate the change in log(AAMOP) from the previous month as
[Delta]t = log (AAMOPt)-
log(AAMOPt-1). This approximates the percentage change.
5. Estimate the first order moving average model
[Delta]t = [alpha] + [beta]et-1 +
et, where et denotes the forecast error for
month t. The forecast error is simply the difference between the
one-month ahead forecast and the actual realization of
[Delta]t. The forecast error is expressed as
et = [Delta]t - [alpha] -
[beta]et-1. The model can be estimated using standard
commercially available software. Using least
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squares, the estimated parameter values are [alpha] = 0.0005219 and
[beta] = -0.87539.
6. For the month of August 2011 forecast
[Delta]t = 8/11 = [alpha] + [beta]et = 8/11.
For all subsequent months, forecast [Delta]t = [alpha].
7. Calculate forecasts of log(AAMOP). For example, the forecast
of log(AAMOP) for October 2011 is given by
FLAAMOPt = 10/11 = log(AAMOPt = 7/11) +
[Delta]t = 8/11 +[Delta]t = 9/11 +
[Delta]t = 10/11.
8. Under the assumption that et is normally
distributed, the n-step ahead forecast of AAMOP is given by
exp(FLAAMOPt + [sigma]n\2\/2), where
[sigma]n denotes the standard error of the n-step ahead
forecast.
9. For October 2011, this gives a forecast AAMOP of $14.6
Billion (Column I), and a forecast AMOP of $307.6 Billion (Column
J).
10. Iterate this process through September 2012 to obtain a
baseline estimate of the aggregate maximum offering prices for
fiscal year 2012 of $3,708,294,634,490.
B. Using the Forecasts From A To Calculate the New Fee Rate.
1. Using the data from Table A, estimate the aggregate maximum
offering prices between 10/1/11 and 9/30/12 to be
$3,708,294,634,490.
2. The rate necessary to collect the target $425,000,000 in fee
revenues set by Congress is then calculated as: $425,000,000 /
$3,708,294,634,490 = 0.000114608.
3. Round the result to the seventh decimal point, yielding a
rate of 0.0001146 (or $114.60 per million).
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[FR Doc. 2011-22652 Filed 9-2-11; 8:45 am]
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