[Federal Register Volume 79, Number 171 (Thursday, September 4, 2014)]
[Notices]
[Pages 52771-52778]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-21071]
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SECURITIES AND EXCHANGE COMMISSION
[Release Nos. 33-9635; 34-72948/August 29, 2014]
Order Making Fiscal Year 2015 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\ These provisions require the Commission to make annual
adjustments to the fee rates applicable under these provisions.
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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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II. Fiscal Year 2015 Annual Adjustment to Fee Rates
Section 6(b)(2) of the Securities Act requires the Commission to
make an annual adjustment to the fee rate applicable under Section
6(b).\4\ 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.\5\
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\4\ 15 U.S.C. 77f(b)(2). 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.
\5\ 15 U.S.C. 78m(e)(4) and 15 U.S.C. 78n(g)(4).
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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 2015.
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 2015], is reasonably
likely to produce aggregate fee collections under [Section 6(b)] that
are equal to the target fee collection amount for [fiscal year 2015].''
That is, the adjusted rate is determined by dividing the ``target fee
collection amount'' for fiscal year 2015 by the ``baseline estimate of
the aggregate maximum offering prices'' for fiscal year 2015.
Section 6(b)(6)(A) specifies that the ``target fee collection
amount'' for fiscal year 2015 is $515,000,000. Section 6(b)(6)(B)
defines the ``baseline estimate of the aggregate maximum offering
price'' for fiscal year 2015 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 2015] as determined by the Commission, after
consultation with the Congressional Budget Office and the Office of
Management and Budget. . . .''
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To make the baseline estimate of the aggregate maximum offering
price for fiscal year 2015, 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 years 2011 through
2014 annual adjustments.\6\ Using this methodology, the Commission
determines the ``baseline estimate of the aggregate maximum offering
price'' for fiscal year 2015 to be $4,433,900,707,058.\7\ Based on this
estimate, the Commission calculates the fee rate for fiscal 2015 to be
$116.20 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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\6\ For the fiscal year 2011 estimate, the Commission used a
ten-year series of monthly observations ending in March 2011. For
fiscal years 2012-2015, the Commission used a ten-year series ending
in July of the applicable year.
\7\ Appendix A explains how we determined the ``baseline
estimate of the aggregate maximum offering price'' for fiscal year
2015 using our methodology, and then shows the arithmetical process
of calculating the fiscal year 2015 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 2015.
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III. Effective Dates of the Annual Adjustments
The fiscal year 2015 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, 2014.\8\
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\8\ 15 U.S.C. 77f(b)(4), 15 U.S.C. 78m(e)(6) and 15 U.S.C.
78n(g)(6).
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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,\9\
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\9\ 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 $116.20 per million effective on October 1, 2014.
By the Commission.
Kevin M. O'Neill,
Deputy Secretary.
Appendix A
Congress has 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 2015, 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 2014, 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 2015.
First, calculate the aggregate maximum offering prices (AMOP)
for each month in the sample (July 2004-July 2014). 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 2004 to July 2014.
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 squares, the estimated parameter values are
[alpha] = 0.0005277 and [beta] = -0.89215.
6. For the month of August 2014 forecast
[Delta]t = 8/12 = [alpha] + [beta]e t = 7/12.
For all subsequent months, forecast [Delta]t = [alpha].
7. Calculate forecasts of log(AAMOP). For example, the forecast
of log(AAMOP) for October 2014 is given by FLAAMOP
t = 10/12 = log(AAMOP t = 7/12) + [Delta]
t = 8/12 + [Delta] t = 9/12 + [Delta]
t = 10/12.
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 2014, this gives a forecast AAMOP of $17.470
billion (Column I), and a forecast AMOP of $401.8 billion (Column
J).
10. Iterate this process through September 2015 to obtain a
baseline estimate of the aggregate maximum offering prices for
fiscal year 2015 of $4,433,900,707,058.
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 10/01/14 and 9/30/15 to be
$4,433,900,707,058.
2. The rate necessary to collect the target $515,000,000 in fee
revenues set by Congress is then calculated as: $515,000,000 /
$4,433,900,707,058 = 0.00011615.
3. Round the result to the seventh decimal point, yielding a
rate of 0.0001162 (or $116.20 per million).
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BILLING CODE 8011-01-P
[FR Doc. 2014-21071 Filed 9-3-14; 8:45 am]
BILLING CODE 8011-01-C