80 FR 68286 - Securities Investor Protection Corporation

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 213 (November 4, 2015)

The Securities Investor Protection Corporation (``SIPC'') filed proposed rules with the Securities and Exchange Commission (``Commission''). SIPC proposes to adopt the SIPC Series 600 Rules, entitled ``Rules Relating to Supplemental Report of SIPC Membership,'' in accordance with paragraph (e)(4) of Rule 17a-5 under the Securities Exchange Act of 1934 (``Exchange Act''). The Commission is publishing the proposed rules for public comment. Because SIPC rules have the force and effect as if promulgated by the Commission, those rules are published in Title 17 of the Code of Federal Regulations.

[Federal Register Volume 80, Number 213 (Wednesday, November 4, 2015)]
[Proposed Rules]
[Pages 68286-68288]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-27921]


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SECURITIES AND EXCHANGE COMMISSION

17 CFR Part 300

[Release No. SIPA-173; File No. SIPC-2015-01]


Securities Investor Protection Corporation

AGENCY: Securities and Exchange Commission.

ACTION: Proposed rule.

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SUMMARY: The Securities Investor Protection Corporation (``SIPC'') 
filed proposed rules with the Securities and Exchange Commission 
(``Commission''). SIPC proposes to adopt the SIPC Series 600 Rules, 
entitled ``Rules Relating to Supplemental Report of SIPC Membership,'' 
in accordance with paragraph (e)(4) of Rule 17a-5 under the Securities 
Exchange Act of 1934 (``Exchange Act''). The Commission is publishing 
the proposed rules for public comment. Because SIPC rules have the 
force and effect as if promulgated by the

[[Page 68287]]

Commission, those rules are published in Title 17 of the Code of 
Federal Regulations.

DATES: Comments are to be received on or before November 25, 2015.

ADDRESSES: Interested persons are invited to submit written data, 
views, and arguments concerning the foregoing by any of the following 
methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/other.shtml); or
     Send an email to [email protected]. Please include 
File Number SIPC-2015-01 on the subject line.

Paper Comments

     Send paper comments to Brent J. Fields, Secretary, 
Securities and Exchange Commission, 100 F Street NE., Washington, DC 
20549-1090.

All comments should refer to File Number SIPC-2015-01. To help the 
Commission process and review your comments more efficiently, please 
use only one method. The Commission will post all comments on the 
Commission's Internet Web site (http://www.sec.gov/rules/other.shtml).
    Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for Web site viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE., Washington, 
DC 20549, on official business days between the hours of 10 a.m. and 3 
p.m. All comments received will be posted without change; the 
Commission does not edit personal identifying information from 
submissions. You should submit only information that you wish to make 
available publicly.

FOR FURTHER INFORMATION CONTACT: Michael A. Macchiaroli, Associate 
Director, at (202) 551-5525; Thomas K. McGowan, Associate Director, at 
(202) 551-5521; Randall W. Roy, Deputy Associate Director, at (202) 
551-5522; Rose Russo Wells, Senior Counsel, at (202) 551-5527; Office 
of Financial Responsibility, Division of Trading and Markets, 
Securities and Exchange Commission, 100 F Street NE., Washington, DC 
20549-7010.

SUPPLEMENTARY INFORMATION: Pursuant to Section 3(e)(2)(A) of the 
Securities Investor Protection Act of 1970 (``SIPA''),\1\ notice is 
hereby given that SIPC filed with the Commission on April 17, 2015, 
proposed rules, and subsequently filed amendments to the proposed rules 
on June 23, 2015, July 24, 2015, and September 29, 2015 as described in 
Item I below, which item has been substantially prepared by SIPC. The 
Commission is publishing this notice to solicit comments on the 
proposed rules from interested persons.
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    \1\ 15 U.S.C. 78ccc(e)(2)(A).
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I. SIPC's Statement of the Purpose of, and Statutory Basis for, the 
Proposed Rules

    In its filing with the Commission, SIPC included statements 
concerning the purpose of and basis for the proposed rules. The text of 
these statements may be examined at the places specified above.
    Pursuant to 15 U.S.C. 78ddd(c), and SIPC Bylaws, broker-dealers 
that are SIPC members pay assessments into the SIPC Fund. As long as 
the assessment is a percentage of revenue, each member must file with 
SIPC a Form SIPC-6 (General Assessment Payment Form) and a Form SIPC-7 
(General Assessment Reconciliation Form) which show the member's 
calculation of the assessment.\2\ If the broker-dealer is exempt from 
having to pay an assessment, it files a Form SIPC-3, which is a 
certification by the broker-dealer that it is excluded from SIPC 
membership under 15 U.S.C. 78ccc(a)(2)(A).
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    \2\ Form SIPC-6 reflects the assessment calculation for the 
first half of the fiscal year. Form SIPC-7 is submitted at the end 
of the member's fiscal year and provides for a deduction of the 
amount paid with the Form SIPC-6.
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    In 1972, as a result of significant discrepancies between the 
assessment information reported to SIPC and information supplied in 
reports filed with the Commission on which the calculation of the 
assessment was based, the Commission amended its broker-dealer 
reporting rule, Rule 17a-5,\3\ to require every member of a national 
securities exchange and every broker-dealer subject to the reporting 
requirements of Rule 17a-5 to file a supplemental report.\4\ The 
supplemental report must include forms showing a detailed calculation 
of the member's SIPC assessment payments or the broker-dealer's 
exclusion from membership, and be accompanied by a report of the 
independent public accountant of the broker-dealer. The independent 
public accountant must be engaged to perform certain procedures 
specified in Rule 17a-5.\5\
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    \3\ 17 CFR 240.17a-5.
    \4\ See Report of Securities Investor Protection Corporation 
Assessments, Exchange Act Release No. 9766 (Sep. 15, 1972), 37 FR 
18909 (Sep. 16, 1972).
    \5\ The items that must be included in the report and the 
procedures to be performed by the accountant are listed in 
paragraphs (e)(4)(ii)(A), (B), and (C) of Rule 17a-5.
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    The annual reports that broker-dealers file with the Commission 
under paragraph (d) of Rule 17a-5 contain detailed information 
regarding the financial condition of the broker-dealer. On July 30, 
2013, the Commission, among other things, made significant amendments 
to Rule 17a-5 (``the 2013 amendments'').\6\ Effective December 31, 
2013, the Commission's amendments to paragraph (d)(6) of Rule 17a-5 
require that a copy of the annual reports also be provided to SIPC if 
the broker-dealer is a member of SIPC.\7\ In addition, effective June 
1, 2014, the Commission's amendments to paragraph (e)(4) of Rule 17a-5 
provide that the broker-dealer must file with SIPC a report on the SIPC 
annual general assessment reconciliation or exclusion from membership 
forms that contains such information and is in such format as 
determined by SIPC by rule and approved by the Commission.\8\ The 
Commission determined that because Forms SIPC-3 and SIPC-7 are used 
solely by SIPC for purposes of levying its assessments, SIPC should 
prescribe by rule the form of the report. Under the amendments to 
paragraph (e)(4), broker-dealers are required to file the SIPC 
supplemental reports using the existing formats for the reports until 
the earlier of the Commission approving a rule adopted by SIPC or two 
years from the effective date of the amendment and if, after two years, 
no such rule has been approved, broker-dealers would no longer be 
required to file the reports.\9\ The proposed rule change would add 
SIPC Rule 600 (``Rule 600''), entitled ``Rules Relating to Supplemental 
Report of SIPC Membership.'' \10\ The purpose of the proposed rule is 
to prescribe the information that must be included in, and the format 
of, a broker-dealer's supplemental report to SIPC.
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    \6\ See Broker-Dealer Reports, Exchange Act Release No. 70073 
(Jul. 30, 2013), 78 FR 51910 (Aug. 21, 2013) (``Broker-Dealer 
Reports'').
    \7\ See Broker-Dealer Reports, 78 FR 51990.
    \8\ See Broker-Dealer Reports, 78 FR 51926-7, 51991. Under 15 
U.S.C. 78ccc(e)(2)(A), to be final, rules proposed by SIPC must be 
approved by the Commission.
    \9\ See Broker-Dealer Reports, 78 FR 51927, 51991.
    \10\ 17 CFR 300.600.
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    In a letter to SIPC dated January 9, 1989, Commission staff advised 
that it would not recommend action by the Commission if a SIPC member 
reporting $500,000 or less in total revenue did not

[[Page 68288]]

file the supplemental report.\11\ The proposed SIPC rules incorporate 
this relief by providing that a SIPC member broker-dealer is exempt 
from filing the supplemental report if the broker-dealer reports 
$500,000 or less in total revenue in its ``annual audited statement of 
income'' filed with the Commission. The proposed rules also provide 
that the independent public accountant must be independent in 
accordance with the provisions of 17 CFR 240.2-01 and that the 
accountant must be engaged to perform the enumerated agreed-upon 
procedures in accordance with standards of the Public Company 
Accounting Oversight Board. Finally, under paragraph (e) of Rule 17a-5, 
a broker-dealer's annual reports must be prepared and filed in 
accordance with certain enumerated requirements. Paragraph (e)(4) of 
Rule 17a-5 requires the broker-dealer to file the supplemental report, 
and paragraph (e)(5) of Rule 17a-5 requires that a broker-dealer's 
annual reports be filed not more than 60 calendar days after the fiscal 
year end of the broker-dealer. Accordingly, the proposed rules provide 
that a broker-dealer must file the supplemental report within 60 days 
after the end of its fiscal year. In other respects, the proposed rules 
largely mirror the text of paragraphs (e)(4)(ii)(A), (B), and (C) of 
Rule 17a-5.
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    \11\ See Letter dated January 9, 1989 from Michael A. 
Macchiaroli, SEC, to Theodore H. Focht, President and General 
Counsel, SIPC (SEC No-Action Letter 1989 WL 245631).
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II. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within thirty-five days of the date of publication of this notice 
in the Federal Register, or within such longer period (i) as the 
Commission may designate of not more than ninety days after such date 
if it finds such longer period to be appropriate and publishes its 
reasons for so finding or (ii) as to which SIPC consents, the 
Commission shall:
    (A) By order approve such proposed rule change or
    (B) Institute proceedings to determine whether such proposed rule 
change should be disapproved.
    To allow public access to SIPC's rules, SIPC rules that are 
approved by the Commission are published under Part 300 of 17 CFR 
Chapter II.

III. Statutory Authority

    Pursuant to SIPA, 15 U.S.C. 78aaa et seq., and particularly, 
section 3(e) (15 U.S.C. 78ccc(e), SIPC proposes to adopt 300.600 of 
Title 17 of the Code of Federal Regulations.

List of Subjects in 17 CFR Part 300

    Brokers, Securities.

Text of the Amendments

    In accordance with the foregoing, Title 17, Chapter II of the Code 
of Federal Regulations is proposed to be amended as follows:

PART 300--RULES OF THE SECURITIES INVESTOR PROTECTION CORPORATION

0
1. The authority citation for part 300 continues to read as follows:

    Authority: 15 U.S.C. 78ccc.

0
2. An undesignated center heading and Sec.  300.600 are added to read 
as follows:

Rules Relating to Supplemental Report on SIPC Membership


Sec.  300.600  Rules relating to supplemental report on SIPC 
membership.

    (a)(i) Who must file the supplemental report. Except as provided in 
paragraph (a)(ii) of this section, a broker or dealer must file with 
SIPC, within 60 days after the end of its fiscal year, a supplemental 
report on the status of its membership in SIPC (commonly referred to as 
the ``Independent Accountants' Report on Applying Agreed-Upon 
Procedures'') if a rule of the Securities and Exchange Commission (SEC) 
requires the broker or dealer to file audited financial statements 
annually.
    (ii) If the broker or dealer is a member of SIPC, the broker or 
dealer is not required to file the supplemental report for any year in 
which it reports $500,000 or less in total revenues in its annual 
audited statement of income filed with the SEC.
    (b) Requirements of the supplemental report. The supplemental 
report must cover the SIPC Annual General Assessment Reconciliation 
Form (Form SIPC-7) or the Certification of Exclusion From Membership 
Form (Form SIPC-3) for each year for which an SEC Rule requires audited 
financial statements to be filed. The supplemental report must include 
the following:
    (i) A copy of the form filed or a schedule of assessment payments 
showing any overpayments applied and overpayments carried forward, 
including payment dates, amounts, and name of SIPC collection agent to 
whom mailed; or
    (ii) If exclusion from membership was claimed, a statement that the 
broker or dealer qualified for exclusion from membership under the 
Securities Investor Protection Act of 1970, as amended, and the date 
the Form SIPC-3 was filed with SIPC; and
    (iii) An independent public accountant's report. The independent 
public accountant, who must be independent in accordance with the 
provisions of 17 CFR 240.210.2-01, must be engaged to perform the 
following agreed-upon procedures in accordance with standards of the 
Public Company Accounting Oversight Board (PCAOB):
    (A) Compare assessment payments made in accordance with the General 
Assessment Payment Form (Form SIPC-6) and applied to the General 
Assessment calculation on the Form SIPC-7 with respective cash 
disbursements record entries;
    (B) For all or any portion of a fiscal year, compare amounts 
reflected in the audited financial statements required by SEC Rule with 
amounts reported in the Form SIPC-7;
    (C) Compare adjustments reported in the Form SIPC-7 with supporting 
schedules and working papers supporting the adjustments;
    (D) Verify the arithmetical accuracy of the calculations reflected 
in the Form SIPC-7 and in the schedules and working papers supporting 
any adjustments; and
    (E) Compare the amount of any overpayment applied with the Form 
SIPC-7 on which it was computed; or
    (F) If exclusion from membership is claimed, compare the income or 
loss reported in the audited financial statements required by SEC Rule 
with the Form SIPC-3.
* * * * *

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(f)(3).

    Dated: October 28, 2015.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-27921 Filed 11-3-15; 8:45 am]
BILLING CODE 8011-01-P