The Securities Investor Protection Corporation proposed a bylaw change relating to SIPC fund assessments on SIPC members - pursuant to Section 3(e)(1) of the Securities Investor Protection Act of 1970 (“SIPA”). 

Section 4(c)(2) of SIPA requires SIPC to impose assessments upon its member broker-dealers deemed necessary and appropriate to establish and maintain a broker-dealer liquidation fund administered by SIPC (the “SIPC Fund”) and to repay any borrowings by SIPC used to liquidate a broker-dealer.  The amount of the annual assessment is prescribed by SIPA and the SIPC bylaws.

e.g., if SIPC has an outstanding loan from the Commission, SIPA provides that SIPC assess its member broker-dealers ½ of 1% of the gross revenues from their securities business.  If the SIPC Fund aggregates or is likely to aggregate less than $2.5 billion for 6 months or more, SIPC must raise each member’s assessment to ¼ of 1% of net operating revenues.  When the SIPC Fund reaches its targeted level, SIPC collects a minimum assessment as provided for in SIPA. The current target level for the SIPC Fund is $2.5 billion.

As required under the Dodd-Frank Reform Act, SIPA was amended changing the minimum assessment from an amount not to exceed $150 to an amount not to exceed 0.02% of the gross revenues from the securities business of the SIPC member.  Other computations are factored in.   SIPC's bylaw changes also refer to “net operating revenues” instead of “gross revenues.”  Basing the assessment on net operating revenues as opposed to gross revenues will decrease the amount of the assessment in most situations.  However, under SIPA, SIPC may adjust the basis for collecting assessments and the amount of assessments as long as the assessments are within the parameters prescribed in SIPA.  Using a minimum assessment of 0.02% of net operating revenues would not cause the amount of the assessment to exceed the maximum amount permitted for the minimum assessment under Section 4(d)(1)(C) of SIPA, as amended by the Dodd-Frank Act.

For complete details, click onto:   [SIPA Rel. 169, SIPC File 10-01, 11/30]