Securities Investor Protection Corporation, 9561-9563 [2016-04022]
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Federal Register / Vol. 81, No. 37 / Thursday, February 25, 2016 / Notices
proposed annual fee. This differs with
the methodology used to calculate the
total shares outstanding for other ETPs,
including Portfolio Depository Receipts,
Index Fund Shares, Managed Fund
Shares, or other security listed under
the Rule 5700 Series where no other fee
schedule is specifically applicable listed
on The Nasdaq Global Market. The
Exchange believes that although the
proposed annual fees are higher for
NextShares than for other ETPs, for the
reasons discussed above, these fees are
equitable and not unfairly
discriminatory.
For the above reasons, Nasdaq
believes the proposed rule change is
consistent with the requirements of
Sections 6(b)(4) and 6(b)(5) of the Act.12
B. Self-Regulatory Organization’s
Statement on Burden on Competition
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
Written comments were neither
solicited nor received.
mstockstill on DSK4VPTVN1PROD with NOTICES
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing change has become
effective pursuant to Section
19(b)(3)(A)(ii) of the Act.13 At any time
within 60 days of the filing of the
proposed rule change, the Commission
summarily may temporarily suspend
such rule change if it appears to the
Commission that such action is
necessary or appropriate in the public
interest, for the protection of investors,
13 15
U.S.C. 78f(b)(4) and (5).
U.S.C. 78s(b)(3)(A)(ii).
VerDate Sep<11>2014
18:07 Feb 24, 2016
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NASDAQ–2016–025 on the subject line.
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NASDAQ–2016–025. This
file number should be included on the
subject line if email is used. 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 (https://www.sec.gov/
rules/sro.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
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
offices of the Exchange. 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. All submissions
should refer to File Number SR–
NASDAQ–2016–025, and should be
submitted on or before March 17, 2016.
14 17
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CFR § 200.30–3(a)(12).
Frm 00143
Fmt 4703
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.14
Brent J. Fields,
Secretary.
[FR Doc. 2016–03951 Filed 2–24–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. SIPA–174; File No. SIPC–2016–
01]
Electronic Comments
Paper Comments
The Exchange does not believe that
the proposed rule change will result in
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
Exchange believes that the proposed
fees for this new exchange-traded
product will promote competition to the
benefit of the markets and investors by
making NextShares available to
investors at a reasonable cost across a
broad range of actively managed
investment strategies in a structure that
offers the cost and tax efficiencies and
shareholder protections of exchangetraded funds. In order to remain
competitive with other exchanges that
also develop and market new ETPs,
Nasdaq scrutinizes its fees closely
before adopting such entry and annual
fees.
12 15
or otherwise in furtherance of the
purposes of the Act.
9561
Sfmt 4703
Securities Investor Protection
Corporation
Securities and Exchange
Commission.
ACTION: Notice of the determination of
the Board of Directors of the Securities
Investor Protection Corporation
(‘‘SIPC’’) regarding the standard
maximum cash advance amount,
beginning January 1, 2017.
AGENCY:
Pursuant to Section 3(e)(2) of
the Securities Investor Protection Act of
1970 (‘‘SIPA’’),1 notice is hereby given
that the Board of Directors of SIPC (the
‘‘Board’’) filed with the Securities and
Exchange Commission (‘‘Commission’’)
on February 17, 2016 notification that
the Board has determined, beginning
January 1, 2017, and for the five year
period immediately thereafter, that the
standard maximum cash advance
amount available to satisfy customer
claims for cash in a SIPA liquidation
proceeding will remain at $250,000. The
Commission is publishing this notice to
solicit comments on Board’s
determination from interested parties.
DATES: Comments are to be received on
or before March 11, 2016.
ADDRESSES: Interested persons are
invited to submit written data, views,
and arguments concerning the foregoing
by any of the following methods:
SUMMARY:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/other.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number
SIPC–2016–01 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–2016–01. To help the
Commission process and review your
comments more efficiently, please use
1 15
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U.S.C. 78ccc(e)(2).
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9562
Federal Register / Vol. 81, No. 37 / Thursday, February 25, 2016 / Notices
mstockstill on DSK4VPTVN1PROD with NOTICES
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/other.shtml).
Copies of the submission, all
subsequent amendments, all written
statements with respect to this Notice
that are filed with the Commission, and
all written communications relating to
the Notice 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
10:00 a.m. and 3:00 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;
Timothy C. Fox, Branch Chief, at (202)
551–5687; or 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.
I. SIPC’S Statement of the Purpose of
and Statuory Basis of the Determination
of the Board of Directors of SIPC Not To
Adjust the Standard Maximum Cash
Advance Amount for Inflation
In its filing with the Commission,
SIPC included statements concerning
the purpose of and statutory basis of the
SIPC Board’s determination. The text of
these statements may be examined at
the places specified above, and appear
in the text, below.
*
*
*
*
*
‘‘Under the Securities Investor
Protection Act, 15 U.S.C. Section 78aaa
et seq. (‘‘SIPA’’), the Board of SIPC must
decide, every five years beginning no
earlier and no later than January 1,
2011, whether to adjust for inflation the
standard maximum amount that SIPC
can advance to satisfy customer claims
for cash under SIPA. See SIPA § 78fff–
3(e)(1).2 The Board considered the
question at its Meeting on June 18, 2015,
and on July 16, 2015, after further
deliberation, the Board reached its
2 For convenience, references herein to provisions
of SIPA shall be to the United States Code, and
shall omit ‘‘15 U.S.C.’’
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18:07 Feb 24, 2016
Jkt 238001
determination. The Board’s
determination is subject to the approval
of the Commission as provided under
SIPA Section 78ccc(e)(2).3 If approved,
any adjustment to the standard cash
maximum advance would take effect on
January 1, 2017. See SIPA 78fff–3(e)(4).
Under SIPA Section 78fff–3(e)(3)(A), the
SEC is required to publish in the
Federal Register notice of the maximum
amount.
Per our notice to the Commission by
letter dated August 18, 2015, this will
re-affirm to the Commission that
effective January 1, 2017, and for the
five years immediately thereafter, the
Board has determined that the
maximum amount of the advance to
satisfy a claim for cash will remain at
the current level of $250,000 per
customer.
Consideration of the Statutory Criteria
In deciding whether to adjust the
maximum cash advance amount, the
Board is to consider the following
criteria under SIPA Section 78fff–
3(e)(5):
(A) The overall state of the fund and
the economic conditions affecting
members of SIPC;
(B) the potential problems affecting
members of SIPC; and
(C) such other factors as the Board of
Directors of SIPC may determine
appropriate.
In furtherance of the Board’s
consideration of the above factors, the
SIPC staff solicited and received
comments and/or data from the staffs of
FINRA, SIFMA, the SEC, and the FDIC.
The data related to member firms’
aggregate leverage, liquidity, and default
risk, and to aggregate customer free
credit balances. The information was
presented to the Board by the SIPC staff,
as part of an analysis by the staff of the
state of the SIPC Fund and its projected
growth. The staff’s analysis focused on
SIPC’s historical experience and
examined (1) SIPC advances in past and
present liquidation proceedings; (2)
amounts generated from assessments on
member broker-dealers; and (3)
projected returns on SIPC investments.
The analysis also considered a 2013
study by consultants engaged by SIPC to
examine the potential impact on the
SIPC Fund of an increase in the cash
advance limit to $500,000. The
conclusions reached by the staff in their
analysis were corroborated by the data
received from the aforementioned
authorities and by the 2013 consultants’
study, namely, that the SIPC Fund is
positioned to remain on a steady growth
3 SIPA Section 78ccc(e)(2) establishes procedures
governing proposed changes to SIPC’s rules.
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path for the foreseeable future, barring
any unforeseen catastrophic event.
The Board also reviewed the number
of claims for cash exceeding the limit of
protection in past and present
liquidation proceedings. This data
suggests that an inflation adjustment
may not be necessary to further SIPC’s
purposes, but that if an inflation
adjustment is made, its impact on the
SIPC Fund may not be significant.
Of the more than 625,000 allowed
claims in completed or substantially
completed liquidation proceedings as of
December 31, 2014, the unsatisfied
portion of cash claims amounted to $25
million. More than half of that amount
related to only three claims that were
submitted when the limit of protection
for cash claims was less than the current
$250,000. In the six SIPA proceedings
initiated since 2010, SIPC has advanced,
net, funds for only one cash claim in
excess of $250,000.
The Board also noted that customer
credit balances at brokerage firms had
decreased at the end of 2013 and 2014,
and that due to broker-dealers’ offer of
overnight ‘‘sweep’’ programs, customer
free credit balances were being moved
to bank accounts, with the protection of
such accounts thereby transferred to the
FDIC.
With regard to FDIC deposit
insurance, increases to the limit of
protection for cash claims under SIPA
historically have been in lockstep with
increases in FDIC deposit insurance
under the Federal Deposit Insurance
Act, 12 U.S.C. 1821 et seq. (‘‘FDIA’’).4 In
2008, and again, in 2010, parity with
deposit insurance was the primary
reason for SIPC’s request to Congress to
increase the SIPA limit of protection for
cash claims. FDIC coverage is currently
$250,000. While the Federal Deposit
Insurance Act includes similar language
to SIPA related to adjusting for inflation,
the adjustment is based upon a $100,000
coverage level, and the FDIC has not
4 The below compares the limits of protection for
cash under SIPA and the FDIA:
SIPA: $20,000 (Pub. L. 91–598, § 6(f)(1)(A), 84
Stat. 1636, 1651 (1970))
FDIA: $20,000 (Pub. L. 91–151, § 7, 83 Stat. 371,
375 (1969))
SIPA: $40,000 (Pub. L. 95–283, § 9, 92 Stat. 249,
265 (1978))
FDIA: $40,000 (Pub. L. 93–495, § 102(a), 88 Stat.
1500, 1502 (1974))
SIPA: $100,000 (Pub. L. 96–433, § 1, 94 Stat. 1855
(1980))
FDIA: $100,000 (Pub. L. 96–221, § 308, 94 Stat.
132, 147 (1980))
SIPA: $250,000 (Pub. L. 111–203, § 929H, 124
Stat. 1376, 1865 (2010))
FDIA: $250,000 ((temporary until 12/31/2009)
Public Law No. 110–343, § 136, 122 Stat. 3765, 3799
(2008); (permanent) Public Law 111–203, § 335, 124
Stat. 1376, 1540 (2010)).
E:\FR\FM\25FEN1.SGM
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Federal Register / Vol. 81, No. 37 / Thursday, February 25, 2016 / Notices
increased coverage under the inflation
provision.5
The Board expressed concern that a
unilateral increase to the SIPA limit
could have unintended consequences,
particularly in light of the issue not
having been widely studied or
discussed. For example, increasing the
SIPA limit above the deposit insurance
limit could incentivize the movement of
funds to brokerage accounts as a savings
vehicle, an outcome not consistent with
the intent of SIPA.
Finally, the Board considered the
amount by which the limit of protection
for allowed cash claims would change if
adjusted for inflation. Under SIPA
Section 78fff–3(e)(1)(B), if the Board
determines that an adjustment is
appropriate, then $250,000 is to be
multiplied by
[t]he ratio of the annual value of the Personal
Consumption Expenditures Chain-Type Price
Index (or any successor index thereto),
published by the Department of Commerce,
for the calendar year preceding the year in
which such determination is made, to the
published annual value of such index for the
calendar year preceding the year in which
this subsection was enacted.
mstockstill on DSK4VPTVN1PROD with NOTICES
15 U.S.C. 78fff–3(e)(1)(B).6 Although
the amount of the inflation adjustment
need only be considered if the Board
determines to adjust the $250,000 for
inflation, see SIPA Section 78fff–3(e)(1),
that determination would be
meaningless if the adjustment resulted
in no change. This was the case on
January 1, 2011, when application of the
formula would have increased the limit
to the adjusted amount of $254,449.52.7
However, under SIPA Section 78fff–
3(e)(2), because the adjusted amount
must be rounded down to the nearest
$10,000 if it is not a multiple of $10,000,
the limit would have remained at
$250,000. Even if it had determined to
5 12 U.S.C. 1821(a)(1)(F)(i)(I). See Deposit
Insurance Regulations; Permanent Increase in
Standard Coverage Amount; Advertisement of
Membership; International Banking; Foreign Banks,
75 FR 49363 n.6 (Aug. 13, 2010).
6 Under SIPA Sections 78fff–3(d) and 78fff–
3(e)(1), the Board was required to adjust the
maximum cash advance, if at all, after December 31,
2010, but no later than January 1, 2011, and then,
could do so every 5 years thereafter. Thus, the fiveyear period after January 1, 2011, would occur in
2016. Under SIPA Section 78fff–3(e)(4), any
adjustment to the amount of the cash advance
would take effect on January 1 of the year
immediately after the year in which the adjustment
was made.
7 The calculation would be as follows: $250,000
multiplied by 1.017798—the ratio of 111.112 (the
annual value of the Price Index published by the
Department of Commerce for 2010, the calendar
year preceding the year in which the determination
was to be made), to 109.169 (the published annual
value of such index for 2009, the calendar year
preceding the year in which the subsection was
enacted)—equals $254,449.52.
VerDate Sep<11>2014
18:07 Feb 24, 2016
Jkt 238001
do so, the Board could not have
adjusted the amount.
Conclusion
A present-day application of the
formula would increase the limit by
$20,000.8 The Board weighed the
relevant factors against a potential
adjustment of $20,000. The Board
concluded that, on balance, in light of
the unprecedented break with the FDIC
limit that would result, with possibly
harmful consequences, and the absence
of evidence that an appreciable number
of investors would be benefitted, an
adjustment to the limit of protection for
cash claims was not appropriate.
Accordingly, the Board determined that
the standard maximum cash advance
amount should remain at $250,000 per
customer.’’
*
*
*
*
*
II. Date of Effectiveness and Timing for
Commission Action
Within thirty-five days of the date of
publication of this notice of the SIPC
Board’s determination 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
determination or
(B) Institute proceedings to determine
whether such determination should be
disapproved.
III. Notice of the Determination of the
SIPC Board Not To Adjust the Standard
Maximum Cash Advance Amount for
Inflation
Effective January 1, 2016, the Board of
Directors of the Securities Investor
Protection Corporation determined that
an inflation adjustment to the standard
8 The $20,000 is arrived at as follows: $250,000
multiplied by 1.08763 which is the ratio of 108.763
(the annual value of the Price Index published by
the Department of Commerce for calendar year
2014), to 100.000 (the published annual value of the
index for 2009, the calendar year preceding the year
in which subsection 78fff–3(e)(1)(B) was enacted)
which equals $271,907.50. Rounded down to
$270,000, the adjusted limit reflects an increase of
$20,000 from the $250,000 limit. Because the
determination is to be made for the calendar year
2016, the annual value of the Price Index to be used
is for the ‘‘calendar year preceding the year in
which such determination is made,’’ namely, the
year 2015. However, the 2015 annual value was not
available until after the end of the year. This
calculation therefore was conditioned on the
assumption of no unexpected dramatic rise in
inflation in calendar year 2015. See https://
www.bea.gov/iTable/iTable.cfm?ReqID
=9&step=1#reqid=9&step=3&isuri
=1&904=2009&903=64&906=a&905
=2015&910=x&911=0.
PO 00000
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9563
maximum cash advance amount, as
defined in section 9(d) of the Securities
Investor Protection Act, 15 U.S.C. 78fff–
3(d), would not be appropriate for the
five-year period beginning on January 1,
2017. Accordingly, the Board
determined that the standard maximum
cash advance amount should remain at
$250,000 per customer, effective January
1, 2017 and for the five years
immediately thereafter.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.9
Dated: February 22, 2016.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–04022 Filed 2–24–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–77198; File No. SR–NYSE–
2016–12]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change Amending the
NYSE Listed Company Manual To
Adopt a Requirement That Listed
Foreign Private Issuers Must, at a
Minimum, Submit a Form 6–K to the
Securities and Exchange Commission
Containing Semi-Annual Unaudited
Financial Information
February 19, 2016.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934
(‘‘Act’’),2 and Rule 19b–4 thereunder,3
notice is hereby given that on February
5, 2016, New York Stock Exchange LLC
(‘‘NYSE’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend the
NYSE Listed Company Manual (the
‘‘Manual’’) to adopt a requirement that
listed foreign private issuers must, at a
minimum, submit a Form 6–K to the
Securities and Exchange Commission
(‘‘SEC’’) containing semi-annual
9 17
CFR 200.30–3(f)(3).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
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]]>Agencies
[Federal Register Volume 81, Number 37 (Thursday, February 25, 2016)]
[Notices]
[Pages 9561-9563]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-04022]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. SIPA-174; File No. SIPC-2016-01]
Securities Investor Protection Corporation
AGENCY: Securities and Exchange Commission.
ACTION: Notice of the determination of the Board of Directors of the
Securities Investor Protection Corporation (``SIPC'') regarding the
standard maximum cash advance amount, beginning January 1, 2017.
-----------------------------------------------------------------------
SUMMARY: Pursuant to Section 3(e)(2) of the Securities Investor
Protection Act of 1970 (``SIPA''),\1\ notice is hereby given that the
Board of Directors of SIPC (the ``Board'') filed with the Securities
and Exchange Commission (``Commission'') on February 17, 2016
notification that the Board has determined, beginning January 1, 2017,
and for the five year period immediately thereafter, that the standard
maximum cash advance amount available to satisfy customer claims for
cash in a SIPA liquidation proceeding will remain at $250,000. The
Commission is publishing this notice to solicit comments on Board's
determination from interested parties.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78ccc(e)(2).
---------------------------------------------------------------------------
DATES: Comments are to be received on or before March 11, 2016.
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 (https://www.sec.gov/rules/other.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SIPC-2016-01 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-2016-01. To help the
Commission process and review your comments more efficiently, please
use
[[Page 9562]]
only one method. The Commission will post all comments on the
Commission's Internet Web site (https://www.sec.gov/rules/other.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to this Notice that are filed with the
Commission, and all written communications relating to the Notice
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 10:00 a.m. and
3:00 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; Timothy C. Fox, Branch Chief, at (202) 551-5687; or 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.
I. SIPC'S Statement of the Purpose of and Statuory Basis of the
Determination of the Board of Directors of SIPC Not To Adjust the
Standard Maximum Cash Advance Amount for Inflation
In its filing with the Commission, SIPC included statements
concerning the purpose of and statutory basis of the SIPC Board's
determination. The text of these statements may be examined at the
places specified above, and appear in the text, below.
* * * * *
``Under the Securities Investor Protection Act, 15 U.S.C. Section
78aaa et seq. (``SIPA''), the Board of SIPC must decide, every five
years beginning no earlier and no later than January 1, 2011, whether
to adjust for inflation the standard maximum amount that SIPC can
advance to satisfy customer claims for cash under SIPA. See SIPA Sec.
78fff-3(e)(1).\2\ The Board considered the question at its Meeting on
June 18, 2015, and on July 16, 2015, after further deliberation, the
Board reached its determination. The Board's determination is subject
to the approval of the Commission as provided under SIPA Section
78ccc(e)(2).\3\ If approved, any adjustment to the standard cash
maximum advance would take effect on January 1, 2017. See SIPA 78fff-
3(e)(4). Under SIPA Section 78fff-3(e)(3)(A), the SEC is required to
publish in the Federal Register notice of the maximum amount.
---------------------------------------------------------------------------
\2\ For convenience, references herein to provisions of SIPA
shall be to the United States Code, and shall omit ``15 U.S.C.''
\3\ SIPA Section 78ccc(e)(2) establishes procedures governing
proposed changes to SIPC's rules.
---------------------------------------------------------------------------
Per our notice to the Commission by letter dated August 18, 2015,
this will re-affirm to the Commission that effective January 1, 2017,
and for the five years immediately thereafter, the Board has determined
that the maximum amount of the advance to satisfy a claim for cash will
remain at the current level of $250,000 per customer.
Consideration of the Statutory Criteria
In deciding whether to adjust the maximum cash advance amount, the
Board is to consider the following criteria under SIPA Section 78fff-
3(e)(5):
(A) The overall state of the fund and the economic conditions
affecting members of SIPC;
(B) the potential problems affecting members of SIPC; and
(C) such other factors as the Board of Directors of SIPC may
determine appropriate.
In furtherance of the Board's consideration of the above factors,
the SIPC staff solicited and received comments and/or data from the
staffs of FINRA, SIFMA, the SEC, and the FDIC. The data related to
member firms' aggregate leverage, liquidity, and default risk, and to
aggregate customer free credit balances. The information was presented
to the Board by the SIPC staff, as part of an analysis by the staff of
the state of the SIPC Fund and its projected growth. The staff's
analysis focused on SIPC's historical experience and examined (1) SIPC
advances in past and present liquidation proceedings; (2) amounts
generated from assessments on member broker-dealers; and (3) projected
returns on SIPC investments. The analysis also considered a 2013 study
by consultants engaged by SIPC to examine the potential impact on the
SIPC Fund of an increase in the cash advance limit to $500,000. The
conclusions reached by the staff in their analysis were corroborated by
the data received from the aforementioned authorities and by the 2013
consultants' study, namely, that the SIPC Fund is positioned to remain
on a steady growth path for the foreseeable future, barring any
unforeseen catastrophic event.
The Board also reviewed the number of claims for cash exceeding the
limit of protection in past and present liquidation proceedings. This
data suggests that an inflation adjustment may not be necessary to
further SIPC's purposes, but that if an inflation adjustment is made,
its impact on the SIPC Fund may not be significant.
Of the more than 625,000 allowed claims in completed or
substantially completed liquidation proceedings as of December 31,
2014, the unsatisfied portion of cash claims amounted to $25 million.
More than half of that amount related to only three claims that were
submitted when the limit of protection for cash claims was less than
the current $250,000. In the six SIPA proceedings initiated since 2010,
SIPC has advanced, net, funds for only one cash claim in excess of
$250,000.
The Board also noted that customer credit balances at brokerage
firms had decreased at the end of 2013 and 2014, and that due to
broker-dealers' offer of overnight ``sweep'' programs, customer free
credit balances were being moved to bank accounts, with the protection
of such accounts thereby transferred to the FDIC.
With regard to FDIC deposit insurance, increases to the limit of
protection for cash claims under SIPA historically have been in
lockstep with increases in FDIC deposit insurance under the Federal
Deposit Insurance Act, 12 U.S.C. 1821 et seq. (``FDIA'').\4\ In 2008,
and again, in 2010, parity with deposit insurance was the primary
reason for SIPC's request to Congress to increase the SIPA limit of
protection for cash claims. FDIC coverage is currently $250,000. While
the Federal Deposit Insurance Act includes similar language to SIPA
related to adjusting for inflation, the adjustment is based upon a
$100,000 coverage level, and the FDIC has not
[[Page 9563]]
increased coverage under the inflation provision.\5\
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\4\ The below compares the limits of protection for cash under
SIPA and the FDIA:
SIPA: $20,000 (Pub. L. 91-598, Sec. 6(f)(1)(A), 84 Stat. 1636,
1651 (1970))
FDIA: $20,000 (Pub. L. 91-151, Sec. 7, 83 Stat. 371, 375
(1969))
SIPA: $40,000 (Pub. L. 95-283, Sec. 9, 92 Stat. 249, 265
(1978))
FDIA: $40,000 (Pub. L. 93-495, Sec. 102(a), 88 Stat. 1500, 1502
(1974))
SIPA: $100,000 (Pub. L. 96-433, Sec. 1, 94 Stat. 1855 (1980))
FDIA: $100,000 (Pub. L. 96-221, Sec. 308, 94 Stat. 132, 147
(1980))
SIPA: $250,000 (Pub. L. 111-203, Sec. 929H, 124 Stat. 1376,
1865 (2010))
FDIA: $250,000 ((temporary until 12/31/2009) Public Law No. 110-
343, Sec. 136, 122 Stat. 3765, 3799 (2008); (permanent) Public Law
111-203, Sec. 335, 124 Stat. 1376, 1540 (2010)).
\5\ 12 U.S.C. 1821(a)(1)(F)(i)(I). See Deposit Insurance
Regulations; Permanent Increase in Standard Coverage Amount;
Advertisement of Membership; International Banking; Foreign Banks,
75 FR 49363 n.6 (Aug. 13, 2010).
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The Board expressed concern that a unilateral increase to the SIPA
limit could have unintended consequences, particularly in light of the
issue not having been widely studied or discussed. For example,
increasing the SIPA limit above the deposit insurance limit could
incentivize the movement of funds to brokerage accounts as a savings
vehicle, an outcome not consistent with the intent of SIPA.
Finally, the Board considered the amount by which the limit of
protection for allowed cash claims would change if adjusted for
inflation. Under SIPA Section 78fff-3(e)(1)(B), if the Board determines
that an adjustment is appropriate, then $250,000 is to be multiplied by
[t]he ratio of the annual value of the Personal Consumption
Expenditures Chain-Type Price Index (or any successor index
thereto), published by the Department of Commerce, for the calendar
year preceding the year in which such determination is made, to the
published annual value of such index for the calendar year preceding
the year in which this subsection was enacted.
15 U.S.C. 78fff-3(e)(1)(B).\6\ Although the amount of the inflation
adjustment need only be considered if the Board determines to adjust
the $250,000 for inflation, see SIPA Section 78fff-3(e)(1), that
determination would be meaningless if the adjustment resulted in no
change. This was the case on January 1, 2011, when application of the
formula would have increased the limit to the adjusted amount of
$254,449.52.\7\ However, under SIPA Section 78fff-3(e)(2), because the
adjusted amount must be rounded down to the nearest $10,000 if it is
not a multiple of $10,000, the limit would have remained at $250,000.
Even if it had determined to do so, the Board could not have adjusted
the amount.
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\6\ Under SIPA Sections 78fff-3(d) and 78fff-3(e)(1), the Board
was required to adjust the maximum cash advance, if at all, after
December 31, 2010, but no later than January 1, 2011, and then,
could do so every 5 years thereafter. Thus, the five-year period
after January 1, 2011, would occur in 2016. Under SIPA Section
78fff-3(e)(4), any adjustment to the amount of the cash advance
would take effect on January 1 of the year immediately after the
year in which the adjustment was made.
\7\ The calculation would be as follows: $250,000 multiplied by
1.017798--the ratio of 111.112 (the annual value of the Price Index
published by the Department of Commerce for 2010, the calendar year
preceding the year in which the determination was to be made), to
109.169 (the published annual value of such index for 2009, the
calendar year preceding the year in which the subsection was
enacted)--equals $254,449.52.
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Conclusion
A present-day application of the formula would increase the limit
by $20,000.\8\ The Board weighed the relevant factors against a
potential adjustment of $20,000. The Board concluded that, on balance,
in light of the unprecedented break with the FDIC limit that would
result, with possibly harmful consequences, and the absence of evidence
that an appreciable number of investors would be benefitted, an
adjustment to the limit of protection for cash claims was not
appropriate. Accordingly, the Board determined that the standard
maximum cash advance amount should remain at $250,000 per customer.''
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\8\ The $20,000 is arrived at as follows: $250,000 multiplied by
1.08763 which is the ratio of 108.763 (the annual value of the Price
Index published by the Department of Commerce for calendar year
2014), to 100.000 (the published annual value of the index for 2009,
the calendar year preceding the year in which subsection 78fff-
3(e)(1)(B) was enacted) which equals $271,907.50. Rounded down to
$270,000, the adjusted limit reflects an increase of $20,000 from
the $250,000 limit. Because the determination is to be made for the
calendar year 2016, the annual value of the Price Index to be used
is for the ``calendar year preceding the year in which such
determination is made,'' namely, the year 2015. However, the 2015
annual value was not available until after the end of the year. This
calculation therefore was conditioned on the assumption of no
unexpected dramatic rise in inflation in calendar year 2015. See
https://www.bea.gov/iTable/iTable.cfm?ReqID=9&step=1#reqid=9&step=3&isuri=1&904=2009&903=64&906=a&905=2015&910=x&911=0.
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* * * * *
II. Date of Effectiveness and Timing for Commission Action
Within thirty-five days of the date of publication of this notice
of the SIPC Board's determination 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 determination or
(B) Institute proceedings to determine whether such determination
should be disapproved.
III. Notice of the Determination of the SIPC Board Not To Adjust the
Standard Maximum Cash Advance Amount for Inflation
Effective January 1, 2016, the Board of Directors of the Securities
Investor Protection Corporation determined that an inflation adjustment
to the standard maximum cash advance amount, as defined in section 9(d)
of the Securities Investor Protection Act, 15 U.S.C. 78fff-3(d), would
not be appropriate for the five-year period beginning on January 1,
2017. Accordingly, the Board determined that the standard maximum cash
advance amount should remain at $250,000 per customer, effective
January 1, 2017 and for the five years immediately thereafter.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\9\
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\9\ 17 CFR 200.30-3(f)(3).
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Dated: February 22, 2016.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-04022 Filed 2-24-16; 8:45 am]
BILLING CODE 8011-01-P
