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Start Preamble
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 Start Printed Page 53891on 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 specified proxy solicitations and statements in corporate control transactions.[3] These provisions require the Commission to make annual adjustments to the applicable fee rates.
II. Fiscal Year 2021 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]
Section 6(b)(2) sets forth the method for determining the annual adjustment to the fee rate under Section 6(b) for fiscal year 2021. 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 2021], is reasonably likely to produce aggregate fee collections under [Section 6(b)] that are equal to the target fee collection amount for [fiscal year 2021].” That is, the adjusted rate is determined by dividing the “target fee collection amount” for fiscal year 2021 by the “baseline estimate of the aggregate maximum offering prices” for fiscal year 2021.
III. Target Fee Collection Amount for FY 2021
The statutory “target fee collection amount” for fiscal year 2021 and “each fiscal year thereafter” is “an amount that is equal to the target fee collection amount for the prior fiscal year, adjusted by the rate of inflation.” The target fee collection amount for fiscal year 2020 was $705,000,000. To adjust the fiscal year 2020 target fee collection amount by the rate of inflation to determine the fiscal year 2021 target fee collect amount, the Commission has determined that it will use an approach similar to one that it uses to annually adjust civil monetary penalties by the rate of inflation.[6] Under this approach, the Commission will use the Consumer Price Index for All Urban Consumers (“CPI-U”), not seasonally adjusted, rounded to five decimal places, in calculating the target fee collection amount, which is then rounded to the nearest whole dollar. The calculation for the fiscal year 2021 target fee collection amount is described in more detail below.
The most recent CPI-U index value, not seasonally adjusted, available for use by the Commission is for June 2020. This value is 257.797.[7] The CPI-U index value, not seasonally adjusted, for June 2019 is 256.143.[8] Dividing the June 2020 value by the June 2019 value and rounding to five decimal places yields a multiplier value of 1.00646. Multiplying the fiscal year 2020 target fee collection amount of $705,000,000 by the multiplier value of 1.00646 and rounding to the nearest whole dollar yields a fiscal year 2021 target fee collection amount of $709,554,300.
Section 6(b)(6)(B) defines the “baseline estimate of the aggregate maximum offering prices” for fiscal year 2021 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 2021] 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 2021, the Commission is using the methodology it has used in prior fiscal years and that was developed in consultation with the Congressional Budget Office and the Office of Management and Budget (“OMB”).[9] Using this methodology, the Commission determines the “baseline estimate of the aggregate maximum offering price” for fiscal year 2021 to be $6,506,143,522,561. Based on this estimate and the fiscal year 2021 target fee collection amount, the Commission calculates the fee rate for fiscal 2021 to be $109.10 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. IV. Effective Dates of the Annual Adjustments
The fiscal year 2021 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, 2020.[10]
V. Conclusion
Accordingly, pursuant to Section 6(b) of the Securities Act and Sections 13(e) and 14(g) of the Exchange Act,[11]
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 $109.10 per million effective on October 1, 2020.
Start SignatureBy the Commission.
Vanessa A. Countryman,
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 2021, the Commission has estimated the aggregate maximum offering prices by projecting forward the trend established in the previous decade. More specifically, an auto-regressive integrated moving average (“ARIMA”) model was used to forecast the value of the aggregate maximum offering prices for months subsequent to July 2020, Start Printed Page 53892the 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 2021
First, calculate the aggregate maximum offering prices (AMOP) for each month in the sample (July 2010-July 2020). 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] [ARIMA] 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 2010 to July 2020.
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 Δt = log (AAMOPt)-log(AAMOPt-1). This approximates the percentage change.
5. Estimate the first order moving average model Δt = α + βe t−1 + e t, where e t 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 Δ t. The forecast error is expressed as e t = Δ t−α−βe t−1. The model can be estimated using standard commercially available software. Using least squares, the estimated parameter values are α = 0.0070920641 and β = 0.8803315102.
6. For the month of August 2020 forecast Δ t=8/2020 = α + βe t=7/2020. For all subsequent months, forecast Δ t = α.
7. Calculate forecasts of log(AAMOP). For example, the forecast of log(AAMOP) for October 2020 is given by FLAAMOP t=10/2020 = log(AAMOP t=7/2020) + Δ t=8/2020 + Δ t=9/2020 + Δ t=10/2020.
8. Under the assumption that e t is normally distributed, the n-step ahead forecast of AAMOP is given by exp(FLAAMOP t + σ n 2/2), where σ n denotes the standard error of the n-step ahead forecast.
9. For October 2020, this gives a forecast AAMOP of $24.705 billion (Column I), and a forecast AMOP of $543.503 billion (Column J).
10. Iterate this process through September 2021 to obtain a baseline estimate of the aggregate maximum offering prices for fiscal year 2021 of $6,506,143,522,561.
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 10/01/20 and 9/30/21 to be $6,506,143,522,561.
2. The rate necessary to collect the target $709,554,300 in fee revenues set by Congress is then calculated as: $709,554,300 ÷ $6,506,143,522,561 = 0.00010906.
3. Round the result to the seventh decimal point, yielding a rate of 0.0001091 (or $109.10 per million).
Table A—Estimation of Baseline of Aggregate Maximum Offering Prices
Fee rate calculation a. Baseline estimate of the aggregate maximum offering prices, 10/01/20 to 09/30/21 ($Millions) 6,506,144 b. Implied fee rate ($709,554,300 / a) $109.10 Start Printed Page 53895 Start Printed Page 53896 End PreambleMonth Number of trading days in month Aggregate maximum offering prices, in $millions Average daily aggregate max. offering prices (AAMOP) in $millions Log(AAMOP) Log (change in AAMOP) forecast log(AAMOP) Standard error Forecast AAMOP, in $millions Forecast aggregate maximum offering prices, in $millions (A) (B) (C) (D) (E) (F) (G) (H) (I) (J) Jul-10 21 171,191 8,152 22.822 Aug-10 22 240,793 10,945 23.116 0.295 Sep-10 21 260,783 12,418 23.242 0.126 Oct-10 21 214,988 10,238 23.049 -0.193 Nov-10 21 340,112 16,196 23.508 0.459 Dec-10 22 297,992 13,545 23.329 −0.179 Jan-11 20 233,668 11,683 23.181 −0.148 Feb-11 19 252,785 13,304 23.311 0.130 Mar-11 23 595,198 25,878 23.977 0.665 Apr-11 20 236,355 11,818 23.193 −0.784 May-11 21 319,053 15,193 23.444 0.251 Jun-11 22 359,727 16,351 23.518 0.073 Jul-11 20 215,391 10,770 23.100 −0.418 Aug-11 23 179,870 7,820 22.780 −0.320 Sep-11 21 168,005 8,000 22.803 0.023 Oct-11 21 181,452 8,641 22.880 0.077 Nov-11 21 256,418 12,210 23.226 0.346 Dec-11 21 237,652 11,317 23.150 −0.076 Jan-12 20 276,965 13,848 23.351 0.202 Feb-12 20 228,419 11,421 23.159 −0.193 Mar-12 22 430,806 19,582 23.698 0.539 Apr-12 20 173,626 8,681 22.884 −0.813 May-12 22 414,122 18,824 23.658 0.774 Jun-12 21 272,218 12,963 23.285 −0.373 Jul-12 21 170,462 8,117 22.817 −0.468 Aug-12 23 295,472 12,847 23.276 0.459 Sep-12 19 331,295 17,437 23.582 0.305 Oct-12 21 137,562 6,551 22.603 −0.979 Nov-12 21 221,521 10,549 23.079 0.476 Start Printed Page 53893 Dec-12 20 321,602 16,080 23.501 0.422 Jan-13 21 368,488 17,547 23.588 0.087 Feb-13 19 252,148 13,271 23.309 −0.279 Mar-13 20 533,440 26,672 24.007 0.698 Apr-13 22 235,779 10,717 23.095 −0.912 May-13 22 382,950 17,407 23.580 0.485 Jun-13 20 480,624 24,031 23.903 0.322 Jul-13 22 263,869 11,994 23.208 −0.695 Aug-13 22 253,305 11,514 23.167 −0.041 Sep-13 20 267,923 13,396 23.318 0.151 Oct-13 23 293,847 12,776 23.271 −0.047 Nov-13 20 326,257 16,313 23.515 0.244 Dec-13 21 358,169 17,056 23.560 0.045 Jan-14 21 369,067 17,575 23.590 0.030 Feb-14 19 298,376 15,704 23.477 −0.113 Mar-14 21 564,840 26,897 24.015 0.538 Apr-14 21 263,401 12,543 23.252 −0.763 May-14 21 403,700 19,224 23.679 0.427 Jun-14 21 423,075 20,146 23.726 0.047 Jul-14 22 373,811 16,991 23.556 −0.170 Aug-14 21 405,017 19,287 23.683 0.127 Sep-14 21 409,349 19,493 23.693 0.011 Oct-14 23 338,832 14,732 23.413 −0.280 Nov-14 19 386,898 20,363 23.737 0.324 Dec-14 22 370,760 16,853 23.548 −0.189 Jan-15 20 394,127 19,706 23.704 0.156 Feb-15 19 466,138 24,534 23.923 0.219 Mar-15 22 753,747 34,261 24.257 0.334 Apr-15 21 356,560 16,979 23.555 −0.702 May-15 20 478,591 23,930 23.898 0.343 Jun-15 22 446,102 20,277 23.733 −0.166 Jul-15 22 402,062 18,276 23.629 −0.104 Aug-15 21 334,746 15,940 23.492 −0.137 Sep-15 21 289,872 13,803 23.348 −0.144 Oct-15 22 300,276 13,649 23.337 −0.011 Nov-15 20 409,690 20,485 23.743 0.406 Dec-15 22 308,569 14,026 23.364 −0.379 Jan-16 19 457,411 24,074 23.904 0.540 Feb-16 20 554,343 27,717 24.045 0.141 Mar-16 22 900,301 40,923 24.435 0.390 Apr-16 21 250,716 11,939 23.203 −1.232 May-16 21 409,992 19,523 23.695 0.492 Jun-16 22 321,219 14,601 23.404 −0.291 Jul-16 20 289,671 14,484 23.396 −0.008 Aug-16 23 352,068 15,307 23.452 0.055 Sep-16 21 326,116 15,529 23.466 0.014 Oct-16 21 266,115 12,672 23.263 −0.203 Nov-16 21 443,034 21,097 23.772 0.510 Dec-16 21 310,614 14,791 23.417 −0.355 Jan-17 20 503,030 25,152 23.948 0.531 Feb-17 19 255,815 13,464 23.323 −0.625 Mar-17 23 723,870 31,473 24.172 0.849 Apr-17 19 255,275 13,436 23.321 −0.851 May-17 22 569,965 25,908 23.978 0.657 Jun-17 22 445,081 20,231 23.730 −0.247 Jul-17 20 291,167 14,558 23.401 −0.329 Aug-17 23 263,981 11,477 23.164 −0.238 Sep-17 20 372,705 18,635 23.648 0.485 Oct-17 22 173,749 7,898 22.790 −0.858 Nov-17 21 377,262 17,965 23.612 0.822 Dec-17 20 281,126 14,056 23.366 −0.245 Jan-18 21 593,025 28,239 24.064 0.698 Feb-18 19 353,182 18,589 23.646 −0.418 Mar-18 21 685,784 32,656 24.209 0.563 Apr-18 21 367,569 17,503 23.586 −0.624 May-18 22 543,840 24,720 23.931 0.345 Jun-18 21 477,967 22,760 23.848 −0.083 Jul-18 21 327,710 15,605 23.471 −0.377 Start Printed Page 53894 Aug-18 23 347,239 15,097 23.438 −0.033 Sep-18 19 259,874 13,678 23.339 −0.099 Oct-18 23 300,814 13,079 23.294 −0.045 Nov-18 21 447,767 21,322 23.783 0.489 Dec-18 19 276,130 14,533 23.400 −0.383 Jan-19 21 495,624 23,601 23.885 0.485 Feb-19 19 372,166 19,588 23.698 −0.186 Mar-19 21 604,813 28,801 24.084 0.385 Apr-19 21 267,737 12,749 23.269 −0.815 May-19 22 476,892 21,677 23.800 0.531 Jun-19 20 399,178 19,959 23.717 −0.083 Jul-19 22 359,438 16,338 23.517 −0.200 Aug-19 22 401,391 18,245 23.627 0.110 Sep-19 20 382,876 19,144 23.675 0.048 Oct-19 23 181,113 7,874 22.787 −0.888 Nov-19 20 553,889 27,694 24.044 1.258 Dec-19 21 438,062 20,860 23.761 −0.283 Jan-20 21 636,403 30,305 24.135 0.373 Feb-20 19 424,133 22,323 23.829 −0.306 Mar-20 22 409,403 18,609 23.647 −0.182 Apr-20 21 389,821 18,563 23.644 −0.002 May-20 20 731,835 36,592 24.323 0.679 Jun-20 22 650,219 29,555 24.110 −0.214 Jul-20 22 457,871 20,812 23.759 −0.351 Aug-20 21 23.858 0.336 24,317 510,665 Sep-20 21 23.865 0.338 24,510 514,715 Oct-20 22 23.872 0.341 24,705 543,503 Nov-20 20 23.879 0.343 24,901 498,013 Dec-20 22 23.886 0.346 25,098 552,159 Jan-21 19 23.893 0.348 25,297 480,647 Feb-21 19 23.901 0.350 25,498 484,460 Mar-21 23 23.908 0.353 25,700 591,103 Apr-21 21 23.915 0.355 25,904 543,984 May-21 20 23.922 0.357 26,109 522,189 Jun-21 22 23.929 0.359 26,317 578,965 Jul-21 21 23.936 0.362 26,525 557,032 Aug-21 22 23.943 0.364 26,736 588,186 Sep-21 21 23.950 0.366 26,948 565,904 Footnotes
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.
Back to Citation6. The Commission annually adjusts for inflation the civil money penalties that can be imposed under the statutes administered by Commission, as required by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, pursuant to guidance from the Office of Management and Budget (“OMB”). See OMB December 16, 2019 Memorandum for the Heads of Executive Departments and Agencies,” M-20-05, on “Implementation of Penalty Inflation Adjustments for 2020, Pursuant to the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015.”
Back to Citation7. This was announced on July 14, 2020. See https://www.bls.gov/news.release/archives/cpi_07142020.htm.
Back to Citation8. See Supplemental Tables, “CPI-U News Release Companion File” from the July 14, 2020 press release.
Back to Citation9. Appendix A explains how we determined the “baseline estimate of the aggregate maximum offering price” for fiscal year 2021 using our methodology, and then shows the arithmetical process of calculating the fiscal year 2021 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 2021.
Back to Citation11. 15 U.S.C. 77f(b), 78m(e) and 78n(g).
Back to Citation
Document Information
- Published:
- 08/31/2020
- Department:
- Securities and Exchange Commission
- Entry Type:
- Notice
- Document Number:
- 2020-19079
- Pages:
- 53890-53896 (7 pages)
- Docket Numbers:
- Release Nos. 33-10826, 34-89671/August 26, 2020
- PDF File:
- 2020-19079.pdf