2728 Federal Register / Vol. 76, No. 10 / Friday, January 14, 2011 / Notices 

1See Release No. SIPA–169 (November 30, 2010), 

75 FR 75711 (December 6, 2010). 

2The Dodd-Frank Act, Section 929V. 

3 15 U.S.C. 78ddd(c)(2) and 78lll(9). 4 15 U.S.C. 78ccc(e)(2)(D). 

meeting on January 19, 2011, 10 a.m. at 

the Board’s meeting room on the 8th 

floor of its headquarters building, 844 

North Rush Street, Chicago, Illinois, 

60611. The agenda for this meeting 

follows: 

(1) Executive Committee Reports 

The entire meeting will be open to the 

public. The person to contact for more 

information is Beatrice Ezerski, 

Secretary to the Board, Phone No. 312– 

751–4920. 

Dated: January 10, 2011. 

Beatrice Ezerski, 

Secretary to the Board. 

[FR Doc. 2011–864 Filed 1–12–11; 11:15 am] 

BILLING CODE 7905–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. SIPA–170; File No. SIPC–2010– 

01] 

Securities Investor Protection 

Corporation; Order Approving a 

Proposed Bylaw Change Relating to 

SIPC Fund Assessments on SIPC 

Members 

January 10, 2011. 

On October 8, 2010, the Securities 

Investor Protection Corporation (‘‘SIPC’’) 

filed with the Securities and Exchange 

Commission (‘‘Commission’’) a proposed 

bylaw change pursuant to Section 

3(e)(1) of the Securities Investor 

Protection Act of 1970 (‘‘SIPA’’), 15 

U.S.C. 78ccc(e)(1). Notice of the 

proposed bylaw change was published 

in the Federal Register on December 6, 

2010.1 The Commission received no 

comment letters on the proposed bylaw 

change. This order approves the 

proposed bylaw change. 

I. Description of Proposed Bylaw 

Change 

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. 

Pursuant to this authority, SIPC collects 

an annual assessment from its members. 

The amount of the annual assessment is 

prescribed by SIPA and the SIPC 

bylaws. When the SIPC Fund is at its 

targeted level, SIPC collects a minimum 

assessment as provided in SIPA. The 

current target level for the SIPC Fund is 

$2.5 billion. 

The Dodd-Frank Wall Street Reform 

and Consumer Protection Act of 2010 

(‘‘Dodd-Frank Act’’) amended SIPA to 

change the minimum assessment from 

an amount not to exceed $150 to an 

amount not to exceed 0.02 percent of 

the gross revenues from the securities 

business of the SIPC member.2 Under 

Article 6 of the SIPC bylaws, SIPC must 

assess its members a minimum amount 

($150) unless certain conditions apply. 

Because in some cases an assessment of 

$150 would exceed 0.02 percent of a 

member’s gross revenues, the SIPC 

Assessments bylaw must be amended to 

be consistent with the Dodd-Frank Act. 

First, SIPC has proposed to amend 

Article 6, Section 1(a)(1)(B) of the SIPC 

bylaws by replacing ‘‘$150’’ with the 

term ‘‘0.02 percent of the net operating 

revenues from the securities business.’’ 

This amendment clarifies that the 

minimum assessment for members, once 

the SIPC Fund reaches its target, is 0.02 

percent of a member’s net operating 

revenues, rather than $150. Second, 

SIPC has proposed deleting Section 

1(a)(3) of Article 6, which states that 

$150 was the minimum assessment a 

SIPC member would be required to pay 

in any calendar year. These 

amendments were approved by SIPC’s 

Board of Directors on September 16, 

2010. 

As indicated above, SIPC’s bylaw 

changes refer to ‘‘net operating 

revenues’’ instead of ‘‘gross revenues.’’ 

Since 1991, when assessing on a 

percentage basis (i.e., not a flat $150 

minimum assessment), SIPC has based 

the assessment amount on a percentage 

of net operating revenues, not gross 

revenues, from the securities business. 

In 1991, a SIPC Task Force study found 

that securities firms no longer 

structured their business on a gross 

revenue basis but instead used a net 

operating revenue basis, which excludes 

interest expense and dividend expense 

in accounting for revenue. SIPC bases its 

assessment on the net revenues 

associated with that business, which it 

believes is consistent with SIPA. 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.3 Using a minimum 

assessment of 0.02 percent 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. 

II. Commission Findings 

Section 3(e)(1) of SIPA provides that 

SIPC must file with the Commission a 

copy of proposed bylaw changes. That 

section further provides that bylaw 

changes shall take effect 30 days after 

filing, unless the Commission either: (i) 

Disapproves the change as contrary to 

the public interest or the purposes of 

SIPA, or (ii) finds that the change 

involves a matter of such significant 

public interest that public comment 

should be obtained. Once the 

Commission finds that the proposed 

bylaw change involves a matter of such 

significant public interest that public 

comment should be obtained, the 

Commission may, after notifying SIPC 

in writing of such finding, require that 

the proposed bylaw change be 

considered by the same procedures as a 

proposed rule change including, among 

other things, publication in the Federal 

Register and opportunity for public 

comment. Prior to approving a proposed 

bylaw change that has been noticed for 

public comment the Commission must 

make a finding that the change is in the 

public interest and is consistent with 

the purposes of SIPA.4

The Commission finds, pursuant to 

Section 3(e)(2)(D) of SIPA, that the 

proposed bylaw change is in the public 

interest and consistent with SIPA. First, 

the proposed bylaw change is a 

necessary consequence of Dodd-Frank. 

Second, utilizing net operating revenues 

instead of gross revenues is consistent 

with industry practice, SIPA, and the 

SIPC bylaws. 

III. Conclusion 

It is therefore ordered, pursuant to 

Section 3(e)(2)(B) of SIPA, that the 

proposed bylaw changes (File No. SIPC– 

2010–01) are approved. 

By the Commission. 

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2011–711 Filed 1–13–11; 8:45 am] 

BILLING CODE 8011–01–P 

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