
[Federal Register Volume 76, Number 172 (Tuesday, September 6, 2011)]
[Notices]
[Pages 55139-55148]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-22652]


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SECURITIES AND EXCHANGE COMMISSION

[Release Nos. 33-9255; 34-65231/August 31, 2011]


Order Making Fiscal Year 2012 Annual Adjustments to Registration 
Fee Rates

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 on 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 proxy solicitations and statements in corporate control 
transactions.\3\
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    \1\ 15 U.S.C. 77f(b).
    \2\ 15 U.S.C. 78m(e).
    \3\ 15 U.S.C. 78n(g).
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    The Investor and Capital Markets Fee Relief Act of 2002 (``Fee 
Relief Act'') \4\ has required the Commission to make annual 
adjustments to the fee rates applicable under these sections for each 
of the fiscal years 2003 through 2011 in an attempt to generate 
collections equal to yearly targets specified in the statute.\5\ Under 
the Fee Relief Act, each year's fee rate has been announced on the 
preceding April 30, and has taken effect five days after the date of 
enactment of the Commission's regular appropriation.
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    \4\ Pub. L. 107-123, 115 Stat. 2390 (2002).
    \5\ See 15 U.S.C. 77f(b)(5), 77f(b)(6), 78m(e)(5), 78m(e)(6), 
78n(g)(5), and 78n(g)(6).
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    The Dodd-Frank Wall Street Reform and Consumer Protection Act 
(``Dodd-Frank Act'') changes many of the provisions related to these 
fees. The

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Dodd-Frank Act created new annual collection targets for FY 2012 and 
thereafter. It also changed the date by which the Commission must 
announce a new fiscal year's fee rate (August 31) and the date on which 
the new rate takes effect (October 1).

II. Fiscal Year 2012 Annual Adjustment to the Fee Rate

    Section 6(b)(2) of the Securities Act, as amended by the Dodd-Frank 
Act, requires the Commission to make an annual adjustment to the fee 
rate applicable under Section 6(b).\6\ 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.\7\
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    \6\ 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.
    \7\ See Sections 13(e)(6) and 14(g)(6) of the Exchange Act. On 
October 1, 2011, Sections 13(e)(4) and 14(g)(6) of the Exchange Act, 
as amended by the Dodd-Frank Act, will require an annual adjustment 
to the fee rates under Sections 13(e) and 14(g) of the Exchange Act 
to the same level as the new the fee rate under Section 6(b) of the 
Securities Act.
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    Section 6(b)(2) sets forth the method for determining the annual 
adjustment to the fee rate under Section 6(b) for fiscal year 2012. 
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 2012], is reasonably 
likely to produce aggregate fee collections under [Section 6(b)] that 
are equal to the target fee collection amount for [fiscal year 2012].'' 
That is, the adjusted rate is determined by dividing the ``target fee 
collection amount'' for fiscal year 2012 by the ``baseline estimate of 
the aggregate maximum offering prices'' for fiscal year 2012.
    Section 6(b)(6)(A) specifies that the ``target fee collection 
amount'' for fiscal year 2012 is $425,000,000. Section 6(b)(6)(B) 
defines the ``baseline estimate of the aggregate maximum offering 
price'' for fiscal year 2012 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 2012] 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 2012, the Commission used a methodology similar 
to that developed in consultation with the Congressional Budget Office 
(``CBO'') and Office of Management and Budget (``OMB'') to project the 
aggregate offering price for purposes of the fiscal year 2012 annual 
adjustment.\8\ Using this methodology, the Commission determines the 
``baseline estimate of the aggregate maximum offering price'' for 
fiscal year 2012 to be $3,708,294,634,490.\9\ Based on this estimate, 
the Commission calculates the fee rate for fiscal 2012 to be $114.60 
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.
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    \8\ For the fiscal year 2011 estimate, the Commission used a 
ten-year series of monthly observations ending in March 2010. For 
fiscal year 2012, the Commission used a ten-year series ending in 
July 2011.
    \9\ Appendix A explains how we determined the ``baseline 
estimate of the aggregate maximum offering price'' for fiscal year 
2012 using our methodology, and then shows the purely arithmetical 
process of calculating the fiscal year 2012 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 2012.
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III. Effective Dates of the Annual Adjustments

    The fiscal year 2012 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, 2011, under the 
changes made by the Dodd-Frank Act.\10\
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    \10\ On October 1, 2011, Section 6(b)(4) of the Securities Act 
and Sections 13(e)(6) and 14(g)(6) of the Exchange Act, as amended 
by the Dodd-Frank Act, will require the fiscal year 2012 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 to 
be effective on October 1, 2011.
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IV. Conclusion

    Accordingly, pursuant to Section 6(b) of the Securities Act and 
Sections 13(e) and 14(g) of the Exchange Act,\11\
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    \11\ 15 U.S.C. 77f(b), 78m(e), and 78n(g).
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    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 $114.60 per million effective on October 1, 2011.

    By the Commission.
Elizabeth M. Murphy,
Secretary.

Appendix A

    With the passage of the Dodd-Frank Wall Street Reform and 
Consumer Protection Act, Congress has, among other things, 
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 2012, the Commission has estimated the aggregate maximum 
offering prices by projecting forward the trend established in the 
previous decade. More specifically, an ARIMA model was used to 
forecast the value of the aggregate maximum offering prices for 
months subsequent to July 2011, the 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 2012

    First, calculate the aggregate maximum offering prices (AMOP) 
for each month in the sample (July 2001-July 2011). 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 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 2001 to July 2011.
    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 
[Delta]t = log (AAMOPt)-
log(AAMOPt-1). This approximates the percentage change.
    5. Estimate the first order moving average model 
[Delta]t = [alpha] + [beta]et-1 + 
et, where et 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 
[Delta]t. The forecast error is expressed as 
et = [Delta]t - [alpha] - 
[beta]et-1. The model can be estimated using standard 
commercially available software. Using least

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squares, the estimated parameter values are [alpha] = 0.0005219 and 
[beta] = -0.87539.
    6. For the month of August 2011 forecast 
[Delta]t = 8/11 = [alpha] + [beta]et = 8/11. 
For all subsequent months, forecast [Delta]t = [alpha].
    7. Calculate forecasts of log(AAMOP). For example, the forecast 
of log(AAMOP) for October 2011 is given by 
FLAAMOPt = 10/11 = log(AAMOPt = 7/11) + 
[Delta]t = 8/11 +[Delta]t = 9/11 + 
[Delta]t = 10/11.
    8. Under the assumption that et is normally 
distributed, the n-step ahead forecast of AAMOP is given by 
exp(FLAAMOPt + [sigma]n\2\/2), where 
[sigma]n denotes the standard error of the n-step ahead 
forecast.
    9. For October 2011, this gives a forecast AAMOP of $14.6 
Billion (Column I), and a forecast AMOP of $307.6 Billion (Column 
J).
    10. Iterate this process through September 2012 to obtain a 
baseline estimate of the aggregate maximum offering prices for 
fiscal year 2012 of $3,708,294,634,490.

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 10/1/11 and 9/30/12 to be 
$3,708,294,634,490.
    2. The rate necessary to collect the target $425,000,000 in fee 
revenues set by Congress is then calculated as: $425,000,000 / 
$3,708,294,634,490 = 0.000114608.
    3. Round the result to the seventh decimal point, yielding a 
rate of 0.0001146 (or $114.60 per million).
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[FR Doc. 2011-22652 Filed 9-2-11; 8:45 am]
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