[Federal Register Volume 86, Number 20 (Tuesday, February 2, 2021)]
[Notices]
[Pages 7900-7902]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-02128]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. SIPA-183; File No. SIPC-2021-01]


Securities Investor Protection Corporation; Determination

AGENCY: Securities and Exchange Commission.

ACTION: Notice.

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SUMMARY: Pursuant to Section 3(e)(2) of the Securities Investor 
Protection Act of 1970 (``SIPA''), notice is hereby given that the 
Board of Directors of SIPC (the ``Board'') filed with the Securities 
and Exchange Commission (``Commission'') on January 5, 2021, 
notification that the Board has determined, beginning January 1, 2022, 
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 February 17, 2021.

ADDRESSES: Interested persons are invited to submit written data, 
views, and arguments concerning the foregoing by any of the following 
methods:

[[Page 7901]]

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/submitcomments.htm); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SIPC-2021-01 on the subject line.

Paper Comments

     Send paper comments to Secretary, Securities and Exchange 
Commission, 100 F Street NE, Washington, DC 20549-1090.

All comments should refer to File Number SIPC-2021-01. This file 
numbers 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 website (http://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 website 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 a.m. and 3 
p.m. All comments received will be posted without change. Persons 
submitting comments are cautioned that we do not redact or edit 
personal identifying information from comment 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; Raymond A. Lombardo, at (202) 551-5755; Timothy C. Fox, 
Branch Chief, at (202) 551-5687; or A.J. Jacob, Special Counsel, at 
(202) 551-5583; Office of Financial Responsibility, Division of Trading 
and Markets, Securities and Exchange Commission, 100 F Street NE, 
Washington, DC 20549-7010.

SUPPLEMENTARY INFORMATION: 

I. SIPC'S Statement of the Purpose of and Statutory 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.
* * * * *
    ``Pursuant to section 9(e)(1) of the Securities Investor Protection 
Act (``SIPA''), 15 U.S.C. 78fff-3(e)(1),\1\ the Board of Directors 
(``Board'') of the Securities Investor Protection Corporation 
(``SIPC'') must determine, ``[n]ot later than January 1, 2011, and 
every five years thereafter, and subject to the approval of the 
Commission,'' whether to adjust for inflation the standard maximum cash 
advance amount that SIPC can advance to satisfy customer claims for 
cash under SIPA Sec.  78fff-3(a)(1). The Board considered the issue at 
its Meeting on September 9, 2020, and again at its Meeting on November 
12, 2020. Among other things, and as more fully set forth below, the 
Board considered the criteria set forth in SIPA Sec.  78fff-3(e)(5), 
and the views of the staffs of the Commission, the FDIC, and FINRA.
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    \1\ 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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    The Board has determined that the maximum cash advance amount 
should remain at the current level of $250,000 per customer. Pursuant 
to SIPA Sec.  78fff-3(e)(4), and subject to the approval of the 
Commission as provided under SIPA Sec. Sec.  78ccc(e)(2) and 78fff-
3(e)(1),\2\ the Board's determination will become effective January 1, 
2022. Further, pursuant to SIPA Sec.  78fff-3(e)(3)(A), the Commission 
``shall publish in the Federal Register the standard maximum cash 
advance amount'' not later than April 5, 2021.
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    \2\ SIPA Sec.  78fff-3(e)(1) provides that approval by the 
Commission be obtained ``as provided under section 78ccc(e)(2)'' of 
SIPA. SIPA Sec.  78ccc(e)(2) establishes procedures governing 
proposed changes to SIPC's rules.
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Consideration of the Statutory Criteria

A. Amount of Potential Adjustment
    Were the Board to have determined that the maximum cash advance 
amount should be adjusted, the formula for calculation of such 
adjustment would entail multiplying $250,000 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 2010.

    SIPA Sec.  78fff-3(e)(1)(B).
    A present-day application of the formula would increase the limit 
by $40,000, to a total of $290,000.\3\
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    \3\ Pursuant to SIPA Sec.  78fff-3(e), the $40,000 amount was 
determined as follows: $250,000 multiplied by 1.1675 [the ratio of 
108.763 (the annual value of the Price Index published by the 
Department of Commerce for calendar year 2019), to 94.094 (the 
published annual value of the index for 2009)], which equals 
$291,875. Pursuant to SIPA Sec.  78fff-3(e)(2), this amount is to be 
rounded down to the nearest multiple of $10,000, i.e., $290,000. 
However, because the determination is to be made for the calendar 
year 2021, 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 2020. The 2020 annual value will not be 
available until sometime in 2021. Nevertheless, through the month of 
November 2020, the index increased by approximately 0.9%. 
Consequently, the index value would have to either increase in 
December 2020 by approximately 1.9% or decrease by approximately 
1.5% for the result to be different from $290,000, which is 
extremely unlikely.
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B. Inflation Adjustment Considerations
    SIPA Sec.  78fff-3(e)(5) provides that in deciding whether to 
adjust the maximum cash advance amount, the Board shall consider the 
following criteria:
    (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.
1. The Overall State of the SIPC Fund and Economic Conditions Affecting 
Members, and Potential Problems Affecting Members of SIPC
    The Board reviewed the projected growth of the SIPC Fund, including 
the target amount for the Fund of $5 billion, the assessment rate 
imposed on SIPC members pursuant to SIPC's Assessments bylaw, as 
amended, and the potential impact of an inflation adjustment on the 
Fund, and determined that keeping the standard maximum cash advance at 
$250,000 did not adversely affect SIPC members. In its review, the 
Board also considered 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.

[[Page 7902]]

In addition, the Board considered the views of the staffs of the 
Commission, the FDIC, and FINRA, as reported to the SIPC staff and as 
further reported by the SIPC staff to the Board. The Board concluded 
that the SIPC Fund remains on a steady growth path for the near future, 
barring any unforeseen catastrophic event, and that any increases in 
the cash limit of SIPA protection would not appreciably benefit 
customers.
2. Other Appropriate Factors
a. Potential Divergence Between FDIC and SIPC Protections
    The Board noted the equivalency--presently $250,000--between SIPA's 
maximum cash advance amount and the ``standard maximum deposit 
insurance amount'' that fixes the limit on bank deposit insurance under 
the Federal Deposit Insurance Act (``FDIA''), 12 U.S.C. 1821 et seq. An 
inflation adjustment to the former without a corresponding adjustment 
to the latter would result in an unprecedented divergence between the 
maximum cash advance amount under SIPA and the standard maximum deposit 
insurance amount under FDIA.
    Increases to the limit of protection for cash claims under SIPA 
historically have been in lockstep with increases in FDIC deposit 
insurance.\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. In 2016, 
uniformity with FDIC deposit insurance was a primary factor in the 
Board's determination not to adjust the standard maximum cash advance 
amount.
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    \4\ The below compares the limits of protection for cash under 
SIPA and the FDIA: SIPA: $20,000 (Pub. L. No 91-598, Sec.  
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 110-343, 136, 122 Stat. 3765, 3799 (2008); (permanent) 
Public Law 111-203, 335, 124 Stat. 1376, 1540 (2010)).
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b. Historical Claims Experience and Benefit to Customers
    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 the benefit to customers of an inflation adjustment 
may be limited. Of the more than 770,000 allowed claims in completed or 
substantially completed liquidation proceedings as of year-end 2019, 
the unsatisfied portion of cash claims amounted to $25 million. More 
than half of that amount involved only three claims. In the seven SIPA 
proceedings initiated since 2010, when the cash limit was raised to 
$250,000, only one cash claim remains unsatisfied.
c. Aggregate Credit Balances and Sweep Programs
    It also was brought to the Board's attention that aggregate cash 
credit balances at member firms have not increased over the last five 
years in line with inflation. Instead, member firms have increasingly 
utilized sweep programs to move customer free credit balances from 
broker- dealers to banks.

Conclusion

    The Board weighed all the relevant factors against a potential 
adjustment of $40,000, the amount determined by the formula set forth 
in SIPA Sec.  78fff-3(e)(1)(B). The Board concluded that, on balance, 
in light of the intent to grow the SIPC Fund to reach a target of $5 
billion, the unprecedented break with the FDIC limit that would result, 
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

    On January 1, 2021, pursuant to section 9(e)(1) of the Securities 
Investor Protection Act, 15 U.S.C. 78fff-3(e)(1), the Board of 
Directors of the Securities Investor Protection Corporation (the 
``Board'') determined that an inflation adjustment to the standard 
maximum cash advance amount would not be appropriate. Accordingly, the 
Board determined that the standard maximum cash advance amount will 
remain at $250,000 per customer, effective January 1, 2022.
    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\5\
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    \5\ 17 CFR 200.30-3(f)(3).

    Dated: January 27, 2021.
J. Matthew DesLesDernier,
Assistant Secretary.
[FR Doc. 2021-02128 Filed 2-1-21; 8:45 am]
BILLING CODE 8011-01-P


