[Federal Register Volume 87, Number 167 (Tuesday, August 30, 2022)]
[Notices]
[Pages 53030-53038]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-18668]


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SECURITIES AND EXCHANGE COMMISSION

[Release Nos. 33-11095; 34-95597/August 25, 2022]


Order Making Fiscal Year 2023 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 specified proxy solicitations and statements in corporate 
control transactions.\3\ These provisions require the Commission to 
make annual adjustments to the applicable fee rates.
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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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II. Fiscal Year 2023 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\
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    \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 prices 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'' required by Section 6(b)(6)(A) for 
that fiscal year.
    \5\ 15 U.S.C. 78m(e)(4) and 15 U.S.C. 78n(g)(4).
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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 2023. 
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 2023], is reasonably 
likely to produce aggregate fee collections under [Section 6(b)] that 
are equal to the target fee collection amount for [fiscal year 2023].'' 
That is, the adjusted rate is determined by dividing the ``target fee 
collection amount'' for fiscal year 2023 by the ``baseline estimate of 
the aggregate maximum offering prices'' for fiscal year 2023.

III. Target Fee Collection Amount for FY 2023

    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.'' \6\ Consistent with the fiscal year 2021 
calculation, 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.\7\ Under this approach, the Commission will 
use the year-over-year change, rounded to five decimal places, in the 
Consumer Price Index for All Urban Consumers (``CPI-U''), not 
seasonally adjusted, in calculating the target fee collection amount, 
which is then rounded to the nearest whole dollar. The calculation for 
the fiscal year 2023 target fee collection amount is described in more 
detail below.
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    \6\ 15 U.S.C. 77f(b)(6)(A).
    \7\ The Commission annually adjusts for inflation the civil 
monetary 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.''
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    The most recent CPI-U index value, not seasonally adjusted, 
available for use by the Commission at the time this fee rate update 
was prepared was for June 2022. This value is 296.311.\8\ The CPI-U 
index value, not seasonally adjusted, for June 2021 is 271.696.\9\ 
Dividing the June 2022 value by the June 2021 value and rounding to 
five decimal places yields a multiplier value of 1.09060. Multiplying 
the fiscal year 2022 target fee collection amount of $747,806,372 \10\ 
by the multiplier value of 1.09060 and rounding to the nearest whole 
dollar yields a fiscal year 2023 target fee collection amount of 
$815,557,629.
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    \8\ This value was announced on July 13, 2022. See https://www.bls.gov/news.release/archives/cpi_07132022.htm.
    \9\ See ``Table 1, Consumer Price Index for All Urban Consumers 
(CPI-U): U.S. city average, by expenditure category, June 2022'' in 
the announcement referenced above.
    \10\ See 86 FR 47696, published August 26, 2021. (https://www.federalregister.gov/documents/2021/08/26/2021-18402/order-making-fiscal-year-2022-annual-adjustments-to-registration-fee-rates).
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    Section 6(b)(6)(B) defines the ``baseline estimate of the aggregate 
maximum offering prices'' for fiscal year 2023 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 2023] 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 
prices for fiscal year 2023, 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 OMB.\11\ Using this 
methodology, the Commission determines the ``baseline estimate of the 
aggregate maximum

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offering price'' for fiscal year 2023 to be $7,398,886,333,730. Based 
on this estimate and the fiscal year 2023 target fee collection amount, 
the Commission calculates the fee rate for fiscal 2023 to be $110.20 
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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    \11\ Appendix A explains how we determined the ``baseline 
estimate of the aggregate maximum offering prices'' for fiscal year 
2023 using our methodology, and then shows the arithmetical process 
of calculating the fiscal year 2023 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 
prices'' for fiscal year 2023.
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IV. Effective Dates of the Annual Adjustments

    The fiscal year 2023 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, 2022.\12\
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    \12\ 15 U.S.C. 77f(b)(4), 15 U.S.C. 78m(e)(6), and 15 U.S.C. 
78n(g)(6).
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V. Conclusion

    Accordingly, pursuant to Section 6(b) of the Securities Act and 
Sections 13(e) and 14(g) of the Exchange Act,\13\
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    \13\ 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 $110.20 per million effective on October 1, 2022.

    By the Commission.
J. Matthew DeLesDernier,
Deputy 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 2023, 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 
2022, 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 2023

    First, calculate the aggregate maximum offering prices (AMOP) 
for each month in the sample (July 2012-July 2022). 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 2012 to July 2022.
    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 squares, the estimated parameter values are 
[alpha] = 0.007860021 and [beta] =0.82732681.
    6. For the month of August 2022 forecast 
[Delta]t = 8/2022 = [alpha] + 
[beta]et = 7/2022. For all subsequent months, forecast 
[Delta]t = [alpha].
    7. Calculate forecasts of log(AAMOP). For example, the forecast 
of log(AAMOP) for October 2022 is given by 
FLAAMOPt = 10/2022 = log(AAMOPt = 7/2022) + 
[Delta]t = 8/2022 + [Delta]t = 9/2022 + 
[Delta]t = 10/2022.
    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 2022, this gives a forecast AAMOP of $28.053 
billion (Column I), and a forecast AMOP of $589.112 billion (Column 
J).
    10. Iterate this process through September 2023 to obtain a 
baseline estimate of the aggregate maximum offering prices for 
fiscal year 2023 of $7,398,886,333,730.

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 10/01/22 and 9/30/23 to be 
$7,398,886,333,730.
    2. The rate necessary to collect the target $815,557,629 in fee 
revenues required by Section 6(b) of the Securities Act is then 
calculated as: $815,557,629 / $7,398,886,333,730 = 0.0001102271.
    3. Round the result to the seventh decimal point, yielding a 
rate of 0.0001102 (or $110.20 per million).
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[FR Doc. 2022-18668 Filed 8-29-22; 8:45 am]
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