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U.S. Securities and Exchange Commission

Securities and Exchange Commission

[Release Nos. 33-8095 and 34-45842/April 29, 2002]

Order Making Fiscal 2003 Annual Adjustments to the Fee Rates Applicable Under Section 6(b) of the Securities Act of 1933 and Sections 13(e), 14(g), 31(b) and 31(c) of the Securities Exchange Act of 1934

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 certain 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 Finally, Sections 31(b) and (c) of the Exchange Act require the Commission to collect fees from national securities exchanges and national securities associations, respectively, on transactions in certain securities.4

On January 16, 2002, the President signed the Investor and Capital Markets Fee Relief Act ("Fee Relief Act").5 The Fee Relief Act reduced the fee rates applicable under Section 6(b) of the Securities Act and Sections 13(e), 14(g), 31(b) and 31(c) of the Exchange Act. The Fee Relief Act also amended these sections to require the Commission to make annual adjustments to the fee rates applicable under these sections for each of the fiscal years 2003 through 2011, and one final adjustment to fix the fee rates under these sections for fiscal 2012 and beyond.6

II. Fiscal 2003 Annual Adjustment to the Fee Rates Applicable Under Section 6(b) of the Securities Act and Sections 13(e) and 14(g) of the Exchange Act

Paragraph 6(b)(2) of the Securities Act requires an issuer to pay to the Commission a fee at an initial rate of $92 per million of the maximum aggregate offering price at which securities are proposed to be offered. This same fee rate applies to certain repurchases of securities under Section 13(e) of the Exchange Act and proxy solicitations and statements in corporate control transactions under Section 14(g) of the Exchange Act.

Paragraph 6(b)(5) of the Securities Act requires the Commission to make an annual adjustment to the fee rate applicable under paragraph 6(b)(2) of the Securities Act in each of the fiscal years 2003 through 2011.7 In those same fiscal years, paragraphs 13(e)(5) and 14(g)(5) of the Exchange Act require the Commission to adjust the fee rates under Sections 13(e) and 14(g) to a rate that is equal to the rate that is applicable under Section 6(b). In other words, 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.

Paragraph 6(b)(5) specifies the method for determining the annual adjustment to the fee rate under Section 6(b) for fiscal 2003. 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 2003], is reasonably likely to produce aggregate fee collections under [Section 6(b)] that are equal to the target offsetting collection amount for [fiscal 2003]." That is, the adjusted rate is determined by dividing the "target offsetting collection amount" for fiscal 2003 by the "baseline estimate of the aggregate maximum offering prices" for fiscal 2003.

Paragraph 6(b)(11)(A) specifies that the "target offsetting collection amount" for fiscal 2003 is $435,000,000.8 Paragraph 6(b)(11)(B) defines the "baseline estimate of the aggregate maximum offering price" for fiscal 2003 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 2003] as determined by the Commission, after consultation with the Congressional Budget Office and the Office of Management and Budget . . . ."

Using a methodology developed in consultation with the Congressional Budget Office ("CBO") and Office of Management and Budget ("OMB"), the Commission determines the "baseline estimate of the aggregate maximum offering price" for fiscal 2003 to be $5,379,329,602,021.9 Based on this estimate, the Commission calculates the annual adjustment for fiscal 2003 to be $80.90 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.

III. Fiscal 2003 Annual Adjustment to the Fee Rates Applicable Under Sections 31(b) and (c) of the Exchange Act

Section 31(b) of the Exchange Act requires each national securities exchange to pay the Commission a fee at a rate, as adjusted by our order pursuant to paragraph 31(j)(2), of $30.10 per million of the aggregate dollar amount of sales of certain securities transacted on the exchange.10 Similarly, Section 31(c) requires each national securities association to pay the Commission a fee at the same adjusted rate on the aggregate dollar amount of sales of certain securities transacted by or through any member of the association otherwise than on an exchange. Paragraph 31(j)(1) requires the Commission to make annual adjustments to the fee rates applicable under Sections 31(b) and (c) for each of the fiscal years 2003 through 2011.11

Paragraph 31(j)(1) specifies the method for determining the annual adjustment for fiscal 2003. Specifically, the Commission must adjust the rates under Sections 31(b) and (c) to a "uniform adjusted rate that, when applied to the baseline estimate of the aggregate dollar amount of sales for [fiscal 2003], is reasonably likely to produce aggregate fee collections under [Section 31] (including assessments collected under [Section 31(d)]) that are equal to the target offsetting collection amount for [fiscal 2003]."

Paragraph 31(l)(1) specifies that the "target offsetting collection amount" for fiscal 2003 is $849,000,000.12 Paragraph 31(l)(2) defines the "baseline estimate of the aggregate dollar amount of sales" as "the baseline estimate of the aggregate dollar amount of sales of securities . . . to be transacted on each national securities exchange and by or through any member of each national securities association (otherwise than on a national securities exchange) during [fiscal 2003] 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 dollar amount of sales for fiscal 2003, the Commission is using the same methodology it developed in consultation with the CBO and OMB for making projections of dollar volume for purposes of the fiscal 2002 mid-year adjustment.13 Using this methodology, the Commission calculates the baseline estimate of the aggregate dollar amount of sales for fiscal 2003 to be $33,158,519,250,001. Based on this estimate, and an estimated collection of $450,000 in assessments on securities futures products in fiscal 2003,14 the uniform adjusted rate is $25.20 per million.15

IV. Effective Dates of the Annual Adjustments

Subparagraph 6(b)(8)(A) of the Securities Act provides that the fiscal 2003 annual adjustment to the fee rate applicable under Section 6(b) of the Securities Act shall take effect on the later of October 1, 2002, or five days after the date on which a regular appropriation to the Commission for fiscal 2003 is enacted.16 Subparagraphs 13(e)(8)(A) and 14(g)(8)(A) of the Exchange Act provide for the same effective date for the annual adjustments to the fee rates applicable under Sections 13(e) and 14(g) of the Exchange Act.17

Subparagraph 31(j)(4)(A) of the Exchange Act provides that the fiscal 2003 annual adjustments to the fee rates applicable under Sections 31(b) and (c) of the Exchange Act shall take effect on the later of October 1, 2002, or thirty days after the date on which a regular appropriation to the Commission for fiscal 2003 is enacted.

V. Conclusion

Accordingly, pursuant to Section 6(b) of the Securities Act and Sections 13(e), 14(g) and 31(j) of the Exchange Act,18

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 $80.90 per million effective on the later of October 1, 2002, or five days after the date on which a regular appropriation to the Commission for fiscal 2003 is enacted; and

IT IS FURTHER ORDERED that the fee rates applicable under Sections 31(b) and (c) of the Exchange Act shall be $25.20 per million effective on the later of October 1, 2002, or thirty days after the date on which a regular appropriation to the Commission for fiscal 2003 is enacted.

By the Commission.

Margaret H. McFarland
Deputy Secretary

*   Appendix A
*   Appendix B

Endnotes

1 15 U.S.C. § 77f(b).

2 15 U.S.C. § 78m(e).

3 15 U.S.C. § 78n(g).

4 15 U.S.C. §§ 78ee(j)(1) and (j)(3). Section 31(d) of the Exchange Act also requires the Commission to collect assessments from national securities exchanges and national securities associations for round turn transactions on security futures.

5 Pub. L. No. 107-123, 115 Stat. 2390 (2002).

6 See 15 U.S.C. §§ 77f(b)(5), 77f(b)(6), 78m(e)(5), 78m(e)(6), 78n(g)(5), 78n(g)(6), 78ee(j)(1), and 78ee(j)(3). Paragraph 31(j)(2) of the Exchange Act, 15 U.S.C. § 78ee(j)(2), also requires the Commission, in certain circumstances, to make a mid-year adjustment to the fee rates under Sections 31(b) and (c) of the Exchange Act in fiscal 2002 through fiscal 2011.

7 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 offsetting collection amount" specified in Section 6(b)(11)(A) for that fiscal year.

8 Congress determined the target offsetting collection amounts by applying reduced fee rates to the CBO's January 2001 projections of the aggregate maximum offering prices for fiscal years 2002 through 2011. In any fiscal year through fiscal 2011, the annual adjustment mechanism will result in additional fee rate reductions if the CBO's January 2001 projection of the aggregate maximum offering prices for the fiscal year proves to be too low, and fee rate increases if the CBO's January 2001 projection of the aggregate maximum offering prices for the fiscal year proves to be too high.

9 Appendix A explains how we determined the "baseline estimate of the aggregate maximum offering price" for fiscal 2003 using our methodology, and then shows the purely arithmetical process of calculating the fiscal 2003 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 2003.

10 Exchange Act Release No. 45489 (March 1, 2002), 67 F.R. 10239 (March 6, 2002).

11 The annual adjustments, as well as the mid-year adjustments required in certain circumstances under paragraph 31(j)(2) in fiscal 2002 through fiscal 2011, are designed to adjust the fee rates in a given fiscal year so that, when applied to the aggregate dollar volume of sales for the fiscal year, they are reasonably likely to produce total fee collections under Section 31 equal to the "target offsetting collection amount" specified in Section 31(l)(1) for that fiscal year.

12 Congress determined the target offsetting collection amounts by applying reduced fee rates to the CBO's January 2001 projections of dollar volume for fiscal years 2002 through 2011. In any fiscal year through fiscal 2011, the annual and, in certain circumstances, mid-year adjustment mechanisms will result in additional fee rate reductions if the CBO's January 2001 projection of dollar volume for the fiscal year proves to be too low, and fee rate increases if the CBO's January 2001 projection of dollar volume for the fiscal year proves to be too high.

13 Appendix B explains how we determined the "baseline estimate of the aggregate dollar amount of sales" for fiscal 2003 using our methodology, and then shows the purely arithmetical process of calculating the fiscal 2003 annual adjustment based on that estimate. The appendix also includes the data used by the Commission in making its "baseline estimate of the aggregate dollar amount of sales" for fiscal 2003.

14 This estimate is based on the CBO's August 2001 estimate of Section 31(d) collections in fiscal 2003, adjusted to reflect the Fee Relief Act's reduction in the Section 31(d) assessment.

15 As explained in Appendix B, the calculation of the adjusted fee rate assumes that the current fee rate of $30.10 per million will apply through October 31st due to the operation of the effective date provision contained in subparagraph 31(j)(4)(A) of the Exchange Act.

16 15 U.S.C. § 77f(b)(8)(A).

17 15 U.S.C. §§ 78m(e)(8)(A) and 78n(g)(8)(A).

18 15 U.S.C. §§ 77f(b), 78m(e), 78n(g), and 78ee(j).

 

http://www.sec.gov/rules/other/33-8095.htm


Modified: 04/29/2002