How to Calculate an SIPC Assessment

by Grayson Charles; Updated September 26, 2017
SIPC member firms must pay an annual assessment.

Member firms of the Securities Investor Protection Corporation pay an annual assessment to create a kind of insurance fund for investors who fall victim to member firms' failure or wrongdoing. This assessment is calculated on two forms, called the SIPC-6 and the SIPC-7 (see Resources), which cover the first and second halves of the member firms' fiscal years, respectively. The assessment amount for each firm is based on the firm's net operating revenues through the end of the applicable filing period.

Step 1

Determine the firm's net operating revenue for the reporting period as defined by SIPC. Generally, net operating revenue is the income that remains after subtracting operating expenses and taxes paid from gross revenues. Accountants often differ on whether to include specific items in calculating net revenue. To avoid discrepancies, SIPC established its own technical definition.

Step 2

Determine the firm's additions to net revenues. These additions include losses in trading, commodities and investment accounts. (The addition of losses to net revenues may seem counterintuitive, but the point is to arrive at the firm’s gross revenues as required by the SIPC.) Also included in this category are certain advertising, printing, registration fees and legal fees.

Step 3

Determine the firm's deductions from net revenues. These include revenues generated in trading and investments and commodities accounts. The firm should also deduct expenses that are unrelated to the underwriting of securities.

Step 4

Subtract the greater of two numbers as an additional deduction: total interest and dividend expense up to a set amount, or 40 percent of margin interest earned on customers' securities accounts.

Step 5

Determine your SIPC net operating revenues by adding gross revenues and additions and subtracting deductions.

Step 6

Multiply the SIPC net operating revenues by the applicable rate, which at the time of publication is 0.0025, or one quarter of one percent.

Step 7

The SIPC-6 calculates the assessment due on the firm's net operating revenue for the first half of the fiscal year. The SIPC-7 is similar, but it calculates the total assessment due on the firm's annual net operating revenues, and then provides a credit for assessments paid with the SIPC-6.

Warnings

  • A penalty accrues at a 20 percent annual rate on the unpaid portion of the assessment for each day it is overdue. The SIPC-6 is due by the 30th day after the fiscal year's midpoint, and the SIPC-7 is due 60 days after its end. Both deadlines permit 15-day grace periods.

About the Author

Grayson Charles has been writing and editing since 1986. He enjoys writing technical articles in the areas of government, law, public policy, computers and the impact of the Internet on society. He was previously a freelance writer for "Panacea Magazine." Charles holds a Bachelor of Arts in philosophy from the State University of New York at Albany.

Photo Credits

  • stocks and shares image by Andrew Brown from Fotolia.com