SIPC Supplemental Report: Last Helpful Tip

I'm getting bored with this subject, I have to admit... but I looked into something and thought I'd pass along what I learned.

The "e-4 report," or "supplemental report" required under SEA 17a-5(e)(4), is a newly-unearthed requirement for SIPC members (read my two earlier blogs on this if you're confused right now: Sept. 24 and Nov. 10). FINRA sent out a little blurb that stated, "If your firm is a SIPC member and has net operating revenues of more than $500,000, your firm's auditor must complete the SIPC Supplemental Report..."

A helpful reader (I have readers! and some of them are helpful!!) was looking for the source of that $500,000 threshold. I, being busy, promised to look for it, but he, being helpful, found it himself and forwarded me FINRA's 89-25 NtM...here is the link to that: http://finra.complinet.com/en/display/display_main.html?rbid=2403&element_id=1400

This old Notice includes an SEC no-action letter that describes the $500,000 threshold. But SEC uses the term "total revenues" and FINRA, in said Notice, uses the term "gross annual revenue." Both of these terms contradict FINRA's newest descriptor, "net operating revenues."

So I called a woman at SIPC who is smart and kind and--again, this word--helpful! She explained that yes, it is indeed "total revenue"--that is, before deductions--and that the SEC no-action letter is the only reference to that exclusion/threshold. You won't find it anywhere else. She also surmised that this new assessment equation will be in place for a while--so get used to it, folks!

If you work for FINRA and you are reading this, a) why are you reading my blog? and b) to be helpful (pay it forward), tell someone at your shop about this discrepancy/miscommunication, so that firms may do what is required without being confused.

Thanks to Mr. A.C., who inspired today's blog entry.