SIPC frequently asked questions (FAQs)
The Securities Investor Protection Corporation (SIPC) recently updated FAQs to include questions about materiality limits included in the SIPC-7 agreed-upon procedures (AUP) reports of independent public accountants. The following graphic shows the materiality limits that were established by SIPC for purposes of reporting exceptions identified in an AUP engagement required under SIPC Series 600 Rules.
Materiality limits for purposes of comparisons required by SIPC Rules 600(b)(3)(i) to (v) in the AUP report
SIPC Rule 600(b)(3)(ii) and (iii)
SIPC will not treat as a violation a difference of $25 or less not being reported as an exception in an AUP report when:
- Comparing a SIPC member’s Annual Report Revenue (as defined in footnote 2 of the General Requirements Regarding SIPC Rule 600) for the relevant fiscal year with the member’s SIPC-7 Line 1 Revenue for the same fiscal year; and
- Comparing an Adjustment Amount (as defined in footnote 3 of the General Requirements Regarding SIPC Rule 600) reported in a SIPC member’s Form SIPC-7 with the corresponding Support Amount for the same fiscal year.
SIPC Rule 600(b)(3)(i), (iv), and (v)
SIPC will not treat as a violation a difference of $1 or less not being reported as an exception when performing procedures specified in those provisions of the rule.
These materiality limits for SIPC Rule(b)(3)(i) to (v), as described above, may be applied provided:
- The SIPC member and the independent public accountant who prepared the AUP Report agreed to such materiality limits for reporting exceptions as part of the independent public accountant’s engagement letter; and
- Any agreed-upon materiality limits for reporting exceptions are described in the AUP Report.
Note: The position expressed in the updated FAQ represents SIPC’s view and is not binding on the Securities and Exchange Commission.
Grant Thornton insight:
Companies may apply the materiality limits for future or in-process AUP engagements. To implement these materiality limits for in-process engagements, coordination with the company’s independent public accountant will be necessary to revise the terms of the engagement letter. The independent public accountant may also request additional written representations prior to issuing the AUP report.
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