Supplemental Statement of Income (SSOI) Frequently Asked Questions

Please refer to the SSOI and instructions.

 

General Questions
Commissions (Section 1)
Revenue From Sale of Investment Company Shares (Section 2)
Revenue From Sale of Insurance Based Products (Section 3)
Gains or Losses on Derivative Trading Desks (Section 4)
Net Gains or Losses on Principal Trades (Section 5)
Interest/Rebate/Dividend Income (Section 7)
Revenue From Underwritings and Selling Group Participation (Section 8)
Fees Earned (Section 9)

Commodities Revenue (Section 10)
Other Revenue (Section 11)
Compensation Expense (Section 12)
Commission, Clearance and Custodial Expenses (Section 13)
Fees Paid to Third-Party Service Providers (Section 16)
General, Administrative, Regulatory and Miscellaneous Expenses (Section 17)
Other Expenses (Section 18)
Operational Page

 


 

General Questions

1. When the FOCUS Report Reference Line Column contains a “C,” does this preclude a Part II or Part IIA filer from populating the line?

No. The reference lines are included only for original “mapping” purposes. If a firm is prohibited from using certain links, or must use other lines, that information is included in the instructions. For convenience, the limited use lines/sections are:

 

Section 1, Line 13991 (FOCUS Part II CSE firms only)
Section 1, Line 11007 (FOCUS Part II and IIA firms only)
Section 4 – (FOCUS Part II CSE firms only)
Section 5, Line 13904 (FOCUS Part II CSE firms only)
Section 10, Line 13990 (FOCUS Part II and IIA firms only)

 

2. In instances where a line on the SSOI refers to a FOCUS Report Reference Line, do the amounts on the two lines have to be equal?

The only lines on the SSOI and the FOCUS Report that must be equal are the following:

 

SSOI Line

FOCUS Report Line & Title (Related FOCUS Report)

13940

Line 3940 Total commissions (C); Total securities commissions (II/IIA)

13926

Line 3926 Derivative Trading Desks - Total gains or (losses) (C)

13952

Line 3952 Gains or losses on Firm Securities Investment Accounts (C/IIA); Total realized and unrealized gains (losses) (II)

14030

Line 4030 Total revenue (A)

14200

Line 4200 Total expenses (A)

14210

Line 4210 Income (loss) before Federal income taxes and items below (A)

14220

Line 4220 Provision for Federal income taxes (for parent only) (A)

14222

Line 4222 Equity in earnings (losses) of unconsolidated subsidiaries not included above (A)

14224

Line 4224 Extraordinary gains (losses) (A)

14225

Line 4225 Cumulative effect of changes in accounting principles (A)

14230

Line 4230 Net income (loss) after Federal income taxes and extraordinary items (A)

The FOCUS Report references refer to the various FOCUS Reports as follows:

  • “C” if the line is reflected on the Part II CSE of the FOCUS Report;
  • “II” if the line is reflected on the Part II of the FOCUS Report;
  • “IIA” if the line is reflected on the Part IIA of the FOCUS Report; and
  • “A” if the line is reflected on all three versions (Part II CSE, Part II and Part IIA) of the FOCUS Report. 

 

3. Where should firms report revenue (or expense) that results from a Transfer Pricing Agreement (TPA) with an affiliated entity? 
To the extent that a firm is able to report transfer pricing revenue, or expense, in a manner that reflects the revenues and expenses in the detailed categories on the SSOI, the firm would report on that basis. Firms that are unable to report based on the more detailed categories of revenues and expenses on the SSOI may report on the same line items as they do on the FOCUS report, or may use Line 11090 (Fees earned from affiliated entities) in Section 9 (Fees Earned) to report revenue resulting from a TPA, and may use Line 11240 (To Affiliates) in Section 16 (Fees Paid to Third Party Service Providers) to report expenses. The firm must continue to use the same method on all subsequent SSOI filings. To the extent such revenue and expense are material, the firm may be required to provide supplemental information to FINRA staff to enable the staff to understand the underlying components of revenue and/or expense resulting from a TPA.

 

4. If a firm has an Expense Sharing Agreement (ESA) with an affiliated entity and is charged for a portion of various operating expenses—including among other items, office space, office equipment, computers and phones—for which the affiliated entity contracts with (and is responsible to) a third party for payment of such goods or services, where on the SSOI would the firm report these expenses?

To the extent costs covered by an ESA relate to specific items in the SSOI, the firm would report the expenses on that SSOI line to the extent possible. For example, if a firm has an ESA that provides for the payment of $100,000 per quarter—$30,000 for technology-related costs, $60,000 for rent and $10,000 for various expenses that are not specifically provided for on the SSOI—the firm would report technology costs on Line 14060 (Technology, data and communication costs) in Section 17 (General Administrative, Regulatory and Miscellaneous Expenses), rent on Line 14080 (Occupancy and equipment expenses) in Section 17 (General Administrative, Regulatory and Miscellaneous Expenses) and the remaining various expenses on Line 11240 (To Affiliates) in Section 16 (Fees Paid to Third Party Service Providers).

 

5. If a firm has a Management Services Agreement (MSA) under which personnel of an affiliated entity provide various human resources-related services to the firm, where on the SSOI would the firm report these expenses?

Since the SSOI does not specifically provide for human resources-related services, the firm would report this expense on Line 11240 (To Affiliates) in Section 16 (Fees Paid to Third Party Service Providers).

 


 

Commissions (Section 1)

1. On what line should firms report foreign exchange commissions? 

Firms should report commissions related to foreign exchange transactions on Line 11007 (Foreign Exchange) in Section 1 if the firm files Part II or IIA of the FOCUS Report. A firm that files a FOCUS Part II CSE would report the commissions on foreign exchange transactions on Line 13995 (Other Revenue) in Section 11 (Other Revenue).

   

2. Where should a firm report commissions from REIT transactions? 

Firms should report commissions from REIT transactions on Line 13939 (All Other Securities Commissions) in Section 1.

 

3. If a firm earns commissions on transactions in equities, ETFs or closed-end funds, and routes these trades to other parties for execution, where would the firm report these commissions? 

If the firm reported this revenue on Line 3935 of its FOCUS Report, it may carry over the value to SSOI Line 13935 (Listed Equities, ETFs and Closed End Funds Executed on an Exchange) in Section 1, without modification. The firm may do the same with FOCUS Report Line 3937 and SSOI Line 13937 (Exchange Listed Equity Securities Executed OTC) in Section 1. If this revenue is not reported on either Line 3935 or 3937 of the FOCUS Report, the firm may report the commission earned on SSOI Line 13939 (All Other Securities Commissions) in Section 1.

 

4. On what line should firms report commissions from swap transactions? Is there a difference if the swap is centrally cleared?

All firms should report commissions on security-based swaps on Line 13939 (All Other Securities Commissions) in Section 1. 

Firms filing FOCUS Part II and IIA should report commissions from foreign currency swaps on line 11007 (Foreign Exchange) in Section 1. Firms that file FOCUS Part II CSE should report these commissions on Line 13991 (Commodity Transactions) in Section 1.

 

Firms filing FOCUS Part II CSE should report commissions from all other swaps on Line 13991 (Commodity Transactions) in Section 1. Firms filing FOCUS Part II and IIA should report these commissions on Line 13990 (Commodities Revenue) in Section 10 (Commodities Revenue).

 

For the purpose of the SSOI, it does not matter whether the product is centrally cleared. 

 


 

Revenue from Sale of Investment Company Shares (Section 2)

1. If a firm is affiliated with an investment company, where should the firm report revenue from the sale of investment company shares?

The firm should report revenue in Section 2 (Revenue From Sale of Investment Company Shares) irrespective of whether the broker-dealer is affiliated with the investment company. 

 


 

Revenue from Sale of Insurance-Based Products (Section 3)

1. If a firm is affiliated with an insurance company, where should the firm report revenue from the sale of insurance-based products?

The firm should report revenue in Section 3 (Revenue From Sale of Insurance-Based Products) irrespective of whether the broker-dealer is affiliated with the insurance company. 

 


 

Gains or Losses on Derivative Trading Desks (Section 4)

1. On what line should firms report gains/losses from principal transactions in non-commodities futures (e.g., interest rate futures)?

Firms filing a FOCUS Part II and IIA should report gains/losses from principal transactions in Section 5 (Net Gains or Losses on Principal Trades), as appropriate, and on Line 13951(Other) in Section 5 (Net Gains or Losses on Principal Trades) as a default.

 

Firms that file a FOCUS Part II CSE and report the revenue on lines 3921 through 3925 of the FOCUS Report would carry over the revenue to lines 13921 through 13925 in Section 4 of the SSOI without modification.  As noted in the answer to General Question 1, only firms filing FOCUS Part II CSE can use Section 4 of the SSOI. If a particular revenue source is not included in Section 4, a firm filing FOCUS Part II CSE must use Section 5 (Net Gains or Losses on Principal Trades) and report the revenue as appropriate, or use Line 13951 (Other) as a default for products not listed.

 


 

Net Gains or Losses on Principal Trades (Section 5)

1. On what line should a firm report gains/losses from principal transactions in non-commodities futures (e.g., interest rate futures)?

See question 1 in Gains or Losses on Derivative Trading Desks (Section 4).

 

2. Where should a firm report gains/losses from principal transactions in swaps?

If the product is a security-based swap, firms should report the gains/losses on Line 11042 (Securities Based Swaps) in Section 5. Firms should report gains/losses for all other swaps on Line 11043 (All Other Swaps) in Section 5.

 


 

Interest/Rebate/Dividend Income (Section 7)

1. Where would a firm report fees earned on non-cash stock borrow transactions?

Firms should report fees earned on non-cash stock borrow transactions on Line 11060 (Securities Borrowing) in Section 7.

 


 

Revenue from Underwritings and Selling Group Participation (Section 8)

1. Section 8 of the SSOI requires a firm to break out revenue from underwritings and selling group participations. Does the capacity in which a firm functions (e.g., lead manager, co-manager) impact this reporting requirement in any way?

All firms must complete Section 8 of the SSOI, irrespective of the capacity in which they participated in such offering(s).

 


 

Fees Earned (Section 9)

1. Where should a firm report 12b-1 fees earned from a fund issued by an affiliated investment company?

Firms should report 12b-1 fees earned from a fund issued by an affiliated investment company on Line 11090 (Fees earned from affiliated entities) in Section 9. The SSOI Instructions for this line state that firms should include “fees earned from affiliated entities to the extent that the fees relate to products or services enumerated in Items B through N in this section.” Because 12b-1 fees are referenced in Item G, the broker-dealer would reflect 12b-1 fees from an affiliate on Line 11090 (Fees earned from affiliated entities), and all other 12b-1 fees on Line 11094 (12b-1 Fees) in Section 9.

 

2. If a firm generates fee revenue (non-commissions) related to various products (both securities and non-securities) or services that are not reflected on the SSOI, where would the firm report such revenue?

Firms should report fees that are not provided for elsewhere on Line 11101 (Other Fees) in Section 9.

 

See also question 3 under General Questions related to transfer pricing agreements with an affiliated entity.

 


 

Commodities Revenue (Section 10)

1. On what line should a firm report commissions from swap transactions? Is there a difference if the swap is centrally cleared?

See the answer to question 4 in – Commissions (Section 1).

 


 

Other Revenue (Section 11)

1. On what line should firms report foreign exchange commissions? 

See the answer to question 1 in – Commissions (Section 1).

 


 

Compensation Expense (Section 12)

1. If a firm’s payroll system does not maintain information regarding a person’s securities licenses (e.g., Series 7 and/or Series 24), how should a firm break out compensation expenses in Section 12 between Lines 14110 (Registered Representatives Compensation) and 14040 (Compensation Paid to all Other Revenue-Producing Personnel)?

The firm should make reasonable efforts to distinguish the nature of the compensation into Lines 14110 (Registered Representatives Compensation), 14040 (Compensation Paid to all Other Revenue-Producing Personnel) and 11200 (Compensation Paid to Non-Revenue-Producing Personnel (including temporary personnel)). For some firms, this may mean carrying over the values from the FOCUS Report Line 4110 to SSOI Line 14110 (Registered Representatives Compensation), and Line 4040 to SSOI Line 14040 (Compensation Paid to all Other Revenue-Producing Personnel) in Section 12. The firm must continue to use the method it selects on subsequent SSOI filings.

 

However, regardless of the method a firm selects, all firms are expected to report Line 11201(Bonuses) and Line 11202 (Other compensation expenses) in Section 12 separately—i.e., these amounts may not be included in Lines 14110 (Registered Representatives Compensation), 14040 (Compensation Paid to all Other Revenue- Producing Personnel) and 11200 (Compensation Paid to Non-Revenue-Producing Personnel (including temporary personnel)).

 

2. The firm’s registered representatives do not receive commissions as part of their compensation, nor is their compensation tied directly to the assets they bring into the firm. However, in addition to a salary, they may earn additional compensation as measured by key metrics used to grow the business. The instructions to Line 14110 (Registered Representatives Compensation) in Section 12 state that this field would include “[c]ompensation paid to personnel whose activities are primarily sales related … ” Would the firm report the compensation in Line 14040 (Compensation Paid to all Other Revenue-Producing Personnel), and accordingly leave Line 14110 (Registered Representatives Compensation) blank?

Yes.

 


 

Commission, Clearance and Custodial Expenses (Section 13)

1. Where would an introducing firm report fees it pays to its clearing firm for clearing services? Is the fee treated differently if the introducing firm and clearing firm are affiliated?

Firms should report fees paid to a clearing firm on Line 11210 (Clearance Fees Paid to Broker-Dealers) in Section 13 irrespective of whether the clearing firm and introducing firm are affiliated.

 


 

Fees Paid to Third-Party Service Providers (Section 16)

See the answers to questions 3, 4 and 5 under General Questions.

 


 

General, Administrative, Regulatory and Miscellaneous Expenses (Section 17)

1. Does Line 11253 (Professional Services Fees) in Section 17 include the professional services of persons whose work is related to the conduct of the securities business only, or does it include the professional services of, for example, electricians, telephone installers or building equipment maintenance personnel?

Line 11253 (Professional Services Fees) in Section 17 includes only professional fees related to the broker-dealer’s business and does not include non-broker-dealer-related professional services as provided in the example above.

 

See also question 4 under General Questions related to expense sharing agreements with an affiliated entity.

 


 

Other Expenses (Section 18)

1. Where should firms report gift expenses?

Firms should report gift expenses on Line 14100 (Other Expenses) in Section 18.

 


 

Operational Page

1. Where would a firm find the information that is required on the SSOI Operational Page for unregistered offerings?

The information required in Items A through G would be available through a review of the Offering Memorandum (OM). In addition, a firm may determine the answer to Item B by conducting a search of the SEC's website (www.sec.gov) for Form D filings. Item F refers to the minimum investment accepted from any outside investor. For example, the OM may state that the offering is for units at $10,000 each and the minimum investment is 5 units, or $50,000. The firm should report $50,000 on the Operational Page. In reporting this amount, the firm would disregard any language in the OM that states that the issuer may waive the minimum investment at its discretion. Item G is also contained in the OM. For example, if the offering is a contingent offering where the issuer must, by way of example, raise at least $1 million (or the offering will be cancelled) and seeks to raise a maximum of $5 million, the firm would report $5 million in Item G. If there is no maximum value noted on the OM, the firm should check the “Indefinite” box.

 

Items H through J refer to the activity of the firm completing the SSOI. If the offering is for the sale of securities where an affiliate is the issuer, Item K requires that the firm report the issuer’s affiliation to the firm.