SEC Division of Trading and Markets no-action letter: Charles Schwab & Co., Inc.

August 13, 2020
Aubrey Thacker
Senior Vice President – Corporate Controller
Charles Schwab & Co., Inc.
9800 Schwab Way
Lone Tree, CO 80124
Re: Net capital treatment of deferred tax liabilities directly related to intangible assets recognized as part of a business acquisition Dear Mr. Thacker:
In your August 12, 2020 letter (“Letter”) on behalf of The Charles Schwab Corporation (“Schwab”) you request written assurance that the staff of the Division of Trading and Markets (“Division”) of the U.S. Securities and Exchange Commission (“Commission”) will not recommend enforcement action to the Commission under section 15(c) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 15c3-1 thereunder (“Rule 15c3-1”). In particular, you request that the Division not recommend enforcement action if, when computing net capital, TD Ameritrade Inc. (“TDAI”), TD Ameritrade Clearing Inc. (“TDAC”), and Charles Schwab & Co. Inc. (“CS&Co”) add back to net worth the amount of deferred tax liabilities (“DTLs”) they incur to the extent that amount directly relates to non-allowable intangible assets recognized as part of a non-taxable business combination. I understand the following facts are relevant to your request. Background On November 24, 2019 Schwab announced a pending acquisition of TD Ameritrade Holding Corporation (“TDA”) and its subsidiaries (the “TDA Transaction”), including two broker-dealers: TDAI and TDAC. This transaction will not be a taxable business combination and, accordingly, you represent that Schwab will receive no increase in the tax basis in the acquired intangible assets. The TDA Transaction will be accounted for under the acquisition method of accounting in accordance with Accounting Standards Codification Topic 805, Business Combinations (“ASC 805”). ASC 805 generally requires assets acquired and liabilities assumed to be measured at fair value as of the acquisition date. Assets acquired and measured at fair value