Agency Information Collection Activities; Submission for OMB Review; Comment Request; Extension: Rule 17a-4

<NOTICE> SECURITIES AND EXCHANGE COMMISSION <DEPDOC>[OMB Control No. 3235-0279]</DEPDOC> <SUBJECT>Agency Information Collection Activities; Submission for OMB Review; Comment Request; Extension: Rule 17a-4</SUBJECT> <FP SOURCE="FP-1"> <E T="03">Upon Written Request, Copies Available From:</E> Securities and Exchange Commission, Office of FOIA Services, 100 F Street NE, Washington, DC 20549-2736 </FP> Notice is hereby given that, pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 <E T="03">et seq.</E> ), the Securities and Exchange Commission (SEC or “Commission”) is submitting to the Office of Management and Budget (“OMB”) this request for extension of the proposed collection of information in Rule 17a-4. Rule 17a-4 requires exchange members, brokers, and dealers (“broker-dealers”) to preserve for prescribed periods of time certain records required to be made by Rule 17a-3. In addition, Rule 17a-4 requires the preservation of records required to be made by other Commission rules and other kinds of records which firms make or receive in the ordinary course of business. These include, but are not limited to, bank statements, cancelled checks, bills receivable and payable, originals of communications, and descriptions of various transactions. Rule 17a-4 also permits broker-dealers to employ, under certain conditions, electronic storage media to maintain records required to be maintained under Rules 17a-3 and 17a-4. There are approximately 3,298 active, registered broker-dealers. The staff estimates that the average amount of time necessary to preserve the books and records as required by Rule 17a-4 is 254 hours per broker-dealer per year. Additionally, the Commission estimates that paragraph (b)(11) of Rule 17a-4 imposes an annual burden of 3 hours per year to maintain the requisite records. The Commission estimates that there are approximately 200 internal broker-dealer systems, resulting in an annual recordkeeping burden of 600 hours. The Commission also estimates that there are approximately 2,424 broker-dealers with retail customers resulting in an annual ongoing burden of approximately 3,934,152 to comply with Rule 17a-4(e)(5). Moreover the Commission estimates that these broker-dealers will incur 242 hours in annual burden to comply with Rule 17a-4(e)(10). Therefore, the Commission estimates that compliance with Rule 17a-4 requires 4,772,698 hours each year ((3,298 broker-dealers × 254 hours) + (200 broker-dealers × 3 hours) + + 3,934,152 hours + 242 hours)). These burdens are recordkeeping burdens. The total burden hour decrease of 4,527,481 hours is due to a decrease in the number of respondents from 3,508 to 3,298, as well as the removal of the initial burden association with the recordkeeping requirements for broker-dealers with retail customers. In addition, the Commission estimates that the telephonic recording retention provision of paragraph (b)(4) of Rule 17a-4 imposes an initial burden on broker-dealer SBSDs and broker-dealer MSBSPs of 13 hours per firm in the first year and an ongoing burden of 6 hours per year (including the first year). The Commission estimates that there will be three new broker-dealer SBSDs that register with the Commission in the next three years and that there are currently eight broker-dealer SBSDs registered with the Commission resulting in an estimated industry-wide initial burden of 39 hours  <SU>1</SU> <FTREF/> in the first year and an ongoing burden of 48 hours per year (including the first year). <SU>2</SU> <FTREF/> Over a three year period, the total industry burden is estimated to be 186 hours, <SU>3</SU> <FTREF/> or 62 <E T="03">hours per year when annualized.</E> <SU>4</SU> <FTREF/> <FTNT> <SU>1</SU>  13 hours × 3 broker-dealer SBSDs = 39 hours. </FTNT> <FTNT> <SU>2</SU>  6 hours × 8 broker-dealer SBSDs and broker-dealer MSBSPs = 48 hours. </FTNT> <FTNT> <SU>3</SU>  (39 hours in first year [initial] + 48 hours in first year [ongoing]) + 48 hours in second year + 48 hours in third year = 186 hours. </FTNT> <FTNT> <SU>4</SU>  186 hours/3 years = 62 hours per year or 7.75 hours per respondent per year. </FTNT> The Commission estimates that the provisions of paragraphs (b)(1), and (b)(8)(v)-(viii) relating to security-based swap activities and paragraphs (b)(8)(xvi) and (b)(14) of Rule 17a-4 impose an initial burden of 65 hours per firm in the first year and an ongoing burden of 30 hours per year (including the first year). The Commission estimates that there will be three new respondents in the next three years, resulting in an estimated industry-wide initial burden of 195 hours  <SU>5</SU> <FTREF/> in the first year and an ongoing burden of 240 hours per year (including the first year). <SU>6</SU> <FTREF/> Over a three year period, the total industry burden is estimated to be 9150 hours, <SU>7</SU> <FTREF/> or 305 hours per year when annualized. <FTNT> <SU>5</SU>  65 hours × 3 respondents = 195 hours. </FTNT> <FTNT> <SU>6</SU>  30 hours × 8 respondents = 240 hours. </FTNT> <FTNT> <SU>7</SU>  (195 hours in first year + 240 hours in first year) + 240 hours in second year + 240 hours in third year = 915 hours. </FTNT> The Commission estimates that the provisions of paragraph (b)(1) applicable to broker-dealer SBSDs and broker-dealer MSBSPs and paragraphs (b)(15) and (b)(16) of Rule 17a-4 impose an initial burden of 65 hours per firm in the first year and an ongoing burden of 30 hours per year (including the first year). The Commission estimates that there will be three new respondents over the next three years, resulting in an estimated initial industry-wide initial burden of 185 hours  <SU>8</SU> <FTREF/> in the first year and an ongoing burden of 180 hours per year (including the first year). <SU>9</SU> <FTREF/> Over a three year period, the total industry burden is estimated to be 725 hours, <SU>10</SU> <FTREF/> or <E T="03">242 hours per year when annualized.</E> <SU>11</SU> <FTREF/> <FTNT> <SU>8</SU>  65 hours × 3 broker-dealer SBSDs and broker-dealer MSBSPs = 185 hours. </FTNT> <FTNT> <SU>9</SU>  30 hours × 8 broker-dealer SBSDs and broker-dealer MSBSPs = 180 hours. </FTNT> <FTNT> <SU>10</SU>  (185 hours in first year + 180 hours in first year) + 180 hours in second year + 180 hours in third year = 725 hours. </FTNT> <FTNT> <SU>11</SU>  725 hours/3 years = 241.67 hours per year or 30.21 hours per respondent per year. </FTNT> The Commission estimates that provisions of paragraph (b)(1) of Rule 17a-4 that apply only to broker-dealer SBSDs imposes an initial burden of 13 hours per firm in the first year and an ongoing burden of 6 hours per year (including the first year). The Commission estimates that there will be three new broker-dealer SBSDs registered in the next three years, resulting in an estimated industry-wide initial burden of 39 hours  <SU>12</SU> <FTREF/> in the first year and an ongoing burden of 48 hours per year (including the first year). <SU>13</SU> <FTREF/> Over a three year period, the total industry burden is estimated to be 418 hours, <SU>14</SU> <FTREF/> or <E T="03">62 hours per year when annualized.</E> <SU>15</SU> <FTREF/> <FTNT> <SU>12</SU>  13 hours × 3 broker-dealer SBSDs = 39 hours. </FTNT> <FTNT> <SU>13</SU>  6 hours × 8 broker-dealer SBSDs = 48 hours. </FTNT> <FTNT> <SU>14</SU>  (39 hours in first year + 48 hours in first year) + 48 hours in second year + 48 hours in third year = 186 hours. </FTNT> <FTNT> <SU>15</SU>  186 hours/3 years = 62 hours per year or 7.75 hours per respondent per year. </FTNT> In 2019, the Commission amended Rule 17a-4(b)(1), (e)(11), and (e)(12) to account for the security-based swap risk mitigation activities of broker-dealers, including Broker-Dealer SBSDs and Broker-Dealer MSBSPs (collectively, “SBS Entities”), by, among other things, requiring the preserving of any required records regarding portfolio reconciliation (Rule 15Fi-3(a) and (b)), bilateral offsets (Rule 15Fi-4(a)(1)), bilateral or multilateral portfolio compression (Rule 15Fi-4(b) and (c)), valuation disputes (Rule 15Fi-3(c)), and written trading relationship documentation (Rule 15Fi-5). Rule 17-4 does not require the firm to create these records or perform the underlying task required by the Rule. Rather, the burden to create these records and perform the underlying task is accounted for in Rule 15Fi-3—15Fi-5. <SU>16</SU> <FTREF/> Accordingly, the burdens imposed by the requirements in 17a-4 are to ensure these records related to risk mitigation are preserved for the requisite time period and produced when requested. The Commission estimates that these recordkeeping requirements impose an initial burden of 60 hours per firm for updating the applicable policies and systems required to account for capturing the additional records made pursuant to Rule 15Fi-3 through 15Fi-5, and an ongoing annual burden of 75 hours per firm for maintaining such records as well as to make additional updates to the applicable recordkeeping policies and systems to account for the new rules. The Commission estimates that there three new SBS Entity respondents in the next three years, for a total average initial annual burden for all respondents of 180 hours  <SU>17</SU> <FTREF/> and a total ongoing average annual burden of 225 hours, <SU>18</SU> <FTREF/> for a total <E T="03">annual burden of 285 hours.</E> <SU>19</SU> <FTREF/> <FTNT> <SU>16</SU>   <E T="03">See Risk Mitigation Adopting Release,</E> 85 FR at 6389. </FTNT> <FTNT> <SU>17</SU>  One-time initial reporting burden for 3 SBS Entities (60 hour × 3 SBS Entities) = 180 hours. </FTNT> <FTNT> <SU>18</SU>  75 hour × 3 SBS Entities = 225 hours. </FTNT> <FTNT> <SU>19</SU>  (180 hours in first year + 225 hours in first year) + 225 hours ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 18k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━