[Federal Register Volume 76, Number 8 (Wednesday, January 12, 2011)]
[Notices]
[Pages 2153-2154]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-475]
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SECURITIES AND EXCHANGE COMMISSION
Proposed Collection; Comment Request
Upon Written Request, Copies Available From: Securities and Exchange
Commission, Office of Investor Education and Advocacy, Washington, DC
20549-0213.
Extension:
Rule 15c3-3; SEC File No. 270-087; OMB Control No. 3235-0078.
Notice is hereby given that pursuant to the Paperwork Reduction Act
of 1995 (44 U.S.C. 3501 et seq.) the Securities and Exchange Commission
(``Commission'') is soliciting comments on the existing collection of
information provided for in Rule 15c3-3 (17 CFR 240.15c3-3), under the
Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.). The Commission
plans to submit this existing collection of information to the Office
of Management and Budget for extension and approval.
Rule 15c3-3 requires that a broker-dealer that holds customer
securities obtain and maintain possession and control of fully-paid and
excess margin securities they hold for customers. In addition, the Rule
requires that a broker-dealer that holds customer funds make either a
weekly or monthly computation to determine whether certain customer
funds need to be segregated in a special reserve bank account for the
exclusive benefit of the firm's customers. It also requires that a
broker-dealer maintain a written notification from each bank where a
Special Reserve Bank Account is held acknowledging that all assets in
the account are for the exclusive benefit of the broker-dealer's
customers, and to provide written notification to the Commission (and
its designated examining authority) under certain, specified
circumstances. Finally, paragraph (o) of Rule 15c3-3, which applies
only to broker-dealers that sell securities futures products (``SFP'')
to customers, requires that such broker-dealers provide certain
notifications to customers, and to make a record of any changes of
account type.
There are approximately 279 broker-dealers fully subject to the
Rule (i.e., broker-dealers that cannot claim any of the exemptions
enumerated at paragraph (k)), of which approximately 13 make daily, 210
make weekly, and 56 make monthly, reserve computations. On average,
each of these respondents require approximately 2.5 hours to complete a
computation. Accordingly, Commission staff estimates that the resulting
burden totals 36,780 hours annually ((2.5 hours x 240 computations x 13
respondents that calculate daily) + (2.5 hours x 52 computations x 210
respondents that calculate weekly) + (2.5 hours x 12 computations x 56
respondents that calculate monthly)).
A broker-dealer required to maintain the Special Reserve Bank
Account prescribed by Rule 15c3-3 must obtain and retain a written
notification from each bank in which it has a Special Reserve Bank
Account to evidence bank's acknowledgement that assets deposited in the
Account are being held by the bank for the exclusive benefit of the
broker-dealer's customers. As stated previously, 279 broker-dealers are
presently fully-subject to Rule 15c3-3. In addition, 120 broker-dealers
operate in accordance with the exemption provided in paragraph
(k)(2)(i) which also requires that a broker-dealer maintain a Special
Reserve Bank Account. The staff estimates that of the total broker-
dealers that must comply with this rule, only 25%, or 100 ((279 + 120)
x .25) must obtain 1 new letter each year (either because the broker-
dealer changed the type of business it does and became subject to
either paragraph (e)(3) or (k)(2)(i) or simply because the broker-
dealer established a new Special Reserve Bank Account). The staff
estimates that it would take a broker-dealer approximately 1 hour to
obtain this written notification from a bank regarding a Special
Reserve Bank Account because the language in these letters is largely
standardized. Therefore, Commission staff estimates that broker-dealers
will spend approximately 100 hours each year to obtain these written
notifications.
In addition, a broker-dealer must immediately notify the Commission
and its designated examining authority if it fails to make a required
deposit to its Special Reserve Bank Account. Commission staff estimates
that broker-dealers file approximately 33 such notices per year.
Broker-dealers would require approximately 30 minutes, on average, to
file such a notice. Therefore, Commission staff estimates that broker-
dealers would spend a total of
[[Page 2154]]
approximately 17 hours each year to comply with the notice requirement
of Rule 15c3-3.
Finally, a broker-dealer that effects transactions in SFPs for
customers also will have paperwork burdens associated with the
requirement in paragraph (o) of Rule 15c3-3 to make a record of each
change in account type.\1\ More specifically, a broker-dealer that
changes the type of account in which a customer's SFPs are held must
create a record of each change in account type that includes the name
of the customer, the account number, the date the broker-dealer
received the customer's request to change the account type, and the
date the change in account type took place. As of December 31, 2009,
broker-dealers that were also registered as futures commission
merchants reported that they maintained 35,242,468 customer accounts.
The staff estimates that 8% of these customers may engage in SFP
transactions (35,242,468 accounts x 8% = 2,819,397). Further, the staff
estimates that 20% per year may change account type. Thus, broker-
dealers may be required to create this record for up to 563,879
accounts (2,819,397 accounts x 20%). The staff believes that it will
take approximately 3 minutes to create each record.\2\ Thus, the total
annual burden associated with creating a record of change of account
type will be 28,194 hours (563,879 accounts x (3min/60min)).
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\1\ 17 CFR 240.15c3-3(o)(3)(i).
\2\ In fact, the staff believes that most firms will have this
process automated. To the extent that no person need be involved in
the generation of this record, the burden will be very minimal.
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Consequently, the staff estimates that the total annual burden
hours associated with Rule 15c3-3 would be approximately 65,091 hours
(36,780 hours + 100 hours + 17 hours + 28,194 hours).
The staff estimates that a broker-dealer would have (1) A financial
reporting manager make a record of its reserve computations and send
the required notices to the Commission, (2) an attorney obtain the
written notifications from banks where it has a Special Reserve Bank
Account to evidence bank's acknowledgement that assets deposited in the
Account are being held by the bank for the exclusive benefit of
customers, and (3) a compliance clerk create a record of each change in
account type. The staff estimates that the hourly rate of a financial
reporting manager and an attorney are $290 and $354, respectively,\3\
and the hourly rate of a compliance clerk is $67.\4\ Consequently, the
total cost of the above-described hour burden would be $12,595,528.\5\
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\3\ The $290/hour figure for a financial reporting manager and
the $354/hour figure for an attorney are derived from SIFMA's
Management & Professional Salaries in the Securities Industry 2010,
as modified by Commission staff to account for an 1,800 hour work-
year and multiplied by 5.35 to account for bonuses, firm size,
employee benefits and overhead.
\4\ The $67/hour figure for a compliance clerk is derived from
SIFMA's Office Salaries in the Securities Industry 2010, modified by
Commission staff to account for an 1,800 hour work-year and
multiplied by 2.93 to account for bonuses, firm size, employee
benefits and overhead.
\5\ (((36,780 hours + 17 hours) x $290/hour) + (100 hours x
$354/hour) + (28,194 hours x $67/hour)).
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In addition, a broker-dealer that effects transactions in SFPs for
customers also will have an annualized cost burden associated with the
requirements in paragraph (o) of Rule 15c3-3 to (1) provide each
customer that plans to effect SFP transactions with a disclosure
document containing certain information,\6\ and (2) send each SFP
customer notification of any change of account type.\7\ Approximately
8% of the accounts held by broker-dealers that are also registered as
FCMs, or 2,819,397 accounts, may engage in SFP transactions. The staff
estimates that the cost of printing and sending each disclosure
document will be approximately $.15 per document sent.\8\ Thus, the
staff estimates that the cost of printing and sending disclosure
documents would be approximately $422,910 (2,819,397 accounts x $.15).
In addition, approximately 563,879 accounts (2,819,397 accounts x 20%)
may change account type per year requiring that broker-dealers provide
notification to those customers. The staff estimates that the cost of
sending this notification to customers will be about $84,582 (563,879
accounts x $.15). Consequently, the staff estimates that the total
annual cost associated with Rule 15c3-3 would be $507,492 ($422,910 +
$84,583).
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\6\ 17 CFR 240.15c3-3(o)(2).
\7\ 17 CFR 240.15c3-3(o)(3)(ii).
\8\ Based on past conversations with industry representatives
regarding other rule changes as adjusted to account for inflation
and increased postage costs.
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Written comments are invited on: (a) Whether the proposed
collection of information is necessary for the proper performance of
the functions of the agency, including whether the information shall
have practical utility; (b) the accuracy of the agency's estimate of
the burden of the proposed collection of information; (c) ways to
enhance the quality, utility, and clarity of the information to be
collected; and (d) ways to minimize the burden of the collection of
information on respondents, including through the use of automated
collection techniques or other forms of information technology.
Consideration will be given to comments and suggestions submitted in
writing within 60 days of this publication.
Please direct your written comments to: Thomas Bayer, Chief
Information Officer, Securities and Exchange Commission, c/o Remi
Pavlik-Simon, 6432 General Green Way, Alexandria, Virginia 22312 or
send an e-mail to: [email protected].
Dated: January 6, 2011.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-475 Filed 1-11-11; 8:45 am]
BILLING CODE 8011-01-P