PAPERWORK REDUCTION ACT
EXTENSION SUBMISSION
Rule 15b11-1 and Form BD-N
Supporting Statement
A. Justification
1. Necessity of Information Collection
The Securities Exchange Act of 1934 (“Exchange Act”) was enacted by Congress to regulate the nation’s securities markets and the securities professionals who participate in those markets. The Exchange Act establishes a regulatory scheme for broker-dealers to effect transactions in securities. In addition, the Exchange Act and the rules promulgated thereunder require broker-dealers to meet minimum standards designed to protect investors.
In 2000, Congress enacted the Commodity Futures Modernization Act of 2000 (“CFMA”).1 Among other purposes, the CFMA permits the trading of security futures products. Security futures products are defined as securities for purposes of the Exchange Act, and as futures contracts for purposes of the Commodity Exchange Act. The CFMA added Section 15(b)(11) to the Exchange Act, which provides that futures commission merchants (“FCMs”) and introducing brokers (“IBs”) that are registered with the Commodity Futures Trading Commission (“CFTC”) may register with the Commission as broker-dealers for the purpose of effecting transactions in security futures products by filing a written notice with the Commission.2
To implement the foregoing statutory provisions of the Exchange Act, the Commission has promulgated Rule 15b11-1 (17 C.F.R. 240.15b11-1) and Form BD-N (17 C.F.R. 249.501b) to serve as the form of notice for futures commission merchants and introducing brokers that register as broker-dealers by notice pursuant to Section 15(b)(11)(A) of the Exchange Act. Specifically, the form requires a broker-dealer registering by notice to indicate whether it is filing a notice registration to conduct a securities business in security futures products and if so, that it satisfies the statutory conditions for notice registration. These items enable the Commission and other regulators to identify notice-registered broker-dealers.
2. Purpose and Use of the Information Collection
The Form BD-N is used to elicit basic identification information as well as information that allows the Commission staff to ensure that the futures commission merchants and introducing brokers meet the statutory conditions to register by notice pursuant to Section 15(b)(11) of the Exchange Act. Without the information elicited by the Form BD-N, the Commission would be unable to fulfill its regulatory obligations.
3. Consideration Given to Information Technology
Applicants for notice registration as broker-dealers file Form BD-N with the National Futures Association (“NFA”), similar to the manner in which they file forms required to register as an FCM or IB. This method of collection reduces the regulatory burden upon notice-registered broker-dealers by permitting them to file applications for registration and amendments thereto at one central location, rather than filing Form BD-N separately with the Commission and other regulators.
4. Duplication.
There is no duplication of the requirement of Rule 15b11-1 exists.
5. Effect on Small Entities
Rule 15b11-1 applies uniformly to all entities.
6. Consequences of Less Frequent Collection
Applicants for notice registration as broker-dealers generally are required to file Form BD-N only once to register and are required to file amendments to Form BD-N only when information originally reported in Form BD-N changes or becomes inaccurate. Therefore, less frequent collection for Form BD-N information would impair the accuracy of the information available to the Commission and decrease the protections afforded to investors.
7. Inconsistencies with Guidelines in 5 CFR 1320.5(d)(2).
This collection is consistent with the guidelines in 5 CFR 1320.5(d)(2).
8. Consultations Outside the Agency.
When writing Rule 15b11-1 and creating Form BD-N, the Commission staff consulted with the NASD, and staff of the CFTC. The required 60 day and 30 day Federal Register Notices have been published. The Commission has received no comments on this collection.
9. Payment or Gift
Not applicable.
10. Confidentiality
The Commission makes the information obtained from Form BD-N available to the public.
11. Sensitive Questions.
Form BD-N asks no questions of a sensitive nature.
Burden of Information Collection
As of July 21, 2010, 301 FCMs and IBs were notice registered with the Commission. NFA received eighteen initial applications on Form BD-N in calendar year 2008, six in calendar year 2009, and six from January 1, 2010 through September 17, 2010. Based on this data, Commission staff estimates that NFA will receive approximately ten initial applications annually on Form BD-N.3 Commission staff has previously estimated that the average time necessary to complete the initial Form BD-N is approximately 30 minutes.4 The Commission staff estimates that total annual burden hours required for filing initial Forms BD-N is approximately five hours.5
Once registered on Form BD-N, notice-registered broker-dealers will be required to file amendments to Form BD-N when information originally reported in Form BD-N changes or becomes inaccurate. NFA received eighteen amendments on Form BD-N in calendar year 2008, six in calendar year 2009, and six from January 1, 2010 through September 17, 2010. Based on this data, Commission staff estimates that NFA will receive approximately eleven amendments annually on Form BD-N.6 Commission staff has previously estimated that the average time necessary to complete an amendment to Form BD-N is approximately 15 minutes.7 Therefore, Commission staff estimates that the total annual burden hours for filing Form BD-N amendments by notice-registered broker-dealers is approximately three hours.8
The Commission staff previously estimated the total annual filing burden for Form BD-N and Form BD-N amendments to be 8 hours. As the number of initial applications filed on Form BD-N decreased yet the number of amendments received on the Form BD-N increased since the last filing with OMB, Commission staff estimates that the total annual filing (reporting) burden associated with Rule 15b11-1 and Form BD-N has not changed.9
The Commission believes that a broker-dealer would have a compliance department employee, at $294 per hour;10 ensure that the firm is compliant with Filing and amending Form BD-N. Therefore, the Commission estimates that the annualized cost to respondents of the burden associated with filing and amending Form BD-N is approximately $2,352.11
Costs to Respondents
The Rule does not impose any costs aside from those associated with the burden hours discussed in item 12 above.
14. Costs to Federal Government
Because the NFA has agreed to accept and process all applications for notice-registered broker-dealers on Form BD-N electronically, the cost to the federal government of processing a Form BD-N for purposes of Rule 15b11-1 is negligible.
15. Reason for Changes in Burden
The Commission staff’s estimated total annual filing burden for initial applications and amendments filed on Form BD-N did not change.
16. Information Collections Planned for Statistical Purposes
This information collection will not be utilized for statistical purposes.
17. Display of OMB Approval Date
We request authorization to omit the expiration date on the electronic version of the form, although the OMB control number will be displayed. Including the expiration date on the electronic version of this form will result in increased costs, because the need to make changes to the form may not follow the application’s scheduled version release dates.
18. Exceptions to Certification for Paperwork Reduction Act Submissions
This collection complies with the requirements in 5 CFR 1320.9.
B. Collection of Information Employing Statistical Methods
The information collection does not employ statistical methods.
1 Pub. L. No. 106-554, Appendix E, 114 Stat. 2763.
2 15 U.S.C. 78o(b)(11).
3 (20 initial applications + 6 initial applications + ((2 initial applications / 9 months) x 12 months) = 28.67 total initial applications / 3 years = 9.56 initial applications annually.
4 Securities Exchange Act Release No. 44730 (August 21, 2001), 66 FR 45138.
5 (10 initial applications x 0.5 hours per application) = 5 hours.
6 (18 amendments + 6 amendments + ((6 amendments / 9 months) x 12 months) = 32 total initial applications / 3 years = 10.67 initial applications annually.
7 Id.
8 (11 amendments per year x 0.25 hours per amendment) = 2.75 hours (which rounds to 3 hours)
9 (5 hours for initial applications + 2¾ hours for amendments) = 7¾ hours.
10 This figure ($294/hour) is the salary given for a Compliance Manager in the Securities Industry and Financial Markets Association’s Report on Management & Professional Earnings in the Securities Industry 2009, modified by the Commission to account for an 1,800-hour work year and multiplied by 5.35 to account for bonuses, firm size, employee benefits and overhead.
11 8 hours x $294 = $2,352.
| File Type | application/msword |
| File Title | SUPPORTING STATEMENT |
| Author | ROCHEJ |
| Last Modified By | pavliksimonr |
| File Modified | 2010-12-20 |
| File Created | 2010-12-20 |