2011-17a-19-Supporting Statement

SUPPORTING STATEMENT
for the Paperwork Reduction Act Information Collection Submission for
Rule 17a-19 and Form X-17A-19

A.

Justification
1.

Necessity of Information Collection

Before it begins doing business, a broker-dealer must become a member of a selfregulatory organization (“SRO”). SROs assist the Securities and Exchange Commission
(“Commission”) in regulating the activities of broker-dealers. The Financial Industry
Regulatory Authority (“FINRA”), a registered national securities association, and the
national securities exchanges are all SROs. In a 1974 study, the Commission
recommended that each broker-dealer be examined by and report to only one SRO
regarding financial responsibility and related recordkeeping. However, the study
concluded that, for this system to be successful, the Commission would have to receive
prompt notification of any change in the broker-dealer’s membership in an SRO. The
Commission therefore adopted Securities Exchange Act of 19341 (“Exchange Act”) Rule
17a-19 (17 CFR 240.17a-19) and Form X-17A-19 (17 CFR 249.635) in 1974 to require
and facilitate the reporting of this information.
Rule 17a-19 requires every national securities exchange and registered national
securities association to file a Form X-17A-19 with the Commission within 5 business
days of the initiation, suspension, or termination of any member and, when terminating
the membership interest of any member, to notify that member of its obligation to file
financial reports as required by Exchange Act Rule 17a-5(b) (17 CFR 240.17a-5).
The Commission adopted Rule 17a-19 pursuant to Sections 17(a) and 23(a) of the
Exchange Act, 15 U.S.C. Sections 78q(a) and 78w(a), respectively.
2.

Purpose and Use of the Information Collection

Upon the receipt of a Form X-17A-19, Commission staff puts the information into
a database, which is regularly shared with the SROs. The Commission uses the
information contained in Form X-17A-19 to assign the appropriate SRO to be the
designated examining authority (“DEA”) for the member firm. This information is also
used by the Securities Investor Protection Corporation (“SIPC”) in determining which
self-regulatory body is the collection agent for the SIPC fund.

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15 U.S.C. 78a et seq.

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3.

Consideration Given to Information Technology

While both the Commission and the SROs continue to improve their systems for
information gathering and compilation through increasing use of computer technology,
the burden associated with filing each Form X-17A-19 is already negligible. Thus,
improved information technology will have little effect in reducing the burden.
4.

Duplication

Rule 17a-19 is the only rule that requires the submission of this information.
Because no similar information is already available, no duplication exists.
5.

Effect on Small Entities

The required reports are not extensive, and therefore the collection of information
is not unduly burdensome for small entities.
6.

Consequences of Not Conducting Collection

If this information was not collected, broker-dealers would be subject to duplicate
examinations by SROs.
7.

Inconsistencies with Guidelines in 5 CFR 1320.5(d)

There are no special circumstances. This collection is consistent with the
guidelines in 5 CFR 1320.8(d).
8.

Consultations Outside the Agency

The required Federal Register notice with a 60-day comment period soliciting
comments on this collection of information was published. No public comments were
received.
9.

Payment or Gift

There are no payments or gifts.
10.

Confidentiality

No assurance of confidentiality is provided by Rule 17a-19.
11.

Sensitive Questions

Questions of a sensitive nature are not asked.

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12.

Estimate of Respondent Reporting Burden

This is a reporting burden occurring on an ongoing basis. The information
requested by Form X-17A-19 is obtained from the respondent’s membership files. The
Commission staff estimates that, in its experience, Form X-17A-19 can be completed and
signed within 15 minutes. The number of responses per year per respondent varies,
depending on the number of membership changes reported. The number of filings is
approximately 1,200 per year. The aggregate time spent by all respondents per year in
complying with the rule is approximately 300 hours. The estimated cost of clerical time
to complete the form is $16.75 per response. Since there are approximately 1,200
responses per year, the aggregate compliance cost for the respondents is $20,100.
13.

Costs to Respondents

(a) It is not anticipated that respondents will have to incur any capital and start up
cost to comply with the rule. (b) It is not anticipated that the respondents will have to
incur any additional operational or maintenance cost (other than provided for in item No.
12) to comply with the rule.
14.

Costs to Federal Government

Commission staff estimates that there is no annual cost to the Federal Government
associated with Rule 17a-19.
15.

Changes in Burden

The burden has been increased to reflect an increase in the number of membership
changes taking place in national securities exchanges and registered national securities
associations and the resulting increase in the annual number of Form X-17A-19 filings
with the Commission.
16.

Information Collection Planned for Statistical Purposes

The Commission does not publish information collected pursuant to Rule 17a-19
and Form X-17A-19.
17.

Display of OMB Approval Date

The Commission is not seeking approval to not display the expiration date for
OMB approval.
18.

Exceptions to Certification for Paperwork Reduction Act Submissions

This collection complies with the requirements in 5 CFR 1320.9.

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B.

Collections of Information Employing Statistical Methods
This collection does not involve statistical methods.