PRA201217f-1(b)supp

SUPPORTING STATEMENT
for the Paperwork Reduction Act Collection Submission
“Rule 17f-1(b)”
A.

Justification
(1)

Necessity of Information Collection

The Commission, pursuant to Sections 2, 17(f), 19(a) and 23 of the Securities
Exchange Act of 1934 (“Act”), adopted Rule 17f-1 (17 CFR 240.17f-1(b)) in 1979. This
rule implemented Section 17(f)(1) of the Act by establishing a program for reporting and
making inquiries requirements regarding missing, lost, stolen, or counterfeit securities
(“Program”). Section 17(f)(1) of the Act was a response by Congress to large numbers of
securities thefts. Testimony at the hearings conducted before the Senate Permanent
Subcommittee on Investigation between 1971 and 1974 indicated that the trafficking in
stolen securities was a profitable area for organized crime and that the failure to have
available to the financial community a means of easily identifying missing, lost, stolen, or
counterfeit certificates was a contributing factor to the increase in, and the ease of,
negotiating such securities. The purpose of Section 17(f)(1) and Rule 17f-1 thereunder is
to create a central database of information related to missing, lost, stolen, or counterfeit
securities and to make available to covered institutions information that promptly
identifies those securities, removing them from the stream of commerce and facilitating
the capture of those who engage in such traffic.
The Commission has adopted a number of amendments to Rule 17f-1, including
the addition of paragraph (b). Paragraph (b) requires that every “reporting institution”
(i.e., every national securities exchange, member thereof, registered clearing agency,
participant therein, member of the Federal Reserve System, and bank insured by the
Federal Deposit Insurance Corporation) register with the Commission or its designee
according to instructions issued by the Commission. (Two classes of broker-dealers were
exempted.)
Upon accepting the registration form by the Securities Information Center
(“SIC”), the Commission’s designee to maintain and operate the database, a reporting
institution is given access to the data base for both reporting and inquiry purposes.
Without the identifying information provided by the registration form, access to the
confidential database could not be limited to those institutions specified in the Act and
Rule 17f-1. In addition, the registration procedure provides the Commission with a
means of identifying those reporting institutions that have not registered in the Program
and those institutions that have registered but are not complying with the requirements
for reporting and inquiry.

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(2)

Purpose and Use of the Information Collection

The Commission uses the information received in response to Rule 17f-1(b) to
correlate the occurrence of securities losses and thefts to the size and type of reporting
institution involved. The information is also used during the inquiry procedure to notify
immediately the Federal Bureau of Investigation with regard to attempted negotiations of
such securities. Without Rule 17f-1(b), the Commission would not have a means of
identifying those reporting institutions that have not registered in the Program and those
institutions that have registered but are not complying with the requirements for reporting
and inquiry.
(3)

Consideration Given to Information Technology

Not applicable.
(4)

Duplication

Not applicable because reporting institutions are required to register with SIC
only once.
(5)

Effect on Small Entities

Although the information requested in the registration form affects small entities,
the effect is minimal. The specific information requested is easily accessible to all
reporting institutions and creates no significant burden.
(6)

Consequences of Not Conducting Collection

Since the information is requested only once upon registration for participation in
the Program, the collection of this information could not be conducted less frequently.
(7)

Inconsistencies with Guidelines in 5 CFR 1320.5(d)(2)

There are no special circumstances. The collection is consistent with the
guidelines in 5 CFR 1320.5(d)(2).
(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

Not applicable.

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(10)

Confidentiality

Reporting institutions required to register under rule 17f-1(b) will not be kept
confidential. However, the Program database will be kept confidential.
(11)

Sensitive Questions

No information of a sensitive nature is required.
(12)

Burden of Information Collection

Approximately 25,000 entities in the securities industry are required to register
with SIC. Registration is a one-time event; it is ongoing until the registrant withdraws
from the Program. We estimate that, each year, 1,000 reporting institutions register with
SIC and 1,000 institutions withdraw. The staff estimates that the average number of
hours necessary to comply with Rule 17f-1(b), that is, to register with SIC, is one-half
hour. Accordingly, the staff estimates that the total annual reporting burden for all
participants is 500 hours (1,000 x one-half hour).
(13)

Costs to Respondents

Not applicable; (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 respondents
will have to incur any additional operational or maintenance cost (other than provided for
in item number 12) to comply with the rule.
(14)

Costs to Federal Government

Costs to the Federal Government in administering Rule 17f-1(b) are minimal.
The staff presently receives about two inquiries per week from reporting institutions with
regard to registration. Those inquiries can be responded to within one-half hour. The
staff is also involved with annually reviewing the delegation arrangement with the
Securities Information Center (“SIC”). The staff estimates that approximately 150 hours
of staff time per year will be devoted to answering oral inquiries and reviewing the SIC
delegation at a cost of $16,200 per year.
This figure is based on our computation of staff time devoted to this activity and
related overhead at 35 percent of the value of staff time. This estimate has been
computed based on GSA, Guide to Estimating Reporting Costs (1973).
(15)

Changes in Burden

Not applicable. Burden is unchanged.

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(16)

Information Collection Planned for Statistical Purposes

Not applicable. The information collection is not used for statistical purposes.
(17)

Approval to Display OMB Expiration Date

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

Exceptions to Certification

This collection complies with the requirements in 5 CFR 1320.9.
B. Collection of Information Employing Statistical Methods
This collection does not employ statistical methods.