2013 17f-1(g) justification DGL REVISED

SUPPORTING STATEMENT
for the Paperwork Reduction Act Information Collection Submission for
Rule 17f-1(g)
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 on December 6, 1976. This Rule implemented Section
17(f)(1) of the Act by establishing reporting and inquiry requirements regarding missing, lost,
stolen, or counterfeit securities. Section 17(f)(1) of the Act was a response by Congress to the
large number of securities thefts that had occurred in recent years. 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
ease of, negotiating such securities. The purpose of Section 17(f)(1) and Rule 17f-1 thereunder
is to create a central data base 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.
Paragraph (g) of Rule 17f-1 requires that all reporting institutions (i.e., every national
securities exchange, member thereof, registered securities association, broker, dealer, municipal
securities dealer, registered transfer agent, registered clearing agency, participant therein,
member of the Federal Reserve System, and bank insured by the FDIC) maintain and preserve a
number of documents related to their participation in the Lost and Stolen Securities Program
(“Program”) under Rule 17f-1. The following documents must be kept in an easily accessible
place for three years, according to paragraph (g): (1) copies or all reports of theft or loss (Form
X-17F-1A) filed with the Commission’s designee; (2) all agreements between reporting
institutions regarding registration in the Program or other aspects of Rule 17f-1; and (3) all
confirmations or other information received from the Commission or its designee as a result of
inquiry.
2.

Purpose and Use of the Information Collection

Reporting institutions utilize these records and reports (a) to report missing, lost, stolen
or counterfeit securities to the database, (b) to confirm inquiry of the database, and (c) to
demonstrate compliance with Rule 17f-1. The Commission and the reporting institutions’
examining authorities utilize these records to monitor the incidence of thefts and losses incurred
by reporting institutions and to determine compliance with Rule 17f-1. If reporting institutions
did not retain such records, compliance with Rule 17f-1 could not be monitored effectively.

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3.

Consideration Given to Improved Technology

Most transfer agent processing systems are automated and those automated systems
enable transfer agents to easily identify and to retain records under the Rule. There are no legal
or technical obstacles that, if removed, would reduce burdens.
4.

Duplication

No other reporting requirement with respect to the information required to be reported
under the Rule currently exists.
5.

Effect on Small Entities

The minimal record retention requirements of Rule 17f-1(g) do not require small entities
to create records, but simply to retain existing records.
6.

Consequences of Not Conducting Collection

Rule 17f-1(g) does not require periodic collection, but does require retention of records
generated as a result of compliance with Rule 17f-1. Any less frequent reporting or inquiry
under Rule 17f-1 would expose reporting institutions to significant financial loss.
7.

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

There are no special circumstances. This 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.

10.

Confidentiality

Under Section 17(b) and (f) of the Act, the information required by Rule 17f-1(g) is
available to the Commission and Federal bank regulators for examinations or collection
purposes. Rule 0-4 of the Act deems such information to be confidential.

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11.

Sensitive Questions

No questions of a sensitive nature are asked. The information collection does not
collect any Personally Identifiable Information (PII).
12.

Burden of Information Collection

The Commission estimates that there are 24,969 reporting institutions (respondents) and,
on average, each respondent would need to retain 33 records annually, with each retention
requiring approximately 1 minute. Thus, the total estimated annual burden for all respondents
is 13,733 hours (24,969 x (33 records + 1 minute/response x 1 hour/60 minutes) = 13,733).
As indicated above, the Commission estimates that each respondent must spend 33
minutes per year (33 records x 1 minute/response) to retain information under the rule.
Assuming an average hourly cost for clerical work of $50.00, the average total yearly record
retention cost for each respondent would be $27.50 ($50.00 x 0.55 hours). Based on these
estimates, the total annual compliance cost for the estimated 24,969 reporting institutions would
be approximately $686,647 (24,969 x $27.50).
13.

Costs to Respondents

Not applicable. The Commission does not anticipate that respondents would have to
incur any capital or startup costs, nor any additional operational or maintenance costs (other than
as provided in Item 12), to comply with the collection of information requirements required by
Rule 17f-1(g).
14.

Costs to Federal Government
There is no cost to the Federal government from Rule 17f-1(g).

15.

Changes in Burden

Aggregate burden hours have decreased by 268.9 hours (14,001.9 – 13,733 = 268.9), due
to the decrease by 489 in the number of reporting institutions that have registered in the Lost and
Stolen Securities Program (year-end 2009 to year-end 2012). These 489 institutions chose to
drop out of the Program to avoid the costs involved.
16.

Information Collection Planned for Statistical Purposes
Not applicable. This information collection is not used for statistical purposes.

17.

Approval to Omit OMB Expiration Date
Not applicable. The Commission is not seeking approval to omit the expiration date.

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18.

Exceptions to Certification for Paperwork Reduction Act Submission
Not applicable. This collection complies with the requirements in 5 CFR 1320.9.

B.

COLLECTION OF INFORMATION EMPLOYING STATISTICAL METHODS
Not applicable. This collection does not involve statistical methods.

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