Rule 15c3-5 -- Risk Management Controls for Brokers or Dealers with Market Access

Forms and Documents

Document Name	Status
DGL REVISED Rule 15c3-5 Supporting Statement 2013.pdf Supporting Statement A	2013-12-11

IC Document Collections

IC ID	Document Title	Status
192016	Rule 15c3-5: Risk Management Controls for Brokers or Dealers with Market Access	Modified

ICR Details

OMB Control No: 3235-0673	ICR Reference No: 201308-3235-004
Status: Historical Active	Previous ICR Reference No: 201010-3235-009
Agency/Subagency: SEC	Agency Tracking No: TM-270-601
Title: Rule 15c3-5 -- Risk Management Controls for Brokers or Dealers with Market Access
Type of Information Collection: Extension without change of a currently approved collection	Common Form ICR:  No
Type of Review Request: Regular
OIRA Conclusion Action: Approved without change	Conclusion Date: 01/21/2014
	Date Received in OIRA: 12/11/2013
Terms of Clearance:

	Inventory as of this Action	Requested	Previously Approved
Expiration Date	01/31/2017	36 Months From Approved	01/31/2014
Responses	870	0	1,375
Time Burden (Hours)	139,200	0	332,750
Cost Burden (Dollars)	17,835,000	0	35,520,375

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Abstract: Rule 15c3-5 would require brokers or dealers with access to trading directly on an exchange or ATS, including those providing sponsored or direct market access to customers or other persons, to implement risk management controls and supervisory procedures designed to manage the financial, regulatory, and other risks of this business activity. Specifically, Rule 15c3-5 would require that brokers or dealers with access to trading securities on an exchange or ATS, as a result of being a member or subscriber thereof, establish, document, and maintain a system of risk management controls and supervisory procedures that, among other things, are reasonably designed to (1) systematically limit the financial exposure of the broker or dealer that could arise as a result of market access, and (2) ensure compliance with all regulatory requirements that are applicable in connection with market access. Each such broker or dealer would be required to preserve a copy of its supervisory procedures and a written description of its risk management controls as part of its books and records in a manner consistent with Rule 17a-4(e)(7) under the Exchange Act. The financial and regulatory risk management controls and supervisory procedures required by Rule 15c3-5 generally must be under the direct and exclusive control of the broker or dealer with market access. Broker-dealers with market access are permitted to reasonably allocate certain required risk management controls and supervisory procedures to other broker-dealers that are participants in a particular market access arrangement. Regardless of how the risk management controls and supervisory procedures are allocated to other parties, the Rule affirms that the broker-dealer providing market access retains the ultimate responsibility over its market access business activity. In addition, a broker or dealer with market access would be required to establish, document, and maintain a system for regularly reviewing the effectiveness of the risk management controls and supervisory procedures and for promptly addressing any issues. Among other things, the broker or dealer would be required to review, no less frequently than annually, the business activity of the broker or dealer in connection with market access to assure the overall effectiveness of such risk management controls and supervisory procedures and document that review. Such review would be required to be conducted in accordance with written procedures and would be required to be documented. The broker or dealer would be required to preserve a copy of such written procedures, and documentation of each such review, as part of its books and records in a manner consistent with Rule 17a-4(e)(7) under the Exchange Act, and Rule 17a-4(b) under the Exchange Act, respectively. In addition, the Chief Executive Officer (or equivalent officer) of the broker or dealer would be required, on an annual basis, to certify that the risk management controls and supervisory procedures comply with Rule 15c3-5, and that the regular review described above has been conducted. Such certifications would be required to be preserved by the broker or dealer as part of its books and records in a manner consistent with Rule 17a-4(b) under the Exchange Act.

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Authorizing Statute(s): US Code: 15 USC 78q(a) and (b), and 78w(a) Name of Law: Sections 17(a) and (b), and 23(a) of the Exchange Act
   US Code: 15 USC 78b, 78c(b), 78k-1, and 78o Name of Law: Sections 2, 3(b), 11A and 15 of the Exchange Act
  

Citations for New Statutory Requirements: None

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Associated Rulemaking Information
RIN:	Stage of Rulemaking:	Federal Register Citation:	Date:
	Not associated with rulemaking

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Federal Register Notices & Comments
60-day Notice:	Federal Register Citation:	Citation Date:
	78 FR 52809	08/26/2013
30-day Notice:	Federal Register Citation:	Citation Date:
	78 FR 65718	11/01/2013
Did the Agency receive public comments on this ICR? No

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Number of Information Collection (IC) in this ICR: 1

IC Title	Form No.	Form Name
Rule 15c3-5: Risk Management Controls for Brokers or Dealers with Market Access

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ICR Summary of Burden

	Total Approved	Previously Approved	Change Due to New Statute	Change Due to Agency Discretion	Change Due to Adjustment in Estimate	Change Due to Potential Violation of the PRA
Annual Number of Responses	870	1,375	0	0	-505	0
Annual Time Burden (Hours)	139,200	332,750	0	0	-193,550	0
Annual Cost Burden (Dollars)	17,835,000	35,520,375	0	0	-17,685,375	0

Burden increases because of Program Change due to Agency Discretion: No

Burden Increase Due to:

Burden decreases because of Program Change due to Agency Discretion: No

Burden Reduction Due to:

Short Statement: The estimates of burden under Rule 15c3-5 have decreased since the prior submission. The total estimated annual time burden of compliance with the rule has been reduced from 332,750 hours to 139,200 hours, and the estimated dollar cost expenses have been reduced from $35,520,375 to $17,835,000, in each case because broker-dealers already have compliance systems in place and thus initial cost and hourly burden estimates are no longer applicable, and because the Commission has reduced its estimate of the number of broker-dealers with market access.

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Annual Cost to Federal Government: $0

Does this IC contain surveys, censuses, or employ statistical methods? No

Is the Supporting Statement intended to be a Privacy Impact Assessment required by the E-Government Act of 2002? No

Is this ICR related to the Affordable Care Act [Pub. L. 111-148 & 111-152]? No

Is this ICR related to the Dodd-Frank Wall Street Reform and Consumer Protection Act, [Pub. L. 111-203]? No

Is this ICR related to the American Recovery and Reinvestment Act of 2009 (ARRA)? No

Is this ICR related to the Pandemic Response? Uncollected

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Common Form ICR:  No

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On behalf of this Federal agency, I certify that the collection of information encompassed by this request complies with 5 CFR 1320.9 and the related provisions of 5 CFR 1320.8(b)(3).

The following is a summary of the topics, regarding the proposed collection of information, that the certification covers:

(a) It is necessary for the proper performance of agency functions;

(b) It avoids unnecessary duplication;

(c) It reduces burden on small entities;

(d) It uses plain, coherent, and unambiguous language that is understandable to respondents;

(e) Its implementation will be consistent and compatible with current reporting and recordkeeping practices;

(f) It indicates the retention periods for recordkeeping requirements;

(g) It informs respondents of the information called for under 5 CFR 1320.8 (b)(3) about:

(i) Why the information is being collected;

(ii) Use of information;

(iii) Burden estimate;

(iv) Nature of response (voluntary, required for a benefit, or mandatory);

(v) Nature and extent of confidentiality; and

(vi) Need to display currently valid OMB control number;

(h) It was developed by an office that has planned and allocated resources for the efficient and effective management and use of the information to be collected.

(i) It uses effective and efficient statistical survey methodology (if applicable); and

(j) It makes appropriate use of information technology.

If you are unable to certify compliance with any of these provisions, identify the item by leaving the box unchecked and explain the reason in the Supporting Statement.

Certification Date: 12/11/2013

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