Rule 19d-3 justification

SUPPORTING STATEMENT
for the Paperwork Reduction Act Information Collection Submission for
Rule 19d-3; OMB No. 3235-0204
A.

JUSTIFICATION
1.

Necessity of Information Collection

Rule 19d-3 (“Rule”) under the Securities Exchange Act of 1934 (the “Exchange Act”)
prescribes the form and content of applications to the Securities and Exchange Commission
(“Commission”) for review of final actions by self-regulatory organizations (“SRO”) imposing final
disciplinary sanctions, denials of membership or participation, bars from association with a member
firm, or prohibitions or limitations of access to services offered by the SRO or member thereof.
2.

Purpose and Use of the Information Collection

The Commission uses the information provided in the application filed pursuant to Rule
19d-3 to review final actions taken by SROs including: (1) final disciplinary sanctions; (2) denial
or conditioning of membership or participation; (3) bars from association; and (4) prohibitions or
limitations of access to services offered by a SRO or member thereof.
3.

Consideration Given to Information Technology

Submission of a written application for review is the least burdensome and most effective
means of giving the Commission notice of the applicant’s intent.
4.

Duplication

There is no duplication of this application process to the Commission.
5.

Effect on Small Entities

Rule 19d-3 affects small entities because the universe of potential respondents includes
natural persons and firms that meet the definition of “small entities” found in Rule 0-10 of the
Exchange Act. Most applications involve natural persons or firms that meet the definition of
“small entities.” There are some applications from firms that do not meet the definition of “small
entities,” but these are relatively uncommon.
6.

Consequences of Not Conducting Collection

The filing of an application is discretionary for the applicants; therefore a less frequent
collection is not available to the Commission.
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

There has been no decision to provide any payment or gift to respondents.
10.

Confidentiality

No assurance of confidentiality is provided to applicants.
11.

Sensitive Questions

No information of a sensitive nature, including social security numbers, will be required under
this collection of information. The information collection collects basic Personally Identifiable
Information (PII) that may include name, home address, zip code, employee ID, occupation, job title,
work address, certificate/license number, work history and civil or criminal history. However, the agency
has determined that the information collection does not constitute a system of record for purposes of the
Privacy Act. Information is not retrieved by a personal identifier. In accordance with Section 208 of the
E-Government Act of 2002, the agency has determined that the information collection does not trigger
the Privacy Impact Assessment (PIA) requirement.

12.

Burden of Information Collection

Based upon past submissions, we estimate that each application will require approximately
eighteen hours spent per respondent. Some applicants hire outside counsel, and other applicants
draft the applications themselves. In our experience the number of applicants who represent
themselves varies considerably from year to year. We estimate that approximately 20 applicants
would draft the applications themselves, and therefore incur an hourly burden, and that 20 would
hire outside counsel, and therefore incur a cost burden (discussed in Item 13 below).
With respect to the 20 respondents who incur an hourly burden, we estimate that
approximately 5 are firms that may incur internal labor costs of approximately $298, per hour, per

2

response. 1 Therefore, the internal labor cost of compliance for these respondents is approximately
$26,820 (assuming 5 submissions from firms x 18 hours per response x $298 per hour). We
estimate that the remaining 15 are natural persons who complete the forms themselves, and
therefore we do not estimate an internal labor cost of compliance for these respondents.
Summary of Hourly Burdens (Annual)
Name of
Information
Collection

Type of
Burden

Rule 19d-3
Applications

Recordkeeping

Number of
Entities

Number of
Responses
per Entity

20

1

Burden per
Response

Total Industry
Burden

18
TOTAL BURDEN

13.

360
360

Costs to Respondents

Respondents may incur costs if they hire counsel to prepare their applications. As noted
previously, some applications are submitted by parties who file their applications pro se. However,
some parties may hire counsel and incur related costs. We estimate that 20 respondents may hire
outside counsel. We estimate this cost to be $169,920 (estimate of 20 respondents x 18 hours per
response x $472 per hour). 2

1

This estimate was calculated using a $298 per hour wage for a Compliance Manager (assuming
the firm has one), based on the Security Industry and Financial Markets Association’s,
Management & Professional Earnings in the Securities Industry 2013, which has been modified
by Commission staff to account for an 1,800-hour work year as well as inflation, and multiplied
by 5.35 to account for bonuses, firm size, employee benefits and overhead.
2

This estimate was calculated using a $472 per hour wage for an outside Attorney, based on the
Security Industry and Financial Markets Association’s, Management & Professional Earnings in
the Securities Industry 2013, which has been modified by Commission staff to account for an
1,800-hour work year as well as inflation, and multiplied by 5.35 to account for bonuses, firm
size, employee benefits and overhead.
3

Summary of Cost Burdens (Annual)
Name of
Type of
Informatio Burden
n Collection

Number of
Number of Cost per Hours
Total Industry
Respondents Responses
Response Per
Burden
per
Response
Respondent

Rule 19d-3
Recordkeeping
Applications

20

1

$472

18
TOTAL BURDEN

14.

$169,920
$169,920

Costs to Federal Government

Not Applicable.
15.

Changes in Burden

We are increasing our estimated number of respondents from 6 to 20 in Item 12 and from
0 to 20 in Item 13. This increase is based on the periodic reports under Rule 900 of the
Commission’s Rules of Practice, 17 C.F.R. § 201.900. Those reports reflect that, for the periods
between October 2015 and September 2018, the average number of new administrative
proceedings instituted in SRO matters was 40 per year. (This figure also includes matters filed
pursuant to Section 11A of the Securities Exchange Act of 1934, matters filed pursuant to
Section 105(e) of the Sarbanes-Oxley Act of 2002, and remands from a Court of Appeals, but in
our experience the number of these applications is de minimis compared with applications under
Rule 19d-3).

Summary of Change in Hourly Burden (Annual)
Previously
Approved
Burden

New Estimated
Burden

Change in Burden

108
(6 responses,
18 hours per
response)

360
(20 responses, 18
hours per
response)

+252

Reason for the Change

The estimated number of respondents
increased from 6 to 40, and we estimate
that 20 of these would incur an hourly
burden (the other 20 would incur a cost
burden). The hourly burden per response
of 18 hours remains unchanged
TOTAL CHANGE IN

4

+252

BURDEN
Summary of Change in Cost Burden (Annual)
Previously
Approved
Burden
0

New Estimated
Burden

$169,920

Change in Burden

We have added a new cost burden to
reflect an estimate that on average 20
respondents use outside counsel to prepare
their applications.

+$169,920

TOTAL CHANGE IN

BURDEN
16.

Reason for the Change

+$169,920

Information Collections Planned for Statistical Purposes

Not applicable. The information collected is not used for statistical purposes.
17.

Approval to Omit OMB Expiration Date

The Commission is not seeking approval to omit the expiration date.
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 METHOD
This collection does not involve statistical methods.

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