2020 17a-5 PRA Supporting Statement

2020 17a-5 PRA Supporting Statement.pdf

Rule 17a-5, Form X-17A-5 (FOCUS REPORT)

OMB: 3235-0123

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SUPPORTING STATEMENT
for the Paperwork Reduction Act Information Collection Submission for Rule 17a-5
OMB Control No. 3235-0123
A.

JUSTIFICATION
1.

Information Collection Necessity

Section 17(a)(1) 1 of the Securities Exchange Act of 1934 (“Exchange Act”) provides that
broker-dealers must make and keep records, furnish copies of the records, and make and
disseminate reports as the Securities and Exchange Commission (“Commission”), by rule,
prescribes. Section 17(e)(1)(A) 2 of the Exchange Act requires every broker-dealer registered
with the Commission to file annually with the Commission: (1) a balance sheet and income
statement “certified by a[n] independent public accounting firm, or by a registered public
accounting firm if the firm is required to be registered under the Sarbanes-Oxley Act of 2002”;
and (2) such other financial statements (which shall, as the Commission specifies, be certified)
and information concerning its financial condition as the Commission, by rule, may prescribe. A
registered public accounting firm means a public accounting firm registered with the Public
Company Accounting Oversight Board (“PCAOB”). 3 Section 17(e)(2) 4 of the Exchange Act
provides that the Commission, by rule, may prescribe the form and content of the financial
statements and the accounting principles and standards used in their preparation.
Exchange Act Rule 17a-5 5 is a reporting rule for broker-dealers. 6 Paragraph (a) of Rule
17a-5 requires broker-dealers to file Form X-17A-5, 7 the Financial and Operational Combined
Uniform Single Report (“FOCUS Report”). The FOCUS Report was designed to eliminate the
overlapping regulatory reports required by various self-regulatory organizations and the
Commission and to reduce reporting burdens. The FOCUS Report consists of: (1) Part I, which
is a monthly report that must be filed by every broker-dealer that clears transactions or carries
customer accounts; 8 (2) one of two alternative monthly or quarterly reports (a comprehensive
1

See 15 U.S.C. § 78q(a)(1).

See 15 U.S.C. § 78q(e)(1)(A).

See Pub. L. No. 107-204 § 2(a)(12).

See 15 U.S.C. § 78q(e)(2).

See 17 CFR 240.17a-5.

On September 19, 2019, the Commission adopted amendments to its recordkeeping and reporting rules for
broker-dealers, as well as new recordkeeping and reporting rules for security-based swap dealers and major
security-based swap participants. See Recordkeeping and Reporting Requirements for Security-Based
Swap Dealers, Major Security-Based Swap Participants, and Broker-Dealers; Final Rule, Exchange Act
Release No 34-87005. (Sep. 19, 2019), 84 FR (Dec. 16, 2019). This Supporting Statement discusses only
the collections of information that were part of the collections of information that were in existence prior to
the rulemaking referenced above. The burdens associated with the above referenced rulemaking will be
discussed in a separate Supporting Statement associated specifically with that rulemaking.

See 17 CFR 249.17a-5(a).

In practice, broker-dealers are no longer required to file Part I of the FOCUS Report. See 17 CFR
240.17a-5(a)(4).

Part II which must be filed by every broker-dealer that clears transactions or carries customer
accounts and over-the-counter (“OTC”) derivatives dealers; or a less detailed Part IIA which
must be filed by broker-dealers that do not clear transactions or carry customer accounts); 9 and
(3) Part III, a Facing Page, which must be filed as the cover page for the annual audited financial
statements broker-dealers file with the Commission pursuant to paragraph (d) of Rule 17a-5.
Paragraph (c) of Rule 17a-5 requires broker-dealers to furnish certain financial
information to customers. 10 Paragraph (d) of Rule 17a-5 requires broker-dealers, subject to
limited exception, to file annual reports, including financial statements and supporting schedules
that generally must be audited by a PCAOB-registered independent public accountant in
accordance with PCAOB standards. 11 Paragraph (h) of Rule 17a-5 contains notification
requirements related to certain findings made during the course of the independent accountant’s
audit. 12 Paragraph (k) of Rule 17a-5 pertains to supplemental reports to be filed by brokerdealers that compute certain capital charges in accordance with Appendix E to Exchange Act
Rule 15c3-1. 13 Paragraph (p) of Rule 17a-5 provides that OTC derivatives dealers may comply
with Rule 17a-5 by complying with Exchange Act Rule 17a-12. 14
2.

Information Collection Purpose and Use

Reports required to be made under Rule 17a-5 are used, among other things, to monitor
the financial and operational condition of a broker-dealer by Commission staff and by the
broker-dealer’s designated examining authority (“DEA”). The reports required under Rule 17a-5
are one of the primary means of ensuring compliance with the financial responsibility rules. A
firm’s failure to comply with these rules would severely impair the ability of the Commission
and the firm’s DEA to protect customers.
FOCUS Report data are used in preparation for broker-dealer examinations and
inspections. The completed forms also are used to determine which firms are engaged in various
securities-related activities, the extent to which they are engaged in those activities, and how
economic events and government policies might affect various segments of the securities
industry.

These reports must be filed within 17 business days after the end of each calendar month or quarter and
within 17 days after the end of the fiscal year of the broker-dealer if that date is not the end of a calendar
quarter. However, if a broker-dealer ceases to be a member in good standing of a national securities
exchange or registered national securities association, paragraph (b) of Rule 17a-5 requires the brokerdealer to file its final applicable report within two business days after the broker-dealer ceases to be a
member in good standing of such exchange or association, subject to certain exceptions.

See 17 CFR 240.17a-5(c). Paragraph (c) of Rule 17a-5 is subject to a separate Paperwork Reduction Act
filing (OMB Control Number 3235-0199).

See 17 CFR 240.17a-5(d).

See 17 CFR 240.17a-5(h).

See 17 CFR 240.17a-5(k); 17 CFR 240.15c3-1e.

See 17 CFR 240.17a-5(p); 17 CFR 240.17a-12.

Consideration Given to Information Technology

The data required in the FOCUS Report are tailored to the complexity of the brokerdealer’s business. The burden is therefore commensurate with the type of business in which the
firm engages. Approximately 90% of FOCUS Reports are filed electronically. Annual reports
are filed with the Commission in paper form, although Commission staff have issued no-action
guidance permitting registrants to file annual reports electronically through the Commission’s
EDGAR system.
4.

Duplication

The Commission designed Rule 17a-5 to eliminate duplicative reporting requirements
among the various securities regulatory agencies. Therefore, any duplication of the information
requested is minimal.
5.

Effect on Small Entities

As discussed above, a broker-dealer typically must file one of two alternative quarterly or
monthly reports: (1) a comprehensive FOCUS Report Part II which must be filed by every
broker-dealer that clears transactions or carries customer accounts and OTC derivatives dealers;
or (2) a less detailed FOCUS Report Part IIA which must be filed by broker-dealers that do not
clear transactions or carry customer accounts. The majority of small broker-dealers file FOCUS
Report Part IIA because they do not clear transactions or carry customer accounts. Part IIA is
shorter and is required to be filed less often than Part II. Out of the 460 broker-dealers that file
Part II, the Commission does not believe any are small firms since they are clearing firms or
carrying customer accounts. Even if small firms filed FOCUS Report Part II, it would be
inappropriate to provide these small firms with an exemption from Rule 17a-5 because the
FOCUS Report provides Commission and DEA staff with critical financial information from the
firms responsible for the safekeeping and disposition of customer funds and securities.
6.

Consequences of Not Conducting Collection

The required reports are used by securities regulators to monitor the financial and
operational condition of broker-dealers. If the required reports were not made, the ability of the
Commission and the DEAs to monitor the financial and operational condition of broker-dealers
would be impaired, potentially affecting regulators’ capability to protect customers. Further, if
the required collections were conducted less frequently, the information in the reports would
become outdated.
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.
3

Payment or Gift

No payment or gift is provided to respondents.
10.

Confidentiality

Reports filed pursuant to paragraph (a) of Rule 17a-5 are deemed to be confidential
pursuant to paragraph (a)(3) of Rule 17a-5. Annual reports filed by broker-dealers under
paragraph (d) of Rule 17a-5 are not confidential, except that if the Statement of Financial
Condition is bound separately from the balance of the annual reports, and each page of the
balance of the annual reports is stamped “confidential,” then the balance of the annual reports
shall be deemed confidential to the extent permitted by law. 15 Broker-dealers are also required
to furnish customers with their audited statement of financial condition and certain information
about their annual reports on an annual basis. 16 In addition, broker-dealers are required to
furnish customers with unaudited financial statements dated six months from the date of the
audited statements. 17 With respect to the other information collected under the amendments, a
broker-dealer can request the confidential treatment of the information. 18 If such a confidential
treatment request is made, the information will be treated as confidential to the extent permitted
by law. 19
Subject to the provisions of the Freedom of Information Act, 5 U.S.C. § 552, and the
Commission’s rules thereunder (17 CFR 200.80(b)(4)(iii)), the Commission generally does not
publish or make available information contained in reports, summaries, analyses, letters, or
memoranda arising out of, in anticipation of, or in connection with an examination or inspection
of the books and records of any person or any other investigation.
11.

Sensitive Questions

The information collection collects Personally Identifiable Information (“PII”) of certain
individuals. In accordance with Section 208 of the E-Government Act of 2002, the agency has conducted
a Privacy Impact Assessment (“PIA”) of the EDGAR system, in connection with this collection of
information. The EDGAR PIA, published on February 5, 2020, is provided as a supplemental document
and is also available at https://www.sec.gov/privacy. The agency has determined that the information
collection does not constitute a system of record for purposes of the Privacy Act as the information is not
retrieved by a personal identifier.

See paragraph (e)(3) of Rule 17a-5.

See paragraph (c)(2) of Rule 17a-5.

See paragraph (c)(3) of Rule 17a-5.

See 17 CFR 200.83. Information regarding requests for confidential treatment of information submitted to
the Commission is available at http://www.sec.gov/foia/howfo2.htm#privacy.

See, e.g., 15 U.S.C. 78x (governing the public availability of information obtained by the Commission);
5 U.S.C. 552 et seq.

12.

Information Collection Burden

FOCUS Report for Broker-Dealers that Clear Transactions or Carry Customer
Accounts: Broker-dealers that clear transactions or carry customer accounts and do not use
ANC models to calculate net capital are required to file FOCUS Report Part II on a monthly
basis. 20 Commission staff estimates that each FOCUS Report Part II takes approximately 12
hours to prepare and file. This estimate is based on Commission staff’s history and experience
reviewing these filings and communicating with broker-dealers regarding the reports. As of
December 31, 2019, approximately 460 firms cleared transactions or carried customer accounts
and therefore filed FOCUS Report Part II. As a result, each respondent is estimated to have an
annual burden of 144 hours, 21 resulting in an annual industry burden of 66,240 hours. 22
FOCUS Report for Broker-Dealers that do not Clear Transactions or Carry
Customer Accounts: Broker-dealers that do not clear transactions or carry customer accounts
and do not use ANC models to calculate net capital are required to file FOCUS Report Part IIA
on a quarterly basis. 23 Commission staff estimates that each FOCUS Report Part IIA takes
approximately 12 hours to prepare and file. As of December 31, 2019, approximately 3,215
firms filed FOCUS Report Part IIA. As a result, each respondent is estimated to have an annual
reporting burden of 48 hours, 24 resulting in an annual industry burden of 154,320 hours. 25
ANC Supplemental Reports: As previously explained, paragraph (k) of Rule 17a-5
requires broker-dealers that compute certain capital charges in accordance with Appendix E to
Exchange Act Rule 15c3-1 26 to file supplemental reports with the Commission regarding their
internal risk management controls. The Commission currently estimates that approximately 10
broker-dealers will elect to use Appendix E to Rule 15c3-1 to compute certain of their capital
charges.
ANC Supplemental Monthly Reports: The average amount of time necessary to prepare
and file the required supplemental monthly reports by each firm is estimated to be 4 hours per
month. As a result, each firm is estimated to have an annual reporting burden of 48 hours, 27

See 17 CFR 240.17a-5(a)(2)(ii).

12 hours x 12 responses per year = 144 hours per respondent.

144 hours per respondent x 460 respondents = 66,240 hours per year.

See 17 CFR 240.17a-5(a)(2)(iii).

12 hours x 4 responses per year = 48 hours per respondent.

48 hours per respondent x 3,215 respondents = 154,320 hours per year.

Generally, a broker-dealer meeting certain conditions, including the existence of strong internal risk
management practices, may apply to the Commission for authorization to use the alternative method for
computing capital contained in Appendix E to Rule 15c3-1, thereby permitting the firm to utilize the
mathematical modeling methods it uses to manage its own business risk, including value-at-risk models and
scenario analysis, to compute deductions from net capital for market risks and for credit risks arising from
OTC derivatives transactions.

4 hours x 12 responses per year = 48 hours per respondent.

resulting in an annual industry burden of 480 hours. 28 This estimate is based on Commission
staff’s history and experience reviewing these filings and communicating with broker-dealers
regarding the reports.
ANC Supplemental Quarterly Reports: The average amount of time necessary to prepare
and file the required supplemental quarterly reports is estimated to be 8 hours per quarter. As a
result, each firm is estimated to have an annual reporting burden of 32 hours, 29 resulting in an
annual industry burden of 320 hours. 30 This estimate is based on Commission staff’s history and
experience reviewing these filings and communicating with broker-dealers regarding the reports.
ANC Supplemental Annual Reports: The average amount of time necessary to prepare
and file the required supplemental annual reports with the annual audit required is estimated to
be 40 hours per year. As a result, each firm is estimated to have an annual reporting burden of
40 hours, 31 resulting in an annual industry burden of 400 hours. 32 This estimate is based on
Commission staff’s history and experience reviewing these filings and communicating with
broker-dealers regarding the reports.
Annual Reports: Paragraph (d) of Rule 17a-5 requires most broker-dealers to file
annual reports, including financial statements and supporting schedules that generally must be
audited by a PCAOB-registered independent public accountant in accordance with PCAOB
standards. 33 Approximately 3,679 broker-dealers filed annual audited financial statements for
fiscal year 2019. 34 Each firm is estimated to have an annual reporting burden of 12 hours, 35
resulting in an annual industry burden of 44,148 hours. 36
A broker-dealer that does not claim it was exempt from Rule 15c3-3 throughout the most
recent fiscal year must file a compliance report with the Commission on an annual basis. 37 As of
June 30, 2016, there are approximately 175 carrying broker-dealers that must comply with Rule
15c3-3 and therefore must file an annual compliance report. The Commission estimates that it
takes approximately 60 hours to prepare the compliance report. As a result, each respondent is

48 hours per respondent x 10 respondents = 480 hours per year.

8 hours x 4 responses per year = 32 hours per respondent.

32 hours per respondent x 10 respondents = 320 hours per year.

40 hours x 1 response per year = 40 hours per respondent.

40 hours per respondent x 10 respondents = 400 hours per year.

See 17 CFR 240.17a-5(d).

This filing includes Form X-17A-5 Schedule I and Form X-17A-5 Part III. The burden estimate also
includes related filing responsibilities under paragraph (c) of Rule 17a-5.

12 hours x 1 response per year = 12 hours per respondent.

12 hours per respondent x 3,679 respondents = 44,148 hours per year.

See 17 CFR 240.17a-5(d)(1)(i)(B)(1).

estimated to have an annual reporting burden of 60 hours, 38 resulting in an annual industry
burden of 10,500 hours. 39
Exemption Report: A broker-dealer that claims it was exempt from Rule 15c3-3
throughout the most recent fiscal year must file an exemption report with the Commission on an
annual basis. 40 As of December 31, 2019, 3,689 broker-dealers filed FOCUS Reports with the
Commission. Of these, 3,001 broker-dealers claimed exemptions from Rule 15c3-3. The
Commission estimates that it takes a broker-dealer claiming an exemption from Rule 15c3-3
approximately 7 hours to complete the exemption report. As a result, each respondent is
estimated to have an annual reporting burden of 7 hours, 41 resulting in an annual industry burden
of 21,007. 42
SIPC Annual Reports: Paragraph (d)(6) of Rule 17a-5 requires SIPC member brokerdealers to file a copy of the annual reports with SIPC. 43 According to SIPC’s 2018 annual
report, there were approximately 3,621 SIPC members. The Commission estimates that it takes
a broker-dealer approximately 30 minutes to file the annual reports with SIPC. As a result, each
firm is estimated to have an annual third-party disclosure burden of 30 minutes, 44 resulting in an
annual industry burden of 1,810.5 hours. 45
Change of Fiscal Year End: Paragraph (d)(1)(ii) of Rule 17a-5 requires a copy of a
DEA’s written approval to change a broker-dealer’s fiscal year end be sent to the Commission’s
principal office in Washington, D.C., in addition to the regional office of the Commission for the
region in which the broker-dealer has its principal place of business. Based on the number of
copies of approvals received by the Commission and staff experience in the application of Rule
17a-5, the Commission estimates 75 broker-dealers will receive approval each year to change
their fiscal year end. The Commission estimates that it takes a broker-dealer approximately 10
minutes 46 to copy and send a copy of the approval to the Commission. As a result, each firm is
estimated to have an annual reporting burden of about 0.167 hours, 47 resulting in an annual
industry burden of about 12.5 hours. 48
SIPC Annual General Assessment Reconciliation Report or Exclusion from
Membership Forms: Paragraph (e)(4) of Rule 17a-5 requires broker-dealers to file with SIPC a
38

60 hours x 1 response per year = 60 hours per respondent.

60 hours per respondent x 175 respondents = 10,500 hours per year.

See 17 CFR 240.17a-5(d)(1)(i)(B)(1) and (2).

7 hours x 1 response per year = 7 hours per respondent.

7 hours per respondent x 3,001respondents = 21,007 hours per year.

See 17 CFR 240.17a-5(d)(6).

.5 hours x 1 response per year = .5 hours per respondent.

.5 hours per respondent x 3,621 respondents = 1,810.5 hours per year.

10 minutes / 60 minutes = 0.1667 hours.

0.167 hours x 1 response per year = 0.167 hours per respondent.

0.167 hours per respondent x 75 respondents = 12.5 hours.

report on the SIPC annual general assessment reconciliation or exclusion from membership
forms. 49 Commission staff estimates that it takes a broker-dealer approximately 5 hours to file
SIPC’s annual assessment reconciliation form or certification of exclusion from membership
forms. There are approximately 3,689 broker-dealers, resulting in an estimated annual industry
burden of about 18,445 hours. 50
Statement Regarding Independent Public Accountant: Paragraph (f)(2) of Rule 17a-5
requires broker-dealers to prepare a statement providing information regarding the brokerdealer’s independent public accountant and to file it each year with the Commission and its DEA
(except that if the engagement is of a continuing nature, no further filing is required). 51
Carrying or Clearing Broker-Dealer: The Commission estimates that it takes a carrying
or clearing broker-dealer approximately 10 hours to file the Statement Regarding Independent
Public Accountant with the Commission. As a result, each carrying or clearing broker-dealer is
estimated to have an annual burden of 10 hours. 52 The Commission estimates there are 460
carrying or clearing broker-dealers required to file the Statement Regarding Independent Public
Accountant each year, resulting in an annual industry burden of 4,600 hours. 53
Broker-Dealers that Neither Carry nor Clear Transactions: The Commission estimates
that it takes a broker-dealer that neither carries customer accounts nor clears transactions
approximately 2 hours to file the Statement Regarding Independent Public Accountant with the
Commission. As a result, each broker-dealer that neither carries nor clears transactions is
estimated to have an annual burden of 2 hours. 54 The Commission estimates there are 3,215
broker-dealers that neither carry nor clear transactions required to file the Statement Regarding
Independent Public Accountant each year, resulting in an annual industry burden of 6,430
hours. 55
Statement Regarding Change of Independent Public Accountant: Paragraph (f)(3) of
Rule 17a-5 requires a broker-dealer to file a notice with the Commission if it replaces the
independent public accountant engaged to prepare reports covering the annual reports. 56 The
estimated one-time burden associated with this requirement is approximately 2 hours, or about
0.67 hours on an annualized basis. 57 The Commission estimates that approximately 50 of these

See 17 CFR 240.17a-5(e)(4).

5 hours x 3,689 broker-dealers = 18,445 hours.

See 17 CFR 240.17a-5(f)(2).

10 hours per response x 1 response per year = 10 hours per respondent.

10 hours per respondent x 60 respondents = 600 hours per year.

2 hours per response x 1 response per year = 2 hours per respondent.

2 hours per respondent x 440 respondents = 880 hours per year.

See 17 CFR 240.17a-5(f)(3).

2 hours / 3 years = 0.67 hours per respondent.

notices are filed per year, resulting in an annual industry burden of 100 hours, 58 or about 33.33
hours on an annualized basis. 59
Total Industry Hour Burden: Thus, the Commission estimates that the total annual
industry hour burden attributable to Rule 17a-5 is 328,746 hours per year. 60
Summary of Hourly Burdens
A.
IC

Name of Information Collection

Type of
Burden

Number
of
Entities
Impacted

Annual
Responses
per Entity

Initial
Burden per
Entity per
Response

D.
E.
Initial
Ongoing
Burden
Burden per
Annualized
Entity per
per Entity
Response
per Response
[C ÷ 3 years]

1
2

FOCUS Report Part II: NonModel Clearing BrokerDealers
FOCUS Report Part IIA: NonModel Non-Clearing BrokerDealers

Annual
Burden Per
Entity per
Response

Total Annual
Burden Per
Entity

Total Industry
Burden

[ D + E]

[F * B]

[G * A]

Small
Business
Entities
Affected

Reporting

460

0.00

12.00

144.00

66,240.00

Reporting

3,215

0.00

12.00

48.00

154,320.00

895

ANC Supplemental Monthly
Reports

Reporting

0.00

4.00

48.00

480.00

ANC Supplemental Quarterly
Reports

Reporting

0.00

8.00

32.00

320.00

ANC Supplemental Annual
Reports

Reporting

0.00

40.00

400.00

Annual Reports

Reporting

3,679

0.00

12.00

44,148.00

895

Compliance Report

Reporting

175

0.00

60.00

10,500.00

Exemption Report

Reporting

3,001

0.00

7.00

21,007.00

895

SIPC Annual Reports

Third-Party
Disclosure

3,621

0.00

0.50

1,810.5

895

Change of Fiscal Year End

Reporting

0.00

0.17

12.50

Annual General Assessment
Reconciliation or Exclusion
from Membership Forms

Third-Party
Disclosure

3,689

0.00

5.00

18,445.00

895

Statement Regarding
Independent Public
Accountant - Carrying or
Clearing Broker-Dealer

Reporting

460

0.00

10.00

4600.00

Statement Regarding
Independent Public
Accountant - Non-Carrying or
Non-Clearing Broker-Dealer

Reporting

3,215

0.00

2.00

6,430.00

112

Statement Regarding Change
in Independent Public
Accountant

Reporting

2.00

0.67

0.00

0.67

33.33

6
7
8

TOTAL HOURLY BURDEN FOR ALL RESPONDENTS

328,746.33

2 hours per respondent x 50 respondents = 100 hours per year.

100 hours / 3 years = 33.33 hours per year.

66,240 hours + 154,320 hours + 480 hours + 320 hours + 400 hours + 44,148 hour + 10,500 hours + 21,007
hours + 1,810.5 hours + 12.5 hours +18,445 hours + 4600 hours + 6,430 hours + 33.33 hours = 328,746.33
hours.

13.

Costs to Respondents

The Commission estimates that Rule 17a-5 causes a broker-dealer to incur no initial
dollar cost, but causes an annual dollar cost to meet the reporting requirements. Those
requirements that are expected to impose an annual cost to the industry are discussed below.
ANC Supplemental Reports: Paragraph (k) of Rule 17a-5, imposes monthly, quarterly,
and annual reporting requirements on ANC broker-dealers. The Commission estimates that
postage costs to comply with paragraph (k) of Rule 17a-5, impose an annual cost of $8.50 per
ANC broker-dealer. 61 The Commission estimates that 10 firms will elect to be ANC brokerdealers, such that the estimated cost burden on the industry is $85 per year. 62
Annual Reports: The Commission estimates that postage costs to comply with
paragraph (d) of Rule 17a-5, impose on broker-dealers an annual dollar cost of $7.75 per firm. 63
The Commission estimates that there are 3,679 respondents, resulting in an estimated industrywide cost of approximately $28,512 per year. 64
Compliance Report: A broker-dealer that does not claim it was exempt from Rule
15c3-3 throughout the most recent fiscal year must file a compliance report with the Commission
on an annual basis. 65 As of June 30, 2016, there are approximately 175 carrying broker-dealers
that must comply with Rule 15c3-3 and therefore must file an annual compliance report. The
estimated cost associated with the independent public accountant’s examination of the
compliance report will be an average incremental cost of approximately $150,000 per carrying
broker-dealer per year. This result in an industry-wide annual ongoing reporting cost of
approximately $26,250,000 per year. 66
Exemption Report: A broker-dealer that claims it was exempt from Rule 15c3-3
throughout the most recent fiscal year must file an exemption report with the Commission on an
annual basis. 67 As of December 31, 2019, 3,689 broker-dealers filed FOCUS Reports with the
Commission. Of these, 3,001 broker-dealers claimed exemptions from Rule 15c3-3. The cost
associated with the independent public accountant’s review of the exemption report is estimated

($0.50 per filing x 12 monthly reports) + ($0.50 per filing x 4 quarterly reports) + ($0.50 per filing x 1
annual report) = $8.50 per year.

$8.50 per year x 10 ANC broker-dealers = $85 per year.

Currently, a priority mail flat rate envelope costs $7.75, based on costs obtained on the U.S. Postal Service
website, available at www.usps.gov.

$7.75 per firm x 3,679 broker-dealers = $28,512.25 per year.

See 17 CFR 240.17a-5(d)(1)(i)(B)(1).

$150,000 per year x 175 carrying broker-dealers = $26,250,000.

See 17 CFR 240.17a-5(d)(1)(i)(B)(2).

to create an ongoing cost of $3,000 per non-carrying broker-dealer per year, for a total industrywide annual reporting cost of approximately $9,003,000. 68
SIPC Annual Reports: The Commission estimates that postage costs to comply with
paragraph (d)(6) of Rule 17a-5, impose an annual dollar cost of 50 cents per firm registered with
SIPC as a SIPC member broker-dealer. The Commission estimates that each year, 3,621 firms
will file a copy of the annual reports with SIPC, such that the estimated cost burden on the
industry is $1,810.50 per year. 69
Notice of Change of Fiscal Year End: The Commission estimates that postage costs to
comply with paragraph (d)(1)(ii) of Rule 17a-5, impose an annual dollar cost of 50 cents per firm
planning to change its fiscal year. The Commission estimates that each year, 75 firms will
change its fiscal year, such that the estimated cost burden on the industry is $37.50 per year. 70
SIPC Annual General Assessment Reconciliation Report or Exclusion from
Membership Forms: The Commission estimates that postage costs to comply with paragraph
(e)(4) of Rule 17a-5, impose an annual dollar cost of 50 cents per firm. The Commission
estimates that each year, 3,689 firms will file with SIPC a report on the SIPC annual general
assessment reconciliation or exclusion from membership forms, such that the estimated cost
burden on the industry is $1,844.50 per year. 71
Statement Regarding Independent Public Accountant: The Commission estimates
that postage costs to comply with paragraphs (f)(2) and (f)(3) of Rule 17a-5, impose an annual
dollar cost of 50 cents per firm. The Commission estimates that there are 3,675 respondents,
resulting in an industry-wide cost of $1837.50 per year. 72
Total Industry Costs Burden: Therefore, the total industry-wide dollar cost burden
associated with Rule 17a-5 is estimated to be $35,287,127.25. 73

$3,000 per year x 3,001 non-carrying broker-dealers = $9,003,000.

$0.50 per year x 3,621 SIPC member broker-dealers = $1,810.50 per year.

$0.50 per year x 75 broker-dealers = $35.25 per year.

$0.50 per year x 3,629 broker-dealers = $1,844.50 per year.

$0.50 per firm x 3,675 broker-dealers = $1837.50 per year.

$85 + $28,512.25 + $26,250,000 + $9,003,000 + $1,810.50 + $37.50 + $1,844.50 + $1,837.50 =
$35,287,127.25.

Summary of Dollar Costs
A.

Name of Information
Collection

Type of
Burden

Number
of
Entities
Impacted

Annual
Responses
per Entity

Initial
Cost per
Entity
per
Response

Initial Cost
Annualized
per Entity
per
Response

Ongoing
Cost per
Entity per
Response

Annual
Cost Per
Entity per
Response

Total
Annual
Cost Per
Entity

Total Industry Cost

[ D + E]

[F * B]

[G * A]

[C ÷ 3
years]

Small
Business
Entities
Affected

ANC Supplemental
Monthly Reports

Reporting

$0.50

$6.00

$60.00

ANC Supplemental
Quarterly Reports

Reporting

$0.50

$2.00

$20.00

ANC Supplemental
Annual Reports

Reporting

$0.50

Annual Report

Reporting

3,689

$7.75

$28,512.25

895

Rule 17a-5(d)(3):
Compliance Report

Reporting

175

$150,000.00

$26,250,000

Rule 17a-5(d)(4):
Exemption Report

Reporting

3,001

$3,000.00

$9,003,000

895

SIPC Annual Report

Third-Party
Disclosure

3,621

$0.50

$1,810.50

895

Reporting

$0.50

$37.50

Third-Party
Disclosure

3,689

$0.50

$1,844.50

895

Reporting

3,675

$0.50

$1,837.5

155

11
12
&
13

Notice of Change in
Fiscal Year
SIPC Annual General
Assessment
Reconciliation Report
or Exclusion from
Membership Forms
Statement Regarding
Independent Public
Accountant

TOTAL COST FOR ALL RESPONDENTS

14.

$35,287,127.25

Costs to Federal Government

Rule 17a-5, is not expected to result in costs to the federal government due to contracting,
information technology, development, hiring one or more new employees, or reallocating
existing employees.
15.

Changes in Burden

The annual ongoing hour burden and cost decreased overall as a result of an adjustment
in Commission staff’s estimates.
Change in Burden Hours
With respect to the ongoing hour burden, the Comission staff estimates that the total
burden has decreased from 353,510 hours to 328,746.33 hours, a reduction of approximately
24,764 hours. As detailed in the chart below, the reduction in the estimated burden hours is
largely a result of a decrease in the number of registered broker-dealers, which results in a
decrease in the number of respondents for most of the collections of information.

Summary of Changes in Burden Hours

Name of
Information
Collection

FOCUS Report
Part II: NonModel
Clearing
Broker-Dealers
FOCUS Report
Part IIA: NonModel NonClearing
Broker-Dealers

Estimated
Annual
Industry
Burden

66,240

154,320

Annual Industry
Burden
Previously
Approved

69,408

171,648

Change in
Burden

Reason for Change in Burden

(3,168)

The estimated burden hours have been reduced as a result of a decrease
in the number of respondents. The Commission estimates that the
number of respondents has decreased from 482 to 460, a reduction of 22
non-model clearing broker-dealers. As a result of this decrease in
respondents, the estimated annual industry burden has decreased by
3,168 hours.

(17,328)

The estimated industry burden has been reduced as a result of a decrease
in the number of respondents. Specifically, the Commission estimates
that the number of respondents has decreased from 3,576 to 3,215, a
reduction of 361 non-model, non-clearing broker-dealers. As a result, the
estimated annual industry burden has decreased by 17,238 hours.

(3,036)

The estimated industry burden has been reduced as a result of a decrease
in the number of respondents. The Commission estimates that the number
of respondents has decreased from 3,932 to 3,679, a reduction of 253
respondents filing annual reports with the Commission. As a result, the
estimated annual industry burden has decreased by 3,000 hours.

(2,940)

The estimated industry burden has been reduced as a result of a decrease
in the number of respondents. The Commission estimates that the
number of respondents has decreased from 224 to 175, a reduction of 49
respondents. As a result, the estimated annual industry burden has
decreased by 2,940 hours.

Annual
Reports

Compliance
Report

Exemption
Report

21,007

26,838

(5,831)

The estimated industry burden has been reduced as a result of a decrease
in the number of respondents. The Commission estimates that the
number of respondents has decreased from 3,834 to 3,001, a reduction of
833 respondents. As a result, the estimated annual industry burden has
decreased by 5,831 hours.

SIPC Annual
Reports

1,810.50

1,975

(164.5)

The estimated industry burden has been reduced as a result of a decrease
in the number of respondents. The Commission estimates that the number
of respondents has decreased from 3,950 to 3,621. As a result, the
estimated annual industry burden has decreased by 164.5 hours.

(1,845)

The estimated industry burden has been reduced as a result of a decrease
in the number of respondents. The Commission estimates that the number
of respondents has decreased from 4,058 to 3,689, a reduction of 369
respondents. As a result of this reduction, the estimated annual industry
burden has decreased by 1,845 hours.

Annual
General
Assessment
Reconciliation
or Exclusion
from
Membership
Forms
Statement
Regarding
Independent
Public Account
– Carrying or
Clearing
Broker-Dealer
Statement
Regarding
Independent
Public
Accountant Carrying or
Clearing
Broker-Dealer

44,148

10,500

18,445

4,600

6,430

47,184

13,440

20,290

600

880

4,000

The estimated industry burden has increased as a result of a revision in
the number of respondents. The Commission estimates that the number
of respondents is 460, a difference of 400. As a result, the estimated
annual industry burden has increased from 880 to 4,600 hours, an
increase of 4,000 hours.

5,550

The estimated industry burden has increased as a result of a revision in
the number of respondents. The Commission estimates that the number
of respondents is 3,215. As a result, the estimated annual industry
burden has increased from 880 to 4,600 hours, an increase of 5,550
hours.

Changes in Cost Burdens
With respect to the cost burden, the Commission staff estimates that the total burden has
decreased from $45,131,475 to $35,287,127.25, a reduction of approximately $9,844,348. As
detailed in the chart below, notwithstanding the increase in the cost of postage due to inflation,
the overall reduction in the cost burden is largely a result of a decrease in the number of
registered broker-dealers, which results in a decrease in the number of respondents for many of
the collections of information.
Summary of Changes in Cost
Name of
Information
Collection

Estimated
Annual
Industry
Cost

Annual
Industry Cost
Previously
Approved

Change in
Cost

Reason for Change in Cost

ANC
Supplemental
Monthly
Reports

$60

$56

The estimated industry costs has increased as a result of inflation in the
cost of postage.

ANC
Supplemental
Quarterly
Reports

$20

$19

The estimated industry cost has increased as a result of inflation in the
cost of postage.

Annual Report

$28,512

$25,361

$3,151.25

The estimated industry cost has increased as a result of inflation in the
cost of postage.

Rule 17a5(d)(3):
Compliance
Report

$26,250,000

$33,600,000

($7,350,000)

The estimated industry cost has decreased as a result of a reduction in
the number of respondents from 224 to 175.

Rule 17a5(d)(4):
Exemption
Report

$9,003,000

$11,502,000

($2,499,000)

Notwithstanding the increase in the cost of postage as a result of
inflation, the estimated industry cost has decreased as a result of a
reduction in the number of respondents from 3,834 to 3,001.

SIPC Annual
Report

$1,810.50

$1,857

($46.50)

The estimated industry cost has decreased as a result of a reduction in
the number of respondents from 3,950 to 3,621.

Notice of
Change in
Fiscal Year

$37.50

$35

$2.50

The estimated industry cost has increased as a result of inflation in the
cost of postage.

SIPC Annual
General
Assessment
Reconciliation
Report or
Exclusion
from
Membership
Forms

$1,844.50

$1,907

($62.76)

Notwithstanding the increase in the cost of postage as a result of
inflation, the estimated industry cost has decreased as a result of a
reduction in the number of respondents from 4,058 to 3,689.

Statement
Regarding
Independent
Public
Accountant

$1,837.50

$235

$1,602.50

The estimated industry cost has increased as a result of inflation in the
cost of postage and an increase in the number.

4
6

12 & 13

16.

Information Collection Planned for Statistical Purposes

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

Approval to Omit OMB Expiration Date

We request authorization to omit the expiration date on the electronic version of the form.
Including the expiration date on the electronic version of the form will result in increased costs,
because the need to make changes to the form may not follow the application’s scheduled
version release dates. The OMB control number will be displayed.
18.

Exceptions to Certification for Paperwork Reduction Act Submissions

This collection complies with the requirements in 5 CFR 1320.9.
B.

COLLECTIONS OF INFORMATION EMPLOYING STATISTICAL METHODS
This collection does not involve statistical methods.

File Type	application/pdf
File Modified	2020-05-22
File Created	2020-05-22