3235-0012-- 2023 Rule 15b1-1 revised Supporting Statement re ATS proposal

SUPPORTING STATEMENT
for the Paperwork Reduction Act Information Collection Submission for
Rule 15b1-1 and Form BD
SEC File No. 270-19, OMB Control No. 3235-0012
Proposed Partial Revision

A.
1.

JUSTIFICATION
Necessity of Information Collection

The Securities Exchange Act of 1934 (“Exchange Act”) regulates the nation’s securities
markets and the securities professionals who participate in those markets.
Under the Exchange Act, broker-dealers must register with the Securities and Exchange
Commission (“Commission”).Section 15(a)(1) of the Exchange Act provides that it is unlawful
for broker-dealers to solicit or effect transactions in most securities unless they are registered as
broker-dealers with the Commission pursuant to Section 15(b) of the Exchange Act. Section
15B(a)(1) of the Exchange Act also provides that it is unlawful for municipal securities dealers,
other than registered broker-dealers, to solicit or effect transactions in municipal securities unless
they are registered with the Commission as municipal securities dealers pursuant to Section
15B(a)(2) of the Exchange Act. In addition, Section 15C(a)(1) of the Exchange Act provides
that it is unlawful for government securities broker-dealers, other than registered broker-dealers
and certain financial institutions, to solicit or effect transactions in government securities unless
they are registered as government securities broker-dealers with the Commission pursuant to
Section 15C(a)(2) of the Exchange Act.
Sections 15(b)(1) and (2) of the Exchange Act authorize the Commission to prescribe by
rule an application form for registration that contains such information about broker-dealers that
is necessary or appropriate in the public interest or for the protection of investors. Section
17(a)(1) of the Exchange Act authorizes the Commission to require registered broker-dealers and
registered municipal securities dealers to make and file such reports as the Commission
determines as necessary or appropriate in the public interest or for the protection of investors.
To implement these provisions, the Commission adopted Rule 15b1-1 (17 CFR
240.15b11) and Form BD (17 CFR 249.501). Form BD is the uniform application for brokerdealer registration. Form BD requires the applicant or registrant filing the form to provide the
Commission with certain information concerning the nature of its business and the background
of its principals, controlling persons, and employees. Form BD is designed to permit the
Commission to determine whether the applicant meets the statutory requirements to engage in
the securities business.

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In 1981, the Central Registration Depository (“CRD”) was created as a cooperative effort
between the National Association of Securities Dealers 1 and the North American Securities
Administration Association (“NASAA”), in order to facilitate a “one stop” filing process for
broker-dealers and their associated persons (i.e., only one form had to be filed with the CRD to
satisfy FINRA and participating state registration requirements). The CRD is operated and
maintained by FINRA and is used by the Commission (since 1992), 2 self-regulatory
organizations (or “SROs”), 3 and state securities regulators in connection with registering and
licensing broker-dealers and their associated persons.
2022 Proposed Rulemaking Affecting this OMB Control Number
In January 2022, the Commission proposed amendments to Regulation ATS 4 and
Exchange Act Rule 3b-16, which defines certain terms in the definition of “exchange” under
section 3(a)(1) of the Exchange Act. 5 In April 2023, the Commission provided supplemental
information and reopened the comment period for the 2022 Reg ATS Proposing Release. 6
These proposed amendments would increase the number of respondents for the collections of
information in several rules, including this one. This revision only increases the number of
respondents, as described below, and does not otherwise revise the collections of information in
this OMB Control Number.
The Commission assumed in both the 2022 Reg ATS Proposing and 2023 Reg ATS
1

The National Association of Securities Dealers merged with New York Stock Exchange
Member Regulation to form the Financial Industry Regulatory Authority (or "FINRA") on
July 30, 2007. For the sake of clarity, as used herein the term “FINRA” will be used to
identify both FINRA and its predecessor, the National Association of Securities Dealers.

2

Securities Exchange Act Release No. 31660 (Dec. 28, 1992), 58 FR 11.

3

The SROs include FINRA and various other entities.

4

“Regulation ATS” consists of 17 CFR 242.300 through 242.304 (Rules 300 through 304
under the Exchange Act).

5

See Securities Exchange Act Release No. 94062 (Jan. 26, 2022), 87 FR 15496 (Mar. 18,
2022) (“2022 Reg ATS Proposing Release”). The Commission proposed to, among other
things: (1) amend Rule 3b-16 under the Exchange Act to, among other things, include
within the definition of “exchange” systems that offer the use of non-firm trading interest
and provide non-discretionary protocols to bring together buyers and sellers of securities;
(2) eliminate the exemption from compliance with Regulation ATS for ATSs that trade
government securities as defined under Section 3(a)(42) of the Exchange Act (“government
securities”) or repurchase and reverse repurchase agreements on government securities
(“Government Securities ATSs”).

6

See Securities Exchange Act Release No. 97309 (Apr. 14, 2023), 88 FR 29448 (May 5,
2023) (“2023 Reg ATS Reopening Release”). The Commission reopened the comment
period for the 2022 Reg ATS Proposing Release and provided supplemental information
and economic analysis regarding trading systems that trade crypto asset securities that
would be newly included in the definition of “exchange” under the proposal.
2

Reopening Releases that, under the proposed amendments, systems that would be newly
captured under the proposed definition of “exchange” will choose to register as broker-dealers
and comply with the conditions of Regulation ATS rather than register as a national securities
exchange, because of the lighter regulatory requirements imposed on ATSs, as compared to
registered exchanges. 7 Accordingly, this revision to the PRA analysis for Rule 15b-1 and Form
BD increases the estimated number of respondents, in light of the 2022 Reg ATS Proposing and
2023 Reg ATS Reopening Releases, to include both (1) Government Securities ATSs that are
not currently registered as broker-dealers and (2) systems that would be newly captured under
the proposed definition of “exchange” and choose to register as broker-dealers and comply with
the conditions of Regulation ATS rather than register as national securities exchanges.
2.

Purpose and Use of Information Collection

The Commission uses the information disclosed by applicants in Form BD: (1) to
determine whether the applicant meets the standards for registration set forth in the provisions of
the Exchange Act; (2) to develop a central information resource where members of the public
may obtain relevant, up-to-date information about broker-dealers, municipal securities dealers,
and government securities broker-dealers, and where the Commission, other regulators, and
SROs may obtain information for investigatory purposes in connection with securities litigation;
and (3) to develop statistical information about broker-dealers, municipal securities dealers, and
government securities broker-dealers. Without the information disclosed in Form BD, the
Commission could not effectively implement policy objectives of the Exchange Act with respect
to its investor protection function.
3.

Consideration Given to Information Technology

Broker-dealer applicants currently file Form BD electronically with FINRA. FINRA then
provides the Commission with access to the CRD system and provides certain reports to the
Commission, as requested. This method of collecting information reduces the regulatory burden
upon broker-dealers by permitting them to file applications for registration and amendments
thereto once and electronically, rather than requiring the broker-dealer to file multiple
applications for registration and amendments separately with the Commission, SROs, and state
regulators.
4.

Duplication

As noted above, broker-dealer applicants use Form BD to register with the Commission,
the states, and certain SROs. By filing Form BD in one central location, the Commission

7

See 2022 Reg ATS Proposing Release, supra note 5, at 15618 n.1056 and accompanying
text.
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provides “one stop” filing for applicants, so that they are not required to file multiple copies of
Form BD.
The requirements to disclose information in Form BD do not duplicate any other federal
statute or rule.
5.

Effect on Small Entities

On December 31, 2021, 3,553 broker-dealers were registered with the Commission.8 As
of December 31, 2021, there were 1,405 small broker-dealers. 9
All broker-dealers, regardless of size, are required to disclose the information requested in
Form BD. Therefore, Form BD affects small broker-dealers registered or registering with the
Commission. The Commission believes, however, that the disclosure requirements of Form BD
are not unduly burdensome, particularly in relation to the important objectives served by the
disclosure of registration information.
6.

Consequences of Not Conducting Collection

Broker-dealer applicants generally are required to file Form BD only once to register and
are required to file amendments to Form BD only when information originally reported in Form
BD changes or becomes inaccurate. Therefore, less frequent collection for Form BD information
would impair the accuracy of the information available to the Commission and decrease the
protections afforded to investors.
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

Based on Form BD data.

9

Based on data provided to the Commission through Forms X-17A-5. 17 CFR 240.0-10
defines “small entities under the Securities Exchange Act for purposes of the Regulatory
Flexibility Act.[1]” In particular, section (c) defines a small broker-dealer as a “broker
dealer that: (1) Had total capital (net worth plus subordinated liabilities) of less than
$500,000 on the date in the prior fiscal year as of which its audited financial statements
were prepared pursuant to § 240.17a-5(d) or, if not required to file such statements, a broker
or dealer that had total capital (net worth plus subordinated liabilities) of less than $500,000
on the last business day of the preceding fiscal year (or in the time that it has been in
business, if shorter); and (2) Is not affiliated with any person (other than a natural person)
that is not a small business or small organization as defined in this section[. . .]”.
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8.

Consultations Outside the Agency

In the 2022 Reg ATS Proposing Release, the Commission solicited comment on the
accuracy of the burden of the proposed revisions to the seven collections of information contained
in the proposal. 10 The Commission did not receive comments specifically relating to the collection
of information for this OMB Control Number, but it did receive general comments questioning
whether the Commission had underestimated the number of newly-designated ATSs, particularly
particularly systems that trade crypto asset securities and systems commenters characterize as
decentralized finance or (“DeFi”), 11 which would, in turn, affect the number of estimated
respondents for this collection of information. In the 2023 Reg ATS Reopening Release, the
Commission increased the estimated number of respondents for this collection of information
specifically to account for the types of systems raised by commenters, as detailed below. The
Commission has also solicited comment on the revised PRA analysis in the 2023 Reg ATS
Reopening Release, 12 but has not yet received specific comments on that topic. The Commission
will consider all comments received before adoption of a final rule.
9.

Payment or Gift
Not applicable.

10.

Confidentiality
The information provided on Form BD is not confidential and is available to the public.

11.

Sensitive Questions

The information collection collects personally identifiable information (PII) that may
include name, personal address and telephone number, criminal history, and financial
information, as well as job title and work address. The PII collected may also include the brokerdealer’s social security number or tax identification number. The agency has determined that, in
general, the information collection does not constitute a system of record for purposes of the
10

See 2022 Reg ATS Proposing Release, supra note 5, at 15593.

11

See Letter from Gregory Babyak and Gary Stone, Regulatory Affairs, Bloomberg L.P.,
dated Sept. 21, 2022, at 2; Letter from Robert Toomey, Managing Director, Associate
General Counsel, SIFMA, dated Jun. 13 2022, at 5-6; Letter from Gus Coldebella and
Gregory Xethalis, dated Apr. 19, 2022, at 4-5; Letter from Sheila Warren, Chief Executive
Officer, Crypto Council for Innovation, dated Apr. 18, 2022, at 4; Letter from Kristin
Smith, Executive Director, and Jake Chervinsk, Head of Policy, Blockchain Association,
dated Apr. 18, 2022, at 7-8; Letter from Renata K. Szkoda, Chair, Global Digital Asset &
Cryptocurrency Association, dated Apr. 18, 2022, at 6; Letter from LeXpunK, dated Apr.
18, 2022, at 11; Letter from Miller Whitehouse-Levine, Policy Director, DeFi Education
Fund, dated Apr. 18, 2022, at 16-17; Letter from Paul Grewal, Chief Legal Officer,
Coinbase, dated Apr. 18, 2022, at 6; Letter from Teana Baker-Taylor, Chief Policy Officer,
Chamber of Digital Commerce, et al., dated Mar. 24, 2022, at 5; all available at
https://www.sec.gov/comments/s7-02-22/s70222.htm.

12

See 2023 Reg ATS Proposing Release, supra note 6, at 29469.
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Privacy Act, because the information is not retrieved by a personal identifier. However, there is
a scenario in which a potential sole proprietor registered as a broker-dealer may use his or her
name as the designated company name. To the extent that the collection in this instance
constitutes a Privacy Act record, SORN SEC-03 “Division of Trading and Markets Records”
covers the information collection. Also, the EDGAR PIA will cover the information collection.
A Privacy Act statement is included on Form BD.
12.

Information Collection Burden
2022 Proposed Rulemaking Affecting this OMB Control Number

As discussed above, the changes proposed in the 2022 Reg ATS Proposing and 2023 Reg
ATS Reopening Releases would increase the number of respondents for the collections of
information in several rules, including this one. This revision only increases the number of
respondents, as described below, and does not otherwise revise the collections of information in
this OMB Control Number.
Based on the number of initial applications on Form BD the Commission received from
10/01/2019 through 09/30/2021, and considering the number of initial applications estimated by
the 2022 Reg ATS Proposing and 2023 Reg ATS Reopening Releases, Commission staff
estimates that the Commission will receive approximately 185 applications each year on Form
BD. 13 While it is likely that the time necessary to complete Form BD will vary depending on the
nature and complexity of the entity’s business, Commission staff has previously estimated that
the average time necessary for a broker-dealer to complete and file an application for brokerdealer registration on Form BD would be approximately 2.75 hours, and that estimate has been
subject to notice and comment. 14 Consequently, Commission staff estimates that total annual
burden hours required for all firms to complete and file applications for broker-dealer registration
on Form BD is approximately 509 hours (2.75 × 185 = 508.75 rounded up to 509).
Once registered, a broker-dealer must file an amended Form BD when information it
originally reported on Form BD changes or becomes inaccurate. Commission staff has
previously estimated that the average time necessary to complete an amended Form BD would be
approximately 20 minutes (0.33333333 hours), and that estimate has been subject to notice and
13

The Commission generally classifies Form BD data based on the Federal government's
fiscal year, from October 1 through September 30. The Commission received 186, 161, and
179 broker-dealer applications on Form BD during the fiscal years ending 2019, 2020, and
2021, respectively. The number of new respondents estimated by the 2022 Reg ATS
Proposing and 2023 Reg ATS Reopening Releases is 28 total. See 2022 Reg ATS
Proposing Release, supra note 5, at 15592; 2023 Reg ATS Reopening Release, supra note 6,
at 29468. 186 + 161 + 179 + 28) / 3 years = 184.67, rounded up to 185. It should be noted
that the addition of the estimated number of applications from the 2022 Reg ATS Proposing
and 2023 Reg ATS Reopening Releases to actual Form BD data is done solely for the
purposes of this revision. Future renewals of this OMB Control Number will continue to
follow the methodology of averaging the number of actual new Form BD applications from
the most recent three fiscal years to derive an annual estimate of new applications.

14

Securities Exchange Act Release No. 41594 (July 2, 1999), 64 FR 37586.
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comment. 15 Based on the number of amended Forms BD the Commission received from
10/01/2019 through 09/30/2021, Commission staff estimates that the total number of
amendments that the Commission will receive on Form BD would be approximately 9,667, 16 or
approximately 2.72 per broker-dealer each year. 17 Therefore, Commission staff estimates that
the total annual burden hours necessary for broker-dealers to complete and file amended Forms
BD is approximately 3,222 hours (9,667 amended Forms BD per year × 0.33333333 hours per
amendment = 3,222.3333 rounded down to 3,222).
Thus, the Commission estimates that the total industry-wide annual filing burden for
applications and amendments filed with the Commission on Form BD is approximately 3,720
hours (498 + 3,222).
Form type

Burden type

Annual number
of responses
received

Hours per
response

Total burden
per burden type
(hours)

Form BD

Initial reporting

185

2.75

509

Form BD/A

Periodic
reporting

9,667

0.33333333

3,222
3,731

Total Burden

The staff believes that a broker-dealer would have a Compliance Manager complete and file
both applications and amendments on Form BD, at $344/hour. 18 Consequently, the staff
estimates that the total internal cost of compliance associated with these burden hours for all
broker-dealers is approximately $1,283,464 each year ($344 × 3,731).
13.

Costs to Respondents

It is not anticipated that respondents will have to incur any capital and start-up costs, nor
any additional operational or maintenance costs (other than as provided in Item 12), to comply
with the collection of information.
15

Id.

16

See supra, footnote 6. The Commission received 10,668, 8,708, and 9,625 amended Forms
BD’s during the fiscal years ending 2019, 2020, and 2021, respectively. 9,667 = (10,668 +
8,708 + 9,625) /3 years.

17

2.72 = 9,667/3,553.

18

$344 per hour figure for a Compliance Manager is from the Securities Industry and
Financial Markets Association's publication titled Management & Professional Earnings in
the Securities Industry 2013, as modified by Commission staff to account for an 1,800-hour
work-year and multiplied by 5.35 to account for bonuses, firm size, employee benefits, and
overhead.
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14.

Costs to Federal Government

Not applicable. Review and processing of broker-dealer applications and amendments
filed on Form BD is done by existing Commission staff as part of their regular duties.
15.

Changes in Burden

The increase of 28 hours in the annual time burden (from approximately 3,703 hours to
approximately 3,731 hours) is due to an increase in the number of broker-dealers the staff expects
to file on Form BD as a result of the proposed amendments described in the 2022 Reg ATS
Proposing and 2023 Reg ATS Reopening Releases.
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.

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