Rule 15c1-5 Supporting Statement 2023 DGL REVISED

SUPPORTING STATEMENT
for the Paperwork Reduction Act Information Collection Submission for
Rule 15c1-5
OMB Control No. 3235-0471
A. JUSTIFICATION
1.

Necessity of Information Collection

The Securities and Exchange Commission (“Commission”) adopted Rule 15c1-5 (17 CFR
240.15c1-5) to protect the public by prohibiting a broker or dealer from inducing the purchase or
sale of any security by any act, practice or course of business which would defraud or deceive any
person. Rule 15c1-5 states that any broker-dealer controlled by, controlling, or under common
control with the issuer of a security that the broker-dealer is trying to sell to or buy from a customer
must give the customer written notification disclosing the control relationship at or before
completion of the transaction. See Securities Exchange Act Release No. 34-1265 (June 25, 1937)
(proposing the rule), and Securities Exchange Act Release No. 34-1330 (August 4, 1937) (adopting
the rule).
The Commission is statutorily authorized by Section 15 of the Securities Exchange Act of
1934 (“Exchange Act”) 15 U.S.C. 780(c)(2) to adopt rules and regulations that define and prescribe
means reasonably designed to prevent such acts and practices as are fraudulent, deceptive, or
manipulative. Further statutory authority is in Section 23(a) of the Exchange Act, 15 U.S.C. 78w.
2.

Purpose and Use of Information Collection

The information required by the rule is necessary for the execution of the Commission's
mandate under the Exchange Act to prevent fraudulent, manipulative, and deceptive acts and
practices by broker-dealers. In particular, the information required by the rule provides a potential
investor with full knowledge of the control relationships of the broker-dealer. Without this
disclosure, an investor would be at risk of making an uninformed investment choice based on advice
from a broker who had a potential conflict of interest.
3.

Consideration Given to Information Technology

Because compiling this information is done on an individual basis for each potential
investor, improved information technology would not reduce the burden.
4.

Duplication

There is no duplication of information.

5.

Effect on Small Entities

The rule requirements are not unduly burdensome on smaller broker-dealers.
6.

Consequences of Not Conducting Collection

Failure to collect the information will adversely impact the Commission’s ability to prevent
fraud and deceptive practices by broker-dealers.
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 were no payments or gifts to respondents.
10.

Confidentiality

No assurances of confidentiality are provided in the statute or the rule.
11.

Sensitive Questions

The Information Collection does not collect information about individuals, therefore, a PIA,
SORN, and PAS are not required.
12.

Information Collection Burden

As of July 1, 2023, there are approximately 3,497 registered broker-dealers. Only 175
(about 5%) are likely to be involved in a control relationship with an issuer whose securities they
are trying to sell or buy. It should take each respondent approximately 10 hours per year to prepare
and distribute the written notifications required to comply with the rule. Thus, the total compliance
burden per year is approximately 1,750 hours.
Burden Type
Third Party
Disclosure
Total
Aggregate
Burden

Number of
Respondents
175

Hours Per Year to
Prepare and Distribute
10

Total Burden Per Year
(Hours)
1,750
1,750 hours

The approximate internal cost per hour of complying with the collection of information
imposed by Rule 15c1-5 is $100, resulting in a total internal cost of compliance for all respondents
of $175,000 (1,750 hours x $100). This is, however, solely a monetization of the hour burden not a
cost burden.
13.

Costs to Respondents

There are no one time capital or start-up costs and no ongoing operation or maintenance
costs imposed on respondents by the collection of information.
14.

Costs to Federal Government

There is no estimated cost to the Federal Government.
15.

Changes in Burden

The estimated burden of collecting information pursuant to Rule 15c1-5 has decreased
slightly from 1,810 hours per year to 1,750 hours per year because of a reduction in the number of
broker-dealers affected by the rule from 181 to 175.
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

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