FRH3_20240227_omb

Supporting Statement for the
Recordkeeping and Disclosure Requirements Associated with Regulation H
(Securities Transactions by State Member Banks)
(FR H-3; OMB No. 7100-0196)
Summary
The Board of Governors of the Federal Reserve System (Board), under authority
delegated by the Office of Management and Budget (OMB), has extended for three years,
without revision, the Recordkeeping and Disclosure Requirements Associated with Regulation H
(Securities Transactions by State Member Banks) (FR H-3; OMB No. 7100-0196).1 Section 15C
of the Securities Exchange Act of 1934 (the Act)2 establishes federal regulation of brokers and
dealers of government securities, including banks and other financial institutions, and directs
those brokers and dealers to keep certain records. These requirements are implemented for state
member banks in section 208.34 of the Board’s Regulation H - Membership of State Banking
Institutions in the Federal Reserve System (12 CFR Part 208), which requires that non-exempt
state member banks3 effecting securities transactions for customers establish and maintain a
system of records of these transactions, furnish confirmations of transactions to customers that
disclose certain information, and establish written policies and procedures relating to securities
trading. Regulation H also indirectly imposes certain disclosure requirements on certain state
member bank employees and officers.
The estimated total annual burden for the FR H-3 is 100,774 hours.
Background and Justification
The Act authorizes the Department of the Treasury (Treasury) to enact regulations
concerning the protection of customer securities, as well as the financial responsibility, reporting,
and recordkeeping of brokers and dealers in government securities. Treasury consults with the
Securities and Exchange Commission (SEC), Board, and other federal banking regulatory
agencies in promulgating these regulations. Regulations promulgated by the Treasury have
exempted state member banks from recordkeeping requirements imposed on government
securities brokers and dealers, because they are subject to the requirements of Regulation H.4
The recordkeeping and disclosure requirements in Regulation H for state member banks are
similar to requirements imposed upon broker-dealers by the SEC and also have been adopted by
The title of this collection previously was “Recordkeeping and Disclosure Requirements Associated with
Securities Transactions Pursuant to Regulation H.”
2
15 U.S.C. § 78o-5.
3
The requirements of section 208.34 of Regulation H apply to all state member banks that effect more than 500
government securities brokerage transactions per year, unless the institution has filed a written notice, or is required
to file notice, with the Board that it acts as a government securities broker or a government securities dealer. These
requirements also do not apply to activities of foreign branches of state member banks; activities of nonmember,
non-insured trust company subsidiaries of bank holding companies; or activities that are subject to regulations
promulgated by the Municipal Securities Rulemaking Board. In addition, state member banks with an annual
average of less than 200 securities transactions for customers over the prior three calendar years (exclusive of
transactions in U.S. government and agency obligations) are exempt from these Regulation H recordkeeping and
disclosure requirements. See 12 CFR 208.34(a)(1)(i)-(iv).
4
See 17 CFR 404.4(a)(1).
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the Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency with
respect to the banks those agencies supervise. These requirements are necessary to protect
customers, to avoid or settle customer disputes, and to protect state member banks against
potential liability arising under the anti-fraud and insider trading provisions of the Act. This
information is not available from other sources.
Description of Information Collection
Each non-exempt state member bank effecting securities transactions for customers must
maintain certain records for at least three years following transactions and make certain
disclosures, as described below.
Recordkeeping Requirements
Section 208.34(c) of Regulation H requires any state member bank that transacts more
than a minimal number of securities transactions for customers to maintain records of the
transaction.
State member banks subject to section 208.34 must also maintain certain records for at
least three years. These records include (1) chronological records of original entry containing an
itemized daily record of all purchases and sales of securities, (2) account records for each
customer reflecting all purchases and sales of securities, all receipts and deliveries of securities,
all receipts and disbursements of cash in connection with transactions in securities for an
account, and all other debits and credits pertaining to transactions in securities, (3) a separate
memorandum (order ticket) of each order to purchase or sell securities that discloses information
generally disclosed in a confirmation, (4) a record of broker-dealers used for securities
transactions and the amount of commissions paid or allocated to each, and (5) copies of required
written notifications of securities transactions.
Section 208.34(g) requires that every state member bank effecting securities transactions
for customers shall establish and maintain written policies and procedures regarding assignment
of responsibility for supervision of officers or employees who perform the functions associated
with those transactions and regarding the fair and equitable processing of orders.
The bank must retain quarterly reports provided to it by bank officers and employees who
make investment recommendations or decisions or obtain information about securities being
purchased or sold, or recommended to be purchased or sold, detailing all transactions in
securities made by them or on their behalf, either at the bank or elsewhere. The officer or
employee provides the report to the bank within 10 days of the end of the calendar quarter.
Disclosure Requirements
Section 208.34(d) requires any state member bank that transacts more than a minimal
number of securities transactions for customers to issue confirmations at or before completion of
the transaction, unless the bank provides a copy of a broker-dealer’s confirmation, which must be

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presented to the customer within one business day of the bank’s receipt of the broker-dealer’s
confirmation.
The regulation also provides alternative notification procedures for certain investment
arrangements.5
As discussed above, pursuant to section 208.34(g)(4) of Regulation H, the written
policies and procedures adopted by state member banks must provide that certain bank officers
and employees make quarterly reports to the bank regarding their compliance with those policies
and procedures. The reports made pursuant to this provision are disclosure requirements
sponsored by the Board.
Respondent Panel
The FR H-3 panel comprises state member banks, excluding those that qualify for an
exemption pursuant to section 208.34(a)(1) of Regulation H, and officers or employees of such
state member banks who make investment recommendations or decisions for the accounts of
customers, who participate in the determination of such recommendations or decisions, or who,
in connection with their duties, obtain information concerning which securities are being
purchased or sold or recommended for such action.
Frequency and Time Schedule
The FR H-3 is disclosed on a quarterly and event-generated basis. Specifically,
maintenance of records of securities transactions and the disclosure requirements discussed
above are event-generated and must occur when securities are purchased or sold. Section
208.34(c) requires that records be maintained for at least 3 years. Bank officers and employees
reporting relevant securities transactions in which they have a beneficial interest must do so
within ten days after the end of the calendar quarter.
Public Availability of Data
There are no data related to this information collection made available to the public by
the Board.
Legal Status
The FR H-3 is authorized pursuant to section 23 of the Act (15 U.S.C. § 78w), which
empowers the Board to make rules and regulations implementing those portions of the Act for
which it is responsible.6 The Board also has the authority to require reports from state member
5

12 CFR 208.34(e).
Section 208.34(g)(4) of Regulation H requires that the written policies and procedures adopted by state member
banks must provide that certain bank officers and employees make quarterly reports to the bank. 15 U.S.C. §
78w(a)(1) grants the Board the authority to “make such rules and regulations as may be necessary or appropriate to
implement the provisions of this chapter for which [it it] responsible” and to “classify persons, securities,
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banks pursuant to the sections 9 and 11 of the Federal Reserve Act (12 U.S.C. §§ 248(a) and
324). The obligation to comply with the Regulation H recordkeeping and disclosure
requirements is mandatory.
Because these records and disclosures would be maintained at each banking organization,
the Freedom of Information Act (FOIA) would only be implicated if the Board obtained such
records as part of the examination or supervision of a banking organization. In the event the
records are obtained by the Board as part of an examination or supervision of a financial
institution, this information is considered confidential pursuant to exemption 8 of the FOIA,
which protects information contained in “examination, operating, or condition reports” obtained
in the bank supervisory process (5 U.S.C. § 552(b)(8)). In addition, the information may also be
kept confidential under exemption 4 for the FOIA, which protects commercial or financial
information obtained from a person that is privileged or confidential (5 U.S.C. § 552(b)(4)).
Additionally, to the extent that records constituted personnel, medical, or similar information,
and disclosure would constitute a clearly unwarranted invasion of personal privacy, they could
be withheld pursuant to exemption 6 of the FOIA (5 U.S.C. § 552(b)(6)).
Consultation Outside the Agency
There has been no consultation outside the Federal Reserve System.
Public Comments
On September 11, 2023, the Board published an initial notice in the Federal Register (88
FR 62366) requesting public comment for 60 days on the extension, without revision, of the
FR H-3. The comment period for this notice expired on November 13, 2023. The Board did not
receive any comments. The Board adopted the extension, without revision, of the FR H-3 as
originally proposed. On January 29, 2024, the Board published a final notice in the Federal
Register (89 FR 5543).
Estimate of Respondent Burden
As shown in the table below, the estimated total annual burden for the FR H-3 is 100,774
hours. The estimated number of respondents is based on the number of state member banks as of
December 31, 2022, excluding state chartered nondepository trust companies that are members
of the Federal Reserve, which typically do not conduct activities that would require
recordkeeping pursuant to this regulation.
State member banks with trust departments incur more burden than state member banks
without trust departments. The higher burden for the former respondents is attributed to the
additional responsibilities related to their investment discretion over customers’ managed
accounts. State member banks with trust departments must provide disclosures upon request for
discretionary accounts in addition to their responsibility for providing disclosures on all
transactions, statements, applications, reports, and other matters within [its jurisdiction], and prescribe greater,
lesser, or different requirements for different classes thereof.” 15 U.S.C. § 78c(a)(9) defines the term “person” to
include a natural person.

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nondiscretionary accounts and typically must keep records for more covered securities
transactions. Further, these institutions must maintain records of each employee’s securities
transactions for those employees involved in investment decision making processes. The
estimated number of employee respondents reporting to their employers is based on an estimated
percentage of the total full-time equivalent employees at state member banks with trust
departments. The burden estimate was produced using the standard Board burden calculation
methodology. These recordkeeping and disclosure requirements represent approximately 1.6
percent of the Board’s total paperwork burden.

FR H-3
Recordkeeping
State member banks (de novo)
Section 208.34(g)
Establish policies and procedures
State member banks with trust
departments
Section 208.34(c)
Securities transactions
Section 208.34(g)
Policies and procedures
Section 208.34(g)
Employee quarterly report
State member banks without
trust departments
Section 208.34(c)
Securities transactions
Section 208.34(g)
Policies and procedures
Disclosure
State member banks with trust
departments
Section 208.34(d)
Securities transactions
State member banks without
trust departments
Section 208.34(d)
Securities transactions

Estimated
number of
respondents7

Estimated
annual
frequency

Estimated
average hours
per response

Estimated
annual burden
hours

1

1

30

30

195

12

2

4,680

195

12

2

4,680

195

4

2

1,560

506

12

0.25

1,518

506

12

0.25

1,518

195

12

15

35,100

506

12

5

30,360

7

Of these respondents, 472 (83 state member banks with trust departments and 389 state member banks without
trust departments) are considered small entities as defined by the Small Business Administration (i.e., entities with
less than $850 million in total assets). Size standards effective March 17, 2023. See
https://www.sba.gov/document/support-table-size-standards. There are no special accommodations given to mitigate
the burden on small institutions.

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Officers and employees of state
member banks with trust
departments
Section 208.34(g)
Employee quarterly report
Total

2,666

4

2

21,328
100,774

The estimated total annual cost to state member banks is $5,263,298,8 while the estimated
total annual cost to individuals is $639,840. Accordingly, the estimated total annual cost to the
public for the FR H-3 is $5,903,138.9
Sensitive Questions
This information collection contains no questions of a sensitive nature, as defined by
OMB guidelines.
Estimate of Cost to the Federal Reserve System
The estimated cost to the Federal Reserve System for collecting and processing this
information collection is negligible.

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Total cost to the responding public is estimated using the following formula: total burden hours, multiplied by the
cost of staffing, where the cost of staffing is calculated as a percent of time for each occupational group multiplied
by the group’s hourly rate and then summed (30% Office & Administrative Support at $22, 45% Financial
Managers at $80, 15% Lawyers at $79, and 10% Chief Executives at $118). Hourly rates for each occupational
group are the (rounded) mean hourly wages from the Bureau of Labor Statistics (BLS), Occupational Employment
and Wages, May 2022, published April 25, 2023, https://www.bls.gov/news.release/ocwage.t01.htm. Occupations
are defined using the BLS Standard Occupational Classification System, https://www.bls.gov/soc/.
9
The average consumer cost of $30 is estimated using data from the Bureau of Labor Statistics (BLS), Occupational
Employment and Wages, May 2022, published April 25, 2023, https://www.bls.gov/news.release/ocwage.t01.htm.

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