Rule 17a-12 Supporting Statement (2025 Final Rule)

SUPPORTING STATEMENT
for the Paperwork Reduction Act Information Collection Submission for
Rule 17a-12/Form X-17A-5 Part II
OMB Control No. 3235-0498
This submission is being made pursuant to the Paperwork Reduction Act of 1995, 44 U.S.C.
Section 3501 et seq.
A.

JUSTIFICATION
1.

Necessity of Information Collection

Section 17(a)(1) of the Securities Exchange Act of 1934 ("Exchange Act") requires
registered broker-dealers to make, keep, furnish, and disseminate records and reports prescribed
by the Commission as necessary or appropriate in the public interest, for the protection of
investors, or otherwise in furtherance of the purposes of the Exchange Act. Section 17(e) of the
Exchange Act requires every registered broker-dealer to file annually with the Commission a
balance sheet and income statement certified by an independent public accountant or by an
accounting firm registered with the Public Company Accounting Oversight Board, if the firm is
required to be registered under the Sarbanes-Oxley Act of 2002, and such other information
concerning its financial condition as the Commission, by rule, may prescribe as necessary or
appropriate in the public interest or for the protection of investors. Pursuant to this authority, in
October 1998 the Commission enacted Rule 17a-121 and amended Form X-17A-5 to add Part II2
to establish the basic periodic reporting structure for OTC (over-the-counter) derivatives dealers.
Rule 17a-12 requires OTC derivatives dealers registered with the Commission to file quarterly
Financial and Operational Combined Uniform Single Reports (“FOCUS” reports) on Part II of
Form X-17A-5 and annual audited reports with the Commission. The provisions of Rule 17a-12
are similar to those contained in Exchange Act Rule 17a-53– reports to be made by certain
brokers and dealers – but take into consideration the more limited and unique business conducted
by OTC derivatives dealers.
Rule 17a-12 also requires that OTC derivatives dealers file an annual audited report.
Among other things, the audited report must include a statement of financial condition, a
statement of income, a statement of cash flows, a statement of changes in owners’ equity, a
statement of changes in subordinated liabilities, and supporting schedules, including a
computation of net capital. The report must be audited by an independent public accountant.
Concurrently with the annual audited report, OTC derivatives dealers must file supplemental
reports by the auditor, including an accountant’s report on material inadequacies and reportable
conditions, an accountant’s report on management controls, and an accountant’s report on
inventory pricing and modeling.

1

17 CFR 240.17a-12.

2

17 CFR 249.617.

3

17 CFR 240.17a-5.

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2024 Rule Amendments
The Commission recently amended Rule 17a-12 to require OTC derivatives dealers to
electronically file annual audited reports and related annual filings with the Commission
electronically in Inline eXtensible Business Reporting Language (“Inline XBRL”) through the
Commission’s Electronic Data Gathering, Analysis, and Retrieval (“EDGAR”) system.4 The
filings were previously made either in paper or voluntarily on the EDGAR system as PDF
documents. The Commission also removed the oath or affirmation notarization requirement of
the annual audited reports. In addition, the Commission is amending Rule 17a-12 to require
OTC derivatives dealers to file the unaudited FOCUS Report Part II electronically through the
SEC eFOCUS system instead of in paper. The Commission is also allowing electronic
signatures in Rule 17a-12 filings, which includes the FOCUS Report. Finally, the Commission
made corrective and clarifying amendments to FOCUS Report Part II.
2.

Purpose and Use of the Information Collection

The information collected under Rule 17a-12 is essential to the regulation and oversight
of OTC derivatives dealers and the primary means the Commission uses to monitor and enforce
compliance with the Commission’s financial responsibility rules as prescribed by the Exchange
Act. These quarterly FOCUS and annual audited reports are used to evaluate the securitiesrelated and other activities each OTC derivatives dealer is engaged in, the extent to which it is
engaged in those activities, and how economic events and government policies might affect
various segments of the securities industry. In addition, the Commission staff reviews FOCUS
report information as part of its preparation for examinations and inspections. A firm’s failure to
comply with this rule would severely impair the Commission’s ability to protect customers,
industry counterparties, and others.
3.

Consideration Given to Information Technology

Most OTC derivatives dealers and other firms engaged in swaps and related activities use
automated systems to prepare information provided on quarterly FOCUS reports and annual
audited reports. As stated above, under the 2024 rule amendments, OTC derivatives dealers are
required to file quarterly FOCUS reports due on or after December 31, 2024, electronically on
the SEC eFOCUS system, and annual audited reports and supplemental reports due on or after
December 31, 2024, electronically on EDGAR. For annual audited reports and supplemental
reports due on or after December 31, 2025, OTC derivative dealers also will be required to apply
machine-readable Inline XBRL data “tags” to such reports.
4.

Duplication

OTC derivatives dealers are not otherwise required to obtain and maintain the
information required by the rule.

4

Electronic Submission of Certain Materials Under the Securities Exchange Act of 1934; Amendments
Regarding the FOCUS Report; SEC Release Nos. 33–11342; 34–101925; IC– 35420; (Dec. 16, 2024); 90 FR 7250
(Jan. 21, 2024) (File No. S7-08-23) (“Adopting Release”).

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5.

Effect on Small Entities

The rule does not affect small entities.
6.

Consequences of Not Conducting Collection

If the collection were not made, or were made less frequently, the protection afforded to
the public would be lessened.
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 Commission requested comment on the collection of information requirements in the
proposing release in March 2023.5 Multiple commenters generally agreed that the Inline XBRL
requirements under the rule amendments will impose additional costs on affected entities, but
disagreed with the Commission’s estimates on the specific nature and magnitude of such costs.6
The Commission considered these comments. The Commission estimated at proposal, and
continues to estimate for the rule amendments, that certain affected filers or submitters
(specifically, clearing agencies and exchanges not affiliated with public companies) will incur
costs of $20,000 to $30,000 to structure the documents, but that other affected filers or
submitters will incur lower costs. The Commission has, however, increased the burden and cost
estimates for Inline XBRL tagging of the relevant documents. In addition, the Commission
received comment asking us to remove the requirement for the annual audit’s oath or affirmation
to be notarized. The Commission considered the comment and agreed that the notarization
requirement can be eliminated.
9.

Payment or Gift to Respondents

Not applicable. No payment or gift was provided to respondents.
10.

Confidentiality

Information provided by OTC derivatives dealers in FOCUS reports, supporting
schedules, and annual audited reports is confidential pursuant to Rule 17a-12(a)(2) and (c)(4).
The statutory basis for this confidential treatment is the exemption contained in Section (b)(4) of
the Freedom of Information Act, 5 U.S.C. 552, which provides that the requirement for public
5

See Electronic Submission of Certain Materials Under the Securities Exchange Act of 1934; Amendments
Regarding the FOCUS Report; SEC Release Nos. 33-11176, 34-97182, IC-34864 (Mar. 22, 2023); 88 FR 23920 (Apr.
18, 2023) (File No. S7-08-23).
6

The comments on the proposing release are available at https://www.sec.gov/comments/s7-0823/s70823.htm.

4

dissemination does not apply to commercial or financial information which is privileged or
confidential.
11.

Sensitive Questions

The information collection collects basic elements of PII including name, job title, and
work address that is covered by the EDGAR PIA. No information of a sensitive nature will be
required under this collection of information. The agency has determined that a SORN is not
required in connection with the collection of information.
12.

Burden of Information Collection

As of December 31, 2023, there are seven OTC derivatives dealers registered with the
Commission, and four of these OTC derivatives dealers also are registered with the Commission
as Security-Based Swap Dealers (“SBSDs”). As a consequence of these entities registering as
SBSDs, they are subject to Rule 18a-7 under the Exchange Act, rather than Rule 17a-12, and
only three OTC derivatives dealers are subject to the requirements of Rule 17a-12.
Currently Approved Burden
FOCUS Report on Part II of Form X-17A-5: The staff estimates that the average
amount of time necessary to prepare and file the quarterly FOCUS reports on Part II of Form X17A-5 is 80 hours per OTC derivatives dealer per year (based upon an average of 20 hours spent
preparing each response and 4 responses per year). Thus, the annual industrywide ongoing
burden is 240 hours per year (80 x 3 = 240).
Annual Audited Report and Supporting Schedules: The staff estimates that the
average amount of time necessary to prepare and file the annual audited report and supporting
schedules is 100 hours per OTC derivatives dealer per year. Thus, the annual industrywide
ongoing burden is 300 hours per year (100 x 3 = 300).
2024 Rule Amendments
Filing Annual Audit on EDGAR: The Commission is requiring OTC derivatives
dealers to file the annual audited report and supporting schedules on EDGAR. The Commission
estimates that the one-time burden for an OTC derivatives dealer to familiarize itself with
EDGAR would be approximately 16 hours. However, because all three OTC derivatives dealers
already voluntarily file their annual reports on EDGAR, the Commission estimates that the onetime industry-wide burden would be 0 hours.
Filing Annual Audit in Inline XBRL – Initial Burden: The Commission is requiring
OTC derivatives dealers to file the annual audited report and supporting schedules on EDGAR in
Inline XBRL. On average, respondents are estimated to incur 7 burden hours for the first
response to be tagged in Inline XBRL, resulting in an industry-wide initial internal burden of 21
hours (7 x 3 = 21), or 7 hours on an annualized basis (21 / 3 = 7).

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Filing Annual Audit in Inline XBRL – Ongoing Burden: The Commission is
requiring OTC derivatives dealers to file the annual audited report and supporting schedules on
EDGAR in Inline XBRL. On average, respondents are estimated to incur an ongoing burden of
4.5 hours to tag responses in Inline XBRL, resulting in an industry-wide ongoing annual
industry-wide ongoing internal burden of 13.5 hours (4.5 x 3 = 13.5).
Corrective and Clarifying Amendments to FOCUS Report Part II: The Commission
is making corrective and clarifying amendments to FOCUS Report Part II. The Commission
estimates that the amendments will result in an initial burden of 5 hours on each OTC derivatives
dealer so firms can familiarize themselves with the amendments to FOCUS Report Part II,
resulting in an industry-wide initial burden of 15 hours (5 x 3 = 15), or 5 hours on an annualized
basis (15 / 3 = 5). The Commission believes that these proposed amendments will either have no
ongoing burden on or reduce the ongoing burden OTC derivatives dealers because they will
reduce questions about where and how to report items on the form.
FOCUS Report Signature Requirement: The Commission is requiring only the CEO
or CFO’s signature lines to be signed on the FOCUS Report’s cover page, and allows these
signatures to be signed either manually or electronically. This amendment is expected to result
in an initial burden of 1 hour on each filer so that the firm can review the standards for an
electronic signature on the FOCUS Report Part II, resulting in an industry-wide initial burden of
3 hours (1 x 3 = 3), or 1 hour on an annualized basis (3 / 3 = 1). However, this amendment is
expected to either have no impact on or reduce the ongoing burden on FOCUS Report filers,
because they will not be required to furnish as many signatures as before the amendment, and it
may be easier to prepare electronic signatures rather than manual signatures since firms will
already be familiar with the process and can easily obtain these signatures while working
remotely.
FOCUS Report to be Filed on SEC eFOCUS: The Commission is requiring OTC
derivatives dealers to file the FOCUS Report electronically on the SEC eFOCUS system instead
of in paper. The Commission estimates that this amendment will result in an initial burden of 15
hours on each OTC derivatives dealer so that the firm can familiarize itself with the SEC
eFOCUS system, resulting in an industry-wide initial burden of 45 hours (15 x 3 = 45), or 15
hours on an annualized basis (45 / 3 = 15). However, this amendment is expected to either have
no impact on or reduce the ongoing burden on OTC derivatives dealers, because filing the
FOCUS Report electronically is an automated process as compared to filing by paper.
Removal of Oath or Affirmation Notarization Requirement: The Commission is
amending Part III of Form X-17A-5 (i.e., the annual audit’s cover page) to remove the signature
line for the notary public. The Commission received comment asking us to remove the
requirement for the annual audit’s oath or affirmation to be notarized. The Commission
considered the comment and agreed that the notarization requirement can be eliminated. We
believe this amendment will generally either have no impact on or reduce the ongoing burden on
the filers because they will no longer need to obtain notarization of the annual reports.
Nevertheless, the Commission estimates that the amendment will result in an initial burden of
five hours on each firm so firms can familiarize themselves with the change, resulting in an
industry-wide initial burden of 15 hours (5 x 3 = 15), or 5 hours on an annualized basis (15 / 3 =

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5).
Therefore, the total industry-wide hourly burden associated with Rule 17a-12 is estimated
to be 586.50 hours per year. The burden is summarized in the table below.

Name of Information
Collection

Rule 17a-12 - Summary of Hourly Burdens
Initial
Number
Initial
Burden
Annual
of
Burden per Annualized
Responses
Entities
Entity per
per Entity
per Entity
Impacted
Response
per
Response

Type of
Burden

Rule 17a-12/Form X17A-5 Part II
Rule 17a-12 – Annual
Audited Report and
Supporting Schedules
2024 Amendment Filing annual audit on
EDGAR – Initial burden
2024 Amendment Filing annual audit in
Inline XBRL – Initial
burden
2024 Amendment Filing annual audit in
Inline XBRL – Ongoing
burden
2024 Amendment Corrective and
clarifying amendments
to FOCUS Report Part
II – Initial burden
2024 Amendment Amendments to FOCUS
Report signature
requirement – Initial
burden
2024 Amendment Filing FOCUS Report
on SEC eFOCUS –
Initial burden
2024 Amendment Removal of oath or
affirmation notarization
requirement – Initial
burden

Ongoing
Burden
per
Entity
per
Response

Annual
Burden
Per
Entity
per
Response

Total
Annual
Burden
Per
Entity

Total
Industry
Burden

Reporting

3

4

0

0

20

80

80

240

Reporting

3

1

0

0

100

100

100

300

Reporting

0

1

16.00

5.33

0.00

5.33

5.33

0.00

Reporting

3

1

7.00

2.33

0.00

2.33

2.33

7.00

Reporting

3

1

0.00

0.00

4.50

4.50

4.50

13.50

Reporting

3

1

5.00

1.67

0.00

1.67

1.67

5.00

Reporting

3

1

1.00

0.33

0.00

0.33

0.33

1.00

Reporting

3

1

15.00

5.00

0.00

5.00

5.00

15.00

Reporting

3

1

5.00

1.67

0.00

1.67

1.67

5.00

TOTAL HOURLY BURDEN FOR ALL RESPONDENTS

13.

Costs to Respondents

Currently Approved Burden
The Commission estimates that the average annual reporting cost per OTC derivatives
dealer for the independent public accountant to examine the financial statements is
approximately $46,300 per respondent, resulting in an industrywide ongoing cost burden of
$138,900 ($46,300 x 3 = $138,900).
2024 Rule Amendments

586.50

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The Commission estimates that each OTC derivative dealer will incur $1,600 in initial
cost and $1,000 in ongoing cost to tag the annual audited reports in Inline XBRL. Thus, the
2024 amendments resulted in $4,800 ($1,600 x 3 = $4,800) of total industrywide initial cost, or
$1,600 ($4,800 / 3 = $1,600) on an annualized basis, and $3,000 ($1,000 x 3 = $3,000) of total
industrywide ongoing cost.
Therefore, the total industry-wide cost burden associated with Rule 17a-12 is estimated to
be $143,500 hours per year. The burden is summarized in the table below.

Name of
Information
Collection
Rule 17a-12 –
Annual Audited
Report and
Supporting
Schedules
2024 Amendment
- Filing annual
audit in Inline
XBRL – Initial
cost
2024 Amendment
- Filing annual
audit in Inline
XBRL – Ongoing
cost

14.

Rule 17a-12 - Summary of Dollar Costs
Initial Cost
Annual
Initial Cost
Ongoing
Annualized
Respon
per Entity
Cost per
per Entity
ses per
per
Entity per
per
Entity
Response
Response
Response

Type of
Burden

Number
of
Entities
Impacte
d

Reporting

3

1

0

0

Reporting

3

1

$1,600.00

Reporting

3

1

$0.00

Annual
Cost Per
Entity per
Response

Total Annual
Cost Per
Entity

$46,300

$46,300

$46,300

$138,900

$533.33

$0.00

$533.33

$533.33

$1,600

$0.00

$1,000.00

$1,000.00

$1,000.00

$3,000

TOTAL COST FOR ALL RESPONDENTS

$143,500

Total
Industry
Cost

Costs to Federal Government

Rule 17a-12, 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.

Explanation of Changes in Burden

The most recent burden estimates, approved by OMB as part of a routine extension on
November 20, 2024, were approximately 540 hours and $138,900 per year. This current
submission requests approval for information collections in the Commission’s 2024 rulemaking.
The current requested hourly burden of 586.50 hours represents an increase of approximately
46.5 hours. The current requested cost burden of $143,500 represents an increase of $4,600.
The increase in burden is due to the revisions in the 2024 rule amendments. The burdens that
were previously submitted to OMB in the November 2024 routine extension are not affected by
the rule amendments and are not being changed in this supporting statement.
The Commission previously submitted a proposed revision in connection with the
rulemaking on April 19, 2023. We note that the initial burden associated with the 2024
amendment to remove oath or affirmation notarization requirement of annual audited reports was

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not included in the proposed revision. As explained above, the Commission adopted this
amendment after considering public comments, and this rule change is expected to either have no
ongoing burden or reduce the ongoing burden; however, the Commission is estimating some
initial burdens for firms to become familiar with the change.
In addition, some of the burdens have changed since the 2023 proposal since the
Commission has, after considering public comments, increased the burden and cost estimates for
Inline XBRL tagging of the relevant documents.
The changes in hour and cost burdens are summarized in the table below.
Name of Information Collection
2024 Amendment - Filing annual audit in
Inline XBRL – Initial burden
2024 Amendment - Filing annual audit in
Inline XBRL – Ongoing burden
2024 Amendment - Corrective and clarifying
amendments to FOCUS Report Part II –
Initial burden
2024 Amendment - Amendments to FOCUS
Report signature requirement – Initial burden
2024 Amendment - Filing FOCUS Report on
SEC eFOCUS – Initial burden
2024 Amendment - Removal of oath or
affirmation notarization requirement – Initial
burden
2024 Amendment - Filing annual audit in
Inline XBRL – Initial cost
2024 Amendment - Filing annual audit in
Inline XBRL – Ongoing cost

16.

New Estimated
Burden

Burden
Previously
Approved

Change in
Burden

7.00

0

7.00

13.50

0

13.50

5.00

0

5.00

1.00

0

1.00

15.00

0

15.00

5.00

0

5.00

$1,600

0

$1,600

$3,000

0

$3,000

Reason for Change
New requirements of 2024 rule
amendments
New requirements of 2024 rule
amendments
New requirements of 2024 rule
amendments
New requirements of 2024 rule
amendments
New requirements of 2024 rule
amendments
New requirements of 2024 rule
amendments
New requirements of 2024 rule
amendments
New requirements of 2024 rule
amendments

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.

Collection of Information Employing Statistical Methods
This collection does not involve statistical methods.