3235-0035 Supporting Statement (2025 Extension)

SUPPORTING STATEMENT for the Paperwork Reduction Act Information Collection
Submission for Rule 17a-13--Quarterly security counts to be made by certain exchange
members, brokers, and dealers
OMB Control No. 3235-0035
This submission is being made pursuant to the Paperwork Reduction Act of 1995, 44
U.S.C. Section 3501 et seq.
A.

JUSTIFICATION
1.

Information Collection Necessity

In the period between 1967 and 1970, the securities industry was in the midst of a
prolonged and severe operational crisis. An increase in trading volume clogged the inadequate
machinery for the control and delivery of securities. As a result, many broker-dealers were
unable to locate securities belonging to customers. Others found themselves with substantial
quantities of securities in their possession without knowing to whom they belonged. The chaotic
state of affairs in many back offices of broker-dealers created the climate for the theft of
securities by back office personnel.
In response, on November 8, 1971, the Securities and Exchange Commission (the
“Commission”) adopted Rule 17a-13 (17 CFR 240.17a-13) under the Securities Exchange Act of
1934 (15 U.S.C. 78 et seq.) (“Exchange Act”). Paragraph (b) of Rule 17a-13 generally requires
that at least once each calendar quarter, all registered broker-dealers physically examine and
count all securities held and account for all other securities not in their possession, but subject to
the broker-dealer’s control or direction. Any discrepancies between the broker-dealer’s
securities count and the firm’s records must be noted and, within seven days, the unaccounted for
difference must be recorded in the firm’s records. Paragraph (c) of Rule 17a-13 provides that
under specified conditions, the securities count, examination, and verification of a brokerdealer’s entire list of securities may be conducted on a cyclical basis rather than on a certain date.
Although Rule 17a-13 does not require a broker-dealer to file a report with the Commission,
discrepancies between a broker-dealer’s records and its securities count may be required to be
reported, for example, as a loss on Form X-17A-5 (17 CFR 248.617), which must be filed with
the Commission under Exchange Act Rule 17a-5. Rule 17a-13 exempts broker-dealers that limit
their business to the sale and redemption of securities of registered investment companies or
interests or participation in an insurance company separate account and those who solicit
accounts for federally insured savings and loan associations, provided that such persons
promptly transmit all funds and securities and hold no customer funds and securities. Rule 17a13 also does not apply to certain broker-dealers required to register only because they effect
transactions in securities futures products.
Rule 17a-13 requires the recording of only those differences in the broker-dealer’s
records that remain unresolved seven business days after the date of the examination, count, and
verification. The Commission or the self-regulatory organization (“SRO”) designated as the
broker-dealer’s examining authority may examine these recorded discrepancies in a broker-

dealer’s records to determine whether they are the result of the firm’s inability to maintain
control of its business.
The Commission is statutorily authorized to promulgate Rule 17a-13 by virtue of
Exchange Act Sections 15(c)(3) and 17(a). These sections authorize the Commission to provide
safeguards with respect to the financial responsibility and related practices of broker-dealers,
including the acceptance of custody and the use of customer securities. These sections also
authorize the Commission to require the making and preservation of such records as the
Commission deems appropriate for the protection of investors and in the public interest. Further
statutory authority is found in Exchange Act Section 23(a) (15 U.S.C. 78w).
2.

Information Collection Purpose and Use

The information is used as an inventory control device to monitor a broker-dealer’s
ability to account for all securities held in transfer, in transit, pledged, loaned, borrowed,
deposited, or otherwise subject to the firm’s control or direction. Any discrepancies between the
security count and the broker-dealer’s records alert the Commission and the SROs to those firms
experiencing back-office operational issues. Without Rule 17a-13, the Commission and
applicable SROs would lose this important warning device to inform them when a broker-dealer
might be having problems accounting for the securities for which it is responsible.
3.

Consideration Given to Information Technology

Since Rule 17a-13 provides that firms must reconcile their books and records with their
physical inventory and inventory in transit, improved information technology would not reduce
the burden.
4.

Duplication

Some SROs of which a broker-dealer may be a member require the broker-dealer to make
similar counts of securities in the firm’s possession or control. These counts, however, are used
for different purposes.
5.

Effect on Small Entities

To the extent that broker-dealers covered by Rule 17a-13 are small entities, these entities
would be impacted. The impact would, however, be minimal because most small entities do not
hold securities.
6.

Consequences of Not Conducting Collection

If the security counts were conducted less frequently, investors would not have the
protection that the federal securities laws require. As discussed above, before Rule 17a-13 was
adopted, many broker-dealers were unable to locate securities belonging to customers. Others
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found themselves with substantial quantities of securities in their possession without knowing to
whom they belonged. .
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).
Rule 17a-13 does not include a recordkeeping or retention requirement in the text
of the rule. Instead, Rule 17a-3 1 requires broker-dealers to make and keep current
certain records relating to their financial condition, communications, customer
information, and employees. Rule 17a-4 2 requires broker-dealers to preserve, for
prescribed periods of time, the records required to be created under Rule 17a-3 and
certain other Commission rules.
Pursuant to Rule 17a-3, broker-dealers must, among other things, maintain
ledgers reflecting all long and all short securities record differences arising from the
examination, count, verification, and comparison pursuant to Rule 17a-13. 3 Under
Rule 17a-4, broker-dealers are required, in relevant part, to preserve for a period of not
less than three years, the first two in an easily accessible place, ledgers reflecting all
long and all short securities record differences required by Rule 17a-3(a)(4). 4
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

No payments or gifts were provided to respondents.
10.

Confidentiality

The records required to be made by Rule 17a-13 are available only to Commission
examination staff, state securities authorities, and applicable SROs. Subject to the provisions of the
Freedom of Information Act, 5 U.S.C. § 522, and the Commission’s rules thereunder (17 CFR
200.80(b)(4)(iii)), the Commission does not generally publish or make available information
contained in any reports, summaries, analyses, letters, or memoranda arising out of, in anticipation
1

17 CFR 240.17a-3.

2

17 CFR 240.17a-4.

3

17 CFR 240.17a-3(a)(4)(vi).

4

17 CFR 240.17a-4(b)(1).

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

12.

Information Collection Burden

As of December 2024, there were approximately 3,342 active broker-dealers registered
with the Commission. However, given the variability in their businesses, it is difficult to
quantify how many hours per year each broker-dealer spends complying with Rule 17a-13. As
noted, Rule 17a-13 requires a broker-dealer to account for all securities in its possession or
subject to its control or direction. Many broker-dealers hold few, if any, securities, while others
hold large quantities. Therefore, the time burden of complying with Rule 17a-13 will depend on
respondent-specific factors, including size, number of customers, and proprietary trading
activity. The staff estimates that the average time spent per respondent is 100 hours per year on
an ongoing basis to maintain the records required under Rule 17a-13. This estimate takes into
account the fact that more than half of the 3,342 respondents – according to financial reports
filed with the Commission – may spend little or no time complying with Rule 17a-13, given that
they do not do a public securities business or do not hold inventories of securities. For these
reasons, the staff estimates that the total recordkeeping burden per year is approximately 334,200
hours (3,342 respondents x 100 hours/respondent).
Summary of Hourly Burdens

Name of
Information
Collection

Type of
Burden

Number
of
Entities
Impacted

Annual
Responses
per Entity

Rule 17a-13

Recordkeeping

3,342

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13.

Initial
Burden
per Entity
per
Response

Initial
Burden
Annualized
per Entity
per Response

Ongoing
Burden per
Entity per
Response

Annual
Burden Per
Entity per
Response

Total
Annual
Burden Per
Entity

Total Industry
Burden

Small
Business
Entities
Affected

0.00

0.00

100.00

100.00

100.00

334,200

0.00

TOTAL HOURLY BURDEN FOR ALL RESPONDENTS

334,200

Costs to Respondents

Not applicable: (a) it is not anticipated that respondents will have to incur any capital and start-up
costs to comply with Rule 17a-13; and (b) it is not anticipated that respondents will have to incur any
operational or maintenance costs to comply with Rule 17a-13.

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14.

Costs to Federal Government

Not applicable. The staff does not anticipate the federal government will incur any
significant expense in reviewing documents filed in compliance with Rule 17a-13. All review
will be done by existing staff as part of their regular duties.
15.

Changes in Burden

The change in the estimated hour burden is due to the change in the estimated number of
broker-dealers subject to Rule 17a-13. The estimated number of broker-dealers decreased from
3,532 to 3,342. Therefore, the estimated hour burden decreased from 353,200 hours per year
(3,532 respondents x 100 hours/respondent) to 334,200 hours per year (3,342 respondents x 100
hours/respondent), resulting in a decrease of 19,000 hours per year. This change is summarized
in the table below.
Changes in Hour Burdens
Name of Information
Collection
Rule 17a-13

16.

Annual Industry
Burden

Annual Industry Burden
Previously Reviewed

Change in Burden

353,200

(19,000)

334,200

Reason for Change
Decrease in the number of
registered broker-dealers

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.

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