Supporting Statement A

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SUPPORTING STATEMENT
for the Paperwork Reduction Act Information Collection Submission for
Rule 17f-2(e)
OMB Control No. 3235-0031
A.

JUSTIFICATION
1.

Necessity of Information Collection

Between 1971 and 1974, the Senate Permanent Subcommittee of Investigations took
testimony indicating that trafficking in stolen securities certificates was profitable for organized
crime and that the failure to have available to the financial community a means of easily
identifying security-risk personnel (i.e., persons with records of serious criminal offenses) was a
contributing factor to that problem. Accordingly, in 1975, Congress added Section 17(f) to the
Securities Exchange Act of 1934 (“Exchange Act”) 1 as part of the Securities Acts Amendments
of 1975. 2 Specifically, Section 17(f)(2) requires, in pertinent part, that every member of a
national securities exchange, broker, dealer, registered transfer agent, and registered clearing
agency (collectively, “covered entities”) require that each of their partners, directors, officers,
and employees be fingerprinted and submit (or cause to be submitted) such fingerprints to the
U.S. Attorney General for identification and appropriate processing. 3
Section 17(f)(2) also authorizes the Commission, by rule, to exempt from the
fingerprinting requirements of Section 17(f)(2) upon specified terms, conditions, and periods,
any class of partners, directors, officers, and employees of a covered entity, if the Commission
finds that such action is not inconsistent with the public interest or the protection of investors.
And on March 16, 1976, the Commission adopted Rule 17f-2 pursuant to Section 17(f)(2) to
provide for certain exemptions from the fingerprinting requirement of Section 17(f)(2). 4 Under
Rule 17f-2, a covered entity may claim an exemption from the fingerprint requirements of Rule
17f-2 provided they make and keep current a statement entitled “Notice Pursuant to Rule 17f-2”
containing the information specified in Rule 17f-2(e)(1) to support their claim of exemption
(“Notice”). 5
Rule 17f-2(e)(2) requires covered entities to keep a copy of the Notice in an easily
accessible place at the organization’s principal office and at the office employing the persons for
whom exemptions are claimed, and to make the Notice available for inspection upon request by
the Commission, appropriate regulatory agency (if not the Commission), or other designated
examining authority. Notices prepared pursuant to Rule 17f-2(e) must be maintained for
different lengths of time depending on the type of entity maintaining the Notice. Under Rule
1

15 U.S.C. 78q(f).

2

Pub. L. No. 94-29, 89 Stat. 97 (June 4, 1975).

3

15 U.S.C. § 78q(f)(2). Section 17(f)(2) was designed, in part, to: (1) identify security-risk personnel; (2)
provide criminal record information to employers so they can make fully informed employment decisions;
and (3) deter persons with a criminal record from seeking employment or association with covered entities.

4

17 CFR § 240.17f-2; Exchange Act Release No. 12214 (Mar. 16, 1976), 41 FR 13594 (Mar. 31, 1976).

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17 CFR § 240.17f-2(e).

240.17a-1, every registered clearing agency must keep and preserve at least one copy of all
documents made or received by it in the course of its business for a period of not less than five
years. Under Rule 240.17a-4 certain members of national securities exchanges, brokers, and
dealers must maintain the Notice during the life of their enterprise. Under Rule 240.17Ad-7,
registered transfer agents must maintain the Notice in an easily accessible place. The
recordkeeping requirement under Rule 17f-2(e) assists the Commission and other regulatory
agencies with helping ensure compliance with Rule 17f-2.
2.

Purpose and Use of Information Collection

The Commission uses the required information collection to assist it and other regulatory
agencies with monitoring and reviewing the appropriateness of the covered entities’ claims for
exemptions from the fingerprinting requirement of Section 17(f)(2). Without Rule 17f-2(e), the
Commission could not perform its duties as statutorily required.
3.

Consideration Given to Information Technology

Rule 17f-2(e)(2) requires covered entities to keep a copy of the Notice in an easily
accessible place at the organization’s principal office and at the office employing the persons for
whom exemptions are claimed and to make the Notice available upon request for inspection by
the Commission, appropriate regulatory agency (if not the Commission), or other designated
examining authority. Covered entities typically utilize computer systems to make and keep the
required copies of such Notices.
4.

Duplication

No other reporting requirement with respect to the information required to be reported
under Rule 17f-2(e) currently exists.
5.

Effect on Small Entities

No information is requested from small entities.
6.

Consequences of Not Conducting Collection

If information was not required to be maintained by the covered entities, the
Commission’s ability to monitor covered entities’ compliance would be weakened.
7.

Inconsistencies with Guidelines in 5 CFR 1320.8(d)(2)

There are special circumstances that would require respondents to retain records other
than health, medical, government contract, grant-in-aid, or tax records for more than three years.
Rule 240.17f-2(e) applies to members of national securities exchanges, brokers, dealers,
registered transfer agents, and registered clearing agencies that claim one or more of the
exemptions in Rule 240.17f-2(a). Under Rule 240.17a-1, every registered clearing agency must
keep and preserve at least one copy of all documents made or received by it in the course of its

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business for a period of not less than five years. Under Rule 240.17a-4, certain members of
national securities exchanges, brokers, and dealers must maintain the Notice during the life of
their enterprise. Under Rule 240.17Ad-7(e)(2), registered transfer agents must maintain the
Notice in an easily accessible place.
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 are no payments or gifts to respondents.
10.

Confidentiality

Not applicable; no assurance of confidentiality is provided by Rule 17f-2(e). The rule
does not require respondents to submit personally identifiable information.
11.

Sensitive Questions

Although the rule imposes a Paperwork Reduction Act (PRA) burden under Office of
Management and Budget (OMB) control number 3235-0031, the SEC does not routinely collect
any information from respondents. There is no form filed with the SEC or information otherwise
provided to the SEC under the portion of the rule referenced by this Privacy Assessment
Worksheet (PAW). Therefore, no Systems of Records Notice (SORN), Privacy Impact
Assessment (PIA), or Privacy Act Statement (PAS) is required.
12.

Information Collection Burden

Based on the Commission’s experience with Rule 17f-2(e), we estimate that
approximately 75 respondents will incur an average burden of 30 minutes per year to comply
with this rule, which represents the time it takes for a staff person at a covered entity to properly
document a claimed exemption from the fingerprinting requirements of Rule 17f-2 in the
required Notice (0.4 hours, constituting a reporting type of burden) and to properly retain the
Notice according to the entity’s record retention policies and procedures (0.1 hours, constituting
a recordkeeping type of burden). The estimated aggregate annual burden for all covered entities
is approximately 38 hours (75 entities x 0.5 hours, rounded up).
Rule

Burden Type

Number of
Respondents

Total Burden Per Burden Type
(Hours)

75

Time Per
Response
(Hours)
0.4

Rule 17f-2(e)

Initial
Reporting

Rule 17f-2(e)

Recordkeeping

75

0.1

7.5

Total Aggregate Burden

30

38 (37.5 rounded up)

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13.

Costs to Respondents

The work associated with the burden of 38 hours per year is typically performed by the
covered entities’ staff. There is no cost to respondents other than the internal wage or salary costs
associated with generating and maintaining the documentation as described in Item 12, above.
14.

Costs to Federal Government

Rule 17f-2(e) does not require that any information be submitted to the Federal government,
and thus no costs to the Federal government are imposed by the rule’s requirement that brokerdealers disclose information to their customers.
15.

Changes in Burden

There are no changes to the overall burden.
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.

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