SUPPORTING STATEMENT
A. Justification
(1) Necessity for Information Collection
Section 17f-1 of the Securities Exchange Act of 1934 (“Act”) was a response by Congress to the large number of securities thefts which occurred in the late 1960s. Testimony at hearings conducted before the Senate Permanent Subcommittee on Investigations between 1971 and 1974 indicated that trading of stolen securities was profitable for organized crime. Testimony also indicated that the inability to easily identify missing, lost, stolen, or counterfeit securities certificates was a contributing factor to the increase in trading of such securities. Accordingly, the Commission adopted Rule 17f-1, which established certain requirements relating to the Lost and Stolen Securities Program (“Program”). Separately, the Commission created a central database for information relating to missing, lost, counterfeit, or stolen securities and made available to financial institutions designated in rule 17f-1 information that promptly identifies those securities.
Rule 17f-1(c) was adopted in December 1976, pursuant to 15 U.S.C 78b, 78q(f), 78s(a) and 78w and was most recently amended on September 20, 1988. Proposed amendments to the rule were published in November 1985. Paragraph (c) of the rule established requirements related to the Program. In particular, Rule 17f-1(c) requires financial institutions to report to the Commission or its designee whenever a security is suspected of being lost, missing, stolen or counterfeit. National securities exchanges and their members, registered securities associations, brokers, dealers, transfer agents, clearing agencies, FDIC insured banks, and members of the Federal Reserve System make these reports to a central database on Form X-17f-1A.
(2) Purpose of and Consequences of Not Requiring the Information Collection
The Program serves three objectives. First, the Program enables the Commission's designee, the Securities Information Center (“SIC”), to maintain a database of securities reported as lost, missing, stolen, or counterfeit. Second, the database enables institutions considering giving value in exchange for securities certificates, as well as law enforcement authorities that discover suspect certificates, to consult a repository of information about lost, missing, stolen, or counterfeit securities. Third, the mere existence of the report and inquiry process enhances commercial confidence in efficient certificate handling and thereby serves to discourage sophisticated criminals from placing stolen securities into commerce for value. Failure to report this information would cause substantial losses to securities holders and financial institutions through increased trading and pledging of lost, missing, stolen, or counterfeit securities.
(3) Role of Improved Information Technology and Obstacles to Reducing Burden
The SIC has consistently used the most current computer techniques for processing inquiries and reports. Initial inquiries and reports generally can be processed over the telephone in less than one minute. Follow-up written reports on Form X-17F-1A generally are processed quickly and efficiently. In addition, the SIC is exploring direct automated communication links with participants to further reduce compliance burdens.
(4) Efforts to Identify Duplication
The Program is unique, and therefore duplication is not possible.
(5) Effect on Small Entities
Through arrangements with larger financial institutions, the Program provides a low-cost means for small businesses to report and inquire about securities. The rule also exempts from the inquiry requirement securities certificates received from the institution's customers, if the institution's records show that the security was sold to the customer by that institution.
(6) Consequences of Less Frequent Collection
Less frequent reports and inquiries would result in an unreliable database and increased losses to financial institutions.
(7) Inconsistencies with Guidelines in 5 CFR 1320.5(d)(2)
The collection is conducted in a manner consistent with the guidelines in 5 CFR 1320.5(d)(2).
(8) Consultations Outside the Agency
The Commission has consistently communicated with personnel at the SIC concerning the use, collection, availability, and accuracy of data. The SIC has informed the Commission that a survey of participating institutions indicated that Form X-17F-1A is well designed to provide necessary information in a relatively simple format.
(9) Payment of Gift to Respondents
Not applicable.
(10) Assurance of Confidentiality
Each participating institution must have a unique access code to gain entry to the database. The Commission believes such confidentiality is necessary and adequate to achieve the goals of Section 17f-1 of the Act.
(11) Sensitive Questions
No questions of a sensitive nature are asked.
(12) Estimate of Respondent Reporting Burden
Approximately 26,000 reporting institutions will report that securities are either missing, lost, counterfeit, or stolen annually. Each reporting institution will submit this report approximately 50 times each year. The staff estimates that the average amount of time necessary to comply with the Rule 17f-1(c) and Form X-17F-1A is five minutes.
(13) Estimate of Total Annualized Cost Burden
Not applicable; (a) it is not anticipated that responsdents wil have to incur any capital and start up cost to comply with the rule; (b) it is not anticipated that the respondents wil have to incur any additional operational or maintenance cost (other than provided for in item number 12) to comply with the rule.
(14) Estimate of Cost to the Federal Government
No costs are incurred by the Federal Government for direct operation of the Program. No estimate is available regarding staff time expended on the development and supervision of the Program. The SIC, as the Commission's designee, finances its operations by assessing Program participants fees based upon participation status, report/inquiry volume, and use of specialized services.
(15) Explanation of Changes in Burden
The increase in the change in burden is due to an increase in the number of financial institutions that are required to submit reports. The number of financial institutions has increased from 23,000 to 26,000 according to SIC reports to the SEC. However, the burden per report remains at five minutes.
(16) Information Collection Planned for Statistical Purposes
Not applicable.
(17) Explanation as to Why Expiration Date Will Not be Displayed
Not applicable.
(18) Exceptions to Certification
Not applicable.
B. Collection of Information Employing Statistical Methods
No statistical methods are employed in connection with the collections of information.
| File Type | application/msword |
| Last Modified By | martinsons |
| File Modified | 2006-05-24 |
| File Created | 2006-05-24 |