Incentive-based Compensation supporting statement - May 9 2011

SUPPORTING STATEMENT
for the Paperwork Reduction Act New Information Collection Submission for
“Incentive-based Compensation Arrangements”
A. JUSTIFICATION
1. Necessity of Information Collection
The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”
or the “Act”) (Pub. L. 111-203, section 956, 124 Stat. 1376, 2011-2018 (2010)), which was
signed into law on July 21, 2010, requires the Securities and Exchange Commission (“SEC” or
“Commission”) to jointly prescribe regulations or guidelines with six other Federal financial
agencies (“Other Agencies”) 1 with respect to incentive-based compensation practices at covered
financial institutions.
2. Purpose and Use of the Information Collection
The proposed rule (17 CFR 248.201 through 207) would require broker-dealers and
investment advisers with assets of at least $1 billion (“covered BDs and IAs”) to file an annual
report with the Commission related to their incentive compensation arrangements, to establish
and maintain policies and procedures related to incentive-based compensation, and maintain
certain records related to the firm’s incentive-based compensation program. In addition, the
proposal would require covered BDs and IAs with assets of at least $50 billion to create and
maintain records related to those persons designated by a firm’s board of directors that
individually have the ability to expose the firm to possible losses that are substantial in relation
to the institution’s size, capital, or overall risk tolerance.
The information will be used by SEC staff to determine compliance with Section 956 of
the Act.
3. Consideration Given to Information Technology
Following the adoption of the proposed rule, each of the Other Agencies and the SEC,
will assess whether it should prescribe a specific format for the report to be filed in. At that time,
due consideration will be given to the appropriate use of information technology to facilitate the
required annual reports.

1

The Other Agencies include the Board of Governors of the Federal Reserve System, the Office of the
Comptroller of the Currency, the Board of Directors of the Federal Deposit Insurance Corporation, the
Director of the Office of Thrift Supervision, the National Credit Union Administration Board, and the
Federal Housing Finance Agency.

Revised – 5/10/2011

4.

Duplication
The SEC currently receives information about executive compensation from publicly
traded companies, including many broker-dealers and investment advisers covered under the
proposed rule. The staff of the Commission reviewed the relevant SEC form, (Item 402 of
Regulation S-K), in connection with the joint proposal to minimize duplicative reporting.
The reports and policies and procedures required under the proposed rule for brokerdealers and investment advisers would be substantially the same reports, policies and procedures
required by the Other Agencies. Some of the entities regulated by Other Agencies include bank
holding companies, which often serve as the parent of broker-dealers and investment advisers
covered by the SEC proposal. The Commission staff anticipates that this phenomenon will lead
to certain economies in complying with the proposed rule as between broker-dealers/investment
advisers and affiliated entities. To the extent that duplicative policies and procedures and
reporting requirements do result, Section 956 of the Act determined this result.

5.

Effect on Small Entities
The Commission solicited comment on whether small entities would be affected by the
proposed rule. The Commission staff preliminarily does not believe that the proposed SEC rule
would impact small entities, but sought comment on whether small entities would be covered, for
example, as subsidiaries of other financial institutions such as bank holding companies.

6. Consequences of Not Conducting Collection
If the Commission does not adopt the proposal, it could be in violation of Section 956 of the
Act, which requires the Other Agencies and the Commission to jointly adopt rules that provide
for reports and standards related to the incentive-based compensation of certain people within
broker-dealers and investment advisers.
7. Inconsistencies with Guidelines in 5 CFR 1320.8(d)
The Commission anticipates that it may receive some sensitive information from the brokerdealers and investment advisers that submit the reports required under the proposed rules. The
Commission will protect trade secrets or other confidential information to the extent permitted
by the Freedom of Information Act (“FOIA”).

8. Consultations Outside the Agency
The Commission has issued a release soliciting comment on the new “collection of
information” requirements and associated paperwork burdens. A copy of the release is attached.
Comments on Commission releases are generally received from registrants, investors, and other
market participants. In addition, the Commission and staff participate in ongoing dialogue with
representatives of various market participants through public conferences, meetings and informal
exchanges. Any comments received on this proposed rulemaking will be posted on the
Commission’s public website, and made available through
http://www.sec.gov/rules/proposed.shtml. The Commission will consider all comments received

2

prior to publishing the final rule, and will explain in any adopting release how the final rule
responds to such comments, in accordance with 5 C.F.R. 1320.11(f).
Section 956 of the Act requires the SEC to jointly adopt rules related to the incentivebased compensation of broker-dealers and investment advisers. The staff consulted extensively
with representatives from the Other Agencies during the process of drafting the proposed
rulemaking.
9. Payment or Gift
The Commission did not provide any payment or gift to respondents in connection with
the proposed rulemaking.
10. Confidentiality
The confidentiality of the information submitted to the Commission in the reports
required under the proposed rule will be protected only to the extent permitted by FOIA.
11. Sensitive Questions
The Commission’s proposal does not include reporting requirements for the incentivebased compensation levels of individuals, which should minimize the Commission’s receipt of
certain types of sensitive information, including personally identifiable information. To the
extent that the Commission receives information that is sensitive to the covered financial
institution (such as the structure of its compensation of certain types of employees), the
Commission will protect the confidentiality of such information to the extent permitted by FOIA.
12. Burden of Information Collection
Number of respondents: The proposed rule would establish additional reporting and
recordkeeping burdens for covered BDs and IAs with assets of at least $50 billion, as compared
to covered BDs and IAs with assets between $1 billion and $50 billion. The Commission
estimates that approximately 200 respondents (approximately 130 broker-dealers and
approximately 70 investment advisers) would be affected generally by the proposed rules, but
that only approximately 30 of the 200 respondents would be affected by proposed Section
248.204(c)(3) and Section 248.205(b)(3)(ii)(B).2
2

Each other Agency and the SEC has proposed how to calculate a firm’s “total consolidated assets.” For
broker-dealers, the determination of whether the broker-dealer had $1 billion in assets would be made by
reference to the broker-dealer’s year-end audited consolidated statement of financial condition filed with
the Commission pursuant to Rule 17a-5. For investment advisers, asset size would be determined by the
adviser’s total assets shown on the balance sheet for the adviser’s most recent fiscal year end. Data from
the SEC’s Office of Risk, Strategy and Financial Innovation indicates that there are 132 registered brokerdealers with assets of $1 billion or more and 18 broker-dealers with assets of at least $50 billion. Most
investment advisers currently do not report to the Commission the amount of their own assets, so the
Commission is unable to determine how many have $1 billion or more in assets and $50 billion or more in
total consolidated assets. See Form ADV, Part 1A, Item 12. The Commission estimates that advisers with
assets under management of $100 billion or more would have total consolidated assets of $1 billion or
more, and advisers with assets under management of $500 billion or more would have total consolidated
assets of $50 billion or more. Based on data from the Investment Adviser Registration Depository

3

A) Proposed Section 248.204 (Required Reports)
The Commission, jointly with the Other Agencies, proposes that each covered BD and IA
be required to describe the structure of the firms’ incentive-based compensation arrangements for
covered persons in a manner that is sufficient to allow an assessment of whether the structure or
features of those arrangements provide or are likely to provide covered persons with excessive
compensation, fees, or benefits to covered persons or could lead to material financial loss to the
firm. Proposed Section 248.204(c)(1) would require a narrative description of the components of
the incentive-based compensation arrangements applicable to covered persons, specifying the
types of covered persons to which they apply. Proposed Section 248.204(c)(2) would require
that covered BDs and IAs provide a succinct description of their incentive-based compensation
policies and procedures. Proposed Section 248.204(c)(3) would require that covered BDs and
IAs with total consolidated assets of $50 billion or more provide the Commission with a succinct
description of incentive-based compensation policies and procedures applicable to executive
officers and other covered persons whom the board of directors, or a committee thereof, has
identified as having the ability to expose the institution to possible losses that are substantial in
relation to the firm’s size, capital, or overall risk tolerance. Proposed Section 248.204(c)(4)
would require covered BDs and IAs to describe the material changes to the firm's incentive based
compensation arrangements. Proposed Section 248.204(c)(5) would require each covered BD
and IA to describe the specific reasons why it believes the structure of its incentive-based
compensation does not encourage inappropriate risks by the covered financial institution by
providing covered persons with excessive compensation or incentive-based compensation that
could lead to material financial loss to the covered financial institution.
Based on the initial and ongoing burden the Commission estimated in connection with
the adoption of the executive compensation reporting requirements for public companies filing
Form10-Ks under the Exchange Act (i.e. Item 402 of Regulation S-K), the Commission
estimates that the initial and ongoing annual burden for the covered BD and IA respondents
imposed by the proposed reporting requirements would be 100 hours.3 Since the proposed rule
does not provide for different reporting requirements for smaller covered BDs and IAs with
assets between $1 billion and $50 billion and for larger firms with assets of at least $50 billion,
the Commission has not estimated separate reporting burdens for larger covered BDs and IAs.
This estimate applies to all 200 of the estimated respondents. Therefore, the Commission
estimates a collective initial and ongoing reporting burden of 20,000 hours for covered BDs and
IAs.4
(“IARD”), the SEC’s Division of Investment Management estimates that 68 registered advisers with assets
under management of at least $100 billion would have assets of $1 billion or more, and 7 registered
advisers with assets under management of at least $500 billion would have total consolidated assets of at
least $50 billion. The Commission has rounded these numbers to 70 and 10 for purposes of its analysis.

3

4

The Commission estimated that public company respondents would incur approximately 95 hours of annual
burden in connection with the adoption of Item 402 of Regulation S-K. See Securities Act of 1933 Release
No. 8432A and Securities Exchange Act Release No. 54302A.(August 29, 2006), 71 FR 53158, 53217
(September 8, 2006) (S7-03-06). The Commission is rounding this number up to 100 for the instant
proposed rule estimate.
200 covered BDs and IAs x 100 hours = 20,000 hours.

4

B) Documentation of Determining Designated Persons (Section 248.205(b)(3)(ii)(B))
For covered BDs and IAs with assets of at least $50 billion, proposed Section
248.205(b)(3)(ii)(B) would require a firm’s board of directors, or a committee thereof, to identify
those covered persons (other than executive officers) that individually have the ability to expose
the institution to possible losses that are substantial in relation to the institution’s size, capital, or
overall risk tolerance. These covered persons may include, for example, traders with large
position limits relative to the institution’s overall risk tolerance and other individuals that have
the authority to place at risk a substantial part of the capital of the covered financial institution.
The SEC and other Agencies propose that the compensation decisions applicable to such persons
must be approved by the firm’s board of directors or a committee of the board and that the
covered BD or IA document the compensation decisions made by the board or its committee.
The Commission estimates that each covered BD and IA with assets of at least $50
billion would incur 20 hours of burden initially, in the first year, to comply with the proposed
recordkeeping requirements associated with the proposed rule and 10 hours per year of burden
on an ongoing basis. Therefore, the Commission estimates an initial collective recordkeeping
burden in connection with the documentation requirement provided in Section
248.205(b)(3)(ii)(B) is 600 hours for covered BDs and IAs with assets of at least $50 billion.5
The Commission estimates the ongoing annual collective recordkeeping burden in connection
with this requirement to be 300 hours for covered BDs and IAs with assets of at least $50
billion.6
To derive an average annual estimate during the first three years of the effectiveness of
the proposed rule, the staff multiplied the initial estimate of 20 by 1/3 (6.67 hours) and multiplied
the ongoing estimate of 10 by 2/3 (6.67 hours) and added the two products together to arrive at a
13.33 (rounded to 13) hour average annual burden during the first three years following the
proposed rule’s effectiveness.
C) Required Policies and Procedures
Proposed Section 248.206(a) would require covered financial institutions to adopt and
maintain policies and procedures reasonably designed to ensure and monitor compliance,
commensurate with the size and complexity of the organization and the scope and nature of its
use of incentive-based compensation. As described in further detail above, proposed Section
248.206(b) would require that the policies and procedures, at a minimum, are consistent with the
disclosure requirements and prohibitions in other parts of the proposed rule, ensure that risk
management or oversight personnel have a role in designing and assessing incentive-based
compensation arrangements, provide for independent monitoring of the incentive-based
compensation awards, risks taken and actual outcomes, require that a covered financial
institution’s board receive data and analysis from management and other sources sufficient to
enable the board to assess whether the incentive-based compensation arrangements are consistent
with 12 U.S.C. 5641, and require sufficient documentation of the covered financial institution’s
5

30 covered BDs and IAs with assets of at least $50 billion x 20 hours = 600 hours.

6

30 covered BDs and IAs with assets of at least $50 billion x 10 hours = 300 hours.

5

incentive-based compensation arrangements to enable the Commission to determine the covered
BDs or IAs compliance with 12 U.S.C. 5641. In addition, the proposal would require that the
covered BDs’ and IAs’ policies and procedures include certain features when a firm uses deferral
in connection with an incentive-based compensation arrangement, and that the policies and
procedures subject incentive-based compensation arrangements to a corporate governance
framework.
Many covered BDs and IAs are already conforming to the incentive-based compensation
standards reflected in the Guidance because they are affiliated with banking organizations
supervised by the FRB, OCC, OTS or FDIC that have already altered their incentive-based
compensation arrangements and policies and procedures following the publication of the
Guidance. The Guidance applies to all banking organizations supervised by the FRB, OCC,
OTS or FDIC, including national banks, State member banks, State nonmember banks, savings
associations, U.S. bank holding companies, savings and loan holding companies, the U.S.
operations of foreign banks with a branch, agency or commercial lending company in the United
States, and Edge and agreement corporations (collectively “banking organizations”).7 Based
upon information filed with the Commission and the staff’s discussions with a number of BDs
and its review of the public filings of covered BDs, IAs and certain parent companies, the
Commission believes that covered BDs and IAs affiliated with banking organizations (“covered
bank BDs and IAs”) have already altered their incentive-based compensation policies and
procedures and corresponding arrangements in conjunction with their affiliated banking
organizations that are subject to the Guidance. Based on public filings with the Commission, the
SEC estimates that there are approximately 25 covered bank BDs and IAs with total consolidated
assets of at least $50 billion and approximately 85 covered bank BDs and IAs with total
consolidated assets between $1 billion and $50 billion.8 Therefore, covered bank BDs and IAs
should bear significantly less burden than those covered BDs and IAs not already subject to the
Guidance (“covered non-bank BDs and IAs”) to develop and maintain policies and procedures as
required in the proposed rules. The Commission requests comment on its estimated number of
covered bank BDs and IAs.
The Commission believes that the covered bank BDs and IAs would incur approximately
the same recordkeeping burden as the banking organizations. Based on the initial estimates of
recordkeeping burden provided by FRB, OCC, FDIC and OTS for proposed Section 248.206, the
Commission estimates an initial recordkeeping burden of 80 hours for each covered bank BD
and IA with $50 billion or more in total consolidated assets and 40 hours of initial recordkeeping
burden for each covered bank BD and IA with total consolidated assets between $1 billion and
$50 billion. Based on the ongoing estimates of recordkeeping burden provided by FRB, OCC,
FDIC and OTS, the Commission believes that each covered bank BD and IA respondent with
total consolidated assets of at least $50 billion would incur approximately 30 hours of ongoing
7

8

See Guidance 75 FR at 36398.
The Commission estimates that there are approximately 20 covered bank BDs with assets of at least $50
billion and 35 covered bank BDs with assets between $1 billion and $50 billion. The Commission bases
the estimates for covered bank BDs upon data submitted to the Commission in FOCUS reports (i.e. Form
X-17A-5 Part II). The Commission estimates that there are approximately 5 covered bank IAs with assets
of at least $50 billion and 50 covered bank IAs with assets between $1 billion and $50 billion. The
estimates for covered bank IAs are based upon data submitted to the Commission in Form ADV (i.e. Form
ADV Part 1A, Items 6.A.(6) and 7.A.(5)).

6

recordkeeping burden and each covered bank BD and IA respondent with total consolidated
assets between $1 billion and $50 billion would incur approximately 10 hours of recordkeeping
burden on an ongoing basis.
For covered non-bank BDs and IAs, the Commission estimates a significantly higher
burden, namely the amount of burden that the banking agencies originally estimated in the
Guidance (480 hours of initial burden, rounded up to 500 in the instant proposal and 40 hours of
ongoing burden)9 in addition to the amounts that the FRB, OTS, FDIC and OCC estimated in
connection with the instant proposed rule. The Commission estimates that there are
approximately 75 covered non-bank BDs with assets between $1 billion and $50 billion, 10
covered non-bank IAs with assets between $1 billion and $50 billion and 5 covered non-bank
IAs with assets of at least $50 billion.10
Therefore, for covered non-bank BDs and IAs, the Commission estimates an initial
recordkeeping burden estimate of 580 hours11 for covered BDs and IAs with $50 billion or more
in total consolidated assets and 540 hours12 of recordkeeping burden for covered BDs and IAs
with total consolidated assets between $1 billion and $50 billion. The Commission estimates
that covered non-bank BD and IA respondents with total consolidated assets of at least $50
billion would incur approximately 70 hours13 of ongoing recordkeeping burden while those
covered non-Bank BDs and IAs with total consolidated assets between $1 billion and $50 billion
would incur approximately 50 hours14 of ongoing recordkeeping burden.
To derive an average annual estimate during the first three years of the effectiveness of
the proposed rule, the staff subtracted the estimated total number of burden hours associated with
the proposed rule (42,600) by the sum of the hours estimated in connection with the required
reports (20,000 hours) and the required records that would be required under proposed Section
248.205(b)(3)(ii)(B) (390 hours) to derive an estimate of 22,200 hours of collective burden to
comply with the policies and procedures requirements. Staff then divided that number by 200
(number of respondents) to come up with the average per respondent burden (111).
9

See Guidance, 75 FR at 36403.

10

The Commission estimates that there are approximately 75 covered non-bank BDs with assets between $1
billion and $50 billion. The Commission estimates that there are approximately 5 covered non-bank IAs
with assets of at least $50 billion and 10 covered non-bank IAs with assets between $1 billion and $50
billion. The Commission bases these estimates upon data submitted to the Commission in FOCUS reports
(i.e. Form X-17A-5 Part II) and in Form ADV (i.e. Form ADV Part 1A, Items 6.A.(6) and 7.A.(5)). See
supra note 8. It is difficult to determine whether any unregistered advisers are non-bank IAs that are not
subject to the Guidance.

11

500 hours (from Guidance) + 80 hours (from the estimate provided by the Fed, OCC, FDIC and OTS in
instant proposed rule) = 580 hours.

12

500 hours (from Guidance) + 40 hours (from the estimate provided by the Fed, OCC, FDIC and OTS in
instant proposed rule) = 540 hours.

13

40 hours (from Guidance) + 30 hours (from the estimate provided by the Fed, OCC, FDIC and OTS in
instant proposed rule) = 70 hours.

14

40 hours (from Guidance) + 10 hours (from the estimate provided by the Fed, OCC, FDIC and OTS in
instant proposed rule) = 50 hours.

7

Detailed Estimated Hourly Burden
SEC estimated initial and annual recordkeeping and reporting burdens per respondent
Covered bank BDs
and IAs ($50B +)
(25 respondents)

Covered bank BDs
and IAs ($1B-$50B)
(85 respondents)

Covered non-bank
BDs and IAs ($50B
+) (5 respondents)

100 hours
15
100 hours

100 hours
40 hours

100 hours
16
600 hours

Covered bank BDs
and IAs ($50B +)
(25 respondents)

Covered bank BDs
and IAs ($1B-$50B)
(85 respondents)

Covered non-bank
BDs and IAs ($50B
+)(5 respondents)

Ongoing Reporting

100 hours

100 hours

100 hours

Ongoing Recordkeeping

40 hours

10 hours

80 hours

Initial Reporting
Initial Recordkeeping

17

18

Covered non-bank
BDs and IAs ($1B$50B) (85
respondents)
100 hours
540 hours
Covered non-bank
BDs and IAs ($1B$50B) (85
respondents)
100 hours
50 hours

Initial and annual estimated weighted average per respondent recordkeeping and
reporting burdens for the first three years following adoption of the proposal
Reporting:
Recordkeeping:

100 hours
113 hours

Staff notes that the Commission estimated that each cateogry of covered BDs and IAs (ie.
covered bank BDs and IAs with assets above $50B, covered bank BDs and IAs with assets
between $1B and $50B, covered non-bank BDs and IAs with assets above $50B, and covered
non-bank BDs and IAs with assets between $1B and $50B) would incur approximately 100
hours per respondent per year of initial and ongoing reporting obligations.
For the estimated recordkeeping burdens, the staff developed its estimated annual burden
during the first three years of effectiveness of the proposed rule, using a weighted average of the
estimated initial burden and the estimated ongoing burden. The staff first estimated a weighted
average per respondent of the initial recordkeeping burden and ongoing recordkeeping burden
across all covered BDs and IAs. The staff calculated a 274 hour weighted average per
15

80 hours in connection with proposed Section 248.206 + 20 hours in connection with proposed Section
248.205(b)(3)(ii)(B)) = 100 hours.

16

580 hours in connection with proposed Section 248.206 + 20 hours in connection with proposed Section
248.205(b)(3)(ii)(B)) = 600 hours.

17

30 hours in connection with proposed Section 248.206 + 10 hours in connection with proposed Section
248.205(b)(3)(ii)(B)) = 40 hours.

18

70 hours in connection with proposed Section 248.206 + 10 hours in connection with proposed Section
248.205(b)(3)(ii)(B)) = 80 hours.

8

respondent initial recordkeeping burden estimate19 and a 32.5 hour weighted average per
respondent ongoing recordkeeping burden estimate. 20 To estimate the average annual
recordkeeping burden during the first three years that the proposal would be in effect, the staff
multiplied the initial burden (274) by 1/3 (representing the first of three years) and multiplied the
ongoing annual burden (32.5) by 2/3 (representing the second and third years) and added the two
products together to derive 113.21
13. Costs to Respondents
The Commission also believes that the proposed rules would likely generate external
costs to the covered BDs and IAs, particularly at the stage of preparing the initial reports
required by Section 248.204 and initially developing and implementing the policies and
procedures in compliance with Section 248.206. Covered BDs and IAs may elect to hire various
types of professionals, including attorneys, benefits consultants, and accountants. The
Commission estimates that the covered BDs and IAs would hire professionals to prepare the
necessary reports and develop and maintain the necessary policies and procedures at
approximately the same hourly level as the covered BDs and IAs assume internally (e.g. covered
bank BDs and IAs with at least $50 billion in assets would collectively use approximately the
equivalent of 2,500 hours worth of professionals’ time to prepare the required reports, in addition
to the covered bank BDs’ and IAs’ internal burden to prepare them).
The Commission believes that there would be approximately an equal balance of
attorneys,22 benefits consultants,23 actuaries24 and accountants25 that are hired at each covered
19

((25 respondents x 100 hours) + (85 respondents x 40 hours) + (5 respondents x 600 hours) + (85
respondents x 540) hours)) / 200 = 274 hours.

20

((25 respondents x 40 hours) + (85 respondents x 10 hours) + (5 respondents x 80 hours) + (85 respondents
x 50) hours))) / 200 =32.5 hours.

21

274 hours * 1/3 + 32.5 hours * 2/3 = 113 hours.

22

An outside attorney’s salary range is estimated at $400 an hour based on industry sources. See Securities
Exchange Act Release No. 62174 (May 26, 2010) at note 510, 75 FR 32556 (June 8, 2010) (S7-15-09).
The Commission requests comment on this estimate.

23

An outside management consultant’s salary range (national averages) is available from www.payscale.com.
Using their data from the 75th percentile, adjusting it for an 1800-hour work year, and multiplying by the
5.35 factor which normally is used to include benefits but here is used as an approximation to offset the fact
that New York salaries are typically higher than the rest of the country, the result is $596 per hour (rounded
to $600). The Commission requests comment on this estimate.

24

An outside actuary’s salary range (national averages) is available from www.payscale.com. Using their
data from the 75th percentile, adjusting it for an 1800-hour work year, and multiplying by the 5.35 factor
which normally is used to include benefits but here is used as an approximation to offset the fact that New
York salaries are typically higher than the rest of the country, the result is $330 per hour. The Commission
requests comment on this estimate.

25

An outside accountant’s salary range is available from the U.S. Bureau of Labor Statistics, Occupational
Employment Statistics website. Using their data for median salaries from New York State, which has the
highest rates in the country, and multiplying by the 5.35 factor which is used to include benefits, the result
is $250 per hour. The Commission requests comment on this estimate.

9

BD or IA. The chart below summarizes the external costs that the Commission estimates
covered BDs and IAs would assume collectively in connection with the proposed rule. The
Commission requests comments on these external cost estimates, including the hourly rate that
the Commission estimates for external attorneys, benefits consultants, actuaries and accountants.
Initial and annual estimated weighted average per respondent external costs for the first
three years following adoption of the proposal
Covered bank BDs
and IAs ($50B +)
(25 respondents)
26

Initial Reporting

$39,500

Initial Recordkeeping

$39,500

27

$39,500

30

31

Covered bank BDs
and IAs ($50B +)
Ongoing Reporting

Covered bank BDs
and IAs ($1B-$50B)
(85 respondents)

34

$39,500

Covered non-bank
BDs and IAs ($50B
+) (5 respondents)
28

$39,500

32

$15,800

$237,000

Covered bank BDs
and IAs ($1B-$50B)

Covered non-bank
BDs and IAs ($50B
+)
36
$39,500

35

$39,500

Covered non-bank
BDs and IAs ($1B$50B) (85
respondents)
29
$39,500
33

$213,300

Covered non-bank
BDs and IAs ($1B$50B)
37
$39,500

26

100 hours x [(25% x $400/hour) + (25% x $600/hour) + (25% x $330/hour) + (25% x $250/hour)] =
$39,500.

27

100 hours x [(25% x $400/hour) + (25% x $600/hour) + (25% x $330/hour) + (25% x $250/hour)] =
$39,500.

28

100 hours x [(25% x $400/hour) + (25% x $600/hour) + (25% x $330/hour) + (25% x $250/hour)] =
$39,500.

29

100 hours x [(25% x $400/hour) + (25% x $600/hour) + (25% x $330/hour) + (25% x $250/hour)] =
$39,500.

30

100 hours x [(25% x $400/hour) + (25% x $600/hour) + (25% x $330/hour) + (25% x $250/hour)] =
$39,500.

31

40 hours x [(25% x $400/hour) + (25% x $600/hour) + (25% x $330/hour) + (25% x $250/hour)] =
$15,800.

32

600 hours x [(25% x $400/hour) + (25% x $600/hour) + (25% x $330/hour) + (25% x $250/hour)] =
$237,000.

33

540 hours x [(25% x $400/hour) + (25% x $600/hour) + (25% x $330/hour) + (25% x $250/hour)] =
$213,300.

34

100 hours x [(25% x $400/hour) + (25% x $600/hour) + (25% x $330/hour) + (25% x $250/hour)] =
$39,500.

35

100 hours x [(25% x $400/hour) + (25% x $600/hour) + (25% x $330/hour) + (25% x $250/hour)] =
$39,500.

36

100 hours x [(25% x $400/hour) + (25% x $600/hour) + (25% x $330/hour) + (25% x $250/hour)] =

10

Ongoing Recordkeeping

38

$15,800

39

40

$3,950

$31,600

41

$19,750

Estimated initial and ongoing estimated per respondent recordkeeping and reporting
external costs for each of the first three years following adoption of the proposal
Reporting:
Recordkeeping:

$39,500
$44,635

Staff notes that the Commission estimated that each category of covered BDs and IAs (ie.
covered bank BDs and IAs with assets above $50B, covered bank BDs and IAs with assets
between $1B and $50B, and covered non-bank BDs and IAs with assets above $50B, covered
non-bank BDs and IAs with assets between $1B and $50B) would incur approximately $39,500
of initial and ongoing external reporting costs.42
For the estimated recordkeeping burdens, the staff developed its estimated annual burden
during the first three years of effectiveness of the proposed rule, using a weighted average of the
estimated initial burden and the estimated ongoing burden. The staff first estimated a weighted
average per respondent of the initial recordkeeping burden and ongoing recordkeeping burden
across all covered BDs and IAs. The staff calculated a $108,230 per respondent initial external
cost estimate 43 and a $12,838 per respondent ongoing recordkeeping external cost estimate.44 To
estimate the average annual recordkeeping burden during the first three years that the proposal
would be in effect, the staff multiplied the initial estimated external cost per respondent
($108,230) by 1/3 (representing the first of three years) and multiplied the ongoing annual
burden ($12,838) by 2/3 (representing the second and third years) and added the two products
together to derive $44,635.45

$39,500.
37

100 hours x [(25% x $400/hour) + (25% x $600/hour) + (25% x $330/hour) + (25% x $250/hour)] =
$39,500.

38

40 hours x [(25% x $400/hour) + (25% x $600/hour) + (25% x $330/hour) + (25% x $250/hour)] =
$15,800.

39

10 hours x [(25% x $400/hour) + (25% x $600/hour) + (25% x $330/hour) + (25% x $250/hour)] = $3,950.

40

80 hours X [(25% x $400/hour) + (25% x $600/hour) + (25% x $330/hour) + (25% x $250/hour)] =
$31,600

41

50 hours X [(25% x $400/hour) + (25% x $600/hour) + (25% x $330/hour) + (25% x $250/hour)] =
$19,750

42

100 hours X [(25% x $400/hour) + (25% x $600/hour) + (25% x $330/hour) + (25% x $250/hour)] =
$39,500.

43

274 x [(25% x $400/hour) + (25% x $600/hour) + (25% x $330/hour) + (25% x $250/hour)] = $108,230.

44

32.5 hours x [(25% x $400/hour) + (25% x $600/hour) + (25% x $330/hour) + (25% x $250/hour)] =
$12,837.5.

45

$108,230 * 1/3 + $12,838 * 2/3 = $44,635.

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14. Costs to Federal Government
We do not anticipate any costs to the Federal Government that result from the proposed
rule.
15. Changes in Burden
We do not have any changes to report, as this is an initial proposal.
16. Information Collection Planned for Statistical Purposes
The Commission does not anticipate any complex analytical techniques to be used in
connection with the proposed rule.
17. Display of OMB Approval Date
The Commission is not seeking approval to not display the OMB approval expiration
date.

18. Exceptions to Certification for Paperwork Reduction Act Submissions
Not applicable because no exceptions to certification are contained in the proposed rule.
B. COLLECTIONS OF INFORMATION EMPLOYING STATISTICAL METHODS
This collection does not involve statistical methods or analyze the information for the
agency.

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