2013 Rule 15a-4 Justification

SUPPORTING STATEMENT
For the Paperwork Reduction Act Information Collection Submission for
“Rule 15a-4”

A.

Justification
1. Necessity of Information Collection

The Commission adopted Rule 15a-4 pursuant to Section 15(a)(2) of the Securities
Exchange Act of 1934 (the “Exchange Act”) in order to provide a 45-day exemption from
the broker-dealer registration requirement contained in Section 15(a)(1) of the Exchange Act
for natural person members of national securities exchanges who have terminated their
association with a registered broker-dealer. The rule is part of the Commission’s brokerdealer registration program.
Rule 15a-4 permits a natural person exchange member who terminates his or her
association with a registered broker-dealer to continue to transact business on the floor for
45 days provided that before the termination of his or her association with the registered
broker-dealer he or she submits to the Commission an application for registration as a
broker-dealer on Form BD accompanied by a written statement from the exchange
(“Statement”). The exchange Statement must indicate that the exchange has reviewed the
application and is not aware of any reason that the application should be denied.
On occasion, the registered entity with which an exchange member is associated
may dissolve, or the member may seek to become self-employed and continue to transact
business on the floor of the exchange. In such instances, without Rule 15a-4, the natural
person would be prohibited from continuing his or her securities business until he or she had
registered with the Commission as a broker-dealer. The rule permits natural person
exchange members to continue to do business during the period required for the
Commission to process their broker-dealer applications. In order to ensure that the public is
adequately protected during that period, the rule requires the exchange involved to send a
Statement to the Commission indicating that it has reviewed the member’s application for
registration as a broker-dealer and that there do not appear to be grounds for denying the
application.
2.

Purpose and Use of the Information Collection

The Commission uses the information disclosed by applicants in Form BD: (1) to
determine whether the applicant meets the standards for registration set forth in the
provisions of the Exchange Act; (2) to develop a central information resource where
members of the public may obtain relevant, up-to-date information about broker-dealers,
municipal securities dealers and government securities broker-dealers, and where the
Commission, other regulators and SROs may obtain information for investigatory purposes
in connection with securities litigation; and (3) to develop statistical information about

broker-dealers, municipal securities dealers and government securities broker-dealers.
Without the information disclosed in Form BD, the Commission could not effectively
implement policy objectives of the Exchange Act with respect to its investor protection
function.
The Statement submitted by the exchange assures the Commission that the
applicant, in the opinion of the exchange, is qualified to transact business on the exchange
during the time that the applications are reviewed.
3.

Consideration Given to Information Technology

Broker-dealer applicants currently file Form BD with FINRA. FINRA then enters
the information into the CRD system and forwards it electronically to the Commission. This
method of collecting information reduces the regulatory burden upon broker-dealers by
permitting them to file applications for registration and amendments thereto at one central
location, rather than filing Form BD separately with the Commission, SROs and other
regulators.
4.

Duplication

Not applicable. The Commission believes that no duplication of the requirement of
Rule 15a-4 exists.
5.

Effect on Small Entities

Not applicable. Rule 15a-4 applies uniformly to all entities.
6.

Consequences of Not Conducting Collection

If the Commission did not require collection, it would be unable to allow the
potential BD to transact business while it waited for its Form BD to be processed.
7.

Inconsistencies with Guidelines in 5 CFR 1320.5(d)(2)

This collection is consistent with 5 CFR 1320.5(d)(2).
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

Not applicable.

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10.

Confidentiality

No assurances of confidentiality are provided.
11.

Sensitive Questions

No questions of a sensitive nature are asked.
12.

Burden of Information Collection

The burden hours required to compile the application information and to complete an
average Form BD for purposes of Rule 15a-4 have been included in the approved collection for
Rule 15a-1 and Form BD (OMB Control No. 3235-0012). Therefore, these hours will not be
included in this request for OMB extension and approval of the Rule 15a-4 collection.
The amount of time required by the exchange to prepare a written consent Statement will
vary with the complexity of a proposed broker-dealer’s business. We estimate that the completion
of a written consent Statement will take approximately 4.23 hours, including 3.4 hours for Middle
Management, 0.5 hours for Supervisor and 0.33 hours for Clerical. The total annual hourly
burden is 8.46 hours, based on approximately 2 responses (2 Respondents x 1
Statement/Respondent), each requiring approximately 4.23 hours to complete, rounded to 8 hours.
13.

Costs to Respondents

Not applicable. It is not anticipated that respondents will have to incur any capital
and start-up costs, nor any additional operational or maintenance costs to comply with the
collection of information.
14.

Costs to Federal Government

On an annual basis, the Commission receives approximately 2 responses filed
pursuant to Rule 15a-4. The cost of processing a Form BD for purposes of Rule 15a-4 has
been included in the approved collection for Rule 15a-1 and Form BD (OMB Control No.
3235-0012). Therefore, this cost will not be included in this request for OMB extension and
approval of the Rule 15a-4 collection. The cost of processing an exchange’s consent
Statement is negligible.
15.

Changes in Burden

The total annual hourly burden has been reduced from 42 hours to 8 hours, based on
a reduction of the estimated number of respondents from 10 to 2.
16.

Information Collections Planned for Statistical Purposes

Not applicable. The information collected is not used for statistical purposes.
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17.

Approval to Omit OMB Expiration Date

We request authorization to omit the expiration date on the electronic version of
the form for design and IT project scheduling reasons. The OMB control number will be
displayed.
18.

Exceptions to Certification for Paperwork Reduction Act Submissions

Not applicable. The Commission is not seeking an exception to the certification
statement.
B.

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

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