17a-10 Justification - 2014 DGL REDLINE

SUPPORTING STATEMENT
For the Paperwork Reduction Act Information Collection Submission for
Rule 17a-10 and Form X-17A-5

A.

Justification
1.

Necessity of Information Collection

Paragraph (a)(1) of Rule 17a-10 (17 CFR 240.17a-10) under the Securities
Exchange Act of 1934 1 (“Exchange Act”) generally requires broker-dealers that are
exempted from the requirement to file monthly and quarterly reports pursuant to paragraph
(a) of Exchange Act Rule 17a-5 (17 CFR 240.17a-5) to file with the Commission the
Facing Page, Statement of Income (Loss), and balance sheet from Part IIA of Form X17A-5 2 (17 CFR 249.617), and Schedule I of Form X-17A-5 not later than 17 business
days after the end of each calendar year.
Paragraph (a)(2) of Rule 17a-10 requires a broker-dealer subject to Rule 17a-5(a)
to submit Schedule I of Form X-17A-5 with its Form X-17A-5 for the calendar quarter
ending December 31 of each year. The burden associated with filing Schedule I of Form
X-17A-5 is accounted for in the Paperwork Reduction Act filing associated with Rule
17a-5.
Paragraph (b) of Rule 17a-10 provides that the provisions of paragraph (a) do not
apply to members of national securities exchanges or registered national securities
associations that maintain records containing the information required by Form X-17A-5
and which transmit to the Commission copies of the records pursuant to a plan which has
been declared effective by the Commission.
The primary purpose of Rule 17a-10 is to obtain the economic and statistical data
necessary for an ongoing analysis of the securities industry. The Commission adopted
Rule 17a-10 pursuant to sections 15(c)(3), 17(a) and 23(a) of the Exchange Act, 15
U.S.C. sections 78o(c)(3), 78q(a) and 78w(a), respectively.
2.

Purpose and Use of the Information Collection

The information submitted pursuant to Rule 17a-10 is used to identify which
broker-dealers engage in various securities-related activities and to determine the amount
of revenue derived by such broker-dealer firms from these activities. This data is needed
by the Commission to evaluate the effects of economic events and public policies on
various segments of the securities industry. Only the most current information will assist
1

2

15 U.S.C. 78a et seq.
Form X-17A-5 is the Financial and Operational Combined Uniform Single Report
(“FOCUS Report”), which is used by broker-dealers to provide certain required
information to the Commission.

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the Commission in its ongoing analysis of securities industry revenue sources and related
expenses. No available information is more current than that obtained through Rule 17a10.
3.

Consideration Given to Information Technology

The compilation and filing of the data required reflects the complexity of the
broker-dealer’s business. The increasing use by the Commission and broker-dealers of
computerized systems for information gathering and compilation has minimized the
burden associated with Rule 17a-10 to the extent possible at this time.
4.

Duplication

Rule 17a-10 is the only rule that requires the submission of this information for
broker-dealers exempt from the requirement to file monthly and quarterly reports pursuant
to paragraph (a) of Exchange Act Rule 17a-5. Because no similar information is already
available, no duplication exists.
5.

Effect on Small Entities

The required reports are not extensive, and therefore the collection of information
is not unduly burdensome for small entities.
6.

Consequences of Not Conducting Collection

If this information were collected less frequently, the Commission could not
maintain and formulate effective policy regarding the securities industry.
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).
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.
10.

Confidentiality

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Paragraph (c) of Rule 17a-10 provides that the reports filed pursuant to the rule
are to be considered non-public information, except in situations where the Commission
determines it is in the public interest to direct otherwise.
11.

Sensitive Questions

No questions of a sensitive nature are asked. The information collection does not
collect any Personally Identifiable Information (PII).
12.

Burden of Information Collection

The staff estimates that approximately 38 broker-dealers are subject to the facing
page, income statement, and balance sheet filing requirement of Rule 17a-10.
Because of variations in the size and complexity of broker-dealers subject to the
facing page, income statement, and balance sheet filing requirement of Rule 17a-10, it is
very difficult to develop a meaningful figure for the amount of respondent time needed to
comply with the rule. The staff estimates that, on average, the amount of time required
per response will be approximately 12 hours. This estimation is based on staff experience
in this area. Each broker-dealer is required to make one filing per year. Therefore, the
number of filings is approximately 35 per year, and the estimated total compliance burden
is approximately 456 burden-hours per year (35 responses per year times 12 hours per
response). The burden is a reporting type of burden.
13.

Costs to Respondents

Not applicable. It is not anticipated that respondents will have to incur capital or
start-up costs to comply with Rule 17a-10.
14.

Costs to Federal Government

Commission staff estimates that there is no annual cost associated with reviewing
revenue and expense data submitted pursuant to Rule 17a-10.
15.

Changes in Burden

The total compliance burden dropped from 1,236 hours to 456 hours due to the
number of broker-dealers that file the facing page, income statement, and balance sheet
under Rule 17a-10 decreasing from 103 to 38.
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

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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.