18a-7 Supporting Statement

18a-7 Supporting Statement.pdf

Rule 18a-7 – Reports to be Made by Certain Security-Based Swap Dealers and Major Security-Based Swap Participants

OMB: 3235-0749

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SUPPORTING STATEMENT
for the Paperwork Reduction Act Information Collection Submission for Rule 18a-7
This submission is being made pursuant to the Paperwork Reduction Act of 1995, 44
U.S.C. Section 3501 et seq.
A.

JUSTIFICATION
1.

Necessity of Information Collection

On July 21, 2010, President Obama signed the Dodd-Frank Wall Street Reform and
Consumer Protection Act (the “Dodd-Frank Act”) into law. 1 Section 764 of the Dodd-Frank Act
added section 15F to the Securities Exchange Act of 1934 (the “Exchange Act”), which provides
that the Commission shall adopt rules governing recordkeeping and reporting for security-based
swap dealers (“SBSDs”) and major security-based swap participants (“MSBSPs”), 2 and section
15F(f)(1)(A) provides that SBSDs and MSBSPs shall make such reports as are required by the
Commission, by rule or regulation, regarding the transactions and positions and financial
condition of the SBSD or MSBSP. 3
Accordingly, on April 17, 2014, the Commission proposed amendments to its
recordkeeping and reporting rules for broker-dealers as well as new recordkeeping and reporting
rules for SBSDs and MSBSPs (the “SBS Recordkeeping Release”). 4 More specifically,
proposed new Exchange Act Rule 18a-7 would establish reporting requirements applicable to
stand-alone SBSDs, stand-alone MSBSPs, bank SBSDs, and bank MSBSPs. 5 Proposed Rule
18a-7 is modeled on Exchange Act Rule 17a-5, which applies to broker-dealers, but proposed
Rule 18a-7 does not include a parallel requirement for every requirement in Rule 17a-5 because
some of the requirements in Rule 17a-5 relate to activities that are not expected or permitted of
SBSDs and MSBSPs.
Under proposed Rule 18a-7, SBSDs and MSBSPs would be required to periodically file
proposed Form SBS. 6 Moreover, instead of requiring stand-alone SBSDs and stand-alone
MSBSPs to make available to customers an audited statement of financial condition with
appropriate notes and certain reports of the independent public accountant, the Commission
proposed that stand-alone SBSDs and stand-alone MSBSPs make such information available on
1

See Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, Public Law 111-203, 124 Stat.
1376 (2010).

See 15 U.S.C. 78o-10.

See 15 U.S.C. 78o-10(f)(1)(A).

See Recordkeeping and Reporting Requirements for Security-Based Swap Dealers, Major Security-Based
Swap Participants, and Broker-Dealers; Capital Rule for Certain Security-Based Swap Dealers; Proposed
Rules, Exchange Act Release No. 71958 (Apr. 17, 2014), 79 FR 25193 (May 2, 2014).

See id.

See paragraphs (a)(1)-(2) of proposed Rule 18a-7. Nonbank SBSDs and nonbank MSBSPs would be
required to file Form SBS on a monthly basis, whereas bank SBSDs and bank MSBSPs would be required
to file Form SBS on a quarterly basis.

their public website. 7 Further, for the reasons discussed above, the reporting requirements in
proposed Rule 18a–7, other than the requirement to periodically file proposed Form SBS, would
not apply to bank SBSDs and bank MSBSPs.
2.

Purpose and Use of the Information Collection

The purpose of requiring stand-alone SBSDs, stand-alone MSBSPs, bank SBSDs, and
bank MSBSPs to report the records specified in Rule 18a-7 is to enhance regulators’ ability to
protect investors. These records and the information contained therein are used by examiners
and other representatives of the Commission to determine whether stand-alone SBSDs, standalone MSBSPs, bank SBSDs, and bank MSBSPs are in compliance with the Commission’s antifraud and anti-manipulation rules, financial responsibility program, and other laws, rules, and
regulations. If stand-alone SBSDs, stand-alone MSBSPs, bank SBSDs, and bank MSBSPs were
not required to report these records, examiners would be unable to conduct effective and efficient
examinations to determine whether stand-alone SBSDs, stand-alone MSBSPs, bank SBSDs, and
bank MSBSPs were complying with relevant laws, rules, and regulations.
3.

Consideration Given to Information Technology

The data required in Form SBS is tailored to the complexity of the firm’s business. The
burden is therefore commensurate with the type of business in which the firm engages. The
Commission expects that most, if not all, Form SBSs will be filed electronically. Annual reports,
however, would be filed with the Commission in paper form.
4.

Duplication

There is no duplication anticipated with respect to stand-alone SBSDs and stand-alone
MSBSPs, because they currently are not required to report the information in proposed Form
SBS. In addition, proposed Form SBS is intended to minimize duplication with respect to bank
SBSDs and bank MSBSPs, which currently file Call Reports with the prudential regulators.
5.

Effect on Small Entities

Based on feedback from industry participants about the security-based swap market,
entities that would qualify as SBSDs or MSBSPs would likely exceed the thresholds defining
“small entities”. Thus, it is unlikely that the requirements under proposed new Rule 18a–7
would have a significant economic impact on a small entity.
6.

Consequences of Not Conducting Collection

The required reports are used by Commission to monitor the financial and operational
condition of stand-alone SBSDs, stand-alone MSBSPs, bank SBSDs, and bank MSBSPs. If the
required reports were not made, the ability of the Commission to monitor the financial and
operational condition of these firms would be impaired potentially affecting regulators’
7

capability to protect customers. Further, if the required collections were conducted less
frequently, the information in the reports would become outdated.
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 Commission has issued a release soliciting comment on the new “collection of
information” requirements and associated paperwork burdens. A copy of the SBS
Recordkeeping 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
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).
9.

Payment or Gift

No payment or gift is provided to respondents.
10.

Confidentiality

Annual reports filed by nonbank SBSDs and nonbank MSBSPs under paragraph (c) of
proposed Rule 18a-7 are not confidential, except that if the Statement of Financial Condition is
bound separately from the balance of the annual reports, and each page of the balance of the
annual reports is stamped “confidential,” then the balance of the annual reports shall be deemed
confidential to the extent permitted by law. 8 With respect to the other information collected
under proposed Rule 18a-7, the covered firm can request the confidential treatment of the
information. 9 If such a confidential treatment request is made, the information will be treated as
confidential to the extent permitted by law. 10
Subject to the provisions of the Freedom of Information Act, 5 U.S.C. § 552, and the
Commission’s rules thereunder (17 CFR 200.80(b)(4)(iii)), the Commission generally does not
publish or make available information contained in reports, summaries, analyses, letters, or
memoranda arising out of, in anticipation of, or in connection with an examination or inspection
of the books and records of any person or any other investigation.
8

See paragraph (d)(1) of proposed Rule 18a-7.

See 17 CFR 200.83. Information regarding requests for confidential treatment of information submitted to
the Commission is available at http://www.sec.gov/foia/howfo2.htm#privacy.

See, e.g., 15 U.S.C. 78x (governing the public availability of information obtained by the Commission);
5 U.S.C. 552 et seq.

11.

Sensitive Questions

As discussed above in Item 10, the collection of information will not include publicly
available information. Furthermore, we do not believe that the collection of information will
contain Personally Identifiable Information (“PII”). 11
12.

Burden of Information Collection

Proposed Rule 18a-7 described in the SBS Recordkeeping Release would establish
reporting requirements applicable to stand-alone SBSDs, stand-alone MSBSPs, bank SBSDs,
and bank MSBSPs. 12 The proposed rule is expected to impose a one-time initial burden and an
ongoing burden on the industry, although actual reporting requirements are expected to vary
depending on the size and complexity of the firm.
ANC Reports: Paragraph (a)(3) of proposed Rule 18a–7 would require ANC stand-alone
SBSDs to periodically file certain additional reports relating to their use of internal models to
calculate net capital. 13 The Commission estimates that paragraph (a)(3) of proposed Rule 18a–7
would impose no initial burden and an annual burden of 132 hours per ANC stand-alone SBSD
(including the first year). 14 The Commission estimates that there are six ANC stand-alone
SBSDs, resulting in an industry-wide estimated ongoing burden of 792 hours per year. 15
Customer Statements: Paragraph (b) of proposed Rule 18a–7 would require stand-alone
SBSDs and stand-alone MSBSPs to disclose certain financial statements on their Internet
websites. 16 The Commission estimates that paragraph (b) of proposed Rule 18a–7 would impose
an initial burden of 10 hours per firm and an annual burden of one hour per firm (including the
first year). The Commission estimates that there are 13 respondents (nine stand-alone SBSDs
and four stand-alone MSBSPs), resulting in an industry-wide initial burden of 130 hours 17 and an
industry-wide ongoing burden of 13 hours per year (including the first year). 18 Over a three year

The term “Personally Identifiable Information” refers to information which can be used to distinguish or
trace an individual’s identity, such as their name, social security number, biometric records, etc. alone, or
when combined with other personal or identifying information which is linked or linkable to a specific
individual, such as date and place of birth, mother’s maiden name, etc.

See paragraph (a)(3) of proposed Rule 18a-7.

(4 hours/monthly report x 12 months/year + 8 hours/quarterly report x 4 quarters/year + 40 hours/annual
report) + 1 hour/liquidity stress test filing × 12 months per year = 132 hours per year.

132 hours per year × 6 ANC stand-alone SBSDs = 792 hours per year.

See paragraph (b) of proposed Rule 18a–7.

10 hours × 13 stand-alone SBSDs and stand-alone MSBSPs = 130 hours.

1 hour per year × 13 stand-alone SBSDs and stand-alone MSBSPs = 13 hours per year.

period, the total estimated industry burden would be 169 hours, 19 or about 56 hours per year
when annualized. 20
Annual Reports for Stand-Alone MSBSPs: Paragraph (c) of proposed Rule 18a–7
would require stand-alone SBSDs and stand-alone MSBSPs to file with the Commission an
annual report consisting of certain financial reports. 21 In addition, paragraph (d) of proposed
Rule 18a–7 requires the filing firm to attach Part III of Form X–17A–5 to the annual report. 22
Part III must include an oath or affirmation, which implicitly requires a senior officer or a trusted
delegate to review the annual report. The Commission estimates that paragraphs (c) and (d) of
proposed Rule 18a–7 would impose on stand-alone MSBSPs an annual burden of 10 hours
(including the first year). The Commission estimates that there are four stand-alone MSBSPs,
resulting in an industry-wide estimated ongoing burden of 40 hours per year (including the first
year). 23
Annual Reports for Stand-Alone SBSDs: Unlike stand-alone MSBSPs, stand-alone
SBSDs would be required to include a compliance report with their annual reports. 24 The
Commission estimates that each compliance report takes approximately 60 hours to prepare. 25
Therefore, paragraphs (c) and (d) of proposed Rule 18a–7 would impose an estimated annual
burden of 70 hours per stand-alone SBSD (including the first year). The Commission estimates
that there are nine stand-alone SBSDs, resulting in an industry-wide estimated ongoing burden of
630 hours per year (including the first year). 26
Statement Regarding Independent Public Accountant: Paragraph (e) of proposed
Rule 18a–7 would require stand-alone SBSDs and stand-alone MSBSPs to file a statement
regarding the independent public accountant engaged to audit the firm’s annual reports. 27 The
Commission estimates that paragraph (e) of proposed Rule 18a–7 would impose an initial burden
of 10 hours per firm and an annual burden of two hours per firm (including the first year). The
Commission estimates that there are 13 respondents (nine stand-alone SBSDs and four standalone MSBSPs), resulting in an estimated industry-wide initial burden of 130 hours 28 and an
estimated industry-wide ongoing burden of 26 hours per year (including the first year). 29 Over a

(130 hours + 13 hours) + 13 hours + 13 hours = 169 hours.

169 hours / 3 years = 56.33 hours per year.

See paragraph (c) of proposed Rule 18a–7.

See paragraph (d) of proposed Rule 18a–7.

10 hours per year × 4 stand-alone MSBSPs = 40 hours per year.

See paragraph (c)(1)(i)(B) of proposed Rule 18a–7.

See Broker-Dealer Reports; Final Rule, Exchange Act Release No. 70073 (July 30, 2013), 78 FR 51910,
51960 (Aug. 21, 2013).

70 hours per year × 9 stand-alone SBSDs = 630 hours per year.

See paragraph (e) of proposed Rule 18a–7.

10 hours × 13 stand-alone SBSDs and stand-alone MSBSPs = 130 hours.

2 hours per year × 13 stand-alone SBSDs and stand-alone MSBSPs = 26 hours per year.

three year period, the total estimated industry burden would be 208 hours, 30 or about 69 hours
per year when annualized. 31
Notice of Change in Fiscal Year: Paragraph (j) of proposed Rule 18a–7 would require
stand-alone SBSDs and stand-alone MSBSPs to notify the Commission of a change in fiscal
year. 32 The Commission estimates that each financial notice takes approximately one hour to
prepare and file with the Commission. 33 The Commission estimates that paragraph (j) of
proposed Rule 18a–7 would impose a burden of one hour per firm planning to change its fiscal
year. The Commission estimates that each year, one firm will change its fiscal year, such that
the estimated burden on the industry would be one hour per year (including the first year). 34
Proposed Form SBS for Stand-Alone SBSDs: Proposed Rule 18a–7 would require
stand-alone SBSDs to file proposed Form SBS on a monthly basis. 35 Proposed Form SBS
includes 11 sections and five schedules applicable to stand-alone SBSDs. 36 Stand-alone SBSDs
dually registered as FCMs would be required to complete five additional sections, all of which
the CFTC already requires or has proposed to require FCMs to file as part of Form 1–FR–
FCM. 37 In consideration of these additional requirements, the Commission estimates that the
30

(130 hours + 26 hours) + 26 hours + 26 hours = 208 hours.

208 hours / 3 years = 69.33 hours per year.

See paragraph (j) of proposed Rule 18a–7.

See Commission, Supporting Statement for the Paperwork Reduction Act Information Collection
Submission for Rule 17a–11 (June 29, 2012), available at
http://www.reginfo.gov/public/do/DownloadDocument?documentID=332313&version=1.

1 hour per year x 1 stand-alone SBSD or stand-alone MSBSP = 1 hour per year.

See paragraph (a)(1) of proposed Rule 18a–7.

Stand-alone SBSDs would be required to complete the following sections and schedules: (1) Statement of
Financial Condition; (2) either Computation of Net Capital (Filer Authorized to Use Models) or
Computation of Net Capital (Filer Not Authorized to Use Models); (3) Computation of Minimum
Regulatory Capital Requirements (Non-Broker-Dealer); (4) Statement of Income (Loss); (5) Capital
Withdrawals; (6) Capital Withdrawals—Recap; (7) Financial and Operational Data; (8) Financial and
Operational Data—Operational Deductions from Capital—Note A; (9) Financial and Operational Data—
Potential Operational Charges Not Deducted from Capital—Note B; (10) Computation for Determination
of the Amount to be Maintained in the Special Account for the Exclusive Benefit of Security-Based Swap
Customers—Rule 18a–4, Appendix A; (11) Information for Possession or Control Requirements under
Rule 18a–4; (12) Schedule 1—Aggregate Securities, Commodities, and Swaps Positions; (13) Schedule
2—Credit Concentration Report for Fifteen Largest Exposures in Derivatives; (14) Schedule 3—Portfolio
Summary of Derivatives Exposures by Internal Credit Rating; and (15) Schedule 4 –Geographic
Distribution of Derivatives Exposures for Ten Largest Countries.

Stand-alone SBSDs also registered as FCMs would be required to file the following sections: (1)
Computation of CFTC Minimum Capital Requirement; (2) Statement of Segregation Requirements and
Funds in Segregation for Customers Trading on U.S. Commodity Exchanges; (3) Statement of Cleared
Swaps Customer Segregation Requirements and Funds in Cleared Swaps Customer Accounts under Section
4d(f) of the Commodity Exchange Act; (4) Statement of Segregation Requirements and Funds in
Segregation for Customers’ Dealer Options Accounts; and (5) Statement of Secured Amounts and Funds
Held in Separate Accounts for Foreign Futures and Foreign Options Customers Pursuant to CFTC
Regulation 30.7. The Commission does not estimate a burden for these 5 sections, since the CFTC already
requires FCMs to file these 5 sections on a monthly basis (17 CFR 1.10(b)(i)), and therefore, the hourly
burden is already accounted for in the PRA estimate for the CFTC’s Rule 1.10 (1 CFR 1.10). In addition,

requirement for stand-alone SBSDs to file proposed Form SBS every month would impose an
initial burden of 160 hours per firm and an ongoing annual burden of 192 hours per firm
(including the first year). The Commission estimates that there are nine stand-alone SBSDs,
resulting in an estimated industry-wide initial burden of 1,440 hours 38 and an estimated industrywide ongoing burden of 1,728 hours per year (including the first year). 39 Over a three year
period, the total estimated industry burden would be 6,624 hours, 40 or 2,208 hours per year when
annualized. 41
Proposed Form SBS for Stand-Alone MSBSPs: Proposed Rule 18a–7 would require
stand-alone MSBSPs to file proposed Form SBS on a monthly basis. 42 Proposed Form SBS
includes three sections and five schedules applicable to stand-alone MSBSPs. 43 Stand-alone
MSBSPs dually registered as FCMs would be required to complete five additional sections, all of
which the CFTC already requires or has proposed to require FCMs to file as part of Form 1–FR–
FCM. 44 In consideration of these additional requirements, the Commission estimates that the
requirement for stand-alone MSBSPs to file proposed Form SBS every month would impose an
initial burden of 40 hours per firm and an ongoing annual burden of 48 hours per firm. The
Commission estimates that there are four stand-alone MSBSPs, resulting in an estimated
industry-wide initial burden of 160 hours 45 and an estimated industry-wide ongoing burden of

the Commission does not anticipate that FCMs will be required to file both the CFTC’s Form 1–FR–FCM
and the Commission’s proposed Form SBS.
38

160 hours × 9 stand-alone SBSDs = 1,440 hours.

192 hours per year × 9 stand-alone SBSDs = 1,728 hours per year.

(1,440 hours + 1,728 hours) + 1,728 hours + 1,728 hours = 6,624 hours.

6,624 hours / 3 years = 2,208 hours per year.

See paragraph (a)(1) of proposed Rule 18a–7.

Stand-alone MSBSPs would be required to complete the following sections and schedules: (1) Statement of
Financial Condition; (2) Computation of Tangible Net Worth; (3) Statement of Income (Loss); (4)
Schedule 1—Aggregate Securities, Commodities, and Swaps Positions; (5) Schedule 2—Credit
Concentration Report for Fifteen Largest Exposures in Derivatives; (6) Schedule 3—Portfolio Summary of
Derivatives Exposures by Internal Credit Rating; and (7) Schedule 4 –Geographic Distribution of
Derivatives Exposures for Ten Largest Countries.

Stand-alone MSBSPs also registered as FCMs would be required to file the following sections: (1)
Computation of CFTC Minimum Capital Requirement; (2) Statement of Segregation Requirements and
Funds in Segregation for Customers Trading on U.S. Commodity Exchanges; (3) Statement of Cleared
Swaps Customer Segregation Requirements and Funds in Cleared Swaps Customer Accounts under Section
4d(f) of the Commodity Exchange Act; (4) Statement of Segregation Requirements and Funds in
Segregation for Customers’ Dealer Options Accounts; and (5) Statement of Secured Amounts and Funds
Held in Separate Accounts for Foreign Futures and Foreign Options Customers Pursuant to CFTC
Regulation 30.7. The Commission does not estimate a burden for these 5 sections, since the CFTC already
requires FCMs to file these 5 sections on a monthly basis (17 CFR 1.10(b)(i)), and therefore, the hourly
burden is already accounted for in the PRA estimate for the CFTC’s Rule 1.10 (1 CFR 1.10). In addition,
the Commission does not anticipate that FCMs will be required to file both the CFTC’s Form 1–FR–FCM
and the Commission’s proposed Form SBS.

40 hours × 4 stand-alone MSBSPs = 160 hours.

192 hours per year. 46 Over a three year period, the total estimated industry burden would be 736
hours, 47 or 245 hours per year when annualized. 48
Proposed Form SBS for Bank SBSDs: Proposed Rule 18a–7 would require bank
SBSDs to file proposed Form SBS on a quarterly basis. 49 Proposed Form SBS includes five
sections and one schedule applicable to bank SBSDs. 50 The Commission does not expect
proposed Form SBS to impose a significant burden on bank SBSDs, because two of the five
sections require the firm to file calculations already computed in accordance with proposed Rule
18a-3, and the other three sections either mirror or are scaled down versions of schedules to
FFIEC Form 031, which banks are already required to file with their prudential regulator
(although they would need to transpose this information from FFIEC Form 031 to Form SBS).
Although bank SBSDs dually registered as FCMs would be required to complete 5 additional
sections, the CFTC already requires or has proposed to require FCMs to file these schedules on
Form 1–FR– FCM. 51 In consideration of these additional requirements, the Commission
estimates that the requirement for bank SBSDs to file proposed Form SBS quarterly would
impose an initial burden of 36 hours per firm and an ongoing annual burden of 16 hours per firm
per year. The Commission estimates that there are 25 bank SBSDs, resulting in an estimated
industry-wide initial burden of 900 hours 52 and an estimated industry-wide ongoing burden of
400 hours per year. 53 Over a three year period, the total estimated industry burden would be
2,100 hours, 54 or 700 hours per year when annualized. 55
46

48 hours per year × 4 stand-alone MSBSPs = 192 hours per year.

(160 hours + 192 hours) + 192 hours + 192 hours = 736 hours.

736 hours / 3 years = 245.33 hours per year.

See paragraph (a)(2) of proposed Rule 18a–7.

Bank SBSDs would be required to complete the following sections and schedules: (1) Balance Sheet
(Information as Reported on FFIEC Form 031—Schedule RC); (2) Regulatory Capital (Information as
Reported on FFIEC Form 031— Schedule RC–R); (3) Income Statement (Information as Reported on
FFIEC Form 031—Schedule RI); (4) Computation for Determination of the Amount to be Maintained in
the Special Account for the Exclusive Benefit of Security-Based Swap Customers—Rule 18a–4, Appendix
A; (5) Information for Possession or Control Requirements under Rule 18a–4; and (6) Schedule 1 –
Derivative Positions.

Bank SBSDs also registered as FCMs would be required to file the following sections: (1) Computation of
CFTC Minimum Capital Requirement; (2) Statement of Segregation Requirements and Funds in
Segregation for Customers Trading on U.S. Commodity Exchanges; (3) Statement of Cleared Swaps
Customer Segregation Requirements and Funds in Cleared Swaps Customer Accounts under Section 4d(f)
of the Commodity Exchange Act; (4) Statement of Segregation Requirements and Funds in Segregation for
Customers’ Dealer Options Accounts; and (5) Statement of Secured Amounts and Funds Held in Separate
Accounts for Foreign Futures and Foreign Options Customers Pursuant to CFTC Regulation 30.7. The
Commission does not estimate a burden for these 5 sections, since the CFTC already requires FCMs to file
these 5 sections on a monthly basis (17 CFR 1.10(b)(i)), and therefore, the hourly burden is already
accounted for in the PRA estimate for the CFTC’s Rule 1.10 (1 CFR 1.10). In addition, the Commission
does not anticipate that FCMs will be required to file both the CFTC’s Form 1–FR–FCM and the
Commission’s proposed Form SBS.

36 hours × 25 bank SBSDs = 900 hours.

16 hours per year × 25 bank SBSDs = 400 hours per year.

(900 hours + 400 hours) + 400 hours + 400 hours = 2,100 hours.

Proposed Form SBS for Bank MSBSPs: Proposed Rule 18a–7 would require bank
MSBSPs to file proposed Form SBS on a quarterly basis. 56 Proposed Form SBS includes three
sections and one schedule applicable to bank MSBSPs. 57 Bank MSBSPs dually registered as
FCMs would be required to complete five additional sections, all of which the CFTC already
requires or has proposed to require FCMs to file as part of Form 1–FR–FCM. 58 However, the
Commission does not expect any banks to register with the Commission as MSBSPs and
therefore does not anticipate these requirements to impose an additional burden. 59

2,100 hours / 3 years = 700 hours per year.

See paragraph (a)(2) of proposed Rule 18a–7.

Bank MSBSPs would be required to complete the following sections and schedules: (1) Balance Sheet
(Information as Reported on FFIEC Form 031—Schedule RC); (2) Regulatory Capital (Information as
Reported on FFIEC Form 031—Schedule RC–R); (3) Income Statement (Information as Reported on
FFIEC Form 031—Schedule RI); and (4) Schedule 1 – Derivative Positions.

Bank MSBSPs also registered as FCMs would be required to file the following sections: (1) Computation
of CFTC Minimum Capital Requirement; (2) Statement of Segregation Requirements and Funds in
Segregation for Customers Trading on U.S. Commodity Exchanges; (3) Statement of Cleared Swaps
Customer Segregation Requirements and Funds in Cleared Swaps Customer Accounts under Section 4d(f)
of the Commodity Exchange Act; (4) Statement of Segregation Requirements and Funds in Segregation for
Customers’ Dealer Options Accounts; and (5) Statement of Secured Amounts and Funds Held in Separate
Accounts for Foreign Futures and Foreign Options Customers Pursuant to CFTC Regulation 30.7. The
Commission does not estimate a burden for these 5 sections, since the CFTC already requires FCMs to file
these 5 sections on a monthly basis (17 CFR 1.10(b)(i)), and therefore, the hourly burden is already
accounted for in the PRA estimate for the CFTC’s Rule 1.10 (1 CFR 1.10). In addition, the Commission
does not anticipate that FCMs will be required to file both the CFTC’s Form 1–FR–FCM and the
Commission’s proposed Form SBS.

The Commission estimates that the requirement for bank MSBSPs to file proposed Form SBS quarterly
would impose an initial burden of 16 hours per firm and an ongoing annual burden of 8 hours per firm.

Total Industry Hour Burden: Thus, the Commission estimates that the total initial
industry hour burden attributable to proposed Rule 18a-7 is 2,760 hours 60 and the total annual
industry hour burden attributable to proposed Rule 18a-7 is 3,822 hours per year (including the
first year). 61 Over a three year period, the total estimated industry burden would be 14,226
hours, 62 or about 4,742 hours per year when annualized. 63 These burdens are reporting burdens.
Summary of Hourly Burdens

Name of Information
Collection

Type of
Burden

Number
of Entities
Impacted

Annual
Responses
per Entity

Initial
Burden per
Entity per
Response

Initial Burden
Annualized
per Entity per
Response

Ongoing
Burden per
Entity per
Response

Annual
Burden Per
Entity per
Response

Total Annual
Burden Per
Entity

Total Industry
Burden

Small
Business
Entities
Affected

[ D + E]

[F * B]

[G * A]

[A * 0 %]

[C ÷ 3 years]
Additional ANC
Reports

Reporting

0.00

132.00

792.00

Customer Statements

Reporting

10.00

3.33

1.00

4.33

56.33

Annual Reports for
Stand-Alone MSBSPs

Reporting

0.00

10.00

40.00

Annual Reports for
Stand-Alone SBSDs

Reporting

0.00

70.00

630.00

Statement Regarding
Independent Public
Accountant

Reporting

10.00

3.33

2.00

5.33

69.33

Notice of Change in
Fiscal Year

Reporting

0.00

1.00

Proposed Form SBS for
Stand-Alone SBSDs

Reporting

13.33

4.44

16.00

20.44

245.33

2,208.00

Proposed Form SBS for
Stand-Alone MSBSPs

Reporting

3.33

1.11

4.00

5.11

61.33

245.33

Proposed Form SBS for
Bank SBSDs

Reporting

9.00

3.00

4.00

7.00

28.00

700.00

TOTAL HOURLY BURDEN FOR ALL RESPONDENTS

4,742.00

13.

Costs to Respondents

The Commission estimates that proposed Rule 18a-7 would cause a stand-alone SBSD or
a stand-alone MSBSP to incur no initial dollar cost, but would cause an annual dollar cost to
meet the reporting requirements of the annual report, statement regarding accountant,
engagement of accountant, and notice of change in fiscal year. Proposed Rule 18a-7 is not
expected to increase the initial or annual dollar costs that bank SBSDs and bank MSBSPs incur
to meet the reporting requirements, because banks are already subject to reporting requirements

130 hours + 130 hours + 1,440 hours + 160 hours + 900 hours = 2,760 hours.

792 hours + 13 hours + 40 hours + 630 hours + 26 hours + 1 hour + 1,728 hours + 192 hours + 400 hours =
3,822 hours.

(2,760 hours in first year + 3,822 hours in first year) + 3,822 hours in second year + 3,822 hours in third
year = 14,226 hours.

14,226 hours / 3 years = 4,742 hours per year.

by the prudential regulators. 64 Those requirements that are expected to impose an annual cost to
the industry are discussed below.
Website and Toll-Free Number: The Commission does not anticipate a dollar cost to
establish a website and a toll-free number under paragraph (b) of proposed Rule 18a-7, because
the Commission believes firms that are large enough to register as an SBSD or MSBSP already
maintain a toll-free number for their customers and already have an Internet website.
Annual Report for Stand-Alone SBSDs and Stand-Alone MSBSPs: The Commission
estimates that postage costs to comply with paragraphs (c) and (d) of proposed Rule 18a–7
would impose on stand-alone SBSDs and stand-alone MSBSPs an annual dollar cost of $5.60 per
firm. 65 The Commission estimates that there are 13 respondents (nine stand-alone SBSDs and
four stand-alone MSBSPs), resulting in an estimated industry-wide cost of $72.80 per year. 66
Statement Regarding Accountant: The Commission estimates that postage costs to
comply with paragraph (e) of proposed Rule 18a–7 would impose an annual dollar cost of 46
cents per firm. 67 The Commission estimates that there are 13 respondents (nine stand-alone
SBSDs and four stand-alone MSBSPs), resulting in an industry-wide cost of $5.98 per year. 68
Engagement of Accountant for Stand-Alone SBSDs and Stand-Alone MSBSPs:
Paragraph (f) of proposed Rule 18a–7 would require stand-alone SBSDs and stand-alone
MSBSPs to engage an independent public accountant to provide reports covering the firm’s
annual reports. 69 The Commission previously estimated that it would cost each carrying firm
$300,000 to retain an independent public accountant to audit its financial statements and
$150,000 to examine its compliance report. 70 However, since only stand-alone SBSDs are
required to file a compliance report, 71 only they (and not stand-alone MSBSPs) would be
required to retain an independent public accountant to review their compliance reports.
Therefore, Commission estimates that paragraph (f) of proposed Rule 18a–7 would
impose an annual cost of $300,000 on each stand-alone MSBSP. The Commission estimates that

See, e.g., 12 CFR 12.3 (Department of Treasury); 12 CFR 219.21 et seq. (Federal Reserve); 12 CFR 344.4
(FDIC).

As of May 2013, a priority mail flat rate envelope cost $5.60, based on costs obtained on the U.S. Postal
Service website at www.usps.gov.

$5.60 per firm x 13 stand-alone SBSDs and stand-alone MSBSPs = $72.80 per year.

As of October 2013, it cost 46 cents to send a one ounce retail domestic first-class letter through the U.S.
Postal Service.

$0.46 per firm x 13 stand-alone SBSDs and stand-alone MSBSPs = $5.98 per year.

See paragraph (f) of proposed Rule 18a–7.

See Broker-Dealer Reports; Final Rule, Exchange Act Release No. 70073 (July 30, 2013), 78 FR 51910,
51963 (Aug. 21, 2013).

See paragraph (c)(1)(i)(B) of proposed Rule 18a-7.

there are four stand-alone MSBSPs, resulting in an industry-wide ongoing burden of $1,200,000
per year. 72
The Commission estimates that paragraph (f) of proposed Rule 18a–7 would impose on
stand-alone SBSDs an annual cost of $450,000 per firm, 73 since both their financial statements
and compliance report would need to be audited. The Commission estimates that there are nine
stand-alone SBSDs, resulting in an industry-wide ongoing burden of $4,050,000 per year. 74
Notice of Change of Fiscal Year: The Commission estimates that postage cost to
comply with paragraph (j) of proposed Rule 18a–7 would impose an annual dollar cost of 46
cents per firm planning to change its fiscal year. 75 The Commission estimates that each year,
one firm will change its fiscal year, such that the estimated cost burden on the industry would be
46 cents per year. 76
Total Industry Costs Burden: Therefore, the total industry-wide dollar cost of proposed
Rule 18a-7 is estimated to be $5,250,079.24 per year. 77
Summary of Dollar Costs

Name of Information
Collection

Type of
Burden

Number
of Entities
Impacted

Annual
Responses
per Entity

Initial Cost
per Entity
per
Response

Initial Cost
Annualized
per Entity per
Response

Ongoing
Cost per
Entity per
Response

Annual Cost
Per Entity
per Response

Total Annual
Cost Per
Entity

Total Industry
Cost

Small
Business
Entities
Affected

[ D + E]

[F * B]

[G * A]

[A * 0 %]

[C ÷ 3 years]
Annual Reports for
Stand-Alone MSBSPs

Reporting

$0.00

$5.60

$22.40

Annual Reports for
Stand-Alone SBSDs

Reporting

$0.00

$5.60

$50.40

Statement Regarding
Independent Public
Accountant

Reporting

$0.00

$0.46

$5.98

Engagement of
Accountant for StandAlone MSBSPs

Reporting

$0.00

$300,000.00

$1,200,000.00

Engagement of
Accountant for StandAlone SBSDs

Reporting

$0.00

$450,000.00

$4,050,000.00

Notice of Change in
Fiscal Year

Reporting

$0.00

$0.46

TOTAL HOURLY COST FOR ALL RESPONDENTS

$5,250,079.24

$300,000 per year x 4 stand-alone MSBSPs = $1,200,000 per year.

$300,000 per year (financial statements) + $150,000 per year (compliance report) = $450,000 per year.

$450,000 per year x 9 stand-alone SBSDs = $4,050,000 per year.

As of October 2013, it cost 46 cents to send a one ounce retail domestic first-class letter through the U.S.
Postal Service.

$0.46 per year x 1 stand-alone SBSD or stand-alone MSBSP = $0.46 per year.

$72.80 + $5.98 + $4,050,000 + $1,200,000 + $0.46 = $5,250,079.24.

14.

Cost to Federal Government

Rule 18a-7 is not expected to result in costs to the federal government due to contracting,
information technology, development, hiring one or more new employees, or reallocating
existing employees.
15.

Changes in Burden

Because stand-alone SBSDs, stand-alone MSBSPs, bank SBSDs, and bank MSBSPs are
currently not regulated by the Commission, the estimated change in burden represents the entire
estimated industry-wide burden. More specifically, the annual ongoing burden of 4,742 hours
reflects a 4,742 hour increase from the current OMB inventory of 0 hours. Similarly, the annual
cost burden of $5,250,079.24 reflects a $5,250,079.24 increase from the current OMB inventory
of $0.
16.

Information Collection Planned for Statistical Purposes

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

OMB Expiration Date Display Approval

We request authorization to omit the expiration date on the electronic version of the form,
although the OMB control number will be displayed. Including the expiration date on the
electronic version of the form will result in increased costs, because the need to make changes to
the form may not follow the application’s scheduled version release dates.
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.

File Type	application/pdf
File Modified	2016-09-09
File Created	2016-09-09