2018 Rule 17f-1(b) Supporting Statement.FINAL

SUPPORTING STATEMENT
for the Paperwork Reduction Act Collection Submission
for Rule 17f-1(b)
A.

JUSTIFICATION
1.

Necessity of Information Collection

The Commission, pursuant to Sections 2, 17(f), 19(a) and 23 of the Securities
Exchange Act of 1934 (“Act”), adopted Rule 17f-1 (17 CFR 240.17f-1(b)) in 1979. This
rule implemented Section 17(f)(1) of the Act by establishing a program for reporting and
making inquiries requirements regarding missing, lost, stolen, or counterfeit securities
(“Program”). Section 17(f)(1) of the Act was a response by Congress to large numbers of
securities thefts. Testimony at the hearings conducted before the Senate Permanent
Subcommittee on Investigation between 1971 and 1974 indicated that the trafficking in
stolen securities was a profitable area for organized crime and that the failure to have
available to the financial community a means of easily identifying missing, lost, stolen, or
counterfeit certificates was a contributing factor to the increase in, and the ease of,
negotiating such securities. The purpose of Section 17(f)(1) and Rule 17f-1 thereunder is
to create a central database of information related to missing, lost, stolen, or counterfeit
securities and to make available to covered institutions information that promptly
identifies those securities, removing them from the stream of commerce and facilitating
the capture of those who engage in such traffic.
The Commission has adopted a number of amendments to Rule 17f-1, including
the addition of paragraph (b). Paragraph (b) requires that every “reporting institution”
register with the Commission or its designee according to instructions issued by the
Commission. The term “reporting institution” includes every national securities
exchange, member thereof, registered securities association, broker, dealer, municipal
securities dealer, government securities broker, government securities dealer, registered
transfer agent, registered clearing agency, participant therein, member of the Federal
Reserve System and bank whose deposits are insured by the Federal Deposit Insurance
Corporation.
Upon accepting the registration form by the Securities Information Center
(“SIC”), the Commission’s designee to maintain and operate the database, a reporting
institution is given access to the data base for both reporting and inquiry purposes.
Without the identifying information provided by the registration form, access to the
confidential database could not be limited to those institutions specified in the Act and
Rule 17f-1. In addition, the registration procedure provides the Commission with a
means of identifying those reporting institutions that have not registered in the Program
and those institutions that have registered but are not complying with the requirements
for reporting and inquiry.

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2.

Purpose and Use of the Information Collection

The Commission uses the information received in response to Rule 17f-1(b) to
correlate the occurrence of securities losses and thefts to the size and type of reporting
institution involved. The information is also used during the inquiry procedure to notify
immediately the Federal Bureau of Investigation with regard to attempted negotiations of
such securities. Without Rule 17f-1(b), the Commission would not have a means of
identifying those reporting institutions that have not registered in the Program and those
institutions that have registered but are not complying with the requirements for reporting
and inquiry.
3.

Consideration Given to Information Technology

Not applicable.
4.

Duplication

Not applicable because reporting institutions are required to register with SIC
only once.
5.

Effect on Small Entities

Although the information requested in the registration form affects small entities,
the effect is minimal. The specific information requested is easily accessible to all
reporting institutions and creates no significant burden.
6.

Consequences of Not Conducting Collection

Since the information is requested only once upon registration for participation in
the Program, the collection of this information could not be conducted less frequently.
7.

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

There are no special circumstances. The 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.

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10.

Confidentiality

Reporting institutions required to register under rule 17f-1(b) will not be kept
confidential. However, the Program database will be kept confidential.
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

Approximately 10,000 entities in the securities industry are registered with SIC.
Registration is a one-time event; it is ongoing until the registrant withdraws from the
Program. We estimate that, each year, 10 new reporting institutions register with SIC
and 140 institutions withdraw. The staff estimates that the average number of hours
necessary to comply with Rule 17f-1(b), that is, to register with SIC, is one-half hour.
Accordingly, the staff estimates that the total annual reporting burden for all participants
is 5 hours (10 x one-half hour).
While not a cost burden under Item 13, with respect to the estimated 5 hours per
year to comply with Rule 17Ad-15, the Commission staff estimates that compliance staff
work at subject entities results in an internal cost of compliance, at an estimated hourly
wage of $283, of $141.50 per year per entity (.5 hours x $283 per hour = $141.50 per
year). 1 Therefore, the aggregate annual internal cost of compliance is approximately
$1,415 ($141.50 x 10= $1,415).
13.

Costs to Respondents

Not applicable; (a) it is not anticipated that respondents will have to incur any
capital and start up cost to comply with the rule; (b) it is not anticipated that respondents
will have to incur any additional operational or maintenance cost (other than provided for
in item number 12) to comply with the rule.
14.

Costs to Federal Government

Costs to the Federal Government in administering Rule 17f-1(b) are minimal.
The staff occasionally receives an inquiry from a reporting institution with regard to
registration. Those inquiries can be responded to within one-half hour. The staff is also
involved with reviewing the multi-year delegation arrangement with the Securities
Information Center (“SIC”). Accounting for the burden of this staff time on an
annualized basis, the staff estimates that approximately 150 hours of staff time per year is
1

The estimated hourly wages used in this analysis were derived from reports prepared by the
Securities Industry and Financial Markets Association. See Securities Industry and Financial Markets
Association, Office Salaries in the Securities Industry – 2013 (2013), modified to account for an 1800-hour
work year and multiplied by 5.35 to account for bonuses, firm size, employee benefits and overhead.

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devoted to answering oral inquiries and reviewing the SIC delegation. As a result, annual
total operational cost concerning Rule 17Ad-15 is estimated to be approximately $7,500
based on an average hourly cost of $50. This figure is based on computation of the value
of government staff time devoted to this activity and the related overhead valued at 35%
of the value of staff time.
15.

Changes in Burden

Not applicable.
16.

Information Collection Planned for Statistical Purposes

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

Display of OMB Approval Date

The Commission is not seeking approval to omit the expiration date.
18.

Exceptions to Certification

This collection complies with the requirements in 5 CFR 1320.9.
B.

COLLECTIONS OF INFORMATION EMPLOYING STATISTICAL
METHODS
This collection does not employ statistical methods.