DGL REVISED 2019 Rule 17f-1(g) Supporting Statement (2)

SUPPORTING STATEMENT
for the Paperwork Reduction Act Information Collection Submission for
Rule 17f-1(g)
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 on December 6, 1976. This Rule implemented Section
17(f)(1) of the Act by establishing reporting and inquiry requirements regarding missing, lost,
stolen, or counterfeit securities. Section 17(f)(1) of the Act was a response by Congress to the
large number of securities thefts that had occurred in recent years. 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
ease of, negotiating such securities. The purpose of Section 17(f)(1) and Rule 17f-1 thereunder
is to create a central data base 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.
Paragraph (g) of Rule 17f-1 requires that all reporting institutions (i.e., every national
securities exchange, member thereof, registered securities association, broker, dealer, municipal
securities dealer, registered transfer agent, registered clearing agency, participant therein,
member of the Federal Reserve System, and bank insured by the FDIC) maintain and preserve a
number of documents related to their participation in the Lost and Stolen Securities Program
(“Program”) under Rule 17f-1. The following documents must be kept in an easily accessible
place for three years, according to paragraph (g): (1) copies or all reports of theft or loss (Form
X-17F-1A) filed with the Commission’s designee; (2) all agreements between reporting
institutions regarding registration in the Program or other aspects of Rule 17f-1; and (3) all
confirmations or other information received from the Commission or its designee as a result of
inquiry.
2. Purpose and Use of the Information Collection
Reporting institutions utilize these records and reports (a) to report missing, lost, stolen or
counterfeit securities to the database, (b) to confirm inquiry of the database, and (c) to
demonstrate compliance with Rule 17f-1. The Commission and the reporting institutions’
examining authorities utilize these records to monitor the incidence of thefts and losses incurred
by reporting institutions and to determine compliance with Rule 17f-1. If reporting institutions
did not retain such records, compliance with Rule 17f-1 could not be monitored effectively.

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3. Consideration Given to Improved Technology
Most transfer agent processing systems are automated and those automated systems
enable transfer agents to easily identify and retain records under the Rule. There are no legal or
technical obstacles that, if removed, would reduce burdens.
4. Duplication
No other reporting requirement with respect to the information required to be reported
under the Rule currently exists.
5. Effect on Small Entities
The minimal record retention requirements of Rule 17f-1(g) do not require small entities
to create records, but simply to retain existing records.
6. Consequences of Not Conducting Collection
Rule 17f-1(g) does not require periodic collection, but does require retention of records
generated as a result of compliance with Rule 17f-1. Any less frequent reporting or inquiry
under Rule 17f-1 would expose reporting institutions to significant financial loss.
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
Under Section 17(b) and (f) of the Act, the information required by Rule 17f-1(g) is
available to the Commission and Federal bank regulators for examinations or collection
purposes. Rule 0-4 of the Act deems such information to be confidential.

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11. Sensitive Questions
Rule 17f-1(g) requires that all reporting institutions maintain and preserve a number of
documents related to their participation in the Lost and Stolen Securities Program (“Program”) under
Rule 17f-1. A separate rulemaking pertains to Form X-17F-1A. No information of a sensitive nature,
including social security numbers, will be required under this collection of information. The
information collection does not collect personally identifiable information (PII). The agency has
determined that a system of records notice (SORN) and privacy impact assessment (PIA) are not
required in connection with the collection of information.

12. Burden of Information Collection
The Commission estimates that there are approximately 10,018 reporting institutions
(respondents) and, on average, each respondent would need to retain 33 records annually, with
each retention requiring approximately 1 minute (a total of 33 minutes or 0.5511 hours per
respondent per year). Thus, the total estimated annual time burden for all respondents is 5,521
hours (10,018 x 0.5511 hours = 5,521). Assuming an average hourly cost for clerical work of
$50.00, the average total yearly record retention internal cost of compliance for each respondent
would be $27.56 ($50 x 0.55 hours). Based on these estimates, the total annual internal
compliance cost for the estimated 10,018 reporting institutions would be approximately
$276,096 (10,018 x $27.56).
Rule

Burden
Type

Rule 17f-1(g)

Record
Keeping

Number of
Number of
Respondents Annual
Reponses
Per
Respondent
10,018
33

Time Per
Response
(Hours)

Total
Burden Per
Respondent
(Hours)

.0167

0.5511

Total
Burden for
All
Respondents
(Hours)
5,521

13. Costs to Respondents
Not applicable. The Commission does not anticipate that respondents would have to
incur any capital or startup costs, nor any additional operational or maintenance costs (other than
as provided in Item 12), to comply with the collection of information requirements of Rule 17f1(g).

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14. Costs to Federal Government
Records required by Rule 17f-1(g) generally cost the Federal Government little because
the records are maintained by the transfer agents and are produced as requested during transfer
agent examinations. It is estimated that the review of these records during examinations takes
approximately three hours, costing the Commission and Federal Bank Regulatory Agencies
approximately $4,050 based on the number of transfer agents examined each year and our
computation of the value of staff time devoted to examinations and the related overhead, valued
at 35% of the value of staff time. Costs to the Federal Government also include staff time
devoted to responding to questions from transfer agents regarding the rule. The staff estimates
that approximately 60 hours of staff time per year are devoted to Rule 17f-1(g), at a cost of
$3,000 per year (60 hours times $50). In addition, the staff estimates overhead expenses at
$1,050, resulting in total cost to the Federal Government of $4,050. This figure is based on our
computation of staff time devoted to this activity and related overhead at 35 percent of the value
of staff time. This estimate was computed according to the guidelines set forth in GSA, Guide to
Estimating Reporting Costs (1973).
15. Changes in Burden
Aggregate burden hours have decreased by 1,613 hours (7,134-5,521 = 1,613), due to the
decrease by 2,953 in the number of reporting institutions that have registered in the Lost and
Stolen Securities Program (year-end 2015 to year-end 2018). These 2,953 institutions chose to
drop out of the Program either to avoid the costs involved or because of business closures.
16. Information Collection Planned for Statistical Purposes
Not applicable. This information collection is not used for statistical purposes.
17. Approval to Omit OMB Expiration Date
The Commission is not seeking approval to omit the expiration date.
18. Exceptions to Certification for Paperwork Reduction Act Submission
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.