DGL REVISED 2020 17f-2(c) Supporting Statement (004)

SUPPORTING STATEMENT
for the Paperwork Reduction Act Information Collection Submission for
Rule 17f-2(c)
(OMB No. 3235-0029)
A. JUSTIFICATION
1. Necessity of Information Collection
Congress added Section 17(f) to the Securities Exchange Act of 1934 (“Exchange Act”) 1
in 1975 as part of the Securities Acts Amendments of 1975 2 in order to respond to a large
number of securities thefts that occurred in the late 1960s. Testimony before the Senate
Permanent Subcommittee of Investigations between 1971 and 1974 indicated that the trafficking
in stolen securities certificates was profitable for organized crime and that the failure to have
available to the financial community a means of easily identifying security-risk personnel was a
contributing factor to that problem. Specifically, Section 17(f)(2) requires every member of a
national securities exchange, broker, dealer, registered transfer agent, and registered clearing
agency to require that each of its partners, directors, officers, and employees be fingerprinted and
to submit such fingerprints to the U.S. Attorney General for identification and appropriate
processing. This section also authorizes the Commission to, by rule, exempt from the provisions
of this paragraph any class of partners, directors, officers, and employees of any such member,
broker, dealer, registered transfer agent, and registered clearing agency.
On March 16, 1976, the Commission adopted Rule 17f-2 under the Exchange Act. The
general purposes of Rule 17f-2 are: (1) to identify security risk personnel (i.e., persons with
criminal history records for serious offenses); (2) to provide criminal record information so that
employers can make fully informed employment decisions; and (3) to deter persons with a
criminal record from seeking employment or association with covered entities. The rule attempts
to achieve these purposes primarily by requiring, subject to certain exceptions, that every partner,
director, officer, and employee of every member of a national securities exchange, broker,
dealer, registered transfer agent, and registered clearing agency (“covered entities”) be
fingerprinted and that such fingerprints be submitted to the U.S. Attorney General or its designee
(i.e., the Federal Bureau of Investigation (“FBI”)).
Paragraph (c) of Rule 17f-2 specifies that covered entities may satisfy the fingerprinting
requirement by submitting the required fingerprints through a registered national securities
exchange or to a registered national securities association (collectively, also known as “selfregulatory organizations” or “SROs”) which, pursuant to a fingerprint plan filed with and
declared effective by the Commission, forwards such fingerprints to the FBI for identification
and appropriate processing.

1

15 U.S.C. 78q(f).

2

Pub. L. No. 94-29, 89 Stat. 97 (June 4, 1975).

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2. Purpose and Use of the Information Collection
The purpose of this requirement is based on the fact that the fingerprints are processed by
the FBI, which will not accept or process fingerprints received directly from submitting
organizations. 3 Therefore, Commission approval of plans from SROs is essential to carry out the
Congressional goal to fingerprint securities industry personnel. Filing fingerprint plans for
approval by the Commission assures covered entities and their personnel that SROs will handle
fingerprints responsibly.
3. Consideration Given to Information Technology
Rule 17f-2(a) requires covered entities to submit fingerprints to the U.S. Attorney
General or its designee (in practice, the FBI). Improved information technology has enabled the
FBI to collect such fingerprint records electronically. There is a trend by the securities industry
to take advantage of electronic fingerprinting procedures as doing so substantially reduces the
cost of compliance. In 2019, the fingerprint processing fees levied by FINRA and the FBI for
hard copy (paper card) fingerprints increased from approximately $40.00 to approximately
$41.00 per submission. The approximate processing fee for electronic fingerprint submissions
also increased from approximately $25.00 to approximately $26.00 per submission.
4.

Duplication

Rule 17f-2(b) provides that if fingerprints have already been taken pursuant to any other
federal or state law or regulation and are submitted to the U.S. Attorney General or its designee,
the requirements of Section 17(f)(2) of the Act are satisfied.
5. Effect on Small Entities
No information is requested from small entities.
6. Consequences of Not Conducting Collection
If the fingerprint plans were not collected and approved by the Commission, the
Commission will be unable to meet the purposes of Section 17(f)(2) of the Act.
7. Inconsistencies with Guidelines in 5 CFR 1320.8(d)
There are no special circumstances. This collection is consistent with the guidelines in
5 CFR 1320.5(d)(2).

3

In practice, the Financial Industry Regulatory Authority (“FINRA”), which is a registered
national securities association, submits most, if not all, of the fingerprint cards to the FBI on
behalf of covered entities.

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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
There were no payments or gifts to respondents.
10. Confidentiality
No assurance of confidentiality is provided by Rule 17f-2(d); information collected will
otherwise be kept private to the extent protected by law.
11. Sensitive Questions
The information collection does not collect personally identifiable information.
Therefore, the agency has determined that a SORN and PIA are not required in connection with
the collection of information.
12.

Burden of Information Collection

We received information from FINRA indicating that an annual average of 3,900
respondents have submitted an annual average of 281,804 sets of fingerprints (which includes
both electronic and hard copy submissions) to FINRA. We estimate that it takes approximately
10 minutes for respondents to collect the fingerprints through FINRA (electronically or manually
by paper) and 5 minutes to submit them to the FBI (again, either electronically or by paper mail
or courier service) in compliance with Rule 17f-2(c), for a total burden of 15 minutes per
submission. Therefore, we estimate the total annual burden to be approximately 70,451 hours
(281,804 submissions times .25 hours).
Number of
Respondents
3,900

Number of
Fingerprints
Submitted
281,804

Burden Per
Submission

Total Annual
Burden

15 minutes

70,451 hours

13. Costs to Respondents
Approximately 281,804 total sets of fingerprints are submitted annually (consisting of
approximately 253,721 electronic sets and 28,083 hard copy sets). We estimate the total annual
cost to the industry to be approximately $7,748,149 as broken down further below by submission
type.
There is currently an approximate $26 fee levied by FINRA and the FBI to process each

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set of fingerprints submitted electronically. Approximately 253,721 sets of fingerprints are
submitted electronically each year. Therefore, we estimate the total annual cost to the industry
for electronic fingerprint submissions to be approximately $6,596,746 (253,721 times $26).
There is currently an approximate $41 fee levied by FINRA and the FBI to process each set
of fingerprints submitted in hard copy. Approximately 28,083 sets of fingerprints are submitted
in hard copy each year. Therefore, we estimate the total annual cost to the industry for hard copy
fingerprint submissions to be approximately $1,151,403 (28,083 times $41).
The aggregate annual cost for fingerprint submissions is thus approximately $7,748,149
($6,596,746 + $1,151,403).
Electronic
Fingerprints
Submitted Per Year

Cost Per
Submission

Total Cost for
Electronic
Fingerprint
Submissions Per Year

253,721

$26

$6,596,746

Hard Copy
Fingerprints
Submitted Per Year

Cost Per
Submission

Total Cost for Hard
Copy Fingerprint
Submissions Per
Year

28,083

$41

$1,151,403

Total Annual Cost for
Electronic
Fingerprint
Submissions
$6,596,746

Total Annual Cost
for Hard Copy
Fingerprint
Submissions
$1,151,403

Aggregate Annual
Cost for Fingerprint
Submissions
$7,748,149

14. Costs to Federal Government
The costs to the federal government to administer Rule 17f-2(c) are zero. First, the
fingerprint cards are collected and submitted to the FBI by self-regulatory organizations. Second,
while the Commission periodically reviews new fingerprinting plans that are submitted by SROs
for Commission approval, the costs to the federal government for this aspect of the rule is
composed solely of staff time to review such plans. For purposes of the Paperwork Reduction
Act burden, this cost is considered zero.

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15. Changes in Burden
The estimated time burden has decreased from 71,400 to 70,451 due to a decrease in the
number of fingerprint sets submitted.
The estimated cost burden has decreased from $7,770,000 to $7,748,149 because (even
though there has been a slight increase in the cost of processing electronic and hard copy
fingerprint cards) there has been both a decrease in the total number of fingerprint sets submitted
and a shift away from the use of paper submissions to a greater use of electronic submissions,
which are less costly.

2017
2020
Change

Total Annual Hour Burden

Total Annual Cost Burden

71,400
70,451
(949)

$7,770,000
$7,748,149
$(21,851)

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