DGL REVISED Rules 17Ad-6 and 7 Supporting Statement 2021

SUPPORTING STATEMENT
for the Paperwork Reduction Act Information Collection Submission for
Rules 17Ad-6 and 17Ad-7
OMB Control No. 3235-0291
A. JUSTIFICATION
1. Necessity of Information Collection
As a result of the paperwork crisis that occurred in the late 1960s, during which the number of
securities transactions exceeded the securities industry's capacity to process those transactions,
Congress enacted the Securities Acts Amendments of 1975. 1 In order to establish a national
system for the prompt and accurate clearance and settlement of securities transactions, Congress
provided for a scheme of regulation with respect to the business of being a transfer agent. Those
amendments to the Securities Exchange Act of 1934 (“Exchange Act”) require transfer agents to
meet minimum standards, as established by the Commission, in furtherance of the purposes of
the Exchange Act and generally, to protect investors.
Transfer agents play an integral role in the national system for the clearance and settlement of
securities transactions. Transfer agents cancel certificates presented for transfer, issue new
certificates to the transferee and record the change of record ownership of securities on the
issuer’s securityholder records. They also prepare, maintain and certify securityholder records,
disburse dividend and interest payments and mail security-owner communications such as proxy
material and annual reports to shareholders.
To the extent transfer agents fail to perform their activities promptly, accurately and safely, the
entire clearance, settlement and transfer process suffers. Moreover, substandard performance by
transfer agents can affect the accuracy of an issuer's securityholder records and interrupt the
channels of communication between issuers and securityholders. Thus, substandard performance
by transfer agents can adversely affect issuers, broker-dealers, banks, other financial
intermediaries, the investing public and the securities markets.
Based on experience in the operation of the transfer agent regulatory program, the Commission
adopted Rules 17Ad-6 and 17Ad-7, which require registered transfer agents to make and keep
current certain records such as: (1) specific operational data regarding the time taken to perform
transfer agent activities (to ensure compliance with the minimum performance standards in Rule
17Ad-2 (17 CFR 240.17Ad-2)); (2) written inquiries and requests by shareholders and brokerdealers and response time thereto; (3) resolutions, contracts or other supporting documents
concerning the appointment or termination of the transfer agent; (4) stop orders or notices of
adverse claims to the securities; and (5) all canceled registered securities certificates.
2. Purpose and Use of Information Collection
Rules 17Ad-6 and 17Ad-7 were designed to accomplish two purposes. First, the recordkeeping
requirements ensure that all registered transfer agents are maintaining the records necessary to
1

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

monitor and keep adequate control over their own performance. Second, the recordkeeping
requirements allow the examination of registered transfer agents on an historical basis for
compliance with applicable rules.
3. Consideration Given to Information Technology
Rules 17Ad-6 and 17Ad-7 do not state how information must be recorded but only state that
certain information needed to determine a transfer agent’s compliance with the applicable rules
must be recorded. Therefore, improved information technology does not affect the transfer
agent’s recordkeeping requirements.
4. Duplication
When Rules 17Ad-6 and 17Ad-7 were promulgated, the Commission consulted with other
appropriate regulatory agencies (“ARA”) (i.e., the Board of Governors of the Federal Reserve
System, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the
Currency) to prevent multiple recordkeeping requirements among the various ARAs. Regulation
H, Section 208.31 (12 CFR 208.31) of the Board of Governors of the Federal Reserve System
imposes Rules 17Ad-6 and 17Ad-7, among other rules, on state member bank transfer agents.
Office of the Comptroller of the Currency rule §9.20 (12 CFR 9.20) imposes Rules 17Ad-6 and
17Ad-7, among other rules, upon the domestic activities of registered national bank transfer
agents.
5. Effect on Small Entities
Small transfer agents are exempt under Rule 17Ad-4(b) (17 CFR 240.17Ad-4(b)) from many of
the recordkeeping requirements of Rules 17Ad-6 and 17Ad-7. The recordkeeping requirements
imposed on these small entities are the minimal recordkeeping requirements needed to
adequately fulfill their most basic duty to transfer securities and do not create any significant
burden.
6. Consequences of Not Conducting Collection
The records that must be made or retained under Rules 17Ad-6 and 17Ad-7 require regular
updating because of the relationship between a transfer agent’s function and the securities market
(i.e., the on-going, daily transfer of record ownership of securities resulting from continuous
trading activity in the market). Preparation and retention of these records are essential to
establish record ownership of securities and to operate successfully as a registered transfer agent.
Lesser requirements under the Rules would adversely affect the Commission’s ability to examine
transfer agent compliance with applicable Commission rules. This would allow transfer agents
experiencing operational difficulty to continue operating in such a manner, with a potential for
further operational deterioration. Such a situation would greatly increase risks to public
investors and to the national system for clearance and settlement of securities transactions.

7. Inconsistencies with Guidelines in 5 CFR 1320.5(d)(2)
The records retention periods required by Rule 17Ad-7 vary depending on the type of record. For
certain types of records, the retention period may exceed three years.
Rule 17Ad-7(c) provides that the records required by Rules 17Ad-6(a) (8), (9) and (10) and (b)
shall be maintained for one year after termination of the transfer agency. Thus, if the transfer
agent relationship with the issuer continued for longer than a two year period, these records
would be required to be retained for more than three years. Also, Rule 17Ad-7(e) provides that
records required under Rule 17f-2(d) must be maintained until at least three years after the
termination of employment of those persons required by Rule 17f-2 to be fingerprinted.
Therefore, these records, in nearly all cases, would be required to be retained for more than three
years. In addition, Rule 17Ad-7(d) provides that the records required by § 240.17Ad-6(c), which
relate to cancelled security certificates and accompanying documentation, shall be maintained for
a period of not less than six years.
Other than the above-referenced aspects of Rule 17Ad-7, there are no special circumstances and
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
There were no payments or gifts to respondents.
10. Confidentiality
The information required by Rules 17Ad-6 and 17Ad-7 is maintained in the possession of the
registered transfer agents or their third party agents, outside service bureaus or other
recordkeeping services. Under Section 17(b) of the Exchange Act, the Commission and the
ARA for such registered transfer agent have access to the records for inspection and examination
purposes and, in appropriate circumstances, for investigations. Rule 17Ad-7(f)(5)(ii) requires,
with respect to electronic storage media or micrographic media, that the independent third party
escrow agent required to be used by such rule file an undertaking with the Commission and the
ARA for such registered transfer agent stating that the third party will furnish upon request to the
Commission the physical and logical format, the field format, and source code for such media
and information required to access such media. Rule 17Ad-7(f)(6)(i) requires, with respect to
electronic storage media or micrographic media, that a third party agent used by a registered
transfer agent file an undertaking with the Commission and the ARA for such registered transfer
agent stating that the third party will permit examination of the records by the Commission. In
addition, Rule 17Ad-7(g) requires a registered transfer agent using an outside service bureau or
other recordkeeping service to obtain an agreement from the outside service bureau or other
recordkeeping service that the records are subject to examination by the Commission and the

ARA for such registered transfer agent and that the records will be furnished upon demand in
hard copy to the Commission and the ARA for such registered transfer agent.
11. Sensitive Questions
No information collected will be shared with or stored by the SEC outside of responses to
Division of Examinations document requests; the SEC would not see or have access to the
information collected by transfer agents otherwise. The agency has determined that neither a
Privacy Impact Assessment nor a System of Records Notice is required in connection with the
collection of information.
12. Information Collection Burden
The time required to administer the retention of the necessary information varies from each
transfer agent depending on the size and nature of the transfer agent’s operation. In addition,
some records are made on a daily basis, while other records must be made only once. The
Commission estimates that, on average, each of the approximately 359 registered transfer agents
spends approximately 500 hours per year storing and retaining these records. The aggregate
annual burden on the 359 registered transfer agents is thus approximately 179,500 hours per
year.
Rule

Burden
Type

Rules 17Ad-6 Record
Keeping
and 17Ad-7
Total Aggregate Burden

Number of
Number of
Respondents Annual
Reponses
Per
Respondent
359
1

Time Per Total Burden
Response Per Burden Type
(Hours)
(Hours)
500

179,500
179,500

While not a cost burden under Item 13, with respect to the estimated 500 hours per year per
transfer agent to comply with Rules 17Ad-6 and 17Ad-7, the Commission staff estimates that
compliance staff work at registered transfer agents results in an internal cost of compliance, at an
estimated hourly wage of $319, or $159,500 per year per transfer agent (500 hours x $319 per
hour = $159,500 per year). 1 Therefore, the aggregate annual internal cost of compliance for the
approximately 359 registered transfer agents is approximately $57,260,500 ($159,500 x 359 =
$57,260,500).
13. Costs to Respondents
The collections of information required by Rules 17Ad-6 and 17Ad-7 do not impose any cost
burdens, as defined by the Paperwork Reduction Act, on transfer agents.
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 by Commission staff to account for an 1800-hour work
year and multiplied by 5.35 to account for bonuses, firm size, employee benefits and overhead.
1

14. Costs to Federal Government
Not applicable. All Commission review and processing would be conducted by existing
Commission staff so there are no additional Federal government costs involved.
15. Changes in Burden
The total annual hourly burden decreased from 191,000 hours to 179,500 hours due to the
decrease in the number of registered transfer agents.
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 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.