DGL REVISED 2021 Interagecy on Sound Practices CSFT Supporting Statement 2021

SUPPORTING STATEMENT
for the Paperwork Reduction Act Information Collection Submission for
“Interagency Statement on Sound Practices Concerning Complex Structured Finance
Transactions”
OMB Control No. 3235-0622
In May 2006, the Securities and Exchange Commission (“Commission”), together with
the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve
System, the Federal Deposit Insurance Corporation, and the Office of Thrift Supervision
(collectively, “Agencies”), issued for public comment a revised Interagency Statement on Sound
Practices Concerning Elevated Risk Complex Structured Finance Transactions (“statement”).
The statement describes the types of internal controls and risk management procedures that the
Agencies believe are particularly effective in assisting financial institutions to identify and
address the reputational, legal, and other risks associated with complex structured finance
transactions. The statement is intended to ensure that these transactions receive enhanced
scrutiny by the institution and to ensure that the institution does not participate in illegal or
inappropriate transactions.
A.

JUSTIFICATION
1.

Necessity of Information Collection

A financial institution may assume substantial reputational and legal risk if the institution
enters into a complex structured finance transaction with a customer and the customer uses the
transaction to circumvent regulatory or financial reporting requirements, evade tax liabilities, or
further other illegal or improper behavior.
As financial intermediaries, financial institutions play a critical role in ensuring the
integrity of financial markets and maintaining the trust and public confidence essential to the
proper functioning of the capital markets. Structured finance products normally serve the
legitimate business interests of customers and are an essential part of U.S. and international
capital markets. Financial institutions need effective policies and procedures in place to identify
those complex structured finance transactions that may involve heightened reputational and legal
risk, to ensure that these transactions receive enhanced scrutiny by the institution, and to ensure
that the institution does not participate in illegal or inappropriate transactions.
2.

Purpose and Use of the Information Collection

Financial institutions’ policies and procedures should ensure that an institution’s
operations are conducted in compliance with applicable law and regulations. This is critical to
the institution’s well being since an institution may face substantial legal risk, including
enforcement action by an Agency and lawsuits by private parties, if it participates in structured
finance transactions that are used by a customer to circumvent regulatory or financial reporting
requirements, evade tax liabilities, or further other illegal or improper behavior. The policies and
procedures also help the institution avoid reputational risk where the transactions involved are

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structured to technically comply with existing laws and regulations.
3.

Consideration Given to the Information Technology

Registered broker-dealers and investment advisers may adopt any existing technology
relevant to producing or retaining the information.
4.

Duplication

There is no duplication. This collection is unique in that it involves policies and
procedures specific to a particular institution and appropriate to the types of structured finance
transactions that the institution conducts.
5.

Effect on Small Entities

Small institutions are not involved in transactions of this type. Therefore, this collection
of information imposes no burden on them.
6.

Consequences of Not Conducting Collection

This collection involves only usual and customary recordkeeping and requires no
submission to the Commission.
7.

Inconsistencies with Guidelines in 5 CFR Part 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

None.
10.

Confidentiality

No assurance of confidentiality is made.
11.

Sensitive Questions

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The information collection does not collect personally identifiable information and no
information is collected or maintained by the Commission. Neither a PIA nor a SORN are
required; the PAW is sufficient.
12.

Information Collection Burden

The collections of information contained in the statement involve the types of policies
and procedures already adopted by the large institutions that participate in developing complex
structured finance transactions for customers. The statement describes the types of internal
controls and risk management procedures that the Agencies believe are particularly effective in
assisting financial institutions to identify and address the reputational, legal, and other risks
associated with complex structured finance transactions. The Agencies believe that involved
institutions already have developed the policies and procedures addressed in the statement. Thus,
the development time for the policies and procedures is usual and customary for any large
institution involved in transactions of this type. Further, responsible institutions would update
regularly their policies and procedures to ensure that they address transactions appropriately and
are adequate for that institution. Nevertheless, the Commission has estimated the burden at 25
recordkeeping burden hours per respondent per year.
The Commission believes that 5 registered broker-dealers or investment advisers are
involved in complex structured finance transactions activities. The Commission is providing an
estimate of 25 burden hours per respondent to cover updating the policies and procedures needed
regarding these activities. Therefore, the recordkeeping burden for this information collection is
as follows:
5 respondents @ 25 hours = 125 burden hours
Burden type

Respondents
subject to
Interagency
Statement

Recordkeeping

5

13.

Number of hours
spent complying
with Interagency
Statement
annually
25

Total burden
(hours) annually

125

Costs to Respondents

Not applicable: (a) it is not anticipated that respondents will have to incur any capital and
start up costs to comply with the rule; (b) it is not anticipated that the respondents will have to
incur any additional operational or maintenance costs.
14.

Costs to Federal Government

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Not applicable.
15.

Change in Burden

There is no change.
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.