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pdfSUPPORTING STATEMENT FOR THE PAPERWORK REDUCTION ACT
INFORMATION COLLECTION SUBMISSION FOR
APPLICATIONS BY SECURITY-BASED SWAP DEALERS OR
MAJOR SECURITY-BASED SWAP PARTICIPANTS FOR STATUTORILY
DISQUALIFIED ASSOCIATED PERSONS TO EFFECT OR BE
INVOLVED IN EFFECTING SECURITY-BASED SWAPS
A.
JUSTIFICATION
1.
Necessity of Information Collection
This submission is being made pursuant to the Paperwork Reduction Act of 1995, 44
U.S.C. Section 3501 et seq. The Dodd-Frank Wall Street Reform and Consumer Protection Act
of 2010 (the “Dodd-Frank Act”) added Section 15F to the Securities Exchange Act of 1934
(“Exchange Act”) to create a regulatory structure to allow the Securities and Exchange
Commission (the “Commission”) to regulate security-based swap dealers and major securitybased swap participants (collectively, “SBS Entity”). Exchange Act Section 15F(b)(6), as
added by Section 764(a) of the Dodd-Frank Act, makes it unlawful for an SBS Entity to permit
an associated person who is subject to a statutory disqualification to effect or be involved in
effecting security-based swaps on behalf of the SBS Entity if the SBS Entity knew, or in the
exercise of reasonable care should have known, of the statutory disqualification, “[e]xcept to the
extent otherwise specifically provided by rule, regulation, or order of the Commission.” 1
On August 5, 2015, the Commission proposed Rule of Practice 194 which would
provide a process for an SBS Entity to make an application to the Commission for an order
permitting an associated person who is subject to a statutory disqualification to effect or be
involved in effecting security-based swaps on behalf of the SBS Entity. 2 The rule specifies the
process for obtaining relief from the statutory prohibition in Exchange Act Section 15F(b)(6),
including by setting forth the required showing, the form of application and the items to be
addressed with respect to associated persons that are natural persons.
In particular, Rule of Practice 194 provides as follows:
1
Exchange Act Section 15F(b)(6) provides: “Except to the extent otherwise specifically provided by rule,
regulation, or order of the Commission, it shall be unlawful for a security-based swap dealer or a major
security-based swap participant to permit any person associated with a security-based swap dealer or a
major security-based swap participant who is subject to a statutory disqualification to effect or be involved
in effecting security-based swaps on behalf of the security-based swap dealer or major security-based swap
participant, if the security-based swap dealer or major security-based swap participant knew, or in the
exercise or reasonable care should have known, of the statutory disqualification.” 15 U.S.C. 78o-10(b)(6).
2
See Applications by Security-Based Swap Dealers or Major Security-Based Swap Participants for
Statutorily Disqualified Associated Persons to Effect or be Involved in Effecting Security-Based Swaps,
Exchange Act Release No. 75612 (Aug. 5, 2013), 80 Fed. Reg. 51683 (Aug. 25, 2015). OMB No. 32350733 was assigned to proposed collection of information.
3
•
Paragraph (a) of the rule defines the scope of the rule. The rule allows an SBS Entity to
voluntarily submit an application to the Commission to request an order where an
associated person of an SBS Entity is subject to a statutory disqualification and thereby
prohibited from effecting or being involved in effecting security based swaps on behalf
of the SBS Entity under Exchange Act Section 15F(b)(6). 3
•
Paragraph (b) sets forth the required showing for an application. For the Commission to
issue an order granting relief under Rule of Practice 194, the Commission would need to
find that it would be consistent with the public interest to permit the associated person of
the SBS Entity who is subject to a statutory disqualification to effect or be involved in
effecting security-based swaps on behalf of the SBS Entity.
•
Paragraph (c) provides an exclusion from the statutory prohibition in Exchange Act
Section 15F(b)(6) with respect to associated persons that are not natural persons and that
are subject to a statutory disqualification.
•
Paragraph (d) specifies the form of the application for natural persons subject to a
statutory disqualification. Paragraph (d) requires that each application with respect to an
associated person subject to a statutory disqualification shall be supported by a written
statement, signed by a knowledgeable person authorized by the SBS Entity.
•
Paragraph (e) sets forth the items to be addressed for applications with respect to natural
persons subject to a statutory disqualification. Each of the items in paragraph (e) is
addressed in the written statement required by paragraph (d).
•
Paragraph (f) requires an applicant to provide as part of the application any order, notice
or other applicable document reflecting the grant, denial or other disposition (including
any dispositions on appeal) of any prior application concerning the associated person
under the rule and other similar processes.
•
Paragraph (g) governs the procedure where there is an adverse recommendation proposed
by the staff with respect to an application. Paragraph (g) provides that where there is
such an adverse recommendation, the applicant shall be so advised and provided with a
written statement by the staff of the reasons for such recommendation.
•
Paragraph (h) limits the applicability of the prohibition in Exchange Act Section
15F(b)(6) by prescribing the conditions under which an SBS Entity may permit a person
associated with it that is subject to a statutory disqualification to effect or be involved in
effecting security-based swaps on its behalf without being required to file an application
under Rule of Practice 194. Generally, paragraph (h) permits associated persons that are
subject to a statutory disqualification to effect or be involved in effecting security-based
swaps on behalf of SBS Entities where the Commission or other regulatory authority
previously reviewed the matter and permitted the person subject to a statutory
15 U.S.C. 78o-10(b)(6).
2
disqualification to be a member, associated with a member, registered or listed as a
principal of a regulated entity notwithstanding statutory disqualification.
Application
To make an application under Rule of Practice 194, the SBS Entity filing an application
with respect to an associated person would provide to the Commission:
•
Exhibits required by paragraph (d) to Rule of Practice 194, including a copy of the order
or other applicable document that resulted in the associated person being subject to a
statutory disqualification; an undertaking by the applicant to notify promptly the
Commission in writing if any information submitted in support of the application
becomes materially false or misleading while the application is pending; a copy of the
questionnaire or application for employment specified in Rule 15Fb6-2(b), with respect
to the associated person; in cases where the associated person has been subject of any
proceedings resulting in the imposition of disciplinary sanctions during the five years
preceding the filing of the application or is the subject of a pending proceeding by the
Commission, Commodity Futures Trading Commission (“CFTC”), any federal or state
regulatory or law enforcement agency, registered futures association, foreign financial
regulatory authority, registered national securities association, or any other selfregulatory organization (“SRO”), 4 or commodities exchange or any court, a copy of the
related order, decision, or document issued by the court, agency or SRO.
•
A written statement that includes the information specified in paragraph (e) to Rule of
Practice 194, including, but not limited to: the associated person’s compliance with any
order resulting in statutory disqualification; the capacity or position in which the person
subject to a statutory disqualification proposes to be associated with the SBS Entity; the
terms and conditions of employment and supervision to be exercised over such associated
person and, where applicable, by such associated person; the compliance and disciplinary
history, during the five years preceding the filing of the application, of the SBS Entity;
information concerning prior applications or processes.
Under paragraph (g) to Rule of Practice 194, an applicant could submit a written
statement in response to any adverse recommendation proposed by Commission staff with
respect to an application under proposed Rule of Practice 194.
The information sought in connection with Rule of Practice 194 assists the Commission
in determining whether allowing associated persons to effect or be involved in effecting
security-based swaps on behalf of a SBS Entity, notwithstanding statutory disqualification, is
consistent with the public interest.
4
“Self-regulatory organization” is defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26)) as
“any national securities exchange, registered securities association, or registered clearing agency, or (solely
for the purposes of sections 19(b), 19(c) and 23(b) of [the Exchange Act]) the Municipal Securities
Rulemaking Board established by section 15B of [the Exchange Act].”
3
Notice
An SBS Entity is not required to file an application under Rule of Practice 194 with
respect to certain associated persons that are subject to a statutory disqualification, as provided
for in paragraph (h) of Rule of Practice 194. To meet those requirements, however, the SBS
Entity is required to file a notice with the Commission.
For associated persons that are natural persons, the notice in paragraph (h)(2)(iii) sets
forth: (1) the name of the SBS Entity; (2) the name of the associated person subject to a
statutory disqualification; (3) the name of the associated person’s prospective supervisor(s) at
the SBS Entity; (4) the place of employment for the associated person subject to a statutory
disqualification; and (5) identification of any SRO or agency that has indicated its agreement
with the terms and conditions of the proposed association, registration or listing as a principal.
Information collected in connection with the notice provided by Rule of Practice
194(h)(2)(iii) assists the Commission for examination purposes by identifying associated
persons that are subject to a statutory disqualification (and other basic information).
2.
Purpose and Use of the Information Collection
Application
Information collected in connection with an application under Rule of Practice 194
assists the Commission in determining whether an associated person of an SBS Entity should be
permitted to effect or be involved in effecting security-based swaps on behalf of the SBS Entity,
notwithstanding that the associated person is subject to a statutory disqualification. Although,
absent the rule, an SBS Entity could nonetheless submit an application for an exemptive order
directly under Exchange Act Section 15F(b)(6), 5 Rule of Practice 194 specifies the information
the Commission needs to evaluate such an application, and under what standard the
Commission will consider whether to grant such relief.
Notice
Information collected in connection with the notice provided by Rule of Practice
194(h)(2)(iii) assists the Commission for examination purposes by identifying associated
persons that are subject to a statutory disqualification (and other basic information).
3.
Consideration Given to Information Technology
Rule of Practice 194 utilizes established procedures under the Commission’s current
Rules of Practice, 6 including Rule of Practice 150. 7 Rule of Practice 150 allows filings with the
Commission to be made by facsimile if a contemporaneous transmission of a non-facsimile
5
15 U.S.C. 78o-10(b)(6).
6
17 CFR 201.100 et seq.
7
17 CFR 201.150.
4
original with manual signature is made.
4.
Duplication
Rule of Practice 194 does not establish a duplicative process because SBS Entities are
not presently required to register and are not presently subject to the statutory prohibition in
Exchange Act Section 15F(b)(6). 8 Rule of Practice 194 establishes a voluntary process for an
SBS Entity to seek relief in the event that an associated person of the SBS Entity becomes
subject to the statutory prohibition in Exchange Act Section 15F(b)(6).
In proposing Rule of Practice 194, the Commission sought, where appropriate, to
minimize the burdens and costs associated with Rule of Practice 194 and to avoid duplication.
For example, as proposed, the Commission would not require an application under proposed
Rule of Practice 194 with respect to certain associated persons subject to a statutory
disqualification previously granted relief (i.e., by Commission, CFTC, SRO, or NFA). Rather,
in such instances, SBS Entities would only be required to provide a brief notice to the
Commission under Rule of Practice 194(h)(2)(iii).
5.
Effect on Small Entities
Based on the Commission’s existing information about the security-based swap market,
the Commission believes that no entities that will qualify as SBS Entities will be “small
entities” under the definition used for the purposes of the Regulatory Flexibility Act and
specified in 17 CFR 240.0-10. 9
6.
Consequences of Not Conducting Collection
Absent Rule of Practice 194, SBS Entities seeking to apply for relief from Exchange Act
Section 15F(b)(6) will be able to apply to the Commission directly, outside of a formal process,
possibly looking to either Rule of Practice 193 10 or an analogous process as a guide. However,
the Commission believes that such applications, due to the lack of clarity, would be more time8
An entity is not subject to the statutory prohibition in Exchange Act Section 15F(b)(6) until it becomes a
security-based swap dealer or a major security-based swap participant pursuant to the Commission’s rules.
See 17 CFR 240.3a67-8, 240.3a67-9, 240.3a71-2.
In addition, on June 15, 2011, the Commission issued an order that, among other things, granted temporary
relief from compliance with Exchange Act Section 15F(b)(6), and Exchange Act Section 29(b), 15 U.S.C.
78cc(b), concerning enforceability of contracts that would violate, among other provisions, Exchange Act
Section 15F(b)(6). See Temporary Exemptions and Other Temporary Relief, Together With Information on
Compliance Dates for New Provisions of the Securities Exchange Act of 1934 Applicable to Security-Based
Swaps, Exchange Act Release No. 64678 (June 15, 2011), 76 FR 36287, 36301, 36305-07 (June 22, 2011)
(“Temporary Exemptions Order”). Under the Temporary Exemptions Order, persons subject to a statutory
disqualification who were, as of July 16, 2011, associated with an SBS Entity and who effected or were
involved in effecting security-based swaps on behalf of such SBS Entity could continue to be associated
with an SBS Entity until the date upon which rules adopted by the Commission to register SBS Entities
became effective.
9
See 17 CFR 240.0-10.
10
17 CFR 201.193.
5
consuming, and would be more prone to errors or more likely to be deemed to contain
insufficient information to allow the Commission to make a determination.
Under Rule of Practice 194, SBS Entities should generally be aware of the information
they are required to provide, as well as the standard of review. The Commission also believes
that clarity about the items that the Commission will consider in making a determination, while
not altering the set of possible outcomes, will allow SBS Entities to make informed assessments
as to the likelihood that the Commission will either grant or deny relief. Thus, Rule of Practice
194 may conserve resources and may allow SBS Entities to make more-informed evaluations
about the tradeoff between pursuing an application and reassigning a person subject to a
statutory disqualification.
Finally, paragraph (h) of Rule of Practice 194 provides relief in cases where the
Commission, the CFTC, an SRO, or a registered futures association has granted a prior
application or otherwise granted relief from a statutory disqualification with respect to that
associated person. To the extent that SBS Entities and other regulated entities use the same
personnel or entities to effect security-based swaps, swaps, and securities transactions, this
proposed rule may conserve resources in the sense that SBS Entities will not have to undergo
duplicate review when decisions about relief from statutory disqualifications have already been
made by the Commission or another regulatory authority.
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 Commission requested comment on the collection of information requirements in
the proposing release in August 2015 and provide a footnote to the proposed release. 11 The
Commission received six comment letters in response to the proposed rule. 12 In particular, the
Commission asked commenters to evaluate whether the proposed collection of information is
necessary for the proper performance of our functions, including whether the information shall
have practical utility; to evaluate the accuracy of our estimate of the burden of the proposed
collection of information; to determine whether there are ways to enhance the quality, utility,
and clarity of the information to be collected; and to evaluate whether there are ways to
minimize the burden of collection techniques or other forms of information technology. The
Commission did not receive any comments on the collection of information requirements.
9.
Payment or Gift
Not applicable.
11
See https://www.gpo.gov/fdsys/pkg/FR-2015-08-25/pdf/2015-19662.pdf.
12
See https://www.sec.gov/comments/s7-14-15/s71415.shtml.
6
10.
Confidentiality
The information collected pursuant to Rule of Practice 194 will be kept confidential,
subject to the provisions of applicable law.
11.
Sensitive Questions
The collection of information includes Personally Identifiable Information (PII). In
particular, the collection of information includes the name of the associated person that is
subject to a statutory disqualification.
The Commission has published System of Records Notices for the collection of
information relating to security-based swap dealers and major security-based swap
participants. 13 A Privacy Impact Assessment is not necessary as submissions pursuant to this
rule will be paper submissions.
12.
Burden of Information Collection
a.
Respondents
The Commission has previously stated that it believes that, based on data obtained from
the Depository Trust & Clearing Corporation and conversations with market participants,
approximately 50 entities may fit within the definition of security-based swap dealer and up to
five entities may fit within the definition of major security-based swap participant—55 SBS
Entities in total. 14
With respect to associated persons that are natural persons, the Commission has
estimated that there will be 420 total associated persons that are natural persons at each SBS
dealer and 62 total associated persons that are natural persons at each major participant, or
21,310 total associated persons that are natural persons. 15 The Commission anticipates that, on
13
See Systems of Records Notice SEC-70, SEC's Division of Trading and Markets Records, available at
http://www.sec.gov/about/privacy/secprivacyoffice.htm.
14
See Application of “Security-Based Swap Dealer” and “Major Security-Based Swap Participant”
Definitions to Cross-Border Security-Based Swap Activities, Exchange Act Release No. 72472 (June 25,
2014), 79 FR 47278, 47300 (Aug. 12, 2014) (“Cross-Border Adopting Release”).
15
Based on an analysis of broker-dealer FOCUS reports, as of December 31, 2017, there were 3,523 brokerdealers that employed full-time registered representatives and were doing a public business; these brokerdealers each employed on average 75.8 registered representatives, or approximately 267,043 in total.
However, based on our review of the entities we believe may register as security-based swap dealers, the
Commission believes the subset of clearing broker-dealers provides a better estimate. As of December 31,
2017, there were 438 clearing broker-dealers which had, on average, each employed 420 persons who were
registered representatives; we use this average as the basis for our estimate of 21,000 natural persons
associated with dealers (420*50=21,000). Note, however, that SBS Entities will be limited to sales of
security-based swaps, whereas broker-dealers are generally engaged in the sale of a broader range of
financial instruments, as well as other business lines such as prime brokerage services. Thus, it is possible
that fewer people would be needed to facilitate this business.
Since registration requirements for major security-based swap participants are triggered by position
7
an average annual basis, only a small fraction of the natural persons would be subject to a
statutory disqualification. By way of comparison, of the nearly 4,000 currently registered
broker-dealers and approximately 272,000 registered representatives, 16 based on information
provided by FINRA to the Commission, between 2011 and June 2018, FINRA received an
average of 33 MC-400 applications with respect to individuals subject to a statutory
disqualification seeking relief under the FINRA Rule 9520 Series. Given that the Commission
estimates that there will be far fewer SBS Entities (55) and associated persons of SBS Entities
that are natural persons (21,310 total associated persons that are natural persons), the
Commission anticipates that SBS Entities will file for relief under Rule of Practice 194 with
respect to substantially fewer associated persons that are natural persons.
In addition, to estimate the number of such persons, the Commission staff has conferred
with NFA to assess how many associated persons of the 101 provisionally registered Swap
Entities 17 have applied for relief from CEA 4s(b)(6) 18 (the analogous provision to Exchange Act
Section 15F(b)(6) 19 for SBS Entities) for determination by NFA that, had the associated person
applied for registration as an associated person of a Swap Entity, notwithstanding statutory
disqualification, the application would have been granted. 20 NFA has informed Commission
staff that, from October 2012 to June 30, 2018, NFA determined that in 13 out of 15 requests
NFA would have granted registration with respect to the associated person subject to a statutory
disqualification.
Accordingly, based on that available data, the Commission estimates that, on an average
annual basis, of the 55 SBS Entities, the Commission would receive up to five applications in
accordance with Rule of Practice 194 with respect to associated person that are natural persons,
and five notices pursuant to proposed Rule of Practice 194(h)(2)(iii) with respect to associated
persons that are natural persons. 21
thresholds, as opposed to activity thresholds for dealer registration, we anticipate that entities which may
seek to register with the Commission as major security-based swap participants may more closely resemble
hedge funds and investment advisors. To estimate the number of natural persons associated with major
security-based swap participants, we use Form ADV filings by registered investment advisers. Based on
this analysis, as of June 30, 2018 there were 13,010 registered investment advisers; these investment
advisers had an average 62 employees each. We use this average as the basis for our estimate of 310
natural persons associated with major security-based swap participants (62*5=310).
16
Based on an analysis of regulatory filings, as of December 31, 2014, there are 3,954 broker-dealers that
employed full-time registered representatives and were doing a public business; these broker-dealers each
employed on average 69 registered representatives, or approximately 272,000 in total.
17
See NFA SD/MSP Registry, https://www.nfa.futures.org/NFA-swaps-information/regulatory-info-sd-andmsp/SD-MSP-registry.HTML.
18
7 U.S.C. 6s(b)(6).
19
15 U.S.C. 78o-10(b)(6).
20
See EasyFile AP Statutory Disqualification Form Submission, NFA, https://www.nfa.futures.org/NFAelectronic-filings/easyFile-statutory-disqualification.HTML.
21
Because Rule of Practice 194, as adopted, provides an exclusion for an SBS Entity from the prohibition in
Exchange Act Section 15F(b)(6) with respect to associated person entities, Rule 15Fb6-1 and its related
Schedule C to Forms SBSE, SBSE-A, and SBSE-BD are no longer necessary. However, the staff did not
8
b.
Description of Burdens
i.
Burden Associated with Filing Applications
under Rule of Practice 194
It is likely that the time necessary to complete an application under Rule of Practice 194
will vary depending on the number of exhibits required to be submitted in accordance with Rule
of Practice 194(d), and the amount of information that will need to be discussed in the written
statement, as specified in Rule of Practice 194(e) and (f).
Based on the Commission staff’s estimates and experience, 22 the Commission estimates
that the average time necessary for an SBS Entity to research the questions, and complete and
file an application under Rule of Practice 194 with respect to associated persons that are natural
persons, the information requested under Rule of Practice 194 is approximately 30 hours.
Given that the Commission estimates that, on an average annual basis, there will be five
applications 23 under Rule of Practice 194 with respect to associated persons that are natural
persons, the Commission estimates the total burden associated with filing such applications on
average to be 150 hours on an annual basis. 24 As explained further below, given that the
Commission estimates that, on an average annual basis, there will be up to five notices under
Rule of Practice 194(h)(2)(iii), the Commission estimates the total burden associated with filing
such applications and notices on average to be 180 hours on an annual basis. 25
estimate any additional time burdens associated with completing Schedule C to those forms. As the
Commission noted in the Registration Adopting Release for Rules 15Fb1-1 through 15Fb6-2, because
applicants will have already identified statutorily disqualified persons in order to provide certification on
Forms SBSE, SBSE-A, and SBSE-BD, listing statutorily disqualified entity associated persons on
Schedule C will not measurably increase the time it will take to complete those forms. Thus, eliminating
Schedule C to those forms will not result in any change to the time burdens estimated for Forms SBSE,
SBSE-A, and SBSE-BD as set forth in the Registration Adopting Release nor will it impact the time
burdens associated with Rule of Practice 194.
22
For example, based on the experience relative to Form BD, the Commission has estimated the average time
necessary for an SBS Entity to research the questions and complete and file a Form SBSE for an entity,
including the accompanying schedules and disclosure reporting pages—which solicit information
regarding statutory disqualification—to be approximately one work week, or 40 hours. However, the
Commission has estimated that it would take an SBS Entity three-quarters of the time to make a similar
application on behalf of a natural person, or in this case, 30 hours per natural person. See Proposing
Release, 80 FR 51707. The Commission also estimates that the internal cost burden associated with filing
an application will be approximately $12,270 per application ($409 per hour x 30 hours = $12,270).
23
The Commission estimates that, out of the 55 possible SBS Entities that would submit an application in
accordance with Rule of Practice 194, a total of up to five applications are likely to be submitted in a given
year. While it is possible that some SBS Entities would submit more than one application in a given year,
the total number of applications submitted by all 55 SBS Entities is not expected to exceed five
applications in a given year. For purposes of the burden estimate, we are treating each application as being
submitted by a separate SBS Entity respondent.
24
This estimate is based on the following: (30 hours) x (5 SBS Entities applying with respect to associated
persons that are natural persons) = 150 hours per year.
25
This estimate is based on the following: (30 hours) x (up to 5 SBS Entities applying with respect to
9
In summary, the Commission estimates that, over a three-year period, the ongoing
reporting burden for all SBS Entity respondents associated with Rule of Practice 194 with
respect to associated persons that are natural persons would be approximately 450
hours, 26 or 150 hours per year. 27 The ongoing burden per SBS Entity respondent would
be 90 hours, or 30 hours per year. 28
ii.
Burden Associated with Filing Notices under
Rule of Practice 194(h)(2)(iii)
The Commission has estimated that approximately five SBS Entities will provide
notices pursuant to Rule of Practice 194(h)(2)(iii) for one natural person each on an average
annual basis. The Commission believes that the average time necessary for an SBS Entity to
research the questions, complete and file the brief notice under Rule of Practice 194(h)(2)(iii)
will be less than for a full application under Rule of Practice 194 and the Commission estimates
that it will take approximately 6 hours per notice, or 30 hours total on an average annual basis
for all SBS Entities providing the notices for an estimated five natural persons. 30
29
In summary, the Commission estimates that, over a three-year period, the ongoing
reporting burden for all SBS Entities associated with filing notices under Rule of Practice
194(h)(2)(iii) would be approximately 90 hours, 31 or 30 per year. 32 The average estimated
burden per SBS Entity respondent would be 18 hours, or 6 hours per year. 33
associated persons that are natural persons) + (6 hours) x (5 SBS Entities filing notices under Rule of
Practice 194(h)(2)(iii)) = 180 hours per year.
26
This estimate is based on the following: (30 hours) x (5 SBS Entities applying with respect to associated
persons that are natural persons) x (3 years) = 450 hours total.
27
450 hours ÷ 3 = 150 hours per year.
28
450 hours (total burden to research the questions, and complete and file an application under Rule of
Practice 194) ÷ 5 SBS Entities (estimated number of SBS Entities that will submit applications under Rule
of Practice 194 with respect to associated persons that are natural persons) = 90 hours ÷ 3 = 30 hours per
respondent.
29
The Commission estimates that, out of the 55 possible SBS Entities that would submit a notice in
accordance with Rule of Practice 194(h)(2)(iii), a total of up to five notices are likely to be submitted in a
given year. While it is possible that some SBS Entities would submit more than one notice in a given year,
the total number of notices submitted by all 55 SBS Entities is not expected to exceed five notices in a
given year. For purposes of the burden estimate, we are treating each notice as being submitted by a
separate SBS Entity respondent. The Commission also estimates that the internal cost burden associated
with filing a notice will be approximately $2,454 per notice ($409 per hour x 6 hours = $2,454).
30
This estimate is based on the following: (6 hours) x (5 SBS Entities filing notices under proposed Rule of
Practice 194(h)(2)(iii)) = 30 hours per year.
31
This estimate is based on the following: (6 hours) x (5 SBS Entities filing notices under proposed Rule of
Practice 194(h)(2)(iii)) x (3 years) = 90 hours total.
32
90 hours ÷ 3 = 30 hours per year.
33
90 hours (total burden to file a notice under Rule of Practice 194(h)(2)(iii)) ÷ 5 SBS Entities (estimated
number of total SBS Entities) = 18 hours ÷ 3 = 6 hours per respondent.
10
Summary of Hourly Burdens
Rule of Practice 194
Type of Burden
Number of
Respondents
Number of
Annual
Responses Per
Respondent
Initial Burden
Per Response
Per
Respondent
Ongoing
Burden Per
Response Per
Year Per
Respondent
Total Annual
Burden Per
Respondent
Total Annual
Industry Burden
Small
Business
Entities
Affected
Burden Associated with Filing
Applications
Reporting
5
1
0
30
30
150
0
Burden Associated with Filing
Notices)
Reporting
5
1
0
6
6
30
0
Nature of Information
Collection Burden
180
13.
Costs to Respondents
Not applicable.
14.
Costs to the Federal Government
Not applicable.
15.
Reason for Changes in Burden
The Commission has increased its estimate for the hour burden per respondent filing a
notice under proposed Rule of Practice 194(h)(2)(iii). Although the Commission did not
receive any comments on the time burden for completing a notice under Rule of Practice 194,
we have decided to increase the estimate of 3 hours per notice to 6 hours per notice to reflect
that it may take an SBS Entity, especially one doing this for the first time, longer to research the
questions, complete and file a notice than the proposed 3 hours per notice. Thus, the total annual
time burden for the burden associated with filing notices is increasing by 15 hours.
Additionally, the Commission is removing two previously reviewed information
collections – the filing of notices and applications connected to associated person entities. In
the proposal, the Commission solicited comment on two alternative approaches with respect to
the proposed temporary exclusion for associated person entities. One of the alternatives in the
proposal would have provided relief from the general prohibition in Exchange Act Section
15F(b)(6) with respect to all associated person entities – an approach that would be consistent
with the CFTC’s approach. In an effort to more closely harmonize with the CFTC’s approach
and, as noted by one commenter, to reduce potential disruptions to the business of SBS Entities,
even temporary disruptions, which could lead to market disruption, the Commission adopted
Rule of Practice 194 with an exclusion from the general prohibition in Exchange Act Section
15F(b)(6) with respect to all associated person entities. As a result, the final rule does not have
an information collection requirement for associated person entities and we removed the
burdens estimates associated with filing applications and notices for these entities. The
Commission previously anticipated a total time burden of 80 hours per year for applications
11
involving associated person entities that were statutorily disqualified and six hours per year for
notices involving associated person entities that were statutorily disqualified. Both of those
burdens are zero hours under the rule that that Commission has adopted.
Summary of Burden Changes
Rule of Practice 194
Total Annual Number of Responses
Nature of Information
Collection Burden
Total Annual Time Burden (Hrs.)
Type of Burden
Previously
Reviewed
Requested
Change
Previously
Reviewed
Requested
Change
Burden Associated with Filing
Applications (entities)
Reporting
2
0
-2
80
0
-80
Burden Associated with Filing
Notices (entities)
Reporting
2
0
-2
6
0
-6
Burden Associated with Filing
Applications (natural persons)
Reporting
5
5
0
150
150
0
Burden Associated with Filing
Notices (natural persons)
Reporting
5
5
0
15
30
+15
-4
Net Change
16.
-71
Information Collections Planned for Statistical Purposes
Not applicable.
17.
date.
Display of OMB Approval Date
The Commission is not seeking approval to not display the OMB approval expiration
18.
Exceptions to Certification for Paperwork Reduction Act Submissions
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.
12
| File Type | application/pdf |
| File Modified | 2019-02-19 |
| File Created | 2019-02-19 |