2023 Rule 17Ab2-1 Supporting Statement DGL REVISED

SUPPORTING STATEMENT
for the Paperwork Reduction Act -Information Collection Submission for
Rule 17Ab2-1 and Form CA-1
(OMB Control No. 3235-0195)
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 which amended the
Securities Exchange Act of 1934 (“Exchange Act”) in order to establish a national system for the
prompt and accurate clearance and settlement of securities transactions.
As part of those amendments, Congress authorized and directed the Securities and
Exchange Commission (the “Commission”) to oversee clearing agencies, which play a central
role in the development and functioning of the national clearance and settlement system. As part
of this directive, Section 17A(b)(1) of the Exchange Act requires any clearing agency operating
in interstate commerce to register with the Commission, and Section 17A(b)(2) of the Exchange
Act authorizes the Commission to promulgate rules to establish the process for clearing agencies
to submit their registration application for consideration by the Commission, which would
include an applicant’s rules and any other information that the Commission deems necessary or
appropriate. Section 17A(b)(3) of the Exchange Act prohibits the Commission from registering a
clearing agency unless the Commission is able to determine that the clearing agency meets
certain standards specified in that section, such as the ability to enforce the clearing agency’s
rules against its members.
To implement Section 17A(b) of the Exchange Act, the Commission adopted Rule
17Ab2-1 and Form CA-1 on November 3, 1975. Rule 17Ab2-1 requires that any entity applying
to be a registered clearing agency, requesting an exemption from registration, or amending an
existing registration file a Form CA-1 with the Commission. The rule requires amendments of
certain portions of Form CA-1 if they have become inaccurate, misleading, or incomplete.
The Commission adopted Rule 17Ab2-1 and Form CA-1 pursuant to authority found in
Sections 2, 17, 17A, 19, and 23(a) of the Exchange Act (15 U.S.C. Sections 78b, 78q, 78q-1, 78s,
and 78w, respectively).
2.

Purpose and Use of Information Collection

The Commission uses the information disclosed on Form CA-1 to (a) determine whether
an applicant meets the standards for registration or an exemption as set forth in the Exchange
Act, (b) enforce compliance with the Exchange Act’s registration requirements, and (c) collect
information about specific clearing agencies for compliance and investigatory purposes. Without
1

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

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Rule 17Ab2-1, the Commission could not perform these duties as statutorily required.
3.

Consideration Given to Information Technology

Form CA-1 is officially submitted to the Commission as a paper (hardcopy) document.
The Commission has proposed permitting applicants to file Form CA-1 through the
Commission’s EDGAR system under Release No. 33-11176 (Mar. 22, 2023). Nonetheless,
applicants utilize various computer information systems to compile information sought by Form
CA-1 such as financial statements and account statements.
4.
CA-1.

Duplication

There is no duplication of the information that the Commission obtains through Form
5.

Effect on Small Entities

Clearing agencies are generally sophisticated entities that are owned by their participants,
namely banks and broker-dealers. Due to the nature of clearing agency activities as a risk
mitigation tool, clearing agencies are likely to be well-capitalized, large operations, or affiliates
of such entities. Therefore, no information is requested from small businesses.
6.

Consequences of Not Conducting Collection

The information collected by Form CA-1 is necessary for the Commission to make its
statutorily-required determination that an applicant for registration meets the statutory standards
in Section 17A(b)(3) of the Exchange Act. Some of this information is not already available to
the general public, and therefore would not be attainable by the Commission unless provided by
the applicant.
7.

Inconsistencies with Guidelines in 5 CFR 1320.5(d)(2)

Form CA-1 requires that an applicant file four copies with the Commission, making this
Form inconsistent with the guidelines in 5 CFR 1320.5(d)(2)(iii). The special circumstance that
explains why an applicant is required to file four copies is that the Form CA-1 has not been
amended since 1975 and four copies were likely appropriate for dissemination within the
Commission at the time of the form’s adoption. Note that under Release No. 33-11176 (Mar. 22,
2023), the Commission has proposed eliminating the requirement for any paper copies.
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

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No payments or gifts have been or will be made to respondents.
10.

Confidentiality

Form CA-1 does not require applicants to reveal confidential information in order to form
the basis of the Commission’s determination. However, some Form CA-1 filings may contain
sensitive information that may be considered trade secrets or commercial information, which the
applicant may include in its Form CA-1. In particular, such information may be included in
responses to items 5(c)(ii) and 5(d)(ii) (relating to potential exposure to losses) and the exhibits
required by items 20 and 21 (security measures and safeguards), as well as any statement under
Exhibit S of the Form CA-1 that requires an applicant to demonstrate that an exemption from
registration would be consistent with the statutory standards. Consistent with the requirements of
17 CFR § 240.24b-2, an applicant may submit a redacted version of a completed Form CA-1
with sensitive information deleted, in addition to the original version filed with the Commission,
and the Commission has made the redacted version available for public review or comment
alongside a Federal Register notice of the application. Applicants routinely request that sensitive
information submitted on Form CA-1 be given confidential treatment (and therefore not revealed
to the public) pursuant to 17 CFR § 240.24b-2.
A Privacy Analysis Worksheet has been completed. The Form CA-1 requires a human
being to attest to its accuracy; therefore, the name, job title, and contact information of the person
making the attestation is collected.
11.

Sensitive Questions

The Information Collection does not collect information about individuals,
therefore, a PIA, SORN, and PAS are not required.
12.

Information Collection Burden

Rule

Burden
Type

Rule 17Ab2-1
(Initial Form
CA-1 Filings)

Initial
1
Reporting

1

340

Total
Burden
Per
Burden
Type
(Hours)
340

Rule 17Ab2-1 Periodic
1
(Periodic
Reporting
Form 1
Amendments)

1

60

60

Total Aggregate Burden

Number of
Number of Time Per
Respondents Annual
Response
Reponses
(Hours)
Per
Respondent

400

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The Commission receives approximately one Form CA-1 per year pursuant to Rule
17Ab2-1. The Commission staff estimates that the Form CA-1 would take approximately
340 hours to complete and submit for approval. This burden reflects the applicant’s staff
time (i.e. internal labor costs) to prepare and submit the Form to the Commission.
Additionally, an applicant or a registrant must file amendments to Form CA-1, which is
required when certain information contained in an applicant’s or registrant’s Form CA-1
becomes inaccurate, misleading, or incomplete. The time burden related to preparing and
submitting an amendment widely varies depending on the nature of the information that
needs to be updated, but staff estimates that the amendment burden would involve 60 hours
of an applicant or registrant’s staff time. Commission staff estimates that there is now on
average one amendment per year. Consequently, the aggregate annual burden associated
with compliance with Rule 17Ab2-1 and Form CA-1 is approximately 400 hours (340 +
60).
The Commission staff estimates that, in order to complete a new Form CA-1, 300
hours of a Compliance Attorney’s time (estimated at $406 per hour 1) and 40 hours of a
Chief Compliance Officer’s time (estimated at $589 per hour) would be required, resulting
in an internal cost of compliance of $145,360 for a new applicant. For an amendment of an
existing Form CA-1, the staff estimates that 40 hours of a Compliance Attorney’s time and
20 hours of a Chief Compliance Officer’s time would be required, resulting in an internal
cost of compliance of $28,020. Therefore, the total annual internal cost of compliance is
estimated to be approximately $173,380.
13.

Cost to Respondents

Rule

Burden
Type

Rule
17Ab2-1
(Initial
Form CA-1
Filings)

Initial
Reporting

Number of
Number of
Respondents Annual
Reponses
Per
Respondent
1
1

Cost per
Response
($)
$23,200

As noted in Question 12, the Commission receives approximately one Form CA-1
filing, and one Form CA-1 amendment per year. The main cost to respondents is
associated with drafting, collecting, providing, and maintaining the information sought by
Form CA-1. The external costs associated with such activities may include fees charged by
outside lawyers and accountants to assist the registrant with any novel questions raised by
collecting and preparing the information sought by the Form CA-1 (although such
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 to account for an 1800-hour work year and multiplied to
account for bonuses, firm size, employee benefits, and overhead, updated for 2022.

1

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consultations are not required by the Commission). For a new Form CA-1, Commission
staff estimates the cost of 45 hours of an Attorney’s time (estimated at $462 per hour) and
10 hours of a Senior Accountant’s time (estimated at $241), which would result in an
aggregate external cost of approximately $23,200 per year. Commission staff is not
estimating any external costs for an amendment to Form CA-1 because the existence of
novel questions is less likely.
14.

Costs to Federal Government

The annual cost to the Federal Government is zero because the rule only requires
only normal full-time employees to review the materials.
15.

Changes in Burden

Commission staff changed its cost burden estimate to reflect the most recent
updated wage and salary information for the industry. The estimated cost burden increased
from $21,090 to $23,200.
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.