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Proposed Collection; Comment Request

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Information about this document as published in the Federal Register.

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Upon Written Request, Copies Available From: Securities and Exchange Commission, Office of Filings and Information Services, Washington, DC 20549.


Rule 17a-11 SEC File No. 270-94; OMB Control No. 3235-0085

Notice is hereby given that pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.), the Securities and Exchange Commission (“Commission”) is soliciting comments on the collection of information summarized below. The Commission plans to submit this existing collection of information to the Office of Management and Budget for extension and approval.

Rule 17a-11 (17 CFR 240.17a-11) requires broker-dealers to give notice when certain specified events occur. Specifically, the rule requires a broker-dealer to give notice of a net capital deficiency on the same day that the net capital deficiency is discovered or a broker-dealer is informed by its designated examining authority or the Commission that it is, or has been, in violation of its minimum requirement under Rule 15c3-1 (17 CFR 240.15c3-1) of the Securities Exchange Act of 1934 (“Exchange Act”). Under Rule 17a-11 an over-the-counter (“OTC”) derivatives dealers must also provide notice to the Commission when a net capital deficiency is discovered but need not give notice to any SRO because OTC derivatives dealers are only required to register with the Commission.

Rule 17a-11 also requires a broker-dealer to send notice promptly (within 24 hours) after the broker-dealer's aggregate indebtedness is in excess of 1,200 percent of its net capital, its net capital is less than 5 percent of aggregate debit items, or its total net capital is less than 120 percent of its required minimum net capital. In addition, a broker-dealer must give notice if it fails to make and keep current books and records required by Rule 17a-3 (17 CFR 240.17a-3), if any material inadequacy is discovered as defined in Rule 17a-5(g) (17 CFR 240.17a-5(g)), and if back testing exceptions are identified pursuant to Appendix F of Rule 15c3-1 (17 CFR 240.15c3-1f) for a broker-dealer registered as an OTC derivatives dealer.

The notice required by the rule alerts the Commission, self-regulatory organizations (“SROs”), and the Commodity Futures Trading Commission (“CFTC”) if the broker-dealer is registered as a futures commission merchant, which have oversight responsibility over broker-dealers, to those firms having financial or operational problems.

Because broker-dealers are required to file pursuant to Rule 17a-11 only when certain specified events occur, it is difficult to develop a meaningful figure for the cost of compliance with Rule 17a-11. In 2001, the Commission received 692 notices under this rule from 627 broker-dealers. Each broker-dealer reporting pursuant to Rule 17a-11 will spend approximately one hour preparing and transmitting the notice as required by the rule. Accordingly, the total estimated annualized burden for 2001 was 692 hours. With respect to those broker-dealers that must give notice under Rule 17a-11, the Commission staff estimates that the approximate administrative cost, consisting mostly of accountant clerical work, to broker-dealers would be $24.53 per hour (based on the Securities Industry Association salary survey and including 35% in overhead costs). Therefore, based on approximately one hour per notice and a total of 692 notices filed, the total annual expense for the reporting broker-dealers in 2001 was approximately $16,975.

Written comments are invited on: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility; (b) the accuracy of the agency's estimate of the burden of the collection of information; (c) ways to enhance the quality, utility, and clarity of the information collected; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology. Consideration will be given to comments and suggestions submitted in writing within 60 days of this publication.

Please direct your written comments to Michael E. Bartell, Associate Executive Director, Office of Information Technology, Securities and Exchange Commission, 450 5th Street, NW, Washington, DC 20549.

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Dated: March 26, 2002.

Margaret H. McFarland,

Deputy Secretary.

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[FR Doc. 02-7866 Filed 4-1-02; 8:45 am]