Upon Written Request, Copies Available From: Securities and Exchange Commission, Office of Investor Education and Advocacy, Washington, DC 20549-0213.
Rule 15c3-3; SEC File No. 270-087; OMB Control No. 3235-0078.
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”) has submitted to the Office of Management and Budget requests for extension of the previously approved collections of information discussed below. The Code of Federal Regulation citation to this collection of information is the following rule: 17 CFR 240.15c3-3 Customer Protection—Reserves and Custody of Securities.
Rule 15c3-3 under the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) requires that a broker-dealer that hold customer securities obtain and maintain possession and control of fully-paid and excess margin securities they hold for customers. In addition, the Rule requires that a broker-dealer that holds customer funds make either a weekly or monthly computation to determine whether certain customer funds need to be segregated in a special reserve bank account for the exclusive benefit of the firm's customers. It also requires that a broker-dealer maintain a written notification from each bank where a Special Reserve Bank Account is held acknowledging that all assets in the account are for the exclusive benefit of the broker-dealer's customers, and to provide written notification to the Commission (and its designated examining authority) under certain, specified circumstances. Finally, Rule 15c3-3 was amended in 2001 to add paragraph (o), which only applies to broker-dealers that sell securities futures products to customers. Paragraph (o) requires that such broker-dealers provide certain notifications to customers, and to make a record of any changes of account type.
There are approximately 344 broker-dealers fully subject to the Rule (i.e., broker-dealers that can not claim any of the exemptions enumerated at paragraph (k)), of which approximately 9 make daily, 245 make weekly, and 90 make monthly, reserve computations. On average, each of these respondents require approximately 2.5 hours to complete a computation. Accordingly, Commission staff estimates that the resulting burden totals 39,950 hours annually ((2.5 hours × 240 computations × 9 respondents that calculate daily) + (2.5 hours × 52 computations × 245 respondents that calculate weekly) + (2.5 hours × 12 computations × 90 respondents that calculate monthly)).
A broker-dealer required to maintain the Special Reserve Bank Account prescribed by Rule 15c3-3 must obtain Start Printed Page 67326and retain a written notification from each bank in which it has a Special Reserve Bank Account to evidence bank's acknowledgement that assets deposited in the Account are being held by the bank for the exclusive benefit of the broker-dealer's customers. As stated previously, 344 broker-dealers are presently fully-subject to Rule 15c3-3. In addition, 140 broker-dealers operate in accordance with the exemption provided in paragraph (k)(2)(i) which also requires that a broker-dealer maintain a Special Reserve Bank Account. The staff estimates that of the total broker-dealers that must comply with this rule, only 25%, or 121 ((344 + 140) × .25) must obtain 1 new letter each year (either because the broker-dealer changed the type of business it does and became subject to either paragraph (e)(3) or (k)(2)(i) or simply because the broker-dealer established a new Special Reserve Bank Account). The staff estimates that it would take a broker-dealer approximately 1 hour to obtain this written notification from a bank regarding a Special Reserve Bank Account because the language in these letters is largely standardized. Therefore, Commission staff estimates that broker-dealers will spend approximately 121 hours each year to obtain these written notifications.
In addition, a broker-dealer must immediately notify the Commission and its designated examining authority if it fails to make a required deposit to its Special Reserve Bank Account. Commission staff estimates that broker-dealers file approximately 65 such notices per year. Broker-dealers would require approximately 30 minutes, on average, to file such a notice. Therefore, Commission staff estimates that broker-dealers would spend a total of approximately 33 hours each year to comply with the notice requirement of Rule 15c3-3.
Finally, a broker-dealer that effects transactions in securities futures products (“SFPs”) for customers  also will have paperwork burdens associated with the requirement in paragraph (o) of Rule 15c3-3 to make a record of each change in account type. More specifically, a broker-dealer that changes the type of account in which a customer's SFPs are held must create a record of each change in account type that includes the name of the customer, the account number, the date the broker-dealer received the customer's request to change the account type, and the date the change in account type took place. As of December 31, 2006, broker-dealers that were also registered as futures commission merchants (“FCMs”) reported that they maintained 38,815,092 customer accounts. The staff estimates that 8% of these customers may engage in SFP transactions (38,815,092 accounts × 8% = 3,105,207). Further, the staff estimates that 20% per year may change account type. Thus, broker-dealers may be required to create this record for up to 621,041 accounts (3,105,207 accounts × 20%). The staff believes that it will take approximately 3 minutes to create each record. Thus, the total annual burden associated with creating a record of change of account type will be 31,052 hours (621,041 accounts × (3min/60min)).
Consequently, the staff estimates that the total annual burden hours associated with Rule 15c3-3 would be approximately 71,156 hours (39,950 hours + 121 hours + 33 hours + 31,052 hours).
In addition, a broker-dealer that effects transactions in SFPs for customers also will have an annualized cost burden associated with the requirements in paragraph (o) of Rule 15c3-3 to (1) provide each customer that plans to effect SFP transactions with a disclosure document containing certain information, and (2) send each SFP customer notification of any change of account type. Approximately 8% of the accounts held by broker-dealers that are also registered as FCMs, or 3,105,207 accounts, may engage in SFP transactions. The staff estimates that the cost of printing and sending each disclosure document will be approximately $.12 per document sent. Thus, the staff estimates that the cost of printing and sending disclosure documents would be approximately $372,625 (3,105,207 accounts × $.12). In addition, approximately 621,041 accounts (3,105,207 accounts × 20%) may change account type per year requiring that broker-dealers provide notification to those customers. The staff estimates that the cost of sending this notification to customers will be about $74,525 (621,041 accounts × $.12). Consequently, the staff estimates that the total annual cost associated with Rule 15c3-3 would be $447,150 ($372,625 + $74,525).
Records required to be created and notices required to be filed with the Commission pursuant to Rule 15c3-3 must be maintained in accordance with Rule 17a-4 (17 CFR 240.17a-4). The collection of information is mandatory and the information required to be provided to the Commission pursuant to these Rules are deemed confidential, notwithstanding any other provision of law under Section 24(b) of the Securities Exchange Act of 1934 (15 U.S.C. 78x(b)) and Section 552(b)(3)(B) of the Freedom of Information Act (5 U.S.C. 552(b)(3)(B)).
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid control number.
Comments should be directed to (i) Desk Officer for the Securities and Exchange Commission, Office of Information and Regulatory Affairs, Office of Management and Budget, Room 10102, New Executive Office Building, Washington, DC 20503 or by sending an e-mail to: Alexander_T._Hunt@omb.eop.gov; and (ii) R. Corey Booth, Director/Chief Information Officer, Securities and Exchange Commission, c/o Shirley Martinson, 6432 General Green Way, Alexandria, VA 22312 or send an e-mail to: PRA_Mailbox@sec.gov. Comments must be submitted within 30 days of this notice.Start Signature
Dated: November 19, 2007.
Florence E. Harmon,
1. Broker-dealers that do not engage in an SFP business with or for customers are not affected by this section of Rule 15c3-3. Broker-dealers that engage in an SFP business must also register with the CFTC as a futures commission merchant (“FCM”). As of January 31, 2007 there were 64 broker-dealers that were also registered as FCMs.Back to Citation
3. In fact, the staff believes that most firms will have this process automated. To the extent that no person need be involved in the generation of this record, the burden will be very minimal.Back to Citation
6. Based on past conversations with industry representatives regarding other rule changes as adjusted to account for inflation.Back to Citation
[FR Doc. E7-23111 Filed 11-27-07; 8:45 am]
BILLING CODE 8011-01-P