[Federal Register Volume 66, Number 24 (Monday, February 5, 2001)]
[Notices]
[Pages 8986-8988]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-2953]


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SECURITIES AND EXCHANGE COMMISSION


Submission for OMB Review; Comment Request

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

Extension:
    Rule 11Aa3-2, SEC File No. 270-439, OMB Control Number 3235-
0500;
    Rule 15c3-4, SEC File No. 270-441, OMB Control No. 3235-0497;
    Rule 15c3-1(c)(13), SEC File No. 270-443, OMB Control No. 3235-
0499

    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.
    Rule 11Aa3-2 provides that self-regulatory organizations (SROs) 
may, acting jointly, file a national market system plan or may propose 
an amendment to an effective national market system plan by submitting 
the text of the plan or amendment to the Secretary of the Commission, 
together with a statement of the purpose of such plan or amendment and, 
to the extent applicable, the documents and information required by 
paragraphs (b)(4) and (5) of Rule 11Aa3-2.
    The collection of information is designed to permit the Commission 
to achieve its statutory directive to facilitate the development of a 
national market system. The information is used to determine if a 
national market system plan, or an amendment thereto, should be 
approved and implemented.
    The respondents to the collection of information are self-
regulatory organizations, including national securities exchanges, 
national securities associations, registered clearing agencies and the 
Municipal Securities Rulemaking Board.
    Ten respondents file an average total of eight responses per year, 
which corresponds to an estimated annual response burden of 267 hours. 
At an average cost per burden hour of $50, the resultant total related 
cost of

[[Page 8987]]

compliance for these respondents is $13,350 per year (267 burden hours 
multiplied by $50/hour = $13,350).
    Rule 15c3-4 requires certain broker-dealers that are registered 
with the Commission as OTC Derivatives Dealers to establish, document, 
and maintain a system of internal risk management controls. The rule 
sets forth the basic elements for an OTC Derivatives Dealer to consider 
and include when establishing, documenting, and reviewing its internal 
risk management control system, which are designed to, among other 
things, ensure the integrity of an OTC Derivatives Dealer's risk 
measurement, monitoring, and management process, to clarify 
accountability at the appropriate organizational level, and to define 
the permitted scope of the dealer's activities and level of risk. The 
rule also requires that management of an OTC Derivatives Dealer must 
periodically review, in accordance with written procedures, the OTC 
Derivatives Dealer's business activities for consistency with its risk 
management guidelines.
    The staff estimates that the average amount of time an OTC 
Derivatives Dealer will spend implementing its risk management control 
system is 2,000 hours and that, on average, an OTC Derivatives Dealer 
will spend approximately 200 hours each year reviewing and updating its 
risk management control system. Currently, one firm is registered with 
the Commission as an OTC Derivatives Dealer. The staff estimates that 
approximately five additional OTC Derivatives Dealers may become 
registered within the next three years. Accordingly, the staff 
estimates the total burden for six OTC Derivatives Dealers to be 1,200 
hours annually for reviewing and updating its risk management control 
system.
    The staff believes that the cost of complying with Rule 15c3-4 will 
be approximately $82.50 per hour.\1\ This per hour cost is based upon 
the annual average hourly salary for a compliance manager, who would 
generally be responsible for initially establishing, documenting, and 
maintaining an OTC Derivatives Dealer's internal risk management 
control system. The total annual cost for all affected OTC Derivatives 
Dealers is estimated to be $275,000, based on five firms each spending 
10,000 hours to implement an internal risk management control system at 
$82.50 per hour within the next three years.
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    \1\ Per SIA Management and Professional Earnings, Table 051 
(Compliance Manager) + 35% overhead (based on end-of-year 1998 
figures).
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    On December 17, 1997, the Commission proposed for comment 
amendments to its net capital rule, Rule 15c3-1, which would define the 
term ``nationally recognized statistical rating organization'' 
(``NRSRO'').\2\ Rule 15c3-1 currently requires broker-dealers, when 
computing net capital, to deduct from their net work certain 
percentages of the market value (``haircuts'') of their proprietary 
securities positions. Broker-dealers' proprietary positions in 
commercial paper, nonconvertible debt securities, and nonconvertible 
preferred stock are accorded preferential treatment under the net 
capital rule, in the form of smaller haircuts, if the instruments are 
rated investment grade by at least two NRSROs.
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    \2\ See Securities Exchange Act Release No. 39457 (December 17, 
1997), 62 FR 68018 (December 30, 1997). The Commission has not yet 
adopted a final rule defining the term NRSRO. The Commission's 
Division of Market Regulation (the ``Division'') has reviewed 
comments received in connection with the proposal and is preparing a 
recommendation for the Commission to determine what action, if any, 
should be taken.
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    The Commission believes that defining the term NRSRO within the net 
capital rule would provide more transparency in the NRSRO application 
and review process. In the proposed amendments, the Commission sets 
forth a list of attributes that it would consider when reviewing a 
credit rating organization's NRSRO application. Further, the proposed 
amendments would formalize the appeals process if a credit rating 
organization is not provided with the NRSRO status it requests.
    Currently, the Division utilizes the no-action letter process to 
determine which credit rating organizations may be considered NRSROs 
under the net capital rule. Through the no-action letter process, the 
Division has provided seven credit ratings organizations with written 
assurance that it will not recommend enforcement action against broker-
dealers that rely on their credit ratings for purposes of the net 
capital rule.\3\ The Division has issued one letter in which the firm 
requesting NRSRO status was not provided with the assurance it 
requested.
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    \3\ Four of these firms have since combined or are in the 
process of combining with other NRSROs.
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    It is difficult to estimate the number of potential respondents to 
this collection of information. However, based on the current number of 
NRSROs and the previous inquiries of credit rating organizations, it 
appears reasonable to estimate that eight credit rating organizations 
may apply with the Commission pursuant to the proposed amendments. 
Based on conversations with rating organizations currently treated as 
NRSROs under the net capital rule and the Commission's experience in 
this area, it is estimated that the average amount of time necessary to 
compile the information required to submit an NRSRO application is 
approximately 100 hours. Therefore, because there may be eight 
potential respondents to this collection and because it is estimated 
that it will take approximately 100 hours to collect the information 
necessary for an adequate submission, the total reporting and 
recordkeeping burden is estimated to be approximately 800 hours.
    Because the proposed amendments only require a one-time application 
process, which includes any amendments to the initial application, 
there is no recurring reporting or recordkeeping requirement and thus 
no annual reporting or recordkeeping requirement. However, NRSROs will 
be obligated to inform the Commission of any material changes to the 
information previously collected under the proposed amendments.
    The staff believes that the cost of complying with the proposed 
amendments will be approximately $105 per hour.\4\ This per hour cost 
is based upon the annual average hourly salary for a senior analyst, 
who would generally be the personnel responsible for preparing an NRSRO 
application. The total annual startup cost for all affected credit 
rating organizations is estimated to be $84,000, based on eight firms 
spending a total of 800 hours to prepare NRSRO applications.
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    \4\ Per SIA Management and Professional Earnings, Table 145 
(Senior Research Analyst) + 35% overhead (based on 1999 annual base 
salary).
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    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.
    Written comments regarding the above information should be directed 
to the following persons: (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; and (ii) Michael E. Bartell, Associate 
Executive Director, Office of Information Technology, Securities and 
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549. 
Comments must be submitted to OMB within 30 days of this notice.


[[Page 8988]]


    Dated: January 29, 2001.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-2953 Filed 2-2-01; 8:45 am]
BILLING CODE 8010-01-M