[Federal Register Volume 87, Number 13 (Thursday, January 20, 2022)]
[Notices]
[Pages 3132-3135]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-01058]
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SECURITIES AND EXCHANGE COMMISSION
[SEC File No. 270-653, OMB Control No. 3235-0703]
Submission for OMB Review; Comment Request
Upon Written Request, Copies Available From: Securities and Exchange
Commission, Office of FOIA Services, 100 F Street NE, Washington, DC
20549-2736
Extension:
Regulation SCI, Form SCI
Notice is hereby given that pursuant to the Paperwork Reduction Act
of 1995 (``PRA'') (44 U.S.C. 3501 et seq.), the Securities and Exchange
Commission (``Commission'') has submitted to the Office of Management
and Budget (``OMB'') a request for approval of extension of the
previously approved collection of information provided for in
Regulation Systems Compliance and Integrity (``Regulation SCI'') (17
CFR 242.1000-1007) and Form SCI (17 CFR 249.1900) under the Securities
Exchange Act of 1934 (``Exchange Act'') (15 U.S.C. 78a et seq.).
Regulation SCI requires certain key market participants to, among
other things: (1) Have comprehensive policies and procedures in place
to help ensure the robustness and resiliency of their technological
systems, and also that their technological systems operate in
compliance with the federal securities laws and with their own rules;
and (2) provide certain notices and reports to the Commission to
improve Commission oversight of securities market infrastructure.
Regulation SCI advances the goals of the national market system by
enhancing the capacity, integrity, resiliency, availability, and
security of the automated systems of entities important to the
functioning of the U.S. securities markets, as well as reinforcing the
requirement that such systems operate in compliance with the Exchange
Act and rules and regulations thereunder, thus strengthening the
infrastructure of the U.S. securities markets and improving its
resilience when technological issues arise. In this respect, Regulation
SCI establishes an updated and formalized regulatory framework, thereby
helping to ensure more effective Commission oversight of such systems.
Respondents consist of national securities exchanges and
associations, registered clearing agencies, exempt clearing agencies,
plan processors, and alternative trading systems. There are currently
47 respondents, and the Commission staff estimates that, on average, 2
new respondents may become SCI entities each year, 1 of which would be
a self-regulatory organization (``SRO''). Accordingly, Commission staff
estimates that over the next three years there will be an average of 49
respondents per year.
In addition, in December 2020, the Commission adopted amendments to
Regulation SCI in connection with updates to the national market system
for the collection, consolidation, and dissemination of information
with respect to quotations for and transactions in national market
system (``NMS'') stocks (``Infrastructure Amendments''). Specifically,
the Commission adopted a definition of ``SCI competing consolidator''
that will subject competing consolidators to Regulation SCI, after a
transition period, if they are above a specified consolidated market
data gross revenue threshold.\1\ The Infrastructure Amendments
increased the number of respondents to the collections of information
in Regulation SCI, and the Commission estimates that seven competing
consolidators will meet this definition and be subject to the
requirements of Regulation SCI.\2\
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\1\ See Securities Exchange Act Release No. 34-90610 (December
9, 2020), 86 FR 18596 (April 9, 2021) (File No. S7-03-20)
(``Infrastructure Adopting Release'').
\2\ Some of these respondents were estimated to incur no, or
only part of, the estimated initial burdens because they were
already subject to Regulation SCI (i.e., as plan processors, SROs or
affiliates of SROs).
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Rule 1001(a) requires each SCI entity to establish, maintain, and
enforce written policies and procedures reasonably designed to ensure
that its SCI systems and, for purposes of security standards, indirect
SCI systems, have levels of capacity, integrity, resiliency,
availability, and security, adequate to maintain the SCI entity's
operational capability and promote the maintenance of fair and orderly
markets. The Commission staff estimates that the total annual initial
recordkeeping burden for 7 new respondents will be 4,511 hours, and the
annual ongoing recordkeeping burden for all 54 respondents will be, on
average, 12,528 hours. The Commission staff estimates
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that the 7 new respondents would incur, on average, an annual initial
internal cost of compliance of $1,513,382, as well as outside legal or
consulting costs of $305,500. In addition, all respondents will incur,
on average, an estimated ongoing annual internal cost of compliance of
$4,205,412.
Rule 1001(b) requires each SCI entity to establish, maintain, and
enforce written policies and procedures reasonably designed to ensure
that its SCI systems operate in a manner that complies with the
Exchange Act and the rules and regulations thereunder and the entity's
rules and governing documents, as applicable. The Commission staff
estimates that the total annual initial recordkeeping burden for 7 new
respondents will be 1,755 hours, and the annual ongoing recordkeeping
burden for all respondents will be, on average, 8,010 hours. The
Commission staff estimates that the 7 new respondents would incur an
initial internal cost of compliance of $660,270, as well as outside
legal or consulting costs of $175,500. In addition, all respondents
will incur, on average, an estimated ongoing annual internal cost of
compliance of $2,539,890.
Rule 1001(c) requires each SCI entity to establish, maintain, and
enforce reasonably designed written policies and procedures that
include the criteria for identifying responsible SCI personnel, the
designation and documentation of responsible SCI personnel, and
escalation procedures to quickly inform responsible SCI personnel of
potential SCI events. The Commission staff estimates that the total
annual initial recordkeeping burden for 7 new respondents will be 741
hours, and the annual ongoing recordkeeping burden for all respondents
will be, on average, 2,106. The Commission staff estimates that the 7
new respondents would incur an initial internal cost of compliance of
$276,432, and all respondents will incur, on average, an estimated
ongoing annual internal cost of compliance of $839,592.
Rule 1004 requires each SCI entity to establish standards for the
designation of certain members or participants for BC/DR plan testing,
to designate members or participants in accordance with these
standards, to require participation by designated members or
participants in such testing at least annually, and to coordinate such
testing on an industry- or sector-wide basis with other SCI entities.
The Commission staff estimates that the total annual initial
recordkeeping burden for 9 new respondents will be 2,700 hours, and the
annual ongoing recordkeeping burden for all respondents that are not
plan processors will be, on average, 7,290 hours. The Commission staff
estimates that the 7 new respondents would incur an initial internal
cost of compliance of $804,735. In addition, all respondents that are
not plan processors will incur, on average, an estimated ongoing annual
internal cost of compliance of $1,939,950. In addition, the Commission
staff estimates that the 2 plan processor respondents will incur an
estimated ongoing annual cost of $108,000 for outside legal services
($54,000 per plan processor respondent x 2 respondents).
Rule 1002(b)(1) requires each SCI entity, upon any responsible SCI
personnel having a reasonable basis to conclude that an SCI event has
occurred, to notify the Commission immediately. The Commission staff
estimates that the total annual ongoing burden for all 54 respondents
will be, on average, 432 hours. The Commission staff estimates that
respondents will incur, on average, an estimated ongoing annual
internal cost of compliance of $133,030.
Rule 1002(b)(2) requires each SCI entity, within 24 hours of any
responsible SCI personnel having a reasonable basis to conclude that
the SCI event has occurred, to submit a written notification to the
Commission pertaining to the SCI event on a good faith, best efforts
basis. These notifications are required to be submitted on Form SCI.
The Commission staff estimates that the total annual ongoing burden for
all 54 respondents will be, on average, 6,480 hours. The Commission
staff estimates that respondents will incur, on average, an estimated
ongoing annual internal cost of compliance of $2,134,890.
Rule 1002(b)(3) requires each SCI entity to provide updates to the
Commission pertaining to an SCI event on a regular basis, or at such
frequency as reasonably requested by a representative of the
Commission, until the SCI event is resolved and the SCI entity's
investigation of the SCI event is closed. The Commission staff
estimates that the total annual ongoing burden for all 54 respondents
will be, on average, 567 hours. The Commission staff estimates that all
respondents will incur, on average, an estimated ongoing annual
internal cost of compliance of $177,106.50.
Rule 1002(b)(4) requires each SCI entity to submit written interim
reports, as necessary, and a written final report regarding an SCI
event to the Commission. These reports are required to be submitted on
Form SCI. The Commission staff estimates that the total annual ongoing
burden for all 54 respondents will be, on average, 9,450 hours. The
Commission staff estimates that all respondents will incur, on average,
an estimated ongoing annual internal cost of compliance of $3,297,510.
Rule 1002(b)(5) requires each SCI entity to submit to the
Commission quarterly reports containing a summary description of any
systems disruption or systems intrusion that has had, or the SCI entity
reasonably estimates would have, no or a de minimis impact on the SCI
entity's operations or on market participants. These reports are
required to be submitted on Form SCI. The Commission staff estimates
that the total annual ongoing burden for all 54 respondents will be, on
average, 8,640 hours. The Commission staff estimates that respondents
will incur, on average, an estimated ongoing annual internal cost of
compliance of $2,919,348.
In addition, the Commission staff estimates that all 54 respondents
will incur, on average, annual costs of $313,200 for outside legal
advice in preparation of certain notifications required by Rule
1002(b).
Rule 1002(c)(1)(i) requires each SCI entity, promptly after any
responsible SCI personnel has a reasonable basis to conclude that an
SCI event (other than a systems intrusion) has occurred, to disseminate
certain information to its members or participants. The Commission
staff estimates that the total annual ongoing burden for all 54
respondents will be, on average, 1,134 hours. The Commission staff
estimates that all respondents will incur, on average, an estimated
ongoing annual internal cost of compliance of $741,557.50.
Rule 1002(c)(1)(ii) requires each SCI entity, when known, to
promptly disseminate additional information about an SCI event (other
than a systems intrusion) to its members or participants. Rule
1002(c)(1)(iii) requires each SCI entity to provide to its members or
participants regular updates of any information required to be
disseminated under Rules 1002(c)(1)(i) and (ii) until the SCI event is
resolved. The Commission staff estimates that the total annual ongoing
burden for all 54 respondents will be, on average, 6,318 hours. The
Commission staff estimates that all respondents will incur, on average,
an estimated ongoing annual internal cost of compliance of $2,496,096.
Rule 1002(c)(2) requires each SCI entity to disseminate certain
information regarding a systems intrusion to its members or
participants, and provides an exception when the SCI entity determines
that dissemination of
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such information would likely compromise the security of its SCI
systems or indirect SCI systems, or an investigation of the systems
intrusion, and documents the reasons for such determination. The
Commission staff estimates that the total annual ongoing burden for all
54 respondents will be, on average, 540 hours. The Commission staff
estimates that all respondents will incur, on average, an estimated
ongoing annual internal cost of compliance of $212,827.25.
In addition, the Commission staff estimates that all 54 respondents
will incur, on average, annual costs of $179,280 for outside legal
advice in preparation of certain notifications required by Rule
1002(c).
Rule 1003(a)(1) requires each SCI entity to submit to the
Commission quarterly reports describing completed, ongoing, and planned
material changes to its SCI systems and security of indirect SCI
systems during the prior, current, and subsequent calendar quarters.
These reports are required to be submitted on Form SCI. The Commission
staff estimates that the total annual ongoing burden for all 54
respondents will be, on average, 27,000 hours. The Commission staff
estimates that all respondents will incur, on average, an estimated
ongoing annual internal cost of compliance of $8,063,820.
Rule 1003(a)(2) requires each SCI entity to promptly submit a
supplemental report notifying the Commission of a material error in or
material omission from a report previously submitted under Rule
1003(a)(1). These reports are required to be submitted on Form SCI. The
Commission staff estimates that the total annual ongoing burden for all
54 respondents will be, on average, 810 hours. The Commission staff
estimates that all respondents will incur, on average, an estimated
ongoing annual internal cost of compliance of $256,716.
Rule 1003(b)(1) requires each SCI entity to conduct an SCI review
of its compliance with Regulation SCI not less than once each calendar
year, with an exception for penetration test reviews, which are
required to be conducted not less than once every three years. Rule
1003(b)(1) also provides an exception for assessments of SCI systems
directly supporting market regulation or market surveillance, which are
required to be conducted at a frequency based on the risk assessment
conducted as part of the SCI review, but in no case less than once
every three years. Rule 1003(b)(2) requires each SCI entity to submit a
report of the SCI review to senior management no more than 30 calendar
days after completion of the review. The Commission staff estimates
that the total annual ongoing burden for all 54 respondents will be, on
average, 37,260 hours. The Commission staff estimates that all
respondents will incur, on average, an estimated ongoing annual
internal cost of compliance of $11,934,810.
Rule 1003(b)(3) requires each SCI entity to submit the report of
the SCI review to the Commission and to its board of directors or the
equivalent of such board, together with any response by senior
management, within 60 calendar days after its submission to senior
management. These reports are required to be submitted on Form SCI. The
Commission staff estimates that the total annual ongoing burden for all
54 respondents will be, on average, 54 hours. The Commission staff
estimates that all respondents will incur, on average, an estimated
ongoing annual internal cost of compliance of $22,248.
In addition, the Commission staff estimates that all respondents
will incur, on average, annual costs of $2,700,000 for outside legal
advice in preparation of certain notifications required by Rule
1003(b).
Rule 1006 requires each SCI entity, with a few exceptions, to file
any notification, review, description, analysis, or report to the
Commission required under Regulation SCI electronically on Form SCI
through the EFFS. An SCI entity will submit to the Commission an EAUF
to register each individual at the SCI entity who will access the EFFS
system on behalf of the SCI entity. The Commission staff estimates that
the total annual initial burden for 7 new respondents will be 1.95
hours, and the annual ongoing burden for all respondents will be, on
average, 8.1 hours. The Commission staff estimates that the 7 new
respondents would incur an initial internal cost of compliance of $806.
In addition, all 54 respondents will incur, on average, an estimated
ongoing annual internal cost of compliance of $3,348, as well as
outside costs to obtain a digital ID of $2,700.
Rule 1002(a) requires each SCI entity, upon any responsible SCI
personnel having a reasonable basis to conclude that an SCI event has
occurred, to begin to take appropriate corrective action. The
Commission staff estimates that the total annual initial recordkeeping
burden for 7 new respondents will be 741 hours, and the annual ongoing
recordkeeping burden for all 54 respondents will be, on average, 2,106
hours. The Commission staff estimates that the 7 new respondents would
incur an initial internal cost of compliance of $276,432. In addition,
all 54 respondents will incur, on average, an estimated ongoing annual
internal cost of compliance of $831,438.
Rule 1003(a)(1) requires each SCI entity to establish reasonable
written criteria for identifying a change to its SCI systems and the
security of indirect SCI systems as material. The Commission staff
estimates that the total annual initial recordkeeping burden for 7 new
respondents will be 741 hours, and the annual ongoing recordkeeping
burden for all 54 respondents will be, on average, 1,458 hours. The
Commission staff estimates that the 7 new respondents would incur an
initial internal cost of compliance of $276,432. In addition, all 54
respondents will incur, on average, an estimated ongoing annual
internal cost of compliance of $622,944.
Regulation SCI also requires SCI entities to identify certain types
of events and systems. The Commission staff estimates that the total
annual initial recordkeeping burden for 7 new respondents will be 1,287
hours, and the annual ongoing recordkeeping burden for all 54
respondents will be, on average, 2,106 hours. The Commission staff
estimates that the 7 new respondents would incur an initial internal
cost of compliance of $453,089. In addition, all 54 respondents will
incur, on average, an estimated ongoing annual internal cost of
compliance of $831,438.
Rules 1005 and 1007 establish recordkeeping requirements for SCI
entities other than SROs. The Commission staff estimates that for 6 new
respondents that are not SROs the average annual initial burden would
be 935 hours, and the annual ongoing burden for all 18 respondents will
be, on average, 450 hours. The Commission staff estimates that 6 new
respondents would incur an estimated internal initial internal cost of
compliance of $64,515, as well as a one-time cost of $5,400 to modify
existing recordkeeping systems. In addition, all 18 respondents will
incur, on average, an estimated ongoing internal cost of compliance of
$31,050.
An agency may not conduct or sponsor, and a person is not required
to respond to, a collection of information under the PRA unless it
displays a currently valid OMB control number.
The public may view background documentation for this information
collection at the following website: www.reginfo.gov. Find this
particular information collection by selecting ``Currently under 30-day
Review--Open for Public Comments'' or by using the search function.
Written comments and
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recommendations for the proposed information collection should be sent
within 30 days of publication of this notice to (i)
[email protected] and (ii) David Bottom,
Director/Chief Information Officer, Securities and Exchange Commission,
c/o John Pezzullo, 100 F Street NE, Washington, DC 20549, or by sending
an email to: [email protected].
Dated: January 14, 2022.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-01058 Filed 1-19-22; 8:45 am]
BILLING CODE 8011-01-P