[Federal Register Volume 90, Number 186 (Monday, September 29, 2025)]
[Notices]
[Pages 46701-46703]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-18877]
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SECURITIES AND EXCHANGE COMMISSION
[OMB Control No. 3235-0279]
Agency Information Collection Activities; Proposed Collection;
Comment Request; Extension: Rule 17a-4
Upon Written Request, Copies Available From: Securities and Exchange
Commission, Office of FOIA Services, 100 F Street NE, Washington, DC
20549-2736.
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 (``SEC'' or ``Commission'') is soliciting comments on the
proposed collection of information. Rule 17a-4 requires exchange
members, brokers, and dealers (``broker-dealers'') to preserve for
prescribed periods of time certain records required to be made by Rule
17a-3. In addition, Rule 17a-4 requires the preservation of records
required to be made by other Commission rules and other kinds of
records which firms make or receive in the ordinary course of business.
These include, but are not limited to, bank statements, cancelled
checks, bills receivable and payable, originals of communications, and
descriptions of various transactions. Rule 17a-4 also permits broker-
dealers to employ, under certain conditions, electronic storage media
to maintain records required to be maintained under Rules 17a-3 and
17a-4.
There are approximately 3,298 active, registered broker-dealers.
The staff estimates that the average amount of time necessary to
preserve the books and records as required by Rule 17a-4 is 254 hours
per broker-dealer per year. Additionally, the Commission estimates that
paragraph (b)(11) of Rule 17a-4 imposes an annual burden of 3 hours per
year to maintain the requisite records. The Commission estimates that
there are approximately 200 internal broker-dealer systems, resulting
in an annual recordkeeping burden of 600 hours.
The Commission also estimates that there are approximately 2,424
broker-dealers with retail customers resulting in an annual ongoing
burden of approximately 3,934,152 to comply with Rule 17a-4(e)(5).
Moreover the Commission estimates that these broker-dealers will incur
242 hours in annual burden to comply with Rule 17a-4(e)(10).
Therefore, the Commission estimates that compliance with Rule 17a-4
requires 4,772,698 hours each year ((3,298 broker-dealers x 254 hours)
+ (200 broker-dealers x 3 hours) + 3,934,152 hours + 242 hours)). These
burdens are recordkeeping burdens. The total burden hour decrease of
4,527,481 hours is due to a decrease in the number of respondents from
3,508 to 3,298, as well as the removal of the initial burden
association with the recordkeeping requirements for broker-dealers with
retail customers.
In addition, the Commission estimates that the telephonic recording
retention provision of paragraph (b)(4) of Rule 17a-4 imposes an
initial burden on broker-dealer SBSDs and broker-dealer MSBSPs of 13
hours per firm in the first year and an ongoing burden of 6 hours per
year (including the first year). The Commission estimates that there
will be three new broker-dealer SBSDs that register with the Commission
in the next three years and that there are currently eight broker-
dealer SBSDs registered with the Commission resulting in an estimated
industry-wide initial burden of 39 hours \1\ in the first year and an
ongoing burden of 48 hours per year (including the first year).\2\ Over
a three year period, the total industry burden is estimated to be 186
hours,\3\ or 62 hours per year when annualized.\4\
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\1\ 13 hours x 3 broker-dealer SBSDs = 39 hours.
\2\ 6 hours x 8 broker-dealer SBSDs and broker-dealer MSBSPs =
48 hours.
\3\ (39 hours in first year [initial] + 48 hours in first year
[ongoing]) + 48 hours in second year + 48 hours in third year = 186
hours.
\4\ 186 hours/3 years = 62 hours per year or 7.75 hours per
respondent per year.
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The Commission estimates that the provisions of paragraphs (b)(1),
and (b)(8)(v)-(viii) relating to security-based swap activities and
paragraphs (b)(8)(xvi) and (b)(14) of Rule 17a-4 impose an initial
burden of 65 hours per firm in the first year and an ongoing burden of
30 hours per year (including the first year). The Commission estimates
that there will be three new respondents in the next three years,
resulting in an estimated industry-wide initial burden of 195 hours \5\
in the first year and an ongoing burden of 240 hours per year
(including the first year).\6\ Over a three year period, the total
industry burden is estimated to be 9150 hours,\7\ or 305 hours per year
when annualized.
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\5\ 65 hours x 3 respondents = 195 hours.
\6\ 30 hours x 8 respondents = 2400 hours.
\7\ (195 hours in first year + 240 hours in first year) + 240
hours in second year + 240 hours in third year = 915 hours.
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The Commission estimates that the provisions of paragraph (b)(1)
applicable to broker-dealer SBSDs and broker-dealer MSBSPs and
paragraphs (b)(15) and (b)(16) of Rule 17a-4 impose an initial burden
of 65 hours per firm in the first year and an ongoing burden of 30
hours per year (including the first year). The Commission estimates
that there will be three new respondents over the next three years,
resulting in an estimated initial industry-wide initial burden of 185
hours \8\ in the first year and an ongoing burden of 180 hours per year
(including the first year).\9\ Over a three year period, the total
industry burden is estimated to be 725 hours,\10\ or 242 hours per year
when annualized.\11\
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\8\ 65 hours x 3 broker-dealer SBSDs and broker-dealer MSBSPs =
185 hours.
\9\ 30 hours x 8 broker-dealer SBSDs and broker-dealer MSBSPs =
180 hours.
\10\ (185 hours in first year + 180 hours in first year) + 180
hours in second year + 180 hours in third year = 725 hours.
\11\ 725 hours/3 years = 241.67 hours per year or 30.21 hours
per respondent per year.
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The Commission estimates that provisions of paragraph (b)(1) of
Rule 17a-4 that apply only to broker-dealer SBSDs imposes an initial
burden of 13 hours per firm in the first year and an ongoing burden of
6 hours per year (including the first year). The Commission estimates
that there will be three new broker-dealer SBSDs registered in the next
three years, resulting in an estimated industry-wide initial burden of
39 hours \12\ in the first year and an ongoing burden of 48 hours per
year (including the first year).\13\ Over a three year period, the
total industry burden is estimated to be 418 hours,\14\ or 62 hours per
year when annualized.\15\
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\12\ 13 hours x 3 broker-dealer SBSDs = 39 hours.
\13\ 6 hours x 8 broker-dealer SBSDs = 48 hours.
\14\ (39 hours in first year + 48 hours in first year) + 48
hours in second year + 48 hours in third year = 186 hours.
\15\ 186 hours/3 years = 62 hours per year or 7.75 hours per
respondent per year.
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In 2019, the Commission amended Rule 17a-4(b)(1), (e)(11), and
(e)(12) to account for the security-based swap risk mitigation
activities of broker-dealers, including Broker-Dealer SBSDs and Broker-
Dealer MSBSPs (collectively, ``SBS Entities''), by, among other things,
requiring the preserving of any required records regarding portfolio
reconciliation (Rule 15Fi-3(a) and (b)), bilateral offsets (Rule 15Fi-
4(a)(1)), bilateral or multilateral portfolio
[[Page 46702]]
compression (Rule 15Fi-4(b) and (c)), valuation disputes (Rule 15Fi-
3(c)), and written trading relationship documentation (Rule 15Fi-5).
Rule 17-4 does not require the firm to create these records or perform
the underlying task required by the Rule. Rather, the burden to create
these records and perform the underlying task is accounted for in Rule
15Fi-3-15Fi-5.\16\ Accordingly, the burdens imposed by the requirements
in 17a-4 are to ensure these records related to risk mitigation are
preserved for the requisite time period and produced when requested.
The Commission estimates that these recordkeeping requirements impose
an initial burden of 60 hours per firm for updating the applicable
policies and systems required to account for capturing the additional
records made pursuant to Rule 15Fi-3 through 15Fi-5, and an ongoing
annual burden of 75 hours per firm for maintaining such records as well
as to make additional updates to the applicable recordkeeping policies
and systems to account for the new rules. The Commission estimates that
there three new SBS Entity respondents in the next three years, for a
total average initial annual burden for all respondents of 180 hours
\17\ and a total ongoing average annual burden of 225 hours,\18\ for a
total annual burden of 285 hours.\19\
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\16\ See Risk Mitigation Adopting Release, 85 FR at 6389.
\17\ One-time initial reporting burden for 3 SBS Entities (60
hour x 3 SBS Entities) = 180 hours.
\18\ 75 hour x 3 SBS Entities = 225 hours.
\19\ (180 hours in first year + 225 hours in first year) + 225
hours in second year + 225 hours in third year/3 = 285 hours.
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In 2022, the Commission amendments to Rule 17a-4(f) that added an
audit-trail alternative to the current broker-dealer recordkeeping
requirement.\20\ The Commission also amended both of these paragraphs
to require the broker-dealer to have a backup set of records or the
redundant equivalency when records are preserved on an electronic
recordkeeping system.\21\ The amendments to Rule 17a-4(f) also replaced
the third-party access and undertakings requirements with a requirement
that either a designated executive officer or a third party have the
access and provide the necessary undertakings.\22\ The amendments to
Rule 17a-4(f) eliminated a requirement that the broker-dealer notify
its DEA before employing an electronic recordkeeping system.\23\ The
amendments to Rule 17a-4(j) also required a broker-dealer to furnish a
record and its audit trail (if applicable) preserved on an electronic
recordkeeping system pursuant to Rules 17a-4(f), respectively, in a
reasonably usable electronic format, if requested by a representative
of the Commission.\24\ The amendments to Rule 17a-4(i) provided an
alternative undertaking for certain third-party electronic
recordkeeping service providers, in particular cloud service
providers.\25\
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\20\ See section II.D. of the Electronic Recordkeeping
Requirements for Broker-Dealers, Security-Based Swap Dealers, and
Major Security-Based Swap Participants, Exchange Act Release No. 34-
96034 (Oct. 12, 2022), 87 FR 66412 (Nov. 3, 2022) (``2022 Electronic
Recordkeeping Adopting Release) (discussing this amendment).
\21\ See section II.E. of the 2022 Electronic Recordkeeping
Adopting Release (discussing this amendment).
\22\ Id.
\23\ See section II.C. of the 2022 Electronic Recordkeeping
Adopting Release (discussing this amendment).
\24\ See section II.H. of the 2022 Electronic Recordkeeping
Adopting Release (discussing this amendment).
\25\ See section II.G. of the 2022 Electronic Recordkeeping
Adopting Release (discussing this amendment).
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The Commission estimates that 100 firms will register as broker-
dealers over the next three years. The Commission estimates that
replacing the third-party access and undertakings requirements with a
requirement that either a designated executive officer or a third party
have the access and provide the necessary undertakings will result in a
one-time burden for those firms of 100 hours,\26\ or 33.33 hours when
annualized. In addition, the Commission estimates that the alternative
electronic recordkeeper undertaking will result in a one-time initial
burden of 1 hour per the estimated 5 affected broker-dealers, for a
total of 5 hours,\27\ or 1.67 hours when annualized. Finally, the
Commission estimates that the need for the one cloud service providers
to review and execute the Alternative Undertaking will result in a one-
time initial burden of 100 hours per provider, for a total of 100
hours,\28\ or 33.33 hours when annualized.
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\26\ One-time initial reporting burden for 100 broker-dealers (1
hour x 100 broker-dealers) = 100 hours.
\27\ One-time initial recordkeeping burden for 5 broker-dealers
(1 hour x 5 broker-dealers) = 5 hours.
\28\ One-time initial reporting burden for five cloud service
providers: (100 hours x one cloud service provider) = 100 hours.
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The Commission believes that requirements resulting from Rule 17a-4
are performed by individuals in a broker-dealer's compliance
department. A Compliance Clerk earns an average of $78 per hour,\29\
resulting in a total internal cost of compliance of approximately
[$699] million [(9,983,015 hours x $78)].
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\29\ This figure is based on SIFMA's Office Salaries in the
Securities Industry 2013, modified by Commission staff to account
for inflation and an 1,800-hour work-year multiplied by 2.93 to
account for bonuses, firm size, employee benefits, and overhead.
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Based on conversations with members of the securities industry and
the Commission's experience in the area, the staff estimates that the
average broker-dealer spends approximately $5,000 each year to store
documents required to be retained under Rule 17a-4. Costs include the
cost of physical space, computer hardware and software, etc., which
vary widely depending on the size of the broker-dealer and the type of
storage media employed. The Commission estimates that the annual
reporting and recordkeeping cost burden is $16,490,000. This cost is
calculated by the number of active, registered broker-dealers
multiplied by the reporting and recordkeeping cost for each respondent
(3,298 registered broker-dealers x $5,000).
The Commission estimates that each applicable firm incurs an
ongoing annual cost of approximately $2,000 per firm for server,
equipment, and systems development costs associated with the telephonic
recording retention requirement, which applicable to broker-dealer
SBSDs and broker-dealer MSBSPs. The Commission estimates that there are
8 respondents, resulting in an estimated industry-wide ongoing annual
cost of $16,000 for compliance with the telephonic recording retention
provision of Rule 17a-4(b)(4).
The Commission estimates that provisions of paragraphs (b)(1),
(b)(8)(v)-(viii) relating to security-based swap activities and
paragraphs (b)(8)(xvi) and (b)(14) of Rule 17a-4 impose an ongoing
annual cost of approximately $600 per firm. The Commission estimates
that there are 33 respondents, resulting in an estimated industry-wide
ongoing annual cost of $19,800.
The Commission estimates that the provisions of paragraph (b)(1)
applicable to broker-dealer SBSDs and broker-dealer MSBSPs and
paragraphs (b)(15) and (b)(16) of Rule 17a-4 impose ongoing annual cost
of approximately $600 per firm. The Commission estimates that there are
8 respondents, resulting in an estimated industry-wide ongoing annual
cost of $4,800.
The Commission estimates that the provisions of paragraph (b)(1) of
Rule 17a-4 that apply only to broker-dealer SBSDs imposes an additional
ongoing annual cost of approximately $120 per firm to broker-dealer
SBSDs. The Commission estimates that there are 8 broker-dealer SBSDs,
resulting in an estimated industry-wide ongoing annual cost of $960.
An agency may not conduct or sponsor, and a person is not required
to
[[Page 46703]]
respond to, a collection of information unless it displays a currently
valid OMB Control Number.
Written comments are invited on: (a) whether this proposed
collection of information is necessary for the proper performance of
the functions of the SEC, including whether the information will have
practical utility; (b) the accuracy of the SEC's estimate of the burden
imposed by the proposed collection of information, including the
validity of the methodology and the assumptions used; (c) ways to
enhance the quality, utility, and clarity of the information to be
collected; and (d) ways to minimize the burden of the collection of
information on respondents, including through the use of automated,
electronic collection techniques or other forms of information
technology.
Please direct your written comments on this 60-Day Collection
Notice to Austin Gerig, Director/Chief Data Officer, Securities and
Exchange Commission, c/o Tanya Ruttenberg via email to
[email protected] by November 28, 2025. There will be a
second opportunity to comment on this SEC request following the Federal
Register publishing a 30-Day Submission Notice.
Dated: September 25, 2025.
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-18877 Filed 9-26-25; 8:45 am]
BILLING CODE 8011-01-P