2016 17a-7

SUPPORTING STATEMENT
For the Paperwork Reduction Act Information Collection Submission for
Rule 17a-7

A.

JUSTIFICATION
1.

Necessity of Information Collection

Section 17(a)(1) of the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) (“Exchange
Act”) provides that broker-dealers registered with the Securities and Exchange Commission
(“Commission”) must make and keep for prescribed periods, and furnish copies of, such records as
the Commission, by rule, prescribes as necessary or appropriate in the public interest, for the
protection of investors, or otherwise in furtherance of the purposes of the Exchange Act. Pursuant to
this authority, the Commission adopted Rules 17a-3 and 17a-4 (17 CFR 240.17a-3 and 17 CFR
240.17a-4). Rule 17a-3 requires broker-dealers to make certain records, including trade blotters,
asset and liability ledgers, income ledgers, customer account ledgers, securities records, order
tickets, trade confirmations, trial balances, and various employment related documents. Rule 17a-4
specifies the manner in which the records created in accordance with Rule 17a-3, and certain other
records produced by broker-dealers, must be maintained. It also specifies the required retention
periods for these records. In combination, Rules 17a-3 and 17a-4 require broker-dealers to create,
and preserve in an easily accessible manner, a comprehensive record of each securities transaction
they effect and of their securities business in general.
Paragraph (a)(1) of Exchange Act Rule 17a-7 (17 CFR 240.17a-7), “Records of nonresident brokers and dealers,” generally requires a non-resident broker-dealer (defined generally
in section (d)(3) of the rule as a broker or dealer residing in, incorporated in, or with its principal
place of business in any place not subject to the jurisdiction of the United States) registered or
applying for registration pursuant to Section 15 of the Exchange Act to maintain in the United
States complete and current copies of books and records required to be maintained or preserved
pursuant to “any provision of any rule or regulation of the Commission” adopted under the
Exchange Act, which would include Rules 17a-3 and 17a-4.
Paragraph (a)(2) of Rule 17a-7 generally requires a non-resident broker-dealer to furnish
a written notice to the Commission specifying the place within the United States where the
copies of the books and records are located.
Under paragraph (b) of Rule 17a-7, however, a broker-dealer is not required to maintain
those books and records in the United States if: (1) the broker-dealer files with the Commission
a written undertaking to furnish to the Commission, upon demand, copies of any of the books
and records the broker-dealer is required to maintain or preserve (the undertaking must in the
form specified in the rule); and (2) the broker-dealer furnishes to the Commission within 14 days
after a written demand from the Commission complete and current copies of any books and
records that are specified in the demand.

2.

Purpose and Use of the Information Collection

The information contained in the records required to be maintained by broker-dealers subject
to Rule 17a-7 is used by Commission examiners, representatives of the Commission, and selfregulatory organizations (“SROs”) to ensure that these broker-dealers are in compliance with the
financial responsibility, antifraud, anti-manipulative, and other rules and regulations of the
Commission and the SROs. The purpose of Rule 17a-7 is the protection of investors. If the
Commission did not have access to that information, the Commission’s ability to oversee
compliance with Exchange Act and SRO rules would be impaired.
3.

Consideration Given to Information Technology

Rule 17a-4(f) permits broker-dealers to employ micrographic or electronic storage media
to maintain records required to be preserved under Rule 17a-4. The records broker-dealers must
preserve under Rule 17a-7 may be preserved using these types of storage media.
4.

Duplication

Similar information is not available in another form.
5.

Effect on Small Entities

The number and complexity of records required to be preserved pursuant to Rule 17a-7
will vary proportionately with the volume and complexity of each broker-dealer’s business.
Accordingly, small businesses should not encounter any significant or disproportionate impact.
6.

Consequences of Not Conducting Collection

If the Commission did not have access to the broker-dealer books and records outlined
above, the Commission’s ability to oversee compliance of non-resident broker-dealers with
Exchange Act and SRO rules would be impaired.
7.

Inconsistencies with Guidelines in 5 CFR 1320.5(d)(2)

There are no special circumstances. This collection is consistent with the guidelines in 5
CFR 1320.5(d)(2).
8.

Consultations Outside the Agency

The required Federal Register notice with a 60-day comment period soliciting comments
on this collection of information was published. No public comments were received.

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9.

Payment or Gift

No payment or gift was provided to respondents.
10.

Confidentiality

The records required to be maintained by Rule 17a-7 and the notices and undertakings
required to be furnished to the Commission are typically available only to the examination staffs
of the Commission, state securities authorities, and SROs. Subject to the provisions of the
Freedom of Information Act (5 U.S.C. 552) and the Commission’s rules under the Freedom of
Information Act (17 CFR 200.80(b)(4)(iii)), the Commission does not generally publish or make
available information contained in any reports, summaries, analyses, letters, or memoranda
arising out of, in anticipation of, or in connection with an examination or inspection of the books
and records of any person or any other investigation.
11.

Sensitive Questions

No questions of a sensitive nature are involved. The information collection does not
collect any Personally Identifiable Information (PII).
12.

Burden of Information Collection

Based on staff experience, we estimate that the average amount of time necessary to prepare
and submit the documents required by Rule 17a-7 is approximately one hour per year. Therefore,
since there are approximately 45 non-resident broker-dealers, the total industry-wide reporting
burden is approximately 45 hours per year. Assuming an average cost per hour of approximately
$291for a compliance manager, the total internal cost of compliance for the respondents is
approximately $13,095 per year.1
13.

Costs to Respondents

Other than the internal compliance costs associated with the burden of information
collection discussed in item 12 above, Rule 17a-7 does not impose any additional costs on
respondents.
14.

Costs to Federal Government

The government would not experience significant costs based on the recordkeeping and
reporting required pursuant to Rule 17a-7. The information collected by the respondents would be

1

$291 per hour for a compliance manager is from SIFMA's Management & Professional
Earnings in the Securities Industry 2013, modified by Commission staff for an 1800-hour
work-year, multiplied by 5.35 to account for bonuses, firm size, employee benefits, and
overhead, and adjusted for inflation.

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reviewed only as part of an investigation or examination of a respondent. The Commission would
not routinely review the records kept by the respondents.
15.

Changes in Burden

The annual reporting and recordkeeping hour burden has decreased from 51hours to 45
hours due to a decrease in the number of respondents from 51 to 45.
16.

Information Collection Planned for Statistical Purposes

The information collected is not used for statistical purposes.
17.

Approval to Omit OMB Expiration Date

The Commission is not seeking approval to omit the expiration date.
18.

Exceptions to Certification for Paperwork Reduction Act Submissions

This collection complies with the requirements in 5 CFR 1320.9.
B.

COLLECTIONS OF INFORMATION EMPLOYING STATISTICAL METHODS
This collection does not involve statistical methods.

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