FINAL Justification Rule 15b11-1 and Form BDN 2017 PRA SS

SUPPORTING STATEMENT
for the Paperwork Reduction Act Information Collection Submission for
Rule 15b11-1 and Form BD-N
A. JUSTIFICATION
1.

Necessity of Information Collection
Congress enacted the Commodity Futures Modernization Act of 2000 (“CFMA”) 1 to,
among other things, permit transactions in security futures products, which are both
securities for purposes of the Securities Exchange Act of 1934 (“Exchange Act”) and
futures contracts for purposes of the Commodity Exchange Act. Section 203(a) of the
CFMA added Section 15(b)(11) to the Exchange Act, which provides that futures
commission merchants (“FCMs”) and introducing brokers (“IBs”) that are registered
with the Commodity Futures Trading Commission (“CFTC”) may register with the
Commission as broker-dealers for the purpose of effecting transactions in security
futures products by filing a written notice with the Commission.2
In 2001, to implement Section 203(a) of the CFMA and Section 15(b)(11)(A) of the
Exchange Act, the Commission promulgated Rule 15b11-1 (17 CFR 240.15b11-1) and
Form BD-N (17 CFR 249.501b) to provide for the form of notice FMCs and IBs may
use to register as broker-dealers by notice. 3 Rule 15b11-1(b) and Form BD-N require a
broker-dealer registering by notice to indicate whether it is filing a notice registration to
conduct a securities business in security futures products and, if so, that it satisfies the
statutory conditions for notice registration. Rule 15b11-1(c) and Form BD-N require
notice-registered broker-dealers to file an amended Form BD-N promptly if any of the
information reported on the form is or becomes inaccurate.

2.

Purpose and Use of the Information Collection
Form BD-N is used to elicit basic identification information as well as information that
allows the Commission staff to ensure that FMCs and IBs meet the statutory conditions
for registration by notice pursuant to Section 15(b)(11) of the Exchange Act. Without the
information elicited by the Form BD-N, the Commission would be unable to fulfill its
regulatory obligations.

1

Pub. L. No. 106-554, Appendix E, 114 Stat. 2763A-365 (2000).

2

See 15 U.S.C. 78o(b)(11).

3

See Registration of Broker-Dealers Pursuant to Section 15(b)(11) of the Securities Exchange Act
of 1934, Exchange Act Release No. 44730 (Aug. 21, 2001), 66 FR 45137-50 (Aug. 27, 2001).

2

3.

Consideration Given to Information Technology
Form BD-N may be filed electronically with the National Futures Association (“NFA”).
Online Registration System (ORS). A fillable PDF template of the NFA Form 7-R that is used
as an alternative to Form BD-N is available on the NFA’s website at
http://www.nfa.futures.org/NFA-registration/templates-and-forms/Form7-R-entire.pdf.

4.

Duplication
Requiring the filing of Form BD-N with the NFA, and not also requiring the filing of the
form with the Commission, reduces the regulatory burden on respondents by permitting
them to file initial registration notices and amendments at one central location, rather than
at multiple locations.

5.

Effect on Small Entities
As part of the Commission’s proposal to adopt Rule 15b11-1 and a form of notice
registration, the Commission’s Acting Chairman certified pursuant to 5 U.S.C. 605(b) that
the proposal would not, if adopted, have a significant economic impact on a substantial
number of small entities.4 The Acting Chairman also noted that the only impact of the
proposal would be on FCMs and IBs that choose to register by notice to do business in
security futures products, and that notice registrants would be required only to provide
information.5

6.

Consequences of Not Conducting Collection
Notice-registered broker-dealers are required to file Form BD-N only once to register, and
are required to file amendments to Form BD-N only when information earlier reported on
Form BD-N changes or becomes inaccurate. Therefore, less frequent collection of Form
BD-N information would impair the accuracy of the information available to the
Commission and decrease the protections afforded to investors.

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).

4

See Registration of Broker-Dealers Pursuant to Section 15(b)(11) of the Securities Exchange Act
of 1934, Exchange Act Release No. 4455 (June 20, 2001), 66 FR 34041, 34052-53 (June 26,
2001).

5

Id.

3

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.

9.

Payment or Gift
Not applicable.

10. Confidentiality
The Commission makes the information obtained on Form BD-N available to the public.
11. Sensitive Questions
No questions of a sensitive nature are asked. The Commission does not collect any
information internally from this form.
12. Information Collection Burden
The NFA received one initial registration by notice on Form BD-N in calendar year
2015, and three in calendar year 2014. Based on this data, Commission staff estimates
that the NFA will receive approximately two Form BD-N initial filings per year. 6
Commission staff has estimated that the average time necessary to complete an initial
Form BD-N filing is approximately 30 minutes. 7 Therefore, Commission staff
estimates that the annual burden hours associated with reporting information on initial
filings of Form BD-N is approximately one hour. 8
After filing an initial Form BD-N, a notice-registered broker-dealer must promptly
report corrected information on an amended Form BD-N if information earlier reported
on the form changes or becomes inaccurate. The NFA received nine Form BD-N
amendments in calendar year 2015, and also nine in calendar year 2014. Based on this

6

(1 initial application in 2015 + 3 initial applications in 2014) = 4 initial applications in 2 years; 4
initial applications / 2 years) = 2 initial applications per year.

7

See Registration of Broker-Dealers Pursuant to Section 15(b)(11) of the Securities Exchange Act
of 1934, Exchange Act Release No. 44730 (Aug. 21, 2001), 66 FR 45137, 45138 (Aug. 27,
2001).

8

(2 initial applications annually x 0.5 hours per application) = 1 hour annually for initial
applications.

4

data, Commission staff estimates that the NFA will receive approximately nine Form
BD-N amendments per year. 9 Commission staff has estimated that the average time
necessary to complete a Form BD-N amendment is approximately 15 minutes. 10
Therefore, Commission staff estimates that the annual burden hours associated with
reporting information by filing Form BD-N amendments is approximately two hours. 11
Based on the foregoing estimates, Commission staff estimates that the total annual
burden hours associated with reporting information on Form BD-N in compliance with
Rule 15b11-1 is approximately three hours. 12
Commission staff assumes that a notice-registered broker-dealer would have a
compliance department employee, at $293 per hour, 13 ensure that the firm is compliant
with filing and amending Form BD-N as required by Rule 15b11-1. Therefore,
Commission staff estimates that the total annual internal cost of compliance to
respondents associated with reporting information on Form BD-N is approximately
14
$1,172.
13. Costs to Respondents
The Rule does not impose any costs aside from internal compliance costs associated
with the burden hours discussed in item 12 above.

9

(9 amendments + 9 amendments) = 18 amendments; (18 amendments / 2 years) = 9 amendments
per year on average.

10

See Registration of Broker-Dealers Pursuant to Section 15(b)(11) of the Securities Exchange Act
of 1934, Exchange Act Release No. 44730 (Aug. 21, 2001), 66 FR 45137, 45138 (Aug. 27,
2001).

11

(9 amendments annually x 0.25 hours per amendment) = 2.25 hours annually for amendments,
rounded down to 2 hours.

12

(1 hour for initial applications annually + 2 hours for amendments annually) = 3 total hours
annually.

13

This figure ($293/hour) is from the salary given for a Compliance Manager in the Securities
Industry and Financial Markets Association’s Report on Management & Professional Earnings in
the Securities Industry 2013, modified by Commission staff to account for an 1,800-hour work
year and inflation, and multiplied by 5.35 to account for bonuses, firm size, employee benefits
and overhead.

14

(4 total annual burden hours x $293 per hour) = $1,172 total annual cost.

5

14. Costs to Federal Government
Because the NFA has agreed to accept and process all Form BD-N filings for initial
applications for registration by notice and amendments, the cost to the federal government
of processing a Form BD-N filing for purposes of Rule 15b11-1 is negligible.
15. Changes in Burden
The total annual reporting burden associated with Rule 15b11-1 and Form BD-N
decreased by approximately 13 hours due to the estimated number of amendments filed
on Form BD-N falling from 58 to 9. In 2013, Commission staff estimated that the total
annual reporting burden associated with Form BD-N and Form BD-N amendments was
approximately 16 burden hours. Currently, in 2017, Commission staff estimates that
the total annual reporting burden associated with Rule 15b11-1 and Form BD-N is
approximately three burden hours. As the average number of initial applications filed
on Form BD-N remained at two annually, and the average number of amendments filed
on Form BD-N decreased from 58 to nine since the last filing with OMB, Commission
staff estimates that the total annual reporting burden associated with Rule 15b11-1 and
Form BD-N has decreased from approximately 16 burden hours to approximately three
burden hours, for a decrease in burden hours of approximately 13. 15
16. Information Collection Planned for Statistical Purposes
Not applicable. The information collection 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.

15

In 2013, Commission staff estimated that the total annual reporting burden was approximately 16
burden hours (1 hour for 2 initial applications + 15 hours for 58 amendments) = 16 hours for 60.
In 2017, Commission staff estimates that the total annual reporting burden is approximately three
burden hours (1 hour for 2 initial applications + 2 hours for 9 amendments) = 3 hours for 11
responses. The 13-hour decrease in the estimated total annual reporting burden is the difference
between the 2013 estimate of 16 hours and the 2017 estimate of 3 hours (16 hours - 3 hours) = 13
fewer hours.

6

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