DGL REVISED 2019 Justification Rule 15b11-1 and Form BDN PRA renewal (new)

SUPPORTING STATEMENT
for the Paperwork Reduction Act Information Collection Submission for
Rule 15b11-1 and Form BD-N
(OMB Control Number: 3235-0556)
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 FCMs 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).

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3.

Consideration Given to Information Technology
Form BD-N may be filed electronically with the National Futures Association (“NFA”).
A fillable PDF template of the NFA Form 7-R that is used as an alternative to Form BDN is available on the NFA’s website at http://www.nfa.futures.org/NFAregistration/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.

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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 information of a sensitive nature, including social security numbers, will be
required under this collection of information. The information collection collects basic
Personally Identifiable Information (PII) that may include taxpayer ID, name, telephone
number, job title, work address, and work telephone number. The agency has
determined that the information collection constitutes a system of record for purposes
of the Privacy Act and is covered under System of Records Notice (SORN) SEC-70.
The SEC-70 SORN, published on February 15, 2018, is provided as a supplemental
document and is also available at https://www.sec.gov/privacy. A Privacy Act
Statement is applicable for the information collection and is available on Form BD-N.
In accordance with Section 208 of the E-Government Act of 2002, the agency has
determined that the information collection does not trigger the Privacy Impact
Assessment (PIA) requirement. The information collection is collected and maintained
in paper.
12. Information Collection Burden
The NFA received two initial registrations by notice on Form BD-N in calendar year
2017, and one in calendar year 2018. 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
6

(2 initial application in 2017 + 1 initial applications in 2018) = 3 initial applications in 2 years; 3
initial applications / 2 years) = 1.5 initial applications per year, rounded up to 2.

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,

(continued…)

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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 two Form BD-N
amendments in calendar year 2017, and also three in calendar year 2018. Based on this
data, Commission staff estimates that the NFA will receive approximately three 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 1 hour. 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 two hours. 12

Form type

Burden type

Annual
number of
responses
received

Hours per
response

Total burden
per burden
type (hours)

Form BD-N

Initial
reporting

2

0.5

1

(…continued)

2001).
8

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

9

(2 amendments + 3 amendments) = 5 amendments; (5 amendments / 2 years) = 2.5 amendments
per year on average, rounded up to 3.

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

(3 amendments annually x 0.25 hours per amendment) = 0.75 hours annually for amendments,
rounded up to 1 hour.

12

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

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Form BD-N
amendments

Periodic
reporting

3

0.25

Total burden

0.75, rounded
up to 1
2 hours

Commission staff assumes that a notice-registered broker-dealer would have a
compliance department employee, at $310 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
$620.
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.
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 one hour due to the estimated number of amendments filed
on Form BD-N falling from 9 to 3. In 2017, Commission staff estimated that the total
annual reporting burden associated with Form BD-N and Form BD-N amendments was
approximately 3 burden hours. Currently, in 2019, Commission staff estimates that the
total annual reporting burden associated with Rule 15b11-1 and Form BD-N is
approximately two burden hours. As the estimated average number of initial
applications filed on Form BD-N remained at two annually, and the estimated average
13

This figure ($310/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

(2 total annual burden hours x $310 per hour) = $620 total annual cost.

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number of amendments filed on Form BD-N decreased from nine to three 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 three
burden hours to approximately two burden hours, for a decrease in burden of
approximately one hour. 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.
B. COLLECTION OF INFORMATION EMPLOYING STATISTICAL METHODS
This collection does not involve statistical methods.

15

In 2017, Commission staff estimated that the total annual reporting burden was approximately
three burden hours (1 hour for 2 initial applications + 2 hours for 9 amendments) = 3 hours for 11
responses. In 2019, Commission staff estimates that the total annual reporting burden is
approximately two burden hours (1 hour for 2 initial applications + 1 hour for 3 amendments) =
2 hours for 5 responses. The one-hour decrease in the estimated total annual reporting burden is
the difference between the 2017 estimate of 3 hours and the 2019 estimate of 2 hours (3 hours - 2
hours) = 1 fewer hour.