2023 Rule 17f-2(e) Supporting Statement - DGL REVISED

SUPPORTING STATEMENT
for the Paperwork Reduction Act Information Collection Submission for
[Rule 17f-2(e)]
[OMB Control No. 3235-0031]
A. JUSTIFICATION
1. Necessity of Information Collection
Congress added Section 17(f) to the Securities Exchange Act of 1934 (“Exchange Act”) 1
in 1975 as part of the Securities Acts Amendments of 1975 2 in order to respond to a large
number of securities thefts that occurred in the late 1960s. Testimony before the Senate
Permanent Subcommittee of Investigations between 1971 and 1974 indicated that the trafficking
in stolen securities certificates was profitable for organized crime and that the failure to have
available to the financial community a means of easily identifying security-risk personnel was a
contributing factor to that problem. Specifically, Section 17(f)(2) requires every member of a
national securities exchange, broker, dealer, registered transfer agent, and registered clearing
agency to require that each of its partners, directors, officers, and employees be fingerprinted and
submit such fingerprints to the U.S. Attorney General or its designee for identification and
appropriate processing. This section also authorizes the Commission, by rule, to exempt from the
provisions of this paragraph any class of partners, directors, officers, and employees of any such
member, broker, dealer, registered transfer agent, and registered clearing agency.
On March 16, 1976, the Commission adopted Rule 17f-2 under the Exchange Act. The
general purposes of Rule 17f-2 are: (1) to identify security risk personnel (i.e., persons with
criminal history records for serious offenses); (2) to provide criminal record information so that
employers can make fully informed employment decisions; and (3) to deter persons with a
criminal record from seeking employment or association with covered entities. The rule attempts
to achieve these purposes primarily by requiring, subject to certain exceptions, every partner,
director, officer, and employee of every member of a national securities exchange, broker,
dealer, registered transfer agent, and registered clearing agency to be fingerprinted and submit
such fingerprints to the U.S. Attorney General or its designee.
Paragraph (e) of the rule requires every member of national securities exchange, broker,
dealer, registered transfer agent, and registered clearing agency (“covered entities”) that claims
an exemption from the fingerprint requirements of Rule 17f-2 to make and keep current a
statement entitled “Notice Pursuant to Rule 17f-2” (“Notice”) containing the information
specified in paragraph (e)(1) to support their claim of exemption.
2. Purpose and Use of the Information Collection
The Commission uses the information required to be maintained by covered entities
pursuant to Rule 17f-2(e) to assist the Commission and other regulatory agencies with
monitoring and reviewing the appropriateness of the covered entities’ claims of exemptions to
1
2

15 U.S.C. 78q(f).
Pub. L. No. 94-29, 89 Stat. 97 (June 4, 1975).

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fingerprinting its personnel. Without Rule 17f-2(e), the Commission could not perform its duties
as statutorily required.
3. Consideration Given to Information Technology
Rule 17f-2(e)(2) requires covered entities to keep a copy of the Notice in an easily
accessible place at the organization’s principal office and at the office employing the persons for
whom exemptions are claimed and to make the Notice available upon request for inspection by
the Commission, appropriate regulatory agency (if not the Commission) or other designated
examining authority. The covered entities typically utilize computer systems to make and keep
the required copies of such Notices.
4.

Duplication

No other reporting requirement with respect to the information required to be reported
under Rule 17f-2(e) currently exists.
5. Effect on Small Entities
No information is requested from small entities.
6. Consequences of Not Conducting Collection
If information was not required to be maintained by the covered entities, the
Commission’s ability to monitor covered entities’ compliance would be weakened.
7. Inconsistencies with Guidelines in 5 CFR 1320.8(d)
There are special circumstances that would require respondents to retain records other
than health, medical, government contract, grant-in-aid, or tax records for more than three years.
Rule 240.17f-2(e) applies to members of national securities exchanges, brokers, dealers,
registered transfer agents, and registered clearing agencies that claim one or more of the
exemptions in paragraph (a)(1) of Rule 240.17f-2. Under Rule 240.17a-1, every registered
clearing agency must keep and preserve at least one copy of all documents made or received by
it in the course of its business for a period of not less than five years. Under Rule 240.17a-4
certain members of national securities exchanges, brokers, and dealers must maintain the Notice
during the life of their enterprise. Under Rule 240.17Ad-7, registered transfer agents must
maintain the Notice in an easily accessible place.
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

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There are no payments or gifts to respondents.
10. Confidentiality
Not applicable; no assurance of confidentiality is provided by Rule 17f-2(e). The rule
does not require respondents to submit personally identifiable information.
11. Sensitive Questions
The SEC does not collect information about individuals, therefore, a PIA, SORN, and
PAS are not required
12.

Burden of Information Collection

Based on the Commission’s experience with Rule 17f-2(e), we estimate that
approximately 75 respondents will incur an average burden of 30 minutes per year to comply
with this rule, which represents the time it takes for a staff person at a covered entity to properly
document a claimed exemption from the fingerprinting requirements of Rule 17f-2 in the
required Notice (.4 hours, constituting a reporting type of burden) and to properly retain the
Notice according to the entity’s record retention policies and procedures (.1 hours, constituting a
recordkeeping type of burden). The total annual burden for all covered entities is approximately
38 hours (75 entities times .5 hours, rounded up).
Rule

Burden Type

Rule 17f-2(e)

Initial
Reporting
Rule 17f-2(e)
Recordkeeping
Total Aggregate Burden

Number of
Respondents

Total Burden Per
Burden Type (Hours)

75

Time Per
Response
(Hours)
0.4

75

0.1

7.5
38 (37.5 rounded up)

30

13. Costs to Respondents
The work associated with the burden of 38 hours per year is typically performed by the
covered entities’ staff. There is no cost to respondents other than the internal wage or salary costs
associated with generating and maintaining the documentation as described in Item 12, above.
14. Costs to Federal Government
Federal Government costs from Rule 17f-2(e) are appropriate regulatory agency staff
time and related overhead needed to check during periodic inspections that the notices are being
kept. Costs to the Federal Government due to Rule 17f-2(e) are therefore zero.
15. Changes in Burden
There are no changes to the overall burden.

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