
[Federal Register: November 28, 2007 (Volume 72, Number 228)]
[Notices]               
[Page 67325-67326]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr28no07-74]                         

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SECURITIES AND EXCHANGE COMMISSION

 
Request for Review by OMB

Upon Written Request, Copies Available From: Securities and Exchange 
Commission, Office of Investor Education and Advocacy, Washington, DC 
20549-0213.

Extension:
    Rule 15c3-3; SEC File No. 270-087; OMB Control No. 3235-0078.

    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 
(``Commission'') has submitted to the Office of Management and Budget 
requests for extension of the previously approved collections of 
information discussed below. The Code of Federal Regulation citation to 
this collection of information is the following rule: 17 CFR 240.15c3-3 
Customer Protection--Reserves and Custody of Securities.
    Rule 15c3-3 under the Securities Exchange Act of 1934 (15 U.S.C. 
78a et seq.) requires that a broker-dealer that hold customer 
securities obtain and maintain possession and control of fully-paid and 
excess margin securities they hold for customers. In addition, the Rule 
requires that a broker-dealer that holds customer funds make either a 
weekly or monthly computation to determine whether certain customer 
funds need to be segregated in a special reserve bank account for the 
exclusive benefit of the firm's customers. It also requires that a 
broker-dealer maintain a written notification from each bank where a 
Special Reserve Bank Account is held acknowledging that all assets in 
the account are for the exclusive benefit of the broker-dealer's 
customers, and to provide written notification to the Commission (and 
its designated examining authority) under certain, specified 
circumstances. Finally, Rule 15c3-3 was amended in 2001 to add 
paragraph (o), which only applies to broker-dealers that sell 
securities futures products to customers. Paragraph (o) requires that 
such broker-dealers provide certain notifications to customers, and to 
make a record of any changes of account type.
    There are approximately 344 broker-dealers fully subject to the 
Rule (i.e., broker-dealers that can not claim any of the exemptions 
enumerated at paragraph (k)), of which approximately 9 make daily, 245 
make weekly, and 90 make monthly, reserve computations. On average, 
each of these respondents require approximately 2.5 hours to complete a 
computation. Accordingly, Commission staff estimates that the resulting 
burden totals 39,950 hours annually ((2.5 hours x 240 computations x 9 
respondents that calculate daily) + (2.5 hours x 52 computations x 245 
respondents that calculate weekly) + (2.5 hours x 12 computations x 90 
respondents that calculate monthly)).
    A broker-dealer required to maintain the Special Reserve Bank 
Account prescribed by Rule 15c3-3 must obtain

[[Page 67326]]

and retain a written notification from each bank in which it has a 
Special Reserve Bank Account to evidence bank's acknowledgement that 
assets deposited in the Account are being held by the bank for the 
exclusive benefit of the broker-dealer's customers. As stated 
previously, 344 broker-dealers are presently fully-subject to Rule 
15c3-3. In addition, 140 broker-dealers operate in accordance with the 
exemption provided in paragraph (k)(2)(i) which also requires that a 
broker-dealer maintain a Special Reserve Bank Account. The staff 
estimates that of the total broker-dealers that must comply with this 
rule, only 25%, or 121 ((344 + 140) x .25) must obtain 1 new letter 
each year (either because the broker-dealer changed the type of 
business it does and became subject to either paragraph (e)(3) or 
(k)(2)(i) or simply because the broker-dealer established a new Special 
Reserve Bank Account). The staff estimates that it would take a broker-
dealer approximately 1 hour to obtain this written notification from a 
bank regarding a Special Reserve Bank Account because the language in 
these letters is largely standardized. Therefore, Commission staff 
estimates that broker-dealers will spend approximately 121 hours each 
year to obtain these written notifications.
    In addition, a broker-dealer must immediately notify the Commission 
and its designated examining authority if it fails to make a required 
deposit to its Special Reserve Bank Account. Commission staff estimates 
that broker-dealers file approximately 65 such notices per year. 
Broker-dealers would require approximately 30 minutes, on average, to 
file such a notice. Therefore, Commission staff estimates that broker-
dealers would spend a total of approximately 33 hours each year to 
comply with the notice requirement of Rule 15c3-3.
    Finally, a broker-dealer that effects transactions in securities 
futures products (``SFPs'') for customers \1\ also will have paperwork 
burdens associated with the requirement in paragraph (o) of Rule 15c3-3 
to make a record of each change in account type.\2\ More specifically, 
a broker-dealer that changes the type of account in which a customer's 
SFPs are held must create a record of each change in account type that 
includes the name of the customer, the account number, the date the 
broker-dealer received the customer's request to change the account 
type, and the date the change in account type took place. As of 
December 31, 2006, broker-dealers that were also registered as futures 
commission merchants (``FCMs'') reported that they maintained 
38,815,092 customer accounts. The staff estimates that 8% of these 
customers may engage in SFP transactions (38,815,092 accounts x 8% = 
3,105,207). Further, the staff estimates that 20% per year may change 
account type. Thus, broker-dealers may be required to create this 
record for up to 621,041 accounts (3,105,207 accounts x 20%). The staff 
believes that it will take approximately 3 minutes to create each 
record.\3\ Thus, the total annual burden associated with creating a 
record of change of account type will be 31,052 hours (621,041 accounts 
x (3min/60min)).
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    \1\ Broker-dealers that do not engage in an SFP business with or 
for customers are not affected by this section of Rule 15c3-3. 
Broker-dealers that engage in an SFP business must also register 
with the CFTC as a futures commission merchant (``FCM''). As of 
January 31, 2007 there were 64 broker-dealers that were also 
registered as FCMs.
    \2\ 17 CFR 240.15c3-3(o)(3)(i).
    \3\ In fact, the staff believes that most firms will have this 
process automated. To the extent that no person need be involved in 
the generation of this record, the burden will be very minimal.
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    Consequently, the staff estimates that the total annual burden 
hours associated with Rule 15c3-3 would be approximately 71,156 hours 
(39,950 hours + 121 hours + 33 hours + 31,052 hours).
    In addition, a broker-dealer that effects transactions in SFPs for 
customers also will have an annualized cost burden associated with the 
requirements in paragraph (o) of Rule 15c3-3 to (1) provide each 
customer that plans to effect SFP transactions with a disclosure 
document containing certain information,\4\ and (2) send each SFP 
customer notification of any change of account type.\5\ Approximately 
8% of the accounts held by broker-dealers that are also registered as 
FCMs, or 3,105,207 accounts, may engage in SFP transactions. The staff 
estimates that the cost of printing and sending each disclosure 
document will be approximately $.12 per document sent.\6\ Thus, the 
staff estimates that the cost of printing and sending disclosure 
documents would be approximately $372,625 (3,105,207 accounts x $.12). 
In addition, approximately 621,041 accounts (3,105,207 accounts x 20%) 
may change account type per year requiring that broker-dealers provide 
notification to those customers. The staff estimates that the cost of 
sending this notification to customers will be about $74,525 (621,041 
accounts x $.12). Consequently, the staff estimates that the total 
annual cost associated with Rule 15c3-3 would be $447,150 ($372,625 + 
$74,525).
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    \4\ 17 CFR 240.15c3-3(o)(2).
    \5\ 17 CFR 240.15c3-3(o)(3)(ii).
    \6\ Based on past conversations with industry representatives 
regarding other rule changes as adjusted to account for inflation.
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    Records required to be created and notices required to be filed 
with the Commission pursuant to Rule 15c3-3 must be maintained in 
accordance with Rule 17a-4 (17 CFR 240.17a-4). The collection of 
information is mandatory and the information required to be provided to 
the Commission pursuant to these Rules are deemed confidential, 
notwithstanding any other provision of law under Section 24(b) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78x(b)) and Section 
552(b)(3)(B) of the Freedom of Information Act (5 U.S.C. 552(b)(3)(B)).
    An agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information unless it displays a 
currently valid control number.
    Comments should be directed to (i) Desk Officer for the Securities 
and Exchange Commission, Office of Information and Regulatory Affairs, 
Office of Management and Budget, Room 10102, New Executive Office 
Building, Washington, DC 20503 or by sending an e-mail to: Alexander--
T.--Hunt@omb.eop.gov; and (ii) R. Corey Booth, Director/Chief 
Information Officer, Securities and Exchange Commission, c/o Shirley 
Martinson, 6432 General Green Way, Alexandria, VA 22312 or send an e-
mail to: PRA--Mailbox@sec.gov. Comments must be submitted within 30 
days of this notice.

    Dated: November 19, 2007.
Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-23111 Filed 11-27-07; 8:45 am]

BILLING CODE 8011-01-P
