[Federal Register Volume 67, Number 111 (Monday, June 10, 2002)]
[Pages 39751-39752]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-14524]



Submission for OMB Review; Comment Request

Upon Written Request, Copies Available From:
Securities and Exchange Commission, Office of Filings and 
Information Services, Washington, DC 20549.
    Extension: Rule 17a-11, SEC File No. 270-94, OMB Control No. 

    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 a request for extension of the previously approved 
collection of information discussed below.
    Rule 17a-11 (17 CFR 240.17a-11) requires broker-dealers to give 
notice when certain specified events occur. Specifically, the rule 
requires a broker-dealer to give notice of a net capital deficiency on 
the same day that the net capital deficiency is discovered or a broker-
dealer is informed by its designated examining authority or the 
Commission that it is, or has been, in violation of its minimum 
requirement under Rule 15c3-1 (17 CFR 240.15c3-1) of the Securities 
Exchange Act of 1934 (``Exchange Act''). Under Rule 17a-11 an over-the-
counter (``OTC'') derivatives dealers must also provide notice to the 
Commission when a net capital deficiency is discovered but need not 
give notice to any SRO because OTC derivatives dealers are only 
required to register with the Commission.
    Rule 17a-11 also requires a broker-dealer to send notice promptly 
(within 24 hours) after the broker-dealer's aggregate indebtedness is 
in excess of 1,200 percent of its net capital, its net capital is less 
than 5 percent of aggregate debit items, or its total net capital is 
less than 120 percent of its required minimum net capital. In addition, 
a broker-dealer must give notice if it fails to make and keep current 
books and records required by Rule 17a-3 (17 CFR 240.17a-3), if any 
material inadequacy is discovered as defined in Rule 17a-5(g) (17 CFR 
240.17a-5(g)), and if back testing exceptions are identified pursuant 
to Appendix F of Rule 15c3-1 (17 CFR 15c3-1f) for a broker-dealer 
registered as an OTC derivatives dealer.
    The notice required by the rule alerts the Commission, self-
regulatory organizations (``SROs''), and the Commodity Futures Trading 
Commission (``CFTC'') if the broker-dealer is registered as a futures 
commission merchant, which have oversight responsibility over broker-
dealers, to those firms having financial or operational problems.
    Because broker-dealers are required to file pursuant to Rule 17a-11 
only when certain specified events occur, it is difficult to develop a 
meaningful figure for the cost of compliance with Rule 17a-11. In 2001, 
the Commission received 692 notices under this rule from 627 broker-
dealers. Each broker-dealer reporting pursuant to Rule 17a-11 will 
spend approximately one hour preparing and transmitting the notice as 
required by the rule. Accordingly, the total estimated annualized 
burden for 2001 was 692 hours. With respect to those broker-dealers 
that must give notice under Rule 17a-11, the Commission staff estimates 
that the approximate administrative cost, consisting mostly of 
accountant clerical work, to broker-dealers would be $24.53 per hour 
(based on the Securities Industry Association salary survey and 
including 35% in overhead costs). Therefore, based on approximately one 
hour per notice and a total of 692 notices filed, the total annual 
expense for the reporting broker-dealers in 2001 was approximately 
    Broker-dealers providing notice and reports under Rule 17a-11 are 
required to preserve such records under Rule 17a-4 (17 CFR 240.17a-4) 
for a period of not less than three years, the first two years in an 
accessible place. Compliance with the Rule is mandatory. The Commission 
will generally not publish or make available to any person notice or 
reports received pursuant to Rule 17a-11. The Commission believes that 
information obtained under Rule 17a-11 relates to a condition report 
prepared for the use of the Commission, other federal governmental 
authorities, and securities industry self-regulatory organizations 
responsible for the regulation or supervision of financial 
    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.
    Written comments regarding the above information should be directed 
to the following persons: (i) Desk Officer for the Securities and 
Exchange Commission, Office of Information and Regulatory Affairs, 
Office of Management and Budget, Room 10202, New Executive Office 
Building, Washington, DC 20503; and (ii) Michael E. Bartell, Associate 
Executive Director, Office of Information Technology, Securities and 
Exchange Commission, 450 Fifth Street, NW, Washington, DC

[[Page 39752]]

20549. Comments must be submitted to OMB within 30 days of this notice.

    Dated: June 3, 2002.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-14524 Filed 6-7-02; 8:45 am]