FR 2021-02958

The document under review is a notice from the Securities and Exchange Commission (SEC), published in the Federal Register, regarding a request for approval from the Office of Management and Budget (OMB) to extend the collection of information as required by Rule 17f-2(d). This rule, established under the Securities Exchange Act of 1934, is designed to ensure that fingerprint records are maintained by certain financial entities to identify security risks and deter individuals with criminal records from obtaining employment in positions of trust.

General Summary

Rule 17f-2(d) applies to entities such as national securities exchanges, brokers, dealers, registered transfer agents, and registered clearing agencies. These entities are required to record, maintain, and preserve fingerprint records of their employees. The aim is to provide criminal background information that can inform employment decisions and protect against security threats within the financial industry.

The document highlights that approximately 3,900 respondents are required to comply with these recordkeeping requirements. Collectively, they maintain around 8,840 hours of records annually, with an associated cost of approximately $39,000 for third-party storage. These records must be kept for a minimum of three years after an individual's employment or relationship with the organization ends.

Significant Issues or Concerns

Several issues are present in the notice:

• Cost Breakdown and Calculation: The document mentions a total annual cost burden of $39,000 related to third-party storage but fails to provide a detailed breakdown of how this figure was derived. This lack of transparency could make it challenging for stakeholders to understand the financial implications fully.

• Clarity of Time Burden Calculations: The notice states that each individual record takes about 2 minutes to maintain, resulting in an annual burden of approximately 2.2666667 hours per respondent. This precise calculation may be overly complex and difficult for the general reader to interpret, suggesting the need for simplification.

• Complex Language: The text contains legal references and terminology that may not be familiar to a general audience. Simplifying the language could enhance understanding and accessibility for all readers.

Impact on the Public

Broadly, this rule aims to protect the public and financial markets by ensuring that only trustworthy individuals are employed in sensitive positions within covered financial entities. By deterring potential security risks and ensuring that employers have access to relevant criminal background information, the rule contributes to more secure financial operations.

Impact on Specific Stakeholders

• Covered Entities: Entities such as brokers and dealers bear the responsibility and cost of compliance. The administrative burden of maintaining these records, while necessary for security, requires time and resources that might impact their operations.

• Employees and Job Seekers: For individuals seeking employment within these entities, the rule ensures a rigorous background check process. This could be seen positively as it ensures a trust-based work environment but might also deter some individuals from applying due to privacy concerns or past minor infractions.

• Regulatory and Law Enforcement Bodies: These organizations benefit from easier access to fingerprint records, which aids in ongoing monitoring and investigation of potential security threats within the industry.

In summary, the SEC's request for OMB approval to extend Rule 17f-2(d) is a necessary action to ensure ongoing diligence in the financial sector. However, improving clarity and transparency in cost and time burden calculations, as well as simplifying language, could further enhance stakeholder understanding and engagement.

In the document regarding the submission for OMB review, a crucial financial aspect is highlighted concerning the estimated cost burden of the rule being discussed.

The document estimates that the total annual cost burden for respondents is approximately $39,000, which represents third-party storage costs. However, the document does not provide a detailed breakdown or explanation of how this figure was calculated. This lack of a breakdown might leave readers curious about the specific elements contributing to this cost and how each element is evaluated. Such details would ensure transparency and understanding, addressing one of the identified issues with the presentation of financial data.

Moreover, while the document presents precise figures regarding the time burden per respondent, the way these figures are communicated might not be easily digestible for the average reader. Specifically, the document details that each record takes around 2 minutes to maintain, culminating in a burden of approximately 2.2666667 hours annually per respondent. Although precise, expressing such a specific decimal can complicate interpretations. For clearer understanding, it might be more practical to round the figure to a simpler number, such as 2.27 hours, which would assist in resolving another identified issue about clarity in communication.

In summary, the document does present a clear view of the estimated annual cost relating to compliance with the rule. Still, it leaves room for improvement in providing a detailed financial breakdown and simplifying numerical expressions to enhance comprehension among the general audience.