Notice2022-10814
Submission for OMB Review; Comment Request; Extension: Regulation S-ID
Primary source
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Published
May 20, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 98 (Friday, May 20, 2022)</title>
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[Federal Register Volume 87, Number 98 (Friday, May 20, 2022)]
[Notices]
[Pages 31041-31043]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-10814]
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SECURITIES AND EXCHANGE COMMISSION
[SEC File No. 270-644, OMB Control No. 3235-0692]
Submission for OMB Review; Comment Request; Extension: Regulation
S-ID
Upon Written Request, Copies Available From: Securities and Exchange
Commission, Office of FOIA Services, 100 F Street NE, Washington, DC
20549-2736
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 (the ``Commission'') has submitted to the Office of
Management and Budget a request for extension of the previously
approved collection of information discussed below.
Regulation S-ID (17 CFR 248), including the information collection
requirements thereunder, is designed to better protect investors from
the risks of identity theft. Under Regulation S-ID, SEC-regulated
entities are required to develop and implement reasonable policies and
procedures to identify, detect, and respond to relevant red flags (the
``Identity Theft Red Flags Rules'') and, in the case of entities that
issue credit or debit cards, to assess the validity of, and communicate
with cardholders regarding, address changes. Section 248.201 of
Regulation S-ID includes the following information collection
requirements for each SEC-regulated entity that qualifies as a
``financial institution'' or ``creditor'' under Regulation S-ID and
that offers or maintains covered accounts: (i) Creation and periodic
updating of an identity theft prevention program (``Program'') that is
approved by the board of directors, an appropriate committee thereof,
or a designated senior
[[Page 31042]]
management employee; (ii) periodic staff reporting to the board of
directors on compliance with the Identity Theft Red Flags Rules and
related guidelines; and (iii) training of staff to implement the
Program. Section 248.202 of Regulation S-ID includes the following
information collection requirements for each SEC-regulated entity that
is a credit or debit card issuer: (i) Establishment of policies and
procedures that assess the validity of a change of address notification
if a request for an additional or replacement card on the account
follows soon after the address change; and (ii) notification of a
cardholder, before issuance of an additional or replacement card, at
the previous address or through some other previously agreed-upon form
of communication, or alternatively, assessment of the validity of the
address change request through the entity's established policies and
procedures.
SEC staff estimates of the hour burdens associated with section
248.201 under Regulation S-ID include the one-time burden of complying
with this section for newly-formed SEC-regulated entities, as well as
the ongoing costs of compliance for all SEC-regulated entities. All
newly-formed financial institutions and creditors would be required to
conduct an initial assessment of covered accounts, which SEC staff
estimates would entail a one-time burden of 2 hours. Staff estimates
that this burden would result in a cost of $910 to each newly-formed
financial institution or creditor.\1\ To the extent a financial
institution or creditor offers or maintains covered accounts, SEC staff
estimates that the financial institution or creditor would also incur a
one-time burden of 25 hours to develop and obtain board approval of a
Program, and a one-time burden of 4 hours to train the financial
institution's or creditor's staff, for a total of 29 additional burden
hours. Staff estimates that these burdens would result in additional
costs of $15,603 for each financial institution or creditor that offers
or maintains covered accounts.\2\
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\1\ This estimate is based on the following calculation: 2 hours
x $455 (hourly rate for internal counsel) = $910. See infra note 2
(discussing the methodology for estimating the hourly rate for
internal counsel).
\2\ SEC staff estimates that, of the 29 hours incurred to
develop and obtain board approval of a Program and train the
financial institution's or creditor's staff, 10 hours will be spent
by internal counsel at an hourly rate of $455, 17 hours will be
spent by administrative assistants at an hourly rate of $89, and 2
hours will be spent by the board of directors as a whole at an
hourly rate of $4,770. Thus, the estimated $15,603 in additional
costs is based on the following calculation: (10 hours x $455 =
$4,550) + (17 hours x $89 = $1,513) + (2 hours x $4,770 = $9,540) =
$15,603.
The cost estimate for internal counsel is derived from SIFMA's
Management & Professional Earnings in the Securities Industry 2013,
modified to account for an 1800-hour work-year and multiplied by
5.35 to account for bonuses, entity size, employee benefits, and
overhead, and adjusted for inflation. The cost estimate for
administrative assistants is derived from SIFMA's Office Salaries in
the Securities Industry 2013, modified to account for an 1800-hour
work-year and multiplied by 2.93 to account for bonuses, entity
size, employee benefits, and overhead, and adjusted for inflation.
The cost estimate for the board of directors is derived from
estimates made by SEC staff regarding typical board size and
compensation that is based on information received from fund
representatives and publicly-available sources, and adjusted for
inflation.
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SEC staff estimates that approximately 571 SEC-regulated financial
institutions and creditors are newly formed each year.\3\ Each of these
571 entities will need to conduct an initial assessment of covered
accounts, for a total of 1,142 hours at a total cost of $519,610.\4\ Of
these 571 entities, staff estimates that approximately 90% (or 514)
maintain covered accounts.\5\ Accordingly, staff estimates that the
additional initial burden for SEC-regulated entities that are likely to
qualify as financial institutions or creditors and maintain covered
accounts is 14,906 hours at an additional cost of $8,019,942.\6\ Thus,
the total initial estimated burden for all newly-formed SEC-regulated
entities is 16,048 hours at a total estimated cost of $8,539,552.\7\
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\3\ Based on a review of new registrations typically filed with
the SEC each year, SEC staff estimates that approximately 1,277
investment advisers, 109 broker dealers, 34 investment companies,
and 2 ESCs typically apply for registration with the SEC or
otherwise are newly formed each year, for a total of 1,422 entities
that could be financial institutions or creditors. Of these, staff
estimates that all of the investment companies, ESCs, and broker-
dealers are likely to qualify as financial institutions or
creditors, and 33% of investment advisers (or 426) are likely to
qualify. See Identity Theft Red Flags, Investment Company Act
Release No. 30456 (Apr. 10, 2013) (``Adopting Release'') at n.190
(discussing the staff's analysis supporting its estimate that 33% of
investment advisers are likely to qualify as financial institutions
or creditors). We therefore estimate that a total of 571 total
financial institutions or creditors will bear the initial one-time
burden of assessing covered accounts under Regulation S-ID.
\4\ These estimates are based on the following calculations: 571
entities x 2 hours = 1,142 hours; 571 entities x $910 = $519,610.
\5\ In the Proposing Release, the SEC requested comment on the
estimate that approximately 90% of all financial institutions and
creditors maintain covered accounts; the SEC received no comments on
this estimate.
\6\ These estimates are based on the following calculations: 514
financial institutions and creditors that maintain covered accounts
x 29 hours = 14,906 hours; 514 financial institutions and creditors
that maintain covered accounts x $15,603 = $8,019,942.
\7\ These estimates are based on the following calculations:
1,142 hours + 14,906 hours = 16,048 hours; $519,610 + $8,019,942 =
$8,539,552.
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Each financial institution and creditor would be required to
conduct periodic assessments to determine if the entity offers or
maintains covered accounts, which SEC staff estimates would entail an
annual burden of 1 hour per entity. Staff estimates that this burden
would result in an annual cost of $455 to each financial institution or
creditor.\8\ To the extent a financial institution or creditor offers
or maintains covered accounts, staff estimates that the financial
institution or creditor also would incur an annual burden of 2.5 hours
to prepare and present an annual report to the board, and an annual
burden of 7 hours to periodically review and update the Program
(including review and preservation of contracts with service providers,
as well as review and preservation of any documentation received from
service providers). Staff estimates that these burdens would result in
additional annual costs of $8,638 for each financial institution or
creditor that offers or maintains covered accounts.\9\
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\8\ This estimate is based on the following calculation: 1 hour
x $455 (hourly rate for internal counsel) = $455. See supra note 2
(discussing the methodology for estimating the hourly rate for
internal counsel).
\9\ Staff estimates that, of the 9.5 hours incurred to prepare
and present the annual report to the board and periodically review
and update the Program, 8.5 hours will be spent by internal counsel
at an hourly rate of $455, and 1 hour will be spent by the board of
directors as a whole at an hourly rate of $4,770. Thus, the
estimated $7,874 in additional annual costs is based on the
following calculation: (8.5 hours x $455 = $3,868) + (1 hour x
$4,770 = $4,770) = $8,638. See supra note 2 (discussing the
methodology for estimating the hourly rate for internal counsel and
the board of directors).
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SEC staff estimates that there are 9,915 SEC-regulated entities
that are either financial institutions or creditors, and that all of
these will be required to periodically review their accounts to
determine if they offer or maintain covered accounts, for a total of
9,915 hours for these entities at a total cost of $4,511,325.\10\ Of
these 9,915 entities,
[[Page 31043]]
staff estimates that approximately 90 percent, or 8,924, maintain
covered accounts, and thus will need the additional burdens related to
complying with the rules.\11\ Accordingly, staff estimates that the
additional annual burden for SEC-regulated entities that qualify as
financial institutions or creditors and maintain covered accounts is
84,778 hours at an additional cost of $77,085,512.\12\ Thus, the total
estimated ongoing annual burden for all SEC-regulated entities is
94,693 hours at a total estimated annual cost of $81,596,837.\13\
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\10\ Based on a review of entities that the SEC regulates, SEC
staff estimates that, as of September 30, 2021, there are
approximately 14,705 investment advisers, 3,533 broker-dealers,
1,380 active open-end investment companies, and 100 ESCs. Of these,
staff estimates that all of the broker-dealers, open-end investment
companies and ESCs are likely to qualify as financial institutions
or creditors. We also estimate that approximately 33% of investment
advisers, or 4,902 investment advisers, are likely to qualify. See
Adopting Release, supra note 3, at n.190 (discussing the staff's
analysis supporting its estimate that 33% of investment advisers are
likely to qualify as financial institutions or creditors). We
therefore estimate that a total of 9,915 financial institutions or
creditors will bear the ongoing burden of assessing covered accounts
under Regulation S-ID. (The SEC staff estimates that the other types
of entities that are covered by the scope of the SEC's rules will
not be financial institutions or creditors and therefore will not be
subject to the rules' requirements.)
The estimates of 9,915 hours and $3,784,800 are based on the
following calculations: 9,915 financial institutions and creditors x
1 hour = 9,915 hours; 9,915 financial institutions and creditors x
$455 = $4,511,325.
\11\ See supra note 5 and accompanying text. If a financial
institution or creditor does not maintain covered accounts, there
would be no ongoing annual burden for purposes of the PRA.
\12\ These estimates are based on the following calculations:
8,924 financial institutions and creditors that maintain covered
accounts x 9.5 hours = 84,778 hours; 8,924 financial institutions
and creditors that maintain covered accounts x $8,638 = $77,085,512.
\13\ These estimates are based on the following calculations:
9,915 hours + 84,778 hours = 94,693 hours; $4,511,325 + $77,085,512
= $81,596,837.
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The collections of information required by section 248.202 will
apply only to SEC-regulated entities that issue credit or debit
cards.\14\ SEC staff understands that SEC-regulated entities generally
do not issue credit or debit cards, but instead partner with other
entities, such as banks, that issue cards on their behalf. These other
entities, which are not regulated by the SEC, are already subject to
substantially similar change of address obligations pursuant to the
Agencies' identity theft red flags rules. Therefore, staff does not
expect that any SEC-regulated entities will be subject to the
information collection requirements of section 248.202, and
accordingly, staff estimates that there is no hour or cost burden for
SEC-regulated entities related to section 248.202.
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\14\ Sec. 248.202(a).
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In total, SEC staff estimates that the aggregate annual information
collection burden of Regulation S-ID is 110,741 hours (16,048 hours +
94,693 hours). This estimate of burden hours is made solely for the
purposes of the Paperwork Reduction Act and is not derived from a
quantitative, comprehensive, or even representative survey or study of
the burdens associated with Commission rules and forms. Compliance with
Regulation S-ID, including compliance with the information collection
requirements thereunder, is mandatory for each SEC-regulated entity
that qualifies as a ``financial institution'' or ``creditor'' under
Regulation S-ID (as discussed above, certain collections of information
under Regulation S-ID are mandatory only for financial institutions or
creditors that offer or maintain covered accounts). Responses will not
be kept confidential. 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.
The public may view the background documentation for this
information collection at the following website, <a href="http://www.reginfo.gov">www.reginfo.gov</a>.
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 email to:
<a href="/cdn-cgi/l/email-protection#0e4267606a7d6f772043204f6c6f7a6b4e61636c206b617e20696178"><span class="__cf_email__" data-cfemail="da96b3b4bea9bba3f497f49bb8bbaebf9ab5b7b8f4bfb5aaf4bdb5ac">[email protected]</span></a>; and (ii) David Bottom, Director/Chief
Information Officer, Securities and Exchange Commission, c/o John R.
Pezzullo, 100 F Street NE, Washington, DC 20549 or send an email to:
<a href="/cdn-cgi/l/email-protection#82d2d0c3ddcfe3ebeee0edfac2f1e7e1ace5edf4"><span class="__cf_email__" data-cfemail="2e7e7c6f71634f47424c41566e5d4b4d00494158">[email protected]</span></a>. Written comments and recommendations for the
proposed information collection should be sent within 30 days of
publication June 21, 2022 of this notice to <a href="http://www.reginfo.gov/public/do/PRAMain">www.reginfo.gov/public/do/PRAMain</a>. Find this particular information collection by selecting
``Currently under 30-day Review--Open for Public Comments'' or by using
the search function.
Dated: May 16, 2022.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-10814 Filed 5-19-22; 8:45 am]
BILLING CODE 8011-01-P
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