costs for the preparation and review of relationship summary
amendments.
d. Incremental Increase to Form ADV Hourly and External Cost Burdens
Attributable to Form ADV Part 3 Amendments
    For existing and newly-registered advisers with relationship
summary obligations, the additional burden attributable to amendments
to Form ADV to add Part 3: Form CRS, (including the initial preparation
and filing of the relationship summary and amendments thereto) totals
73,355 hours,\1250\ or 8.25 hours per adviser,\1251\ and a monetized
cost of $20,025,915, or $2,252 per adviser.\1252\ The incremental
external legal and compliance cost is estimated to be $7,331,370.\1253\
---------------------------------------------------------------------------

    \1250\ 59,273 hours for initial preparation and filing of the
relationship summary + 14,082 hours for amendments to the
relationship summary = 73,355 total aggregate annual hour burden
attributable to the Form ADV amendments to add Part 3: Form CRS.
    \1251\ 73,355 hours/(8,235 existing advisers + 656 newly
registered advisers) = 8.25 hours per adviser.
    \1252\ 73,355 total aggregate annual hour burden for preparing,
filing, and amending a relationship summary. We believe that
performance of this function will most likely be equally allocated
between a senior compliance examiner and a compliance manager. Data
from the SIFMA Management and Professional Earnings Report suggest
that costs for these positions are $237 and $309 per hour,
respectively. 73,355 hours x 50% x $237 = $8,692,568. 73,355 hours x
50% x $309 = $11,333,348. $8,692,568 + $11,333,348 = $20,025,915.
$20,025,915/(8,235 existing registered advisers + 656 newly
registered advisers) = $2,252 per adviser.
    \1253\ See supra footnote 1242.

---------------------------------------------------------------------------

3. Total Revised Burden Estimates for Form ADV
a. Revised Hourly and Monetized Value of Hourly Burdens
    As discussed above, the currently approved total aggregate annual
hour burden for all registered advisers completing, amending, and
filing Form ADV (Part 1 and Part 2) with the Commission is 363,082
hours, or a blended average per adviser burden of 23.77 hours, with a
monetized cost of $92,404,369, or $6,051 per adviser. This includes the
total annual hour burden for registered advisers of 351,386 hours, or
29.22 hours per registered adviser, and 11,696 hours for exempt
reporting advisers, or 3.60 hours per exempt reporting adviser. For
purposes of updating the total information collection based on the
amendments to Form ADV, we consider three categories of respondents, as
noted above: (i) Existing and newly-registered advisers preparing and
filing a relationship summary, (ii) registered advisers with no
obligation to prepare and file a relationship summary, and (iii) exempt
reporting advisers. One commenter said that the current Form ADV
requirements are a burden to smaller firms and that the currently
approved burdens for Form ADV Parts 1 and 2 are too low.\1254\ We
disagree. We recognize that the burden for some advisers will exceed
our estimate and the burden for others will be less due to the nature
of their business, but we continue to believe that on average our
estimates are appropriate for purposes of the PRA analysis. For
example, the current burden estimates for Form ADV Parts 1 and 2 range
from 15 hours for smaller advisers to 1989 hours for larger
advisers.\1255\
---------------------------------------------------------------------------

    \1254\ See Marotta Letter.
    \1255\ See supra footnote 1221.
---------------------------------------------------------------------------

    For existing and newly-registered advisers preparing and filing a
relationship summary, including amendments to the disclosure, the total
annual collection of information burden for preparing all of Form ADV,
updated to reflect the amendments to Form ADV, equals 37.47 hours per
adviser, with 8.25 hours attributable to the adopted amendments.\1256\
On an aggregate basis, this totals 333,146 hours for existing and newly
registered advisers, with a monetized value of $90,978,858.\1257\
---------------------------------------------------------------------------

    \1256\ 29.22 hours + 8.25 hours for increase in burden
attributable to initial preparation and filing of, and amendments
to, relationship summary = 37.47 hours total.
    \1257\ 37.47 hours x (8,235 existing RIAs required to prepare a
relationship summary + 656 newly registered RIAs required to prepare
a relationship summary) = 333,146 total aggregate annual hour burden
for preparing, filing and amending a relationship summary. We
believe that performance of this function will most likely be
equally allocated between a senior compliance examiner and a
compliance manager. Data from the SIFMA Management and Professional
Earnings Report suggest that costs for these positions are $237 and
$309 per hour, respectively. 333,146 hours x 0.5 x $237 =
$39,477,801. 333,146 hours x 0.5 x $309 = $51,471,057. $39,477,801 +
$51,471,057 = $90,948,858.
---------------------------------------------------------------------------

    As noted above, we estimate 5,064 of existing registered advisers
will not have retail investors; therefore, they will not be obligated
to prepare and file relationship summaries, so their annual per adviser
hour burden will remain unchanged.\1258\ To that end, using the
currently approved total annual hour estimate of 29.22 hours per
registered investment adviser to prepare and amend Form ADV, we
estimate that the updated annual hourly burden for all existing and
newly-registered investment advisers not required to prepare a
relationship summary will be 164,655,\1259\ with a monetized value of
$44,950,816.\1260\ The revised total annual collection of information
burden for exempt reporting advisers, using the currently approved
estimate of 3.60 hours per exempt reporting adviser, will be 16,996
hours,\1261\ for a monetized cost of $4,639,908, or $983 per exempt
reporting adviser.\1262\
---------------------------------------------------------------------------

    \1258\ 13,299 registered investment advisers--8,235 registered
investment advisers with retail investors = 5,064 registered
investment advisers without retail investors.
    \1259\ 29.22 hours x (5,064 existing and 571 newly-registered
investment advisers without retail investors) = approximately
164,655 total annual hour burden for RIAs not preparing a
relationship summary.
    \1260\ We believe that performance of this function for
registered advisers will most likely be equally allocated between a
senior compliance examiner and a compliance manager. Data from the
SIFMA Management and Professional Earnings Report suggest that costs
for these positions are $237 and $309 per hour, respectively.
164,655 hours x 50% x $237 = $19,511,618. 164,655 hours x 50% x $309
= $25,439,198. $19,511,618 + $25,439,198 = $44,950,816.
    \1261\ 3.60 hours x 4,280 exempt reporting advisers currently +
441 new exempt reporting advisers = 16,996 hours.
    \1262\ As with preparation of the Form ADV for registered
advisers, we believe that performance of this function for exempt
reporting advisers will most likely be equally allocated between a
senior compliance examiner and a compliance manager. Data from the
SIFMA Management and Professional Earnings Report suggest that costs
for these positions are $237 and $309 per hour, respectively. 16,996
hours x 0.5 x $237 = $2,014,026. 16,996 hours x 0.5 x $309 =
$2,625,882. $2,014,026 + $2,625,882 = $4,639,908. $4,639,908/(4,280
exempt reporting advisers currently + 441 new exempt reporting
advisers) = $983 per exempt reporting adviser.
---------------------------------------------------------------------------

    In summary, factoring in the amendments to Form ADV to add Part 3,
the revised annual aggregate burden for Form ADV for all registered
advisers and exempt reporting advisers will be 514,797,\1263\ for a
monetized cost of $140,569,582.\1264\ This results in an annual blended
average per adviser burden for Form ADV of 29.28 hours \1265\ and
$7,996 per adviser.\1266\ This is an increase of 151,715 hours, \1267\
or $48,165,213 \1268\ in the monetized value of the hour burden, from
the currently approved annual aggregate burden estimates, increases
which are attributable primarily to the larger registered investment
adviser and exempt reporting adviser population since the most recent
approval, adjustments for inflation, and the amendments to Form ADV to
add Part 3.
---------------------------------------------------------------------------

    \1263\ 333,146 annual hour burden for RIAs preparing
relationship summary + 164,655 annual hour burden for RIAs not
preparing relationship summary + 16,996 annual hour burden for
exempt reporting advisers = 514,797 total updated Form ADV annual
hour burden.
    \1264\ $90,948,858 for RIAs preparing relationship summary +
$44,950,816 for RIAs not preparing relationship summary + $4,639,908
for exempt reporting advisers = $140,539,582 total updated Form ADV
annual monetized hourly burden.
    \1265\ 514,797/(13,299 registered investment advisers + 4,280
exempt reporting advisers) = 29.28 hours per adviser.
    \1266\ $140,569,582/13,299 registered investment advisers +
4,280 exempt reporting advisers) = $7,995 per adviser.
    \1267\ 514,797 hours estimated--363,082 hours currently approved
= 151,715 hour increase in aggregate annual hourly burden.
    \1268\ $140,569,582 monetized hourly burden--$92,404,369 =
$48,135,213 increase in aggregate annual monetized hourly burden.
---------------------------------------------------------------------------

b. Revised Estimated External Costs for Form ADV
    The currently approved total annual collection of information
burden estimate for Form ADV anticipates that there will be external
costs, including (i) a one-time initial cost for outside legal and
compliance consulting fees in connection with the initial preparation
of Part 2 of Form ADV, and (ii) the cost for investment advisers to
private funds to report the fair value of their private fund
assets.\1269\ The currently approved annual cost burden for Form ADV is
$13,683,500, $3,600,000 of which is attributable to external costs
incurred by new advisers to prepare Form ADV Part 2, and $10,083,500 of
which is attributable to obtaining the fair value of certain private
fund assets.\1270\ We do

not expect any change in the annual external costs relating to new
advisers preparing Form ADV Part 2. Due to the slightly higher number
of registered advisers with private funds, however, the aggregate cost
of obtaining the fair value of private fund assets is likely to be
higher. We estimate that 6% of registered advisers have at least one
private fund client that may not be audited. Based on IARD system data
as of December 31, 2018, 4,806 registered advisers advise private
funds. We therefore estimate that approximately 288 registered advisers
may incur costs of $37,625 each on an annual basis, for an aggregate
annual total cost of $10,836,000.\1271\
---------------------------------------------------------------------------

    \1269\ See 2016 Form ADV Paperwork Reduction Analysis, supra
footnote 1209, at 81 FR 60452. We do not anticipate that the
amendments we are adopting to add Form ADV Part 3 will affect those
per adviser cost burden estimates for outside legal and compliance
consulting fees. The estimated external costs of outside legal and
compliance consulting services for the relationship summary are in
addition to the estimated hour burden discussed above.
    \1270\ See 2016 Form ADV Paperwork Reduction Analysis, supra
footnote 1209, at 81 FR at 60452-53. The $10,083,500 is based on
4,469 registered advisers reporting private fund activity as of May
16, 2016.
    \1271\ 6% x 4,806 = 288 advisers needing to obtain the fair
value of certain private fund assets. 288 advisers x $37,625 =
$10,836,000.
---------------------------------------------------------------------------

    In summary, taking into account (i) a one-time initial cost for
outside legal and compliance consulting fees in connection with the
initial preparation of Part 2 of Form ADV, (ii) the cost for investment
advisers to private funds to report the fair value of their private
fund assets, and (iii) the incremental external legal or compliance
costs for the preparation of the relationship summary, we estimate the
annual aggregate external cost burden of the Form ADV information
collection will be $21,767,370, or $1,637 per registered adviser.\1272\
This represents an $8,083,870 increase from the current external costs
estimate for the information collection.\1273\
---------------------------------------------------------------------------

    \1272\ $3,600,000 for preparation of Form ADV Part 2 +
$10,836,000 for registered investment advisers to fair value their
private fund assets + $7,331,370 (see supra footnote 1242) to
prepare relationship summary = $21,767,370 in total external costs
for Form ADV. $21,767,370/13,299 total registered advisers as of
December 31, 2018 = $1,637 per registered adviser.
    \1273\ $21,767,370--$13,683,500 = $8,083,870.
---------------------------------------------------------------------------

B. Rule 204-2 Under the Advisers Act

    Under section 204 of the Advisers Act, investment advisers
registered or required to register with the Commission under section
203 of the Advisers Act must make and keep for prescribed periods such
records (as defined in section 3(a)(37) of the Exchange Act), furnish
copies thereof, and make and disseminate such reports as the
Commission, by rule, may prescribe as necessary or appropriate in the
public interest or for the protection of investors. Rule 204-2 sets
forth the requirements for maintaining and preserving specified books
and records.
    The amendments to rule 204-2 will require registered advisers to
retain copies of each relationship summary. Investment advisers will
also be required to maintain each amendment to the relationship summary
as well as to make and preserve a record of dates that each
relationship summary and each amendment was delivered to any client or
to any prospective client who subsequently becomes a client. These
records will be required to be maintained in the same manner, and for
the same period of time, as other books and records required to be
maintained for the Form ADV Part 2A brochure under the Advisers Act
rule 204-2(a)(14)(i), to allow regulators to access the relationship
summary during an examination.\1274\
---------------------------------------------------------------------------

    \1274\ Specifically, investment advisers will be required to
maintain and preserve records of the relationship summary in an
easily accessible place for not less than five years from the end of
the fiscal year during which the last entry was made on such record,
the first two years in an appropriate office of the investment
adviser. See Advisers Act rule 204-2(e)(1).
---------------------------------------------------------------------------

    As discussed above in Section II.E several commenters suggested
that our estimated burdens for the relationship summary recordkeeping
obligations were too low.\1275\ Some commenters argued that keeping
records of when a relationship summary was given to prospective retail
clients would be unnecessarily burdensome or not feasible, and was not
adequately considered in the Commission's burden estimates.\1276\ One
of these commenters said that it would be difficult for firms to
integrate pre-relationship delivery dates into their operational
systems and procedures, and that there is no way to track when a
disclosure is accessed on a website.\1277\
---------------------------------------------------------------------------

    \1275\ See, e.g., CCMC Letter; SIFMA Letter. See also NSCP
Letter (estimating 80-500 hours to prepare, deliver, and file the
relationship summary, including recordkeeping policies and
procedures).
    \1276\ See, e.g., CCMC Letter; SIFMA Letter; Committee of
Annuity Insurers Letter; Edward Jones Letter. A few others stated
that creating recordkeeping policies and procedures relating to how
professionals respond to ``key questions'' would be burdensome and
extremely difficult. See, e.g., LPL Financial Letter. Although the
final instructions require ``conversation starter'' questions that
are similar to the proposed ``key questions,'' we are not increasing
the burden as urged by commenters. As discussed in Section V.A.2.a.
above, we increased the burden estimates for the initial preparation
of the relationship summary, acknowledging, among other things, that
certain advisers that provide automated investment advisory services
will incur additional burdens to develop written answers to the
conversation starters and make those available on their websites
with a hyperlink to the appropriate page in the relationship summary
for these documents (i.e., robo-advisers). However, we do not expect
these advisers to incur additional recordkeeping burdens under
amendments to rule 204-2 because we are not establishing new or
separate recordkeeping obligations related to the conversation
starters or the answers provided by firms in response to the
conversation starters. See supra footnotes 814-816.
    \1277\ See SIFMA Letter.
---------------------------------------------------------------------------

    Based on our experience with similar requirements for Form ADV Part
2A brochures, we disagree with commenters that retaining records of
when a relationship summary was given to prospective retail clients
would be significantly more burdensome for investment advisers than our
proposed estimate of 0.2 hours. While we recognize that this
recordkeeping requirement will impose some additional burden on
investment advisers that must prepare and deliver relationship
summaries, advisers are already required to keep similar records for
the delivery of the Form ADV Part 2A brochures and the currently
approved burden for that requirement is 1.5 hours. Accordingly, based
on our experience, advisers already maintain this information with
respect to their brochures and should be able to update their systems
to also include the relationship summary. We also do not expect that
investment advisers will incur additional external costs to make and
keep these records because we believe that advisers will create and
retain them in a manner similar to their current recordkeeping
practices for the Form ADV Part 2A brochure.
    This collection of information is found at 17 CFR 275.204-2 and is
mandatory. The Commission staff uses the collection of information in
its examination and oversight program. Requiring maintenance of these
disclosures as part of the firm's books and records will facilitate the
Commission's ability to inspect for and enforce compliance with firms'
obligations with respect to the relationship summary. The information
generally is kept confidential.\1278\
---------------------------------------------------------------------------

    \1278\ See section 210(b) of the Advisers Act.
---------------------------------------------------------------------------

    The likely respondents to this collection of information are all of
the approximately 13,299 advisers currently registered with the
Commission. We estimate that based on updated IARD data as of December
31, 2018, 8,235 existing advisers will be subject to the amended
provisions of rule 204-2 to preserve the relationship summary as a
result of the adopted amendments.
1. Changes in Burden Estimates and New Burden Estimates
    The currently approved annual aggregate burden for rule 204-2 is
2,199,791 hours, with a total annual aggregate monetized cost burden of
approximately $130,316,112, based on an estimate of 12,024 registered
advisers, or 183 hours per registered

adviser.\1279\ We estimate that the requirements to make and keep
copies of each relationship summary under the amendments to rule 204-2
will result in an increase in the collection of information burden
estimate by 0.2 hours \1280\ for each of the estimated 8,235 registered
advisers with relationship summary obligations, resulting in a total of
183.2 hours per adviser. This will yield an annual estimated aggregate
burden of 1,508,652 hours under amended rule 204-2 for all registered
advisers with relationship summary obligations,\1281\ for a monetized
cost of $95,588,191, or $11,607 per adviser.\1282\ In addition, the
5,064 advisers not subject to the amendments will continue to be
subject to an unchanged burden of 183 hours under rule 204-2, or a
total aggregate annual hour burden of 926,712,\1283\ for a monetized
cost of $58,716,472, or $11,595 per adviser.\1284\ The increase in the
collection of information burden estimate by 0.2 hours as a result of
the amendments to rule 204-2 will therefore result in an annual
monetized cost of $12 per adviser.\1285\ In summary, taking into
account the estimated annual burden of registered advisers that will be
required to maintain records of the relationship summary, as well as
the estimated annual burden of registered advisers that do not have
relationship summary obligations and whose information collection
burden is unchanged, the revised annual aggregate burden for all
respondents to rule 204-2, under the amendments, is estimated to be
2,435,364 total hours,\1286\ for a monetized cost of
$154,304,663.\1287\
---------------------------------------------------------------------------

    \1279\ See 2016 Form ADV Paperwork Reduction Analysis, supra
footnote 1209, at 81 FR at 60454-55.
    \1280\ In the Paperwork Reduction Act analysis for amendments to
Form ADV adopted in 2016, we estimated that 1.5 hours would be
required for each adviser to make and keep records relating to (i)
the calculation of performance the adviser distributes to any person
and (ii) all written communications received or sent relating to the
adviser's performance. Because the burden of preparing the
relationship summary is already included in the collection of
information estimates for Form ADV, we estimate that recordkeeping
burden for the relationship summary will be considerably less than
1.5 hours and estimate that 0.2 hours is appropriate.
    \1281\ 8,235 registered investment advisers required to prepare
relationship summary x 183.2 hours = 1,508,652 hours.
    \1282\ As with our estimates relating to the previous amendments
to Advisers Act rule 204-2 (see 2016 Form ADV Paperwork Reduction
Analysis, supra footnote 1209, at 81 FR at 60454-55), we expect that
performance of this function will most likely be allocated between
compliance clerks and general clerks, with compliance clerks
performing 17% of the function and general clerks performing 83% of
the function. Data from the SIFMA Office Salaries in the Securities
Industry Report, modified to account for an 1,800-hour work year and
multiplied by 2.93 to account for bonuses, firm size, employee
benefits, and overhead, suggest that costs for these position are
$70 and $62, respectively. (17% x 1,508,652 hours x $70) + (83% x
1,508,652 hours x $62) = $95,588,191. $95,588,191/8,235 advisers =
$11,607 per adviser.
    \1283\ 5,064 registered investment advisers not required to
prepare the relationship summary x 183 hours = 926,712.
    \1284\ As with our estimates relating to the previous amendments
to Advisers Act rule 204-2 (see 2016 Form ADV Paperwork Reduction
Analysis, supra footnote 1209, at 81 FR at 60454-55, we expect that
performance of this function will most likely be allocated between
compliance clerks and general clerks, with compliance clerks
performing 17% of the function and general clerks performing 83% of
the function. Data from the SIFMA Office Salaries Report suggest
that costs for these positions are $70 and $62, respectively. (17% x
926,712 hours x $70) + (83% x 926,712 hours x $62) = $58,716,473.
$58,716,473/5,064 = $11,595 per adviser.
    \1285\ $11607 aggregate burden per adviser subject to
relationship summary-$11,595 aggregate burden per adviser not
subject to the relationship summary = $12.
    \1286\ 8,235 registered investment advisers required to prepare
relationship summary x 183.2 hours = 1,508,652 hours. 5,064
registered investment advisers not required to prepare the
relationship summary x 183 hours = 926,712 hours. 1,508,652 hours +
26,712 hours = 2,435,364 hours.
    \1287\ $95,588,191 + $58,716,473 = $154,304,664.
---------------------------------------------------------------------------

2. Revised Annual Burden Estimates
    As noted above, the approved annual aggregate burden for rule 204-2
is currently 2,199,791 hours based on an estimate of 12,024 registered
advisers, or 183 hours per registered adviser.\1288\ The revised annual
aggregate hourly burden for rule 204-2 will be 2,435,364 \1289\ hours,
represented by a monetized cost of $154,304,664,\1290\ based on an
estimate of 8,235 registered advisers with the relationship summary
obligation and 5,064 registered advisers without, as noted above. This
represents an increase of 235,573 \1291\ annual aggregate hours in the
hour burden and an annual increase of $23,988,552 from the currently
approved total aggregate monetized cost for rule 204-2.\1292\ These
increases are attributable to a larger registered investment adviser
population since the most recent approval and adjustments for
inflation, as well as the rule 204-2 amendments relating to the
relationship summary as discussed in this release.
---------------------------------------------------------------------------

    \1288\ 2,199,791 hours/12,024 registered advisers = 183 hours
per adviser.
    \1289\ See supra footnote 1286.
    \1290\ See supra footnote 1287.
    \1291\ 2,435,364 hours-2,199,791 hours = 235,573 hours.
    \1292\ $154,304,664-$130,316,112 = $23,988,552.
---------------------------------------------------------------------------

C. Rule 204-5 under the Advisers Act

    New rule 204-5 will require an investment adviser to deliver an
electronic or paper version of the relationship summary to each retail
investor before or at the time the adviser enters into an investment
advisory contract with the retail investor. The adviser also will make
a one-time initial delivery of the relationship summary to all existing
clients within a specified time period after the effective date of the
rule. Also with respect to existing clients, the adviser will deliver
the most recent relationship summary before or at the time of (i)
opening any new account that is different from the retail investor's
existing account(s); (ii) recommending that the retail investor roll
over assets from a retirement account into a new or existing account or
investment; or (iii) recommending or providing a new brokerage or
investment advisory service or investment that does not necessarily
involve the opening of a new account and would not be held in the
existing account.\1293\ The adviser will be required to post a current
version of its relationship summary prominently on its public website
(if it has one), and will be required to communicate any changes in an
amended relationship summary to retail investors who are existing
clients within 60 days, instead of 30 days as proposed, after the
amendments are required to be made and without charge.\1294\ The
investment adviser also must deliver a current relationship summary to
each retail investor within 30 days upon request. In a change from the
proposal, an adviser must make a copy of the relationship summary
available upon request without charge, and where a relationship summary
is delivered in paper format, the adviser may link to additional
information by including URL addresses, QR codes, or other means of
facilitating access to such information.\1295\ The adviser must also
include a telephone number where retail investors can request up-to-
date information and a copy of the relationship summary.\1296\
---------------------------------------------------------------------------

    \1293\ We are adopting these requirements instead of the
proposed requirements that advisers deliver the relationship summary
to existing retail investor clients before or at the time of opening
a new account that is different from the retail investor's existing
account or changes are made to the retail investor's existing
account(s) that would ``materially change'' the nature or scope of
the firm's relationship with the retail investor. See Proposing
Release, supra footnote 5 at Section II.C.2.
    \1294\ The communication can be made by delivering the
relationship summary or by communicating the information through
another disclosure that is delivered to the retail investor.
    \1295\ Additionally, we are adopting the instruction that if a
relationship summary is delivered in paper format as part of a
package of documents, the firm must ensure that the relationship
summary is the first among any documents that are delivered at that
time, substantially as proposed. See supra footnote 701.
    \1296\ This differs from the proposal, which required only firms
that do not have a public website to include a toll-free number that
retail investors may call to request documents. See supra footnote
609.

---------------------------------------------------------------------------

    As discussed further below, we received comments that our estimated
burdens for delivery of the relationship summary were too low. Some of
these comments focused on the administrative and operational burdens
related to monitoring for changes that would ``materially change'' the
nature and scope of the relationship and thereby require delivery to
existing clients and customers.\1297\ One commenter also argued that
imposing different delivery requirements for the Form ADV, Part 2
brochure and the relationship summary would create substantial
administrative burdens specifically for investment advisers.\1298\
Other comments focused on the recordkeeping burdens related to the
requirement to deliver the relationship summary to a new or prospective
retail investor.\1299\ As discussed further below, we made changes to
the proposal to require more specific triggers for initial delivery and
additional delivery to existing customers in order to replace the
requirements in response to comments. We discuss below the specific
separate delivery requirements and modifications.
---------------------------------------------------------------------------

    \1297\ See, e.g., Cambridge Letter; SIFMA Letter; LPL Financial
Letter.
    \1298\ Pickard Djinis and Pisarri Letter.
    \1299\ See supra footnotes 803-808.
---------------------------------------------------------------------------

    New rule 204-5 contains a collection of information requirement.
The collection of information is necessary to provide advisory clients,
prospective clients and the Commission with information about the
investment adviser and its business, conflicts of interest, and
personnel. Clients will use the information contained in the
relationship summary to determine whether to hire or retain an
investment adviser and what type of accounts and services are
appropriate for their needs. The Commission will use the information to
determine eligibility for registration with us and to manage our
regulatory and examination programs. This collection of information
will be found at 17 CFR 275.204-5 and will be mandatory. Responses will
not be kept confidential.
1. Respondents: Investment Advisers
    The likely respondents to this information collection will be the
approximately 8,235 investment advisers registered with the Commission
that will be required to deliver a relationship summary per new rule
204-5. We also note that these figures include the 318 registered
broker-dealers that are dually registered as investment advisers.\1300\
---------------------------------------------------------------------------

    \1300\ See supra footnote 863 and accompanying text.
---------------------------------------------------------------------------

2. Initial and Annual Burdens
a. Posting of the Relationship Summary to Website
    Under new rule 204-5, advisers will be required to post a current
version of their relationship summary prominently on their public
website (if they have one). In the Proposing Release, we estimated that
each adviser will incur 0.5 hours to prepare the posted relationship
summary, such as to ensure proper electronic formatting and to post the
disclosure to the adviser's website, if the adviser has one.\1301\
Although we did not receive any comments regarding burdens associated
with posting of the relationship summary to a public website, we are
increasing our estimate of the time from 0.5 to 1.5 hours based on the
staff's experience.\1302\ We do not anticipate that investment advisers
will incur additional external costs to post the relationship summary
to the adviser's website because advisers without a public website will
not be required to establish or maintain one, and advisers with a
public website have already incurred external costs to create and
maintain their websites. Additionally, external costs for the
preparation of the relationship summary are already included for the
collection of information estimates for Form ADV, in Section A.2.b,
above.
---------------------------------------------------------------------------

    \1301\ Proposing Release, supra footnote, 5 at section V.C.2.a.
    \1302\ See e.g., Optional internet Availability of Investment
Company Shareholder Reports, Investment Company Act Release No.
33115 (June 5, 2018) [83 FR 29158 (Jun. 22, 2018)] (estimating that
funds that already post shareholder reports on their websites will
require a half hour burden per fund to comply with the annual
compliance and posting requirements of rule 30e-3, and funds that do
not already post shareholder reports to their websites will require
one and half hours to post the required documents online). Posting
of the relationship summary under rule 204-5 pertains to one
document, which is similar to the shareholder report posting to
which rule 30e-3 applies.
---------------------------------------------------------------------------

    Based on IARD system data, 91.6% of investment advisers with
individual clients report having at least one public website.\1303\
Therefore, we estimate that 91.6% of the 8,235 existing and 656 newly
registered investment advisers with relationship summary obligations
will incur a total of 12,216 aggregate burden hours to post
relationship summaries to their websites,\1304\ with a monetized cost
of $757,407.\1305\ As with the initial preparation of the relationship
summary, we amortize the estimated initial burden associated with
posting the relationship summary over a three-year period.\1306\
Therefore, the total annual aggregate hourly burden related to the
initial posting of the relationship summary is estimated to be 4,072
hours, with a monetized cost of $252,469.\1307\ We did not receive
comments regarding burdens associated with posting of the relationship
summary to a public website.
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    \1303\ We estimated in the Proposing Release that 91.1 of
investment advisers with individual clients report at least one
public website, based on IARD system data as of December 31, 2017.
See Proposing Release, supra footnote 5 at Section V.C.1.
    \1304\ 1.5 hours to prepare and post the relationship summary x
91.6% x (8,235 existing advisers + 656 newly-registered advisers
with relationship summary obligations) = 12,216 hours.
    \1305\ Based on data from the SIFMA Office Salaries Report, we
expect that requirement for investment advisers to post their
relationship summaries to their websites will most likely be
performed by a general clerk at an estimated cost of $62 per hour.
1.5 hours per adviser x $62 = $93 in monetized costs per adviser.
$93 per adviser x 91.6% x (8,235 existing advisers + 656 newly
registered advisers) = $757,407 total aggregate monetized cost.
    \1306\ See 2016 Form ADV Paperwork Reduction Analysis, supra
footnote 1209.
    \1307\ 12,216 hours/3 years = 4,072 hours annually. $757,407/3
years = $252,469 in annualized monetized costs.
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b. Delivery to Existing Clients
(1) One-Time Initial Delivery to Existing Clients
    The burden for this new rule is based on each adviser with retail
investors having, on average, an estimated 3,985 clients who are retail
investors.\1308\ Although advisers may either deliver the relationship
summary separately, in a ``bulk delivery'' to clients, or as part of
the delivery of information that advisers already provide, such as the
annual Form ADV update, account statements or other periodic reports,
we base our estimates here on a ``bulk delivery'' to existing clients.
This is similar to the approach we took in estimating the delivery
costs for amendments to rule 204-3 under the Advisers Act, which
requires investment advisers to deliver their Form ADV Part 2A
brochures and brochure supplements to their clients.\1309\ As with the
estimates for rule 204-3, we estimate that advisers will require
approximately 0.02 hours to deliver the relationship summary to each
client.\1310\ We did not receive comments on the burdens specific to
delivering the relationship summary to

existing clients under new Rule 204-5. We estimate the total burden
hours for 8,235 advisers for initial delivery of the relationship
summary to existing clients to be 79.7 hours per adviser, or 708,613
total aggregate hours, for the first year after the rule is in
effect,\1311\ with a monetized cost of $4,941 \1312\ per adviser or
$43,930,431 in aggregate.\1313\ Amortized over three years, the total
annual hourly burden is estimated to be 26.57 hours per adviser, or
236,204 annual hours in aggregate,\1314\ with annual monetized costs of
$1,647 per adviser, or $14,643,477 in aggregate.\1315\ We do not expect
that investment advisers will incur external costs for the initial
delivery of the relationship summary to existing clients because we
estimate that advisers will make such deliveries along with another
required delivery, such as an interim or annual update to the Form ADV
Part 2A.
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    \1308\ This estimate is based on IARD system data as of December
31, 2018.
    \1309\ See Brochure Adopting Release, supra footnote 576, at 75
FR at 49259.
    \1310\ This is the same estimate we made in the Form ADV Part 2
proposal and for which we received no comment. Brochure Adopting
Release, supra footnote 576, at 75 FR at 49259 The burden for
preparing relationship summaries is already incorporated into the
burden estimate for Form ADV discussed above.
    \1311\ (0.02 hours per client x 3,985 retail clients per
adviser) = 79.7 hours per adviser. 79.7 hours per adviser x (8,235
existing advisers + 656 newly registered advisers) = 708,613 total
aggregate hours.
    \1312\ Based on data from the SIFMA Office Salaries Report, we
expect that initial delivery requirement to existing clients of rule
204-5 will most likely be performed by a general clerk at an
estimated cost of $62 per hour. 79.7 hours per adviser x $62 =
$4,941 in monetized costs per adviser. We estimate that advisers
will not incur any incremental postage costs because we estimate
that they will make such deliveries with another mailing the adviser
was already delivering to clients, such as interim or annual updates
to the Form ADV, or will deliver the relationship summary
electronically.
    \1313\ $4,941 in monetized costs per adviser x (8,235 existing
advisers + 656 newly registered advisers) = $43,930,431 in total
aggregate costs.
    \1314\ 79.7 initial hours per adviser/3 = 26.57 total annual
hours per adviser. 708,613 initial aggregate hours/3 = 236,204 total
annual aggregate hours.
    \1315\ $4,941 in monetized costs per adviser/3 = $1,647
annualized monetized cost per adviser. $43,930,431 initial aggregate
monetized cost/3 = $14,643,477 in total annual aggregate monetized
cost.
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(2) Additional Delivery to Existing Clients
    As discussed in Section II.C.3.c above, the proposed instructions
would have required investment advisers to deliver the relationship
summary to existing retail investor clients before or at the time firms
open a new account that is different from the retail investor's
existing account or changes are made to the retail investor's existing
account(s) that would ``materially change'' the nature or scope of the
firm's relationship with the retail investor. In response to comments
seeking additional clarity on when the ``materially change''
requirement would apply, and expressing concerns that there will be
additional supervisory, administrative, and operational processes
required, and burdens imposed, we replaced the ``materially change''
requirement with more concrete delivery triggers that firms could more
easily implement based on their existing systems and processes.\1316\
---------------------------------------------------------------------------

    \1316\ See supra footnotes 758-763 and accompanying text.
---------------------------------------------------------------------------

    Investment advisers will be required to deliver the relationship
summary to existing clients before or at the time they open a new
account that is different from the retail investor's existing
account(s), as proposed. In addition, in a change from the proposal,
delivery will be required before or at the time the adviser (i)
recommends that the retail investor roll over assets from a retirement
account into a new or existing account or investment, or (ii)
recommends or provides a new brokerage or investment advisory service
or investment that does not necessarily involve the opening of a new
account and would not be held in the existing account. We are adopting
these two triggers instead of the proposed requirement to deliver the
relationship summary before or at the time changes are made to the
existing account that would ``materially change'' the nature and scope
of the relationship to address commenters' requests for additional
guidance or examples of what would constitute a ``material change.''
\1317\ Commenters also described administrative and operational burdens
arising from this requirement and argued that our estimated burdens
were too low.\1318\ One commenter asserted that firms would be required
to build entirely new operational and supervisory processes to identify
asset movements that could trigger a delivery requirement.\1319\
Another commenter noted the challenges of designing a system that
distinguishes non-ordinary course events from routine account
changes.\1320\
---------------------------------------------------------------------------

    \1317\ See Prudential Letter; TIAA Letter; Cambridge Letter;
SIFMA Letter; LPL Financial Letter; Institute for Portfolio
Alternatives Letter.
    \1318\ See, e.g., SIFMA Letter; LPL Financial Letter.
    \1319\ See SIFMA Letter.
    \1320\ See LPL Letter.
---------------------------------------------------------------------------

    As discussed above, we replaced the ``materially change''
requirement with more specific triggers to be clearer about when a
relationship summary must be delivered.\1321\ While these specific
triggers will still impose operational and supervisory burdens on
firms, we believe that they are more easily identified and monitored,
such that firms will not incur significant burdens as described by
commenters to implement entirely new supervisory, administrative, and
operational processes needed to monitor events that cause a material
change. However, recognizing that some additional processes will be
necessary to implement these delivery triggers, we are increasing our
burden estimate from 0.02 to 0.04 hours. We now estimate that each
adviser will incur 16 hours per year to deliver the relationship
summary in these types of situations, and that delivery under these
circumstances will take place among 10% of an adviser's retail
investors annually.\1322\ We will therefore estimate a total annual
aggregate hours of 142,256,\1323\ with a monetized cost of $992 per
adviser \1324\ and $8,818,872 in aggregate.\1325\
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    \1321\ These more specific triggers are intended to address
circumstances that the proposed ``materially change'' sought to
address. See supra footnote 761 and accompanying text.
    \1322\ 10% of 3,985 retail clients per adviser x .04 hours to
deliver the relationship summary = 16 hours per adviser.
    \1323\ 16 hours x (8,235 existing advisers + 656 new advisers) =
142,256 total aggregate hours.
    \1324\ Based on data from the SIFMA Office Salaries Report, we
expect that delivery requirements of rule 204-5 will most likely be
performed by a general clerk at an estimated cost of $62 per hour.
16 hours per adviser x $62 = $992 per adviser. We estimate that
advisers will not incur any incremental postage costs in the
delivery of the relationship summary to existing clients for changes
in accounts, because we estimate that advisers will make such
deliveries with another mailing the adviser was already delivering
to clients, such as new account agreements and other documentation
normally required in such circumstances.
    \1325\ $992 in monetized costs per adviser x (8,235 existing
advisers + 656 newly registered advisers) = $8,819,872 in total
aggregate costs.
---------------------------------------------------------------------------

(3) Posting of Amended Relationship Summaries to websites and
Communicating Changes to Amended Relationship Summaries, Including by
Delivery
    Investment advisers will be required to amend their relationship
summaries within 30 days when any of the information becomes materially
inaccurate. Investment advisers also will be required to communicate
any changes in an amended relationship summary to existing clients who
are retail investors within 60 days, instead of 30 days as proposed,
after the updates are required to be made and without charge. We do not
expect this change to increase the PRA estimates.\1326\ The
communication can be made by delivering the relationship summary or
through another disclosure that is

delivered to the retail investor. This requirement is a change from the
proposed requirement but is substantively similar.\1327\ Commenters did
not comment on the estimated burden. We have determined not to change
the burden relative to the proposal.
---------------------------------------------------------------------------

    \1326\ As discussed in Section V.A.2.c., we have increased the
burden estimates for preparing amendments to the relationship
summary, acknowledging, among other things, that firms will incur
additional burdens to prepare and file amendments as a result of the
instructions that firms preparing amendments highlight the most
recent changes, and that additional disclosure showing the revised
text be attached as an exhibit to the unmarked relationship summary.
    \1327\ The proposed instructions would have required firms to
communicate updated information by delivering the amended
relationship summary or by communicating the information another
way. The revised instruction will eliminate the wording ``another
way'' and will clarify that the communication can be made through
another disclosure that is delivered to the retail investor. See
supra footnote 767.
---------------------------------------------------------------------------

    Based on the historical frequency of amendments made on Form ADV
Parts 1 and 2, we estimate that on average, each adviser preparing a
relationship summary will likely amend the disclosure an average of
1.71 times per year.\1328\ We are not changing the 0.5 hours estimates
to post the amendments to a public website, consistent with our
estimates at proposal. Using the same percentage of investment advisers
reporting public websites, 91.6% of 8,235 advisers will incur a total
annual burden of 0.86 hours per adviser, or 6,487 hours in
aggregate,\1329\ to post the amended relationship summaries to their
website. This translates into an annual monetized cost of $53.32 per
adviser, or $402,207 in the aggregate for existing registered advisers
with relationship summary obligations.\1330\
---------------------------------------------------------------------------

    \1328\ We estimated in the Proposing Release that each adviser
preparing a relationship summary will likely amend the disclosure an
average 1.81 times based on IARD system data as of December 31,
2017. See Proposing Release, supra footnote 5 at section
V.C.2.b.iii. We are updating the average number to 1.71 times per
year based on IARD system data as of December 31, 2018.
    \1329\ 0.5 hours to post the amendment x 1.71 amendments
annually = 0.86 hours per adviser annually to post amendments to the
website. 0.86 x 8,235 existing advisers amending the relationship
summary x 91.6% of advisers with public websites = 6,487 aggregate
annual hours to post amendments of the relationship summary.
    \1330\ Based on data from the SIFMA Office Salaries Report, we
expect that the posting requirements of rule 204-5 will most likely
be performed by a general clerk at an estimated cost of $62 per
hour. 0.86 hours per adviser x $62 = $53.32 per adviser. $53.32 per
adviser x 91.6% x 8,235 existing advisers = $402,207 in annual
monetized costs.
---------------------------------------------------------------------------

    For this requirement, we estimate that 50% of advisers will choose
to deliver the relationship summary to communicate the updated
information, and that the delivery will be made along with other
disclosures already required to be delivered. We did not receive
comments on this estimate. We believe that it is likely that the other
50% of advisers will incorporate all of the updated information in
their Form ADV Part 2, like the summary of material changes or other
disclosures, which they are already obligated to deliver in order to
avoid having to deliver two documents. We estimate a burden of 561,162
hours,\1331\ or 136.29 hours per adviser,\1332\ at a monetized cost of
$34,792,044 in aggregate,\1333\ or $8,450 per adviser,\1334\ for the
50% of advisers that choose to deliver amended relationship summaries
in order to communicate updated information.\1335\
---------------------------------------------------------------------------

    \1331\ 8,235 advisers amending the relationship summary x 3,985
retail clients per adviser x 50% delivering the amended relationship
summary to communicate updated information x 0.02 hours per delivery
x 1.71 amendments annually = 561,162 hours to deliver amended
relationship summaries.
    \1332\ 3,985 retail clients per adviser x 0.02 hours per
delivery x 1.71 amendments annually = 136.29 hours per adviser.
    \1333\ Based on data from the SIFMA Office Salaries Report, we
expect that delivery requirements of rule 204-5 will most likely be
performed by a general clerk at an estimated cost of $62 per hour.
561,162 hours x $62 = $34,792,044. We estimate that advisers will
not incur any incremental postage costs to deliver the relationship
summary for communicating updated information by delivering the
relationship summary, because we estimate that advisers will make
the delivery along with other documents already required to be
delivered, such as an interim or annual update to Form ADV, or will
deliver the relationship summary electronically.
    \1334\ Based on data from the SIFMA Office Salaries Report,
modified to account for an 1,800-hour work-year and multiplied by
2.93 to account for bonuses, firm size, employee benefits and
overhead, we expect that delivery requirements of rule 204-5 will
most likely be performed by a general clerk at an estimated cost of
$62 per hour. 136.29 hours per adviser x $62 per hour = $8,450 per
adviser.
    \1335\ For the other 50% of advisers that may choose to
communicate updated information in another disclosure, we estimate
no added burden because these advisers will be communicating the
information in other disclosures they are already delivering like
the Form ADV Part 2 brochure or summary of material changes.
---------------------------------------------------------------------------

    In a change from the proposal,\1336\ we are also adopting two
requirements not included in the proposal. First, all firms will be
required to make available a copy of the relationship summary upon
request without charge. Second, in a relationship summary that is
delivered in paper format, firms may link to additional information by
including URL addresses, QR codes, or other means of facilitating
access to such information.\1337\ We believe that these new
requirements will increase the burden relative to the proposal for some
firms that do not currently fulfill these types of disclosure requests,
including, for example, additional costs associated with tracking
delivery preferences related to making copies of the relationship
summary available upon request, and printing and mailing costs for
copies that are delivered in paper. We estimate that the 8,235 advisers
with relationship summary obligations, on average, will require 0.5
hours each annually to comply with this requirement. Therefore, we
estimate that the 8,235 advisers will incur a total of 4,118 aggregate
burden hours to make copies of the relationship summary available upon
request,\1338\ with a monetized cost per adviser of $31, or $255,285 in
aggregate monetized cost.\1339\ We acknowledge that the burden may be
more or less than 0.5 hours for some advisers, but we believe that, on
average, 0.5 hours is an appropriate estimate for calculating an
aggregate burden for the industry for this collection of information.
---------------------------------------------------------------------------

    \1336\ See supra footnotes 699-701 and accompanying text.
    \1337\ We are adopting the instruction that if a relationship
summary is delivered in paper format as part of a package of
documents, it should be the first among any documents that are
delivered at the same time, as proposed. See supra footnote 701.
    \1338\ 0.5 hours to make paper copies of the relationship
summary available upon request x 8,235 advisers with relationship
summary obligations = 4,118 hours.
    \1339\ Based on data from the SIFMA Office Salaries Report, we
expect that the requirement for advisers to make paper copies of the
relationship summary available upon request will most likely be
performed by a general clerk at an estimated cost of $62 per hour.
0.5 hours per adviser x $62 = $31 in monetized costs per adviser.
$31 per adviser x 8,235 advisers with relationship summary
obligations = $255,285 total aggregate monetized cost.
---------------------------------------------------------------------------

    We do not expect investment advisers to incur external costs in
delivering amended relationship summaries or communicating the
information in another way because we estimate that they will make this
delivery with, or as part of, other disclosures required to be
delivered, such as an interim or annual update to Form ADV. We did not
receive comments on this assumption in the proposal.
c. Delivery to New Clients or Prospective New Clients
    Data from the IARD system indicate that of the 13,299 advisers
registered with the Commission, 8,235 have retail investors, and on
average, each has 3,985 clients who are retail investors.\1340\ As
proposed, we estimate that the client base for investment advisers will
grow by approximately 4.5% annually.\1341\ Based on our experience with
Form ADV Part 2, we estimate the annual hour burden for initial
delivery of a relationship summary will be the same by paper or
electronic format, at 0.02 hours for each

relationship summary,\1342\ or 3.6 annual hours per adviser.\1343\
Therefore, we estimate that the aggregate annual hour burden for
initial delivery of the relationship summary to new clients will be
29,646 hours,\1344\ at a monetized cost of $1,838,052, or $223 per
adviser.\1345\
---------------------------------------------------------------------------

    \1340\ This average is based on advisers' responses to Item 5 of
Part 1A of Form ADV as of December 31, 2018.
    \1341\ In the Proposing Release, we determined this estimate
based on IARD system data. See Proposing Release, supra footnote 5
at section V.C.c. The number of retail clients reported by RIAs
changed by 6.7% between December 2015 and 2016, and by 2.3% between
December 2016 and 2017. (6.7% + 2.3%)/2 = 4.5% average annual rate
of change over the past two years. We did not receive comments on
this estimate.
    \1342\ This is the same as the estimate for the burden to
deliver the brochure required by Form ADV Part 2. See Brochure
Adopting Release, supra footnote 576.
    \1343\ 3,985 clients per adviser with retail clients x 4.5% =
179 new clients per adviser. 179 new clients per adviser x 0.02
hours per delivery = 3.6 hours per adviser for delivery of a
relationship summary to new or prospective new clients.
    \1344\ 3.6 hours per adviser for delivery obligation to new or
prospective clients x 8,235 advisers = 29,646 hours.
    \1345\ Based on data from the SIFMA Office Salaries Report,
modified to account for an 1,800-hour work-year and multiplied by
2.93 to account for bonuses, firm size, employee benefits and
overhead, we expect that delivery requirements of rule 204-5 will
most likely be performed by a general clerk at an estimated cost of
$62 per hour. 29,646 hours x $62 = $1,838,052. We estimate that
advisers will not incur any incremental postage costs to deliver the
relationship summary to new or prospective clients because we
estimate that advisers will make the delivery along with other
documentation normally provided in such circumstances, such as Form
ADV Part 2. $1,838,052/8,235 investment advisers = $223 per adviser.
---------------------------------------------------------------------------

    As in the Proposing Release, we continue to estimate that
investment advisers will not incur external costs to deliver the
relationship summary to new or prospective clients because they will
make the delivery along with other documentation normally provided in
such circumstances, such as Form ADV Part 2, or will deliver the
relationship summary electronically. We did not receive comments
regarding the burdens for delivering the relationship summary to
prospective clients that eventually become clients.
d. Total New Initial and Annual Burdens
    All together, we estimate the total collection of information
burden for new rule 204-5 to be 983,945 annual aggregate hours per
year,\1346\ or 120 hours per respondent,\1347\ for a total annual
aggregate monetized cost of $61,003,406,\1348\ or $7,408 \1349\ per
adviser.
---------------------------------------------------------------------------

    \1346\ 4,072 annual hours for posting initial relationship
summaries to adviser websites + 236,204 annual hours for initial
delivery to existing clients + 142,256 hours for delivery to
existing clients based on material changes to accounts or scope of
relationship + 6,487 annual hours to post amended relationship
summary to website + 561,162 hours for delivery to existing clients
to communicate updated information in amended relationship summaries
+ 29,646 hours for delivery to new or prospective clients + 4,118
hours to make paper copies of the relationship summary available
upon demand = 983,945 annual total hours for investment advisers to
post and deliver the relationship summary under proposed rule 204-5.
    \1347\ 983,945 hours (initial and other deliveries)/8,235
advisers = 120 hours per adviser.
    \1348\ $252,469 for posting initial relationship summaries to
adviser websites + $14,643,477 for initial delivery to existing
clients + $8,819,872 for delivery to existing clients based on
material changes to accounts or scope of relationship + $402,207 to
post amended relationship summary to website + $34,792,044 for
delivery to existing clients to communicate updated information in
amended relationship summaries + $1,838,052 for delivery to new or
prospective clients + $255,285 for making paper copies of the
relationship summary available upon demand = $61,003,406 in total
annual aggregate monetized cost for investment advisers to post and
deliver the relationship summary under proposed rule 204-5.
    \1349\ $61,003,406/8,235 advisers = $7,408 per adviser.
---------------------------------------------------------------------------

D. Form CRS and Rule 17a-14 under the Exchange Act

    New rule 17a-14 under the Exchange Act [17 CFR 240.17a-14] and Form
CRS [17 CFR 249.640] will require a broker-dealer that offers services
to retail investors to prepare and file with the Commission, post to
the broker-dealer's website (if it has one), and deliver to retail
investors a relationship summary, as discussed in greater detail in
Section II above. Broker-dealers will deliver the relationship summary
to both existing customers and new or prospective customers who are
retail investors. In a change from the proposal, broker-dealers will
file the relationship summary through Web CRD[supreg] instead of EDGAR.
We are also requiring that all relationship summaries be filed with
machine-readable headings, in a change from the proposal, as well as in
a text-searchable format as proposed.
    New rule 17a-14 under the Exchange Act [17 CFR 240.17a-14] and Form
CRS [17 CFR 249.640] contain a collection of information requirement.
We will use the information to manage our regulatory and examination
programs. Clients can use the information required in the relationship
summary to determine whether to hire or retain a broker-dealer, as well
as what types of accounts and services are appropriate for their needs.
The collection of information is necessary to provide broker-dealer
customers, prospective customers, and the Commission with information
about the broker-dealer and its business, conflicts of interest and
personnel. This collection of information will be found at 17 CFR
249.640 and will be mandatory. Responses will not be kept confidential.
    As discussed in Sections I and II of this release, we received
comments that addressed whether the relationship summary is necessary
for broker-dealers, and whether we could further minimize the burden of
the proposed collections of information. One commenter specifically
addressed the accuracy of our burden estimates for the proposed
collections of information, suggesting that our estimates were too low
because compliance professionals estimated it would take 80-500 hours
to prepare, deliver, and file the relationship summary, depending on
the firm's size and business model.\1350\ Others commented more broadly
that the implementation costs of the relationship summary would be
higher than we estimated in the Proposing Release.\1351\ We have
considered these comments and are increasing our PRA burden estimates
from 15 hours to 40 hours for broker-dealers to prepare and file the
relationship summary. We also modified several substantive requirements
to mitigate some of these estimated increased costs relative to the
proposal.
---------------------------------------------------------------------------

    \1350\ See NSCP Letter.
    \1351\ Some commenters argued that the cost to implement Form
CRS and Regulation Best Interest would be high. See, e.g., Raymond
James Letter; CCMC Letter (investor polling results); SIFMA Letter.
---------------------------------------------------------------------------

1. Respondents: Broker-Dealers
    The respondents to this information collection will be the broker-
dealers registered with the Commission that will be required to
prepare, file, and deliver a relationship summary in accordance with
new rule 17a-14 under the Exchange Act [17 CFR 240.17a-14]. As of
December 31, 2018, there were 2,766 broker-dealers registered with the
Commission that reported sales to retail customer investors,\1352\ and
therefore likely will be required to prepare and deliver the
relationship summary.\1353\ We also note that these include 318 broker-
dealers that are dually registered as investment advisers.\1354\ We did
not receive comments related to the methodology used for estimating the
number of broker-dealers that will be subject to these requirements. We
are maintaining the methodology we used in the Proposing Release and
are updating our estimates to reflect the

number of broker-dealers since the last burden estimate.
---------------------------------------------------------------------------

    \1352\ See supra footnote 867 and accompanying text. Retail
sales activity is identified from Form BR (see supra footnote 861,
which categorizes retail activity broadly (by marking the ``sales''
box) or narrowly (by marking the ``retail'' or ``institutional''
boxes as types of sales activity). We use the broad definition of
sales as we believe that many firms will just mark ``sales'' if they
have both retail and institutional activity. However, this may
capture some broker-dealers that do not have retail activity,
although we are unable to estimate that frequency.
    \1353\ For purposes of Form CRS, a ``retail investor'' will be
defined as: a natural person, or the legal representative of such
natural person, who seeks to receive or receives services primarily
for personal, family or household purposes.
    \1354\ See supra footnote 863 and accompanying text.
---------------------------------------------------------------------------

    Some of the burden for dual registrants to prepare and deliver the
relationship summary and post it to a website is already accounted for
in the estimated burdens for investment advisers under the amendments
to Form ADV and new rule 204-5, discussed in Sections V.A.2.a and V.
C.2 above. However, dually registered broker-dealers will incur burdens
related to their business as an investment adviser that standalone
broker-dealers will not incur, such as the requirement to file the
relationship summary using both IARD and Web CRD[supreg], and to
deliver to both investment advisory clients and brokerage customers, to
the extent those groups of retail investors do not overlap. In
addition, dual registrants may provide different services, charge
different fees, and have different conflicts on the advisory and
broker-dealer sides such that the burden of preparing the relationship
summary on the broker-dealer side may not be substantially reflected in
the burden for preparing the relationship summary on the advisory side.
Therefore, although treating dually registered broker-dealers in this
way may be over-inclusive, we base our burden estimates for rule 17a-14
and the relationship summary on 2,766 broker-dealers with relationship
summary obligations, including those dually registered as broker-
dealers. \1355\
---------------------------------------------------------------------------

    \1355\ The burden estimates for dual registrants to prepare and
file the relationship summary is accounted for in the burden
estimates for Form ADV and under Exchange Act rule 17a-14. For
example, a dual registrant that prepares an initial relationship
summary that covers both its advisory business and broker-dealer
business has an estimated burden of 60 hours amortized (20 hours to
prepare and file relationship summary related to the advisory
business + 40 hours to prepare and file relationship summary related
to the broker-dealer business).
---------------------------------------------------------------------------

2. Initial and Annual Burdens
a. Initial Preparation, Filing, and Posting of Relationship Summary
    As discussed above in Section II, firms will be required to prepare
and file a relationship summary summarizing specific aspects of their
brokerage services that they offer to retail investors. Unlike
investment advisers, which already prepare Form ADV Part 2A brochures
and have information readily available to prepare the relationship
summary, broker-dealers will be required for the first time to prepare
a disclosure that contains all the information required by the
relationship summary.
    In the Proposing Release, we estimated that the initial first year
burden for preparing and filing the relationship summary for broker-
dealers would be 15 hours per registered broker-dealer and an
additional 0.5 hours to prepare the relationship summary for posting on
its website, if it has one. Several commenters said that our estimated
burdens were too low.\1356\ One commenter specifically argued that
preparing, delivering, and filing the relationship summary would take
from 80 to 500 hours, based on input from compliance professionals, and
noted there would be additional costs that are hard to quantify,
including human relations and information technology programming.\1357\
Commenters also said the relationship summary would result in
additional compliance burdens, including training.\1358\
---------------------------------------------------------------------------

    \1356\ See, e.g., NSCP Letter; see also CCMC Letter (costs to
implement the proposal were underestimated and greater than 40% of
firms surveyed anticipate having to spend a moderate or substantial
amount to implement Regulation Best Interest and Form CRS); Raymond
James Letter (noting the significant implementation costs of
Regulation Best Interest and Form CRS for the industry); SIFMA
Letter (stating that implementation costs of Regulation Best
Interest and Form CRS would be significant).
    \1357\ See NSCP Letter.
    \1358\ See NSCP Letter (stating that a minimum of two hours of
firm level training or two hours of training per independent
registered representative or adviser will be required prior to Form
CRS implementation).
---------------------------------------------------------------------------

    We are revising our estimate of the time that it would take each
broker-dealer to prepare and file the relationship summary in the first
year from 15 to 40 hours in light of these comments and the changes we
are making to the proposed relationship summary. For example, in the
Proposing Release, we estimated that it would take firms a shorter
amount of time to prepare the relationship summary than a more
narrative disclosure due to the standardized nature and prescribed
language of the relationship summary. As discussed above, the final
instructions require less prescribed wording relative to the proposal
and require broker-dealers to draft their own summaries for most of the
sections. In addition and in a change from the proposal, we now are
requiring that all relationship summaries be filed with machine-
readable headings, as well as text-searchable format as proposed. We
acknowledge that these changes will increase cost burdens relative to
the proposal because broker-dealers have to develop their own wording
and design, as well as implement machine-readable headings to comply
with these requirements.
    The relationship summary will also require more layered disclosures
relative to the proposal and will encourage the use of electronic
formatting and graphical, text, online features to facilitate access to
other disclosures that provide additional detail. Although broker-
dealers are currently required to disclose certain information about
their services and accounts to their retail investors,\1359\ broker-
dealers are not currently required to disclose in one place all of the
information required by the relationship summary or to file a narrative
disclosure document with the Commission comparable to investment
advisers' Form ADV Part 2A. Broker-dealers will bear the cost of
drafting a new relationship summary and cross-referencing or
hyperlinking to additional information. The higher estimated burden
estimate also reflects our acknowledgement that it will take firms
longer to draft certain disclosures than we estimated in the Proposing
Release, such as answers to ``conversation starters'' that broker-
dealers providing services only online without a particular individual
with whom a retail investor can discuss these questions must include on
their website. We believe these factors and the changes we made to the
proposal will increase the burden to prepare a relationship summary
relative to the proposal.
---------------------------------------------------------------------------

    \1359\ See, e.g., Exchange Act rule 10b-10 (requiring a broker-
dealer effecting transactions in securities to provide written
notice to the customer of certain information specific to the
transaction at or before completion of the transaction, including
the capacity in which the broker-dealer is acting (i.e., agent or
principal) and any third-party remuneration it has received or will
receive).
---------------------------------------------------------------------------

    We are also changing the filing system for broker-dealers as
compared to the proposal. Broker-dealers will file Form CRS through Web
CRD[supreg] instead of EDGAR as proposed, but we believe that this
change will reduce the estimated burden for filing with the Commission,
relative to the proposal. Broker-dealers already submit registration
filings on Web CRD[supreg] so they will not incur additional costs to
access the system.\1360\
---------------------------------------------------------------------------

    \1360\ This reduction in the filing burden is offset by the
increased burden to prepare the relationship summary, resulting in a
higher total burden.
---------------------------------------------------------------------------

    We are estimating the same hourly burden for standalone broker-
dealers and broker-dealers that are dually registered as investment
advisers because we are counting dually registered firms in the burden
calculation for the Advisers Act rule that requires the relationship
summary for investment advisers.\1361\ We recognize that the burden for
some broker-dealers will exceed our estimate and the burden for others
will be less because broker-dealers vary in the size

and complexity of their business models, but we do not believe that the
range could be as high as suggested by some commenters.\1362\ Unlike
investment advisers, which already prepare Form ADV Part 2A brochures
and have information readily available to prepare the relationship
summary, broker-dealers will be required for the first time to prepare
disclosure that contains all the information required by the
relationship summary.
---------------------------------------------------------------------------

    \1361\ See supra footnote 1220.
    \1362\ See NSCP Letter (estimating that the time required to
prepare, deliver, and file Form CRS would be anywhere from 80 to 500
hours).
---------------------------------------------------------------------------

    We recognize that the burden on some broker-dealers might be
significant, especially in the initial preparation and filing of the
relationship summary and thus will require additional burdens than what
we estimated in the Proposing Release. Accordingly, we are increasing
the estimate from 15 to 40 hours in the first year for a broker-
dealer's initial preparation and filing of the relationship summary,
which is higher than the estimated burden for investment
advisers.\1363\ We estimate that the total burden for broker-dealers to
prepare and file the relationship summary will be 110,640 hours,\1364\
for a monetized value of $30,204,720.\1365\ The initial burden will be
amortized over three years to arrive at an annual burden for broker-
dealers to prepare and file the relationship summary. Therefore, the
total annual aggregate hour burden for registered broker-dealers to
prepare and file the relationship summary will be 36,880 hours, or
13.33 hours per broker-dealer,\1366\ for an annual monetized cost of
$10,068,240, or $3,640 per broker-dealer.\1367\
---------------------------------------------------------------------------

    \1363\ See infra footnote 1366. Amortizing the 40 hour burden
imposed by the relationship summary over a three-year period will
result in an average annual burden of 13.33 hours per year for each
of the 2,766 broker-dealers with relationship summary obligations.
    \1364\ 2,766 x 40.0 hours/3 = 36,880 total hours.
    \1365\ We expect that performance of this function will most
likely be equally allocated between a senior compliance examiner and
a compliance manager. Data from the SIFMA Management and
Professional Earnings Report suggest that costs for these positions
are $237 and $309 per hour, respectively. (0.5 x 110,640 hours x
$237) + (0.5 x 110,640 hours x $309) = $30,204,720.
    \1366\ 110,640 hours for preparing and filing/3 years = 36,880
total aggregate annual hour burden to prepare and file relationship
summary. 36,880 hours/2,766 broker-dealers with retail accounts =
13.33 hours annually per broker-dealer.
    \1367\ $30,204,720 total initial aggregate monetized cost for
preparation and filing/3 = $10,068,240 total annual monetized cost
for preparation and filing the relationship summary. $10,068,240/
2,766 broker-dealers subject to relationship summary obligations =
$3,640 per broker-dealer.
---------------------------------------------------------------------------

    As proposed, broker-dealers will be required to post a current
version of their relationship summary prominently on their public
website (if they have one). In the Proposing Release, we estimated that
each broker-dealer will incur 0.5 hours to prepare the posted
relationship summary, such as to ensure proper electronic formatting
and to post a current version of the relationship summary on the
broker-dealer's website, if it has one. Although we did not receive any
comments regarding burdens associated with posting of the relationship
summary to a public website, we are increasing our estimate of the time
from 0.5 to 1.5 hours based upon the staff's experience.\1368\ We
believe that the amount of time needed to prepare the relationship
summary for posting, including ensuring proper formatting and posting
it on the website, will not vary significantly from the time needed by
investment advisers. We do not anticipate that broker-dealers will
incur additional external costs to post the relationship summary to the
broker-dealer's website because broker-dealers without a public website
will not be required to establish or maintain one, and broker-dealers
with a public website have already incurred external costs to create
and maintain their websites. As with investment advisers, we estimate
that each broker-dealer will incur 1.5 hours to prepare the
relationship summary for posting to its website. We estimate that the
initial burden of posting the relationship summary to their websites,
if they have one, will be 4,149 hours,\1369\ for a monetized value of
$257,238.\1370\ The initial burden will be amortized over three years
to arrive at an annual burden for broker-dealers to post the
relationship summary to a public website. Therefore, the total annual
aggregate hour burden for broker-dealers to post the relationship
summary will be 1,383 hours, or 0.5 hours per broker-dealer,\1371\ for
an annual monetized cost of $87,746, or $31 per broker-dealer.\1372\
---------------------------------------------------------------------------

    \1368\ See supra footnote 1302.
    \1369\ 1.5 hours x 2,766 broker-dealers = 4,149 hours to prepare
and post relationship summary to the website.
    \1370\ Based on data from the SIFMA Office Salaries Report,
modified to account for an 1,800-hour work-year and multiplied by
2.93 to account for bonuses, firm size, employee benefits and
overhead, we expect that performance of this function will most
likely be performed by a general clerk at an estimated cost of $62
per hour. 4,149 hours x $62 = $257,238 total aggregate monetized
cost.
    \1371\ 4,149 hours for posting to website/3 years = 1,383 total
aggregate annual burden to prepare and file relationship summary.
1,383 hours/2,766 broker-dealers with retail account = 0.5 hours
annually per broker-dealer.
    \1372\ $257,238 total initial aggregate monetized cost for
posting to website/3 = $85,746 total annual monetized cost for
posting the relationship summary. $87,746/2,766 broker-dealers with
retail accounts = $31 per broker-dealer.
---------------------------------------------------------------------------

    To arrive at an annual burden for preparing, filing, and posting
the relationship summary, as for investment advisers, the initial
burden will be amortized over a three-year period for broker-dealers.
Therefore, the total annual aggregate hour burden for registered
broker-dealers to prepare, file, and post a relationship summary to
their website, if they have one, will be 38,263 hours, or 13.83 hours
per broker-dealer,\1373\ for an annual monetized cost of $10,153,986,
or $3,671 per broker-dealer.\1374\
---------------------------------------------------------------------------

    \1373\ 110,640 hours for preparing and filing + 4,149 hours for
posting = 114,789 hours. 114,789/3 years = 38,263 total aggregate
annual hour burden to prepare and file relationship summary. 38,263
hours/2,766 broker-dealers with retail accounts = 13.83 hours
annually per broker-dealer.
    \1374\ $30,204,720 total initial aggregate monetized cost for
preparation and filing + $257,238 for posting to the website/3 =
$10,153,986 total annual monetized cost for preparation, filing and
posting the relationship summary. $10,153,968/2,766 broker-dealers
subject to relationship summary obligations = $3,671 per broker-
dealer.
---------------------------------------------------------------------------

b. Estimated External Costs for Initial Preparation of Relationship
Summary
    Under new rule 17a-14, broker-dealers will be required to prepare
and file a relationship summary, as well as post it to their website if
they have one. We do not anticipate external costs to broker-dealers in
the form of website set-up, maintenance, or licensing fees because they
will not be required to establish a website for the sole purpose of
posting their relationship summary if they do not already have a
website. We do anticipate that most broker-dealers will incur a one-
time initial cost for outside legal and consulting fees in connection
with the initial preparation of the relationship summary.
    We estimated in the Proposing Release that an external service
provider would spend 3 hours helping a broker-dealer prepare an initial
relationship summary. While we received no specific comments on our
estimate regarding external costs in the Proposing Release, one
commenter suggested that there would be additional implementation costs
such as legal advice, but that these costs are difficult to
quantify.\1375\ Based on the concerns expressed by this commenter and
the changes we are making to the relationship summary, for example,
requiring less prescribed wording, we are increasing the estimate
relative to the proposal from 3 to 5 hours. While we recognize that
different firms may require different amounts of external assistance in
preparing the relationship summary, we believe that this is an
appropriate average number for estimating an aggregate amount for

the industry purposes of the PRA analysis, particularly given our
experience with the burdens for Form ADV.\1376\
---------------------------------------------------------------------------

    \1375\ See NSCP Letter.
    \1376\ See supra footnote 1221.
---------------------------------------------------------------------------

    Although broker-dealers that will be subject to the relationship
summary requirement may vary widely in terms of the size, complexity,
and nature of their business, we believe that the strict page limits
will make it unlikely that the amount of time, and thus cost, required
for outside legal and compliance review will vary substantially among
those broker-dealers who elect to obtain outside assistance.
    Most of the information required in the relationship summary is
readily available to broker-dealers because the information required
pertains largely to the broker-dealer's own business practices, and
thus the information is likely more readily available to the broker-
dealer than to an external legal or compliance consultant. However,
because broker-dealers are drafting a narrative disclosure for the
first time, we anticipate that 50% of broker-dealers will seek the help
of outside legal services and 50% of broker-dealers will seek the help
of compliance consulting services in connection with the initial
preparation of the relationship summary. We estimate that the initial
per broker-dealer cost for legal services related to the preparation of
the relationship summary will be $2,485.\1377\ We estimate that the
initial per broker-dealer cost for compliance consulting services
related to the preparation of the relationship summary will be
$3,705.\1378\ Accordingly, we estimate that 1,383 broker-dealers will
use outside legal services, for a total initial aggregate cost burden
of $3,436,755,\1379\ and 1,383 broker-dealers will use outside
compliance consulting services, for a total initial aggregate cost
burden of $5,124,015,\1380\ resulting in a total initial aggregate cost
burden among all respondents of $8,560,770, or $3,095 per broker-
dealer, for outside legal and compliance consulting fees related to
preparation of the relationship summary.\1381\ Annually, this
represents $2,853,590, or $1,032 per broker-dealer, when amortized over
a three-year period.\1382\
---------------------------------------------------------------------------

    \1377\ External legal fees are in addition to the projected hour
per broker-dealer burden discussed above. Data from the SIFMA
Management and Professional Earnings Report suggest that outside
legal services cost approximately $497 per hour. $497 per hour for
legal services x 5 hours per broker-dealer = $2,485. The hourly cost
estimate of $497 is adjusted for inflation and based on our
consultation with broker-dealers and law firms who regularly assist
them in compliance matters.
    \1378\ External compliance consulting fees are in addition to
the projected hour per broker-dealer burden discussed above. Data
from the SIFMA Management and Professional Earnings Report suggest
that outside management consulting services cost approximately $741
per hour. $741 per hour for outside consulting services x 5 hours
per broker-dealer = $3,705.
    \1379\ 50% x 2,766 SEC registered broker-dealers = 1,383 broker-
dealers. $2,485 for legal services x 1,383 broker-dealers =
$3,436,755.
    \1380\ 50% x 2,766 SEC registered broker-dealers = 1,383 broker-
dealers. $3,705 for compliance consulting services x 1,383 broker-
dealers = $5,124,015.
    \1381\ $3,436,755 + $5,124,015 = $8,560,770. $8,560,770/2,766
broker-dealers = $3,095 per broker-dealer.
    \1382\ $8,560,770 initial aggregate monetized cost/3 years =
$2,853,590 annually. $3,095 initial monetized cost per broker-
dealer/3 years = $1,032.
---------------------------------------------------------------------------

c. Amendments to the Relationship Summary and Filing and Posting of
Amendments
    As with our estimates above for investment advisers, we do not
expect broker-dealers to amend their relationship summaries frequently.
In the Proposing Release, we estimated that broker-dealers required to
prepare and file a relationship summary would require 0.5 hours to
amend and file the updated relationship summary, and 0.5 hours to post
it to their website. We did not receive comments regarding hour burdens
associated with preparing and filing amendments to the relationship
summary. As discussed in section II.C.4 above, in a change from the
proposal, we are adding a requirement that broker-dealers delivering
updated relationship summaries to customers also highlight the most
recent changes by, for example, marking the revised text or including a
summary of material changes. To account for this change, we are
increasing the annual burden to 1 hour per year for preparing and
filing amendments to the relationship summary. We are not changing the
proposed 0.5 hours estimate to post the amendments to a public website.
    Based on staff experience, we believe that many broker-dealers will
update their relationship summary at a minimum once a year, after
conducting an annual supervisory review, for example.\1383\ We also
estimate that on average, each broker-dealer preparing a relationship
summary may amend the disclosure once more during the year, due to
emerging issues. Therefore, we estimate that broker-dealers will update
their relationship summary, on average, twice a year. Thus, we estimate
that broker-dealers will incur a total annual aggregate hourly burden
of 5,532 hours per year to prepare and file amendments per year, and
2,766 hours per year to post to their websites an estimated total of
5,532 amendments per year.\1384\ We therefore estimate that for making
and filing amendments to their relationship summaries, broker-dealers
will incur an annual aggregate monetized cost of $1,510,236, or
approximately $546 per broker-dealer to prepare and file
amendments,\1385\ and an annual aggregate monetized cost of $171,492,
or approximately $62 per broker-dealer to post the amendments.\1386\ In
total, the aggregate annual monetized cost for broker-dealers to make,
file, and post amendments will be $1,681,728, or approximately $608 per
broker dealer.\1387\
---------------------------------------------------------------------------

    \1383\ FINRA rules set an annual supervisory review as a minimum
threshold for broker-dealers, for example in FINRA Rules 3110
(requiring an annual review of the businesses in which the broker-
dealer engages), 3120 (requiring an annual report detailing a
broker-dealer's system of supervisory controls, including compliance
efforts in the areas of antifraud and sales practices); and 3130
(requiring each broker-dealer's CEO or equivalent officer to certify
annually to the reasonable design of the policies and procedures for
compliance with relevant regulatory requirements).
    \1384\ 2,766 broker-dealers amending relationship summaries x 2
amendments per year = 5,532 amendments per year. 5,532 amendments x
1 hour to amend and file = 5,532 hours. 2,766 broker-dealers x (0.5
hours to post amendments to website x 2 amendments a year) = 2,766
hours.
    \1385\ 5,532 total aggregate initial hour burden for amending
relationship summaries. We believe that performance of this function
will most likely be equally allocated between a senior compliance
examiner and a compliance manager. Data from the SIFMA Management
and Professional Earnings Report suggest that costs for these
positions are $237 and $309 per hour, respectively. (5,532 hours x
50% x $237 + 5,532 hours x 50% x $309 = $1,510,236. $1,510,236/2,677
investment advisers = $546 per investment broker-dealer.
    \1386\ Based on data from the SIFMA Office Salaries Report, we
expect that the posting will most likely be performed by a general
clerk at an estimated cost of $62 per hour. 2,766 aggregate hours to
post amendment x $62 = $171,492. $171,492/2,766 broker-dealers = $62
in annual monetized costs.
    \1387\ $1,510,236 to prepare and file amendment + $171,492 to
post the amendments = $1,681,728. $1,681,728/2,766 = $608.
---------------------------------------------------------------------------

    We do not expect ongoing external legal or compliance consulting
costs for the relationship summary.\1388\ Although broker-dealers will
be required to amend the relationship summary within 30 days whenever
any information becomes materially inaccurate, we expect that the
amendments will require relatively minimal wording changes, given the
relationship summary's page limitation and summary nature. We believe
that broker-dealers will be more knowledgeable about the information to
include in the amendments than outside legal or compliance consultants
and will be able to make these revisions in-house. Therefore, we do not
expect that broker-dealers will need to incur ongoing external costs
for the

preparation and review of relationship summary amendments.
---------------------------------------------------------------------------

    \1388\ But see NNCP Letter.
---------------------------------------------------------------------------

d. Delivery of the Relationship Summary
    Rule 17a-14 under the Exchange Act will require a broker-dealer to
deliver the relationship summary, with respect to a retail investor
that is a new or prospective customer, before or at the earliest of:
(i) A recommendation of an account type, a securities transaction or an
investment strategy involving securities; (ii) placing an order for the
retail investor; or (iii) the opening of a brokerage account for the
retail investor. Broker-dealers also will make a one-time, initial
delivery of the relationship summary to all existing customers within a
specified time period after the effective date of the rule. Also with
respect to existing customers, broker-dealers will deliver the most
recent relationship summary before or at the time of (i) opening a new
account that is different from the retail investor's existing
account(s); or (ii) recommending that the retail investor roll over
assets from a retirement account into a new or existing account or
investment; or (iii) recommending or providing a new brokerage or
investment advisory service or investment that does not necessarily
involve the opening of a new account and would not be held in the
existing account.
    As discussed above in Section II.C.3.a, broker-dealers will be
required to post a current version of the relationship summary
prominently on their public websites (if they have one), and will be
required to communicate any changes in an amended relationship summary
to retail investors who are existing clients or customers within 60
days, instead of 30 days as proposed, after the amendments are required
to be made and without charge.\1389\ Broker-dealers also must deliver a
current relationship summary to each retail investor within 30 days
upon request. In a change from the proposal, a broker-dealer must make
available a copy of the relationship summary upon request without
charge, and where a relationship summary is delivered in paper format,
the broker-dealer may link to additional information by including URL
addresses, QR codes, or other means of facilitating access to such
information.\1390\ The broker-dealer must also include a telephone
number where retail investors can request up-to-date information and
request a copy of the relationship summary.\1391\
---------------------------------------------------------------------------

    \1389\ The communication can be made by delivering the
relationship summary or by communicating the information through
another disclosure that is delivered to the retail investor.
    \1390\ Additionally, we are adopting the instruction that if a
relationship summary is delivered in paper format as part of a
package of documents, the firm must ensure that the relationship
summary is the first among any documents that are delivered at that
time, substantially as proposed. See supra footnotes 678-679.
    \1391\ This differs from the proposal, which required only firms
that do not have a public website to include a toll-free number that
retail investors may call to request documents. See supra footnote
609.
---------------------------------------------------------------------------

    As discussed further below, we received comments that our estimated
burdens for delivery of the relationship summary were too low.\1392\
Some of these comments were focused on the delivery burdens related to
the requirement to deliver a relationship summary to existing retail
investors when changes are made to the existing account that would
``materially change'' the nature and scope of the relationship.\1393\
Other comments focused on the recordkeeping burdens related to the
requirement to deliver the relationship summary to a new or prospective
retail investor.\1394\ As discussed further below, we made changes to
the proposal to require more specific triggers for initial delivery and
additional delivery to existing customers in order to replace the
requirements in response to comments. We discuss below the specific
separate delivery requirements and modifications.
---------------------------------------------------------------------------

    \1392\ See, e.g., SIFMA Letter.
    \1393\ See, e.g., Cambridge Letter; SIFMA Letter; LPL Financial
Letter.
    \1394\ See infra footnote 1427.
---------------------------------------------------------------------------

(1) One-Time Initial Delivery to Existing Customers
    We estimate the burden for broker-dealers to make a one-time
initial delivery of the relationship summary to existing customers
based on an estimate of the number of accounts held by these broker-
dealers. Based on FOCUS data, we estimate that the 2,766 broker-dealers
that report retail activity have approximately 139 million customer
accounts, and that approximately 73.5%, or 102.165 million, of those
accounts belong to retail customers.\1395\ We estimate that, under the
adopted rule, broker-dealers will send their relationship summary along
with other required disclosures, such as periodic account statements,
in order to comply with initial delivery requirements for the
relationship summary.
---------------------------------------------------------------------------

    \1395\ See supra footnotes 857-865 and accompanying text. 2,766
broker-dealers (including dually registered firms) report 139
million customer accounts. Approximately 73.5% of registered broker-
dealers report retail customer activity; see supra footnote 861.
Therefore, 73.5% x 139 million accounts = 102.165 million accounts.
This number likely overstates the number of deliveries to be made
due to the double-counting of deliveries to be made by dual
registrants to a certain extent, and the fact that one customer may
own more than one account.
---------------------------------------------------------------------------

    As with investment advisers, we estimate that a broker-dealer will
require no more than 0.02 hours to deliver the relationship summary to
each existing retail investor under rule 17a-14. We did not receive
comments on the burdens specific to delivering the relationship summary
to existing clients. We will therefore estimate broker-dealers to incur
an aggregate initial burden of 2,043,300 hours, or approximately 739
hours per broker-dealer for the first year after the rule is in
effect.\1396\ We expect the aggregate monetized cost for broker-dealers
to make a one-time initial delivery of relationship summaries to
existing customers to be $126,684,600.\1397\ Amortized over three
years, the total annual hourly burden is estimated to be 681,100 hours,
or approximately 246 hours per broker-dealer,\1398\ with annual
monetized costs of $42,228,200 and $15,267, respectively.\1399\ We do
not expect that broker-dealers will incur external costs for the
initial delivery of the relationship summary to existing clients
because we estimate that they will make such deliveries along with
another required delivery, such as periodic account statements.
---------------------------------------------------------------------------

    \1396\ (0.02 hours per customer account x 102.165 million
customer accounts) = 2,043,300 hours. The burden for preparing
updated relationship summaries is already incorporated into the
burden estimate for Form CRS discussed above. 2,043,300 hours/2,766
broker-dealers = approximately 739 hours per broker-dealer.
    \1397\ Based on data from SIFMA's Office Salaries Report, we
expect that initial delivery requirement to existing clients of rule
17a-14 will most likely be performed by a general clerk at an
estimated cost of $62 per hour. 2,043,300 hours x $62 =
$126,684,600. We estimate that broker-dealers will not incur any
incremental postage costs because we estimate that they will make
such deliveries with another mailing the broker-dealer was already
delivering to clients, such as periodic account statements.
    \1398\ 2,043,300 initial aggregate hours/3 = 681,100 total
annual aggregate hours. 739 initial hours per broker-dealer/3 = 246
total annual hours per broker-dealer.
    \1399\ $126,684,600 initial aggregate monetized cost/3 =
$42,228,200 annual aggregate monetized cost. $42,228,200/2,766
broker-dealers = $15,267 annual monetized cost per broker-dealer.
---------------------------------------------------------------------------

(2) Additional Delivery to Existing Customers
    As discussed in Section II.C.3.c above, broker-dealers will be
required to deliver the relationship summary to existing customers when
opening a new account that is different from the retail investor's
existing account(s), as proposed. In addition, in a change from the
proposal, delivery will be required before or at the time the broker-
dealer (i)

recommends that the retail investor roll over assets from a retirement
account into a new or existing account or investment, or (ii)
recommends or provides a new brokerage or investment advisory service
or investment that does not necessarily involve the opening of a new
account and would not be held in the existing account. We are adopting
these two triggers instead of the proposed requirement to deliver the
relationship summary before or at the time changes are made to the
existing account that would ``materially change'' the nature and scope
of the relationship to address commenters' requests for additional
guidance or examples of what would constitute a ``material change.''
\1400\ Commenters also described administrative and operational burdens
arising from this requirement and argued that our estimated burdens
were too low.\1401\ One commenter asserted that firms would be required
to build entirely new operational and supervisory processes to identify
asset movements that could trigger a delivery requirement.\1402\
Another noted the challenges of designing a system that distinguishes
non-ordinary course events from routine account changes.\1403\
---------------------------------------------------------------------------

    \1400\ See supra footnotes 758-763 and accompanying text.
    \1401\ See, e.g., LPL Financial Letter (stating that proposed
re-delivery triggering events would not be easily identifiable and
would present operational challenges and compliance costs).
    \1402\ See SIFMA Letter.
    \1403\ See LPL Financial Letter.
---------------------------------------------------------------------------

    As discussed above, we replaced the ``materially change''
requirement with more specific triggers to be clearer about when a
relationship summary must be delivered.\1404\ While these specific
triggers will still impose operational and supervisory burdens on
broker-dealers, we believe that they are more easily identified and
monitored, such that firms will not incur significant burdens as
described by commenters to implement entirely new supervisory,
administrative, and operational processes needed to monitor events that
cause a material change. However, recognizing that some additional
processes will be necessary to implement these delivery triggers, we
are increasing our burden estimate from 0.02 to 0.04 hours. We now
estimate that each broker-dealer will incur 149 hours per year to
deliver the relationship summary in these types of situations, and that
delivery under these circumstances will take place among 10% of broker-
dealer's retail investors annually. We will therefore estimate broker-
dealers to incur a total annual aggregate burden of 408,660 hours, or
148 hours per broker-dealer,\1405\ at an annual aggregate monetized
cost of $25,336,920, or approximately $9,160 per broker-dealer.\1406\
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    \1404\ See supra footnote 761 and accompanying text.
    \1405\ 10% of 102.165 million customers x 0.04 hours = 408,660
hours. 408,660 hours/2,766 broker-dealers = 148 hours per broker-
dealer.
    \1406\ Based on data from the SIFMA Office Salaries Report,
modified to account for an 1,800-hour work-year and multiplied by
2.93 to account for bonuses, firm size, employee benefits and
overhead, we expect that delivery requirements of rule 17a-14 will
most likely be performed by a general clerk at an estimated cost of
$62 per hour. 408,660 hours x $62 = $25,336,920. $25,336,920/2,766
broker-dealers = $9,160 per broker-dealer. We estimate that broker-
dealers will not incur any incremental postage costs in these
deliveries of the relationship summary to existing customers,
because we estimate that broker-dealers will make such deliveries
with another mailing the broker-dealer was already delivering to
clients, such as periodic account statements, or new account
agreements and other similar documentation.
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(3) Communicating Changes to Amended Relationship Summaries, Including
by Delivery
    As discussed above, broker-dealers will be required to amend their
relationship summaries within 30 days when any of the information
becomes materially inaccurate. They must also communicate any changes
in any new version of the relationship summary to retail investors who
are existing customers within 60 days, instead of 30 days as proposed,
after the updates are required to be made and without charge. We do not
expect this change to increase the PRA estimates.\1407\ The
communication can be made by delivering the relationship summary or by
communicating the information through another disclosure to the retail
investor. This requirement is a change from the proposed requirement
but is substantively similar, and commenters did not comment on the
estimated burden.\1408\ We have determined not to change the burden
relative to the proposal.
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    \1407\ As discussed in Section V.D.2.c., we have increased the
burden estimates for preparing amendments to the relationship
summary, acknowledging, among other things, that firms will incur
additional burdens to prepare and file amendments as a result of the
instructions that firms preparing amendments highlight the most
recent changes, and that additional disclosure showing the revised
text be attached as an exhibit to the unmarked relationship summary.
    \1408\ The proposed instructions would have required firms to
communicate updated information by delivering the amended
relationship summary or by communicating the information another
way. The revised instruction will eliminate the wording ``another
way'' and will clarify that the communication can be made through
another disclosure that is delivered to the retail investor. See
supra footnotes 775-778 and accompanying text.
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    Consistent with our discussion on broker-dealers' amendments to the
relationship summary we are assuming that the broker-dealers with
relationship summaries will amend them twice each year. We also
estimate that 50% will choose to deliver the relationship summary to
communicate the updated information. We did not receive comments on
this estimate. As with investment advisers, we believe that it is
likely that the other 50% of broker-dealers will incorporate all of the
updated information in other disclosures, which they are already
obligated to deliver in order to avoid having to deliver two documents.
We estimate that broker-dealers will require 0.02 hours to make a
delivery to each customer.\1409\ Therefore, the estimated burden for
those broker-dealers choosing to deliver an amended relationship
summary to meet this communication requirement will be approximately
2,043,300 hours, or 739 hours per broker-dealer,\1410\ translating into
a monetized cost of $126,684,600 in aggregate, or $45,801 per broker-
dealer.\1411\
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    \1409\ For the other 50% of broker-dealers that may choose to
communicate updated information in another disclosure, we estimate
no added burden because these broker-dealers are communicating the
information in other disclosures they are already delivering.
    \1410\ 2 amendments per year x 102.165 million customer accounts
x 50% delivering the amended relationship summary to communicate
updated information x 0.02 hours per delivery = 2,043,300 hours to
deliver amended relationship summaries. 2,043,300 hours/2,766
broker-dealers = 739 hours per broker-dealer.
    \1411\ Based on data from the SIFMA Office Salaries Report,
modified to account for an 1,800-hour work-year and multiplied by
2.93 to account for bonuses, firm size, employee benefits and
overhead, we expect that delivery requirements of rule 17a-14 will
most likely be performed by a general clerk at an estimated cost of
$62 per hour. 2,043,300 hours x $62 = $126,684,600. $126,684,600/
2,766 broker-dealers = $45,801 per broker-dealer. We estimate that
broker-dealers will not incur any incremental postage costs to
deliver these relationship summaries, because we estimate that
advisers will make the delivery along with other documentation they
normally would provide, such as account opening documents.
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    In a change from the proposal, we are also adopting two
requirements not included in the proposal. First, all firms will be
required to make available a copy of the relationship summary upon
request without charge. Second, in a relationship summary that is
delivered in paper format, firms may link to additional information by
including URL addresses, QR codes, or other means of facilitating
access to such information. We believe that these new requirements will
increase the burden relative to the proposal for some broker-dealers
that do not currently fulfill these types of disclosure requests,
including, for example, additional costs associated with tracking
customer delivery

preferences related to making copies of the relationship summary
available upon request, and printing and mailing costs for copies
delivered in paper. We estimate that the 2,766 broker-dealers with
relationship summary obligations, on average, will require 0.5 hours
each annually to comply with this requirement. Therefore, we estimate
that the 2,766 broker-dealers with relationship summary obligations
will incur a total of 1,383 aggregate burden hours to make copies of
the relationship summary available upon request,\1412\ with a monetized
cost per adviser of $31, or $85,746 in aggregate monetized cost.\1413\
We acknowledge that the burden may be more or less than 0.5 hours for
some broker-dealers, but we believe that, on average, 0.5 hours is an
appropriate estimate for calculating an aggregate burden for the
industry for this collection of information.
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    \1412\ 0.5 hours to make paper copies of the relationship
summary available upon request x 2,677 broker-dealers with
relationship summary obligations = 1,383 hours.
    \1413\ Based on data from the SIFMA Office Salaries Report, we
expect that the requirement for broker-dealers to make paper copies
of the relationship summary available upon request will most likely
be performed by a general clerk at an estimated cost of $62 per
hour. 0.5 hours per broker-dealer x $62 = $31 in monetized costs per
broker-dealer. $31 per broker-dealer x 2,766 broker-dealers with
relationship summary obligations = $85,746 total aggregate monetized
cost.
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    We do not expect broker-dealers to incur external costs in
delivering amended relationship summaries or communicating the
information in another way because we estimate that they will make
these deliveries with, or as part of other disclosures required to be
delivered. We did not receive comments on this assumption in the
proposal.
e. Delivery to New Customers or Prospective New Customers
    To estimate the delivery burden for broker-dealers' new or
prospective new customers, as discussed above, we estimate that the
2,766 standalone broker-dealers with retail activity have approximately
102.165 million retail customer accounts.\1414\ We did not receive
comments on the burdens specific to delivering the relationship summary
to new and prospective retail investors under rule 17a-14. Based on
FOCUS data over the past five years, we estimate that broker-dealers
grow their customer base and enter into new agreements with, on
average, 11% more new retail investors each year.\1415\ We estimate the
hour burden for initial delivery of a relationship summary will be the
same by paper or electronic format, at 0.02 hours for each relationship
summary, as we have estimated above. Therefore, the aggregate annual
hour burden for initial delivery of the relationship summary by broker-
dealers to new or prospective new customers will be 224,763 hours, or
81.3 hours per broker-dealer,\1416\ at a monetized cost of $13,935,306
at an aggregate level, or $5,038 per broker-dealer.\1417\
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    \1414\ See supra footnotes 857-865 and accompanying text.
    \1415\ This represents the average annual rate of growth from
2014-2018 in the number of accounts for all broker-dealers reporting
retail activity.
    \1416\ 102.165 million customer accounts x 11% increase =
11,238,150 new customers. 11,238,150 new customers x 0.02 hours per
delivery = 224,763 total annual aggregate hours. 224,763/2,766
broker-dealers = 81.3 hours per broker-dealer for delivery to new
customers.
    \1417\ Based on data from the SIFMA Office Salaries Report,
modified to account for an 1,800-hour work-year and multiplied by
2.93 to account for bonuses, firm size, employee benefits and
overhead, we expect that these functions will most likely be
performed by a general clerk at an estimated cost of $62 per hour.
224,763 hours x $62 = $13,935,306. $13,935,306/2,766 broker-dealers
= $5,038 per broker-dealer for delivery to new customers. We
estimate that broker-dealers will not incur any incremental postage
costs to deliver the relationship summary to new or prospective
clients because we estimate that broker-dealers will make the
delivery along with other documentation, such as periodic account
statements.
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f. Total New Initial and Annual Burdens
    As discussed above, we estimate the total annual collection of
information burden for new rule 17a-14 in connection with obligations
relating to the relationship summary, including (i) initial
preparation, filing, and posting to a website; (ii) amendments to the
relationship summary for material updates and related filing and
website posting burdens; (iii) one-time initial delivery to existing
customers; (iv) additional delivery to existing customers; (v) delivery
of amended relationship summaries; (vi) delivery to new and prospective
customers; and (vii) making copies available upon request. Given these
requirements, we estimate the total annual aggregate hourly burden to
be approximately 3,408,533 hours per year, or 1,232 hours on a per
broker-dealer basis.\1418\ This translates into an aggregate annual
monetized cost of $219,110,726, or $79,216 per broker-dealer per
year.\1419\ In addition, we estimate that broker-dealers will incur
external legal and compliance costs in the initial preparation of the
relationship summary of approximately $8,560,770 in aggregate, or
$3,095 per broker-dealer, translating into $2,853,590 annually, or
$1,032 per broker-dealer, when amortized over a three year
period.\1420\
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    \1418\ 36,880 hours per year for initial preparation and filing
of relationship summary + 4,149 hours for posting to website + 8,298
hours per year for amendments, filing, and posting of amendments +
681,100 hours for one-time initial delivery to existing customers +
408,660 hours for delivery to existing customers making material
changes to their accounts + 2,043,300 hours for delivery of
amendments + 224,763 hours for delivery to new customers + 1,383
hours to make paper copies available upon demand = 3,408,533 total
annual aggregate hours. 3,408,533 hours/2,766 broker-dealers = 1,232
hours per broker-dealer.
    \1419\ $10,068,240 per year for initial preparation, filing, and
posting of relationship summary + $257,238 per year for posting to
website + $514,476 per year for amendments, filing, and posting of
amendments + $42,228,200 for one-time initial delivery to existing
customers (amortized over three years) + $25,336,920 for delivery to
existing customers making material changes to their accounts +
$126,684,600 for delivery of amendments + $13,935,306 for delivery
to new customers + $85,746 per year to make paper copies of the
relationship summary available upon demand = $219,110,726 in total
annual aggregate monetized cost. $219,110,726/2,766 broker-dealers =
$79,216 per broker-dealer.
    \1420\ $3,436,755 total external legal costs + $5,124,015 total
external compliance cost = $8,560,770 total external legal and
compliance costs. $8,560,770 total external legal and compliance
costs/2,766 broker-dealers = $3,095 per broker-dealer. $8,560,770
total external legal and compliance costs/3 = $2,853,590 annually.
$3,095/3 = $1,032 per year.
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E. Recordkeeping Obligations Under Exchange Act Rule 17a-3
1421
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    \1421\ In a concurrent release, we are adopting additional
burden adjustments to Exchange Act rules 17a-3 and 17a-4. See
Regulation Best Interest Release, supra footnote 47.
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    The final requirement to make a record indicating the date that a
relationship summary was provided to each retail investor, including
any relationship summary provided before such retail investor opens an
account, will contain a collection of information that will be found at
17 CFR 240.17a-3(a)(24) and will be mandatory. The Commission staff
will use this collection of information in its examination and
oversight program, and the information generally is kept
confidential.\1422\ The likely respondents to this collection of
information requirement are the approximately 2,766 broker-dealers
currently registered with the Commission that offer services to retail
investors, as defined above.\1423\
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    \1422\ See section 24(b) of the Exchange Act.
    \1423\ See supra footnotes 857-865 and accompanying text.
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    Exchange Act section 17(a)(1) requires registered broker-dealers to
make and keep for prescribed periods such records as the Commission
deems ``necessary or appropriate in the public interest, for the
protection of investors or otherwise in furtherance of the purposes
of'' the Exchange Act.'' \1424\ Exchange Act rules 17a-3 and 17a-4
specify minimum requirements with respect to the records

that broker-dealers must make, and how long those records and other
documents must be maintained, respectively.
---------------------------------------------------------------------------

    \1424\ See section 17(a) of the Exchange Act.
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    The amendments to Exchange Act rule 17a-3 will require SEC-
registered broker-dealers to make a record indicating the date that a
relationship summary was provided to each retail investor and to each
prospective retail investor who subsequently becomes a retail investor.
We are adopting these amendments as proposed. In the Proposing Release,
we estimated that the adoption of new paragraph (a)(24) of rule 17a-3
would result in an incremental burden increase of 0.1 hours annually
for each of the estimated 2,766 SEC-registered broker-dealers that will
be required to record the dates that the initial relationship summary
and each new version thereof, is provided to an existing or prospective
retail investor.\1425\
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    \1425\ We applied the same 0.2 hour estimate as with investment
advisers, but divided equally between creating a record of the
relationship summary and its deliveries and the maintenance of those
records. As discussed above, we are increasing our estimates.
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    As discussed above in Section II.E, several commenters suggested
that our estimated burdens for the relationship summary recordkeeping
obligations were too low.\1426\ Some commenters argued that keeping
records of when a relationship summary was given to prospective retail
clients would be unnecessarily burdensome or not feasible, and was not
adequately considered in the Commission's burden estimates.\1427\ One
of these commenters said that it would be difficult for firms to
integrate pre-relationship delivery dates into their operational
systems and procedures, and that there is no way to track when a
disclosure is accessed on a website.\1428\
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    \1426\ See, e.g., CCMC Letter; SIFMA Letter; see also NSCP
Letter (estimating 80-500 hours to prepare, deliver, and file Form
CRS, including recordkeeping policies and procedures).
    \1427\ See, e.g., CCMC Letter; SIFMA Letter; Committee of
Annuity Insurers Letter; Edward Jones Letter. A few others stated
that creating recordkeeping policies and procedures relating to how
professionals respond to ``key questions'' would be burdensome and
extremely difficult. See, e.g., LPL Financial Letter. Although the
final instructions require ``conversation starter'' questions that
are similar to the proposed ``key questions,'' we are not increasing
the burden as urged by commenters. As discussed in Section V.D.2.a.
above, we increased the burden estimates for the initial preparation
of the relationship summary, acknowledging, among other things, that
certain broker-dealers that provide services only online will incur
additional burdens to develop written answers to the conversation
starters and make those available on their websites with a hyperlink
to the appropriate page in the relationship summary for these
documents. However, we do not expect these broker-dealers to incur
additional recordkeeping burdens under amendments to Exchange Act
rule 17a-3 because we are not establishing new or separate
recordkeeping obligations related to the conversation starters or
the answers provided by firms in response to the conversation
starters. See supra footnotes 814-816.
    \1428\ See SIFMA Letter.
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    After consideration of comments, and because broker-dealers do not
currently maintain similar records like the relationship summary, we
are revising our estimate of the time that it would take each broker-
dealer to create the records required by new paragraph (a)(24) of rule
17a-3 as adopted from 0.1 hours to 0.5 hours. The incremental hour
burden for broker-dealers to create the records required by new
paragraph (a)(24) of rule 17a-3 as adopted will therefore be 1,383
hours,\1429\ for a monetized cost of $87,627 in aggregate, or $32 per
broker-dealer.\1430\ We also do not expect that broker-dealers will
incur external costs for the requirement to make records because we
believe that broker-dealers will make such records in a manner similar
to their current recordkeeping practices, including those that apply to
communications and correspondence with retail investors.
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    \1429\ 2,766 broker-dealers x 0.5 hours annually = 1,383 annual
hours for recordkeeping.
    \1430\ As with our estimates relating to the proposed amendments
to Advisers Act rule 204-2 (see, e.g., supra footnote 1284 and
accompanying text), we expect that performance of this function will
most likely be allocated between compliance clerks and general
clerks, with compliance clerks performing 17% of the function and
general clerks performing 83% of the function. Data from the SIFMA
Office Salaries Report suggest that costs for these positions are
$70 and $62, respectively. (17% x 1,383 hours x $70) + (83% x 1,383
hours x $62) = $87,627. $87,627/2,766 broker-dealers = $32 per
broker-dealer.
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F. Record Retention Obligations Under Exchange Act Rule 17a-4

    Exchange Act section 17(a)(1) requires registered broker-dealers to
make and keep for prescribed periods such records as the Commission
deems ``necessary or appropriate in the public interest, for the
protection of investors or otherwise in furtherance of the purposes