approximately $130,316,112, based on an estimate of 12,024 registered
advisers, or 183 hours per registered adviser.\764\ We estimate that
the proposed amendments would result in an increase in the collection
of information burden estimate by 0.2 hours \765\ for each of the
estimated 7,625 registered advisers with relationship summary
obligations,\766\ resulting in a total of 183.2 hours per adviser. This
would yield an annual estimated aggregate burden of 1,396,900 hours
under amended rule 204-2 for all registered advisers with relationship
summary obligations,\767\ for a monetized cost of $85,476,311.\768\ In
addition, the 5,096 advisers \769\ not subject to the proposed
amendments would continue to be subject to an unchanged burden of 183
hours under rule 204-2, or a total aggregate annual hour burden of
932,568,\770\ for a monetized cost of $57,063,836.\771\ In summary,
taking into account the estimated annual burden of registered advisers
that would 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 proposed amendments, would be
estimated to be 2,329,468 total hours,\772\ for a monetized cost of
$142,540,147.\773\
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    \764\ See 2016 Form ADV Paperwork Reduction Analysis, supra note
716, at 81 FR at 60454-55.
    \765\ 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 of the
relationship summary is already included in the collection of
information estimates for Form ADV, and because the relationship is
a short, standardized document, we assume that recordkeeping burden
for the relationship summary would be considerably less than 1.5
hours and estimate that 0.2 hours would be appropriate.
    \766\ See supra note 674.
    \767\ 7,625 registered investment advisers required to prepare
relationship summary x 183.2 hours = 1,396,900 hours.
    \768\ As with our estimates relating to the previous amendments
to rule 204-2 (see 2016 Form ADV Paperwork Reduction Analysis, supra
note 716, 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 (``SIFMA Office Salaries Report), suggest that costs for
these positions are $67 and $60, respectively. (17% x 1,396,9001
hours x $67) + (83% x 1,396,900 hours x $60) = $85,476,311.
    \769\ See supra note 681.
    \770\ 5,096 registered investment advisers not required to
prepare the relationship summary x 183 hours = 932,568.
    \771\ As with our estimates relating to the previous amendments
to rule 204-2 (see 2016 Form ADV Paperwork Reduction Analysis, supra
note 716, 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 $67 and $60, respectively. (17% x 932,568 hours x $67)
+ (83% x 932,568 hours x $60) = $57,063,836.
    \772\ 7,625 registered investment advisers required to prepare
relationship summary x 183.2 hours = 1,396,900 hours. 5,096
registered investment advisers not required to prepare the
relationship summary x 183 hours = 932,568 hours. 1,396,900 hours +
932,568 hours = 2,329,468 hours.
    \773\ $85,476,311 + $57,063,836 = $142,540,147.
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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.\774\ The revised annual
aggregate hourly burden for rule 204-2 would be 2,329,468 \775\ hours,
represented by a monetized cost of $142,540,147,\776\ based on an
estimate of 7,625 registered advisers with the relationship summary
obligation and 5,096 registered advisers without, as noted above. This
represents an increase of 129,677 \777\ annual aggregate hours in the
hour burden and an annual increase of $12,224,035 from the currently
approved total aggregate monetized cost for rule 204-2.\778\ These
increases are attributable to a larger registered investment adviser
population since the most recent approval and adjustments for
inflation, as well as the proposed rule 204-2 amendments relating to
the relationship summary as discussed in this proposing release.
---------------------------------------------------------------------------

    \774\ 2,199,791 hours/12,024 registered advisers = 183 hours per
adviser.
    \775\ See supra note 772.
    \776\ See supra note 773.
    \777\ 2,329,467 hours - 2,199,791 hours = 129,677 hours.
    \778\ $142,540,073 - $130,316,112 = $12,224,035.
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C. Rule 204-5 Under the Advisers Act

    Proposed new rule 204-5 would require an investment adviser to
deliver the relationship summary to each retail investor before or at
the time the adviser enters into an investment advisory agreement (even
if the adviser's agreement with the retail investor is oral) as well as
to existing clients one time within a specified time period after the
effective date of the proposed amendments. The adviser also would
deliver the relationship summary to existing clients before or at the
time (i) a new account is opened that is different from the retail
investor's existing account(s); or (ii) changes are made to the retail
investor's existing account(s) that would materially change the nature
and scope of the adviser's relationship with the retail investor, as
further discussed in Section II.C.2 above. In addition, advisers would
be required to post a current version of their relationship summary
prominently on their public website (if they have one). Investment
advisers would be required to communicate any changes in an updated
relationship summary to retail investors who are existing clients or
customers of the firm within 30 days after the updates are required to
be made and without charge. The communication can be made by delivering
the relationship summary or by communicating the information in another
way to the retail investor.
    Proposed 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 would 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 would use the information
to determine eligibility for registration with us and to manage our
regulatory and examination programs. This collection of information
would be found at 17 CFR 275.204-5 and would be mandatory. Responses
would not be kept confidential.
1. Respondents: Investment Advisers
    The likely respondents to this information collection would be the
approximately 7,625 investment

advisers registered with the Commission that would be required to
deliver a relationship summary per proposed new rule 204-5. We also
note that these figures include the 366 registered broker-dealers that
are dually registered as investment advisers.\779\
---------------------------------------------------------------------------

    \779\ See supra note 457 and accompanying text.
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2. Initial and Annual Burdens
a. Posting of the Relationship Summary to Website
    Under proposed new rule 204-5, advisers would be required to post a
current version of their relationship summary prominently on their
public website (if they have one). We estimate that each adviser would
incur 0.5 hours to prepare the relationship summary, such as to ensure
proper electronic formatting, and to post the disclosure to the
adviser's website, if the adviser has one.\780\ Based on IARD system
data, 91.1% of investment advisers with individual clients report at
least one public website. Therefore, we estimate that 91.1% of the
7,625 existing and 477 newly-registered investment advisers with
relationship summary obligations would incur a total of 3,690 aggregate
burden hours to post relationship summaries to their websites,\781\
with a monetized cost of $221,428.\782\ 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.\783\ Therefore, the total annual aggregate hourly burden
related to the initial posting of the relationship summary is estimated
to be 1,230 hours, with a monetized cost of $73,809.\784\ We do not
anticipate external costs to rule 204-5 because investment advisers
without a public website would not be required to establish or maintain
one. External costs for the preparation of the relationship summary are
already included for the collection of information estimates for Form
ADV, in Section V.A, above.
---------------------------------------------------------------------------

    \780\ This estimate is based upon staff experience. See e.g.,
Enhanced Mutual Fund Disclosure Adopting Release, supra note 47
(``we estimate, as we did in the proposing release, that rule 498
will impose a \1/2\ hour burden per portfolio annually associated
with the compilation of the additional information required on a
cover page or at the beginning of the Summary Prospectus. Rule 498
also imposes annual hour burdens associated with the posting of a
fund's Summary Prospectus, statutory prospectus, SAI, and most
recent report to shareholders on an Internet website. We estimate
that the average hour burden for one portfolio to comply with the
Internet website posting requirements will be approximately one hour
annually.'') Because rule 204-5 pertains to one document, the
relationship summary, which is much shorter than the several
documents to which rule 498 applies, we estimate that each adviser
on average would incur approximately 0.5 hours for the preparation
of the relationship summary for posting, and for the posting itself.
    \781\ 0.5 hours to prepare and post the relationship summary x
91.1% x (7,625 existing advisers + 477 newly-registered advisers
with relationship summary obligations) x 0.5 hours = 3,690 hours.
    \782\ 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 $60 per hour.
0.5 hours per adviser x $60 = $30 in monetized costs per adviser.
$30 per adviser x (7,625 existing advisers + 477 newly registered
advisers = $221,428 total aggregate monetized cost.
    \783\ See 2016 Form ADV Paperwork Reduction Analysis, supra note
716.
    \784\ 43,688 hours/3 years = 1,230 hours annually. $221,428/3
years = $73,809 in annualized monetized costs.
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b. Delivery to Existing Clients
i. One-Time Initial Delivery to Existing Clients
    The burden for this proposed rule is based on each adviser with
retail investors having, on average, an estimated 4,461 clients who are
retail investors.\785\ 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 2
brochures and brochure supplements to their clients.\786\ As with the
estimates for rule 204-3, we estimate that advisers would require
approximately 0.02 hours to deliver the relationship summary to each
client.\787\ Based on IARD data as of December 31, 2017, we estimate
that advisers with the obligation to deliver the relationship summary
under proposed rule 204-5 have, on average, 4,461 clients who are
retail investors, per adviser. Thus, we estimate the total burden hours
for 7,625 advisers for initial delivery of the relationship to existing
clients to be 89.22 hours per adviser, or 722,860 total aggregate
hours, for the first year after the rule is in effect,\788\ with a
monetized cost of $5,353 \789\ per adviser or $43,339,507 in
aggregate.\790\ Amortized over three years, the total annual hourly
burden is estimated to be 29.74 hours per adviser, or 240,953 annual
hours in aggregate,\791\ with annual monetized costs of $1,784 per
adviser, or $14,457,209 in aggregate.\792\ We do not expect that
investment advisers will incur external costs for the initial delivery
of the relationship summary to existing clients because we assume that
advisers will make such deliveries along with another required
delivery, such as an interim or annual update to the Form ADV Part 2.
---------------------------------------------------------------------------

    \785\ Based on IARD system data as of December 31, 2017.
    \786\ See Brochure Adopting Release, supra note 157, at 75 FR at
49259.
    \787\ 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 note 157, at 75 FR at 49259 We note that the burden
for preparing relationship summaries is already incorporated into
the burden estimate for Form ADV discussed above.
    \788\ (0.02 hours per client x 4,461 retail clients per adviser)
= 89.22 hours per adviser. 89.22 hours per adviser x (7,625 existing
advisers + 477 newly registered advisers) = 722,860 total aggregate
hours.
    \789\ 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 $60 per hour. 89.22 hours per adviser x $60 =
$5,353 in monetized costs per adviser. We estimate that advisers
will not incur any incremental postage costs because we assume 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.
    \790\ $5,353 in monetized costs per adviser x (7,625 existing
advisers + 477 newly registered advisers) = $43,339,507 in total
aggregate costs.
    \791\ 89.22 initial hours per adviser/3 = 29.74 total annual
hours per adviser. 722,860 initial aggregate hours/3 = 240,953 total
annual aggregate hours.
    \792\ $5,353 in monetized costs per adviser/3 = $1,784
annualized monetized cost per adviser. $43,339,507 initial aggregate
monetized cost/3 = $14,14,457,209 in total annual aggregate
monetized cost.
---------------------------------------------------------------------------

ii. Delivery for New Account Types or Material Changes in the Nature or
Scope of the Advisory Relationship
    As noted above, investment advisers also would be required to
deliver the relationship summary to existing clients before or at the
time (i) a new account is opened that is different from the retail
investor's existing account(s); or (ii) changes are made to the retail
investor's existing account(s) that would materially change the nature
and scope of the adviser's relationship with the retail investor, as
further discussed in Section II.C.2. With respect to delivery of the
relationship summary in the event new account types are opened or
material changes occur in the nature or scope of the advisory
relationship, we expect that such delivery would take place among 10%
of an adviser's retail investors annually. We would therefore estimate
a total annual hourly burden of 9 hours per adviser and 72,286 hours in
total annual aggregate hours,\793\ with a monetized cost of $535 per
adviser \794\

and $4,337,163 in aggregate.\795\ We do not expect advisers to incur
external costs related to deliveries of the relationship summary due to
new account type openings, or material changes to the nature or scope
of the relationship, because we assume that advisers will deliver the
relationship summary along with new account agreements and other
information normally required in such circumstances.
---------------------------------------------------------------------------

    \793\ 10% of 4,461 retail clients per adviser x .02 hours to
deliver the relationship summary = 9 hours per adviser. 9 hours x
(7,625 existing advisers + 477 new advisers) = 72,286 total
aggregate hours.
    \794\ 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 $60 per hour. 9
hours per adviser x $60 = $535 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 assume 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.
    \795\ $535 in monetized costs per adviser x (7,625 existing
advisers + 477 newly registered advisers) = $4,337,163 in total
aggregate costs.
---------------------------------------------------------------------------

iii. Posting of Amended Relationship Summaries to Websites and
Communicating Changes to Amended Relationship Summaries, Including by
Delivery
    Investment advisers would be required to amend their relationship
summaries within 30 days when any of the information becomes materially
inaccurate. We do not expect amendments to be frequent, but based on
the historical frequency of amendments made on Form ADV Parts 1 and 2,
estimate that on average, each adviser preparing a relationship summary
will likely amend the disclosure and average of 1.81 times per
year.\796\ As above, we estimate that preparation of the relationship
summary for posting to the web and the posting itself will require 0.5
hours. Therefore, once again using the same percentage of investment
advisers reporting public websites, 91.1% of 7,625 advisers would incur
a total annual burden of 0.91 hours per adviser, or 6,286 hours in
aggregate,\797\ to post the amended relationship summaries to their
website. This translates into an annual monetized cost of $54.30 per
adviser, or $377,188 in the aggregate for existing registered advisers
with relationship summary obligations.\798\ Investment advisers also
will be required to communicate any changes in an amended relationship
summary to existing clients who are retail investors. The communication
can be made by delivering the relationship summary or by communicating
the information in another way. 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, such as
an interim or annual Form ADV update. We therefore estimate a burden of
615,674 \799\ hours, or 161.5 hours per adviser,\800\ at a monetized
cost of $36,940,426 in aggregate,\801\ or $9,689 per adviser,\802\ for
the 50% of advisers that choose to deliver amended relationship
summaries in order to communicate updated information. Similar to the
other delivery requirements discussed above for proposed rule 204-5, we
do not expect investment advisers to incur external costs in delivering
amended relationship summaries because we assume that they will make
this delivery with other disclosures required to be delivered, such as
an interim or annual update to Form ADV.
---------------------------------------------------------------------------

    \796\ This estimate is based on IARD system data regarding the
number of filings of Form ADV amendments. See also supra note 702
and accompanying text.
    \797\ 0.5 hours to post the amendment x 1.81 amendments annually
= 0.91 hours per adviser annually to post amendments to the website.
0.91 x 7,625 existing advisers amending the relationship summary x
91.1% of advisers with public websites = 6,286 aggregate annual
hours to post amendments of the relationship summary.
    \798\ 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 $60 per
hour. 0.91 hours per adviser x $60 = $54.30 per adviser. $54.30 per
adviser x 91.1% x 7,625 existing advisers = $377,188 in annual
monetized costs.
    \799\ 7,625 advisers amending the relationship summary x 4,461
retail clients per adviser x 50% delivering the amended relationship
summary to communicate updated information x 0.02 hours per delivery
x 1.81 amendments annually = 615,674 hours to deliver amended
relationship summaries.
    \800\ 4,461 retail clients per adviser x 0.02 hours per delivery
x 1.81 amendments annually = 161.5 hours per adviser.
    \801\ 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 $60 per hour.
615,674 hours x $60 = $36,940,426. 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 assume 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.
    \802\ 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
$60 per hour. 161.5 hours per adviser x $60 per hour = $9,689 per
adviser.
---------------------------------------------------------------------------

c. Delivery to New Clients or Prospective New Clients
    Data from the IARD system indicate that of the 12,721 advisers
registered with the Commission, 7,625 have retail investors, and on
average, each has 4,461 clients who are retail investors.\803\ Based on
IARD system data from 2015 to 2017, we estimate that the client base
for investment advisers will grow by approximately 4.5% annually.\804\
Based on our experience with Form ADV Part 2, we estimate the annual
hour burden for initial delivery of a relationship summary would be the
same by paper or electronic format, at 0.02 hours for each relationship
summary,\805\ or 4 annual hours per adviser.\806\ Therefore, we
estimate that the aggregate annual hour burden for initial delivery of
the relationship summary to new clients would be 30,614 hours,\807\ at
a monetized cost of $1,836,817, or $241 per adviser.\808\ We do not
expect that advisers will incur external costs to deliver the
relationship summary to new or prospective clients because we assume
that advisers 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.
---------------------------------------------------------------------------

    \803\ This average is based on advisers' responses to Item 5 of
Part 1A of Form ADV as of December 31, 2017.
    \804\ 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.
    \805\ 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 note 157.
    \806\ 4,461 clients per adviser with retail clients x 4.5% = 201
new clients per adviser. 201 new clients per adviser x .02 hours per
delivery = 4.0 hours per adviser for delivery of a relationship
summary to new or prospective new clients.
    \807\ 4.0 hours per adviser for delivery obligation to new or
prospective clients x 7,625 advisers = 30,614 hours.
    \808\ 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
$60 per hour. 7,625 hours x $60 = $1,836,817. We estimate that
advisers will not incur any incremental postage costs to deliver the
relationship summary to new or prospective clients because we assume
that advisers will make the delivery along with other documentation
normally provided in such circumstances, such as Form ADV Part 2.
$1,835,371/7,625 investment advisers = $241 per adviser.
---------------------------------------------------------------------------

d. Total New Initial and Annual Burdens
    Altogether, we estimate the total collection of information burden
for proposed new rule 204-5 to be 967,044 annual aggregate hours per
year,\809\ or

126.8 hours per respondent,\810\ for a total annual aggregate monetized
cost of $58,022,611,\811\ or $7,610 \812\ per adviser. We request
comment on the estimated hourly and cost burdens for the new collection
of information under proposed rule 204-5.
---------------------------------------------------------------------------

    \809\ 1,230 annual hours for posting initial relationship
summaries to adviser websites + 240,953 annual hours for initial
delivery to existing clients + 72,286 hours for delivery to existing
clients based on material changes to accounts or scope of
relationship + 6,286 annual hours to post amended relationship
summary to website + 615,674 hours for delivery to existing clients
to communicate updated information in amended relationship summaries
+ 30,614 hours for delivery to new or prospective clients = 967,044
annual total hours for investment advisers to post and deliver the
relationship summary under proposed rule 204-5.
    \810\ 967,044 hours (initial and other deliveries)/7,625
advisers = 126.8 hours per adviser.
    \811\ $73,809 for posting initial relationship summaries to
adviser websites + $14,457,209 for initial delivery to existing
clients + $4,337,162 for delivery to existing clients based on
material changes to accounts or scope of relationship + $377,188 to
post amended relationship summary to website + $36,940,426 for
delivery to existing clients to communicate updated information in
amended relationship summaries + $1,836,817 for delivery to new or
prospective clients = $58,022,611 in total annual aggregate
monetized cost for investment advisers to post and deliver the
relationship summary under proposed rule 204-5.
    \812\ $58,022,611/7,625 advisers = $7,610 per adviser.
---------------------------------------------------------------------------

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

    New proposed rule 17a-14 under the Exchange Act [17 CFR 240.17a-14]
and Form CRS [17 CFR 249.640] would require a broker-dealer that offer
services to retail investors to prepare, 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 would file the relationship summary
with EDGAR and deliver the relationship summary to both existing
customers and new or prospective new customers who are retail
investors. New proposed 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 Form CRS 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 would be found
at 17 CFR 249.640 and would be mandatory. Responses would not be kept
confidential.
1. Respondents: Broker-Dealers
    The respondents to this information collection would be the broker-
dealers registered with the Commission that would be required to
deliver a relationship summary in accordance with proposed new rule
17a-14 under the Exchange Act [17 CFR 240.17a-14]. As of December 31,
2017, there were 2,857 broker-dealers registered with the Commission
that reported sales to retail customer investors,\813\ and therefore
likely would be required to prepare and deliver the relationship
summary.\814\ We also note that these include 366 broker-dealers that
are dually registered as investment advisers.\815\ To a great extent,
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 proposed amendments
to Form ADV and proposed new rule 204-5, discussed in Sections V.A and
V.C 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 with IAPD (in addition to EDGAR as a broker-
dealer), and to deliver to both investment advisory clients and
brokerage customers, to the extent those groups of retail investors do
not overlap. Therefore, although treating dually registered broker-
dealers in this way may be over-inclusive, we base our burden estimates
for proposed rule 17a-14 and Form CRS on 2,857 broker-dealers with
relationship summary obligations, including those dually registered as
broker-dealers. \816\
---------------------------------------------------------------------------

    \813\ See supra note 461 and accompanying text. Retail sales
activity is identified from Form BR (see supra note 280, 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
preliminarily believe that many firms will just mark ``sales'' if
they have both retail and institutional activity. However, we note
that this may capture some broker-dealers that do not have retail
activity, although we are unable to estimate that frequency.
    \814\ For purposes of Form CRS, a ``retail investor'' would be
defined as: a prospective or existing client or customer who is a
natural person (an individual) and would include a trust or other
similar entity that represents natural persons, even if another
person is a trustee or managing agent of the trust.
    \815\ See supra note 457 and accompanying text.
    \816\ See supra note 457 and accompanying text.
---------------------------------------------------------------------------

2. Initial and Annual Burdens
a. Initial Preparation, Filing, and Posting of Relationship Summary
    Unlike investment advisers, broker-dealers currently are not
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. We estimate, therefore, that the initial first
year burden for preparing and filing the relationship summary would be
15.0 hours per registered broker-dealer. The narrative descriptions
required in the relationship summary should be narrowly tailored and
brief, and the relationship summary must be limited to four pages (or
equivalent limit if in electronic format). The relationship summary
would be standardized across broker-dealers given the mandated set and
sequence of topic areas, and moreover, a considerable amount of
language within each topic area also would be prescribed, thereby
limiting the amount of time required to prepare the disclosure.
Therefore, we believe that the time needed to prepare the relationship
summary should not vary significantly based on the size of the broker-
dealer. However, unlike investment advisers, which already prepare Form
ADV Part 2 brochures and have information readily available to prepare
the relationship summary, broker-dealers would be required for the
first time to prepare disclosure that contains all the information
proposed to be required by the relationship summary. In addition,
investment advisers already file their brochures on IARD, while broker-
dealers may incur new burdens to file their relationship summaries on
EDGAR. Therefore, we believe that each broker-dealer respondent would
incur 15 hours on a one-time basis, instead of five hours for
investment advisers, for the initial preparation and filing of the
relationship summary. However, we believe that the amount of time
needed to post the relationship summary on the broker-dealer's website,
if it has one, would not vary significantly from the time needed by
investment advisers because the time required to prepare and post
disclosure that is standardized in length and content should not vary
significantly across firms. As with investment advisers, we estimate
that each broker-dealer would incur 0.5 hours to prepare the
relationship summary for posting to its website, if it has one, such as
to ensure proper electronic formatting, and to perform the actual
posting.\817\
---------------------------------------------------------------------------

    \817\ See supra note 780.
---------------------------------------------------------------------------

    Given these assumptions, we estimate the total one-time initial
hourly burden for broker-dealers to prepare the relationship summary
and file it with the Commission would be 42,855

hours,\818\ for a monetized value of $11,292,293.\819\ We estimate that
the initial burden of posting the relationship summary to their
websites, if they have one, would be 1,428 hours,\820\ for a monetized
value of $85,710.\821\ To arrive at an annual burden for preparing,
filing, and posting the relationship summary, as for advisers, the
initial burden would be amortized over a three-year period. 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, would be 14,761 hours, or 5.17 hours per broker-
dealer,\822\ for an annual monetized cost of $3,792,668, or $1,328 per
broker-dealer.\823\
---------------------------------------------------------------------------

    \818\ 15.0 hours x 2,857 broker-dealers with retail accounts =
42,855 total hours.
    \819\ 42,855 total aggregate initial hour burden for preparing
and filing a relationship summary. 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 $229 and $298 per hour, respectively. (21,427.5
hours x $229 + (21,427.5 hours x $298 = $11,292,293).
    \820\ 0.5 hours x 2,857 broker-dealers = 1,248 hours to prepare
and post relationship summary to the website.
    \821\ 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 $60
per hour. 1,429 hours x $60 = $85,710 total aggregate monetized
cost.
    \822\ 42,855 hours/3 years = 14,761 total aggregate annual hour
burden to prepare and file relationship summary. 14,761 hours/2,857
broker-dealers with retail accounts = 5.17 hours annually per
broker-dealer.
    \823\ ($11,292,293 total initial aggregate monetized cost for
preparation and filing + $85,710 for posting to the website)/3 =
$3,792,668 total annual monetized cost for preparation, filing and
posting the relationship summary. $3,792,668/2,857 broker-dealers
subject to relationship summary obligations = $1,328 per broker-
dealer.
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b. Estimated External Costs for Initial Preparation of Relationship
Summary
    Under proposed new rule 17a-14, broker-dealers would 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 in the
form of website set-up, maintenance, or licensing fees because broker-
dealers would 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 some broker-dealers may incur a
one-time initial cost for outside legal and consulting fees in
connection with the initial preparation of the relationship summary.
Although broker-dealers subject to the relationship summary requirement
may vary widely in terms of the size, complexity and nature of their
businesses, the amount of disclosure required would not vary
substantially among broker-dealers. Accordingly, the amount of time,
and thus cost, required for outside legal and compliance review is
unlikely to vary substantially among those broker-dealers who elect to
obtain outside assistance.\824\ The relationship summary is short,
standardized, and contains largely prescribed language. Because the
information required in the relationship summary pertains largely to
the broker-dealer's own business practices, the information is likely
more readily available to the broker-dealer than to an external legal
or compliance consultant. As a result, we anticipate that only a
quarter of broker-dealers will seek the help of outside legal services
and half 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 would be
$1,416.\825\ We estimate that the initial per broker-dealer cost for
compliance consulting services related to the preparation of the
relationship summary would be $2,109.\826\ Accordingly, we estimate
that 715 broker-dealers will use outside legal services, for a total
initial aggregate cost burden of $1,011,378,\827\ and 1,429 broker-
dealers will use outside compliance consulting services, for a total
initial aggregate cost burden of $3,012,707,\828\ resulting in a total
initial aggregate cost burden among all respondents of $4,024,085, or
$1,409 per broker-dealer, for outside legal and compliance consulting
fees related to preparation of the relationship summary.\829\ Annually,
this represents $1,341,362, or $470 per broker-dealer, when amortized
over a three-year period.\830\
---------------------------------------------------------------------------

    \824\ We estimate that an external service provider would spend
3 hours helping a broker-dealer prepare an initial relationship
summary.
    \825\ External legal fees are in addition to the projected hour
per broker-dealer burden discussed above. $472 per hour for legal
services x 3 hours per broker-dealer = $1,416. The hourly cost
estimate of $472 is adjusted for inflation and based on our
consultation with broker-dealers and law firms who regularly assist
them in compliance matters.
    \826\ 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 $703 per
hour. $703 per hour for outside consulting services x 3 hours per
adviser = $2,109.
    \827\ 25% x 2,857 SEC registered broker-dealers = 715 broker-
dealers. $1,416 for legal services x 715 broker-dealers =
$1,011,378.
    \828\ 50% x 2,857 SEC registered broker-dealers = 1,429 broker-
dealers. $2,109 for compliance consulting services x 1,429 broker-
dealers = $3,012,707.
    \829\ $1,011,378 + $3,012,707 = $4,024,085. $4,024,085/2,857
broker-dealers = $1,409 per broker-dealer.
    \830\ $4,024,085 initial aggregate hours/3 years = $1,341,362
annually. $1,409 initial hours per broker-dealer/3 years = $469.50.
---------------------------------------------------------------------------

    We do not expect ongoing external legal or compliance consulting
costs for the relationship summary. Although broker-dealers would be
required to amend the relationship summary within 30 days whenever any
information becomes materially inaccurate, given the standardized
nature and prescribed language of the relationship summary, we expect
that amendments would be factual and require relatively minimal wording
changes. We believe that broker-dealers would be more knowledgeable
about these facts than outside legal or compliance consultants and
would 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.
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.
Based on staff experience, we believe that many broker-dealers, as a
matter of best practices, would update their relationship summary at a
minimum once a year, after conducting an annual supervisory review, for
example.\831\ 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 assume that
broker-dealers would update their relationship summary, on average,
twice a year, and as with investment advisers, we estimate that broker-
dealers would require 0.5 hours to amend and file the updated
relationship summary, and 0.5 hours to post it to their website. Thus,
we estimate that broker-dealers would incur a total annual aggregate
hourly

burden of 5,714 hours per year, to prepare and file, and post to their
websites an estimated total of 5,714 amendments per year.\832\
---------------------------------------------------------------------------

    \831\ 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).
    \832\ 2,857 broker-dealers amending relationship summaries x 2
amendments per year = 5,714 amendments per year. 5,714 amendments x
(0.5 hours to amend and file + 0.5 hours to post to website) = 5,714
hours.
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d. Delivery of the Relationship Summary
    Proposed rule 17a-14 under the Exchange Act would 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 time
the retail investor first engages the broker-dealer's services. Broker-
dealers also would 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 proposal. Also with respect to
existing customers, broker-dealers would deliver the relationship
summary before or at the time (i) a new account is opened that is
different from the retail investor's existing account(s); or (ii)
changes are made to the retail investor's account(s) existing
account(s) that would materially change the nature and scope of the
broker-dealer's relationship with the retail investor, as further
discussed in II.C.2 above.
i. 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 2,857 broker-dealers
that report retail activity have approximately 128 million customer
accounts, and that approximately 79%, or 101.248 million, of those
accounts belong to retail customers.\833\ We estimate that, under the
proposed rule, broker-dealers would send their relationship summary
along with other required disclosures, such as periodic account
statements, in order to comply with initial delivery requirement for
the relationship summary. As with investment advisers, we estimate that
a broker-dealer will require no more than 0.02 hours to send the
relationship summary to each customer, or an aggregate initial burden
of 2,024,960 hours, or approximately 709 hours per broker-dealer for
the first year after the rule is in effect.\834\ We would therefore
expect the aggregate monetized cost for broker-dealers to make a one-
time initial delivery of relationship summaries to existing customers
to be $121,497,600.\835\ Amortized over three years, the total annual
hourly burden is estimated to be 674,987 hours, or approximately 236.3
hours per broker-dealer,\836\ with annual monetized costs of
$40,499,200 and $14,175, respectively.\837\ We do not expect that
broker-dealers will incur external costs for the initial delivery of
the relationship summary to existing clients because we assume that
they will make such deliveries along with another required delivery,
such as periodic account statements.
---------------------------------------------------------------------------

    \833\ See supra notes 428-437 and accompanying text. 2,857
broker-dealers (including dual registrants) report 128 million
customer accounts. We are aware that, based on data from IARD,
investment advisers reporting retail activity have approximately
79.1% retail clients and 21.9% non-retail clients. While
acknowledging the differences between the investment adviser and
broker-dealer models, we apply the 79.1% in estimating the
proportion of broker-dealer accounts that belong to retail
customers. Therefore, 79.1% x 128 million accounts = 101.248 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.
    \834\ (0.02 hours per customer account x 101.248 million
customer accounts) = 2,024,960 hours. We note that the burden for
preparing updated relationship summaries is already incorporated
into the burden estimate for Form CRS discussed above. 2,024,960
hours/2,857 broker-dealers = approximately 709 hours per broker-
dealer.
    \835\ 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 $60 per hour. 2,024,960 hours x $60 =
$121,497,600. We estimate that broker-dealers will not incur any
incremental postage costs because we assume that they will make such
deliveries with another mailing the broker-dealer was already
delivering to clients, such as periodic account statements.
    \836\ 2,024,960 initial aggregate hours/3 = 674,987 total annual
aggregate hours. 709 initial hours per broker-dealer/3 = 236.3 total
annual hours per broker-dealer.
    \837\ $121,497,600 initial aggregate monetized cost/3 =
$40,499,200 annual aggregate monetized cost. $40,499,200/2,857
broker-dealers = $14,175 annual monetized cost per broker-dealer.
---------------------------------------------------------------------------

ii. Delivery for New Account Types or Material Changes in the Nature or
Scope of the Brokerage Relationship
    Broker-dealers would be required to deliver the relationship
summary to existing customers before or at the time (i) a new account
is opened that is different from the retail investor's existing
account(s); or (ii) changes are made to the retail investor's existing
account(s) that would materially change the nature and scope of the
adviser's relationship with the retail investor, as further discussed
in Section II.C.2. With respect to delivery of the relationship summary
in the event of material changes in the nature or scope of the
brokerage relationship, as with investment advisers, we estimate that
this would take place among 10% of a broker-dealer's retail investors
annually. We would therefore estimate broker-dealers to incur a total
annual aggregate burden of 202,496 hours, or 71 hours per broker-
dealer,\838\ at an annual aggregate monetized cost of $12,149,760, or
approximately $4,253 per broker-dealer.\839\ We do not expect broker-
dealers to incur external costs related to deliveries of the
relationship summary due to new account type openings, or material
changes to the nature or scope of the relationship, because we assume
that broker-dealers will deliver the relationship summary along with
new account agreements and other documentation normally required in
such circumstances, or with periodic account statements.
---------------------------------------------------------------------------

    \838\ 10% of 101.248 million customers x .02 hours = 202,496
hours. 202,496 hours/2,857 broker-dealers = 71 hours per broker-
dealer.
    \839\ 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
$60 per hour. 202,496 hours x $60 = $12,149,760. $12,149,760/2,857
broker-dealers = $4,253 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 assume 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.
---------------------------------------------------------------------------

iii. Communicating Changes to Amended Relationship Summaries, Including
by Delivery
    As discussed above, broker-dealers must communicate any changes in
an updated relationship summary to retail investors who are existing
customers of the firm within 30 days after the updates are required to
be made and without charge. The communication can be made by delivering
the relationship summary or by communicating the information in another
way to the retail investor. Consistent with our discussion on broker-
dealers' amendments to the relationship summary we are assuming that
the 2,857 broker-dealers with relationship summaries will amend them
twice each year. We also assume that 50% will choose to deliver the
relationship summary to communicate the update information. As with
investment advisers, we estimate that broker-dealers would require 0.02
hours to make a delivery to each customer. Therefore, the estimated
burden for those broker-dealers choosing to deliver an amended
relationship summary to meet this communication requirement

would be approximately 2,024,960 hours, or 709 hours per broker-
dealer,\840\ translating into a monetized cost of $121,497,600 in
aggregate, or $42,526 per broker-dealer.\841\ Similar to the other
delivery requirements relating to proposed rule 17a-14, we do not
expect broker-dealers to incur external costs in delivering amended
relationship summaries because we assume that they will make this
delivery with other documents required to be delivered, such as
periodic account statements.
---------------------------------------------------------------------------

    \840\ 2 amendments per year x 101.248 million customer accounts
x 50% delivering the amended relationship summary to communicate
updated information x 0.02 hours per delivery = 2,024,960 hours to
deliver amended relationship summaries. 2,024,960 hours/2,857
broker-dealers = 709 hours per broker-dealer.
    \841\ 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
$60 per hour. 2,024,960 hours x $60 = $121,497,600. $121,467,600/
2,857 broker-dealers = $42,526 per broker-dealer. We estimate that
broker-dealers will not incur any incremental postage costs to
deliver these relationship summaries, because we assume that
advisers will make the delivery along with other documentation they
normally would provide, such as account opening documents.
---------------------------------------------------------------------------

e. Delivery to New Clients or Prospective New Customers
    To estimate the delivery burden for broker-dealers' new or
prospective new customers, as discussed above, we estimate that the
2,857 standalone broker-dealers with retail activity have approximately
101.248 million retail customer accounts.\842\ 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, 8% more
new retail investors each year.\843\ We estimate the hour burden for
initial delivery of a relationship summary would 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 would be 161,917 hours, or 56.7 hours
per broker-dealer.\844\ at a monetized cost of $9,715,001 at an
aggregate level, or $3,400 per broker-dealer.\845\
---------------------------------------------------------------------------

    \842\ See supra notes 429-439 and accompanying text.
    \843\ This represents the average annual rate of growth from
2012-2016 in the number of accounts for all broker-dealers reporting
retail activity.
    \844\ 101.248 million customer accounts x 8% increase =
8,095,834 new customers. 8,095,834 new customers x 0.02 hours per
delivery = 161,917 total annual aggregate hours. 161,917/2,857
broker-dealers = 56.7 hours per broker-dealer for delivery to new
customers.
    \845\ 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 $60 per hour.
161,917 hours x $60 = $9,715,001. $9,715,001/2,857 broker-dealers =
$3,400 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 assume that broker-dealers will make the delivery along
with other documentation, such as periodic account statements.
---------------------------------------------------------------------------

f. Total New Initial and Annual Burdens
    As discussed above, we estimate the total annual collection of
information burden for proposed 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) delivery to existing customers who are opening new
accounts or materially changing the nature or scope of their
relationship with the broker-dealer; (v) delivery of amended
relationship summaries; and (vi) delivery to new and prospective
customers. Given these proposed requirements, we estimate the total
annual aggregate hourly burden to be approximately 3,084,835 hours per
year, or 1,080 hours on a per broker-dealer basis.\846\ This translates
into an aggregate annual monetized cost of $188,578,462, or $66,066 on
a broker-dealer basis per year.\847\ In addition, we estimate that
broker-dealers would incur external legal and compliance costs in the
initial preparation of the relationship summary of approximately
$4,024,085 in aggregate, or $1,409 per broker-dealer, translating into
$1,341,362 annually, or $470 per broker-dealer, when amortized over a
three year period.
---------------------------------------------------------------------------

    \846\ 14,761 hours per year for initial preparation, filing, and
posting of relationship summary + 5,714 hours per year for
amendments, filing, and posting of amendments + 674,987 hours for
one-time initial delivery to existing customers + 202,496 hours for
delivery to existing customers making material changes to their
accounts + 2,024,960 hours for delivery of amendments + 161,917
hours for delivery to new customers = 3,084,835 total annual
aggregate hours. 3,084,835 hours/2,857 broker-dealers = 1,080 hours
per broker-dealer.
    \847\ $3,792,668 per year for initial preparation, filing, and
posting of relationship summary + $924,240 per year for amendments,
filing, and posting of amendments + $40,499,200 for one-time initial
delivery to existing customers (amortized over three years) +
$12,149,760 for delivery to existing customers making material
changes to their accounts + $121,497,600 for delivery of amendments
+ $9,715,001 for delivery to new customers = $188,578,468 in total
annual aggregate monetized cost. $188,578,468/2,857 broker-dealers =
$66,066 per broker-dealer.
---------------------------------------------------------------------------

E. Recordkeeping Obligations Under Rule 17a-3 of the Exchange Act \848\
---------------------------------------------------------------------------

    \848\ In a concurrent release, we are proposing additional
burden adjustments to rules 17a-3 and 17a-4 of the Exchange Act. See
Regulation Best Interest Proposal, supra note 24.
---------------------------------------------------------------------------

    The proposed requirement to make a record indicating the date that
a relationship summary was provided to each customer and to each
prospective customer who subsequently becomes a customer would contain
a collection of information that would be found at 17 CFR 240.17a-
3(a)(24) and would be mandatory. The Commission staff would use this
collection of information in its examination and oversight program, and
the information generally is kept confidential.\849\ The likely
respondents to this collection of information requirement are the
approximately 2,857 broker-dealers currently registered with the
Commission that offer services to retail investors, as defined
above.\850\
---------------------------------------------------------------------------

    \849\ See section 24(b) of the Exchange Act (15 U.S.C. 78x-
24(b)).
    \850\ See supra note 29 and accompanying text.
---------------------------------------------------------------------------

    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.'' \851\ 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 kept, respectively.
---------------------------------------------------------------------------

    \851\ See section 17(a) of the Exchange Act.
---------------------------------------------------------------------------

    The amendments to rule 17a-3 that we are proposing today would
require SEC-registered broker-dealers to make a record indicating the
date that a relationship summary was provided to each customer and to
each prospective customer who subsequently becomes a customer.
Commission staff has estimated that the proposed amendments to rule
17a-3(a)(24) would result in an incremental burden increase of 0.1
hours annually for each of the estimated SEC-registered broker-dealers
that would be required to prepare and preserve the initial relationship
summary and any amendments.\852\
---------------------------------------------------------------------------

    \852\ We apply 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.
---------------------------------------------------------------------------

    The incremental hour burden for broker-dealers to maintain the
relationship summary would therefore

be 286 hours,\853\ for a monetized cost of 17,481 in aggregate, or
$6.00 per broker-dealer.\854\
---------------------------------------------------------------------------

    \853\ 2,857 broker-dealers x 0.1 hours annually = 286 annual
hours for recordkeeping.
    \854\ As with our estimates relating to the proposed amendments
to rule 204-2 under the Advisers Act (see, e.g., supra note 771 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 position are $67
and $60, respectively. (17% x 286 hours x $67) + (83% x 286 hours x
$60) = $17,481. $17,481/2,857 broker-dealers = $6.00 per broker-
dealer.
---------------------------------------------------------------------------

F. Record Retention Obligations Under Rule 17a-4 of the Exchange Act

    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.'' \855\ Exchange Act rule 17a-4 specifies
minimum requirements with respect to how long records created under
Exchange Act rule 17a-3 and other documents must be kept. We are
proposing amendments to rule 17a-4 that would require broker-dealers to
retain copies of each relationship summary, including amendments, and
to preserve the record of dates that each relationship summary and each
amendment thereto was delivered to any existing customer or to any new
or prospective customer, pursuant to the proposed new requirements
under amended rule 17a-3, discussed above. These records would be
required to be maintained in an easily accessible place for at least
six years after such record or relationship summary is created. This
collection of information would be found at 17 CFR 240.17a-4 and would
be mandatory. The Commission staff would use the collection of
information in its examination and oversight program. Requiring
maintenance of these disclosures as part of the broker-dealer's books
and records would facilitate the Commission's ability to inspect for
and enforce compliance with firms' obligations with respect to Form
CRS. The information generally is kept confidential.\856\
---------------------------------------------------------------------------

    \855\ See section 17(a) of the Exchange Act.
    \856\  See section 24(b) of the Exchange Act (15 U.S.C. 78x-
24(b)).
---------------------------------------------------------------------------

    The likely respondents to this collection of information
requirement are the approximately 2,857 broker-dealers that report
retail activity, as described above.
1. Changes in Burden Estimates and New Burden Estimates
    The approved annual aggregate burden for rule 17a-4 is currently
1,042,416 hours, with a total annual aggregate monetized cost burden of
approximately $67.8 million, based on an estimate of 4,104 broker-
dealers and 150 broker-dealers maintaining an internal broker-dealer
system.\857\ The currently approved external cost estimate to
respondents is $20,520,000.\858\ We estimate that the proposed
amendments would result in an increase in the collection of information
burden estimate by 0.10 hours \859\ for each of the estimated 2,857
currently registered broker-dealers that report retail sales activity
and would have relationship summary obligations.\860\ This would yield
an annual estimated aggregate burden of 754,964 hours for all broker-
dealers with relationship summary obligations to comply with rule 17a-
4,\861\ for a monetized cost of approximately $48.6 million.\862\ In
addition, the 984 broker-dealers \863\ not subject to the proposed
amendments would continue to be subject to an unchanged burden of 254
hours per broker-dealer, or 249,936 hours for these broker-
dealers.\864\ In addition, those maintaining an internal broker-dealer
system would continue to be subject to an unchanged burden of 450 hours
annually, under rule 17a-4. In summary, taking into account the
estimated annual burden of broker-dealers that would be required to
maintain records of the relationship summary, as well the estimated
annual burden of broker-dealers that do not have relationship summary
obligations and whose information collection burden is unchanged, the
revised annual aggregate burden for all broker-dealer respondents to
the recordkeeping requirements under rule 17a-4 is estimated to be
976,350 total annual aggregate hours,\865\ for a monetized cost of
approximately $65.4 million.\866\
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    \857\ (4,104 broker-dealers x 254 hours per broker-dealer) +
(150 broker-dealers maintaining internal broker-dealer systems x 3
hours) = (1,042,416 hours + 450 hours ) = 1,042,866 hours each year.
The monetized cost was based on these functions being performed by a
compliance clerk earning an average of $65 per hour, resulting in a
total internal cost of compliance of (1,042,416 x $65) + (450 x $65)
= $67,786. See 17a-4 Supporting Statement, available at https://www.reginfo.gov/public/do/PRAViewDocument?ref_nbr=201607-3235-007.
    \858\ 4,104 broker-dealers x $5,000 annual recordkeeping cost
per broker-dealer = $20,520,000. See id.
    \859\ We apply 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.
    \860\ See supra note 616.
    \861\ 2,857 broker-dealers required to prepare relationship
summary x (254 hours + 0.1 hour) = 725,964 hours.
    \862\ Consistent with our prior paperwork reduction analyses for
rule 17a-4, we expect that performance of this function will most
likely be performed by compliance clerks. Data from the SIFMA Office
Salaries Report suggest that costs for these positions are $67 per
hour. 725,964 hours x $67 = $48,639,568.
    \863\ See supra note 618.
    \864\ 984 broker-dealers x 254 hours = 249,936 hours for broker-
dealers not preparing a relationship summary.
    \865\ 725,964 + 249,936 + 450 = 976,350 total aggregate hours.
    \866\ Consistent with our prior paperwork reduction analyses for
rule 17a-4, we expect that performance of this function will most
likely be performed by compliance clerks. Data from the SIFMA Office
Salaries Report suggest that costs for these positions are $67 per
hour. 976,650 hours x $67 = $65,415,430.
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2. Revised Annual Burden Estimates
    As noted above, the approved annual aggregate burden for rule 17a-4
is currently 1,042,416 hours, with a total annual aggregate monetized
cost burden of approximately $67.8 million, based on an estimate of
4,104 broker-dealers and 150 broker-dealers maintaining an internal
broker-dealer system. The revised annual aggregate hourly burden for
rule 17a-4 would be 976,350 \867\ hours, represented by a monetized
cost of approximately $65.4 million,\868\ based on an estimate of 2,857
broker-dealers with the relationship summary obligation and 984 broker-
dealers without, as noted above. This represents a decrease of 66,516
\869\ annual aggregate hours in the hour burden and an annual decrease
of approximately $2.37 million from the currently approved total
aggregate monetized cost for rule 17a-4.\870\ These changes are
attributable to the proposed amendments to rule 17a-4 relating to the
relationship summary as discussed in this proposing release and the
decline in the number of registered broker-dealer respondents. The
revised external cost to respondents is estimated at approximately
$19.2 million, or a reduction of $1.3 million from the currently
approved external cost burden of $20,520,000.\871\
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    \867\ See supra note 865.
    \868\ See supra note 739.
    \869\ 1,042,866 hours - 976,350 hours = 66,516 hours.
    \870\ $67,786,290 - $65,415,430 = $2,370,860.
    \871\ 3,841 registered broker-dealers as of December 31, 2017 x
$5,000 per broker-dealer in record maintenance costs = $19,205,000.
$20,520,000-$19,205,000 = $1,315,000.
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G. Rule 151-3 Under the Exchange Act

    Proposed new rule 151-3 would require broker-dealers and their
associated natural persons to prominently disclose that it is, or in
the case of a natural person that such person is associated with a
broker-

dealer that is, registered with the Commission as a broker-dealer in
print or electronic retail investor communications. For print
communications, we propose to require that such registration status be
displayed in a type size at least as large as and of a font style
different from, but at least as prominent as, that used in the majority
of the communication. In addition, such disclosure must be presented in
the body of the communication and not in a footnote. For electronic
communications, or in any publication by radio or television, we
propose to require that such disclosure be presented in a manner
reasonably calculated to draw retail investor attention to it.
    Rule 151-3 contains a collection of information requirement. This
collection of information would be found at [17 CFR 240.15l-3] and
would be mandatory. The likely respondents to this information
collection would be all broker-dealers and their associated natural
persons that distribute print or electronic retail investor
communications.
    The Commission believes that the collection of information is
necessary to provide retail investors and the Commission with
information to better determine whether a communication is from a
broker-dealer or investment adviser, and, for retail investors
specifically, to allow them to better identify which type of firm is
more appropriate for their specific investment needs. Additionally, by
requiring an affirmative identification, retail investors would also be
better informed whether a financial professional is an associated
person of a broker-dealer rather than a supervised person of an
investment adviser, allowing them to make a more informed choice as to
which type of professional is appropriate for their financial goals.
1. Respondents: Broker-Dealers and Associated Natural Persons
    Currently, there are 3,841 registered broker-dealers and 435,071
associated natural persons licensed with FINRA.\872\ Of these
registered broker-dealers, we estimate that approximately 74% or 2,857
distribute print or electronic retail investor communications \873\
while 435,071 associated natural persons distribute print or electronic
retail investor communications at standalone broker-dealers or dually
registered firms.\874\ Of these broker-dealers that distribute print or
electronic retail investor communications, 1,388 are large broker-
dealers and 1,469 are small broker-dealers.\875\ Accordingly, the
Commission estimates that 2,857 broker-dealers and 435,071 associated
natural persons would be required to comply with proposed rule 15l-3.
For the purposes of this analysis of the paperwork burden associated
with the proposed rules, the Commission preliminarily estimates that
there would be approximately 2,857 broker-dealer respondents and
435,071 associated natural person respondents. \876\
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    \872\ The number of broker-dealers is as of Dec. 31, 2017. Such
associated natural persons are registered as registered
representatives with FINRA through Form U4 as of Dec. 31, 2017. We
took the total 494,399 registered representatives across standalone
broker-dealers, dually registered firms, and standalone investment
advisers and isolated those registered representatives that act on
behalf of standalone broker-dealers and dually registered firms
(i.e. 88%). See supra Section IV.A.1.e, Economic Analysis:
Registered Representatives of Broker-Dealers, Investment Advisers
and Dually Registered Firms.
    \873\ See Section IV.A, supra note 460 and accompanying text. As
noted above, as of December 2017, 3,841 broker-dealers filed Form
BD. Retail sales by broker-dealers were obtained from Form BR.
    \874\ See supra Section IV.A.1.e, at Table 5. For the purposes
of the Paperwork Reduction Act analysis applicable to proposed rules
15l-3 and 211h-1, we are defining a ``dually registered firm'' in
the same manner as ``dual registrant'' is defined in the baseline of
the Economic Analysis. See supra Section IV, note 453.
    We assume for the purposes of this rule that all 435,071
registered representatives engage retail investors. This estimate is
based on the following calculation: (494,399 total licensed
registered representatives) x (12% (the percentage of pure
investment adviser representatives)) = 59,328 representatives at
standalone investment advisers. Then, to isolate the number of
representatives at standalone broker-dealers and dually registered
firms, subtract 59,328 from 494,399 = 435,071 retail-facing,
licensed registered representatives at standalone broker-dealers or
dually registered firms.
    \875\ For the purposes of this proposed rule, we define large
broker-dealers as those with total assets greater than 1 million and
small broker-dealers as those with less than 1 million in total
assets. See Table 1, Panel B supra Section IV.A.1.a. We note that
this distinction differs from the distinction used for proposed rule
211h-1 below because historically we have used the number of
employees rather than total assets to distinguish small and large
investment advisers. See cf. Rules Implementing Amendments to the
Investment Advisers Act of 1940, Investment Advisers Act Release No.
3221 (Jun. 22, 2011), at n.727 (``Release 3221''). Additionally, we
believe that because broker-dealer services encompass a small set of
large broker-dealers and thousands of smaller broker-dealers
competing for niche or regional segments of the market, the number
of employees would not provide the best estimate for how firms would
be impacted by our proposed rule based on the number of
communications produced. Instead, we believe that total assets
properly account for the varying sizes of these smaller broker-
dealers and are a better indicator as to how many communications
would be impacted in proportion to a firm's size. More specifically,
we assume that the greater the total assets, the larger the firm and
associated number of customer accounts which in turn would lead to a
greater number of communications with retail investors.
    \876\ We note that we are not analyzing new broker-dealers or
associated natural persons because there has been a downward trend
in broker-dealer registration and the number of associated natural
persons has not shown signs of a noticeable increase over the past
few years. From 2016 through 2018 the number of broker-dealers
registered with the Commission decreased by 160. (4064 - 3904) =
160. See also FINRA Statistics, available at https://www.finra.org/newsroom/statistics#reps.
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2. Initial and Annual Burdens
    We estimate that the initial one time burden for complying with the
disclosure requirements would be 72 hours per large broker-dealer \877\
and 15 hours per small broker-dealer.\878\ We note that we are staging
the compliance date to ensure that firms can phase out certain older
communications from circulation through the regular business lifecycle
rather than having to retroactively change them.\879\ As a result of
this staged compliance, our burden estimates do not reflect the burdens
that would have been imposed had these firms had to replace all
outstanding communications.
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    \877\ (8 hours for print communications per large broker-dealer
+ 64 hours for electronic communications per large broker-dealer).
    \878\ (5 hours for print communications per small broker-dealer
+ 10 hours for electronic communications per small broker-dealer).
    \879\ Similarly, we are not requiring firms to send new
communications to replace all older print communications as this
would be overly burdensome and costly for firms.
---------------------------------------------------------------------------

    Aside from certain anticipated outside legal costs, as discussed
below, we preliminary estimate that to comply with our proposed rule
with respect to print communications,\880\ broker-dealers would need to
review their communications, identify which would need to be amended,
make the changes, and verify that all firm communications comply with
the rule's requirements including its technical specifications such as
the type size, font, and prominence. Therefore, for existing print
communications for large broker-dealers, we preliminarily estimate that
the total burden for broker-dealers would be 8 hours for compliance and
business operations personnel to review, identify, and make changes
across all print communications.\881\ For

smaller broker-dealers, we preliminarily estimate that the total burden
for broker-dealers would be 5 hours for compliance and business
operations personnel to review, identify, and make changes across all
print communications.\882\ We note that there is a difference between
large broker-dealers and smaller broker-dealers. We assume that large
broker-dealers will have to review, identify and change more print
communications and in turn have their compliance staff verify more
print communications as being compliant with our proposed rule as
compared to small broker-dealers which will have fewer print
communications.
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    \880\ Such communications could include business cards,
letterheads, newspaper advertisements, and article reprints from an
unaffiliated magazine or newspaper.
    \881\ This estimate is based upon staff experience and industry
sources more generally. See e.g., Self-Regulatory Organizations;
Financial Industry Regulatory Authority, Inc.; Notice of Filing of a
Proposed Rule Change to Amend FINRA Rule 2210, Exchange Act Release
No. 34-75377 (Jul. 7, 2015), at Economic Impact Assessment (``FINRA
2015-22 Notice'') (stating with reference to adding BrokerCheck
links to mid-size and smaller firm communications, which we believe
is analogous to the manual changes made to print communications,
that ``mid-size and small members typically have less complex
websites, which they manage and maintain with nontechnical staff.
These members would use personnel in non-technical roles to
accomplish the required updates to their websites . . . [I]t would
take mid-size or small members approximately eight hours of non-
technical staffs' time to make the required updates . . .'').
    To compute the 8 hours internal initial burden we assume 2 hours
by compliance personnel and 6 hours by business operations personnel
of the broker-dealer.
    \882\ This estimate is based upon staff experience and industry
sources more generally. See e.g., FINRA 2015-22 Notice, supra note
881. To compute the 5 hours internal initial burden we assume 1 hour
by compliance personnel and 4 hours by business operations personnel
of the broker-dealer.
---------------------------------------------------------------------------

    With respect to electronic communications,\883\ we preliminarily
anticipate that it would take large broker-dealers approximately 64
hours \884\ to review, identify and make the required updates coupled
with verifying that such communications (present and future) would be
compliant with the proposed rule. Our estimates take into account that
larger firms likely have full-featured websites that generate other
webpages based on complex system code and logic.\885\ In order to make
changes to comply with our proposed rule, we assume that business
operations and information technology personnel would likely be
required to update the underlying code and logic to automate the
implementation of the required language to populate across all
associated electronic media. Additionally, we assume that these teams
would need to test to ensure that such changes were implemented
correctly.
---------------------------------------------------------------------------

    \883\ We believe such communications could include websites,
smart phone apps, social media, emails, and blogs.
    \884\ This estimate is based upon staff experience and industry
sources more generally. See e.g., FINRA 2015-22 Notice, supra note
881. (``These estimates are based on FINRA's assumption that large
members typically have full-featured websites that dynamically
generate webpages based on data and logic. The technology personnel
at these members would be required to update the underlying
information in order to automate the implementation of references
and hyperlinks to BrokerCheck across all applicable webpages. FINRA
estimates that on average it would take large members approximately
60 hours of technology staffs' time to make the required updates . .
.''). To compute the 64 hours internal initial burden we assume 4
hours by compliance personnel and 60 hours by business operations
and information technology personnel of the broker-dealer.
    \885\ This is based upon staff experience and industry sources
more generally. See e.g., FINRA 2015-22 Notice, supra note
(discussing the burdens associated with the inclusion of a
BrokerCheck reference and hyperlink across all firm communications
for certain firms).
---------------------------------------------------------------------------

    With respect to smaller broker-dealers, we preliminarily anticipate
that it would take approximately 10 hours \886\ to review, identify and
make the required updates coupled with verifying that such
communications (present and future) would be compliant with the
proposed rule. Our estimate for smaller broker-dealers assumes that
smaller broker-dealers have fewer electronic communications that would
be subject to our proposed rule as compared to larger firms, resulting
in a lower burden preliminary estimate.
---------------------------------------------------------------------------

    \886\ This estimate is based upon staff experience and industry
sources more generally. See e.g., FINRA 2015-22 Notice, supra note
881 (stating with reference to adding BrokerCheck links to firm
communications that ``mid-size and small members typically have less
complex websites, which they manage and maintain with nontechnical
staff. These members would use personnel in non-technical roles to
accomplish the required updates to their websites . . . [I]t would
take mid-size or small members approximately eight hours of non-
technical staffs' time to make the required updates . . .'').
    To compute the 10 hours internal initial burden, we assume 2
hours by compliance personnel and 8 hours by business operations and
information technology personnel of the broker-dealer.
---------------------------------------------------------------------------

    We preliminarily estimate that the total initial burden for broker-
dealers is 121,971 hours.\887\ We preliminarily estimate a cost of
approximately $33,179,514 for broker-dealers.\888\ This would be an
annual average burden of 43 hours per broker-dealer \889\ (as
monetized, is an average annual burden per broker-dealer of
$11,613).\890\
---------------------------------------------------------------------------

    \887\ (8 hours for print communications per large broker-dealer
+ 64 hours for electronic communications per large broker-dealers) =
72 hours per large broker-dealer. (72 hours x 1,388 large broker-
dealers) = 99,936 total initial burden for large broker-dealers.
    (5 hours for print communications per small broker-dealer + 10
hours for electronic communications per small broker-dealer) = 15
hours per small broker-dealer. (15 hours x 1,469 small broker-
dealers) = 22,035 total initial burden for small broker-dealers.
    (99,936 total initial burden large broker-dealers + 22,035 total
initial burden small broker-dealers) = 121,971 total broker-dealer
initial burden.
    \888\ Based on the SIFMA Management and Professional Earnings
Report, Commission staff preliminarily estimates that the average
hourly rate for compliance services is $298, for business operation
services is $268, and for information technology services is $270.
The average technology and business rate is ($268 business rate +
$270 technology rate)/2 = $269 average rate.
    This figure was calculated as follows: (6 compliance hours x
$298 compliance rate) + (66 technology/business hours x $269
averaged technology/business rate) x 1,388 large broker-dealers =
$27,124,296 total initial costs for large broker-dealers.
    (3 compliance hours x $298 compliance rate) + (12 technology/
business hours x $269 averaged technology/business rate) x 1,469
small broker-dealers = $6,055,218 total initial costs for small
broker-dealers.
    $27,124,296 total initial cost for large broker-dealers +
$6,055,218 total initial cost for small broker-dealers = $33,179,514
total initial costs for all broker-dealers.
    \889\ (8 hours for print communications per large broker-dealer
+ 64 hours for electronic communications per large broker-dealers) =
72 hours per large broker-dealer. (72 hours x 1,388 large broker-
dealers) = 99,936 total initial burden for large broker-dealers.
    (5 hours for print communications per small broker-dealer + 10
hours for electronic communications per small broker-dealer) = 15
hours per small broker-dealer. (15 hours x 1,469 small broker-
dealers) = 22,035 total initial burden for small broker-dealers.
    99,936 total initial burden large broker-dealers + 22,035 total
initial burden small broker-dealers = 121,971 total broker-dealer
initial burden/2,857 total broker-dealers = 43 total initial burden
per broker-dealer.
    \890\ Based on the SIFMA Management and Professional Earnings
Report, Commission staff preliminarily estimates that the average
hourly rate for compliance services is $298, for business operation
services is $268, and for information technology services is $270.
The average technology and business rate is ($268 business rate +
$270 technology rate)/2 = $269 average rate.
     This figure was calculated as follows: (6 compliance hours x
$298 compliance rate) + (66 technology/business hours x $269
averaged technology/business rate) x 1,388 large broker-dealers =
$27,124,296 total initial costs for large broker-dealers.
    (3 compliance hours x $298 compliance rate) + (12 technology/
business hours x $269 averaged technology/business rate) x 1,469
small broker-dealers = $6,055,218 total initial costs for small
broker-dealers.
    $27,124,296 total initial cost for large broker-dealers +
$6,055,218 total initial cost for small broker-dealers = $33,179,514
total initial costs for all broker-dealers/2,857 total number of
broker-dealers = $11,613 total initial cost per broker-dealer.
---------------------------------------------------------------------------

    We further preliminarily anticipate that associated natural persons
would have an initial one-time burden of 0.5 hours for each associated
natural person respondent to review, identify, and make changes to
their individual communications, both print and electronic.\891\ Based
on staff experience,

we anticipate that many firms will make many communication changes for
their associated natural persons, including their business cards and
letterheads, leaving only certain responsibilities to the individual
such as changes to their individual social media profile(s) and email
signatures. Therefore, we preliminarily estimate that the total initial
one-time burden for associated natural persons is 217,536 hours.\892\
We preliminarily estimate a monetized cost of approximately
$31,107,576.50 for associated natural persons.\893\ This would be an
annual average burden of 0.5 hours per associated natural person \894\
(as monetized, is an average annual burden per associated natural
person of $71.50).\895\
---------------------------------------------------------------------------

    \891\ This estimate is based upon staff experience. See e.g.,
Custody of Funds or Securities of Clients by Investment Advisers,
Investment Advisers Act Release No. 2968 (Dec. 30, 2009) (``Release
2968'') (``We further estimate that the adviser will spend 10
minutes per client drafting and sending the notice.''); Enhanced
Mutual Fund Disclosure Adopting Release, supra note 47 (``we
estimate, as we did in the proposing release, that rule 498 will
impose a \1/2\ hour burden per portfolio annually associated with
the compilation of the additional information required on a cover
page or at the beginning of the Summary Prospectus. Rule 498 also
imposes annual hour burdens associated with the posting of a fund's
Summary Prospectus, statutory prospectus, SAI, and most recent
report to shareholders on an Internet website. We estimate that the
average hour burden for one portfolio to comply with the Internet
website posting requirements will be approximately one hour
annually.'').
    \892\ (0.5 hours x 435,071 associated natural persons) = 217,536
total initial burden for associated natural persons.
    \893\ Based on the SIFMA Management and Professional Earnings
Report, Commission staff preliminarily estimates that the average
hourly rate for compliance services is $298, for business operation
services is $268, and for information technology services is $270.
    This figure was calculated as follows: 0.5 hours/3 firm staff
categories (i.e., compliance, business operations, and information
technology) = 0.17 hours per staff category
    ($298 compliance/hour x 0.17) = $51 per 0.17 of an hour.
    ($268 business operations rate/hour x 0.17) = $46 per 0.17 of an
hour.
    ($270 information technology rate/hour x 0.17) = $46 per 0.17 of
an hour.
    $51 + $46 + $46 = $143 total cost per associated natural person.
     (0.5 x $143 total cost per associated natural person x 435,071
associated natural persons) = $31,107,576.50 total initial cost for
associated natural persons.
    \894\ (0.5 hours x 435,071 associated natural persons) = 217,536
total initial burden for associated natural persons.
    (217,536 total initial burden/435,071 total associated natural
persons) = 0.5 total initial burden per associated natural person.
    \895\ Based on the SIFMA Management and Professional Earnings
Report, Commission staff preliminarily estimates that the average
hourly rate for compliance services is $298, for business operation
services is $268, and for information technology services is $270.
    This figure was calculated as follows: 0.5 hours/3 firm staff
categories (i.e., compliance, business operations, and information
technology) = 0.17 hours per staff category
    ($298 compliance/hour x 0.17) = $51 per 0.17 of an hour.
    ($268 business operations rate/hour x 0.17) = $46 per 0.17 of an
hour.
    ($270 information technology rate/hour x 0.17) = $46 per 0.17 of
an hour.
    $51 + $46 + $46 = $143 total cost per associated natural person.
     (0.5 x $143 total cost per associated natural person x 435,071
associated natural persons) = $31,107,576.50 total initial cost for
associated natural persons.
    ($31,107,576.50 total initial cost for associated natural
persons/435,071 total number of associated natural persons) = $71.50
total initial cost per associated natural person.
---------------------------------------------------------------------------

    Aside from the internal initial burden, we anticipate that there
will be certain associated outside costs as well. We believe that
broker-dealers and their associated natural persons may engage outside
counsel to assist them in understanding our proposed rule should it be
adopted.\896\ We assume that the amount of outsourced legal assistance
would vary among various sizes of broker-dealers and their number of
associated natural persons. As a result, we preliminarily estimate that
large broker-dealers together with their associated natural persons may
initially outsource approximately 8 hours of legal time in order to
understand the implications of our proposed rule, including which
communications are subject to the proposed rule and how best to comply
with the technical specifications.\897\ For small broker-dealers, we
anticipate that such firms will outsource 4 hours of legal time.\898\
Our preliminary estimates take into account that large firms have more
communications affected by our proposed rule and more associated
natural persons to supervise than smaller firms. We estimate initial
outside legal costs associated with the proposed rule of $8,014,560 for
broker-dealers \899\ or $2,805 per broker-dealer.\900\
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    \896\ We are assuming that associated natural persons would not
independently seek outside counsel and would instead rely on the
advice received from outside counsel to the firm. Therefore, we are
not including a separate estimate for associated natural persons.
    \897\ This estimate is based upon staff experience. See e.g.
Disclosure of Order Handling Information Proposed Rule, Securities
Exchange Act Release No. 34-78309 (July 13, 2016) (``Release 34-
78309'') (estimating 4 hours for legal burden ``to assign each order
routing strategy for institutional orders into passive, neutral, and
aggressive categories and establish and document its specific
methodologies for assigning order routing strategies as required by
Rule 606(b)(3)(v)''); Regulation of NMS Stock Alternative Trading
Systems Proposed Rule, Securities Exchange Act Release No. 34-76474
(Nov. 18, 2015) (``Release 34-76474'') (estimating 7 legal hours
``to put in writing its safeguards and procedures to protect
subscribers' confidential trading information and the oversight
procedures to ensure such safeguards and procedures are followed . .
.'').
    \898\ This estimate is based upon staff experience. See supra
note 897.
    \899\ Based on the SIFMA Management and Professional Earnings
Report, Commission staff preliminarily estimates that the average
hourly rate for legal services is $472/hour.
    ($472 x 8 legal hours = $3,776 x 1,388 large broker-dealers =
$5,241,088) + ($472 x 4 legal hours = $1,888 x 1,469 small broker-
dealers = $2,773,472).
    ($5,241,088 large broker-dealers + $2,773,472 small broker-
dealers) = $8,014,560 total cost.
    \900\ Based on the SIFMA Management and Professional Earnings
Report, Commission staff preliminarily estimates that the average
hourly rate for legal services is $472/hour.
    ($472 x 8 legal hours = $3,776 x 1,388 large broker-dealers =
$5,241,088) + ($472 x 4 legal hours = $1,888 x 1,469 small broker-
dealers = $2,773,472).
    $5,241,088 large broker-dealers + $2,773,472 small broker-
dealers = $8,014,560 total cost/2,857 broker-dealers = $2,805 total
cost per broker-dealer.
---------------------------------------------------------------------------

    Additionally, we anticipate that firms will also have one-time
outside cost associated with the cost of printing new communications
including new business cards, envelopes, pitch books, and letterheads.
As part of these costs, we anticipate that both large and small broker-
dealers will have to work with printers to set the disclosure on, for
example, business cards. We estimate initial costs to amend certain
communications associated with the proposed rule of $617,848,307 for
broker-dealers \901\ (or $216,258 per broker-dealer).\902\ We assume
that because small broker-dealers have fewer associated natural persons
there will be less communications that will require printing.
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    \901\ Our estimates are based on staff experience and industry
sources. In particular, staff factored in its cost estimate the
costs associated with printing envelopes, pitch books, letterheads,
and business cards. For large broker-dealers, the staff assumes a
printing cost of $445,121. For small broker-dealers, the staff
assumes a printing cost of $20,359.
    ($445,121 x 1,388 large broker-dealers = $617,827,948) +
($20,359 x 1,469 small broker-dealers = $29,907,371) = $617,848,307
total broker-dealer outside costs.
    \902\ ($445,121 x 1,388 large broker-dealers = $617,827,948) +
($20,359 x 1,469 small broker-dealers = $29,907,371) = $617,848,307
total broker-dealer outside costs/2,857 broker-dealers = $216,258
total cost per broker-dealer.
---------------------------------------------------------------------------

    For the ongoing burden of new communications for broker-dealers, we
preliminarily estimate that the burden for legal, compliance, business
operations, and technology services for adding a registration status
statement would be 0.5 hours annual hours per broker-dealer.\903\ We
anticipate that broker-dealers will need to add the registration
disclosure to each new communication which they create, however we
anticipate the burdens associated with this task to be minimal and
therefore we do not believe there is a material difference between
large and small broker-dealers.\904\ We

preliminarily estimate that the total ongoing annual aggregate burden
for broker-dealers is 1,429 hours.\905\ We preliminarily estimate a
total ongoing monetized cost of approximately $204,275.50 for broker-
dealers.\906\ This would be an annual average burden of 0.5 hours per
broker-dealer \907\ (as monetized, is an average annual burden per
broker-dealer of $71.50).\908\
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    \903\ This estimate is based upon staff experience. See e.g.,
Release 2968, supra note 891; Enhanced Mutual Fund Disclosure
Adopting Release, supra note 47.
    In this estimate we are not calculating the print and
technological associated burdens of updating communications which we
analyzed earlier as we are assuming those burdens to be a one-time
initial burden for a firm seeking compliance with the proposed rule.
    \904\ Our assumption of no material difference between large and
small rests on the fact that all major systems changes would already
have been implemented as part of the initial one-time burden.
Therefore, any new electronic communications would have the
disclosure statement required by our proposed rule built in at the
outset which should take minimal time rather than having to
retroactively insert it into the systems logic which is a more
onerous task. We note that such communications will need to be
reviewed by compliance staff for compliance with applicable
securities laws and associated self-regulatory agency rules,
including FINRA Rule 2210. We anticipate that compliance with
proposed rule 151-3's requirements will be reviewed as part of this
larger compliance check.
    \905\ (0.5 hours x 2,857 broker-dealers) = 1,429 total ongoing
burden for broker-dealers.
    \906\ Based on the SIFMA Management and Professional Earnings
Report, Commission staff preliminarily estimates that the average
hourly rate for compliance services is $298, for business operation
services is $268, and for information technology services is $270.
    This figure was calculated as follows: 0.5 hours/3 firm staff
categories (i.e., compliance, business operations, and information
technology) = 0.17 hours per staff category
    ($298 compliance/hour x 0.17) = $51 per 0.17 of an hour.
    ($268 business operations rate/hour x 0.17) = $46 per 0.17 of an
hour.
    ($270 information technology rate/hour x 0.17) = $46 per 0.17 of
an hour.
    $51 + $46 + $46 = $143 total cost per broker-dealer.
     (0.5 hours x $143 total cost per broker-dealer x 2,857 broker-
dealers) = $204,275.50 total ongoing cost for broker-dealers.
    \907\ (0.5 hours x 2,857 broker-dealers) = 1,429 total ongoing
burden for broker-dealers.
    (1,429 total ongoing burden for broker-dealers/2,857 total
broker-dealers) = 0.5 total initial burden per broker-dealer.
    \908\ Based on the SIFMA Management and Professional Earnings
Report, Commission staff preliminarily estimates that the average
hourly rate for compliance services is $298, for business operation
services is $268, and for information technology services is $270.
    This figure was calculated as follows: 0.5 hours/3 firm staff
categories (i.e., compliance, business operations, and information
technology) = 0.17 hours per staff category
    ($298 compliance/hour x 0.17) = $51 per 0.17 of an hour.
    ($268 business operations rate/hour x 0.17) = $46 per 0.17 of an
hour.
    ($270 information technology rate/hour x 0.17) = $46 per 0.17 of
an hour.
    $51 + $46 + $46 = $143 total cost per broker-dealer.
     (0.5 hours x $143 total cost per broker-dealer x 2,857 broker-
dealers) = $204,275.50 total ongoing cost for broker-dealers/2,857
total number of broker-dealers = $71.50 total ongoing cost per
broker-dealer.
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    For the ongoing burden of new communications for associated natural
persons of a broker-dealer, we preliminarily estimate that the burden
for compliance, business operations, and technology services for adding
a registration status statement would be 0.5 hours.\909\ Therefore, we
preliminarily estimate that the total ongoing annual aggregate burden
for associated natural persons is 217,536 hours.\910\ We preliminarily
estimate a total ongoing monetized cost of approximately $31,107,576.50
for associated natural persons.\911\ This would be an ongoing annual
average burden of 0.5 hours per associated natural person \912\ (as
monetized, is an average ongoing annual burden per associated natural
person of $71.50).\913\
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    \909\ This estimate is based upon staff experience. See e.g.,
Release 2968, supra note 891; Enhanced Mutual Fund Disclosure
Adopting Release, supra note 47.
    In this estimate we are not calculating the print and
technological associated burdens of updating communications which we
analyzed earlier as we are assuming those burdens to be a one-time
initial burden for an associated natural person of a broker-dealer
seeking compliance with the proposed rule.
    \910\ (0.5 hours x 435,071 associated natural persons) = 217,536
total ongoing burden for associated natural persons.
    \911\ Based on the SIFMA Management and Professional Earnings
Report, Commission staff preliminarily estimates that the average
hourly rate for compliance services is $298, for business operation
services is $268, and for information technology services is $270.
    This figure was calculated as follows: 0.5 hours/3 firm staff
categories (i.e., compliance, business operations, and information
technology) = 0.17 hours per staff category
    ($298 compliance/hour x 0.17) = $51 per 0.17 of an hour.
    ($268 business operations rate/hour x 0.17) = $46 per 0.17 of an
hour.
    ($270 information technology rate/hour x 0.17) = $46 per 0.17 of
an hour.
    $51 + $46 + $46 = $143 total cost per associated natural person.
     (0.5 hours x $143 total cost per associated natural person x
435,071 associated natural person) = $31,107,576.50 total ongoing
cost for associated natural persons.
    \912\ (0.5 hours x 435,071 associated natural persons) = 217,536
total ongoing annual burden for associated natural persons.
    (217,536 total ongoing burden/435,071 total associated natural
persons) = 0.5 total ongoing annual burden per associated natural
person.
    \913\ Based on the SIFMA Management and Professional Earnings
Report, Commission staff preliminarily estimates that the average
hourly rate for compliance services is $298, for business operation
services is $268, and for information technology services is $270.
    This figure was calculated as follows: 0.5 hours/3 firm staff
categories (i.e., compliance, business operations, and information
technology) = 0.17 hours per staff category
    ($298 compliance/hour x 0.17) = $51 per 0.17 of an hour.
    ($268 business operations rate/hour x 0.17) = $46 per 0.17 of an
hour.
    ($270 information technology rate/hour x 0.17) = $46 per 0.17 of
an hour.
    $51 + $46 + $46 = $143 total cost per associated natural person.
     (0.5 hours x $143 total cost per associated natural person x
435,071 associated natural person) = $31,107,576.50 total ongoing
cost for associated natural persons/435,071 total number of
associated natural persons) = $71.50 total ongoing annual cost per
associated natural person.
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H. Rule 211h-1 Under the Advisers Act

    Proposed rule 211h-1 would require investment advisers registered
under section 203 and their supervised persons to prominently disclose
that it is, or in the case of supervised persons that such persons are
supervised by an investment adviser that is, registered with the
Commission as an investment adviser in print or electronic retail
investor communications. For print communications, we propose to
require that such registration status be displayed in a type size at
least as large as and of a font style different from, but at least as
prominent as, that used in the majority of the communication. In
addition, such disclosure must be presented in the body of the
communication and not in a footnote. For electronic communications, or
in any publication by radio or television, we propose to require that
such disclosure be presented in a manner reasonably calculated to draw
retail investor attention to it. This collection of information would
be found at [17 CFR 240.15l-3] and would be mandatory. The likely
respondents to this information collection would be all investment
advisers and their supervised persons that distribute print or
electronic retail investor communications.
    The Commission believes that the collection of information is
necessary to provide retail investors and the Commission with
information to better determine whether a communication is from a
broker-dealer or investment adviser, and, for retail investors
specifically, to allow them to better identify which type of firm is
more appropriate for their specific investment needs. Additionally, by
requiring an affirmative identification, retail investors would also be
better informed whether a financial professional is a supervised person
of an investment adviser rather than an associated person of a broker-
dealer. For similar reasons, we believe that because retail investors
interact with a firm primarily through financial professionals, it is
important that financial professionals disclose the firm type with
which they are associated.
1. Respondents: Investment Advisers and Supervised Persons
    Currently, there are 12,721 registered investment advisers and
approximately 942,215 supervised persons.\914\ Of these, 7,625
investment advisers distribute print or electronic retail investor

communications while 245,408 supervised persons distribute print or
electronic retail investor communications at standalone investment
advisers or dually registered firms.\915\ Additionally, of these
investment advisers 2,738 are large advisers and 4,887 are small
advisers.\916\ Accordingly, the Commission estimates that 7,625
investment advisers and 245,408 supervised persons would be required to
comply with proposed rule 211h-1. There are also 477 new SEC registered
investment advisers per year on average and 3,000 new supervised
persons per year.\917\
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    \914\ The investment adviser and supervised person numbers are
as of December 31, 2017. See supra Section IV.A.1.b, at Table 3,
Panel A. We note that our estimate of supervised persons is based on
those supervised persons identified in the baseline in the Economic
Analysis. See Section IV.A.1.e, at Table 6.
    \915\ We estimate the number of supervised persons who
distribute print or electronic retail investor communications using
several data points. First, we analyzed those supervised persons who
only hold a series 65 at a dual registrant or an investment adviser
firm, totaling 27,879. Next we analyzed those supervised persons at
dual registrants or investment advisers holding a combination of
either a series 6 and 65 or a series 7 and 65, totaling 15,381 and
172,304 respectively. Finally, we analyzed those supervised persons
at dual registrants or investment advisers holding a series 6, 7,
and 65, totaling 29,944. (27,879 + 15,281 + 172,304 + 29,944) =
245,408 total supervised persons who engage retail investors through
print or electronic communications. We note that our estimate does
not reflect supervised persons who hold various designations (e.g.
Chartered Financial Analyst) in lieu of the licenses we used to
identify supervised persons of investment advisers who distribute
print or electronic retail investor communications. Finally, our
estimate does not employ rounding as compared to Table 6 in the
Economic Analysis Baseline. See Table 6: Number of Employees at
Retail Facing Firms who are Registered Representatives, Investment
Adviser Representatives, or Both, Section I.V.A.1.e. These numbers
are as of December 31, 2017.
    \916\ For purposes of this estimate, we categorize small
advisers as advisers with 10 or fewer employees and large advisers
as those with 10 or more employees. See cf. Release 3221, supra note
875, at n.727.
    \917\ The number of new investment advisers is calculated by
looking at the number of new advisers in 2016 and 2017 and then
isolating the number each year that services retail investors. (455
for 2016 + 499 for 2017)/2) = 477.
     The number of new supervised persons is calculated by looking
at the difference in the number of supervised persons in 2017 as
compared to 2016 at firms which service retail investors.
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2. Initial and Annual Burdens
    We estimate that the initial one-time burden for complying with the
disclosure requirements would be 72 hours per large investment adviser
\918\ and 15 hours per small investment adviser.\919\ We note that we
are staging the compliance date to ensure that firms can phase out
certain older communications from circulation through the regular
business lifecycle rather than having to retroactively change
them.\920\ As a result of this staged compliance, our burden estimates
do not reflect the burdens that would have been imposed had these firms
had to replace all outstanding communications.
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    \918\ (8 hours for print communications per broker-dealer + 64
hours for electronic communications per broker-dealer).
    \919\ (5 hours for print communications per broker-dealer + 10
hours for electronic communications per broker-dealer).
    \920\ Similarly, we are not requiring firms to send new
communications to replace all older print communications as this
would be overly burdensome and costly for firms.
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    Aside from certain anticipated outside legal costs, as discussed
below, we preliminary estimate that to comply with our proposed rule
with respect to print communications,\921\ investment advisers would
need to review their communications, identify which would need to be
amended, make the changes, and verify that all firm communications
comply with the rule's requirements including its technical
specifications such as the type size, font, and prominence. Our
preliminary estimates differ for large and small investment advisers.
We drew these distinctions because we assume that the larger an adviser
is the more communications it would need to review, identify and change
and in turn have its compliance staff verify that such communications
are compliant with our proposed rule.
---------------------------------------------------------------------------

    \921\ Such communications could include business cards,
letterheads, newspaper advertisements, and article reprints from an
unaffiliated magazines or newspaper.
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    For existing print communications for large investment advisers we
preliminarily estimate that the total burden for investment advisers
would be 8 hours for compliance and business operations personnel to
review, identify, and make changes across all print
communications.\922\ For small investment advisers, we preliminarily
estimate that the total burden for investment advisers would be 5 hours
for compliance and business operations personnel to review, identify,
and make changes across all print communications.\923\
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    \922\ This estimate is based upon staff experience and industry
sources more generally. See e.g., FINRA 2015-22 Notice, supra note
881.
    To compute the 8 hours internal initial burden we assume 2 hours
by compliance personnel and 6 hours by business operations personnel
of the broker-dealer.
    \923\ This estimate is based upon staff experience and industry
materials more generally. See e.g., FINRA 2015-22 Notice, supra note
881. To compute the 5 hours internal initial burden we assume 1 hour
by compliance personnel and 4 hours by business operations personnel
of the investment adviser.
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    With respect to electronic communications \924\ we preliminarily
anticipate that it would take large investment advisers approximately
64 hours \925\ to review, identify and make the required updates
coupled with verifying that such communications (present and future)
would be compliant with the proposed rule. Our estimates take into
account that larger firms likely have full-featured websites that
generate other webpages based on complex system code and logic.\926\ In
order to make changes to comply with our proposed rule, we assume that
business operations and information technology personnel would likely
be required to update the underlying code and logic to automate the
implementation of the required language to populate across all
associated electronic media. Additionally, we assume that these teams
would need to test to ensure that such changes were implemented
correctly.
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    \924\ We believe such communications could include websites,
smart phone apps, social media, emails, and blogs.
    \925\ This estimate is based upon staff experience and industry
materials more generally. See e.g., FINRA 2015-22 Notice, supra note
881. To compute the 64 hours internal initial burden we assume 4
hours by compliance personnel and 60 hours by business operations
and information technology personnel of the investment adviser.
    \926\ This is based upon staff experience and industry materials
more generally. See e.g., FINRA 2015-22 Notice, supra note 881
(discussing the burdens associated with the inclusion of a
BrokerCheck reference and hyperlink across all firm communications
for certain firms).
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    With respect to small investment advisers, we preliminarily
anticipate that it would take approximately 10 hours \927\ to review,
identify and make the required updates coupled with verifying that such
communications (present and future) would be compliant with the
proposed rule. Our estimate for small investment advisers assumes that
small investment advisers have fewer electronic communications that
would be subject to our proposed rule as compared to larger firms,
resulting in a lower burden preliminary estimate.
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    \927\ This estimate is based upon staff experience and industry
materials more generally. See e.g., FINRA 2015-22 Notice, supra note
881.
    To compute the 10 hours internal initial burden, we assume 2
hours by compliance personnel and 8 hours by business operations and
information technology personnel of the investment adviser.
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    We preliminarily estimate that the total initial burden for
investment advisers is 270,441 hours.\928\ We

preliminarily estimate a cost of approximately $73,650,210 for
investment advisers.\929\ This would be an annual average burden of 35
hours per investment adviser \930\ (as monetized, an annual average
cost of $9,659 per investment adviser).\931\
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    \928\ (8 hours for print communications per large investment
adviser + 64 hours for electronic communications per large
investment adviser) = 72 hours per large investment adviser.
    (72 hours x 2,738 large investment advisers) = 197,136 total
initial burden for large investment advisers.
    (5 hours for print communications per small investment adviser +
10 hours for electronic communications per small investment adviser)
= 15 hours per small investment adviser. (15 hours x 4887 small
investment advisers) = 73,305 total initial burden for small
investment advisers.
    (197,136 total burden large investment advisers + 73,305 total
burden small investment advisers) = 270,441 hours.
    \929\ Based on the SIFMA Management and Professional Earnings
Report, Commission staff preliminarily estimates that the average
hourly rate for compliance services in the securities industry is
$298, for business services is $268, and for technology services is
$270. The average technology and business rate is ($270 technology
rate + $268 business rate)/2 = $269 average rate.
     This figure was calculated as follows: (6 compliance hours x
$298 compliance rate) + (66 technology/business hours x $269
averaged technology/business rate) x 2,738 large investment advisers
= $53,505,996 total initial costs for large investment advisers.
    (3 compliance hours x $298 compliance rate) + (12 technology/
business hours x $269 averaged technology/business rate) x 4,887
small investment advisers = $20,144,214 total initial costs for
small investment advisers.
    ($53,505,996 total initial costs for large investment advisers +
$20,144,214 total initial costs for small investment advisers) =
$73,650,210 total initial costs for investment advisers.
    \930\ (8 hours for print communications per large investment
adviser + 64 hours for electronic communications per large
investment adviser) = 72 hours per large investment adviser.
    (72 hours x 2,738 large investment advisers) = 197,136 total
initial burden for large investment advisers.
    (5 hours for print communications per small investment advisers
+ 10 hours for electronic communications per small investment
adviser) = 15 hours per small investment adviser. (15 hours x 4887
small investment advisers) = 73,305 total initial burden for small
investment advisers.
    197,136 total burden large investment advisers + 73,305 total
burden small investment advisers = 270,441 hours/7,625 total
investment advisers = 35 hours average initial burden per investment
adviser.
    \931\ Based on the SIFMA Management and Professional Earnings
Report, Commission staff preliminarily estimates that the average
hourly rate for compliance services is $298, for business operation
services is $268, and for information technology services is $270.
The average technology and business rate is ($268 business rate +
$270 technology rate)/2 = $269 average rate.
     This figure was calculated as follows: (6 compliance hours x
$298 compliance rate) + (66 technology/business hours x $269
averaged technology/business rate) x 2,738 large investment advisers
= $53,505,996 total initial costs for large investment advisers.
     (3 compliance hours x $298 compliance rate) + (12 technology/
business hours x $269 averaged technology/business rate) x 4,887
small investment advisers = $20,144,214 total initial costs for
small investment advisers.
    $53,505,996 total initial cost large investment advisers +
$20,144,214 total initial costs small investment advisers =
$73,650,210 total initial cost investment advisers/7,625 total
number of investment advisers = $9,659 average initial cost per
investment adviser.
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    We further preliminarily anticipate that supervised persons would
have an initial burden of 0.5 hours for each supervised person
respondent to review, identify, and make changes to their individual
communications, both print and electronic.\932\ Based on staff
experience, we anticipate that many firms will make many communication
changes for their supervised persons, including their business cards
and letterheads, leaving only certain responsibilities to the
individual such as changes to their individual social media profile(s)
and email signatures. Therefore, we preliminarily estimate that the
total initial one-time burden for supervised persons is 122,704
hours.\933\ We preliminarily estimate a monetized cost of approximately
$17,546,672 for supervised persons.\934\ This would be an annual
average burden of 0.5 hours per supervised person \935\ (as monetized,
is an annual average cost of $71.50 per supervised person).\936\
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    \932\ This estimate is based upon staff experience. See e.g.,
Release 2968, supra note 891; Enhanced Mutual Fund Disclosure
Adopting Release, supra note 47.
    \933\ (0.5 hours x 245,408 supervised persons) = 122,704 total
initial burden for supervised persons.
    \934\ Based on the SIFMA Management and Professional Earnings
Report, Commission staff preliminarily estimates that the average
hourly rate for compliance services is $298, for business operation
services is $268, and for information technology services is $270.
    This figure was calculated as follows: 0.5 hours/3 firm staff
categories (i.e., compliance, business operations, and information
technology) = 0.17 hours per staff category
    ($298 compliance/hour x 0.17) = $51 per 0.17 of an hour.
    ($268 business operations rate/hour x 0.17) = $46 per 0.17 of an
hour.
    ($270 information technology rate/hour x 0.17) = $46 per 0.17 of
an hour.
    $51 + $46 + $46 = $143 total cost per supervised person.
     (0.5 hours x $143 total cost per supervised person x 245,408
supervised persons) = $17,546,672 total initial cost for supervised
persons.
    \935\ (0.5 hours x 245,408 supervised persons) = 122,704 total
initial burden for supervised persons.
    (122,704 total initial burden for supervised persons/245,408