[Federal Register Volume 76, Number 166 (Friday, August 26, 2011)]
[Notices]
[Pages 53501-53502]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-21858]
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SECURITIES AND EXCHANGE COMMISSION
Submission for OMB Review; Comment Request
Upon written request, copies available from: U.S. Securities and
Exchange Commission, Office of Investor Education and Advocacy,
Washington, DC 20549-0213.
Extension: Rule 15g-9; SEC File No. 270-325; OMB Control No. 3235-
0385.
Notice is hereby given that pursuant to the Paperwork Reduction Act
of 1995 (44 U.S.C. 3501 et seq.), the Securities and Exchange
Commission (``Commission'') has submitted to the Office of Management
and Budget a request for extension of the previously approved
collection of information discussed below.
Section 15(c)(2) of the Securities Exchange Act of 1934 (15 U.S.C.
78a et seq.) (the ``Exchange Act'') authorizes the Commission to
promulgate rules that prescribe means reasonably designed to prevent
fraudulent, deceptive, or manipulative practices in connection with
over-the-counter (``OTC'') securities transactions. Pursuant to this
authority, the Commission in 1989 adopted Rule 15a-6 which was
subsequently redesignated as Rule 15g-9, 17 CFR 240.15g-9 (the
``Rule''). The Rule requires broker-dealers to produce a written
suitability determination for, and to obtain a written customer
agreement to, certain recommended transactions in penny stocks that are
not registered on a national securities exchange, and whose issuers do
not meet certain minimum financial standards. The Rule is intended to
prevent the indiscriminate use by broker-dealers of fraudulent, high
pressure telephone sales campaigns to sell penny stocks to
unsophisticated customers.
The Commission staff estimates that there are approximately 253
broker-dealers subject to the Rule. The burden of the Rule on a
respondent varies
[[Page 53502]]
widely depending on the frequency with which new customers are
solicited. On the average for all respondents, the staff has estimated
that respondents process three new customers per week, or approximately
156 new customer suitability determinations per year. We also estimate
that a broker-dealer would expend approximately one-half hour per new
customer in obtaining, reviewing, and processing (including
transmitting to the customer) the information required by Rule 15g-9,
and each respondent would consequently spend 78 hours annually (156
customers x .5 hours) obtaining the information required in the rule.
We determined, based on the estimate of 253 broker-dealer respondents,
that the current annual burden of Rule 15g-9 is 19,734 hours (253
respondents x 78 hours).
In addition, we estimate that if tangible communications alone are
used to transmit the documents required by Rule 15g-9, each customer
should take: (1) No more than eight minutes to review, sign and return
the suitability determination document; and (2) no more than two
minutes to either read and return or produce the customer agreement for
a particular recommended transaction in penny stocks, listing the
issuer and number of shares of the particular penny stock to be
purchased, and send it to the broker-dealer. Thus, the total current
customer respondent burden is approximately 10 minutes per response,
for an aggregate total of 1,560 minutes for each broker-dealer
respondent. Since there are 253 respondents, the annual burden for
customer responses is 394,680 minutes (1,560 customer minutes per each
of the 253 respondents) or 6,578 hours.
In addition, we estimate that, if tangible means of communications
alone are used, broker-dealers could incur a recordkeeping burden under
Rule 15g-9 of approximately two minutes per response. Since there are
approximately 253 broker-dealer respondents and each respondent would
have approximately 156 responses annually, respondents would incur an
aggregate recordkeeping burden of 78,936 minutes (253 respondents x 156
responses x 2 minutes per response), or 1,315 hours. Accordingly, the
aggregate annual hour recordkeeping burden associated with Rule 15g-9
is 27,627 hours (19,734 hours to prepare the suitability statement and
agreement + 6,578 hours for customer review + 1,315 hours for
processing).
We recognize that under the amendments to Rule 15g-9, the burden
hours may be slightly reduced if the transaction agreement required
under the rule is provided through electronic means such as an e-mail
from the customer to the broker-dealer (e.g., the customer may take
only one minute, instead of the two minutes estimated above, to provide
the transaction agreement by e-mail rather than regular mail). If each
of the customer respondents estimated above communicates with his or
her broker-dealer electronically, the total burden hours on the
customers would be reduced from 10 minutes to 9 minutes per response,
or an aggregate total of 1,404 minutes per respondent (156 customers x
9 minutes for each customer). Since there are 253 respondents, the
annual customer respondent burden, if electronic communications were
used by all customers, would be approximately 355,212 minutes (253
respondents x 1,404 minutes per each respondent), or 5,920 hours. We do
not believe the time burden on broker-dealers in obtaining, reviewing,
and processing the suitability determination would change through use
of electronic communications. In addition, we do not believe that,
based on information currently available to us, recordkeeping burdens
under Rule 15g-9 would change where the required documents were sent or
received through means of electronic communication. Thus, if all
broker-dealer respondents obtain and send the documents required under
the rule electronically, the aggregate annual hour burden associated
with Rule 15g-9 would be 26,969 hours (19,734 hours to prepare the
suitability statement and agreement + 5,920 hours for customer review +
1,315 recordkeeping hours).
We cannot estimate how many broker-dealers and customers will
choose to communicate electronically. If we assume that 50 percent of
respondents would continue to provide documents and obtain signatures
in tangible form, and 50 percent would choose to communicate
electronically in satisfaction of the requirements of Rule 15g-9, the
total aggregate hour burden would be 27,297 burden hours ((27,627
aggregate burden hours for documents and signatures in tangible form x
0.50 of the respondents = 13,813 hours) + (26,969 aggregate burden
hours for electronically signed and transmitted documents x 0.50 of the
respondents = 13,484 hours).
The broker-dealer must keep the written suitability determination
and customer agreement required by the Rule for at least three years.
Completing the suitability determination and obtaining the customer
agreement in writing is mandatory for broker-dealers who effect
transactions in penny stocks and do not qualify for an exemption, but
does not involve the collection of confidential information. Please
note that an agency may not conduct or sponsor, and a person is not
required to respond to, a collection of information unless it displays
a currently valid control number.
The Commission may not conduct or sponsor a collection of
information unless it displays a currently valid control number. No
person shall be subject to any penalty for failing to comply with a
collection of information subject to the PRA that does not display a
valid Office of Management and Budget (OMB) control number.
Background documentation for this information collection may be
viewed at the following link, http://www.reginfo.gov. Comments should
be directed to (i) Desk Officer for the Securities and Exchange
Commission, Office of Information and Regulatory Affairs, Office of
Management and Budget, Room 10102, New Executive Office Building,
Washington, DC 20503 or by sending an e-mail to: [email protected]; and (ii) Thomas Bayer, Director/Chief Information
Officer, Securities and Exchange Commission, c/o Remi Pavlik-Simon,
6432 General Green Way, Alexandria, VA 22312 or send an e-mail to:
[email protected]. Comments must be submitted to OMB within 30 days
of this notice.
Dated: August 22, 2011.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-21858 Filed 8-25-11; 8:45 am]
BILLING CODE 8011-01-P