

[Federal Register: January 23, 2006 (Volume 71, Number 14)]
[Notices]               
[Page 3548-3549]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr23ja06-95]                         

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SECURITIES AND EXCHANGE COMMISSION

 
Proposed Collection; Comment Request

Upon Written Request, Copies Available From: Securities and Exchange 
Commission, Office of Filings and Information Services, Washington, DC 
20549.

Extension:
    Reports of Evidence of Material Violations, SEC File No. 270-
514, OMB Control No. 3235-0572.

    Notice is hereby given that pursuant to the Paperwork Reduction Act 
of 1995, 44 U.S.C. sections 3501-3520, the Securities and Exchange 
Commission (``Commission'') is soliciting comments on the collection of 
information summarized below. The Commission plans to submit the 
existing collection of information to the Office of Management and 
Budget (``OMB'') for extension.
    On February 6, 2003, the Commission published final rules, 
effective August 5, 2003, entitled ``Standards of Professional Conduct 
for Attorneys Appearing and Practicing Before the Commission in the 
Representation of an Issuer'' (17 CFR 205.1-205.7). The information 
collection embedded in the rules is necessary to implement the 
Standards of Professional Conduct for Attorneys prescribed by the rule 
and required by section 307 of the Sarbanes-Oxley Act of 2002. The 
rules impose an ``up-the-ladder'' reporting requirement when attorneys 
appearing and practicing before the Commission become aware of evidence 
of a material violation by the issuer or any officer, director, 
employee, or agent of the issuer. An issuer may choose to establish a 
qualified legal compliance committee (``QLCC'') as an alternative 
procedure for reporting evidence of a material violation. In the rare 
cases in which a majority of a QLCC has concluded that an issuer did 
not act appropriately, the information may be communicated to the 
Commission. The collection of information is, therefore, an important 
component of the Commission's program to discourage violations of the 
federal securities laws and promote ethical behavior of attorneys 
appearing and practicing before the Commission.
    The respondents to this collection of information are attorneys who 
appear and practice before the Commission and, in certain cases, the 
issuer, and/or officers, directors and committees of the issuer. We 
believe that, in providing quality representation to issuers, attorneys 
report evidence of violations to others within the issuer, including 
the Chief Legal Officer, the Chief Executive Officer, and, where 
necessary, the directors. In addition, officers and directors 
investigate evidence of violations and report within the issuer the 
results of the investigation and the remedial steps they have taken or 
sanctions they have imposed. Except as discussed below, we therefore 
believe that the reporting requirements imposed by the rule are ``usual 
and customary''

[[Page 3549]]

activities that do not add to the burden that would be imposed by the 
collection of information.
    Certain aspects of the collection of information, however, may 
impose a burden. For an issuer to establish a QLCC, the QLCC must adopt 
written procedures for the confidential receipt, retention, and 
consideration of any report of evidence of a material violation. We 
estimate for purposes of the PRA that there are approximately 17,710 
issuers that are subject to the rules.\1\ Of these, we estimate that 
approximately ten percent, or 1,771, will establish a QLCC.\2\ 
Establishing the written procedures required by the rule should not 
impose a significant burden. We assume that an issuer would incur a 
greater burden in the year that it first establishes the procedures 
than in subsequent years, in which the burden would be incurred in 
updating, reviewing, or modifying the procedures. For purposes of the 
PRA, we assume that an issuer would spend 6 hours every three-year 
period on the procedures. This would result in an average burden of 2 
hours per year. Thus, we estimate for purposes of the PRA that the 
total annual burden imposed by the collection of information would be 
3,542 hours. Assuming half of the burden hours will be incurred by 
outside counsel at a rate of $300 per hour would result in a cost of 
$531,300.
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    \1\ This estimate is based, in part, on the total number of 
operating companies that filed annual reports on Form 10-K, Form 20-
F, or Form 40-F, during the 2005 fiscal year and an estimate of the 
average number of issuers that may have a registration statement 
filed under the Securities Act pending with the Commission at any 
time (13,660). In addition, we estimate that approximately 4,050 
investment companies currently file periodic reports on Form N-SAR.
    \2\ Indications are that the 2003 estimate of the percentage of 
issuers that would establish QLCC's (20%) was high. Our adjusted 
estimate in the percentage of QLCC's (10%) results in a reduced 
burden estimate as compared to the previously approved collection.
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    The estimate of average burden hours is made solely for the 
purposes of the Paperwork Reduction Act, and is not derived from a 
comprehensive or even a representative survey or study. 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 OMB 
control number.
    Written comments are requested on: (a) Whether the collection of 
information is necessary for the proper performance of the functions of 
the Commission, including whether the information has practical 
utility; (b) the accuracy of the Commission's estimate of the burden[s] 
of the collection of information; (c) ways to enhance the quality, 
utility, and clarity of the information collected; and (d) ways to 
minimize the burden of the collection of information on respondents, 
including through the use of automated collection techniques or other 
forms of information technology. Consideration will be given to 
comments and suggestions submitted in writing within 60 days of this 
publication.
    Please direct your written comments to R. Corey Booth, Director/
Chief Information Officer, Office of Information Technology, Securities 
and Exchange Commission, 100 F St., NE., Washington, DC 20549.

    Dated: January 12, 2006.
Nancy M. Morris,
Secretary.
 [FR Doc. E6-667 Filed 1-20-06; 8:45 am]

BILLING CODE 8010-01-P
