

[Federal Register: January 31, 2007 (Volume 72, Number 20)]
[Notices]               
[Page 4544]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr31ja07-105]                         


[[Page 4544]]

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SECURITIES AND EXCHANGE COMMISSION

 
Submission for OMB Review; Comment Request

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

Extension: Rule 154; SEC File No. 270-438; OMB Control No. 3235-
0495.

    Notice is hereby given that, under the Paperwork Reduction Act of 
1995 (44 U.S.C. 3501-3520), the Securities and Exchange Commission (the 
``Commission'') has submitted to the Office of Management and Budget 
(``OMB'') a request for extension of the previously approved collection 
of information discussed below.
    The federal securities laws generally prohibit an issuer, 
underwriter, or dealer from delivering a security for sale unless a 
prospectus meeting certain requirements accompanies or precedes the 
security. Rule 154 (17 CFR 230.154) under the Securities Act of 1933 
(15 U.S.C. 77a) (the ``Securities Act'') permits, under certain 
circumstances, delivery of a single prospectus to investors who 
purchase securities from the same issuer and share the same address 
(``householding'') to satisfy the applicable prospectus delivery 
requirements.\1\ The purpose of Rule 154 is to reduce the amount of 
duplicative prospectuses delivered to investors sharing the same 
address.
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    \1\ The Securities Act requires the delivery of prospectuses to 
investors who buy securities from an issuer or from underwriters or 
dealers who participate in a registered distribution of securities. 
See Securities Act sections 2(a)(10), 4(1), 4(3), 5(b) (15 U.S.C. 
77b(a)(10), 77d(1), 77d(3), 77e(b)); see also Rule 174 under the 
Securities Act (17 CFR 230.174) (regarding the prospectus delivery 
obligation of dealers); Rule 15c2-8 under the Securities Exchange 
Act of 1934 (17 CFR 240.15c2-8) (prospectus delivery obligations of 
brokers and dealers).
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    Under Rule 154, a prospectus is considered delivered to all 
investors at a shared address, for purposes of the federal securities 
laws, if the person relying on the rule delivers the prospectus to the 
shared address and the investors consent to the delivery of a single 
prospectus. The rule applies to prospectuses and prospectus 
supplements. Currently, the rule permits householding of all 
prospectuses by an issuer, underwriter, or dealer relying on the rule 
if, in addition to the other conditions set forth in the rule, the 
issuer, underwriter, or dealer has obtained from each investor written 
or implied consent to householding.\2\ The rule requires issuers, 
underwriters, or dealers that wish to household prospectuses with 
implied consent to send a notice to each investor stating that the 
investors in the household will receive one prospectus in the future 
unless the investors provide contrary instructions. In addition, at 
least once a year, issuers, underwriters, or dealers, relying on Rule 
154 for the householding of prospectuses relating to open-end mutual 
funds, must explain to investors who have provided written or implied 
consent how they can revoke their consent. Preparing and sending the 
initial notice and the annual explanation of the right to revoke are 
collections of information.
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    \2\ Rule 154 permits the householding of prospectuses that are 
delivered electronically to investors only if delivery is made to a 
shared electronic address and the investors give written consent to 
householding. Implied consent is not permitted in such a situation. 
See Rule 154(b)(4).
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    The rule allows issuers, underwriters, or dealers to household 
prospectuses and prospectus supplements if certain conditions are met. 
Among the conditions with which a person relying on the rule must 
comply are providing notice to each investor that only one prospectus 
will be sent to the household and, in the case of issuers that are 
open-end mutual funds, providing to each investor who consents to 
householding an annual explanation of the right to revoke consent to 
the delivery of a single prospectus to multiple investors sharing an 
address. The purpose of the notice and annual explanation requirements 
of the rule is to ensure that investors who wish to receive individual 
copies of shareholder reports are able to do so.
    Although Rule 154 is not limited to investment companies, the 
Commission believes that it is used mainly by open-end mutual funds and 
by broker-dealers that deliver mutual fund prospectuses. The Commission 
is unable to estimate the number of issuers other than mutual funds 
that rely on the rule.
    The Commission estimates that, as of September 2006, there are 
approximately 2,400 open-end mutual funds, approximately 200 of which 
engage in direct marketing and therefore deliver their own 
prospectuses. The Commission estimates that each direct-marketed mutual 
fund will spend an average of 20 hours per year complying with the 
notice requirement of the rule, for a total of 4,000 hours. The 
Commission estimates that each direct-marketed fund will also spend 1 
hour complying with the explanation of the right to revoke requirement 
of the rule, for a total of 200 hours. The Commission estimates that 
there are approximately 361 broker-dealers that carry customer accounts 
and, therefore, may be required to deliver mutual fund prospectuses. 
The Commission estimates that each affected broker-dealer will spend, 
on average, approximately 20 hours complying with the notice 
requirement of the rule, for a total of 7,220 hours. Each broker-dealer 
will also spend 1 hour complying with the annual explanation of the 
right to revoke requirement, for a total of 361 hours. Therefore, the 
total number of respondents for Rule 154 is 561 (200 mutual funds plus 
361 broker-dealers), and the estimated total hour burden is 11,781 
hours (4,200 hours for mutual funds plus 7,581 hours for broker-
dealers).
    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 of the costs of 
Commission rules and forms.
    Compliance with the collection of information requirements of the 
rule is necessary to obtain the benefit of relying on the rule. 
Responses to the collections of information will not be kept 
confidential. The rule does not require these records be retained for 
any specific period of time. 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.
    Please direct general comments regarding the above information to 
the following persons: (i) Desk Officer for the Securities and Exchange 
Commission, Office of Management and Budget, Room 10102, New Executive 
Office Building, Washington, DC 20503 or e-mail to: 
David_Rostker@omb.eop.gov; and (ii) R. Corey Booth, Director/Chief 

Information Officer, Securities and Exchange Commission, c/o Shirley 
Martinson 6432 General Green Way, Alexandria, VA, 22312; or send an e-
mail to: PRA_Mailbox@sec.gov. Comments must be submitted to OMB within 
30 days of this notice.

    Dated: January 22, 2007.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-1507 Filed 1-30-07; 8:45 am]

BILLING CODE 8011-01-P
