

[Federal Register: April 3, 2007 (Volume 72, Number 63)]
[Notices]               
[Page 15916-15917]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr03ap07-93]                         

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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: Rule 15c2-3; SEC File No. 270-539; OMB Control No. 3235-
0599.

    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 (``OMB'') a request for extension of the previously approved 
collection of information discussed below.
    Proposed rule 15c2-3 (17 CFR 240.15c2-3) under the Securities 
Exchange Act of 1934 (15 U.S.C. 78a et seq.) would require brokers, 
dealers and municipal securities dealers to provide point of sale 
disclosure to investors prior to effecting transactions in mutual fund 
shares, UIT interests and college savings plan interests. The 
disclosure would provide investors with targeted material information 
about distribution-related costs and remuneration that lead to 
conflicts of interest for their brokers, dealers or municipal 
securities dealers. The collection of information under proposed rule 
15c2-3 would require some of the disclosure that is also required under 
rule 15c2-2. However, in contrast to the confirmation disclosure 
required under proposed rule 15c2-2, which a customer will not receive 
in writing until after a transaction has been effected, the point of 
sale disclosure that would be required under rule 15c2-3 would 
specifically require that investors be provided with information that 
they can use at the time they determine whether to enter into a 
transaction to purchase one of the covered securities.
    In addition, the Commission, the self-regulatory organizations, and 
other securities regulatory authorities would be able to use records of 
point of sale disclosure delivered pursuant to proposed rule 15c2-3 in 
the course of examinations, and investigations, as well as enforcement 
proceedings against brokers, dealers and municipal securities dealers. 
However, no governmental agency would regularly receive any of the 
information described above.
    Proposed rule 15c2-2 potentially would apply to all of the 
approximately 5,338 brokers, dealers and municipal securities dealers 
that are registered with the Commission and that are members of NASD. 
It would also potentially apply to approximately 62 additional 
municipal securities dealers. It is important to note, however, that 
the confirmation is a customary document used by the industry.
    Proposed rule 15c2-3(d) would require brokers, dealers and 
municipal securities dealers to make records of their disclosure 
sufficient to

[[Page 15917]]

demonstrate compliance with the delivery requirements of paragraphs (a) 
and (b) of proposed rule 15c2-3. The brokers, dealers or municipal 
securities dealers would have to preserve those records for the period 
specified in Exchange Act rule 17a-4(b) (17 CFR 240.17a-4(b)), or, in 
the case of records of oral communications or the disclosures, for the 
period specified in Exchange Act rule 17a-4(b) with regard to similar 
written communications and records. While this requirement often can be 
satisfied by maintaining a copy of the disclosure document that was 
provided to the customer, in the case of disclosure solely by means of 
oral communications, this provision would require the broker, dealer or 
municipal securities dealer to have compliance procedures in place that 
are adequate to demonstrate that it provided the required disclosure. 
Based on discussions with industry participants, the Commission staff 
estimates that the annual burden to brokers, dealers and municipal 
securities dealers to develop and implement such compliance procedures 
would be approximately 2 million hours.\1\
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    \1\ The staff estimates that the burden to the 10 vendors to 
maintain their systems would be 500,000 hours annually, or 50,000 
hours per vendor. The staff estimates that the burden allocated to 
each client on a pro rata basis would be 100 hours annually per 
broker, dealer or municipal security dealer that uses vendors' 
services (500,000 hours/5,000 = 100 hours). The staff estimates, 
based on discussions with industry representatives, that the 400 
brokers, dealers and municipal securities dealers that use 
proprietary confirmation delivery systems, on average, would have a 
burden of 3,750 hours annually for maintaining systems. Thus, the 
annual burden for maintaining systems is estimated to be 2 million 
hours ((5,000 x 100) + (400 x 3,750) = 2,000,000).
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    Based on discussions with industry representatives, the Commission 
staff estimates that there are 1 billion confirmations delivered 
annually to customers in connection with securities transactions 
involving mutual fund shares, UIT interests and college savings plan 
interests. Proposed rule 15c2-3 would require brokers, dealers and 
municipal securities dealers to provide disclosure to customers about 
costs and conflicts at the point of sale for each of these 
transactions. The information that would be required to be delivered 
pursuant to proposed rule 15c2-3 would be derived from information that 
brokers, dealers and municipal securities dealers would otherwise 
prepare in order to fulfill their confirmation disclosure requirements 
under proposed rule 15c2-2.
    The Commission staff further estimates from information provided by 
industry participants that it will take, on average, about one minute 
to deliver to customers the point of sale disclosure required under 
proposed rule 15c2-3. The Commission staff also estimates from 
information provided by industry participants that the annual burden to 
brokers, dealers and municipal securities dealers to deliver at the 
point of sale the disclosure that would be required under proposed rule 
15c2-3, and to maintaining systems that would permit such disclosure, 
would be 16.7 million hours.\2\ As a result, the Commission staff 
estimates that the total annual burden to brokers, dealers and 
municipal securities dealers to comply with the requirements of 
proposed rule 15c2-3, would be 18.7 million hours.\3\
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    \2\ (1 billion transactions at one minute per point of sale 
disclosure = 1 billion minutes; 1 billion minutes/60 minutes per 
hour = 16.7 million hours.)
    \3\ (16.7 million hours per point of sale disclosure + 2 million 
hours to develop and implement compliance procedures = 18.7 million 
hours.)
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    Based on discussions with industry participants, the Commission 
staff estimates that the annual cost to brokers, dealers and municipal 
securities dealers for call center services and other service providers 
which would assist with development and implementation of procedures 
sufficient to demonstrate compliance with the delivery requirements of 
paragraphs (a) and (b) of proposed rule 15c2-3 would be approximately 
$40 million.\4\
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    \4\ Based on discussions with industry representatives, the 
staff estimates that the annual cost would be $7,400 per broker, 
dealer or municipal securities dealer. (5,400 brokers, dealers and 
municipal securities dealers x $7,400 = $39,996,000.)
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    In summary, the Commission staff estimates that the annual burden 
for complying with the requirements of proposed rule 15c2-3 would be 
18.7 million hours and that the annual costs of complying with the 
requirements of proposed rule 15c2-3, including call center services, 
and recordkeeping and compliance costs, would be $40 million.
    Direct your written comments to 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 
60 days of this notice.

    Dated: March 21, 2007.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-6126 Filed 4-2-07; 8:45 am]

BILLING CODE 8010-01-P
