

[Federal Register: April 3, 2007 (Volume 72, Number 63)]
[Notices]               
[Page 15917-15918]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr03ap07-94]                         

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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 15c2-2; SEC File No. 270-538; OMB Control No. 3235-
0598.

    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'') is soliciting comments on the collection of 
information summarized below. The Commission plans to submit this 
existing collection of information to the Office of Management and 
Budget for extension and approval.
    Proposed rule 15c2-2 (17 CFR 240.15c2-2) under the Securities 
Exchange Act of 1934 (15 U.S.C. 78a et seq.) would provide investors in 
mutual fund shares, UIT interests and college savings plan interests 
with information in transaction confirmations, including information 
about certain distribution-related costs and certain distribution 
arrangements that create conflicts of interest for brokers, dealers, 
municipal securities dealers, and their associated persons. Proposed 
rule 15c2-2 specifically would require confirmation disclosure of 
information about loads and other distribution-related costs that 
directly impact the returns earned by investors in those securities. It 
also would require brokers, dealers and municipal securities dealers to 
disclose their compensation for selling those securities, and to 
disclose information about revenue sharing arrangements and portfolio 
brokerage arrangements that create conflicts of interest for them. 
Moreover, the proposed rule would require brokers, dealers and 
municipal securities dealers to inform customers about whether their 
salespersons or other associated persons receive extra compensation for 
selling certain covered securities.
    In addition, the Commission, the self-regulatory organizations, and 
other securities regulatory authorities would be able to use records of 
confirmations delivered pursuant to proposed rule 15c2-2 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.

[[Page 15918]]

    The Commission anticipates on-going burdens for complying with the 
requirements of proposed rule 15c2-2, including calculating revenue 
sharing and portfolio brokerage amounts required under rule 15c2-2. 
Based upon discussions with industry representatives, the Commission 
staff understands that, once completed, this reprogramming and systems 
updating would permit brokers, dealers, and municipal securities 
dealers to have automated access to the information that would be 
required to be disclosed in confirmations delivered pursuant to 
proposed rule 15c2-2. As a result, the burden associated with obtaining 
data to be included in confirmations would be de minimis. The 
Commission staff estimates from information provided by industry 
participants that the annual burden to brokers, dealers and municipal 
securities dealers, and their vendors, to comply with the requirements 
under proposed rule 15c2-2 to calculate revenue sharing and portfolio 
brokerage amounts and to maintain and further update the confirmation 
delivery systems, would be 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 hours).
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    Brokers, dealers and municipal securities dealers also would have a 
burden for generating and sending confirmations to investors. The 
Commission staff estimates from information provided by industry 
participants that it takes about one minute to generate and send a 
confirmation. Based on the estimate that there are 1 billion 
transactions annually in the covered securities, the Commission staff 
estimates that the annual burden to brokers, dealers and municipal 
securities dealers to generate and send confirmations to customers 
pursuant to proposed rule 15c2-2 would be 16.7 million hours.\2\ It is 
important to note, however, that confirmations for transactions in 
covered securities are currently required to be delivered pursuant to 
rule 10b-10 (17 CFR 240.10b-10) or MSRB rule G-15, as applicable. As a 
result, the burden for generating and sending confirmations would not 
be entirely new, but would reflect a shift of burdens from rule 10b-10 
to proposed rule 15c2-2. In addition, brokers, dealers and municipal 
securities dealers routinely send customers account statements pursuant 
to self-regulatory organizations' requirements and for reasons of 
prudent business practice. Nonetheless, the Commission staff estimates 
that the total annual burden for complying with the requirements of 
proposed rule 15c2-2 would be 18.7 million hours.\3\ The number of 
confirmations sent and the cost of the confirmations vary from firm to 
firm. Smaller firms typically send fewer confirmations than larger 
firms because they effect fewer transactions.
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    \2\ (1 billion confirmations at one minute per confirmation = 1 
billion minutes; 1 billion minutes/60 minutes per hour = 16.7 
million hours.)
    \3\ (16.7 million hours to generate and send confirmations to 
customers + 2 million hours to calculate revenue sharing and 
portfolio brokerage amounts and to maintain and further update the 
confirmation delivery systems = 18.7 million hours.)
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    As stated earlier, the Commission staff estimates that there are 1 
billion securities transactions annually involving mutual fund shares, 
UIT interests and college savings plan interests. According to 
information provided by industry participants, the Commission staff 
estimates that the average cost, including postage and printing, for a 
two-page confirmation is about $1.05. As a result, the Commission staff 
estimates that the annual costs of complying with the requirements of 
proposed rule 15c2-2, including the printing and postal costs for 
generating and sending confirmations, would be $1.05 billion,\4\ 
reflecting an increase of $160 million over the cost of the 
confirmations had they been delivered pursuant to rule 10b-10.\5\
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    \4\ (1 billion confirmations at $1.05 per confirmation = $1.05 
billion.) As noted above, confirmations for transactions in covered 
securities are currently required to be delivered pursuant to rule 
10b-10 or MSRB rule G-15, as applicable. As a result, this estimated 
cost is not entirely a new cost, but reflects a shift of costs from 
rule 10b-10 to proposed rule 15c2-2. This estimated cost also 
reflects an incremental increase in the cost of generating 
confirmations from 89 cents under rule 10b-10 to $1.05 under 
proposed rule 15c2-2. This incremental cost is associated with 
generating the two-page confirmation that would be required under 
proposed rule 15c2-2, as compared to a half-page or one-page 
confirmation that is currently permitted under rule 10b-10.
    \5\ (1 billion confirmations delivered pursuant to rule 10b-10 
at $0.89 per confirmation = $890 million; $1.05 billion-$890 million 
= $160 million.)
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    In summary, 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. The staff estimates that the annual 
burden for complying with the requirements of proposed rule 15c2-2 
would be 18.7 million hours and that the annual costs of complying with 
the requirements of proposed rule 15c2-2, including the printing and 
postal costs for generating and sending confirmations, would be $1.05 
billion. We note that, as stated above, many of these costs and 
burdens, including the majority of the annual costs and burdens, would 
be shifted from rule 10b-10 to proposed rule 15c2-2.
    Written comments are invited on: (a) Whether the proposed 
collection of information is necessary for the proper performance of 
the functions of the agency, including whether the information shall 
have practical utility; (b) the accuracy of the agency's estimate of 
the burden of the proposed collection of information; (c) ways to 
enhance the quality, utility, and clarity of the information to be 
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.
    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.
    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. E7-6127 Filed 4-2-07; 8:45 am]

BILLING CODE 8010-01-P
