
[Federal Register Volume 76, Number 170 (Thursday, September 1, 2011)]
[Notices]
[Pages 54513-54514]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-22366]


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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-2, SEC File No. 270-381, OMB Control No. 3235-
0434.

    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.
    The ``Penny Stock Disclosure Rules'' (Rule 15g-2, 17 CFR 240.15g-2) 
require broker-dealers to provide their customers with a risk 
disclosure document, as set forth in Schedule 15G, prior to their first 
non-exempt transaction in a ``penny stock''. As amended, the rule 
requires broker-dealers to obtain written acknowledgement from the 
customer that he or she has received the required risk disclosure 
document. The amended rule also requires broker-dealers to maintain a 
copy of the customer's written acknowledgement for at least three years 
following the date on which the risk disclosure document was provided 
to the customer, the first two years in an accessible place.
    The risk disclosure documents are for the benefit of the customers, 
to assure that they are aware of the risks of trading in ``penny 
stocks'' before they enter into a transaction. The risk disclosure 
documents are maintained by the broker-dealers and may be reviewed 
during the course of an examination by the Commission.
    There are approximately 253 broker-dealers that could potentially 
be subject to current Rule 15g-2. The Commission estimates that 
approximately 5% of registered broker-dealers are engaged in penny 
stock transactions, and thereby subject to the Rule (5% x approximately 
5,063 registered broker-dealers = 253 broker-dealers). The Commission 
estimates that each one of these firms processes an average of three 
new customers for penny stocks per week. Thus, each respondent 
processes approximately 156 penny stock disclosure documents per year. 
If communications in tangible form alone are used to satisfy the 
requirements of Rule 15g-2, then the copying and mailing of the penny 
stock disclosure document takes no more than two minutes. Thus, the 
total associated burden is approximately 2 minutes per response, or an 
aggregate total of 312 minutes per respondent. Since there are 253 
respondents, the current annual burden is 78,936 minutes (312 minutes 
per each of the 253 respondents) or 1,316 hours for this third party 
disclosure burden. In addition, broker-dealers incur a recordkeeping 
burden of approximately two minutes per response when filing the 
completed penny stock disclosure documents as required pursuant to the 
Rule 15(g)(2)(c), which requires a broker-dealer to preserve a copy of 
the written acknowledgement pursuant to Rule 17a-4(b) of the Exchange 
Act. Since there are approximately 156 responses for each respondent, 
the respondents incur an aggregate recordkeeping burden of 78,936 
minutes (253 respondents x 156 responses for each x 2 minutes per 
response) or 1,316 hours, under Rule 15g-2. Accordingly, the current 
aggregate annual hour burden associated with Rule 15g-2 (that is, 
assuming that all respondents provide tangible copies of the required 
documents) is approximately 2,632 hours (1,316 third party disclosure 
hours + 1,316 recordkeeping hours).
    The burden hours associated with Rule 15g-2 may be slightly reduced 
when the penny stock disclosure document required under the rule is 
provided through electronic means such as e-mail from the broker-dealer 
(e.g., the broker-dealer respondent may take only one minute, instead 
of the two minutes estimated above, to provide the penny stock 
disclosure document by e-mail to its customer). In this regard, if each 
of the customer respondents estimated above communicates with his or 
her broker-dealer electronically, the total ongoing respondent burden 
is approximately 1 minute per response, or an aggregate total of 156 
minutes (156 customers x 1 minute per respondent). Assuming 253 
respondents, the annual third party disclosure burden, if electronic 
communications were used by all customers, is 39,468 minutes (156 
minutes per each of the 253 respondents) or 658 hours. If all 
respondents were to use electronic means, the recordkeeping burden is 
78,936 minutes or 1,316 hours (the same as above). Thus, if all broker-
dealer respondents obtain and send the documents required under the 
rules electronically, the aggregate annual hour burden associated with 
Rule 15g-2 is 1,974 (658 hours + 1,316 hours).
    In addition, if the penny stock customer requests a paper copy of 
the information on the Commission's Web site regarding microcap 
securities, including penny stocks, from his or her broker-dealer, the 
printing and mailing of the document containing this information takes 
no more than two minutes per customer. Because many investors have 
access to the Commission's Web site via computers located in their 
homes, or in easily accessible public places such as libraries, then, 
at most, a quarter of customers who are required to receive the Rule 
15g-2 disclosure document request that their broker-dealer provide them 
with the additional microcap and penny stock information posted on the 
Commission's Web site. Thus, each broker-dealer respondent processes 
approximately 39 requests for paper copies of this information per year 
or an aggregate total of 78 minutes per respondent (2 minutes per 
customer x 39 requests per respondent). Since there are 253 
respondents, the estimated annual burden is 19,734 minutes (78 minutes 
per each of the 253 respondents) or 329 hours. This is a third party 
disclosure type of burden.
    We have no way of knowing how many broker-dealers and customers 
will choose to communicate electronically. Assuming that 50 percent of 
respondents continue to provide documents and obtain signatures in 
tangible form and 50 percent choose to communicate electronically to 
satisfy the requirements of Rule 15g-2, the total aggregate burden 
hours is 3,948 ((aggregate burden hours for documents and signatures in 
tangible form x 0.50 of the respondents = 1,316 hours) + (aggregate 
burden hours for electronically signed and transmitted documents x 0.50 
of the respondents = 987 hours) + (aggregate burden hours for 
recordkeeping of tangible documents x 0.50 of the respondents = 658) + 
(aggregate burden hours for recordkeeping of electronically filed 
documents = 658) + (329 burden hours for those customers making 
requests for a copy of the information on the Commission's Web site)).
    The Commission does not maintain the risk disclosure document. 
Instead, it must be retained by the broker-dealer for at least three 
years following the date on which the risk disclosure document was 
provided to the customer, the first two years in an accessible place. 
The collection of information required by the rule is mandatory. The 
risk disclosure document is otherwise

[[Page 54514]]

governed by the internal policies of the broker-dealer regarding 
confidentiality, etc.
    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.
    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: Shagufta_Ahmed@omb.eop.gov; 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: 
PRA_Mailbox@sec.gov. Comments must be submitted to OMB within 30 days 
of this notice.

    Dated: August 26, 2011.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-22366 Filed 8-31-11; 8:45 am]
BILLING CODE 8011-01-P


