
[Federal Register Volume 76, Number 203 (Thursday, October 20, 2011)]
[Notices]
[Pages 65223-65224]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-27092]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION


Proposed Collection; Comment Request

Upon Written Request, Copies Available From: Securities and Exchange 
Commission, Office of Investor Education and Advocacy, Washington, DC 
20549-0213.
Reports of Evidence of:
    SEC File No. 270-514, OMB Control No. 3235-0572.

Material Violations

     Notice is hereby given that pursuant to the Paperwork Reduction 
Act (PRA) 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 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 (15 
U.S.C. 7245). 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'' 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 16,517 
issuers that are subject to the rules.\1\ Of these, we estimate that 
approximately 3.8%, or 637, have established or 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 1,274 hours. Assuming half of the burden hours will be 
incurred by outside counsel at a rate of $500 per hour would result in 
a cost of $318,500.
---------------------------------------------------------------------------

    \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 2011 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 (14,000). In addition, we estimate that approximately 2,517 
investment companies currently file periodic reports on Form N-SAR.
    \2\ We base this estimate on the number of issuers who have 
reported in filings with the Commission that they have created 
QLCCs. Indications are that the 2005 estimate of the percentage of 
issuers that would establish QLCCs (10%) was high. Our adjusted 
estimate in the percentage of QLCCs (3.8%) results in a reduced 
burden estimate as compared to the previously-approved collection.
---------------------------------------------------------------------------

    The estimate of average burden hours is made solely for the 
purposes of the Paperwork Reduction Act, and is not

[[Page 65224]]

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 Thomas Bayer, Director/Chief 
Information Officer, Securities and Exchange Commission, c/o Remi 
Pavlik-Simon, 6432 General Green Way, Alexandria, Virginia 22312; or 
send an e-mail to: PRA_Mailbox@sec.gov.

    Dated: October 13, 2011.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-27092 Filed 10-19-11; 8:45 am]
BILLING CODE 8011-01-P


