
[Federal Register Volume 79, Number 131 (Wednesday, July 9, 2014)]
[Notices]
[Pages 39002-39003]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-16039]


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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.) (``PRA''), 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 provided for in Rule 15g-2 (17 CFR 240.15g-2) 
under the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) 
(``Exchange Act''). Rule 15g-2 (The ``Penny Stock Disclosure Rule'') 
requires 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. Rule 15g-2 
also requires a broker-dealer, upon request of a customer, to furnish 
the customer with a copy of certain information set forth on the 
Commission's Web site.
    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 221 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 
4,410 registered broker-dealers = 221 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 221 
respondents, the current annual burden is 68,952 minutes (312 minutes 
per each of the 221 respondents) or 1,150 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 68,952 
minutes (221 respondents x 156 responses for each x 2 minutes per 
response) or 1,150 hours, under Rule 15g-2. Accordingly, the current 
aggregate annual hour burden associated with Rule 15g-2 (assuming that 
all respondents provide tangible copies of the required documents) is 
approximately 2,300 hours (1,150 third party disclosure hours + 1,150 
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 minutes per respondent). Assuming 221 
respondents, the annual third party disclosure burden, if electronic 
communications were used by all customers, is 34,476 minutes (156 
minutes per each of the 221 respondents) or 575 hours. If all 
respondents were to use electronic means, the recordkeeping burden 
would be 68,952 minutes or 1,150 hours (the

[[Page 39003]]

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 1,725 (575 hours + 
1,150 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 221 
respondents, the estimated annual burden is 17,238 minutes (78 minutes 
per each of the 221 respondents) or 288 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 would be 2,301 ((aggregate burden hours for sending disclosure 
documents and obtaining signed customer acknowledgments in tangible 
form x 0.50 of the respondents = 1,150 hours) + (aggregate burden hours 
for electronically signed and transmitted documents x 0.50 of the 
respondents = 863 hours) + (288 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 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 under the PRA unless it 
displays a currently valid OMB control number.
    The public may view background documentation for this information 
collection at the following Web site: 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, D.C. 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, 100 F Street 
NE., Washington, DC 20549, or by sending an e-mail to: PRA_Mailbox@sec.gov. Comments must be submitted to OMB within 30 days of 
this notice.

    Dated: July 3, 2014.
Jill M. Peterson,
Assistant Secretary.
 [FR Doc. 2014-16039 Filed 7-8-14; 8:45 am]
BILLING CODE 8011-01-P


