
[Federal Register Volume 80, Number 54 (Friday, March 20, 2015)]
[Notices]
[Pages 15039-15041]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-06358]


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SECURITIES AND EXCHANGE COMMISSION


Proposed Collection; Comment Request

Upon Written Request Copies Available From: U.S. Securities and 
Exchange Commission, Office of FOIA Services, 100 F Street NE., 
Washington, DC 20549-2736.

Extension:
    Rule 17g-5, SEC File. No. 270-581, OMB Control No. 3235-0649.

    Notice is hereby given that pursuant to the Paperwork Reduction Act 
of 1995 (``PRA'') (44 U.S.C. 3501 et seq.), the Securities and Exchange 
Commission (``Commission'') is soliciting comments on the existing 
collection of information provided for in Rule 17g-5 (17 CFR 240.17g-5) 
under the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) 
(``Exchange Act''). The Commission plans to submit this existing 
collection of information to the Office of Management and Budget 
(``OMB'') for extension and approval.
    The Credit Rating Agency Reform Act of 2006 (Pub. L. 109-291) 
(``Rating Agency Act''), enacted on September 29, 2006, defines the 
term ``nationally recognized statistical rating organization,'' or 
``NRSRO'' and provides authority for the Commission to implement 
registration, recordkeeping, financial reporting, and oversight rules 
with respect to registered credit rating agencies. The Rating Agency 
Act added a new section 15E, ``Registration of Nationally Recognized 
Statistical Rating Organizations'' (15 U.S.C. 78o-7) to the Exchange 
Act. Exchange Act section 15E(h)(2) provides the Commission with 
authority to prohibit, or require the management and disclosure of, any 
potential conflict of interest relating to the issuance of credit 
ratings by an NRSRO (15 U.S.C. 78o-7(h)(2)).
    The Commission adopted, and subsequently amended, Rule 17g-5 
pursuant, in part, to section 15E(h)(2) of the Exchange Act.\1\ Rule 
17g-5 requires the disclosure of and establishment of procedures to 
manage certain NRSRO conflicts of interest, prohibits certain other 
NRSRO conflicts of interest, and contains requirements regarding the 
disclosure of information in the case of the conflict of interest of an 
NRSRO issuing or maintaining a credit rating on an asset-backed 
security that was paid for by the issuer, sponsor, or underwriter of 
the security.
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    \1\ See Oversight of Credit Rating Agencies Registered as 
Nationally Recognized Statistical Rating Organizations, Exchange Act 
Release No. 55857 (June 5, 2007), 72 FR 33564, 33595-33599 (June 18, 
2007); Amendments to Rules for Nationally Recognized Statistical 
Rating Organizations, Exchange Act Release No. 59342 (Feb. 2, 2009) 
74 FR 6456, 6465-6469 (Feb. 9, 2009); and Amendments to Rules for 
Nationally Recognized Statistical Rating Organizations, Exchange Act 
Release No. 61050 (Nov. 23, 2009), 74 FR 63832, 63842-63850 (Dec. 4, 
2009).
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    On August 27, 2014, the Commission adopted amendments to Rule 17g-
5.\2\ The amendments modified the collection of information included in 
Rule 17g-5 in three ways. First, the Commission added paragraph 
(a)(3)(iii)(E) to Rule 17g-5 to require an NRSRO to obtain a 
representation from the issuer, sponsor, or underwriter of an asset-
backed security that the issuer, sponsor, or underwriter will post on 
the Web site referred to in paragraph (a)(3)(iii) of Rule 17g-5 (``Rule 
17g-5 Web site''), promptly after receipt, any executed Form ABS Due 
Diligence-15E delivered by a person employed to provide third-party due 
diligence services with respect to the security or money market 
instrument.
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    \2\ See Nationally Recognized Statistical Rating Organizations, 
Exchange Act Release No. 72936 (August 27, 2014), 79 FR 55078, 
55107-55194 (Sept. 15, 2014) (``Adopting Release'').
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    Second, the Commission added paragraph (c)(8) to Rule 17g-5 to 
prohibit an NRSRO from issuing or maintaining a credit rating where a 
person within the NRSRO who participates in determining or monitoring 
the credit rating, or developing or approving procedures or 
methodologies used for determining the

[[Page 15040]]

credit rating, including qualitative and quantitative models, also: (1) 
Participates in sales or marketing of a product or service of the NRSRO 
or a product or service of an affiliate of the NRSRO; or (2) is 
influenced by sales or marketing considerations.
    Third, the Commission added paragraph (f) to Rule 17g-5, which 
provides that upon written application by an NRSRO the Commission may 
exempt, either unconditionally or on specified terms and conditions, 
the NRSRO from paragraph (c)(8) of Rule 17g-5 if the Commission finds 
that due to the small size of the NRSRO it is not appropriate to 
require the separation of the production of credit ratings from sales 
and marketing activities and the exemption is in the public interest.
    The collection of information obligation imposed by Rule 17g-5 is 
mandatory for credit rating agencies that are applying to register or 
are registered with the Commission as NRSROs. Registration with the 
Commission as an NRSRO is voluntary.
    Paragraph (a)(3) of Rule 17g-5 requires disclosures by NRSROs on a 
transaction by transaction basis. The Commission estimates that the 
total number of structured finance ratings issued by all NRSROs in a 
given year is approximately 2,436 and that it would take 1 hour per 
transaction to make the information publicly available. The Commission 
therefore estimates that the corresponding annual disclosure burden for 
NRSROs is approximately 2,436 hours industry-wide.
    Paragraph (a)(3) of Rule 17g-5 also requires arrangers to disclose 
certain information. The Commission previously estimated that there are 
approximately 200 arrangers subject to the rule. The Commission 
estimates that it would take approximately 300 hours to develop a 
system, as well as the policies and procedures, for the disclosures 
required by Rule 17g-5. In the Adopting Release, the Commission 
estimated that there are approximately 336 issuers, sponsors, or 
underwriters of asset-backed securities. Therefore, the one-time burden 
for the additional 136 respondents is approximately 40,800 hours. The 
Commission therefore estimates that, over a three-year period, the 
total industry-wide one-time burden would be approximately 13,600 hours 
per year when annualized over three years.
    Paragraph (a)(3) of Rule 17g-5 also requires disclosures by 
arrangers on a transaction by transaction basis. The Commission 
estimates that 336 arrangers would arrange approximately 20 new 
transactions per year and that it would take 1 hour per transaction to 
make the information publicly available, resulting in a total annual 
disclosure burden of approximately 6,720 hours.
    Paragraph (a)(3) of Rule 17g-5 also requires disclosure of 
information by arrangers on an ongoing basis that is used by an NRSRO 
to undertake credit rating surveillance on the structured finance 
product. The Commission estimates this disclosure would be required for 
approximately 125 transactions a month, and it would take each 
respondent approximately 0.5 hours per transaction to disclose the 
information. Therefore, the Commission estimates that it would take 
each respondent approximately 750 hours on an annual basis to disclose 
such information, for a total aggregate annual disclosure burden of 
252,000 hours.
    Paragraph (e) of Rule 17g-5 requires NRSROs to submit an annual 
certification to the Commission. The Commission estimates that it would 
take each NRSRO approximately 2 hours to complete the certification, 
resulting in a total industry-wide annual reporting burden for 10 
NRSROs of 20 hours.
    New paragraph (a)(3)(iii)(E) of Rule 17g-5 may require NRSROs to 
redraft the agreement templates they use with respect to obtaining 
representations from issuers, sponsors, or underwriters as required 
under Rule 17g-5. The Commission estimates that an NRSRO will spend 
approximately two hours on a one-time basis to redraft these templates 
with respect to each issuer, sponsor, or underwriter, for a total 
industry-wide one-time disclosure burden of approximately 6,720 hours. 
The Commission therefore estimates that the total one-time disclosure 
burden to redraft the templates would be approximately 2,240 hours per 
year when annualized over three years.
    New paragraph (a)(3)(iii)(E) of Rule 17g-5 also requires issuers, 
sponsors, and underwriters to post on the Rule 17g-5 Web sites any 
executed Form ABS Due Diligence-15E delivered by a person employed to 
provide third-party due diligence services. The Commission estimates 
that issuers, sponsors, and underwriters will need to post 
approximately 715 Forms ABS Due Diligence-15E on Rule 17g-5 Web sites 
per year (in addition to the information that is already posted to the 
Web sites). The Commission estimates that it will take the issuer, 
sponsor, or underwriter approximately ten minutes to upload each form 
and post it to the Web site, for a total industry-wide annual 
disclosure burden of approximately 119 hours.
    As a consequence of the new absolute prohibition in paragraph 
(c)(8) of Rule 17g-5, the Commission believes that an NRSRO will need 
to update the written policies and procedures to address and manage 
conflicts of interest the NRSRO must establish, maintain, and enforce 
under section 15E(h) of the Exchange Act and Rule 17g-5. The Commission 
estimates that updating the conflicts of interest policies and 
procedures would take an NRSRO an average of approximately 100 hours, 
for an industry-wide one-time reporting burden of approximately 1,000 
hours. In addition, Exhibit 7 to Form NRSRO requires an NRSRO to 
provide a copy of the written policies and procedures in the exhibit. 
Paragraph (e) of Rule 17g-1 requires an NRSRO to promptly file with the 
Commission an update of its registration on Form NRSRO when information 
on the form is materially inaccurate. The update of registration must 
be filed electronically on the Commission's EDGAR system. The 
Commission estimates that it would take an NRSRO an average of 
approximately twenty-five hours on a one-time basis to prepare and file 
the update of registration to account for the update of the NRSRO's 
written policies and procedures to address and manage conflicts of 
interest, for an industry-wide one-time reporting burden of 
approximately 250 hours. The Commission therefore estimates that the 
total one-time reporting burden to update the conflicts of interest 
policies and procedures and to prepare and file an update of 
registration to account for the update of the NRSRO's written policies 
and procedures would be 1,250 hours, or approximately 417 hours per 
year when annualized over three years.
    Finally, paragraph (f) of Rule 17g-5 permits an NRSRO to apply for 
an exemption from the prohibited conflict under paragraph (c)(8) of 
Rule 17g-5. The Commission estimated that an NRSRO would likely spend 
an average of approximately 150 hours to draft and submit the 
application to the Commission. If all 10 NRSROs apply for an exemption, 
this would result in a one-time industry-wide reporting burden of 1,500 
hours, or approximately 500 hours per year when annualized over 3 
years.
    Accordingly, the total estimated burden associated with Rule 17g-5 
is 50,270 hours on a one-time basis (40,800 + 6,720 + 1,250 + 1,500 = 
50,270) and 261,295 hours on an annual basis (2,436 + 6,720 + 252,000 + 
20 +119 = 261,295).
    Written comments are invited on: (a) Whether the proposed 
collection of information is necessary for the proper performance of 
the functions of the Commission, including whether the information 
shall have practical utility;

[[Page 15041]]

(b) the accuracy of the Commission's estimate of the burden of the 
proposed collection of information; (c) ways to enhance the quality, 
utility, and clarity of the information on respondents; 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 under the PRA unless it 
displays a currently valid OMB control number.
    Please direct your written comments to: Pamela C. Dyson, Director/
Chief Information Officer, Securities and Exchange Commission, c/o Remi 
Pavlik-Simon, 100 F Street NE., Washington, DC 20549 or send an email 
to: PRA_Mailbox@sec.gov.

    Dated: March 16, 2015.
Brent J. Fields,
Secretary.
[FR Doc. 2015-06358 Filed 3-19-15; 8:45 am]
 BILLING CODE 8011-01-P


