Notice2024-25923
Proposed Collection; Comment Request; Extension: Municipal Securities Disclosure (Exchange Act Rule 15c2-12)
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
November 8, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
<html>
<head>
<title>Federal Register, Volume 89 Issue 217 (Friday, November 8, 2024)</title>
</head>
<body><pre>
[Federal Register Volume 89, Number 217 (Friday, November 8, 2024)]
[Notices]
[Pages 88843-88845]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-25923]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[SEC File No. 270-330, OMB Control No. 3235-0372]
Proposed Collection; Comment Request; Extension: Municipal
Securities Disclosure (Exchange Act Rule 15c2-12)
Upon Written Request, Copies Available From: Securities and Exchange
Commission, Office of FOIA Services, 100 F Street NE, Washington, DC
20549-2736.
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 15c2-12--Municipal
Securities Disclosure (17 CFR 240.15c2-12) 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.
In connection with offerings of municipal securities, paragraph (b)
of Rule 15c2-12 \1\ requires Participating Underwriters: \2\ (1) to
obtain and review an official statement ``deemed final'' by an issuer
of the securities, except for the omission of specified information,
prior to making a bid, purchase, offer, or sale of municipal
securities; \3\ (2) in non-competitively bid offerings, to send, upon
request, a copy of the most recent preliminary official statement (if
one exists) to potential customers; \4\ (3) to contract with the issuer
to receive, within a specified time, sufficient copies of the final
official statement to comply with Rule 15c2-12's delivery requirement
and the rules of the Municipal Securities Rulemaking Board (``MSRB'');
\5\ (4) to send, upon request, a
[[Page 88844]]
copy of the final official statement to potential customers for a
specified period of time; \6\ and (5) before purchasing or selling
municipal securities in connection with an offering, to reasonably
determine that the issuer or the obligated person has undertaken, in a
written agreement or contract, for the benefit of holders of such
municipal securities, to provide certain information on a continuing
basis to the MSRB in an electronic format as prescribed by the MSRB.\7\
The information to be provided consists of: (1) certain annual
financial and operating information and audited financial statements
(``annual filings''); \8\ (2) notices of the occurrence of any of
certain specific events (``event notices''); \9\ and (3) notices of the
failure of an issuer or obligated person to make a submission required
by a continuing disclosure agreement (``failure to file notices'').\10\
Annual filings, event notices, and failure to file notices may be
collectively referred to as ``continuing disclosure documents.''
---------------------------------------------------------------------------
\1\ 17 CFR 240.15c2-12(b).
\2\ The term ``Participating Underwriter'' means any broker,
dealer, or municipal securities dealer that acts as an underwriter
in connection with an ``Offering,'' i.e., a primary offering of
municipal securities with an aggregate principal amount of
$1,000,000 or more. 17 CFR 240.15c2-12(a) (defining ``Participating
Underwriter'' and ``Offering'').
\3\ 17 CFR 240.15c2-12(b)(1).
\4\ 17 CFR 240.15c2-12(b)(2).
\5\ 17 CFR 240.15c2-12(b)(3).
\6\ 17 CFR 240.15c2-12(b)(4).
\7\ 17 CFR 240.15c2-12(b)(5)(i).
\8\ 17 CFR 240.15c2-12(b)(5)(i)(A)-(B).
\9\ 17 CFR 240.15c2-12(b)(5)(i)(C).
\10\ 17 CFR 240.15c2-12(b)(5)(i)(D).
---------------------------------------------------------------------------
Rule 15c2-12 is intended to enhance disclosure, and thereby reduce
fraud, in the municipal securities market by establishing standards for
obtaining, reviewing, and disseminating information about municipal
securities by their underwriters.\11\
---------------------------------------------------------------------------
\11\ See generally Municipal Securities Disclosure, Exchange Act
Release No. 26985 (June 28, 1989), 54 FR 28799 (July 10, 1989);
Municipal Securities Disclosure, Exchange Act Release No. 34961
(November 10, 1994), 59 FR 59590 (November 17, 1994); Amendment to
Municipal Securities Disclosure, Exchange Act Release No. 59062
(December 5, 2008), 73 FR 76104 (December 15, 2008); Amendments to
Municipal Securities Disclosure, Exchange Act Release No. 62184A
(May 26, 2010), 75 FR 33100 (June 10, 2010); Amendments to Municipal
Securities Disclosure, Exchange Act Release No. 83885 (August 20,
2018), 83 FR 44700 (August 31, 2018).
---------------------------------------------------------------------------
Municipal offerings of less than $1 million are exempt from the
rule,\12\ as are offerings of municipal securities issued in large
denominations that are sold to no more than 35 sophisticated investors
or have short-term maturities.\13\
---------------------------------------------------------------------------
\12\ 17 CFR 240.15c2-12(a).
\13\ 17 CFR 240.15c2-12(d)(1).
---------------------------------------------------------------------------
With respect to hour burdens, the Commission estimates that
approximately 28,000 issuers, 205 broker-dealers, and the MSRB will
spend a total of 786,220 hours per year complying with Rule 15c2-12
over the next three years.\14\ Rule 15c2-12 indirectly imposes ongoing
third-party disclosure burdens on issuers that determine to engage a
broker-dealer to act as a Participating Underwriter in an offering of
municipal securities. The Commission estimates that the total annual
burden on issuers to comply with Rule 15c2-12 is 662,766 hours.\15\
Based on public MSRB data, issuers annually submitted an average of
approximately 65,082 annual filings to the MSRB over the past three
years. The Commission estimates that an issuer will require
approximately seven hours to prepare and submit each annual filing to
the MSRB. Therefore, the Commission estimates that the total annual
burden on issuers to prepare and submit 65,082 annual filings to the
MSRB is 455,574 hours.\16\ Based on public MSRB data, issuers annually
submitted an average of approximately 49,958 event notices to the MSRB
over the past three years. The Commission estimates that an issuer will
require approximately four hours to prepare and submit each event
notice to the MSRB. Therefore, the Commission estimates that the total
annual burden on issuers to prepare and submit 49,958 event notices to
the MSRB is 199,832 hours.\17\ Based on public MSRB data, issuers
annually submitted an average of approximately 3,680 failure to file
notices to the MSRB over the past three years. The Commission estimates
that an issuer will require approximately two hours to prepare and
submit failure to file notices to the MSRB. Therefore, the total annual
burden on issuers to prepare and submit 3,680 failure to file notices
to the MSRB is estimated to be 7,360 hours.\18\
---------------------------------------------------------------------------
\14\ 662,766 hours (estimated total annual burden on issuers) +
101,454 hours (estimated total annual burden on broker-dealers) +
22,000 hours (estimated total annual burden on the MSRB) = 786,220
hours.
\15\ 65,082 (estimated average number of annual filings
submitted by issuers annually in each of the next three years) x 7
(estimated average number of hours needed to prepare and submit
each) = 455,574 hours. 49,958 (estimated average number of event
notices submitted by issuers annually in each of the next three
years) x 4 (estimated average number of hours needed to prepare and
submit each) = 199,832 hours. 3,680 (estimated average number of
failure to file notices submitted by issuers annually in each of the
next three years) x 2 (estimated average number of hours needed to
prepare and submit each) = 7,360 hours. 455,574 hours + 199,832
hours + 7,360 hours = 662,766 hours.
\16\ See supra note 15.
\17\ See supra note 15.
\18\ See supra note 15.
---------------------------------------------------------------------------
Rule 15c2-12 imposes ongoing third-party disclosure burdens on
broker-dealers that act as Participating Underwriters in offerings of
municipal securities. The Commission estimates that the total annual
burden on broker-dealers to comply with Rule 15c2-12 is 101,454
hours.\19\ Based on public MSRB data, the Commission estimates that an
average of 10,968 offerings of municipal securities occurred annually
over the past three years. Further, based on estimates provided by the
MSRB, the Commission estimates that, over the past three years, an
average of 205 broker-dealers served as a Participating Underwriter in
municipal securities offerings. Accordingly, the Commission estimates
that approximately 205 broker-dealers could serve as a Participating
Underwriter in 10,968 municipal securities offerings in each of the
next three years. The Commission estimates that broker-dealers will
incur a 15 minute (0.25 hour) burden per issuance of municipal
securities to reasonably determine that the issuer or obligated person
has undertaken, in a written agreement or contract, for the benefit of
holders of municipal securities, to provide continuing disclosure
documents to the MSRB,\20\ resulting in an annual burden on all broker-
dealers of approximately 2,742 hours.\21\ The Commission further
estimates that broker-dealers will incur 9 hours of burden per issuance
of municipal securities to determine whether issuers or obligated
persons have failed to comply, in all material respects, with any
previous undertakings in a written contract or agreement specified in
paragraph (b)(5)(i) of Rule 15c2-12, resulting in an annual burden on
broker-dealers of 98,712 hours.\22\
---------------------------------------------------------------------------
\19\ 10,968 (estimated annual issuances) x 0.25 (hourly burden
for broker-dealers to reasonably determine that the issuer or
obligated person has undertaken, in a written agreement or contract,
for the benefit of holders of such municipal securities, to provide
continuing disclosure documents to the MSRB) = 2,742 hours. 10,968
(estimated annual issuances) x 9 (average burden estimate per
issuance for broker-dealers to determine whether issuers or
obligated persons have failed to comply, in all material respects,
with any previous undertakings in a written contract or agreement
specified in paragraph (b)(5)(i) of the Rule) = 98,712 hours. 2,742
hours + 98,712 hours = 101,454 hours.
\20\ The Commission understands that most continuing disclosure
agreements are provided to the broker-dealer by the issuer or
obligated person and that most of these agreements are standard form
agreements of limited length. Further, the Commission believes that
the determination required to be made--that the issuer or obligated
person has undertaken to provide continuing disclosure documents to
the MSRB--is a narrow one that does not require a substantial time
commitment from the broker-dealer. For these reasons, the Commission
believes the estimate of a 15 minute burden per issuance is
appropriate.
\21\ See supra note 19.
\22\ See supra note 19.
---------------------------------------------------------------------------
Finally, Rule 15c2-12 imposes ongoing recordkeeping burdens on the
MSRB. The Commission estimates that the total annual burden on the MSRB
to comply with Rule 15c2-12 is 22,000
[[Page 88845]]
hours. Based on estimates provided by the MSRB, the Commission
estimates that, over the last three years, the MSRB has incurred an
annual burden of approximately 22,000 hours to collect, index, store,
retrieve, and make available the pertinent continuing disclosure
documents under Rule 15c2-12. Accordingly, the Commission estimates
that the MSRB will incur an annual burden of 22,000 hours to collect,
index, store, retrieve and make available the pertinent documents under
Rule 15c2-12 each year over the next three years.
With respect to cost burdens, the Commission estimates that 18,200
issuers and the MSRB will spend a total of $20,492,000 complying with
Rule 15c2-12 over the next three years.\23\ The Commission estimates
that, over the next three years, up to 65% of issuers subject to
continuing disclosure agreements--approximately 18,200 issuers--may use
the services of designated agents to submit some or all of their
continuing disclosure documents to the MSRB. The Commission estimates
that the average annual cost for an issuer's use of a designated agent
is $970 each year. Therefore, the Commission estimates that the average
total annual cost that may be incurred by issuers that use the services
of a designated agent will be $17,654,000.\24\ In addition, the
Commission estimates that issuers will retain outside counsel to assist
with filing approximately 1,000 event notices in each of the next three
years. The Commission further believes that, for those 1,000 complex
event notices in which issuers and obligated persons seek assistance
from outside counsel, one-half of the burden of preparation of the
event notices will be carried by issuers internally (four hours), and
the other half of the burden will be carried by outside professionals
retained by the issuer (four hours). The Commission further estimates
that the average hourly cost for an issuer's use of outside counsel is
$400 per hour. Therefore, the Commission estimates the average total
annual cost incurred by issuers to retain outside counsel to assist in
the evaluation and preparation of certain event notices will be
$1,600,000.\25\ Thus, the total estimated cost to issuers to comply
with the rule is $19,254,000.\26\
---------------------------------------------------------------------------
\23\ $19,254,000 (estimated total annual cost burden for
issuers) + $1,238,000 (estimated total annual cost burden for the
MSRB) = $20,492,000.
\24\ 28,000 (number of issuers subject to continuing disclosure
agreements) x 0.65 (percentage of issuers that may use designated
agents) = 18,200 issuers that may use designated agents. 18,200 x
$970 (estimated average annual cost for issuer's use of designated
agent under Rule 15c2-12) = $17,654,000.
\25\ 1,000 (estimated number of event notices requiring outside
counsel) x 4 (estimated number of hours for outside attorney to
assist in the preparation of such event notice) x $400 (hourly wage
for an outside attorney) = $1,600,000. The Commission recognizes
that the costs of retaining outside professionals may vary depending
on the nature of the professional services, but for purposes of this
PRA analysis we estimate that costs of outside counsel would be an
average of $400 per hour.
\26\ $17,654,000 (estimated annual cost for issuer's use of
designated agent to submit filings) + $1,600,000 (estimated annual
cost for issuers to employ outside counsel in the examination,
preparation, and filing of certain event notices) = $19,254,000.
---------------------------------------------------------------------------
Finally, based on recently obtained data provided by the MSRB, the
Commission estimates that the MSRB will incur total annual costs of
approximately $1,238,000 to operate the continuing disclosure service
for the MSRB's Electronic Municipal Market Access (``EMMA'') system,
including hardware, software, and external third-party costs such as
cloud service provider costs.
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; (b) the accuracy of the Commission's
estimates of the burden of the proposed 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 by
January 7, 2025.
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: Austin Gerig, Director/
Chief Data Officer, Securities and Exchange Commission, c/o Tanya
Ruttenberg, 100 F Street NE, Washington, DC 20549, or send an email to:
<a href="/cdn-cgi/l/email-protection#732321322c3e121a1f111c0b330016105d141c05"><span class="__cf_email__" data-cfemail="fbaba9baa4b69a9297999483bb889e98d59c948d">[email protected]</span></a>.
Dated: November 4, 2024.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-25923 Filed 11-7-24; 8:45 am]
BILLING CODE 8011-01-P
</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>Indexed from Federal Register on November 8, 2024.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.