Notice2025-03135
Proposed Collection; Comment Request; Reinstatement Without Change: Reports of Evidence of Material Violations
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
February 27, 2025
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 90 Issue 38 (Thursday, February 27, 2025)</title>
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[Federal Register Volume 90, Number 38 (Thursday, February 27, 2025)]
[Notices]
[Pages 10841-10842]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-03135]
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SECURITIES AND EXCHANGE COMMISSION
[SEC File No. 270-514, OMB Control No. 3235-0572]
Proposed Collection; Comment Request; Reinstatement Without
Change: Reports of Evidence of Material Violations
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
(PRA) of 1995, 44 U.S.C. 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 reinstatement without change.
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.
This information collection requirement was previously approved by
OMB, but the approval expired on November 30, 2021. Accordingly, the
Commission will request a reinstatement without change of OMB's
approval.
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 11,484
issuers that are subject to the rules.\1\ Of these, we estimate that
approximately 346, which is approximately 3 percent, 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 692 hours. Assuming half of the
burden hours will be incurred by outside counsel at a rate of $700 per
hour, the resulting cost would be $242,200.
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\1\ This figure is based on the estimated 8,230 operating
companies that filed annual reports on Form 10-K, Form 20-F, or Form
40-F during the 2023 calendar year, and the estimated 3,254
investment companies that filed periodic reports on Form N-CEN
during that same period.
\2\ This estimate is based on issuer-filings made with the
Commission between January 1, 2021, and September 30, 2024, that
include a reference to the issuer's QLCC.
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The estimate of average burden hours is made solely for the
purposes of the Paperwork Reduction Act, and is not 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.
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 invited on: (a) whether this collection of
information is necessary for the proper performance of the functions of
the agency, including whether the information will have practical
utility; (b) the accuracy of the agency's estimate of the burden
imposed by 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
[[Page 10842]]
collection of information on respondents, including through the use of
automated collection techniques or other forms of information
technology.
The public may view and comment on this information collection
request at: <a href="https://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=202410-3235-012">https://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=202410-3235-012</a> or send an email comment to
<a href="/cdn-cgi/l/email-protection#29646b710766646b0766607b68077a6c6a764d4c5a4276464f4f404a4c5b6946444b074c4659074e465f"><span class="__cf_email__" data-cfemail="7538372d5b3a38375b3a3c27345b2630362a1110061e2a1a13131c161007351a18175b101a055b121a03">[email protected]</span></a> within 30 days of the day
after publication of this notice by March 31, 2025.
Dated: February 21, 2025.
Sherry Haywood,
Assistant Secretary.
[FR Doc. 2025-03135 Filed 2-26-25; 8:45 am]
BILLING CODE 8011-01-P
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