[Federal Register Volume 67, Number 19 (Tuesday, January 29, 2002)]
[Notices]
[Pages 4291-4293]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-2118]


=======================================================================
-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION


Proposed Collection; Comment Request

Upon Written Request, Copies Available From: Securities and Exchange 
Commission, Office of Filings and Information Services, Washington, 
DC 20549

Extension:
    Rule 15c2-11, SEC File No. 270-196, OMB Control No. 3235-0202

    Notice is hereby given that, pursuant to the Paperwork Reduction 
Act of 1995 (44 U.S.C. 3501 et seq.), the Securities and Exchange 
Commission (``Commission'') is soliciting comments on the collection of 
information summarized below. The Commission plans to submit this 
existing collection of information to the Office of Management and 
Budget for extension and approval.
    The Commission adopted Rule 15c2-11 \1\ (Rule 15c2-11 or Rule) in 
1971 under the Securities Exchange Act of 1934 \2\ (Exchange Act) to 
regulate the initiation or resumption of quotations in a quotation 
medium by a broker-dealer for over-the-counter (OTC) securities. The 
Rule was designed primarily to prevent certain manipulative and 
fraudulent trading schemes that had arisen in connection with the 
distribution and trading of unregistered securities issued by shell 
companies or other companies having outstanding but infrequently traded 
securities. Subject to certain exceptions, the Rule prohibits brokers-
dealers from publishing a quotation for a security, or submitting a 
quotation for publication, in a quotation medium unless they have 
reviewed specified information concerning the security and the issuer.
---------------------------------------------------------------------------

    \1\ 17 CFR 240.15c2-11.
    \2\ 15 U.S.C. 78a et seq.

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

[[Page 4292]]

    In February 1998, the Commission proposed amendments to strengthen 
the Rule's focus on abuses associated with microcap securities.\3\ In 
response to comments on the proposal, the Commission reproposed 
amendments to Rule 15c2-11 to tailor its provisions to cover those 
kinds of quotations and securities that we believe are more likely to 
be the subject of microcap abuses.\4\
---------------------------------------------------------------------------

    \3\ Securities Exchange Act Release No. 39670 (February 17, 
1998) (Proposing Release).
    \4\ Securities Exchange Act Release No. 41110 (March 2, 1999) 
(Re-proposing Release).
---------------------------------------------------------------------------

    Under these reproposed amendments, the Rule will no longer apply to 
securities of larger issuers or those securities that have a 
substantial trading price or value of average daily trading volume. In 
addition, the Rule will only cover priced quotations, except in the 
case of the first quotation for a covered OTC security. The Commission 
has also proposed several revisions that require broker-dealers to 
obtain more information about non-reporting issuers, ease the Rule's 
recordkeeping requirements when broker-dealers can electronically 
access information about reporting issuers, and promote greater access 
to issuer information by customers and other broker-dealers. Because 
these proposed refinements will significantly revise the Rule's scope, 
we are publishing them to give interested persons an opportunity to 
provide us with their comments and views.
    The information required to be reviewed is submitted by the 
respondents to the National Association of Securities Dealers 
Regulation (``NASDR'') on Form 211 for review and approval.
    Based on information provided by the NASDR and the Pink Sheets LLC, 
it is estimated that as of January 4, 2002, there were approximately 
1,876 covered OTC securities quoted exclusively in the OTC Bulletin 
Board, 3,942 quoted exclusively in the Pink Sheets, and 1,889 dually 
quoted on both for a total of 7,707 covered OTC securities.\5\ However, 
we believe that approximately 10% (771) of these securities would not 
be subject to the Rule, based on the exceptions that are included in 
this reproposing Release and therefore approximately 6,936 securities 
would be subject to the Rule.\6\
---------------------------------------------------------------------------

    \5\ Although there may be covered OTC securities quoted in other 
quotation mediums, the empirical data to include them in these 
estimations is not readily available.
    \6\ Because the reproposal excludes debt securities, there is no 
need to include the debt securities quoted in the Yellow Sheets in 
these burden estimates.
---------------------------------------------------------------------------

    According to NASDR estimates, we also believe that approximately 
1,271 new applications from broker-dealers to initiate or resume 
publication of covered OTC securities in the OTC Bulletin Board and/or 
the Pink Sheets or other quotation mediums were approved by the NASDR 
for the 2001 calendar year. We estimate that 75% of the covered OTC 
securities were issued by reporting issuers, while the other 25% were 
issued by non-reporting issuers. We also estimate that broker-dealers 
publish priced quotations for approximately 90% of the covered OTC 
securities quoted in the OTC Bulletin Board and publish priced quotes 
for about 43% of the covered OTC securities quoted in the Pink Sheets. 
According to NASDR and Pink Sheets estimates, we believe that, on 
average, there are approximately 4.3 broker-dealers publishing priced 
quotations for each covered OTC security, and that at any given time 
there are approximately 400 broker-dealers that submit priced 
quotations for covered OTC securities. Finally, the Reproposed Rule's 
transition provision would not subject the broker-dealers quoting the 
securities of the estimated 6,936 potentially covered securities 
currently quoted to the Rule until the annual review requirement is 
triggered. Therefore, only those new applications that are submitted 
after the reproposals become effective would be subject to the initial 
review requirement.
    Because the reproposed amendments would require the first broker-
dealer publishing a quotation (priced or unpriced) for a particular 
security to collect issuer information, we believe that during the 
first year after the reproposed amendments are effective, broker-
dealers that are publishing the first quotations (whether priced or 
unpriced) for covered OTC securities in the aggregate would have to 
conduct approximately 1,143 initial reviews of issuer information. This 
estimate is based on the assumption that the NASDR will, in the first 
year after the reproposals become effective, approve approximately 10% 
fewer Form 211 filings than the 1,271 approved in 2001. We believe that 
it will take a broker-dealer about 4 hours to collect, review, record, 
retain, and supply to the NASDR the information pertaining to a 
reporting issuer, and about 8 hours to collect, review, record, retain, 
and supply to the NASDR the information pertaining to a non-reporting 
issuer.
    We therefore estimate that broker-dealers who are the first to 
publish the first quote for a covered OTC security of a reporting 
issuer will require 3,813 hours (1,271  x  75%  x  4) to collect, 
review, record, retain, and supply to the NASDR the information 
required by the Rule as reproposed. We estimate that after the 
reproposals have become effective the broker-dealers who are the first 
to publish the first quote for a covered OTC security of a non-
reporting issuer (priced or unpriced) will require 2,542 hours (1,271 
x  25%  x  8) to collect, review, record, retain, and supply to the 
NASDR the information required by the Rule. We therefore estimate the 
total annual burden hours for the first broker-dealers to be 6,355 
hours (3,813 + 2,542).
    The Rule also would require an annual review for broker-dealers 
publishing priced quotations for covered OTC securities. We have 
estimated that each issuer is quoted by about 4.3 broker-dealers. We 
are assuming that of approximately 6,936 potentially affected covered 
OTC securities, broker-dealers would publish priced quotations for 
approximately 90% of the OTC Bulletin Board securities or 3,049 
securities ((3,765  x  90%)  x  90%) and for 43% of the Pink Sheet 
securities or 1525 securities ((3,942  x  90%)  x  43%).\7\ Therefore, 
we estimate that priced quotations will be published for approximately 
4,574 (3,049 + 1,525) covered OTC securities. Given that about 75% of 
OTC stocks are issued by reporting issuers and the other 25% by non-
reporting issuers, and that it would take a broker-dealer 4 and 8 
hours, respectively, to meet the requirements of the reproposed Rule 
for these issuers, we estimate the burden hours as follows: for 
reporting issuers we estimate approximately 58,996 hours (3,430  x  4.3 
 x  4), and for non-reporting issuers we estimate approximately 39,319 
hours (1,143  x  4.3  x  8). Therefore, we estimate the total annual 
paperwork burden hours for all broker-dealers to be 104,670 hours 
(6,355 + 58,996 + 39,319).
---------------------------------------------------------------------------

    \7\ Some securities have priced quotations published in both of 
these quotation systems. To avoid double counting, such securities 
are counted as OTC Bulletin Board securities.
---------------------------------------------------------------------------

    Regarding the burden on issuers to provide broker-dealers with the 
required information, we believe that the 2,202 issuers of covered OTC 
securities (based on our estimate that 75% of the 6,936 potentially 
covered OTC securities are reporting issuers) will not bear any 
additional hourly burdens under the reproposed amendments because these 
issuers already report the required information to the Commission 
through mandated periodic filings. Further, reporting issuer 
information is widely available to broker-dealers through a variety of 
media. However, non-

[[Page 4293]]

reporting issuer information is not widely available. Consequently, 
these issuers must provide the information required by the reproposed 
amendments to requesting broker-dealers before quotations in their 
securities can be published. We believe that the 1,734 issuers of non-
reporting covered OTC securities (based on an estimate that 25% of the 
6,936 potentially covered OTC securities are non-reporting) will spend 
an average of 9 hours each to collect, prepare, and supply the 
information required by the proposal to the first broker-dealer that 
requests this information. Thereafter, we estimate that it will take an 
average of 1 hour for an issuer to provide the same information to the 
remaining 3.3 broker-dealers that request the information. Accordingly, 
we estimate that 1,734 non-reporting issuers annually will incur 15,606 
hours (1,734  x  9  x  1) to comply with the first broker-dealer's 
request for information, and 5,722 hours (1,734  x  1  x  3.3) to 
comply with the subsequent 3.3 broker-dealer requests for an annual 
total of 21,328 burden hours (15,606 + 5,722). On average, therefore, 
each non-reporting issuer would spend approximately 12.3 burden hours 
(21,328/1,734) per year to comply with these requests.
    We estimate the collection of information will require 
approximately 125,998 burden hours annually (104,670 + 21,328) from 
approximately 2,134 respondents (400 broker-dealers and 1,734 issuers).
    Written comments are invited on: (a) Whether the proposed 
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 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 Michael E. Bartell, 
Associate Executive Director, Office of Information Technology, 
Securities and Exchange Commission, 450 5th Street, NW., Washington, DC 
20549.

    Dated: January 18, 2002.
J. Lynn Taylor,
Assistant Secretary.
[FR Doc. 02-2118 Filed 1-28-02; 8:45 am]
BILLING CODE 8010-01-P