[Federal Register Volume 83, Number 73 (Monday, April 16, 2018)]
[Notices]
[Pages 16415-16416]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-07783]


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SECURITIES AND EXCHANGE COMMISSION


Proposed Collection; Comment Request

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

    Reports of Evidence of Material Violations, SEC File No. 270-
514, OMB Control No. 3235-0572

    Notice is hereby given that pursuant to the Paperwork Reduction Act 
(PRA) of 1995, 44 U.S.C. Sections 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 extension.
    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.
    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 10,712 
issuers that are subject to the rules.\1\ Of these, we estimate that 
approximately 319, 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 638 hours. Assuming half of the 
burden hours will be incurred by outside counsel at a rate of $500 per 
hour would result in a cost of $159,500.
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    \1\ This figure is based on the estimated 7,625 operating 
companies that filed annual reports on Form 10-K, Form 20-F, or Form 
40-F during the 2017 calendar year, and the estimated 3,087 
investment companies that filed periodic reports on Form N-SAR 
during that same time period.
    \2\ This estimate is based on issuer-filings made with the 
Commission between January 1, 2015 and March 18, 2018 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.
    Written comments are requested on: (a) Whether the collection of 
information is necessary for the proper performance of the functions of 
the Commission, including whether the information has practical 
utility; (b) the accuracy of the Commission's estimate of the burden[s] 
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 Pamela Dyson, Director/Chief 
Information Officer, Securities and Exchange Commission, c/o Remi 
Pavlik-

[[Page 16416]]

Simon, 100 F Street NE, Washington, DC 20549 [email protected].

    Dated: April 9, 2018.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-07783 Filed 4-13-18; 8:45 am]
 BILLING CODE 8011-01-P