[Federal Register Volume 90, Number 22 (Tuesday, February 4, 2025)]
[Notices]
[Pages 8962-8964]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-02163]
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SECURITIES AND EXCHANGE COMMISSION
[SEC File No. 270-330, OMB Control No. 3235-0372]
Submission for OMB Review; 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'') has submitted to the Office of Management
and Budget (``OMB'') a request for approval of extension of the
previously approved 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'').
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 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.''
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\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).
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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\
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\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).
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Municipal offerings of less than $1 million are exempt from the
rule,\12\ as are offerings of municipal securities issued in large
denominations that (i) are sold to no more than 35 sophisticated
investors (``limited offering exemption''), or (ii) have short-term
maturities.\13\
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\12\ 17 CFR 240.15c2-12(a).
\13\ 17 CFR 240.15c2-12(d)(1).
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The required Federal Register notice with a 60-day comment period
soliciting comments on this collection of information was
published.\14\ The Commission received four comment letters in response
to this comment solicitation.\15\ Although Commission staff appreciates
the information received from these four commenters, it is the view of
staff that the estimates contained in the Federal Register notice
remain valid and the staff has not made any changes to the Commission's
burden estimates based on these comments. As discussed more fully in
the Supporting Statement,\16\ it is the view of Commission staff that
the comments received either: (i) addressed the information collection
burden generally but did not provide any quantified alternative
estimate or specific supporting data related to the burden; (ii)
included recommendations that were previously considered and addressed
by the Commission during rulemaking for the 2018 Amendments, and the
commenter provided no rationale as to why the Commission should change
the conclusions it had previously reached; or (iii) included suggested
changes to the Rule itself that would need to be effected pursuant to a
Commission rulemaking and are therefore beyond the scope of the PRA
analysis.
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\14\ See Proposed Collection; Comment Request; Extension:
Municipal Securities Disclosure (Exchange Act Rule 15c2-12), 89 FR
88843 (November 8, 2024).
\15\ Letters from Richard Li (``Li Letter''), January 6, 2025
(personally identifiable information redacted by Commission staff);
Emily S. Brock, Director, Federal Liaison Center, Government Finance
Officers Association (``GFOA Letter''), January 7, 2025; M. Jason
Akers, President, National Association of Bond Lawyers (``NABL
Letter''), January 7, 2025; Leslie M. Norwood, Managing Director and
Associate General Counsel, and Gerald O'Hara, Vice President and
Assistant General Counsel, Securities Industry and Financial Markets
Association (``SIFMA Letter''), January 7, 2025. In addition,
Commission staff discussed the 60-day notice, among other things,
during a video conference with representatives of Digital Assurance
Certification, LLC (``DAC Bond''). See Memorandum from the Office of
Municipal Securities regarding a November 12, 2024 meeting with
representatives of DAC Bond.
\16\ See PRA Supporting Statement for Rule 15c2-12, Section 8,
available at https://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=202410-3235-009.
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Nonetheless, as discussed more fully in the Supporting
Statement,\17\ Commission staff has determined to take under advisement
many of the comments received and will further study whether they
should be applied in future PRA analyses and/or merit potential
guidance or rulemaking activities related to Rule 15c2-12.\18\ Among
other things, staff will take under advisement comments suggesting that
the Commission should: (i) more effectively survey market participants
to obtain PRA burden estimates; (ii)
[[Page 8963]]
analyze the burdens that Rule 15c2-12 imposes on broker-dealers by
offering type (negotiated offering, competitive offering, or private
placement), and by the number of underwriters involved in the
transaction; (iii) analyze the burdens that compliance with the limited
offering exemption imposes on broker-dealers; (iv) update or amend
existing guidance on Rule 15c2-12; and (v) update or amend Rule 15c2-12
itself (e.g., by removing the ``rating change'' event notice).
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\17\ See id.
\18\ Commission staff does not commit to take any course of
action following further study of these comments.
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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.\19\ 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.\20\
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.\21\ 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.\22\ 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.\23\
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\19\ 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.
\20\ 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.
\21\ See supra note 20.
\22\ See supra note 20.
\23\ See supra note 20.
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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.\24\ 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,\25\ resulting in an annual burden on all broker-
dealers of approximately 2,742 hours.\26\ 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.\27\
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\24\ 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.
\25\ 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.
\26\ See supra note 24.
\27\ See supra note 24.
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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 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.\28\ 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.\29\ In addition, the
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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.\30\ Thus, the total estimated cost to issuers to comply
with the rule is $19,254,000.\31\
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\28\ $19,254,000 (estimated total annual cost burden for
issuers) + $1,238,000 (estimated total annual cost burden for the
MSRB) = $20,492,000.
\29\ 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.
\30\ 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.
\31\ $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.
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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.
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.
The public may view and comment on this information collection
request at: https://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=202410-3235-009 or send an email comment to
[email protected] within 30 days of the day
after publication of this notice by March 7, 2025.
Dated: January 29, 2025.
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-02163 Filed 2-3-25; 8:45 am]
BILLING CODE 8011-01-P