[Federal Register Volume 89, Number 217 (Friday, November 8, 2024)]
[Notices]
[Pages 88843-88845]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-25923]


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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.''
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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 are sold to no more than 35 sophisticated investors 
or 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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    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\
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    \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.
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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.\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\
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    \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.
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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

[[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\
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    \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.
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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.
    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


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