2012 12d2-1 ss

SUPPORTING STATEMENT
for the Paperwork Reduction Act Information Collection Submission
“Rule 12d2-1”

A.

Justification.
1.

Necessity for Information Collection

Section 12(a) of the Securities Exchange Act of 1934 (“Act”),1 generally makes it
unlawful for any member, broker, or dealer to effect any transaction in any security (other than
an exempted security) on a national securities exchange unless the security is effectively
registered on that exchange in accordance with the provisions of the Act and the rules
thereunder. Rule 12d2-1 under the Act (“Rule”) provides the procedures by which a national
securities exchange may suspend from trading a security that is listed and registered on the
exchange. Under the Rule, an exchange is permitted to suspend from trading a listed security in
accordance with its rules, and must promptly notify the Securities and Exchange Commission
(“Commission”) of any such suspension, along with the effective date and the reasons for the
suspension.
Any such suspension from trading may be continued until such time as the Commission
may determine that the suspension is designed to evade the provisions of Section 12(d) of the
Act and Rule 12d2-2 thereunder.2 During the continuance of such suspension under the Rule,
the exchange is required to notify the Commission promptly of any change in the reasons for the
suspension. Upon the restoration to trading of any security suspended under the Rule, the
exchange must notify the Commission promptly of the effective date of such restoration.
2.

Purposes of, and Consequences of Not Requiring, the Information Collection

The trading suspension notices serve a number of purposes. First, they inform the
Commission that an exchange has suspended from trading a listed security or reintroduced
trading in a previously suspended security. They also provide the Commission with information
necessary to determine that the suspension has been accomplished in accordance with the rules
of the exchange, and to verify that the exchange has not evaded the requirements of Section
12(d) of the Act and Rule 12d2-2 thereunder by improperly employing a trading suspension.
Without the Rule, the Commission would be unable to fully implement these statutory
responsibilities.

1

15 U.S.C. 78b et seq.

2

Rule 12d2-2 prescribes the circumstances under which a security may be delisted from
an exchange and withdrawn from registration under Section 12(b) of the Act, and
provides the procedures for taking such action. Rule 12d2-2 and Form 25 are
discussed in a separate submission (SEC File No. 270-86).

3.

Role of Improved Information Technology and Obstacles to Reducing Burden

The Commission and the national securities exchanges continue to improve their systems
for information gathering and compilation through increasing use of computer technology.
While the burdens associated with complying with the requirements of the Rule are small, the
Commission staff believes that ongoing implementation of increasingly sophisticated
information technology continues to further minimize these burdens.
4.

Efforts to Identify Duplication

Not applicable.
5.

Effect on Small Business

Not applicable. Neither the national securities exchanges, who must comply with both
the Rule and the Form, nor any issuer obligated to respond under the Rule, would be considered
a small business as described in the OMB guidelines for completing this Submission.
6.

Consequences of Less Frequent Collection

If the collection of information were conducted less frequently, the Commission would
not have the timely information necessary to ensure that trading suspensions are accomplished in
accordance with the rules of the exchange and that the exchange is in compliance with Section
12(d) of the Act. Since the information required by the Rule is not otherwise available to the
Commission, the Rule is necessary for the Commission to be able to fully comply with its
statutory responsibilities.
7.

Inconsistencies with Guidelines in 5 CFR 1320.5(d)(2)

The requirements of the Rule are consistent with the general information collection
guidelines imposed for public protection as set forth in 5 CFR 1320.5(d)(2).
8.

Consultations Outside the Commission

The Commission requested public comment on the collection of information requirements of
Rule 12d2-1 before it submitted this request for extension and approval to the Office of
Management and Budget. The Commission received no comments in response to this request.

9.

Payment or Gift to Respondents

Not applicable.

2

10.

Assurances of Confidentiality

Not applicable.
11.

Sensitive Questions

Not applicable.
12.

Estimate of Respondent Reporting Hour Burden

There are 15 national securities exchanges that are subject to the requirements of Rule
12d2-1. The burden of complying with the Rule is not evenly distributed among the exchanges
since there are many more securities listed on the New York Stock Exchange, the NASDAQ
Stock Market, and NYSE Amex than on the other national securities exchanges. The staff has
assumed, solely for the purpose of making these estimates, that the number of responses would
be evenly distributed among the exchanges.3
The Commission staff has prepared the following breakdown of the respondents’ relevant
reporting hour burdens and related costs:
For national securities exchanges filing suspension of trades, the staff has computed the
average cost per response to be approximately $96.75, representing one-half reporting hour per
response, including:
quarter hour of legal work @ $320/hour4
quarter hour of compliance work @ $67/hour5

= $ 80.00
= $ 16.75
$ 96.75

There are approximately 1,500 responses to the Commission from the national securities
exchanges each year, the resultant aggregate annual reporting hour burden would be, assuming
on average one-half reporting hour per response, 750 annual burden hours for all exchanges
(1,500 responses divided by 2). The related costs associated with these burden hours are
$145,125 (1,500 responses x $96.75).

3

In fact, some exchanges do not file any trading suspension reports in a given year.

4

The $320 per hour figure for legal work is the hourly rate of a compliance attorney from
SIFMA’s Management & Professional Earnings in the Securities Industry 2010, modified
by Commission staff to account for an 1800-hour work-year and multiplied by 5.35 to
account for bonuses, firm size, employee benefits and overhead.

5

The $67 per hour figure for compalince work is the hourly rate of a compliance clerk
from SIFMA’s Management & Professional Earnings in the Securities Industry 2010.
3

13.

Estimate of total annualized cost burden

Not applicable; (a) it is not anticipated that respondents will have to incur any capital and
start up cost to comply with the Rule; (b) it is not anticipated that the respondents will have to
incur any additional operational or maintenance cost to comply with the Rule.
14.

Estimate of Cost to Federal Government

There are no agency records prior to fiscal year 1981 that would permit the Commission
staff to compute the cost of developing the Rule. Concerning ongoing costs to the Federal
Government, based on its experience with reviewing and processing trading suspension notices,
the Commission staff believes that the operational costs to the Commission of a typical
notification should amount to approximately $28.75. There are approximately 1,500 responses
annually, the total estimated cost to the Federal Government would be approximately $43,125.
These estimates were arrived at based on computations of staff time devoted to processing these
responses and related overhead costs (valued at 25 percent of the cost of staff time, in accordance
with the formulas set forth in the Guide to Estimating Reporting Costs (1973)).
15.

Explanation of Changes in Burden

No changes were made to the burden.
16.

Information Collections Planned for Statistical Purposes

The information is not published for statistical use.
17.

Explanation of Why Expiration Date Should Not Be Displayed

Not applicable.
18.

Exceptions to Certification

Not applicable.
B.

Collection of Information Employing Statistical Methods
The collection of information under the Rule does not employ statistical methods.

4