2012 15c2-8 supporting statement ver 2 (2)

SUPPORTING STATEMENT
for the Paperwork Reduction Act Information Collection Submission
“Rule 15c2-8”
A.

Justification

1.

Necessity of Information Collection

Rule 15c2-8 of the Securities Exchange Act of 1934 ("Exchange Act") requires brokerdealers to deliver preliminary and/or final prospectuses to certain people under certain
circumstances. In connection with securities offerings generally, including initial public offerings
(IPOs), the rule requires broker-dealers to take reasonable steps to distribute copies of the
preliminary or final prospectus to anyone who makes a written request, as well as any brokerdealer who is expected to solicit purchases of the security and who makes a request. In
connection with IPOs, the rule requires a broker-dealer to send a copy of the preliminary
prospectus to any person who is expected to receive a confirmation of sale (generally, this means
any person who is expected actually to purchase the security in the offering) at least 48 hours
prior to the sending of such confirmation. This requirement is sometimes referred to as the "48
hour rule."
Additionally, managing underwriters are required to take reasonable steps to ensure that
all broker-dealers participating in the distribution of or trading in the security have sufficient
copies of the preliminary or final prospectus, as requested by them, to enable such broker-dealer
to satisfy their respective prospectus delivery obligations pursuant to Rule 15c2-8, as well as
Section 5 of the Securities Act of 1933.
Rule 15c2-8 implicitly requires that broker-dealers collect information, as such collection
facilitates compliance with the rule. There is no requirement to submit collected information to
the Commission. In order to comply with the rule, broker-dealers participating in a securities
offering must keep accurate records of persons who have indicated interest in an IPO or
requested a prospectus, so that they know to whom they must send a prospectus.
The Commission is statutorily authorized by Section 15(c)(2) of the Exchange Act, 15
U.S.C. 78o(c)(2), to adopt rules and regulations that define and prescribe means reasonably
designed to prevent such acts and practices as are fraudulent, deceptive, or manipulative.
Further statutory authority is found in Section 23(a) of the Exchange Act, 15 U.S.C. 78w.
2.

Purpose and Use of the Information Collection

The purpose of the 48 hour rule is to ensure that in an IPO, where there is limited
information about the company selling its shares publicly for the first time, the investor has
sufficient time to evaluate the investment prior to committing to a purchase. The purpose of the
other provisions is to specify clearly the broker-dealer' s role in disseminating prospectuses in
connection with a public offering. If the 48 hour rule were not in place, investors wishing to
participate in an IPO might find themselves forced to make an investment decision without
having ready access to full disclosure concerning the offering. Likewise, if the other provisions

were not in place, it would likely be more difficult for investors to obtain information on the
offering. The rule specifies how and when prospectuses are to be delivered by broker-dealers.
3.

Consideration Given to Information Technology

Improvements in telecommunication and data processing technology reduce regulatory
burdens that might otherwise result from Rule 15c2-8. The Commission is not aware of any
technical or legal obstacles to reducing the burden through the use of improved information
technology.
4.

Duplication

Subject to certain exceptions, Section 5(b) of the Securities Act of 1933 prohibits the sale
of securities in interstate commerce unless preceded or accompanied by a prospectus that satisfies
the requirements of Section 10 of that act. Rule 15c2-8 under the Exchange Act specifies the
role of broker-dealers in ensuring that the requirement of prospectus delivery is effectuated in a
meaningful way. Though the rule does not purport to specify how prospectus delivery is to be
achieved in all situations, the rule is intended to address a number of situations in which brokerdealers may seek guidance on the scope and extent of their role in ensuring the delivery of
prospectuses where required by the Securities Act, and applicable rules thereunder.
5.

Effects on Small Entities

The information requirements of Rule 15c2-8 apply equally to all issuers of publicly traded
securities when engaging in the sorts of distributions covered by the rule. The Commission
believes that the requirements of Rules 15c2-8 are not unduly burdensome on small entities.
6.

Consequences of Less Frequent Collection
Not applicable.

7.

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

There are no special circumstances. This collection is consistent with the guidelines in
5 CFR 1320.5(d)(2).
8.

Consultations Outside the Agency

The required Federal Register notice with a 60-day comment period soliciting comments
on this collection of information was published. No public comments were received.
9.

Payment or Gift to Respondents
Not applicable.

10.

Assurance of Confidentiality
No assurance of confidentiality is provided.

11.

Sensitive Questions
No questions of a sensitive nature are asked.

12.

Estimates of Respondent Reporting Burden

In order to comply with the rule, broker-dealers participating in a securities offering must
keep accurate records of persons who have indicated interest in an IPO or requested a
prospectus, so that they know to whom they must send a prospectus. The time required to
compile such information varies based on whether the deal is an equity IPO or not. In 2010,
there were 123 equity IPOs in the United States. Estimating that all broker-dealers
participating collectively will require 50 hours to keep accurate records of investor interest in
each IPO, the recordkeeping burden for complying with Rule 15c2-8(b) is approximately
6,150 hours (123 X 50). The number of debt and non-IPO equity offerings in the United
States for 2010 was 6,786. The recordkeeping burden for these offerings for purposes of
compliance with the other provisions of the rule is estimated at 10 hours, for a total of
approximately 67,860 hours (6,786 X 10). The total respondent reporting burden in hours is
therefore estimated to be 74,010 (6,150 + 67,860). The total number of responses is 6,909
(123 + 6,786).
There are currently 4,831 broker-dealers registered with the Commission. Assuming
each one is a potential respondent, the estimated reporting burden for each respondent is 15.32
hours (74,010 / 4,831).
Estimating that records are to be kept by a compliance attorney or other related personnel
paid at an hourly rate of $320, the total internal annualized cost burden for recordkeeping is
$23,683,200 (320 X 74,010).
13.

Estimates of Total Annualized Cost Burden

The annualized cost burden to comply with Rule 15c2-8 is limited to copying and
mailing. These costs are estimated to be approximately $100,000 per equity initial public
offering, for a total of $12,300,000 (123 x $100,000) for those offerings. For other offerings,
the Commission estimates the cost to be approximately $20,000 per offering, but, the
Commission only expects 2% of investors to request a prospectus. Thus, the Commission
estimates the annualized cost burden for these other offerings to be a total of $2,714,400 (6,786
x $20,000 x 2%). Other costs are expected to be de minimis, as they would be incurred for
purposes of complying with Securities Act provisions. The total annualized cost burden is
therefore $15,014,400 ($12,300,000 + $2,714,400).

14.

Estimated Cost to the Federal Government

The government does not experience any direct costs based on the recordkeeping required
pursuant to Rule 15c2-8.
15.

Explanation of Changes in Burden

The change in the estimated reporting burden is based on a current estimate of the number
of offerings covered by Rule 15c2-8. The change in the number of broker-dealers is based on the
current number of Broker-Dealers filing FOCUS Reports with the Commission. The change in the
estimated annualized cost burden is due to changes in salary since 2009 based on industry
estimates, as well as an increase in the number of IPOs in 2010 (123) versus 2008 (29). There are
no other changes in the burden.
16.

Information Collection Planned for Statistical Purposes
Not applicable. There are no plans to require the publication of these records in the future.

17.

Explanation of Why Expiration Date Will Not Be Displayed

The Commission is not seeking approval to not display the expiration date for OMB
approval.
18.

Exceptions to the Certification
This collection complies with the requirements in 5 CFR 1320.9.

B.

Collecting Information Employing Statistical Methods
This collection does not involve statistical methods.