17Ac2-2 supporting statement (2015) DGL REVISED

SUPPORTING STATEMENT
for the Paperwork Reduction Act Information Collection Submission for Rule 17Ac2-2 and
Form TA-2

A.

Justification
1.

Necessity of Information Collection

As a result of the paperwork crisis that occurred in the late 1960s, during which the
number of securities transactions exceeded the securities industry's capacity to process those
transactions, Congress enacted the Securities Acts Amendments of 1975. 1 In order to establish a
national system for the prompt and accurate clearance and settlement of securities transactions,
Congress provided for a scheme of regulation with respect to the business of being a transfer
agent. Those amendments to the Securities Exchange Act of 1934 (“Exchange Act”) require
transfer agents to meet minimum standards, as established by the Commission, in furtherance of
the purposes of the Exchange Act and generally, to protect investors.
Transfer agents play an integral role in the national system for the clearance and
settlement of securities transactions. Transfer agents cancel certificates presented for transfer,
issue new certificates to the transferee and record the change of record ownership of securities on
the issuer’s securityholder records. They also prepare, maintain and certify securityholder
records, disburse dividend and interest payments and mail security-owner communications such
as proxy material and annual reports to shareholders.
To the extent transfer agents fail to perform their activities promptly, accurately and
safely, the entire clearance, settlement and transfer process suffers. Moreover, substandard
performance by transfer agents can affect the accuracy of an issuer's securityholder records and
interrupt the channels of communication between issuers and securityholders. Thus, substandard
performance by transfer agents can adversely affect issuers, broker-dealers, banks, other financial
intermediaries, the investing public and the securities markets.
Pursuant to Section 17A(d)(3)(B) of the Exchange Act, the Commission is afforded broad
regulatory authority to make rules and enforce compliance in the securities processing area. In
the past, the Commission used Form TA-1 as the singular registration device for transfer agents.
However, on the basis of several years of experience in the regulation and examination of
transfer agents, the Commission determined that a one-time registration application, irrespective
of its breadth, does not provide the Commission with sufficient information on an ongoing basis
about the transfer agent community. Therefore, the Commission adopted Rule 17Ac2-2, which
requires all transfer agents, regardless of their appropriate regulatory agency, to file an annual
report of their business activities on Form TA-2.

1

Pub. L. No. 94-29, 89 Stat. 97 (June 4, 1975).

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2.

Purpose and Use of the Information Collection

The information is required to effectively monitor and report the annual business
activities of transfer agents. Without this information, transfer agents would perform transfer
agent duties free from annual regulation by any regulatory agency.

3.

Consideration Given to Information Technology

Rule 17Ac2-2 and Form TA-2 is electronically filed using the Commission’s Electronic Data
Gathering, Analysis and Retrieval (EDGAR) system.

4.

Duplication

Rule 17Ac2-2 does not impose duplicative reporting obligations on transfer agents
registered with other appropriate regulatory agencies (“ARA”) (i.e. the Board of Governors of the
Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the
Comptroller of the Currency). Regulation H, Section 208.31 (12 CFR 208.31) of the Board of
Governors of the Federal Reserve System imposes Rule 17Ac2-2, among other rules, on state
member bank transfer agents. Office of the Comptroller of the Currency rule §9.20 (12 CFR
9.20) imposes Rule 17Ac2-2, among other rules, upon the domestic activities of registered
national bank transfer agents. As a result, Form TA-2 is filed only with the Commission.

5.

Effect on Small Entities

The rule does not disproportionately affect small entities. Registered transfer agents that
received fewer than 1,000 items for transfer in the reporting period for Form TA-2 and did not
maintain master securityholder files for more than 1,000 individual securityholder accounts as of
the end of the reporting period are only required to fill out a partial Form TA-2 (i.e. questions 1
through 5, question 11, and the signature section). The types of entities covered by these
provisions of the rule are substantially similar to the definition of small business or small
organization with respect to transfer agents pursuant to Rule 0-10(h) under the Exchange Act. 17
CFR 240.0-10. In addition, named transfer agents that engaged a service company to perform all
transfer agent functions during the reporting period are only required to fill out a partial Form
TA-2 (i.e. questions 1 through 3 and the signature section). The form was designed to be
minimally burdensome while obtaining the necessary information. In addition, the Commission
can grant an exemption from electronic filing for those transfer agents for which it would be an
undue burden or expense.
6.

Consequences of Not Conducting Collection

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Rule 17Ac2-2 requires transfer agents to file Form TA-2 on an annual basis. Without this
information, transfer agents would perform transfer agent duties free from annual regulation by
any regulatory agency. If the information were not reported, the Commission would be unable to
accurately target transfer agents for examinations. Further, the Commission's information with
respect to transfer agents would be outdated, which would negatively impact the Commission’s
ability to review the rules relating to transfer agents on an ongoing basis.
Less frequent reporting under the Rules would allow transfer agents experiencing
operational difficulty to continue operating in such a manner, with a potential for further
operational deterioration without informing the appropriate regulatory agencies. Such a situation
would greatly increase risks to public investors and to the national system for clearance and
settlement of securities transactions.
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

There were no payments or gifts to respondents.
10.

Confidentiality

Completed transfer agent annual reports are public information, and therefore, not
confidential.
11.

Sensitive Questions

No information of a sensitive nature will be required in the information collection. The
(these) information collection (s) collect basic Personally Identifiable Information (PII) that may
include name, business address, and residential address (for sole proprietor only),
telephone/cellular/facsimile numbers, and email address. The information collection is covered
under the following System of Records Notice (SORN)
http://www.sec.gov/about/privacy/sorn/secsorn6.pdf

12.

Burden of Information Collection

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The amount of time needed to comply with the reporting requirements of amended Rule
17Ac2-2 and Form TA-2 varies. Of the total 429 registered transfer agents, approximately 9.1%
(or 39 registrants) would be required to complete only questions 1 through 3 and the signature
section of amended Form TA-2, which the Commission estimates would take each registrant
approximately 30 minutes, for a total burden of 19.5 hours (39 x .5 hours). Approximately
26.7% of registrants (or 115 registrants) would be required to answer questions 1 through 5,
question 11 and the signature section, which the Commission estimates would take
approximately 1 hour and 30 minutes, for a total of 172.5 hours (115 x 1.5 hours).
Approximately 64.2% of the registrants (or 275 registrants) would be required to complete the
entire Form TA-2, which the Commission estimates would take approximately 6 hours, for a
total of 1,650 hours (275 x 6 hours). The aggregate annual burden on all 429 registered transfer
agents is thus approximately 1,842 hours (19.5 hours + 172.5 hours + 1,650 hours) and the
average annual burden per transfer agent is approximately 4.3 hours (1,842 ÷ 429).
Of the 1,842 hours spent annually to comply with Rule 17Ac2-2, the Commission staff
estimates that:
•

Forty percent (736.8 hours) are spent by operations staff at an estimated hourly wage
of $125, for a total of $92,100 per year (736.8 hours x $125 per hour = $92,100 per
year); 1

•

Forty percent (736.8 hours) are spent by compliance staff at an estimated hourly wage
of $283, for a total of $208,514 per year (736.8 hours x $283 per hour = $208,514 per
year); 2

•

Twenty percent (368.4 hours) are spent by attorneys at an estimated hourly wage of
$380, for a total of $139,992 per year (368.4 hours x $380 per hour = $139,992 per
year). 3

Therefore, the aggregate annual internal cost of compliance for the approximately 429
registered transfer agents is approximately $440,606 ($92,100 + $208,514 + $139,992=
$440,606).
1

The estimated hourly wages used in this analysis were derived from reports prepared by the Securities
Industry and Financial Markets Association. See Securities Industry and Financial Markets Association, Office
Salaries in the Securities Industry – 2013 (2013), modified to account for an 1800-hour work year and multiplied by
5.35 to account for bonuses, firm size, employee benefits and overhead.
2
The estimated hourly wages used in this analysis were derived from reports prepared by the Securities
Industry and Financial Markets Association. See Securities Industry and Financial Markets Association, Office
Salaries in the Securities Industry – 2013 (2013), modified to account for an 1800-hour work year and multiplied by
5.35 to account for bonuses, firm size, employee benefits and overhead.
3
The estimated hourly wages used in this analysis were derived from reports prepared by the Securities
Industry and Financial Markets Association. See Securities Industry and Financial Markets Association, Office
Salaries in the Securities Industry – 2013 (2013), modified to account for an 1800-hour work year and multiplied by
5.35 to account for bonuses, firm size, employee benefits and overhead.

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13.

Costs to Respondents

Not applicable.
a. It is not anticipated that respondents will incur any capital and start-up costs to
comply with the rule and form requirements.
b. It is not anticipated that respondents will incur any additional operational or
maintenance costs (other than provided for in Item number 12 above) to comply with the rule and
form requirements.
14.

Cost to the Federal Government

Cost to the federal government resulting from regular annual maintenance of the
Commission’s electronic application EDGAR through which Form TA-2 is required to be filed
pursuant to Rule 17Ac2-1 is $100,000 per year.
15.

Changes in Burden

The total annual hourly burden has been reduced from 2,174 hours to 1,842 hours due to
the decrease in the number of registered transfer agents.
16.

Information Collection Planned for Statistical Purposes

Not applicable. The information will not be used for statistical purposes.
17.

Display of OMB Approval Date

We request authorization to omit the expiration date on the electronic version of the form
for design and IT project scheduling reasons. The OMB control number will not be displayed.
18.

Exceptions to Certification for Paperwork Reduction Act Submissions

This collection complies with the requirements in 5 CFR 1320.9.
B.

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