Pra Supporting Statement Final

SUPPORTING STATEMENT
for the Paperwork Reduction Act Information Collection Submission for
Rule 15c2-12
This submission is being made pursuant to the Paperwork Reduction Act of 1995, 44
U.S.C. Section 3501 et seq.
A.

JUSTIFICATION
1) Necessity of Information Collection

At the time the securities laws first were enacted, the market for most municipal
securities was largely confined to limited geographic regions. The localized nature of the market,
arguably, allowed investors to be aware of factors affecting the issuer and its securities.
Moreover, municipal securities investors were primarily institutions, which in other instances are
accorded less structured protection under the federal securities laws. Since 1933, however, the
municipal markets have become nationwide in scope and now include a broader range of
investors. At the same time that the investor base for municipal securities has become more
diverse, the structure of municipal financing has become more complex. In the era preceding the
adoption of the Securities Act of 1933, municipal offerings consisted largely of general
obligation bonds. Today, municipal offerings include greater proportions of revenue bonds that
are not backed by the full faith and credit of a governmental entity and which, in many cases,
may pose greater credit risks to investors. In addition, since 2009, municipal issuers have
increasingly used direct purchases of municipal securities 1 and direct loans as alternatives to
public offerings of municipal securities. These direct purchases and direct loans have raised
concerns from industry participants about the potential lack of secondary market disclosure to
investors.
Today there are over $3.83 trillion of municipal securities outstanding. Trading volume is
also substantial, with over $3.1 trillion of long and short-term municipal securities traded in 2016
in more than nine million transactions. The availability of accurate information concerning
municipal offerings is integral to the efficient operation of the municipal securities market. In the
Commission’s view, a thorough, professional review of municipal offering documents by
underwriters could encourage appropriate disclosure of foreseeable risks and accurate
descriptions of complex put and call features, as well as novel financing structures now
employed in many municipal offerings. In addition, with the increase in novel or complex
financing, there may be greater value in having investors receive disclosure documents
describing fundamental aspects of their investments. Yet, underwriters are unable to perform this
function effectively when offering statements are not provided to them on a timely basis.
Moreover, where sufficient quantities of offering statements are not available, underwriters are
hindered in meeting present delivery obligations imposed on them by Municipal Securities
Rulemaking Board (“MSRB”) rules.
1

For example, an investor purchasing a municipal security directly from an issuer.

1

History of Exchange Act Rule 15c2-12
For these reasons, in 1989, pursuant to Sections 15(c)(1) and (2) of the Securities
Exchange Act of 1934, the Commission adopted Rule 15c2-12 (the “Rule” or “Rule 15c2-12”), a
limited rule designed to prevent fraud by enhancing the timely access of underwriters, public
investors, and other interested persons to municipal offering statements. In the context of the
access to offering statements provided by the Rule, the Commission also reemphasized the
existence and nature of an underwriter’s obligation to have a reasonable basis for its implied
recommendation of any municipal securities that it underwrites.
While the availability of primary offering disclosure significantly improved following the
adoption of Rule 15c2-12, there was a continuing concern about the adequacy of disclosure in
the secondary market. To enhance the quality, timing, and dissemination of disclosure in the
secondary municipal securities market, the Commission in 1994 adopted amendments to Rule
15c2-12 (“1994 Amendments”). Among other things, the 1994 Amendments placed certain
requirements on brokers, dealers, and municipal securities dealers (“broker-dealers” or, when
used in connection with primary offerings, “Participating Underwriters”). Specifically, under the
1994 Amendments, Participating Underwriters are prohibited, subject to certain exemptions,
from purchasing or selling municipal securities covered by the Rule in a primary offering, unless
the Participating Underwriter has reasonably determined that an issuer of municipal securities or
an obligated person has undertaken in a written agreement or contract for the benefit of holders
of such securities (“continuing disclosure agreement”) to provide specified annual information
and event notices to certain information repositories. The information to be provided consists of:
(1) certain annual financial and operating information and audited financial statements (“annual
filings”); (2) notices of the occurrence of any of certain specific events (“event notices”); and (3)
notices of the failure of an issuer or other obligated person to make a submission required by a
continuing disclosure agreement (“failure to file notices”) (annual filings, event notices and
failure to file notices may be collectively referred to as “continuing disclosure documents”).
To further promote the more efficient, effective, and wider availability of municipal
securities information to investors and market participants, on December 5, 2008, the
Commission adopted amendments to Rule 15c2-12 (“2008 Amendments”) to provide for a single
centralized repository, the MSRB’s Electronic Municipal Market Access (“EMMA”) system, for
the electronic collection and availability of information about outstanding municipal securities in
the secondary market. Specifically, the 2008 Amendments require the Participating Underwriter
to reasonably determine that the issuer or obligated person has undertaken in its continuing
disclosure agreement to provide the continuing disclosure documents: (1) solely to the MSRB;
and (2) in an electronic format and accompanied by identifying information, as prescribed by the
MSRB. Although the Commission received 23 comment letters on the proposed rulemaking for
the 2008 Amendments, none of the commenters addressed the Commission’s estimates regarding
the collection of information burden associated with the 2008 Amendments.

2

Further amendments to the Rule adopted on May 27, 2010 (“2010 Amendments”): (i)
specified the time period for submission of event notices; (ii) expanded the Rule’s current
categories of events; and (iii) modified an exemption in the Rule used for demand securities. The
2010 Amendments were intended to promptly make available to broker-dealers, institutional and
retail investors, and others important information about significant events relating to municipal
securities and their issuers. The 2010 Amendments help enable investors and other municipal
securities market participants to be better informed about important events that occur with
respect to municipal securities and their issuers, including with respect to demand securities, and
thus allow investors to better protect themselves against fraud. In addition, the 2010
Amendments provide brokers, dealers, and municipal securities dealers with access to important
information about municipal securities that they can use to carry out their obligations under the
securities laws. This information can be used by individual and institutional investors,
underwriters of municipal securities, broker-dealers, analysts, municipal securities issuers, the
MSRB, vendors of information regarding municipal securities, Commission staff, and the public
generally. The 2010 Amendments also included interpretive guidance with respect to the
obligations of Participating Underwriters to determine whether the issuer or obligated person has
disclosed in a final official statement any instances in the previous five years in which it has
failed to comply in all material respects with any previous continuing disclosure undertaking.
The Commission received 29 comment letters on the proposed rulemaking for the 2010
Amendments and some comments generally addressed the collection of information burden
associated with the 2010 Amendments but did not provide any quantified alternative estimates of
or supporting data related to these burdens.
Overview of Rule 15c2-12 Prior to the Proposed Amendments
Rule 15c2-12(b) requires a Participating Underwriter: (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; (2) in noncompetitively bid offerings, to send, upon request, a copy of the most recent preliminary official
statement (if one exists) to potential customers; (3) to contract with the issuer to receive, within a
specified time, sufficient copies of the final official statement to comply with the Rule’s delivery
requirement, and the requirements of the rules of the MSRB; (4) to send, upon request, a copy of
the final official statement to potential customers for a specified period of time; and (5) before
purchasing or selling municipal securities in connection with an offering, 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 in an electronic format as prescribed by the MSRB.
Rule 15c2-12(b)(5)(i) requires Participating Underwriters to reasonably determine, in
connection with an offering, that the issuer or obligated person has undertaken in a continuing
disclosure agreement to provide to the MSRB, in an electronic format prescribed by the MSRB,
the following, described below:
3

•

Under Rule 15c2-12(b)(5)(i)(A), the annual financial information for the issuer or
obligated person for whom financial information or operating data is presented in
the financial official statement.

•

Under Rule 15c2-12(b)(5)(i)(B), if not submitted as part of the annual financial
information, the audited financial statements for the issuer or obligated person
covered by (b)(5)(i)(A), if and when available.

•

Under Rule 15c2-12(b)(5)(i)(C), in a timely manner not in excess of ten business
days of the occurrence of the event, notice of any of the following events with
respect to the securities being offered in the offering: (1) principal and interest
payment delinquencies; (2) non-payment related defaults, if material; (3)
unscheduled draws on debt service reserves reflecting financial difficulties; (4)
unscheduled draws on credit enhancements reflecting financial difficulties; (5)
substitution of credit or liquidity providers, or their failure to perform; (6) adverse
tax opinions, the issuance by the Internal Revenue Service of proposed or final
determinations of taxability, Notices of Proposed Issue or other material notices
or determinations with respect to the tax status of the security, or other material
events affecting the tax status of the security; (7) modifications to rights of
security holders, if material; (8) bond calls, if material, and tender offers; (9)
defeasances; (10) release, substitution, or sale of property securing repayment of
securities, if material; (11) rating changes; (12) bankruptcy, insolvency,
receivership or similar event of the issuer or obligated person; (13) the
consummation of a merger, consolidation, or acquisition involving the issuer or
obligated person or the sale of all or substantially all of the assets of the issuer or
obligated person, other than in the ordinary course of business, the entry into a
definitive agreement to undertake such an action or the termination of a definitive
agreement relating to any such actions, other than pursuant to its terms, if
material; (14) appointment of a successor or additional trustee or the change of a
name of a trustee, if material.

Rule 15c2-12(c) requires that a broker-dealer that recommends the purchase or sale of a
municipal security must have procedures in place that provide reasonable assurance that it will
receive prompt notice of any event specified in paragraph (b)(5)(i)(C) of the Rule and any failure
to file annual financial information regarding the security.
Proposed Amendments to Rule 15c2-12
The Commission has proposed to amend Rule 15c2-12. First, the Commission has
proposed to add new paragraphs (15) and (16) to Rule 15c2-12(b)(5)(i)(C). Proposed new
paragraphs (15) and (16) of Rule 15c2-12(b)(5)(i)(C) would require, respectively, a Participating
Underwriter in an offering to reasonably determine that the issuer or obligated person has
undertaken in a written agreement or contract to provide to the MSRB, within ten business days
4

after the occurrence of the event, notice of the: (15) incurrence of a financial obligation of the
issuer or obligated person, if material, or agreement to covenants, events of default, remedies,
priority rights, or other similar terms of a financial obligation of the issuer or obligated person,
any of which affect security holders, if material; and (16) default, event of acceleration,
termination event, modification of terms, or other similar events under the terms of a financial
obligation of the issuer or obligated person, any of which reflect financial difficulties.
Second, the Commission has proposed to amend Rule 15c2-12(f) to add a definition for
the term “financial obligation.” Under the proposed definition, the term financial obligation
means a debt obligation, lease, guarantee, derivative instrument, or monetary obligation resulting
from a judicial, administrative, or arbitration proceeding. The term financial obligation shall not
include municipal securities as to which a final official statement has been provided to the
MSRB consistent with the Rule.
Third, the Commission has proposed a technical amendment to Rule 15c212(b)(5)(i)(C)(14) to remove the term “and” to account for the new paragraphs added to
(b)(5)(i)(C).
2) Purpose and Use of the Information Collection
Under Rule 15c2-12, the Participating Underwriter is required: (1) to obtain and review a
copy of an official statement deemed final by an issuer of the securities, except for the omission
of specified information; (2) in non-competitively bid offerings, to make available, upon request,
the most recent preliminary official statement, if any; (3) to contract with the issuer of the
securities, or its agent, to receive, within specified time periods, sufficient copies of the issuer’s
final official statement to comply both with this rule and any rules of the MSRB; (4) to provide,
for a specified period of time, copies of the final official statement to any potential customer
upon request; and (5) before purchasing or selling municipal securities in connection with an
offering, to reasonably determine that the issuer or other specified person has undertaken, in a
written agreement or contract, for the benefit of holders of such municipal securities, to provide
certain information about the issue or issuer on a continuing basis to the MSRB. In addition, a
broker-dealer is required to obtain the information the issuer of the municipal security has
undertaken to provide prior to recommending a transaction in the municipal security.
As previously noted, the Rule was designed to prevent fraud by enhancing the timely
access of underwriters, public investors, and other interested persons to municipal offering
statements, and to further promote the more efficient, effective, and wider availability of
municipal securities information by providing for a single centralized repository, EMMA, for the
electronic collection and availability of information about outstanding municipal securities in the
secondary market.
The proposed amendments would provide broker-dealers with timely access to important
information about municipal securities that they can use to carry out their obligations under the
securities laws, thereby reducing the likelihood of antifraud violations. This information could be
5

used by individual and institutional investors, underwriters of municipal securities, brokerdealers, analysts, municipal securities issuers, the MSRB, vendors of information regarding
municipal securities, the Commission and its staff, and the public generally. The proposed
amendments would enable market participants and the public to be better informed about
material events that occur with respect to municipal securities and their issuers and would assist
investors in making decisions about whether to buy, hold or sell municipal securities.
3) Consideration Given to Information Technology
Since the 1994 Amendments to the Rule, there have been significant advancements in
technology and information systems that allow market participants and investors, both retail and
institutional, easily, quickly, and inexpensively to obtain information through electronic means.
The exponential growth of the Internet and the capacity it affords to investors, particularly retail
investors, to obtain, compile, and review information has likely helped to keep investors better
informed. In addition to the Commission’s EDGAR system, which contains filings by public
companies, mutual funds, and municipal advisors, the Commission has increasingly encouraged,
and in some cases required, the use of the Internet and websites by public reporting companies,
mutual funds, and municipal advisors to provide disclosures and communicate with investors.
The Commission believes that, at present, information about municipal issuers and their
securities may not be as consistently available or comprehensive as information about other
classes of issuers and their securities. In past years this may have been due, in part, to the lack of
a central point of collection and availability of information in the municipal securities sector.
Therefore, in the 2008 Amendments, the Commission adopted amendments to Rule 15c2-12 to
provide for a single centralized repository, EMMA, to receive submissions in an electronic
format as a means to encourage a more efficient and effective process for the collection and
availability of continuing disclosure documents.
4) Duplication
The information collection requested from Participating Underwriters is not duplicative,
since this information would not otherwise be required by the Commission.
5) Effect on Small Entities
The Rule is one of general applicability that does not depend on the size of a brokerdealer. Since the Rule is designed to apply to all registered broker-dealers, the Rule must apply
in the same manner to small as well as large broker-dealers. The Commission believes that many
of the substantive requirements of the Rule have been observed by underwriters and issuers as a
matter of business practice or to fulfill their existing obligations under the MSRB rules and the
general anti-fraud provisions of the federal securities laws. Moreover the Rule focuses only on
offerings of municipal securities of $1 million or more, in which any additional costs imposed by
the establishment of specific standards are balanced by the potential harm to the large number of
investors that may purchase securities based on inaccurate information. The Commission is
sensitive to concerns that the Rule not impose unnecessary costs on municipal issuers. When the
6

Rule was proposed, many commenters, including the MSRB and the Public Securities
Association (n/k/a the Securities Industry and Financial Markets Association), indicated that the
Rule would not impose unnecessary costs or force a majority of responsible issuers to depart
from their current practices. The commenters suggested that the Rule, however, should
encourage more effective disclosure practices among those issuers that did not currently provide
adequate and timely information to the market. The Rule also contains exemptions for
underwriters participating in certain offerings of municipal securities issued in large
denominations that are sold to no more than 35 sophisticated investors or have short-term
maturities.
6)

Consequences of Not Conducting Collection

Providing broker-dealers with a more flexible standard may jeopardize the protection that
Rule 15c2-12 provides. The Commission understands that the Rule imposes a burden on brokerdealers; however, the Commission seeks to accomplish this goal in the least intrusive manner, by
imposing minimal additional costs on broker-dealers while enhancing investor protection.
Moreover, the Commission has already limited application of the Rule to primary municipal
offerings of $1 million or more and has incorporated a limited placement exemption into the
Rule.
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 Commission solicited comment on the estimated PRA burden associated with the
proposed collection of information requirements. 2 The comments received on this rulemaking
are posted on the Commission’s public website, and are available
at https://www.sec.gov/comments/s7-01-17/s70117.htm. The Commission will consider all
comments prior to adopting the proposed amendments in accordance with 5 CFR 1320.11(f).
9) Payment or Gift
Not Applicable.
10) Confidentiality
No assurances of confidentiality have been provided.

2

See Proposed Amendments to Municipal Securities Disclosure, Exchange Act Release No. 80130 (Mar. 1,
2017), 82 FR 13928-01 (Mar. 15, 2017).

7

11) Sensitive Questions
No questions of a sensitive nature are asked. The information collection does not collect
any Personally Identifiable Information (PII).
12) Burden of Information Collection and
13) Cost to Respondents
Burden and Cost under Rule 15c2-12 Prior to the Proposed Amendments
In November 2015, OMB approved an extension without change of a currently approved
collection of information associated with Rule 15c2-12. The currently approved paperwork
collection associated with Rule 15c2-12 applies to broker-dealers, issuers of municipal securities,
and the MSRB. The Commission believes the estimates used in connection with the 2015
extension of its currently approved collection continue to be reasonable estimates as of the date
of this proposal, but is modifying the burdens to account for changes in burden that would result
from the proposed amendments.
Under the current Rule 15c2-12, the Commission has estimated that approximately 250
broker-dealers could potentially serve as Participating Underwriters in an offering of municipal
securities. The Commission’s current estimate of the total annual burden on all 250 brokerdealers is 22,500 hours, which includes (1) 2,500 hours per year for 250 broker-dealers (10 hours
per year per broker-dealer) 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; and (2) 20,000 hours per
year for 250 broker-dealers (80 hours per year per broker-dealer) serving as Participating
Underwriters, 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
Rule 15c2-12(b)(5)(i).
Under the current Rule 15c2-12, the Commission has estimated that the total annual
burden on the estimated 20,000 municipal issuers is 599,258 hours, which is the sum of the time
required for issuers to prepare and file (1) 73,480 event notices to the MSRB, with each event
notice taking approximately two hours to prepare and submit, totaling 146,960 hours; (2) 62,596
annual filings to the MSRB, with each filing taking approximately seven hours each, totaling
438,172 hours; and (3) 7,063 failure to file notices to the MSRB, with each failure to file notice
taking approximately two hours to prepare and submit, totaling 14,126 hours. The Commission
also estimated that the average annual cost incurred by issuers that use the services of a
designated agent to submit some or all of their continuing disclosure documents to the MSRB is
$9,750,000, which is derived from (1) an estimate that up to 65% of the 20,000 issuers may use

8

designated agents, and (2) an estimate that the average total annual cost of such designated
agents is $750. 3
Lastly, the Commission has estimated that the total annual burden on the MSRB to
collect, index, store, retrieve, and make available the pertinent documents under Rule 15c2-12 is
12,699 hours, and that the annual cost to the MSRB is $10,000 for hardware and software costs
for the MSRB’s EMMA system.
Burden and Cost under Rule 15c2-12 Including the Proposed Amendments
The Commission has proposed to add new paragraphs (15) and (16) to Rule 15c212(b)(5)(i)(C), which would contain new events for which a notice would be required to be
provided to the MSRB. The proposed amendments would require a Participating Underwriter in
an offering to reasonably determine that the issuer or obligated person has undertaken in a
written agreement or contract to provide to the MSRB, within ten business days after the
occurrence of the event, notice of the: (15) incurrence of a financial obligation of the issuer or
obligated person, if material, or agreement to covenants, events of default, remedies, priority
rights, or other similar terms of a financial obligation of the issuer or obligated person, any of
which affect security holders, if material; and (16) default, event of acceleration, termination
event, modification of terms, or other similar events under the terms of a financial obligation of
the issuer or obligated person, any of which reflect financial difficulties. As discussed below, the
Commission has estimated that these proposals would result in additional one-time and annual
hour burdens for broker-dealers, issuers, and the MSRB.
For broker-dealers, the Commission has estimated that the proposed amendments would
require broker-dealers to spend ten additional hours, per broker-dealer, 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 Rule 15c2-12(b)(5)(i), resulting in an
additional 2,500 hours annually. 4 The Commission has also estimated that each broker-dealer
would incur a one-time paperwork burden of 30 minutes each to have its internal compliance
attorney prepare and issue a notice advising its employees about the proposed revisions to Rule
15c2-12, including any updates to policies and procedures affected by the proposed amendments,
resulting in a one-time burden of 125 hours. 5 The Commission does not believe the proposed
amendments would otherwise increase the annual hourly burden for broker-dealers. Under the
proposed amendments, broker-dealers would spend approximately 25,125 hours the first year,
and 25,000 hours in subsequent years, to comply with Rule 15c2-12. 6
3

4

20,000 (number of issuers) x .65 (percentage of issuers that may use designated agents) x $750 (estimated
average annual cost for issuer’s use of designated agent) = $9,750,000.
250 broker-dealers x 10 hours (each) = 2,500 hours.

5

250 broker-dealers x 0.5 hours (each) = 125 hours.

6

First year burden: (22,500 hours (total estimated annual hourly burden for all broker-dealers under the
current Rule) + 2,500 hours (total estimated additional annual hourly burden for all broker-dealers under

9

For issuers, the Commission has estimated that the proposed amendments would increase
the total number of event notices submitted by issuers annually by approximately 2,200 notices. 7
Based on the estimate that each event notice would take on average approximately two hours to
prepare and submit, the proposed amendments would result in an additional 4,400-hour burden
for issuers, resulting in an annual paperwork burden for issuers to submit event notices of
approximately 151,360 hours, and a total burden on issuers of approximately 603,658 hours. 8
The Commission has also estimated that issuers that use the services of a designated agent for
submission of event notices to the MSRB could incur additional costs of approximately six
percent 9 associated with the proposed amendments, so that the average total annual cost that
would be incurred by issuers that use the services of a designated agent under the proposed
amendments would be $10,335,000. 10
There likely would also be some costs incurred by issuers to revise their current template
for continuing disclosure agreements to reflect the proposed amendments to the Rule. The
Commission understands that models currently exist for continuing disclosure agreements that
are relied upon by legal counsel to issuers and, accordingly, these documents would likely be
updated by outside attorneys to reflect the proposed amendments. Based on a review of industry
sources, the Commission believes that continuing disclosure agreements tend to be standard form
agreements. The Commission preliminarily believes that a 15 minute estimate to prepare a
revised continuing disclosure agreement is a reasonable estimate of the average amount of time
required for an outside attorney to revise the template for continuing disclosure agreements for
the proposed amendments to the Rule. Thus, the Commission estimates that the approximate
average cost of revising a continuing disclosure agreement to reflect the proposed amendments

the proposed amendments to the Rule) + 125 (250 (broker-dealers impacted by the proposed amendments
to the Rule) x .5 hour (estimate for one-time burden to issue notice regarding broker-dealer’s obligations
under the proposed amendments to the Rule)) = 25,125 hours.
Annual burden: (22,500 hours (total estimated annual hourly burden for all broker-dealers under the current
Rule) + 2,500 hours (total estimated additional annual hourly burden for all broker-dealers under the
proposed amendments to the Rule) = 25,000 hours.
7

2,100 notices (for Rule 15c2-12(b)(5)(i)(C)(15)) + 100 notices (for Rule 15c2-12(b)(5)(i)(C)(16)) = 2,200
notices.

8

438,172 hours (current estimated burden for issuers to submit annual filings) + 151,360 hours (estimated
annual burden for issuers to submit event notices under the proposed amendments) + 14,126 hours (current
estimated annual burden for issuers to submit failure to file notices) = 603,658 hours.

9

The Commission is estimating that the proposed amendments would increase the number of issuers’ annual
event filings by approximately three percent, and would increase the number of issuers’ total annual filings
by approximately 1.5 percent. The six percent estimate for additional costs reflects these estimated
increases in filings as well as an estimated reimbursement of approximately 4.5 percent of costs by issuers
to designated agents for the agents’ costs of making necessary changes to their systems.

10

20,000 (number of issuers) x .65 (percentage of issuers that may use designated agents) x $795 ($750 x
1.06) (estimated average annual cost for issuer’s use of designated agent under the proposed amendments
to the Rule) = $10,335,000.

10

for each issuer would be approximately $100, 11 for a one-time total cost of $2,000,000 12 for all
issuers, if an outside counsel were used by each issuer to revise the continuing disclosure
agreement.
The Commission has estimated that the proposed amendments would require the MSRB
to spend approximately 1,162 hours in the first year to implement the necessary modifications to
EMMA to add additional disclosure events for a total one-time first-year burden of 13,861
hours, 13 but would not increase the MSRB’s current burden of 12,699 hours in subsequent years.
Thus, the Commission has estimated that the total burden on the MSRB to collect, store, retrieve,
and make available the disclosure documents covered by the proposed amendments to the Rule
on an ongoing basis would be 12,699 hours annually. 14
The tables below set forth the Commission’s estimates of respondent reporting burden
and total annualized cost burden, excluding one-time burdens and costs.
THIRD-PARTY DISCLOSURE BURDEN AND COST
Responses

Burden (hours)

Cost

250
62,596
73,480
7,063

22,500
438,172
146,960
14,126

$0
$0
$0
$0

Approved Previous Final Rule
Broker-dealers
Issuers (annual filings)
Issuers (event notices)
Issuers (failure to file notices)
Issuers that use the services of a
designated agent to submit
continuing disclosure documents
Previous Total Estimates
Revised Burdens and Cost
Broker-dealers
Issuers (annual filings)
Issuers (event notices)
Issuers (failure to file notices)

11

$9,750,000
143,389

621,758

$9,750,000

250
62,596
75,680
7,063

25,000
438,172
151,360
14,126

$0
$0
$0
$0

1 (continuing disclosure agreement) x $400 (hourly wage for an outside attorney) x .25 hours (estimated
time for outside attorney to revise a continuing disclosure document in accordance with the proposed
amendments to the Rule) = $100. 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 for outside counsel would be an average of $400 per hour.

12

$100 (estimated cost to revise a continuing disclosure agreement in accordance with the proposed
amendments to the Rule) x 20,000 (number of issuers) = $2,000,000.

13

First-year burden for MSRB: 12,699 hours (annual burden under currently approved collection + 1,162
hours (estimate for one-time burden to implement the proposed amendments) = 13,861 hours.

14

Annual burden for MSRB: 12,699 hours (annual burden under currently approved collection).

11

Responses
Issuers that use the services of a
designated agent to submit
continuing disclosure documents
Revised Total Estimates

Burden (hours)

Cost
$10,335,000

145,589

628,658

$10,335,000

RECORDKEEPING BURDEN AND COST
Responses
Approved Previous Final Rule
Municipal Securities Rulemaking Board
Revised Estimates
Municipal Securities Rulemaking Board

Burden
(hours)

Cost

1

12,699

$10,000

1

12,699

$10,000

14) Costs to Federal Government
Cost to the federal government results from appropriate regulatory agency staff time and
related overhead costs for inspection and examination for compliance with requirements of the
Rule. Since the Commission inspects broker-dealers regularly, inspection for compliance with
the requirements of this Rule is a part of the overall broker-dealer inspection. Thus, the
Commission uses little additional resources to ensure compliance with the Rule. Commission
staff estimates that approximately 100 hours of staff time per year are devoted to ensuring
compliance with the requirements of the Rule at a cost of $6,900 per year.
15) Changes in Burden
The paperwork collection associated with Rule 15c2-12 applies to broker-dealers, issuers
of municipal securities, and the MSRB. The Commission is changing the estimated burdens for
brokers-dealers, issuers and the MSRB as a result of amendments to Rule 15c2-12 proposed by
the Commission.
For broker-dealers, the Commission has estimated that the proposed amendments would
require broker-dealers to spend ten additional hours, per broker-dealer, 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 Rule 15c2-12(b)(5)(i), resulting in an
additional 2,500 hours annually. 15 The Commission has also estimated that each broker-dealer
would incur a one-time paperwork burden of 30 minutes each to have its internal compliance
attorney prepare and issue a notice advising its employees about the proposed revisions to Rule

15

250 broker-dealers x 10 hours (each) = 2,500 hours.

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15c2-12, including any updates to policies and procedures affected by the proposed amendments,
resulting in a one-time burden of 125 hours. 16
For issuers, the Commission has estimated that the proposed amendments would increase
the total number of event notices submitted by issuers annually by approximately 2,200
notices. 17 Based on the estimate that each event notice would take on average approximately two
hours to prepare and submit, the proposed amendments would result in an additional 4,400-hour
burden to issuers, and a total burden on issuers of 603,658 hours. 18 The Commission has also
estimated that issuers that use the services of a designated agent for submission of event notices
to the MSRB could incur additional costs of approximately six percent 19 associated with the
proposed amendments, so that the average total annual cost that would be incurred by issuers that
use the services of a designated agent under the proposed amendments would be $10,335,000. 20
The Commission has estimated that the proposed amendments would require the MSRB
to spend approximately 1,162 hours in the first year to implement the necessary modifications to
EMMA to add additional disclosure events for a total one-time first-year burden of 13,861
hours, 21 but would not increase the MSRB’s current burden of 12,699 hours in subsequent years.
Thus, the Commission has estimated that the proposed amendments to Rule 15c2-12
would result in a total industry-wide one-time hour burden increase of approximately 1,287

16

250 broker-dealers x 0.5 hours (each) = 125 hours.

17

2,100 notices (for Rule 15c2-12(b)(5)(i)(C)(15)) + 100 notices (for Rule 15c2-12(b)(5)(i)(C)(16)) = 2,200
notices.

18

438,172 hours (current estimated burden for issuers to submit annual filings) + 151,360 hours (estimated
annual burden for issuers to submit event notices under the proposed amendments) + 14,126 hours (current
estimated annual burden for issuers to submit failure to file notices) = 603,658 hours.

19

The Commission is estimating that the proposed amendments would increase the number of issuers’ annual
event filings by approximately three percent, and would increase the number of issuers’ total annual filings
by approximately 1.5 percent. The six percent estimate for additional costs reflects these estimated
increases in filings as well as an estimated reimbursement of approximately 4.5 percent of costs by issuers
to designated agents for the agents’ costs of making necessary changes to their systems.

20

20,000 (number of issuers) x .65 (percentage of issuers that may use designated agents) x $795 ($750 x
1.06) (estimated average annual cost for issuer’s use of designated agent under the proposed amendments
to the Rule) = $10,335,000.

21

First-year burden for MSRB: 12,699 hours (annual burden under currently approved collection + 1,162
hours (estimate for one-time burden to implement the proposed amendments) = 13,861 hours.

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hours 22 and a total industry-wide ongoing annual hour burden increase of approximately 6,900
hours. 23
16) Information Collection Planned for Statistical Purposes
The information collection is not used for statistical purposes.
17) Approval to Omit OMB Expiration Date
The Commission is not seeking approval to omit the expiration date.
18) Exceptions to Certification for Paperwork Reduction Act Submissions
This collection complies with the requirements in 5 CFR 1320.9.
B.

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

22

Reflecting the one-time hour burden on broker-dealers to prepare and issue a notice advising its employees
about the proposed amendments to Rule 15c2-12 (250 broker-dealers x .5 hours = 125 hours) and the onetime burden on the MSRB to implement the proposed amendments (1,162 hours). 125 hours + 1,162 hours
= 1,287 total one-time hour burden.

23

Reflecting an ongoing annual hour burden increase of 2,500 hours on broker-dealers and 4,400 hours on
issuers.

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