PRA Supporting Statement (Rule 15c2-12 - 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
(“PRA”), 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 and 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 $3.84 trillion of municipal securities outstanding. Trading volume is
also substantial, with over $2.9 trillion of long and short-term municipal securities traded in 2017
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 disclosure documents are not provided to them on a timely basis.

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, a Participating Underwriter is 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 Municipal Securities Rulemaking Board’s (“MSRB”) 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.
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.
2

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.
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:
•

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
3

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 and Adopted Amendments to Rule 15c2-12
In March 2017, the Commission proposed to amend Rule 15c2-12. 2 First, the
Commission 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 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 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 obligated person, any of which reflect financial difficulties.

2

Proposed Amendments to Municipal Securities Disclosure, Exchange Act Release No. 80130 (Mar. 1,
2017), 82 FR 13928 (Mar. 15, 2017) (“Proposing Release”).

4

Second, the Commission proposed to amend Rule 15c2-12(f) to add a definition for the
term “financial obligation.” Under the proposed definition, the term financial obligation meant 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 proposed a technical amendment to Rule 15c2-12(b)(5)(i)(C)(14)
to remove the term “and” to account for the new paragraphs added to (b)(5)(i)(C).
Adopted Amendments to Rule 15c2-12
In August 2018, the Commission adopted amendments to Rule 15c2-12. 3 Paragraphs
(15) and (16) were added to Rule 15c2-12(b)(5)(i)(C) as proposed. Accordingly, as of the
compliance date of the Rule a Participating Underwriter in an offering will be required 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 obligated person, if material, or
agreement to covenants, events of default, remedies, priority rights, or other similar terms of a
financial obligation of the 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 obligated person, any of which reflect
financial difficulties.
The Commission also adopted amendments to Rule 15c2-12(f) to add a definition of the
term “financial obligation.” As discussed below, the definition was narrowed from what was
proposed, in part to alleviate the burden on issuers, obligated persons, and broker-dealers. As
adopted, the term financial obligation means a (i) debt obligation; (ii) derivative instrument
entered into connection with, or pledged as security or a source of payment for, an existing or
planned debt obligation; or (iii) guarantee of (i) or (ii). 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.
Lastly, the Commission adopted the technical amendment to Rule 15c212(b)(5)(i)(C)(14) as proposed, removing the term “and” to account for new paragraphs
(b)(5)(i)(C)(15) and (16).
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
3

Amendments to Municipal Securities Disclosure, Exchange Act Release No. 34-83885 (Aug. 20, 2018)
(“Adopting Release”).

5

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 is designed to prevent fraud by enhancing the timely access
of underwriters, public investors, and other interested persons to important information about
municipal securities, 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 amendments will provide 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 used by individual and
institutional investors, underwriters of municipal securities, broker-dealers, analysts, municipal
securities issuers, the MSRB, vendors of information regarding municipal securities, the
Commission and its staff, and the public generally. The amendments will enable market
participants and the public to be better informed about material events that occur with respect to
municipal securities and their issuers and will 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.
In 2008, 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
6

disclosure documents. The Commission continues to believe that the use of EMMA by investors
and other market participants has increased efficiency in 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 indirect costs on
municipal issuers. When the 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

The purpose of Rule 15c2-12 is to prevent fraud by enhancing the timely access of
underwriters, public investors, and other interested persons to important information about
municipal securities. The Commission believes Rule 15c2-12 and the adopted amendments are
reasonably designed to prevent fraudulent, deceptive, or manipulative acts or practices in the
municipal securities market. Not conducting or narrowing the collection of information set forth
in Rule 15c2-12 may jeopardize the protection that Rule 15c2-12 provides. The Commission
understands that the Rule imposes a burden on broker-dealers; however, the Commission seeks
to accomplish its 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

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. 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 received comment
letters addressing the Commission’s estimates of the added burden and cost of the proposed
amendments as well as prior Commission estimates of the burden and cost of Rule 15c2-12 prior
to the amendments. 4 Commission staff also consulted with MSRB staff concerning the burdens
and costs to the MSRB of complying with the amendments as well as Rule 15c2-12 prior to the
amendments.
As discussed in greater detail below in Item 15, based on the new information provided
by commenters in response to the Proposing Release 5 and MSRB staff in consultations,
Commission staff has substantially revised many of its burden and cost estimates.
9)

Payment or Gift

Not applicable.
10)

Confidentiality

No assurances of confidentiality have been provided.
4

Letters from Clifford M. Gerber, President, National Association of Bond Lawyers (“NABL OMB Letter”),
April 11, 2017; Tracy Ginsburg, Executive Director, Texas Association of School Business Officials
(“TASBO Letter”), May 9, 2017; Leslie M. Norwood, Managing Director and Associate General Counsel,
Securities Industry Financial Markets Association, (“SIFMA Letter”), May 15, 2017; John J. Wagner,
Kutak Rock LLP (“Kutak Rock Letter”), May 15, 2017; Emily S. Brock, Director, Federal Liaison Center,
Government Finance Officers Association (“GFOA Letter”), May 15, 2017; Cristeena G. Naser, Vice
President, Center for Securities, Trust & Investments, American Bankers Association (“ABA Letter”), May
15, 2017; Dr. Marcelo Cavazos, Superintendent, Arlington Independent School District, (“Arlington SD
Letter”), May 12, 2017; Kristin M. Bronson, City Attorney, Denver, Colorado (“Denver Letter”), May 12,
2017); Charisse Mosely, Deputy City Controller, City of Houston, Texas (“Houston Letter”), May 15,
2017; Joanne Wamsley, Vice President for Finance and Deputy Treasurer, Arizona State Universities (“AZ
Universities Letter”), May 15, 2017; Donna Murr, President, National Association of Health and
Educational Facilities Finance Authorities (“NAHEFFA Letter”), May 15, 2017, Susan Gaffney, Executive
Director, National Association of Municipal Advisors (“NAMA Letter”), May 15, 2017; Alexander M.
MacLennan, President, National Association of Bond Lawyers (“NABL III Letter”), June 13, 2018; School
Improvement Partnership (“SIP Letter”), May 31, 2018.

5

Many commenters did not address the PRA estimates or did not address it beyond broadly claiming that the
burden would be excessive. The NABL OMB Letter, SIFMA Letter, Kutak Rock Letter, and GFOA Letter
substantively addressed the burden estimates, and in particular, many commenters incorporated by
reference the estimates contained in the NABL OMB letter.

8

11)

Sensitive Questions

No questions of a sensitive nature are asked. The information collection does not collect
any Personally Identifiable Information.
12)
13)

Burden of Information Collection and
Cost to Respondents

The tables below set forth the Commission’s estimates of respondent reporting burden
and total annualized cost burden, including one-time burdens and costs in separate columns. The
tables capture the Commission’s estimates for Rule 15c2-12 prior to the amendments, the
Commission’s estimates for Rule 15c2-12 contained in the Proposing Release, and the
Commission’s revised estimates for Rule 15c2-12 contained in the Adopting Release. The
changes in estimates of burden and costs are explained below in Item 15.
THIRD-PARTY DISCLOSURE BURDEN AND COST
Estimates Prior to the Amendments
Annual Burden
Responses
(hours)
Broker-dealers
250
22,500
Issuers (annual filings)
62,596
438,172
Issuers (event notices)
73,480
146,960
Issuers (failure to file
7,063
14,126
notices)
Issuers that use the
services of a designated
agent to submit
13,000
0
continuing disclosure
documents
Total Estimates Prior to
156,389
621,758
the Amendments

9

Annual
Cost
$0
$0
$0
$0

$9,750,000

$9,750,000

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
Issuers (to revise
continuing disclosure
agreements to reflect the
proposed amendments)
Broker-dealers (to issue
a notice informing
employees about new
obligations under
amendments)
Total Estimates in
Proposing Release

Estimates in Proposing Release
Annual
Annual
Responses
Burden (hours)
Cost
250
25,000
$0
62,596
438,172
$0
75,680
151,360
$0

One-Time
Burden (hours)
0
0
0

One-Time
Cost
$0
$0
$0

7,063

14,126

$0

0

$0

13,000

0

$10,335,000

0

$0

20,000

0

$0

0

$2,000,000

250

0

0

125

$0

178,839

628,658

$10,335,000

125

$2,000,000

10

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
Issuers (to revise
continuing disclosure
agreements to reflect the
proposed amendments)
Broker-dealers (to issue
a notice informing
employees about new
obligations under
amendments)
Total Revised Estimates
in Adopting Release

Revised Estimates in Adopting Release
Annual
Annual
One-Time
Responses
Burden (hours)
Cost
Burden (hours)
13,658
126,337
$0
0
62,596
438,172
$0
0
75,680
302,720
$1,760,000
0

One-Time
Cost
$0
$0
$0

7,063

14,126

$0

0

$0

18,200

0

$14,469,000

0

$0

28,000

0

$0

0

$2,800,000

250

0

0

1,250

$0

205,447

881,355

$16,229,000

1,250

$2,800,000

RECORDKEEPING BURDEN AND COST
Estimates Prior to the Amendments
Annual Burden
Responses
(hours)
Municipal Securities Rulemaking Board
1
12,699
Estimates in Proposing Release
Annual
Annual
Responses
Burden
Cost
(hours)
Municipal Securities
Rulemaking Board

1

12,699

$10,000

Revised Estimates in Adopting Release
Annual
Annual
Responses
Burden
Cost
(hours)
Municipal Securities
Rulemaking Board

1

19,500
11

$520,000

Annual Cost
$10,000

One-Time
Burden
(hours)

One-Time
Cost

1,162

$0

One-Time
Burden
(hours)

One-Time
Cost

1,700

$0

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 Commission made substantial changes to its estimates of burden and cost in response
to comment letters received. The discussion below closely tracks the Paperwork Reduction Act
analysis in the Adopting Release.
Burden for Broker-Dealers
Prior Estimates
Under Rule 15c2-12 prior to these amendments, the Commission estimated that
approximately 250 broker-dealers could potentially serve as Participating Underwriters in an
offering of municipal securities. The Commission’s estimate prior to these amendments of the
total annual burden on all 250 broker-dealers is 22,500 hours (90 hours per broker-dealer per
year), which is the sum of two separate burdens (1) 2,500 hours per year for 250 broker-dealers
(10 hours per broker-dealer per year) 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 broker-dealer per year) 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).
In the Proposing Release, the Commission estimated that the amendments to the Rule
would result in an increase of 2,500 hours per year (10 hours per broker-dealer per year) 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. Using the Commission’s prior estimate of 20,000 hours per year
(80 hours per broker-dealer per year) as a baseline for this burden, the Commission estimated
that broker-dealers would incur an additional 2,500 hours per year, for a total estimated burden
of 22,500 hours per year (90 hours per broker-dealer per year) to make this determination.
Therefore, in the Proposing Release, the Commission estimated that the total annual burden of

12

broker-dealers acting as a Participating Underwriter in an Offering would increase by 2,500
hours to 25,000 hours annually (100 hours per broker-dealer per year). 6
Comments Received
The Commission received no comments on its estimate that broker-dealers would
continue to incur a burden of 2,500 hours per year (10 hours per broker-dealer per year) 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. However, as discussed in further detail below, the Commission is
revising its method for calculating the PRA burden on broker-dealers. Accordingly, this estimate
is being changed to reflect the new calculation method.
The Commission received several comments on its estimate that the amendments, by
adding two event notices to paragraph (b)(5)(i)(C) of the Rule, would increase the burden on
broker-dealers by 2,500 hours (10 hours per broker-dealer per year) 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. One
commenter stated that because the amendments were “substantially overbroad in scope,” they
would subject broker-dealers acting as Participating Underwriters in Offerings to “enormous
burdens” beyond what had been estimated. 7 Another commenter criticized the Commission’s
estimate as failing to account for the time needed to interpret the “broad” definition of “financial
obligation” contained in the proposed amendments, assess the materiality of events, and
complete review procedures. 8 That commenter stated that the Commission’s estimates of an
increase in burden of ten hours per broker-dealer per year, when calculated on a per issuance
basis, resulted “in an average additional underwriter burden of approximately 12 minutes” per
issuance of municipal securities. 9 That commenter further stated that this estimate was
unrealistic because each broker-dealer, to comply with the proposed amendments, would have to
“obtain a list of all financial obligations (bonds, notes, leases, guarantees, derivatives, and
monetary obligations from judicial, administrative, or arbitration proceedings), obtain a copy of
6

This estimate reflected the following: 2,500 hours (estimate 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 municipal securities, to provide continuing disclosure documents to the MSRB) + [20,000 hours
(estimate under the Rule prior to these amendments 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) + 2,500 hours (estimate of the
increased burden due to the amendments on broker-dealers to determine whether issues 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 )] = 25,000 hours.

7

See ABA Letter.

8

See NABL OMB Letter.

9

See id.

13

the financial obligation,” and then perform a series of reviews, including whether the financial
obligation is “material,” to determine whether the issuer had failed to comply with any previous
undertakings in a written contract or agreement specified in paragraph (b)(5)(i) of the Rule. 10
Commenters also criticized the Commission’s prior estimate, predating the proposed
amendments, that broker-dealers would incur a burden of 20,000 hours per year (80 hours per
broker-dealer per year) 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. 11 These commenters contended that, irrespective of
the increased burden from the proposed amendments, the Commission’s prior estimates of this
burden on broker-dealers were also far too low. 12 One commenter argued that the Commission’s
prior PRA estimates “greatly underestimated the compliance burdens of the existing Rule,” and,
noting that the Commission used its prior PRA estimates as the starting point for its new burden
estimates, criticized the Commission for its “reliance on inapposite, faulty prior estimates.” 13
That commenter also argued that “as a result of subsequent Commission actions, its prior
estimates are no longer indicative.” 14 That commenter further discussed prior Commission
estimates of PRA burdens attributable to Rule 15c2-12, arguing that the prior estimates had
contained “gross inaccuracies” that had not been sufficiently addressed. 15
Revised Estimates of Burden
The Commission has considered the comments received and in response is revising its
method to calculate the PRA burden for broker-dealers under Rule 15c2-12. In doing so, the
Commission is also revising (1) its estimate that broker-dealers would continue to incur a burden
of 2,500 hours per year (10 hours per broker-dealer per year), 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; (2) its
estimate that the amendments would increase the burden on broker-dealers by 2,500 hours (10
10

See id.

11

As discussed above, under the Rule prior to these amendments, the Commission estimated that the total
annual burden 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 was 20,000 hours, or 80 hours per year per broker-dealer. The Commission
used this estimate as a baseline for its estimate in the Proposing Release, concluding that the proposed
amendments would add 2,500 hours of additional burden on broker-dealers to perform this task, for a total
of 22,500 hours.

12

See, e.g., NABL OMB Letter; SIFMA Letter.

13

See NABL OMB Letter.

14

See id.

15

See id. (highlighting the “substantial ‘due diligence’ time” spent by 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 paragraph (b)(5)(i) of the Rule).

14

hours per broker-dealer per year), 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; and (3) its prior estimates under the Rule,
predating the proposed amendments, that the total annual burden 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 was 20,000 hours (80 hours per broker-dealer per year).
In prior PRA submissions, the Commission calculated the PRA burden on broker-dealers
on a collective, rather than per issuance, basis, primarily focusing on the number of brokerdealers acting as Participating Underwriters in Offerings. However, in response to comments, 16
the Commission is now calculating the PRA burdens on broker-dealers under Rule 15c2-12 on a
per issuance of municipal securities basis. The Commission believes this is appropriate because
a broker-dealer’s obligations under Rule 15c2-12 are triggered by acting as a Participating
Underwriter in an Offering. This method is consistent with the Commission’s estimates of the
PRA burden on issuers for the Rule, which are also calculated on a per event basis. The
Commission is basing its estimate on the average number of primary market submissions to the
MSRB over the past three years – 13,658. 17
Using this new method of calculation, the Commission is revising its estimate that
broker-dealers would continue to incur a burden of 2,500 hours per year (10 hours per brokerdealer per year), 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. 18 The Commission estimates that broker-dealers
will incur a 15 minute burden per issuance of municipal securities to make this determination,
resulting in an annual burden on all broker-dealers of approximately 3,415 hours (approximately
13.7 hours per broker-dealer per year). 19 This revised estimate constitutes an increase of
approximately 915 hours (approximately 3.7 hours per broker-dealer) over the estimates

16

See id.

17

According to the MSRB Fact Book for each respective year, in 2017 there were 12,709 primary market
submissions to the MSRB, in 2016 there were 14,314 primary market submissions to the MSRB, and in
2015 there were 13,952 primary market submissions to the MSRB. 12,709 + 14,314 + 13,952 = 40,975.
40,975/3 = 13,658. See MSRB 2017 Fact Book (Mar. 18, 2018), available at
http://www.msrb.org/~/media/Files/Resources/MSRB-Fact-Book-2017.ashx?la=en.

18

As discussed above, this estimate received no comments from commenters and the Commission continues
to believe that this burden is unaffected by the amendments. This estimate is being revised solely to
correspond with the Commission’s new method of calculation.

19

13,658 (estimated annual issuances) x .25 (hourly burden 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) = 3,414.5 hours. 3,414.5
hours/250 (estimated number of broker-dealers) = 13.65 hours.

15

provided in the Proposing Release. 20 No commenter provided an estimate for this burden.
However, 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 21 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.
The Commission is also revising its estimate that the amendments, by adding two event
notices to paragraph (b)(5)(i)(C) of the Rule, would increase the burden on broker-dealers by
2,500 hours per year (10 hours per broker-dealer per year) 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. Under the new
method of calculation, the Commission believes that the amendments will, on average, amount to
an additional one hour burden per issuance of municipal securities, resulting in an annual
increased burden on all broker-dealers of 13,658 hours (approximately 55 hours per year per
broker-dealer). 22 This revised estimate constitutes an increase of 11,158 hours (approximately
45 hours per broker-dealer), over the estimates provided in the Proposing Release. 23 The
Commission believes this revised estimate appropriately reflects the concerns raised by
commenters while also recognizing that the amendments have been narrowed from the
amendments as proposed. 24

20

In the Proposing Release, the Commission estimated broker-dealers would continue to incur a burden of
2,500 hours per year, or ten 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 municipal
securities, to provide continuing disclosure documents to the MSRB. 3,415 hours – 2,500 hours = 915
hours.

21

Although not required by the Commission, a staff letter suggested that a standard form should be used. See
Letter from Catherine McGuire, Chief Counsel, Division of Market Regulation, U.S. Securities and
Exchange Commission, to John S. Overdorff, Chair, Securities Law and Disclosure Committee, Nat’ Ass’n
of Bond Lawyers (Sept. 19, 1995), available at https://www.sec.gov/info/municipal/nabl-2-interpretiveletter-1995-09-19.pdf (“NABL 2”) (stating that such documents “should list all events in the same language
as is contained in the rule, without any qualifying words or phrases”).

22

13,658 (estimated annual issuances) x 1 (average additional hourly burden per issuance as a result of the
amendments) = 13,658 hours. 13,658 hours/250 (estimated number of broker-dealers) = 54.63 hours.

23

In the Proposing Release, the Commission estimated that the amendments to the Rule would result in an
additional 2,500 hours annually (an additional 10 hours per year per broker-dealer) 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.
13,658 hours (new estimate of annual increased burden on broker-dealers) – 2,500 hours (previous
estimate) = 11,158 hours. 11,158/250 (estimated number of broker-dealers) = 44.63 hours.

24

The adopted definition of “financial obligation” in the Rule has significantly limited the scope of leases
covered and no longer covers monetary obligations resulting from a judicial, administrative, or arbitration

16

Finally, the Commission is revising its prior estimates, predating the proposed
amendments, that the total annual burden 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 is 20,000 hours (80
hours per broker-dealer per year). No commenter provided an estimate for this burden. Under
the new method of calculation, the Commission believes that broker-dealers will incur 8 hours of
burden per issuance of municipal securities to make this determination, resulting in an annual
burden on broker-dealers of 109,264 hours (approximately 437 hours per broker-dealer per
year). 25 This revised estimate constitutes an increase of 89,264 hours (an increase of
approximately 357 hours per broker-dealer), over the estimate provided in the Proposing
Release. 26 The Commission arrived at the 8 hour per issuance burden estimate after considering
(1) the comments addressing the prior burden estimates for broker-dealers under Rule 15c2-12,
particularly the comments related to the Commission’s prior PRA submissions, (2) comments
addressing the potential that broker-dealer burdens may have shifted as a result of subsequent
Commission action; (3) the MSRB’s statistics concerning the number of event notices filed on an
annual basis; and (4) the potential volume of documentation to be reviewed under this
obligation. 27 Based on the Commission’s experience, the Commission believes that the estimate
of an average burden of 8 hours per issuance is appropriate.
Accordingly, under the Commission’s revised estimates, the total annual burden for all
broker-dealers acting as Participating Underwriters in Offerings will be 126,337 hours
(approximately 505 hours per broker-dealer per year), 28 or an average of 9.25 hours per issuance
proceeding. Accordingly, broker-dealers, when determining whether issuers or obligated persons have
failed to comply with the events added by the amendments, will have a smaller set of “financial
obligations” to review.
25

13,658 (estimated annual issuances) x 8 (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) =
109,264 hours. 109,264 hours/250 (estimated number of broker-dealers) = 437.05 hours.

26

In the Proposing Release, the Commission estimated that the broker-dealer burden, not including the
proposed amendments, for determining 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, was 20,000 hours (80 hours per year per broker-dealer). See Proposing Release, supra
note 2, 82 FR at 13943-44. 109,264 hours (revised estimate of this broker-dealer burden) – 20,000 hours
(estimate in the Proposing Release) = 89,264 hours. 89,264/250 (estimated number of broker-dealers) =
357.05 hours.

27

See MSRB 2017 Fact Book, supra note 17.

28

109,264 hours (revised estimate of broker-dealer burden, prior to the amendments, 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) + 13,658 hours (revised
estimate of additional broker-dealer burden, due to the amendments, 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) + 3,415 hours (revised annual
estimate for broker-dealers to reasonably determine that the issuer or obligated person has undertaken, in a

17

of municipal securities. 29 This revised estimate constitutes an increase of 101,337 hours
(approximately 405 hours per broker-dealer) over the estimates in the Proposing Release for the
entire broker-dealer community. 30 The Commission understands that burdens will vary across
broker-dealers and across specific issuances depending on numerous factors, such as the
frequency of issuances by the issuer, size and complexity of the issuer, and the familiarity of the
broker-dealer with the issuer. The burden for some broker-dealers will exceed our estimate, and
the burden for others will be less. However, the Commission believes, on balance, that 126,337
hours (on average approximately 505 hours per broker-dealer per year), is a reasonable estimate
for the time needed for broker-dealers acting as Participating Underwriters in Offerings to
comply with their obligations under Rule 15c2-12.
One-Time Burden for Broker-Dealers
In the Proposing Release, the Commission estimated that each broker-dealer acting as a
Participating Underwriter in an Offering would incur a one-time paperwork burden to have an
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. 31 Based on prior estimates for similar amendments, the Commission
estimated that it would take each broker-dealer’s internal compliance attorney approximately 30
minutes to prepare and issue a notice describing the broker-dealer’s obligations in light of the
proposed amendments, for a total one-time, first-year burden of 125 hours for the entire brokerdealer community. 32 The Commission also stated that it believed the task of preparing and
issuing a notice advising the broker-dealer’s employees about the proposed amendments is
consistent with the type of compliance work that a broker-dealer typically handles internally.

written agreement or contract, for the benefit of holders of such municipal securities, to provide continuing
disclosure documents to the MSRB) = 126,336.5 hours. 126,337 hours/250 (estimated number of brokerdealers) = 505.35 hours.
29

0.25 hours (revised estimate of burden per issuance for 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
municipal securities, to provide continuing disclosure documents to the MSRB) + 1 hour (revised estimate
of additional burden per issuance, due to the amendments, 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) + 8 hours (revised estimate of
burden per issuance, prior to the amendments, 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) = 9.25 hours per issuance.

30

126,337 hours (revised estimate of total broker-dealer burden) – 25,000 hours (estimate of total brokerdealer burden in Proposing Release) = 101,337 hours. 101,337 hours/250 (estimated number of brokerdealers) = 405.35 hours.

31

See Proposing Release, supra note 2, 82 FR at 13944.

32

See id.

18

One commenter expressed concern that the Commission’s estimate of the one-time
burden on broker-dealers acting as Participating Underwriters in Offerings was too low. 33 The
commenter stated that broker-dealers would have to “identify their resulting duties, develop
procedures for complying with them (including means for determining appropriate review levels
and materiality judgments in commonly recurring circumstances), communicate the procedures
to applicable personnel, and include the procedures in periodic training.” 34 The commenter did
not provide its own estimate for the one-time burden on broker-dealers. In response to this
comment, the Commission is revising its estimate of the time it will take each broker-dealer to
prepare and issue a notice advising its employees about the amendments to Rule 15c2-12 from
30 minutes per broker-dealer to five hours per broker-dealer. The Commission believes this
revised estimate more accurately captures the time needed to complete the tasks identified by the
commenter while also recognizing that the Commission has narrowed the scope of the
amendments and removed several terms that commenters had characterized as burdensome and
time-consuming to interpret and implement.
Accordingly, the Commission estimates that the 250 broker-dealers acting as a
Participating Underwriter in Offerings would incur a one-time burden of five hours each, for a
total one-time, first year burden of 1,250 hours for all broker-dealers. Under the amendments to
Rule 15c2-12 as adopted, the total burden on all broker-dealers would be 127,587 hours for the
first year 35 and 126,337 hours for each subsequent year.
Burden for Issuers
Prior Estimates
Under the Rule prior to these amendments, the Commission estimates that issuers prepare
and submit annually: (1) 73,480 event notices, with each notice taking approximately two hours
to prepare and submit; (2) 62,596 annual filings, with each filing taking approximately seven
hours to prepare and submit; and (3) 7,063 failure to file notices, with each notice taking
approximately two hours to prepare and submit. Accordingly, under the estimate prior to these
amendments, issuers would incur a total annual burden of 599,258 hours. 36
In the Proposing Release, the Commission estimated that the amendments to the Rule
would result in an increase to the annual total burden of issuers. Specifically, the Commission
estimated that the proposed amendment in subparagraph (b)(5)(i)(C)(15) of the Rule would
33

See NABL OMB Letter.

34

See id.

35

126,337 (revised estimate of total annual burden for broker-dealers acting as a Participating Underwriter) +
1,250 (estimated one-time burden for broker-dealers acting as a Participating Underwriter) = 127,587.

36

73,480 (annual number of event notices) x 2 (average estimate of hours needed to prepare and submit each)
+ 62,596 (annual number of annual filings) x 7 (average estimate of hours needed to prepare and submit
each) + 7,063 (annual number of failure to file notices) x 2 (average estimate of hours needed to prepare
and submit each) = 599,258 hours.

19

increase the total number of event notices submitted by issuers annually by approximately 2,100
notices, and that the proposed amendment in subparagraph (b)(5)(i)(C)(16) would increase the
total number of event notices submitted by issuers annually by approximately 100 notices. The
Commission also estimated that the time required for an issuer to prepare and submit the
proposed two additional types of event notices to the MSRB in an electronic format, including
time to actively monitor the need for filing, would continue to be approximately two hours per
filing, because the two proposed types of event notices would require substantially the same
amount of time to prepare as those prepared for existing events. Accordingly, the Commission
estimated that the increase in number of event notices would result in an increase of 4,400 hours
in the annual paperwork burden for issuers to submit event notices, with a total annual
paperwork burden for issuers to submit event notices of approximately 151,360 hours (146,960
hours + 4,400 hours), and a total annual burden on issuers of 603,658 hours. 37
Comments Received
The Commission received several comments relating to the estimates of the Paperwork
Reduction Act burden on issuers. 38 Commenters expressed concern that the Commission’s
estimates understated the burden of the proposed amendments on issuers because, in large part,
the Commission failed to account for the overly broad definition of “financial obligation.” One
commenter criticized the term financial obligation for requiring “information that is both
superfluous to investors and costly for issuers to present,” further stating that “leases, for
example, are transactions that take place many times per year in many jurisdictions and are
commonly related to the ongoing operations of a government.” 39 Another commenter stated that
issuers “enter into a staggering number of leases and other financial obligations, as defined in the
proposed amendments, in the ordinary course of providing important services to the public.” 40
And another commenter stated that the definition of financial obligation could capture routine
items such as equipment lease programs and short-term maintenance contracts. 41 Commenters
also criticized the inclusion of “monetary obligation resulting from a judicial, administrative, or
arbitration proceeding,” stating that issuers could be subject to potentially hundreds of such
obligations annually and that monitoring for such obligations would be expensive and time37

75,680 (annual number of event notices including additional 2,200 event notice burden created by
amendments) x 2 (average estimate of hours needed to prepare and submit each) + 62,596 (average number
of annual filings) x 7 (average estimate of hours needed to prepare and submit each) + 7,063 (average
number of failure to file notices) x 2 (average estimate of hours needed to prepare and submit each) =
603,658 hours. The Commission believed that the proposed amendments would not affect the number of
annual filings or failure to file notices required to be filed by issuers, so those estimates were unchanged
from the estimates under the Rule prior to these amendments.

38

See GFOA Letter; NABL OMB Letter; Kutak Rock Letter; ABA Letter; SIP Letter; NABL III Letter.

39

See GFOA Letter.

40

See NABL OMB Letter.

41

See Kutak Rock Letter.

20

consuming. 42 Many commenters stated that, as defined, “financial obligations” incurred by the
issuer would be managed across dozens of departments and that “significant expense and effort”
would be required to train employees across these departments and create “a system of
coordination and review that would enable the [issuer] to comply” with the proposed
amendments. 43
Commenters also criticized the Commission for failing to account for the burden created
by what they termed the ambiguity of the term “material.” One commenter argued that the
Commission, by refusing to give explicit guidance as to materiality, will force issuers to “review
voluminous, often inconsistent court decisions and administrative orders in an attempt to give
clarity to the term.” 44 The net result, the commenter argued, is that issuers will expend far more
hours than estimated by the Commission to review “even routine financial obligations” for
materiality. 45
These commenters generally contended that the burden of complying with the proposed
amendments was far greater than the Commission’s estimates. One commenter, after surveying
its members, estimated that the time needed to ensure compliance with the proposed amendments
would be approximately seven hours per event notice required to be filed with the MSRB under
the proposed rule. 46 Another commenter suggested that the time needed for an issuer to prepare
and submit an event notice for the proposed amendments could be up to 100 times greater than
the Commission’s original estimate of two hours per notice. 47 And another commenter estimated
that the total annual burden on issuers for preparing and submitting event notices would be
109,292 hours 48 for proposed amendment (15) and 530 hours 49 for proposed amendment (16).
42

See, e.g. Houston Letter; Denver Letter.

43

See Denver Letter. See also, e.g. AZ Universities Letter, Kutak Rock Letter, NABL OMB Letter,
NAHEFFA Letter.

44

See NABL OMB Letter.

45

See id.

46

See GFOA Letter (“Respondents estimated that the average amount of internal staff time committed to
ensuring compliance to the proposed amendments would be 7.3 hours per material event and 7.8 per
occurrence, modification of terms or other similar event.”).

47

See Kutak Rock Letter.

48

See NABL OMB Letter. The commenter estimated that one-quarter of 34,696 issuers (as discussed above,
the Commission believes this likely overstates the number of issuers) would each file three material event
notices annually under the proposed amendment (15), and each notice would take 4.2 hours to prepare and
file. Using these estimates, issuers would file an additional 26,022 event notices to comply with proposed
amendment (15) based off the following: 34,696 (estimated number of issuers) x .25 (estimated percentage
of such issuers filing event notices under proposed amendment (15)) x 3 (number of event notices needed
to be filed be each such issuer) = 26,022 filings. The commenter did not provide any basis for its estimate
that one-quarter of issuers would need to file event notices, or any basis for its estimate that each such
issuer would file three event notices, which would result in an additional 26,022 filings. Moreover, the
commenter was basing its estimates on the proposed amendments, not the narrowed, adopted definition of
“financial obligation.”.

21

That commenter further estimated that issuers would spend 867,400 hours 50 a year monitoring
for possibly reportable events and 173,480 hours 51 evaluating possibly reportable events.
Commenters also criticized past Commission estimates of issuer burden for filing event notices
for being “substantially understated.” 52
In both the Proposing Release and the Commission’s estimates for Rule 15c2-12 prior to
the amendments, the Commission estimated that 20,000 issuers would annually submit to the
MSRB annual filings, event notices, and failure to file notices. 53 The Commission also received
a comment stating that the true number of issuers affected by Rule 15c2-12 was not 20,000, as
the Commission had estimated, but 34,696, or the number of filings on EMMA in 2016 listed
under the category of “audited financial statements or CAFRs.” 54 However, the Commission
believes that category likely overstates the number of issuers affected by continuing disclosure
agreements because a large number of those filings may not reflect distinct issuers filing separate
audited financial statements. Instead, many of the documents filed under that category are
supplemental documents, or multiple years of audited financial statements filed by a single issuer
all in one year. Instead, based on recent data provided by the MSRB staff to the Commission
staff in conjunction with this rulemaking, the Commission believes that an appropriate revised
estimate is that 28,000 issuers are affected by continuing disclosure requirements under Rule
15c2-12. 55
Revised Estimates of Burden
In response to comments, the Commission is revising, from two hours to four hours, its
estimate of the average time needed for an issuer to prepare and submit an event notice to the
49

See id. The commenter estimated that 100 notices would need to be filed under proposed amendment (16),
and that each would take 5.3 hours to prepare and file. The commenter’s estimate that each such notice
would take 5.3 hours to prepare and file is based on a survey response.

50

See id. The commenter estimated that 34,696 issuers would each need 25 hours a year to monitor and
elevate possibly reportable events under the proposed amendments. The commenter did not provide a basis
for its estimate that every issuer would need 25 hours a year to monitor for such events.

51

See id. The commenter estimated that one-half of 34,696 issuers would need ten hours a year to evaluate
possibly reportable events. The commenter did not provide a basis for its estimate that one-half of issuers
would need to evaluate possibly reportable events, and its estimate that such an evaluation would take ten
hours a year.

52

See id.

53

See Proposing Release, supra note 2, 82 FR at 13944; Submission for OMB Review; Comment Request
(Extension: Rule 15c2-12, SEC File No. 270.330, OMB Control No. 3235-0372), 80 FR 9758 (Feb. 24,
2015) (“2015 PRA Notice”). The number of issuers in the estimate reflects those issuers that are affected
by a continuing disclosure agreement.

54

See NABL OMB Letter.

55

28,000 is the approximate number of issuers identified in MSRB Form G-32 filings as agreeing to provide
continuing disclosure information under Rule 15c2-12 dating from June 2018 back to February 2011, when
the MSRB first began collecting such information.

22

MSRB in an electronic format, including time to actively monitor the need for filing. The
Commission believes this change, which recognizes an increased annual burden estimate on
issuers of 151,360 hours 56 from the estimates in the Proposing Release, appropriately reflects the
concerns raised by the commenters that the original estimates were too low. 57 This four-hour
estimate applies to the average time needed to monitor, prepare, and file all sixteen types of
event notices, not just the two new event notices required by the amendments to the Rule. The
Commission recognizes that the event notices required by the amendments may on average be
more complex and require more than an average of four hours to monitor, evaluate, prepare, and
file. But, as discussed below, the Commission believes that the adopted amendments will
generate relatively few event notices and that the majority of the event notices required to be
filed under the Rule are not as time-consuming for an issuer to monitor, evaluate, prepare, and
file. As even commenters critical of the Commission’s estimates stated, “the existing events
under Rule 15c2-12 are generally objectively ascertainable by most laymen and rarely occur,
making them easily identifiable by issuers and relatively inexpensive to handle.” 58 Furthermore,
the majority of event notices filed on EMMA in recent years have been for bond calls, which is
an action typically instituted by the issuer itself and therefore one the issuer would require very
little effort to monitor. 59 Accordingly, the Commission believes that increasing the estimate of
average time needed to monitor, evaluate, prepare, and file an event notice in electronic format to
the MSRB to four hours per event notice addresses the comments raised and forms an
appropriate average estimate of the burden on issuers to comply with this collection of
information requirement under the Rule.
However, the Commission is not changing its estimate that the amendments to the Rule
will result in 2,200 additional event notices filed annually, raising the total number of event
notices prepared by issuers annually to approximately 75,680. The Commission believes this
estimate remains appropriate because of the adopted definition of financial obligation is narrower
than the definition proposed in Proposing Release. 60 The adopted definition of financial
56

75,680 (annual number of event notices) x 4 (revised estimate of hours needed to prepare and submit each)
= 302,720 hours. This number includes and incorporates its estimate that the amendments, as adopted, add
an additional 2,200 event notices to the burden estimates. The burden estimate in the Proposing Release
was 75,680 event notices at 2 hours each, equaling 151,360 hours. 302,720 hours – 151,360 hours =
151,360 hours of increased burden over the estimate in the Proposing Release.

57

The Commission is not adopting the estimates of total burden provided by the commenters because those
estimates were in response to amendments that have since been narrowed.

58

See Kutak Rock Letter.

59

According to the 2017 MSRB Fact Book, bond call notices in 2017 were 63 % of total event notices
(38,198 of 60,883 total event notices). In 2016, bond call notices were 66% (41,862 of 63,586 event
notices) of total event notices. See MSRB 2017 Fact Book, supra note 17.

60

Other than comments in the NABL OMB Letter discussed above in note 48, the Commission did not
receive comments quantifying the increase in the total number of event notices that issuers would file
because of the proposed amendments. As previously stated, the narrowing of the definition of “financial
obligation” from the definition proposed in the Proposing Release should reduce the number of required

23

obligation removes or extensively limits the definitions, such as the modifications regarding
leases, derivatives, and judicial obligations that commenters cited as the most burdensome. The
adopted definition of financial obligation is tailored to apply only to debt, debt-like, and debtrelated obligations that could impact an issuer’s or obligated person’s liquidity, overall
creditworthiness, or an existing security holder’s rights. The adopted definition narrows the
number of transactions for which issuers and obligated persons will need to monitor, evaluate,
review, or file notices. The Commission believes this change will reduce the burdens of the
adopted amendments as compared to the proposed amendments. In particular, the focusing of
“financial obligation” on instruments that compete with a security holder’s interests, as a security
holder will dramatically limit the need for issuers to centralize reporting and analysis for staff
across multiple departments. 61 Moreover, in the Adopting Release, the Commission has
provided examples intended to assist issuers in determining materiality under the Rule,
addressing another issue commenters believed added to the burden of compliance with the Rule.
Under the amendments to Rule 15c2-12 as adopted, the total burden on issuers to submit
continuing disclosure documents would be 755,018 hours. 62
Burden for the MSRB
Under the Rule prior to these amendments, the Commission estimated that the MSRB
incurred an annual burden of approximately 12,699 hours to collect, index, store, retrieve, and
make available the pertinent documents under the Rule. In the Proposing Release, the
Commission estimated, based on preliminary consultations between Commission staff and
MSRB staff, that 12,699 hours was still a reasonable estimate with respect to operating the
primary market and continuing disclosure submission platform, managing those submissions
securely and deploying educational resources and other tools that make the submissions
meaningful and useful. The Commission also estimated, based on consultations with the MSRB
staff, that the MSRB would require a one-time burden of 1,162 hours to implement the necessary
filings. Nonetheless, in light of the comments in the NABL OMB Letter suggesting that filings resulting
from the proposed amendments might be higher than the Commission originally estimated, in light of a
lack of data to quantify a reduction in filings resulting from the narrowed scope of the amendments, and to
provide an estimate for the paperwork burden that would not be under-inclusive, the Commission has
elected to retain the proposed estimate at this time.
61

Compare, e.g., Denver Letter (the broad scope of financial obligation will require “significant expense and
effort . . . [to] train relevant City employees across dozens of departments and agencies and to create a
system of coordination and review”) and TASBO Letter (“school districts will be required to restructure
their organizations and establish review processes in order to vet the types of ‘financial obligations’
captured under the broad definition included in the proposed regulations.”) with BDA Letter (if the
definition of financial obligation was “properly crafted around competing debt, all of the material ‘financial
obligations’ would ordinarily fall within the responsibility of that one department because it tends to be
responsible for all debt of the issuer.”)

62

438,172 hours (estimated burden for issuers to submit annual filings) + 302,720 hours (estimated annual
burden for issuers to submit event notices under the amendments) + 14,126 hours (estimated annual burden
for issuers to submit failure to file notices) = 755,018 hours.

24

modifications to EMMA to reflect the additional mandatory disclosures under Rule 15c2-12.
Accordingly, the Commission estimated that the total burden on the MSRB to collect, store,
retrieve, and make available the disclosure documents covered by the Rule would be 13,861
hours 63 for the first year and 12,699 hours for each subsequent year.
The Commission received no comments on these estimates. However, the Commission is
revising these estimates to correspond with updated estimates provided by the MSRB. The
Commission now estimates that the MSRB incurs an annual burden of approximately 19,500
hours to collect, index, store, retrieve, and make available the pertinent continuing disclosure
documents under the Rule. 64 The Commission also now estimates that the MSRB would require
a one-time burden of 1,700 hours to implement the necessary modifications to EMMA to reflect
the additional mandatory disclosures under Rule 15c2-12. 65 Accordingly, the Commission
estimates that the total burden on the MSRB to collect, store, retrieve, and make available the
disclosure documents covered the Rule would be 21,200 hours 66 for the first year and 19,500
hours for each subsequent year.
Burden for Broker-Dealers in the Secondary Market
Under the Rule prior to these amendments and in the Proposing Release, the Commission
made no estimate of the burden on broker-dealers effecting transactions in the secondary market
to comply with Rule 15c2-12. Two commenters characterized this as an omission. 67 Those
commenters cited to obligations, under Rule 15c2-12(c) and MSRB Rule G-47, which those
commenters stated required broker-dealers in the secondary market to disclose material
information to investors, expressing concern that the proposed amendments would greatly
increase the burden on such broker-dealers. 68 One commenter estimated that the total annual
burden on broker-dealers effecting transactions in the secondary market would be 14,224,229
hours. 69
63

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

64

According to the MSRB, its estimated annual burden has changed from 12,699 hours to 19,500 hours due
to a change in the method of calculation used by the MSRB to estimate annual burden.

65

According to the MSRB, its estimated one-time burden has changed from 1,162 hours to 1,700 hours after
further assessment of the work needed to prepare EMMA for two new event notices.

66

First-year burden for MSRB: 19,500 hours (estimated annual burden) + 1,700 hours (estimate for one-time
burden to implement the amendments) = 21,200 hours.

67

See NABL OMB Letter and SIFMA Letter.

68

See NABL OMB Letter and SIFMA Letter.

69

See NABL OMB Letter. The commenter derived this estimate by multiplying 9,358,046 (the number of
municipal securities trades reported by the MSRB in 2016) by 76% (the purported percentage of such
transactions that would require review) and then by 2 (for how many hours such a review would take). The
76% figure was the mean response in the commenter’s survey to the question “what percentage [of issuers]
have outstanding ‘financial obligations’ that you believe the SEC might determine to be material . . . ?”

25

The Commission continues to believe that neither the adopted amendments nor Rule
15c2-12 prior to amendment contains “collection of information requirements” within the
meaning of the PRA on broker-dealers effecting transactions in the secondary market. Rule
15c2-12(c) requires only that a broker-dealer acting in the secondary market have “procedures in
place that provide reasonable assurance that it will receive prompt notice of any event disclosed
pursuant to paragraph (b)(5)(i)(C), paragraph (b)(5)(i)(D), and paragraph (d)(2)(ii)(B)” of the
Rule. To the extent that broker-dealers effecting transactions in the secondary market review
and disclose material to customers, those associated burdens stem from antifraud provisions in
the securities laws and MSRB rules that are not subject to this PRA analysis.
Costs for Broker-Dealers and the MSRB
In the Proposing Release, the Commission stated that it did not expect broker-dealers to
incur any additional external costs associated with the proposed amendments to the Rule because
the proposed amendments do not change the obligation of broker-dealers under the Rule 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 to determine whether the issuer or obligated person has
failed to comply with such undertakings in all material respects. 70 To the extent that brokerdealers would incur a one-time burden of preparing and issuing a notice advising the brokerdealer’s employees about the amendments, the Commission believed that the work would be
consistent with the type of compliance work that a broker-dealer typically handles internally, and
that the broker-dealer would not incur any additional external costs. 71 The Commission received
no comments on this estimate and continues to believe that this estimate is appropriate.
Also in the Proposing Release, the Commission stated that it did not expect the MSRB to
incur any additional external costs associated with the proposed amendments to the Rule. The
Commission believed that the MSRB would not incur additional external costs specifically
associated with modifying the indexing system to accommodate the amendments to the Rule
because the MSRB would implement those changes internally. The Commission received no
comments on this estimate. After consultation of the Commission staff with MSRB staff, the
Commission continues to believe that this estimate is appropriate. Additionally, in the Proposing
Release, the Commission estimated that the MSRB expends $10,000 annually in hardware and
software costs for the MSRB’s EMMA system. 72 After consultation of the Commission staff

The estimate that it would take two hours for a broker-dealer to complete its due diligence was apparently
derived from a survey response indicating that an issuer’s redacted financial obligations to be reviewed
would average 39 pages in length.
70

See Proposing Release, supra note 2, 82 FR at 13946.

71

Id.

72

Id.

26

with MSRB staff, the Commission now estimates that the MSRB expends $520,000 annually in
hardware and software costs for the MSRB’s EMMA system. 73
Under the amendments to Rule 15c2-12 as adopted, the total external costs to brokerdealers would be zero and the total external costs to the MSRB would be $520,000 annually.
Costs to Issuers
In the Proposing Release, the Commission stated that it believes issuers generally would
not incur external costs associated with the preparation of event notices filed under the
amendments, because issuers would generally prepare the information contained in the
continuing disclosures internally.
However, the Commission recognized that issuers would be subject to some costs
associated with the amendments to the Rule if they paid third parties to assist them with their
continuing disclosure responsibilities. Under the Rule prior to these amendments, the
Commission estimated that up to 65% of issuers may use designated agents to submit some or all
of their continuing disclosure documents to the MSRB for a fee estimated to range from $0 to
$1,500 per year, with an average total annual cost incurred by issuers using the services of a
designated agent of $9,750,000. 74 In the Proposing Release, the Commission modified this
estimate to account for the estimated increase in filings as a result of the proposed amendments.
The Commission estimated that the proposed amendments would result in 2,200 more event
notices filed annually, increasing costs for issuers using a designated agent for submission of
event notices to the MSRB of approximately six percent, to $10,335,000. 75
The Commission received no comments on this estimate. As discussed above, the
Commission continues to believe that the amendments will result in an increase of 2,200 event
notices filed and that the amendments will increase costs for the issuers using a designated agent
by approximately six percent. 76 The Commission also continues to believe that up to 65% of
issuers may use designated agents; however, the Commission is revising its calculations to
correspond with its revised estimate of the number of issuers affected by continuing disclosure
73

According to the MSRB, its estimated annual cost has changed to $520,000 after a change in the method of
calculation used by the MSRB to estimate annual cost. This estimate corresponds to the estimated annual
cost in hardware and software costs to operate the continuing disclosure service for the MSRB’s EMMA
system.

74

See Proposing Release, supra note 2, 83 FR at 13946. The Commission estimated the following: 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. See also 2015 PRA Notice, supra note 53.

75

Id.

76

The Commission’s estimate of a six percent increase is the combination of two separate but related
estimates: that issuers’ total annual filings would increase by 1.5 percent due to the amendments and an
estimate that issuers would incur a cost of 4.5 percent as reimbursement by issuers to designated agents for
the agents’ cost of making necessary changes to their systems. See Proposing Release, supra note 2, 82 FR
at 13946 and note 150. The Commission received no comments on this six percent estimate.

27

agreements consistent with the Rule, which has changed from 20,000 in the Proposing Release to
28,000, as discussed above. As a result, the Commission is making two adjustments. First, the
Commission is revising its estimate of the cost to issuers who may use designated agents under
the Rule prior to these amendments to reflect the increase in the number of issuers who may use
designated agents. 77 Second, the Commission is increasing the estimated cost to issuers who
may use designated agents under the Rule by six percent, to account for the estimated increased
costs as a result of the amendments to issuers who use designated agents. Accordingly, the
Commission now estimates an average total annual cost incurred by issuers using the services of
a designated agent for the Rule prior to the amendments of $13,650,000 78 and further estimates
that those costs would be increased by approximately six percent as a result of the amendments,
to $14,469,000. 79
In the Proposing Release, the Commission also estimated that issuers would incur some
cost to revise their current template for continuing disclosure agreements to reflect the proposed
amendments to the Rule. The Commission stated its belief that continuing disclosure agreements
tend to be standard form agreements. As it did in response to prior amendments to the Rule in
2010, 80 the Commission estimated that it would take an outside attorney approximately 15
minutes to revise the template for continuing disclosure agreements for the proposed
amendments to the Rule. 81 The Commission estimated that each issuer, if it employed an outside
attorney to update its template for continuing disclosure agreements, would incur a cost of
approximately $100, for a one-time total cost of $2,000,000 for all issuers. 82 The Commission
received one comment on this estimate. The commenter agreed that updating the template was
“a relatively simple process,” but stated that the Commission failed to account for the time spent
reviewing the revised continuing disclosure agreement. 83 Because continuing disclosure
agreements tend to be standard form agreements and because the updates required to continuing
disclosure agreements by these amendments amount to simply adding the text of two additional

77

Previously, the Commission estimated that 65% of 20,000 issuers (13,000 issuers) would use designated
agents for the submission of event notices to the MSRB. See 2015 PRA Notice, supra note 53. The
Commission now estimates that 65% of 28,000 issuers (18,200 issuers) may use designated agents.

78

28,000 issuers (revised estimate of issuers affected by continuing disclosure agreements consistent with the
Rule) x .65 (percentage of issuers that may use designated agents) x $750 (estimated average annual cost
for issuer’s use of designated agent for the Rule prior to the amendments) = $13,650,000.

79

28,000 (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 amendments to the
Rule) = $14,469,000. The increase in annual cost as a result of the amendments is $819,000 ($14,469,000 $13,650,000 = $819,000).

80

See Exchange Act Release No. 34-62184A (May 27, 2010), 75 FR 33100 (June 10, 2010).

81

See Proposing Release, supra note 2, 82 FR at 13946.

82

Id. 20,000 issuers x $100 = $2,000,000.

83

See Kutak Rock Letter.

28

events, 84 the Commission continues to believe that the estimate of 15 minutes per issuer is
appropriate and accounts for the average total cost incurred by each issuer to update and review
its template for continuing disclosure agreements. However, as a result of the Commission’s
revised estimate of issuers affected by continuing disclosure requirements under Rule 15c2-12,
the Commission now estimates a one-time total cost of $2,800,000 for all issuers. 85
The Commission did not estimate any other external costs incurred by issuers as a result
of the proposed amendments. Several commenters disagreed, stating that due to the proposed
broad definition of financial obligation and commenters’ view that there was lack of clarity
around materiality, issuers would rely, in some part, on outside counsel to assist in the
monitoring, evaluating, preparing, and filing of the event notices required by the proposed
amendments. 86 One commenter, citing those same reasons, reported that 97% of survey
respondents indicated that outside counsel would be required when preparing an event notice
under the proposed amendments. 87 Another commenter reported that it would need to “enter
into new engagements with subject matter experts” to determine whether certain financial
obligations needed to be disclosed under the proposed amendments. 88
The Commission has considered these comments and is revising its cost estimates for
issuers. As discussed above, the Commission has clarified and narrowed the scope of the
amendments which will substantially lessen the burden on issuers of monitoring, evaluating,
preparing, and filing event notices required by the amendments to the Rule. The Commission
expects that any external costs that would have been incurred by issuers under the proposed
amendments would be similarly reduced by those changes. The Commission also believes that
the adopted amendments, by focusing on debt, debt-like, and debt-related obligations, will
reduce the need for issuers to obtain outside counsel to assist with an event notice. 89
84

See NABL 2, supra note 21.

85

28,000 issuers (revised estimate of issuers affected by continuing disclosure requirements under the Rule) 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) = $2,800,000
(total one-time cost for all issuers). See also Proposing Release, supra note 2, 82 FR at 13946 and note
153. 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.

86

See NAMA Letter; ABA Letter; Arlington SD Letter; GFOA Letter.

87

See GFOA Letter. According to the commenter, it surveyed 174 GFOA members primarily responsible for
debt disclosure in their respective jurisdictions.

88

See Arlington SD Letter.

89

See, e.g., NAMA Letter (stating the “too broad” definition of financial obligation would force issuers to
consult counsel for “many types of financings and financial obligations that do not affect a government[’s] .
. . ability to pay debt); see also BDA Letter (stating if the definition of financial obligation were focused on
competing debt, the responsibility to assess whether an event notice was needed would be handled by an
issuer’s debt finance department.).

29

However, the Commission acknowledges that some issuers may retain outside counsel to
assist in the evaluation and preparation of some of the more complex event notices as a result of
the amendments to the Rule. As discussed above, the Commission estimates that the
amendments will generate 2,200 additional event notices a year. The Commission believes a
reasonable estimate is that issuers may retain outside counsel on half of those event notices,
1,100, while preparing the other half solely internally. 90 The Commission further believes that,
for those 1,100 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 (including time
for monitoring and evaluation) will be carried by issuers internally (four hours), and the otherhalf of the burden will be carried by outside professionals retained by the issuer (four hours). 91
Thus, the Commission now estimates that issuers will incur an approximate annual total cost of
$1,760,000 92 to employ outside counsel to assist in the examination, preparation, and filing of
certain event notices.
Under the amendments to Rule 15c2-12 as adopted, the total cost to issuers would be
$16,229,000 annually, 93 with a one-time cost of $2,800,000. 94
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.

90

While some commenters stated that the assistance of outside counsel would be required on nearly all event
notices under the proposed amendments, the Commission believes that the narrowed scope of the adopted
amendments, as well as the examples provided in Section III.A.1. intended to assist issuers in determining
materiality under the Rule, will reduce the need for issuers to consult with outside counsel.

91

See NABL OMB Letter (survey of outside bond counsel: “If asked to prepare a summary of a financial
obligation, on average how many hours would be required to comply?” Median answer – 4 hours).

92

1,100 (number of event notices requiring outside counsel) x 4 (estimated time for outside attorney to assist
in the preparation of such event notice) x $400 (hourly wage for an outside attorney) = $1,760,000. 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.

93

$1,760,000 (annual cost to employ outside counsel to assist in preparation of certain event notices) +
$14,469,000 (annual cost to employ designated agents to submit event notices) = $16,229,000.

94

See supra note 85.

30