DGL REVISED 2021 Rule 17Ad-15 Supporting Statement

SUPPORTING STATEMENT
for the Paperwork Reduction Act Information Collection Submission for
Rule 17Ad-15
OMB Control No. 3235-0409
A. JUSTIFICATION
1. Necessity of Information Collection
Congress enacted Section 206 of the Securities Enforcement Remedies and Penny Stock Reform
Act of 1990 ("Enforcement Act") (15 U.S.C. 78q-9(d)(5)), which gives the Securities and
Exchange Commission (“Commission”) explicit authority to implement rules to facilitate the
equitable treatment by transfer agents of financial institutions that issue signature guarantees.
The Commission adopted Rule 17Ad-15 (“Rule 17Ad-15”) (17 CFR 240.17Ad-15) under the
Securities Exchange Act of 1934 ("Act") (15 U.S.C. 78a et seq.). Rule 17Ad-15 implements
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Section 17A(d)(5) of the Act, as amended by Section 206 of the Enforcement Act. Congress
enacted Section 206 of the Enforcement Act to prohibit inequitable treatment of financial
institutions that issue signature guarantees of endorsers of securities. Section 206 of the
Enforcement Act reflects Congressional concern regarding the differential treatment of various
financial institutions (i.e., banks, brokers, dealers, savings and loan associations, and credit
unions) which may require non-exchange member brokers and dealers, savings and loan
associations, and credit unions or their customers to seek a guarantee from a bank or an exchange
member broker or dealer, with whom they may have no prior relationship, in order to effect the
transfer of ownership of securities. This practice imposes unnecessary burdens on financial
institutions facilitating transactions by and on behalf of investors. Rule 17Ad-15 implements a
Congressional directive to ameliorate inequitable treatment of eligible guarantor institutions and
requires transfer agents to establish written standards for the acceptance of signature guarantees.
Signature guarantees are essential to the transfer of registered-form securities. To effect a
transfer of ownership of the registered-form security, the security certificate must be endorsed by
the registered owner. Because it is not possible for an issuer, or its transfer agent, to know all
registered securities owners, the issuer or its transfer agent must rely on a financial intermediary
to guarantee that the endorsement on the certificate is genuine and effective. Thus, a signature
guarantee transfers the risk of, and liability for, forged endorsements or unauthorized transfers
from the issuer or its transfer agent to the guarantor. Because the acceptance of a signature
guarantee requires the transfer agent to determine whether the guarantor has sufficient financial
strength to satisfy any future claims in the event of a wrongful transfer of the security, state law
permits issuers and transfer agents to require signature guarantees by entities reasonably believed
to be responsible. State law further permits issuers and transfer agents to adopt financial
responsibility standards for guarantors, if those standards are not manifestly unreasonable.
Transfer agents generally accept the signature guarantees of institutions that have traditionally
offered signature guarantee services to their customers.

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Enforcement Act, Pub. L. No. 101-429, Section 206, 104 Stat. 941 (1990).

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Rule 17Ad-15 requires transfer agents to establish written standards for the acceptance or
rejection of guarantees of securities transfers from eligible guarantor institutions. Transfer
agents are also required to establish procedures, including written guidelines where appropriate,
to ensure that those standards are used by the transfer agent in determining whether to accept or
reject guarantees from eligible guarantor institutions. Rule 17Ad-15 requires registered transfer
agents to maintain a copy of their standards and procedures in an easily accessible place.
Transfer agents also are required to maintain, for a period of three years following the date of the
rejection, a record of all transfers rejected, along with the reason for the rejection, the
identification of the guarantor, and whether the guarantor failed to meet the transfer agent's
guarantee standard. These recordkeeping requirements assist the Commission and other
regulatory agencies with monitoring transfer agents and ensuring compliance with the rule.
2. Purpose and Use of the Information Collection
The information collected from the transfer agent allows the Commission to determine whether
the transfer agents are treating guarantee signature institutions equitably.
3. Consideration Given to Information Technology
Not applicable.
4. Duplication
The rule does not require substantially more than is required under the fair and reasonable
standards of the state Uniform Commercial Code requirements. The information required by the
rule is not located elsewhere.
5. Effect on Small Entities
While the requirements of the rule increase the recordkeeping burden of all transfer agents,
including small transfer agents, this detriment is more than outweighed by the decreased risk of a
failed signature guarantee and its associated liability.
6. Consequences of Not Conducting Collection
Since the information required by the rule needs to be collected only once and then updated
periodically, the collection of this information could not be conducted less frequently.
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).

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8. Consultations Outside the Agency
The required Federal Register notice with a 60-day comment period soliciting comments on this
collection of information was published. No public comments were received.
9. Payment or Gift
No payment or gift is provided to respondents.
10. Confidentiality
No assurance of confidentiality is provided.
11. Sensitive Questions
The information collection does not collect personally identifiable information. The agency has
determined that neither a PIA nor a SORN are required in connection with the collection of
information.
12. Information Collection Burden
There are approximately 366 registered transfer agents. The staff estimates that each transfer
agent will spend about 40 hours annually to comply with Rule 17Ad-15, or a total of
approximately 14,640 hours per year for all transfer agents (366 x 40 hours =14,640 hours).
Rule

Burden
Type

Rules 17Ad15

Record
Keeping

Total Aggregate Burden

Number of
Number of
Respondents Annual
Reponses
Per
Respondent
366
1

Time Per Total Burden
Response Per Burden Type
(Hours)
(Hours)
40

14,640
14,640

While not a cost burden under Item 13, with respect to the estimated 40 hours per year per
transfer agent to comply with Rule 17Ad-15, the Commission staff estimates that compliance
staff work at registered transfer agents results in an internal cost of compliance, at an estimated
hourly wage of $319, of $12,760 per year per transfer agent (40 hours x $319 per hour = $12,760
per year). 1 Therefore, the aggregate annual internal cost of compliance for the approximately
366 registered transfer agents is approximately $4,670,160 ($12,760 x 366= $4,670,160).

The estimated hourly wages used in this analysis were derived from reports prepared by the Securities
Industry and Financial Markets Association. See Securities Industry and Financial Markets Association, Office
Salaries in the Securities Industry – 2013 (2013), modified to account for an 1800-hour work year and multiplied by
5.35 to account for bonuses, firm size, employee benefits and overhead.
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13. Costs to Respondents
Not applicable; (a) it is not anticipated that respondents will have to incur any capital and start up
cost to comply with the rule; (b) it is not anticipated that the respondents will have to incur any
additional operational or maintenance cost (other than provided for in item number 12) to
comply with the rule.
14. Costs to Federal Government
Not applicable. All Commission review and processing would be conducted by existing
Commission staff so there are no additional federal government costs involved.
15. Changes in Burden
The total annual hourly burden decreased from approximately 14,920 hours to approximately
14,640 hours due to the decrease in the number of registered transfer agents from 373 to 366.
16. Information Collection Planned for Statistical Purposes
Not applicable. This information 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.