Supporting Statement A

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SUPPORTING STATEMENT
for the Paperwork Reduction Act Information Collection Submission for
Rule 15g-9
OMB Control #: 3235-0385
A.

JUSTIFICATION
1.

Necessity of Information Collection

The Commission adopted Rule 15g-9 (17 CFR 240.15g-9) pursuant to Section 15(c)(2) of
the Securities Exchange Act of 1934 (“Exchange Act”), which authorizes the Commission to
promulgate rules reasonably designed to prevent any fraudulent, deceptive, or manipulative
device or contrivance in connection with the over-the-counter (“OTC”) market. 1 Rule 15g-9
applies to transactions in penny stocks as defined in Exchange Act Section 3(a)(51) and Rule
3a51-1 promulgated thereunder, which generally refers to non-exchange traded OTC equity
securities whose issuers do not meet certain listing standards.
In general, prior to effecting a person’s transaction in a penny stock, Rule 15g-9 requires
a broker-dealer to: (1) approve their account for transactions in penny stocks by, among other
things: (a) obtaining from them information concerning their financial situation, investment
experience, and investment objectives; (b) reasonably determining that transactions in penny
stocks are suitable for them, and that he or she (or their independent adviser) has sufficient
knowledge and experience in financial matters and is capable of evaluating the risks of
transactions in penny stocks; and (c) delivering to them a written statement: (i) setting forth the
basis on which the broker-dealer made the suitability determination; (ii) stating in a highlighted
format that it is unlawful for the broker-dealer to effect a transaction in a penny stock unless the
broker-dealer has received, prior to the transaction, a written agreement to the transaction from
the person; and (iii) stating in a highlighted format immediately preceding the person’s signature
line that: (A) the broker-dealer is required to provide the person with the written statement; and
(B) the person should not sign and return the written statement to the broker-dealer if it does not
accurately reflect their financial situation, investment experience, and investment objectives; and
(d)(i) obtaining from the person a signed and dated copy of the statement; and (ii) waiting at least
two business days after sending the statement to effect the penny stock transaction. 2
Rule 15g-9 is necessary to help prevent broker-dealers use of fraudulent, high pressure
sales tactics to sell penny stocks to unsophisticated investors. The scope of Rule 15g-9 is limited
in order to exclude transactions that are less likely to be subject to abusive, high-pressure sales
practices. Similarly, exemptions from Rule 15g-9 are provided for, among other things: (1)
1

See Exchange Act Release No. 51983 (Jul. 7, 2005), 70 FR 40614 (Jul. 13, 2005) (stating that Rule 15g-9
was originally adopted as Rule 15c2-6 to address sales practices abuses involving certain speculative lowpriced securities being traded in the OTC market. See Exchange Act Release No. 27160 (Aug. 22, 1989),
54 FR 35468 (Aug. 28, 1989)).

2

The record retention requirements for broker-dealer records, including records required by Rule 15g-9, are
in Rule 17a-4 (OMB Control No. 3235-0279). Such records must be preserved for a period of not less than
three years, the first two in an easily accessible place.

transactions in which the purchaser is an institutional accredited investor; 3 (2) transactions in
which the purchaser is an established customer of the broker-dealer; 4 (3) transactions that are not
recommended by the broker-dealer; 5 and (4) transactions by a broker-dealer: (a) who has not
been a market maker in the penny stock that is the subject of the transaction in the immediately
preceding twelve months, and (b) whose sales-related revenue from transactions in penny stocks
during certain specified time periods did not exceed five percent of its total sales-related revenue
from transactions in securities. 6
2.

Purpose and Use of Information Collection

In adopting Rule 15g-9, the Commission sought to combat the unscrupulous, highpressure sales tactics of certain broker-dealers by imposing objective and readily reviewable
requirements that discipline the process by which investors are induced to purchase penny
stocks. The requirements were intended to assist investors in protecting themselves from
fraudulent sales practices, and to reinforce the standards of care a broker-dealer owes to its
customers, including the suitability obligation under self-regulatory organization (“SRO”) rules. 7
An essential aspect of high-pressure “boiler-room” operations is the constant solicitation
of new, and often unsophisticated, investors. Rule 15g-9 helps reins in this process by
establishing procedures that must be followed before penny stocks are recommended to
unsophisticated investors. The procedures are intended to increase the likelihood that a brokerdealer will make a suitability determination by requiring the broker-dealer to obtain and consider
sufficient information about the investor, such as their financial situation, investment experience,
and investment objectives.
In addition, Rule 15g-9 helps protect investors from fraudulent sales practices in penny
stocks by, among other things, requiring that the person agree in writing to the penny stock
transaction and requiring that the broker-dealer provide a copy of its suitability determination to
the person prior to the person’s commitment to purchase a penny stock. As a result, the former
provides the investors with an opportunity to make an investment decision outside of a pressured
telephone conversation with a salesperson, and the latter provides the person an opportunity to
review the determination and decide whether the broker-dealer has made a good faith attempt to
consider the person’s financial situation, investment experience, and investment objectives.
3.

Consideration Given to Information Technology

The majority of broker-dealers use technology to comply with Rule 15g-9.

3

See Rule 15g-9(c)(1) and Rule 15g-1(b).

4

Rule 15g-9(c)(3).

5

See Rule 15g-9(c)(1) and Rule 15g-1(e).

6

See Rule 15g-9(c)(1) and Rule 15g-1(a).

7

See, e.g., FINRA Rule 2111 (Suitability).

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4.

Duplication

There is no duplication of information. A broker-dealer is not otherwise required to
deliver to an investor the written statement setting forth, among other things, the basis for its
reasonable determination that: (1) transactions in penny stocks are suitable for the investor, and
(2) the investor (or their independent adviser) has sufficient knowledge and experience in
financial matters and is capable of evaluating the risks of transactions in penny stocks, or obtain
the investor’s signed and dated copy of the statement.
5.

Effect on Small Entities

The collection of information required under Rule 15g-9 is not unduly burdensome for
small entities.
6.

Consequences of Not Conducting Collection

The consequences of not requiring the collection of information specified in Rule 15g-9
would be a substantial weakening of the rule’s effectiveness at combating fraudulent, deceptive,
or manipulative device or contrivance in connection transaction in penny stocks.
7.

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

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

Consultations Outside the Agency

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

Payment or Gift

No payments or gifts are provided to any respondents.
10.

Confidentiality

Not applicable.
11.

Sensitive Questions

The Information Collection does not collect information about individuals, therefore, a
PIA, SORN, and PAS are not required.

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12.

Information Collection Burden

As of May 1, 2026, there are 3,248 registered broker-dealers. Of the 3,248 brokerdealers, approximately five percent, or 162 broker-dealers, are engaged in penny stock
transactions and thereby subject to Rule 15g-9 (5% x 3,248 broker-dealers = 162 broker-dealers).
As indicated above, the burden of the rule on a respondent varies widely depending on the
frequency with which new persons are solicited. The Commission estimates that each of these
broker-dealers effects 3 persons’ first penny stock transaction per week. Thus, each respondent
delivers approximately 156 penny stock written statements per year (52 weeks per year x 3
transactions per week) for a total aggregate of approximately 25,272 responses per year (162
respondents x 156 penny stock written statements per year).
The Commission estimates that a broker-dealer would take approximately one-half hour
per new penny stock investor to obtain, review, and process (including delivering to the person)
the information required by Rule 15g-9, or approximately 78 hours per year (156 new persons x
.5 hours), for a total aggregate burden of approximately 12,636 hours per year (162
respondents x 78 hours per year) for this third-party disclosure obligation.
Rule

Burden
Type

Respondents

Rule 15g-9
(Written
Statement)
Total
Aggregate
Burden

Thirdparty
disclosure

162

13.
rule.

Annual
Responses per
Respondent
156

Time per
Response
(Hours)
1/2

Total
burden
(Hours)
12,636
12,636

Costs to Respondents

There are no capital, start-up, or other external costs on respondents associated with the
14.

Costs to Federal Government

Not applicable. There is no requirement to report the information collections to the SEC.
15.

Changes in Burden

The total annual burden hours decreased from 13,650 to 12,636 due to a decrease in the
number of registered broker-dealers we estimate will be engaged in penny stock transactions
from 175 to 162.

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16.

Information Collection Planned for Statistical Purposes

Not applicable. 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.

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