FR 2021-01663

The document titled "Submission for OMB Review; Comment Request," published by the Securities and Exchange Commission (SEC), addresses the agency's endeavor to extend the collection of information under Rule 12d2-2 and Form 25. This collection process is mandated by the Paperwork Reduction Act of 1995 and concerns the conditions and procedures for delisting a security from an exchange. The SEC is soliciting approval from the Office of Management and Budget (OMB) and inviting public comments regarding this request.

General Summary

The SEC's request pertains specifically to the approval for continuing the existing information collection involving Rule 12d2-2 and Form 25 under the Securities Exchange Act of 1934. This rule and form outline how securities may be withdrawn from listing on exchanges, thus providing clarity and procedural consistency for such actions. The SEC estimates that the process will require an aggregate of 940 hours annually across national securities exchanges and issuers.

Significant Issues or Concerns

There are particular concerns related to the estimations provided in the document. Firstly, while the SEC outlines a total compliance cost of $201,615, the document does not include a detailed breakdown of how these costs are calculated, leaving room for scrutiny on whether this expenditure is justified or wasteful.

Additionally, the SEC assumes an average response time of one hour per response for exchanges and issuers. However, there is no detailed explanation provided to justify this assumption. This could potentially lead to an underestimation of the actual time and financial burden on complying entities.

The document also employs complex legal language and frequently references specific sections and amendments of financial acts without providing simplified explanations. Such an approach may not be easily digestible for individuals without a legal or financial background, potentially limiting public understanding and engagement.

Public Impact

Broadly, the document illustrates how governmental bodies like the SEC manage the complexities of securities trading regulations by setting transparent procedures for delisting securities. On the one hand, this contributes to market integrity by ensuring that only compliant securities remain listed. On the other hand, the public benefits from this transparency, as it helps maintain confidence in the markets where they might invest.

Impact on Specific Stakeholders

For national securities exchanges and issuers, compliance with Rule 12d2-2 and Form 25 represents a necessary administrative burden. The process ensures that securities are delisted in an orderly and publicly accountable manner. However, the potential underestimation of compliance cost and burden could strain resources, particularly for smaller exchanges or issuers that may not have extensive legal and administrative teams.

By streamlining the delisting process while upholding procedural standards, the SEC seeks to balance regulatory compliance with operational efficiency. While larger exchanges like the New York Stock Exchange may have better-equipped resources to accommodate these requirements, smaller players in the market may feel a more pronounced impact due to the compliance costs and time associated with reporting.

In conclusion, the document emphasizes the importance of structured regulatory processes in financial markets but raises concern over the fairness of burden distribution and accessibility of information. Stakeholders are encouraged to provide feedback via public comments, which could help shape the final implementation of these regulatory extensions.

The document in question contains specific references to compliance costs associated with mandatory procedural requirements enforced by the Securities and Exchange Commission (SEC). This commentary will provide a summary of these financial references and relate them to identified issues, ensuring clarity for a general audience.

The document outlines the compliance costs related to Rule 12d2-2 and Form 25 under the Securities Exchange Act of 1934. These rules govern the delisting and deregistration of securities by issuers and national securities exchanges.

Summary of Financial Allocations

The total related internal compliance cost associated with the annual burden hours for respondents is specified as $201,615. This figure is divided between costs for the exchanges, amounting to $166,415, and costs for issuers, which total $35,200. These costs are incurred as part of the regulatory requirements to file Form 25 with the SEC when a security is delisted from an exchange.

Relation to Identified Issues

1. Lack of Cost Breakdown:

The document does not provide a detailed breakdown of these compliance costs, which is a noted issue. Without an explanation of how the $201,615 is distributed among various activities and administrative procedures, it's challenging to evaluate whether these expenditures are necessary or if there might be areas of financial inefficiency. A detailed breakdown would allow for a better assessment of whether the spending is justified or potentially wasteful.

1. Assumed Response Time:

The compliance costs are based on an assumed average response time of one hour per response for both exchanges and issuers. However, the lack of detailed justification for this average might result in underestimating the true financial burden on respondents. If the actual time required exceeds the estimated one hour, the associated costs might be significantly higher than the stated $201,615. This could impose an unexpected financial burden on the involved parties.

Overall, while the document provides a total cost figure, the absence of detailed financial justifications and breakdowns highlights potential areas for further clarification and improvement in assessing regulatory compliance costs. This would be beneficial for ensuring transparency and aiding stakeholders in understanding the financial impacts of these regulatory obligations.