FR 2024-30768

In a recent document from the Securities and Exchange Commission (SEC), the agency seeks an extension for continuing the collection of information required under the Regulation Blackout Trade Restriction (Regulation BTR). This regulation obligates companies, also known as issuers, to notify their directors, executive officers, and the SEC about certain blackout periods. During these periods, trading in the company's securities is restricted. The SEC's request comes under the compliance requirements of the Paperwork Reduction Act, a law designed to minimize the paperwork burden on entities and ensure that information collections do not become needlessly onerous.

Summary of the Regulation

Regulation BTR is intended to enforce the requirements of the Sarbanes-Oxley Act of 2002. Specifically, Section 306(a) of the Act seeks to restrict unfair practices by prohibiting directors and executive officers from trading company securities during blackout periods—times when most employees are similarly restricted from trading in company retirement plans. This regulation ensures that trading is conducted fairly and transparently, reinforcing confidence in financial markets.

Significant Issues and Concerns

Several areas could potentially cause confusion or concern among the document's readers:

• Time Estimates for Compliance: The SEC estimates it takes about two hours per issuer to prepare a blackout notice and approximates 5 minutes per notice for distribution. However, the document does not provide detailed reasoning for these estimates, potentially raising questions about their accuracy and applicability across different organizations. Stakeholders might question whether the time estimates reflect the real-world burdens faced by companies.

• Complex Legal References: The document includes references to specific sections and regulations, such as 17 CFR 245.100-245.104, without offering clear explanations. This could alienate or confuse readers not familiar with legal or financial terminology, limiting their understanding of the requirements and implications of the regulation.

• Public Comment Process: While there are instructions for public comment, the guidelines do not specify which aspects of the information collection are open to feedback. This could lead to a lack of focus in the public's responses or discourage constructive participation.

Impact on the Public

For the general public, the regulation upholds transparency and fairness in financial markets. It bolsters confidence that directors and executives are not unfairly benefiting from insider information during blackout periods. This is essential for maintaining trust in publicly traded companies and the integrity of financial markets.

Impact on Stakeholders

Specific stakeholders, including companies (issuers), directors, and executive officers, are directly impacted:

• Issuers: Companies must invest time and resources to comply with the notice requirements, affecting operational efficiency. The lack of clear justification for the estimated time burdens might lead to financial and administrative strain, particularly for smaller entities with limited compliance capabilities.

• Directors and Executive Officers: These individuals face restrictions on trading, which could impact financial decisions. The regulation ensures they operate within the same constraints as other employees during blackout periods, promoting fairness and equality.

In conclusion, while the SEC's notice aims at reinforcing regulatory compliance and transparency, clarifications regarding the estimation processes and simplifying legal references would help stakeholders better understand and fulfill their roles. Enhanced guidance in the public comment section could improve public participation and feedback quality, leading to more informed regulatory decisions.