FR 2025-03271

The document is a notice from the Securities and Exchange Commission (SEC), which indicates that a request has been submitted to the Office of Management and Budget (OMB) to extend an information collection under the Paperwork Reduction Act. This request concerns Rule 15a-6, which relates to foreign broker-dealers participating in specific activities with U.S. institutional investors under certain conditions.

General Summary

Rule 15a-6 provides conditional exemptions allowing foreign broker-dealers to engage with U.S. institutional investors without registering as broker-dealers, as long as they comply with specific requirements. The SEC suggests that fulfilling these requirements will take U.S. broker-dealers approximately 6,000 hours collectively each year, translating to an estimated cost of $1,000,000 annually. The document seeks public comments on the necessity and practicality of this information collection, its accuracy, and possible ways to reduce the compliance burden. This comment period is open until March 31, 2025.

Significant Issues and Concerns

One major issue is the reliance on cost estimates for compliance roles based on outdated data from 2013, potentially leading to inaccurate financial planning and forecasting for affected entities. Additionally, while the notice encourages feedback on ways to streamline the process using modern technologies, it fails to provide specific suggestions or indicate how public comments will be reviewed and implemented.

Furthermore, the document utilizes specific multiplier values in its cost calculations without explaining their derivation. This lack of transparency might cause confusion or skepticism regarding the legitimacy of the cost estimations, affecting stakeholders' trust in the process.

Public Impact

Broadly, this rule extension is relevant to U.S. broker-dealers and foreign broker-dealers engaged in cross-border trading activities. Its approval could ensure continuous compliance with existing regulatory frameworks, aiming to protect U.S. investors by providing a structured setup for foreign participation in U.S. markets.

Impact on Specific Stakeholders

For U.S. broker-dealers, the rule represents a routine compliance obligation potentially involving significant ongoing administrative effort and cost. The request for an extension underscores the need for maintaining records and satisfying regulatory requirements, which could place a strain on smaller broker-dealers with limited resources.

Foreign broker-dealers who choose to operate under these exemptions must align with the collection criteria, proving both a regulatory hurdle and a potential market access opportunity without needing full broker-dealer registration. Compliance with such obligations ensures operational legitimacy but could also impose extra administrative burdens.

In summary, while maintaining regulatory standards is crucial for market integrity, it is essential that the SEC considers advancing this rule's practical applicability with more current data and clear explanations to ensure it remains effective and efficient for all involved parties.

The document details a request by the Securities and Exchange Commission (SEC) for the extension of the collection of information requirements under Rule 15a-6, as stipulated by the Paperwork Reduction Act. This review pertains to the compliance requirements for U.S. registered broker-dealers when engaging with foreign broker-dealers. A key aspect of this document is the financial impact of maintaining compliance with these regulatory requirements.

Financial Summary

The SEC estimates that 2,000 U.S. registered broker-dealers will need to comply with the requirements of Rule 15a-6. Each broker-dealer is expected to spend an average of three hours annually conducting compliance tasks. This includes two hours of clerical staff time and one hour of managerial staff time. The combined financial implication for these compliance activities amounts to an annual internal labor cost of $1,000,000. This cost is calculated based on the hourly rates of $78 for a compliance clerk and $344 for a compliance manager.

The computation of these costs uses data from 2013, as reported by the Securities Industry and Financial Markets Association (SIFMA). Adjustments to hourly rates include multipliers of 2.93 for clerks and 5.35 for managers to account for bonuses, firm size, employee benefits, and overhead.

Issues with Financial References

One primary issue is the reliance on financial data from 2013, which may be outdated. Using dated salary information could misrepresent the current cost of compliance, especially given inflation and possible changes in the job market since then. This could lead to inaccuracies in estimating the true financial burden on broker-dealers today.

Moreover, the document does not clarify the rationale behind the multipliers used to adjust the hourly rates, potentially leading to questions about the validity of these calculations. Stakeholders and the public might find it necessary to request more current data or justifications for these multipliers to understand whether the proposed $1,000,000 estimate truly reflects contemporary expenses.

Potential for Cost Reduction

The document briefly mentions the possibility of minimizing burdens through automated collection techniques or other technologies. Yet, it does not provide concrete examples or explore these options in detail. Implementing advanced technologies could substantially reduce both the time and financial burden on broker-dealers, potentially offering a more streamlined, cost-effective approach to compliance with Rule 15a-6.

Conclusion

The financial references in the document highlight a substantial commitment of resources to ensure compliance with SEC regulations by U.S. registered broker-dealers. However, the reliance on outdated salary data and unexplained adjustments underscores a need for updated information. Additionally, exploring modernized methods for data collection could present opportunities for cost savings, which would benefit both the regulatory body and the broker-dealers it oversees. As the public has been invited to provide feedback, these areas could critically inform future adjustments to the compliance framework.