FR 2025-03278

General Summary

The document is a notice from the Securities and Exchange Commission (SEC), published in the Federal Register. It announces the SEC’s request for the Office of Management and Budget (OMB) to approve the continued collection of information under Rule 17Ad-11. This rule is part of the regulatory framework governing transfer agents, who manage the records of securities ownership. Transfer agents are required to report discrepancies known as "record differences" and "aged record differences" in securities records. These reports help the SEC and other regulatory agencies ensure that transfer agents are fulfilling their duties accurately and punctually. The SEC estimates the burden on the industry to be minimal, with compliance amounting to 0.5 hours of labor yearly at a cost of $39.

Significant Issues and Concerns

One notable issue in the document is the lack of an abstract in the metadata. An abstract might enhance clarity and understanding of the document’s purpose. Furthermore, the terminology used, such as "aged record difference," may be complex for those not familiar with securities regulation, potentially causing confusion.

The document calculates compliance burdens without a detailed breakdown of how these estimates were reached, which may raise questions about their reliability. Particularly, the assertion that small transfer agents experience minimal burden lacks specific data to substantiate this claim. Additionally, the determination of the $78 hourly rate used for compliance cost estimation is not explained, which could lead to doubts about its appropriateness and accuracy.

Impact on the Public

For the general public, this notice likely has little direct impact, as it primarily concerns the internal processes of transfer agents and regulatory oversight. However, ensuring the accuracy of records in securities transactions indirectly benefits the public by promoting trust and stability in financial markets.

Impact on Specific Stakeholders

Transfer agents are the primary stakeholders affected by this notice. The minimal estimated burden implies that the continuation of these reporting requirements should not impose significant additional costs. However, any underestimation of these burdens could disproportionately affect smaller transfer agents less equipped to absorb compliance costs.

Regulatory agencies, including the SEC, would benefit from the continued flow of information necessary to monitor the performance of transfer agents effectively. This oversight can help maintain the integrity of the securities market but also highlights the importance of ensuring that the compliance burden is justified by the utility of the information collected.

Overall, while the notice describes processes that are low impact for the public and the industry, transparency in the derivation and justification of compliance estimates could alleviate some concerns and build stakeholder confidence in the regulatory process.

The Federal Register document provides information regarding the financial aspects of compliance with Rule 17Ad-11 under the Securities Exchange Act of 1934, focusing on the burden that it imposes on recordkeeping transfer agents. Below is an analysis of the financial references included in the notice.

Summary of Financial References

The document highlights the costs associated with compliance for registered recordkeeping transfer agents who must report specific discrepancies in securities records. According to the estimates provided in the notice, the average total internal compliance cost for each report is $39, based on an assumed hourly rate of $78 for a compliance staff employee at these transfer agents. The total annual internal cost of compliance is calculated to be $39 for the estimated number of respondents, who collectively file approximately one report annually. These figures are part of the broader compliance framework required to ensure transfer agents are accurately recording securities transactions.

Analysis in Relation to Identified Issues

Cost Assumptions Without Detailed Justification:
One of the key issues identified in the document is the lack of detailed explanation regarding how the compliance cost and time burden estimates were derived. The compliance cost is based on a specific hourly rate of $78 for a compliance staff employee, but the document does not offer insight into how this rate was determined. This omission might raise questions about the validity and accuracy of this rate. Readers might wonder whether this rate accurately represents the true cost for all organizations involved, especially smaller transfer agents who may have different cost structures.

Simplified Burden Estimation for Small Transfer Agents:
The notice claims that the collection burden for small transfer agents is minimal because the necessary information is already available to them. However, this assumption is not supported by specific evidence or data. Without concrete examples or empirical support, it is challenging to conclusively determine whether the minimal burden claim holds true across all small entities. This lack of detailed support could lead to skepticism regarding the assertion and may warrant scrutiny by those interested in understanding the actual financial implications for smaller transfer agents.

Conclusion

The document provides an estimation of the financial compliance burden imposed by Rule 17Ad-11, which seems relatively low at $39 per report. However, the lack of transparency around the derivation of the hourly rate and the minimal compliance burden claim for small transfer agents raises questions about the adequacy of the financial estimates provided. For stakeholders, particularly small transfer agents, these assumptions are critical in assessing the true economic impact of such regulatory requirements. More detailed explanations and justifications for the assumptions used in calculating the costs could enhance the understanding and acceptance of the estimated financial obligations.