2023-25355. Submission for OMB Review; Comment Request; Extension: Rule 15g-9

Upon Written Request, Copies Available From: Securities and Exchange Commission, Office of FOIA Services, 100 F Street NE, Washington, DC 20549–2736

Notice is hereby given that, pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.) (“PRA”), the Securities and Exchange Commission (“Commission”) has submitted to the Office of Management and Budget (“OMB”) a request for extension of the previously approved collection of information discussed below.

Section 15(c)(2) of the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) (the “Exchange Act”) authorizes the Commission to promulgate rules that prescribe means reasonably designed to prevent fraudulent, deceptive, or manipulative practices in connection with over-the-counter (“OTC”) securities transactions. Pursuant to this authority, the Commission in 1989 adopted Rule 15c2–6, which was subsequently redesignated as Rule 15g–9 (17 CFR 240.15g–9) (the “Rule”). The Rule requires broker-dealers to produce a written suitability determination for, and to obtain a written customer agreement to, certain recommended transactions in penny stocks that are not registered on a national securities exchange, and whose issuers do not meet certain minimum financial standards. The Rule is intended to prevent the indiscriminate use by broker-dealers of fraudulent, high pressure telephone sales campaigns to sell penny stocks to unsophisticated customers.

The Commission staff estimates that approximately five percent of registered broker-dealers, or 175 broker-dealers,^[1] are subject to the Rule (5% × approximately 3,497 registered broker-dealers = 175 broker-dealers). As indicated above, the burden of the Rule on a respondent varies widely depending on the frequency with which new customers are solicited. On average, for all respondents, the staff has estimated that respondents process three new customers per week, or approximately 156 new customers requiring suitability determinations per year. We also estimate that a broker-dealer would take approximately one-half hour per new customer in obtaining, reviewing, and processing (including transmitting to the customer) the information required by Rule 15g–9, and each respondent would consequently spend 78 hours annually (156 new customers × .5 hours) obtaining the information required in the Rule. This would result in 27,300 annual responses per year for all respondents (175 respondents × 156 new customer suitability determinations per year). We determined, based on the estimate of 175 broker-dealer respondents, that the annual hour burden of Rule 15g–9 is 13,650 hours (175 respondents × 78 hours).

The broker-dealer must keep the written suitability determination and customer agreement required by the Rule for at least three years. Completing the suitability determination and obtaining the customer agreement in writing is mandatory for broker-dealers who effect transactions in penny stocks and do not qualify for an exemption, but does not involve the collection of confidential information.

An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information under the PRA unless it displays a currently valid OMB control number.

The public may view background documentation for this information collection at the following website: www.reginfo.gov. Find this particular information collection by selecting “Currently under 30-day Review—Open for Public Comments” or by using the search function. Written comments and recommendations for the proposed information collection should be sent by December 18, 2023 to (i) www.reginfo.gov/​public/​do/​PRAMain and (ii) David Bottom, Director/Chief Information Officer, Securities and Exchange Commission, c/o John Pezzullo, 100 F Street NE, Washington, DC 20549, or by sending an email to: [e-mail].

Dated: November 13, 2023.

Sherry R. Haywood,

Assistant Secretary.

Footnotes

1.  As of July 1, 2023, there are 3,497 registered broker-dealers. 5% of 3,497 is 174.85, rounded up to 175.