Supporting Statement 17Ad-15 2018

SUPPORTING STATEMENT
for the Paperwork Reduction Act Information Collection Submission
for Rule 17Ad-15
A. Justification
(1) Necessity of Information Collection
Congress enacted Section 206 of the Securities Enforcement Remedies and Penny
Stock Reform Act of 1990 ("Enforcement Act"), 15 U.S.C. § 78q-9(d)(5), which gives
the Securities and Exchange Commission (“Commission”) explicit authority to
implement rules to facilitate the equitable treatment by transfer agents of financial
institutions that issue signature guarantees. The Commission adopted Rule 17Ad-15
under the Securities Exchange Act of 1934 ("Act"). Rule 17Ad-15 implements Section
1
17A(d)(5) of the Act, as amended by Section 206 of the Enforcement Act. Congress
enacted Section 206 of the Enforcement Act to prohibit inequitable treatment of financial
institutions that issue signature guarantees of endorsers of securities. Section 206 of the
Enforcement Act reflects Congressional concern regarding the differential treatment of
various financial institutions (i.e., banks, brokers, dealers, savings and loan associations,
and credit unions) which may require non-exchange member brokers and dealers, savings
and loan associations, and credit unions or their customers to seek a guarantee from a
bank or an exchange member broker or dealer, with whom they may have no prior
relationship, in order to effect the transfer of ownership of securities. This practice
imposes unnecessary burdens on financial institutions facilitating transactions by and on
behalf of investors. Rule 17Ad-15 implements a Congressional directive to ameliorate
inequitable treatment of eligible guarantor institutions and requires transfer agents to
establish written standards for the acceptance of signature guarantees.
Signature guarantees are essential to the transfer of registered-form securities. To
effect a transfer of ownership of the registered-form security, the security certificate must
be endorsed by the registered owner. Because it is not possible for an issuer, or its
transfer agent, to know all registered securities owners, the issuer or its transfer agent
must rely on a financial intermediary to guarantee that the endorsement on the certificate
is genuine and effective. Thus, a signature guarantee transfers the risk of, and liability
for, forged endorsements or unauthorized transfers from the issuer or its transfer agent to
the guarantor. Because the acceptance of a signature guarantee requires the transfer agent
to determine whether the guarantor has sufficient financial strength to satisfy any future
claims in the event of a wrongful transfer of the security, state law permits issuers and
transfer agents to require signature guarantees by entities reasonably believed to be
responsible. State law further permits issuers and transfer agents to adopt financial
responsibility standards for guarantors, if those standards are not manifestly
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Enforcement Act, Pub. L. No. 101-429, § 206, 104 Stat. 941 (1990).

unreasonable. Transfer agents generally accept the signature guarantees of institutions
that have traditionally offered signature guarantee services to their customers.
Rule 17Ad-15 requires transfer agents to establish written standards for the
acceptance or rejection of guarantees of securities transfers from eligible guarantor
institutions. Transfer agents are also required to establish procedures, including written
guidelines where appropriate, to ensure that those standards are used by the transfer agent
in determining whether to accept or reject guarantees from eligible guarantor institutions.
Rule 17Ad-15 requires registered transfer agents to maintain a copy of their standards
and procedures in an easily accessible place. Transfer agents also are required to
maintain, for a period of three years following the date of the rejection, a record of all
transfers rejected, along with the reason for the rejection, the identification of the
guarantor, and whether the guarantor failed to meet the transfer agent's guarantee
standard. These recordkeeping requirements assist the Commission and other regulatory
agencies with monitoring transfer agents and ensuring compliance with the rule.
(2) Purpose and Use of the Information Collection
The information collected from the transfer agent allows the Commission to
determine whether the transfer agents are treating guarantee signature institutions
equitably.
(3) Consideration Given to Information Technology
Not applicable.
(4) Duplication
The rule does not require substantially more than is required under the fair and
reasonable standards of the state Uniform Commercial Code requirements. The
information required by the rule is not located elsewhere.
(5) Effect on Small Entities
While the requirements of the rule increase the recordkeeping burden of all
transfer agents, including small transfer agents, this detriment is more than outweighed
by the decreased risk of a failed signature guarantee and its associated liability.
(6) Consequences of Not Conducting Collection
Since the information required by the rule needs to be collected only once and
then updated periodically, the collection of this information could not be conducted less
frequently.

(7) Inconsistencies with Guidelines in 5 CFR 1320.5(d)(2)
There are no special circumstances. This collection is consistent with the
guidelines in 5 CFR 1320.5(d)(2).
(8) Consultations Outside the Agency
The required Federal Register notice with a 60-day comment period soliciting
comments on this collection of information was published. No public comments were
received.
(9) Payment or Gift
No payment or gift is provided to respondents.
(10) Confidentiality
No assurance of confidentiality is provided.
(11) Sensitive Questions
Not applicable; no information of a sensitive nature is required. The information
collection does not collect any Personally Identifiable Information (PII).
(12) Burden of Information Collection
There are approximately 373 registered transfer agents. The staff estimates that
each transfer agent will spend about 40 hours annually to comply with Rule 17Ad-15, or
a total of 14,920 hours for all transfer agents (373 x 40 hours=14,920 hours).
While not a cost burden under Item 13, with respect to the estimated 40 hours per year
per transfer agent to comply with Rule 17Ad-15, the Commission staff estimates that
compliance staff work at registered transfer agents results in an internal cost of
compliance, at an estimated hourly wage of $283, of $11,320 per year per transfer agent
(40 hours x $283 per hour = $ 11,320 per year). 1 Therefore, the aggregate annual internal
cost of compliance for the approximately 373 registered transfer agents is approximately
$4,222,360 ($11,320 x 373= $4,222,360).
(13) Costs to Respondents
Not applicable; (a) it is not anticipated that respondents will have to incur any
capital and start up cost to comply with the rule; (b) it is not anticipated that the
1

The estimated hourly wages used in this analysis were derived from reports prepared by the
Securities Industry and Financial Markets Association. See Securities Industry and Financial Markets
Association, Office Salaries in the Securities Industry – 2013 (2013), modified to account for an 1800-hour
work year and multiplied by 5.35 to account for bonuses, firm size, employee benefits and overhead.

respondents will have to incur any additional operational or maintenance cost (other than
provided for in item number 12) to comply with the rule.
(14) Costs to Federal Government
Costs to the Federal Government in administering Rule 17Ad-15 result from
appropriate regulatory staff time and related overhead costs devoted to assuring
compliance by transfer agents with the requirements of the rule. Costs to the Federal
Government also include staff time devoted to responding to questions from transfer
agents regarding the rule. The staff estimates that approximately 80 hours of staff time
per year are devoted to Rule 17Ad-15. As a result, annual total operational cost
concerning Rule 17Ad-15 is estimated to be approximately $4,000 based on an average
hourly cost of $50. This figure is based on computation of the value of government staff
time devoted to this activity and the related overhead valued at 35% of the value of staff
time.
(15) Changes in Burden
agents.

The change in burden results from a decrease in the number of registered transfer
(16)

Information Collection Planned for Statistical Purposes

Not applicable. This information is not used for statistical purposes.
(17)

Display of OMB Approval Date

The Commission is not seeking approval to omit the expiration date.
(18) Exceptions to Certification
This collection complies with the requirements in 5 CFR 1320.9.
B. Collection of Information Employing Statistical Methods
This collection does not involve statistical methods.