Final SIFMA SEC Reg AC Paperwork Reduction Act filing response- SEC File no. 270-517 OMB Control No 3235-0575

June 25, 2018
Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549-1090
Attention: Pamela Dyson, Director/Chief Information Officer

Re:

Regulation AC; SEC File No. 270–517, OMB Control No. 3235–0575

Dear Director Dyson:
The Securities Industry and Financial Markets Association (“SIFMA”)1 is writing to
respond to the invitation of the Securities and Exchange Commission (“Commission”)
for public comment, pursuant to the Paperwork Reduction Act of 1995, on the existing
collection of information provided for by Regulation Analyst Certification
(“Regulation AC”). In that regard, you have invited comment on: (a) whether the
proposed collection of information is necessary for the proper performance of the
functions of the Commission, including whether the information shall have practical
utility; (b) the accuracy of the Commission’s estimates of the burden of the proposed
collection of information; (c) ways to enhance the quality, utility, and clarity of the
information collected; and (d) ways to minimize the burden of the collection of
information on respondents, including through the use of automated collection
techniques or other forms of information technology. Our members continue to be
supportive of Regulation AC in principle but have raised concerns about the utility and
burden associated with certain information collection requirements related to public
appearances by research analysts.
Under Regulation AC, broker-dealers must make and keep records related to public
appearances by research analysts. Specifically, if a broker-dealer publishes, circulates
or provides a research report prepared by a research analyst employed by the brokerdealer or a covered person, the broker-dealer is required to make a record within thirty
days after each calendar quarter in which the research analyst made any public
appearance, that includes:

1

SIFMA is the voice of the U.S. securities industry. We represent the broker-dealers, banks and asset managers
whose nearly 1 million employees provide access to the capital markets, raising over $2.5 trillion for businesses and
municipalities in the U.S., serving clients with over $18.5 trillion in assets and managing more than $67 trillion in
assets for individual and institutional clients including mutual funds and retirement plans. SIFMA, with offices in
New York and Washington, D.C., is the U.S. regional member of the Global Financial Markets Association
(GFMA). For more information, visit http://www.sifma.org.
New York | Washington
120 Broadway, 35th Floor | New York, NY 10271-0080 | P: 212.313.1200 | F: 212.313.1301
www.sifma.org

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A statement by the research analyst attesting that the views expressed by the
research analyst in all public appearances during the calendar quarter accurately
reflected the research analyst's personal views at that time about any and all of
the subject securities or issuers; and

•

A written statement by the research analyst certifying that no part of such
research analyst's compensation was, is, or will be directly or indirectly related
to any specific recommendations or views expressed in any such public
appearance.

Our members believe that the burden of making and tracking these statements is quite
significant and has been underestimated historically by the staff. While the current
Paperwork Reduction Act request for comment does not break out the costs identified
for each underlying obligation of Regulation AC, the staff estimated in its adopting
release that, on average, there are approximately 2,076 public appearances by all
registered research analysts per quarter or 4 per year for just 10% of the estimated
population of 5,186 research analysts2. However, a survey of SIFMA’s Research
Committee with firms of varying size suggests that the number is actually quite higher,
with an average of 11-15 public appearances annually per each analyst, or more than
20x that estimated by the SEC when adopting Regulation AC. The cost to develop and
maintain the technology to capture these statements, and the burden on analysts and
compliance to ensure the certifications are made, is quite high given the number of
appearances in a given year. Perhaps more importantly, previous estimates of the time
and cost of compliance do not appear to take full account of the central compliance,
technology and administration resources necessary for the statement collection process,
the cost of which poses an undue burden to our members. Our survey of members
indicates that compliance alone at some firms can devote as many as 60-80 hours per
quarter to compile, vet, and reconcile the quarterly statements.
At the same time, the benefit gained by requiring such statements certifications is
minimal. Regulation AC already imposes an identical certification for all written
research. FINRA Rule 2241 and 2242 also impose requirements to prevent and limit
conflicts of interest and otherwise ensure the independence and integrity of research
analysts and the views they express. In that regard, FINRA 2241 and 2242 effectively
require that research analysts’ discussions of securities or issuers during public
appearances be consistent with their published research views. These requirements
also necessitate policies governing the identification and management of conflicts of
interest related to compensation and public appearances, as well as recordkeeping
related to public appearances.

2

We note the current Paperwork Reduction Act request for comment relies on the estimated 5,186 research analysts
referenced in the adopting release. According to Discovery Data, there are 7,350 analysts who have the 86/87
research analyst license currently. We acknowledge that all these registrants may not be active analysts in the
industry but with the introduction of FINRA Rule 2242, there is a risk that the overall number of active analysts
may also be underrepresented in the cost estimates.

Given the existing requirements under FINRA regulation, our members do not believe
that the quarterly research analyst statements required under Regulation AC for public
appearances serve any meaningful or significant utility. Such statements are not public
documents and rather serve only to internally document an analyst’s compliance with
certain standards which FINRA Rule 2241 and 2242 already address.
We strongly believe that the costs and burdens associated with the quarterly research
analyst statement requirement clearly outweigh any perceived benefit and we
recommend that Regulation AC be amended to remove the requirement to obtain
quarterly analyst statements related to public appearances. We believe this change will
better balance the costs and benefits of the Regulation AC information collection
requirements while in no way impairing the underlying regulatory objectives. We
continue to support well-tailored regulation that ensures the independence and integrity
of research.

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If you have any questions or require additional information, please do not hesitate to
contact the undersigned at (212) 313-1118.
Very truly yours,

Sean C. Davy
Managing Director, Capital Markets Division
Securities Industry and Financial Markets Association