Regulation Analyst Certification
SECURITIES AND EXCHANGE COMMISSION
17 CFR PART 240
[Release No. 34-47591; File No. S7-30-02]
Regulation Analyst Certification
AGENCY: Securities and Exchange Commission.
ACTION: Notice of OMB Approval of Collections of Information.
SUMMARY: The Securities and Exchange Commission ("Commission") adopted new Regulation Analyst Certification ("Regulation AC") [17 CFR 242.500 through 242.505] under the Securities Exchange Act [17 U.S.C. 78, et seq.] on February 20, 2003. Regulation AC requires that brokers, dealers, and certain persons associated with a broker or dealer include in research reports certifications by the research analyst that the views expressed in the report accurately reflect his or her personal views, and disclose whether or not the analyst received compensation or other payments in connection with his or her specific recommendations or views. Broker-dealers would also be required to obtain periodic certifications by research analysts in connection with the analyst's public appearances. Certain provisions of the Regulation contain "collection of information" requirements within the meaning of the Paperwork Reduction Act [44 U.S.C. 3501 et seq.], and the Commission submitted the proposed collections of information to the Office of Management and Budget (OMB) for review. OMB has approved the collection of information requirements contained in Regulation AC.
EFFECTIVE DATE: April 14, 2003
FOR FURTHER INFORMATION CONTACT: James Brigagliano, Thomas Eidt, or Racquel Russell, at (202) 942-0772 in the Office of Risk Management and Control in the Division of Market Regulation, Securities and Exchange Commission, 450 5th Street, NW, Washington, DC 20549-0506.
I. Regulation Analyst Certification
Regulation Analyst Certification requires that broker-dealers and covered persons include in their research reports:
- A statement by the research analyst certifying that the views expressed in the research report accurately reflect such research analyst's personal views about the subject securities or issuers; and
- A statement by the research analyst certifying that no part of his or her compensation was, is, or will be directly or indirectly related to the specific recommendation or views contained in the research report; or
- A statement by the research analyst certifying that part or all of his or her compensation was, is, or will be directly or indirectly related to the specific recommendation or views contained in the research report. If the analyst did receive such related compensation, the statement must include the source and amount of such compensation, and the purpose of the compensation, and further disclose that such compensation may influence the recommendation in the research report.
Additionally, under Regulation AC, broker-dealers must make a record related to public appearances by research analysts. Specifically, a broker-dealer who publishes, circulates, or provides a research report prepared by a research analyst it or a covered person employs, would be required to make a record within thirty days after each calendar quarter in which the research analyst made the public appearance, that includes:
- A written statement by the research analyst certifying that the views expressed in each public appearance accurately reflected such research analyst's personal views about 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 public appearance.
In cases where the broker or dealer does not obtain a statement by the research analyst in connection with public appearances as described above, the broker-dealer must promptly notify its examining authority, designated pursuant to Section 17(d) of the Exchange Act and Rule 17d-2 thereunder, that the analyst did not provide certification in connection with public appearances. In addition, for 120 days following such notification, the broker-dealer must disclose in any research report it distributes authored by that analyst that the analyst did not provide certification specified in Rule 502 (a) of Regulation AC. Further, broker-dealers must keep and maintain these records pursuant to Rule 17a-4(b).
II. Collection of Information Requirements
Certain provisions of Regulation AC contain "collection of information" requirements within the meaning of the Paperwork Reduction Act of 1995.1 In proposing Regulation AC, the Commission estimated the burden hours for these collection of information requirements and solicited comments on the collection of information requirements and the burden estimate. The Commission submitted the proposed collection of information requirements to OMB for review as required pursuant to 44 U.S.C. 3507 and 5 CFR 1320.11. The Commission received one comment letter on the collection of information and has revised estimates in response to that comment.2
The purpose of requiring that research analysts certify that the views expressed in research reports and public appearances reflect their personal views, and requiring disclosure of information regarding whether analyst compensation is related to those specific recommendations or views, is to help bolster investor confidence in the quality of research. This, in turn, should help bolster investor confidence in the securities markets. The Commission estimates that the annual paperwork burden in hours is 11,296 for a cost in dollars of approximately $1,372,464.3
On March 5, 2003, OMB approved the collections of information contained in Regulation AC. Regulation AC (OMB Control No. 3235-0575) was adopted pursuant to the Securities Exchange Act of 1934 [17 U.S.C. 78, et seq.] on February 20, 2003. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid control number. We are providing this Notice to inform the public that the Commission has received OMB approval and OMB has issued a control number for this collection.
By the Commission.
Margaret H. McFarland
Dated: March 28, 2003
|1|| 44 U.S.C. 3501 et seq.
|2|| The Commission intends to submit a change sheet to OMB in order to reflect changes.
|3|| The Commission estimates that the proposed regulation would result in a total annual time
burden of approximately 11,296 hours [10,950 hours to comply with research report requirements + 346 hours to comply with public appearance requirements], and a total annual cost in dollars of approximately $1,372,464 [$1,330,425 to comply with the research report requirements + $42,039 to comply with the public appearance requirements].