83 FR 64383 - Proposed Collection; Comment Request

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 240 (December 14, 2018)

Page Range		64383-64384
FR Document		2018-27093
Federal Register, Volume 83 Issue 240 (Friday, December 14, 2018)
[Federal Register Volume 83, Number 240 (Friday, December 14, 2018)]
[Notices]
[Pages 64383-64384]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-27093]


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SECURITIES AND EXCHANGE COMMISSION

SEC File No. 270-774, OMB Control No. 3235-0726]


Proposed Collection; Comment Request

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

Extension:
    Rules 300-304 of Regulation Crowdfunding (Intermediaries).

    Notice is hereby given that pursuant to the Paperwork Reduction Act 
of 1995 (``PRA'') (44 U.S.C. 3501 et seq.), the Securities and Exchange 
Commission (``Commission'') is soliciting comments on the collection of 
information provided for Rule 17Ab2-1 (17 CFR 240.17Ab2-1) and Form CA-
1: Registration of Clearing Agencies (17 CFR 249b.200) under the 
Securities Exchange Act of 1934 (``Exchange Act'') (15 U.S.C. 78a et 
seq.). The Commission plans to submit this existing collection

[[Page 64384]]

of information to the Office of Management and Budget (``OMB'') for 
extension and approval.
    Rules 300-304 of Regulation Crowdfunding enumerate the requirements 
with which intermediaries must comply to participate in the offer and 
sale of securities in reliance on Section 4(a)(6) of the Securities Act 
of 1933 (``Section 4(a)(6)''). Rule 300 requires an intermediary to be 
registered with the Commission as a broker or as a funding portal and 
be a member of a registered national securities association.\1\
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    \1\ Currently, FINRA is the only registered national securities 
association.
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    Rule 301 requires intermediaries to have a reasonable basis for 
believing that an issuer seeking to offer and sell securities in 
reliance on Section 4(a)(6) through the intermediary's platform 
complies with the requirements in Section 4A(b) of the Securities Act 
and the related requirements in Regulation Crowdfunding. Rule 302 
provides that no intermediary or associated person of an intermediary 
may accept an investment commitment in a transaction involving the 
offer or sale of securities made in reliance on Section 4(a)(6) until 
the investor has opened an account with the intermediary and the 
intermediary has obtained from the investor consent to electronic 
delivery of materials. Rule 303 requires an intermediary to make 
publicly available on its platform the information that an issuer of 
crowdfunding securities is required to provide to potential investors, 
in a manner that reasonably permits a person accessing the platform to 
save, download or otherwise store the information, for a minimum of 21 
days before any securities are sold in the offering, during which time 
the intermediary may accept investment commitments. Rule 303 also 
requires intermediaries to comply with the requirements related to the 
maintenance and transmission of funds. An intermediary that is a 
registered broker is required to comply with the requirements of Rule 
15c2-4 of the Securities Exchange Act of 1934 (``Exchange Act'') 
(Transmission or Maintenance of Payments Received in Connection with 
Underwritings).\2\ An intermediary that is a registered funding portal 
must direct investors to transmit the money or other consideration 
directly to a qualified third party that has agreed in writing to hold 
the funds for the benefit of, and to promptly transmit or return the 
funds to, the persons entitled thereto in accordance with Regulation 
Crowdfunding.
---------------------------------------------------------------------------

    \2\ 17 CFR 240.15c2-4.
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    The rules also require intermediaries to implement and maintain 
systems to comply with the information disclosure, communication 
channels, and investor notification requirements. These requirements 
include providing disclosure about compensation at account opening 
(Rule 302), obtaining investor acknowledgements to confirm investor 
qualifications and review of educational materials (Rule 303), 
providing investor questionnaires (Rule 303), providing communication 
channels with third parties and among investors (Rule 303), notifying 
investors of investment commitments (Rule 303), confirming completed 
transactions (Rule 303) and confirming or reconfirming offering 
cancellations (Rule 304).
    The Commission staff estimates that there are 62 intermediaries 
engaged in crowdfunding activity and therefore subject to Rules 300-
304. The Commission staff estimates that annualized industry burden 
would be 15,621 hours to comply with Rules 300-304. This estimate is 
composed of a one-time burden for new intermediaries to comply with the 
rules and develop the platform and ongoing burdens associated with 
maintaining the platform. The Commission staff estimates that the costs 
associated with complying with Rules 300-304 are estimated to be 
approximately a total amount of $5,772,327. These costs are composed of 
a one-time burden for new intermediaries to comply with the rules and 
develop the platform and ongoing burdens associated with maintaining 
the platform.
    Written comments are invited 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 to 
be 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. 
Consideration will be given to comments and suggestions submitted in 
writing within 60 days of this publication.
    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.
    Please direct your written comments to: Charles Riddle, Acting 
Director/Chief Information Officer, Securities and Exchange Commission, 
c/o Candace Kenner, 100 F Street NE, Washington, DC 20549, or send an 
email to: [email protected].

    Dated: December 10, 2018.
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2018-27093 Filed 12-13-18; 8:45 am]
BILLING CODE 8011-01-P
Federal Register / Vol. 83, No. 240 / Friday, December 14, 2018 / Notices 64383

definition of investment company under personnel of the client’s account the costs of Commission rules and
the Act. manager who know about the client’s forms. An agency may not conduct or
In 1997, the Commission adopted rule account and its management must be sponsor, and a person is not required to
3a–4, which clarifies that programs reasonably available to consult with the respond to a collection of information
organized and operated in accordance client. Each client also must retain unless it displays a currently valid
with the rule are not required to register certain indicia of ownership of all control number.
under the Investment Company Act or securities and funds in the account. Written comments are invited on: (a)
comply with the Act’s requirements.1 The Commission staff estimates that Whether the collections of information
These programs differ from investment 19,618,731 clients participate each year are necessary for the proper
companies because, among other things, in investment advisory programs relying performance of the functions of the
they provide individualized investment on rule 3a–4.4 Of that number, the staff Commission, including whether the
advice to the client. The rule’s estimates that 3,531,372 are new clients information has practical utility; (b) the
provisions have the effect of ensuring and 16,087,359 are continuing clients.5 accuracy of the Commission’s estimate
that clients in a program relying on the The staff estimates that each year the of the burdens of the collections of
rule receive advice tailored to the investment advisory program sponsors’ information; (c) ways to enhance the
client’s needs. staff engage in 1.5 hours per new client quality, utility, and clarity of the
For a program to be eligible for the and 1 hour per continuing client to information collected; and (d) ways to
rule’s safe harbor, each client’s account prepare, conduct and/or review minimize the burdens of the collections
must be managed on the basis of the interviews regarding the client’s of information on respondents,
client’s financial situation and financial situation and investment including through the use of automated
investment objectives and in accordance objectives as required by the rule.6 collection techniques or other forms of
with any reasonable restrictions the Furthermore, the staff estimates that information technology. Consideration
client imposes on managing the each year the investment advisory will be given to comments and
account. When an account is opened, program sponsors’ staff spends 1 hour suggestions submitted in writing within
the sponsor 2 (or its designee) must per client to prepare and mail quarterly 60 days of this publication.
obtain information from each client client account statements, including Please direct your written comments
regarding the client’s financial situation notices to update information.7 Based to Charles Riddle, Acting Director/Chief
and investment objectives, and must on the estimates above, the Commission Information Officer, Securities and
allow the client an opportunity to estimates that the total annual burden of Exchange Commission, C/O Candace
impose reasonable restrictions on the rule’s paperwork requirements is Kenner, 100 F Street NE, Washington,
managing the account.3 In addition, the 41,003,148 hours.8 DC 20549; or send an email to: PRA_
sponsor (or its designee) must contact The estimate of average burden hours Mailbox@sec.gov.
the client annually to determine is made solely for the purposes of the
Dated: December 10, 2018.
whether the client’s financial situation Paperwork Reduction Act. The estimate
or investment objectives have changed is not derived from a comprehensive or Eduardo A. Aleman,
and whether the client wishes to impose even a representative survey or study of Deputy Secretary.
any reasonable restrictions on the [FR Doc. 2018–27094 Filed 12–13–18; 8:45 am]
management of the account or 4 These estimates are based on an analysis of the BILLING CODE 8011–01–P
reasonably modify existing restrictions. number of individual clients from Form ADV Item
5D(a)(1) and (b)(1) of advisers that report they
The sponsor (or its designee) must also provide portfolio management to wrap programs as
notify the client quarterly, in writing, to indicated in Form ADV Item 5I(2)(b) and (c), and
SECURITIES AND EXCHANGE
contact the sponsor (or its designee) the number of individual clients of advisers that COMMISSION
regarding changes to the client’s identify as internet advisers in Form ADV Item
2A(11). From analysis comparing reported SEC File No. 270–774, OMB Control No.
financial situation, investment individual client assets in Form ADV Item 5D(a)(3) 3235–0726]
objectives, or restrictions on the and 5D(b)(3) to reported wrap portfolio manager
account’s management. assets in Form ADV Item 5I(2)(b) and (c), we Proposed Collection; Comment
Additionally, the sponsor (or its discount the estimated number of individual clients Request
designee) must provide each client with of non-internet advisers providing portfolio
management to wrap programs by 10%. These Upon Written Request, Copies Available
a quarterly statement describing all estimates are based on the number of new clients From: Securities and Exchange
activity in the client’s account during expected due to average year-over-year growth in
Commission, Office of FOIA Services,
the previous quarter. The sponsor and individual clients from Form ADV Item 5D(a)(1)
and (b)(1) (about 8%) and an assumed rate of yearly 100 F Street NE, Washington, DC
1 Status of Investment Advisory Programs Under
client turnover of 10%. 20549–2736
5 These estimates are based on the number of new
the Investment Company Act of 1940, Investment Extension:
Company Act Rel. No. 22579 (Mar. 24, 1997) [62 FR clients expected due to average year-over-year
growth in individual clients from Form ADV Item Rules 300–304 of Regulation
15098 (Mar. 31,1997)] (‘‘Adopting Release’’). In Crowdfunding (Intermediaries).
addition, there are no registration requirements 5D(a)(1) and (b)(1) (about 8%) and an assumed rate
under section 5 of the Securities Act of 1933 for of yearly client turnover of 10%. Notice is hereby given that pursuant
6 These estimates are based upon consultation
programs that meet the requirements of rule 3a–4. to the Paperwork Reduction Act of 1995
See 17 CFR 270.3a–4, introductory note. with investment advisers that operate investment
2 For purposes of rule 3a–4, the term ‘‘sponsor’’ advisory programs that rely on rule 3a–4. (‘‘PRA’’) (44 U.S.C. 3501 et seq.), the
refers to any person who receives compensation for 7 The staff bases this estimate in part on the fact Securities and Exchange Commission
sponsoring, organizing or administering the that, by business necessity, computer records (‘‘Commission’’) is soliciting comments
program, or for selecting, or providing advice to already will be available that contain the on the collection of information
amozie on DSK3GDR082PROD with NOTICES1

clients regarding the selection of, persons information in the quarterly reports.
responsible for managing the client’s account in the 8 This estimate is based on the following provided for Rule 17Ab2–1 (17 CFR
program. calculation: (16,087,359 continuing clients × 1 240.17Ab2–1) and Form CA–1:
3 Clients specifically must be allowed to designate hour) + (3,531,372 new clients × 1.5 hours) + Registration of Clearing Agencies (17
securities that should not be purchased for the (19,618,731 total clients × (0.25 hours × 4 CFR 249b.200) under the Securities
account or that should be sold if held in the statements)) = 41,003,148 hours. We note that the
account. The rule does not require that a client be breakdown of burden hours between professional
Exchange Act of 1934 (‘‘Exchange Act’’)
able to require particular securities be purchased for and staff time discussed below may not equal the (15 U.S.C. 78a et seq.). The Commission
the account. estimate of total burden hours due to rounding. plans to submit this existing collection

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64384 Federal Register / Vol. 83, No. 240 / Friday, December 14, 2018 / Notices

of information to the Office of persons entitled thereto in accordance Please direct your written comments
Management and Budget (‘‘OMB’’) for with Regulation Crowdfunding. to: Charles Riddle, Acting Director/Chief
extension and approval. The rules also require intermediaries Information Officer, Securities and
to implement and maintain systems to Exchange Commission, c/o Candace
Rules 300–304 of Regulation
comply with the information disclosure, Kenner, 100 F Street NE, Washington,
Crowdfunding enumerate the
communication channels, and investor DC 20549, or send an email to: PRA_
requirements with which intermediaries
notification requirements. These Mailbox@sec.gov.
must comply to participate in the offer requirements include providing
and sale of securities in reliance on Dated: December 10, 2018.
disclosure about compensation at
Section 4(a)(6) of the Securities Act of Eduardo A. Aleman,
account opening (Rule 302), obtaining
1933 (‘‘Section 4(a)(6)’’). Rule 300 Deputy Secretary.
investor acknowledgements to confirm
requires an intermediary to be registered investor qualifications and review of [FR Doc. 2018–27093 Filed 12–13–18; 8:45 am]
with the Commission as a broker or as educational materials (Rule 303), BILLING CODE 8011–01–P
a funding portal and be a member of a providing investor questionnaires (Rule
registered national securities 303), providing communication
association.1 channels with third parties and among SECURITIES AND EXCHANGE
investors (Rule 303), notifying investors COMMISSION
Rule 301 requires intermediaries to
have a reasonable basis for believing of investment commitments (Rule 303), [Release No. 34–84778; File No. SR–
that an issuer seeking to offer and sell confirming completed transactions CboeEDGX–2018–058]
securities in reliance on Section 4(a)(6) (Rule 303) and confirming or
reconfirming offering cancellations Self-Regulatory Organizations; Cboe
through the intermediary’s platform
(Rule 304). EDGX Exchange, Inc.; Notice of Filing
complies with the requirements in
The Commission staff estimates that and Immediate Effectiveness of a
Section 4A(b) of the Securities Act and Proposed Rule Change Relating To
the related requirements in Regulation there are 62 intermediaries engaged in
crowdfunding activity and therefore Amend Its Provision Related to Its Risk
Crowdfunding. Rule 302 provides that Monitor Mechanism
no intermediary or associated person of subject to Rules 300–304. The
an intermediary may accept an Commission staff estimates that December 10, 2018.
investment commitment in a transaction annualized industry burden would be Pursuant to Section 19(b)(1) of the
15,621 hours to comply with Rules 300– Securities Exchange Act of 1934 (the
involving the offer or sale of securities
304. This estimate is composed of a one- ‘‘Act’’),1 and Rule 19b–4 thereunder,2
made in reliance on Section 4(a)(6) until
time burden for new intermediaries to notice is hereby given that on November
the investor has opened an account with
comply with the rules and develop the 30, 2018, Cboe EDGX Exchange, Inc.
the intermediary and the intermediary
platform and ongoing burdens (the ‘‘Exchange’’ or ‘‘EDGX’’) filed with
has obtained from the investor consent associated with maintaining the
to electronic delivery of materials. Rule the Securities and Exchange
platform. The Commission staff Commission (the ‘‘Commission’’) the
303 requires an intermediary to make estimates that the costs associated with
publicly available on its platform the proposed rule change as described in
complying with Rules 300–304 are Items I and II below, which Items have
information that an issuer of estimated to be approximately a total
crowdfunding securities is required to been prepared by the Exchange. The
amount of $5,772,327. These costs are Exchange filed the proposal as a ‘‘non-
provide to potential investors, in a composed of a one-time burden for new
manner that reasonably permits a controversial’’ proposed rule change
intermediaries to comply with the rules pursuant to Section 19(b)(3)(A)(iii) of
person accessing the platform to save, and develop the platform and ongoing
download or otherwise store the the Act 3 and Rule 19b–4(f)(6)
burdens associated with maintaining the thereunder.4 The Commission is
information, for a minimum of 21 days platform.
before any securities are sold in the publishing this notice to solicit
Written comments are invited on: (a)
offering, during which time the comments on the proposed rule change
Whether the proposed collection of
intermediary may accept investment from interested persons.
information is necessary for the proper
commitments. Rule 303 also requires performance of the functions of the I. Self-Regulatory Organization’s
intermediaries to comply with the Commission, including whether the Statement of the Terms of Substance of
requirements related to the maintenance information shall have practical utility; the Proposed Rule Change
and transmission of funds. An (b) the accuracy of the Commission’s Cboe EDGX Exchange, Inc. (the
intermediary that is a registered broker estimates of the burden of the proposed ‘‘Exchange’’ or ‘‘EDGX’’) proposes to
is required to comply with the collection of information; (c) ways to amend its provision related to its Risk
requirements of Rule 15c2–4 of the enhance the quality, utility, and clarity Monitor Mechanism. The text of the
Securities Exchange Act of 1934 of the information to be collected; and proposed rule change is provided in
(‘‘Exchange Act’’) (Transmission or (d) ways to minimize the burden of the Exhibit 5.
Maintenance of Payments Received in collection of information on The text of the proposed rule change
Connection with Underwritings).2 An respondents, including through the use is also available on the Exchange’s
intermediary that is a registered funding of automated collection techniques or website (http://www.cboe.com/
portal must direct investors to transmit other forms of information technology. AboutCBOE/CBOELegal
the money or other consideration Consideration will be given to RegulatoryHome.aspx), at the
directly to a qualified third party that comments and suggestions submitted in Exchange’s Office of the Secretary, and
amozie on DSK3GDR082PROD with NOTICES1

has agreed in writing to hold the funds writing within 60 days of this at the Commission’s Public Reference
for the benefit of, and to promptly publication. Room.
transmit or return the funds to, the An agency may not conduct or
sponsor, and a person is not required to 1 15 U.S.C. 78s(b)(1).
1 Currently, FINRA is the only registered national respond to, a collection of information 2 17 CFR 240.19b–4.
securities association. under the PRA unless it displays a 3 15 U.S.C. 78s(b)(3)(A)(iii).
2 17 CFR 240.15c2–4. currently valid OMB control number. 4 17 CFR 240.19b–4(f)(6).

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Document Created: 2018-12-14 03:50:51
Document Modified: 2018-12-14 03:50:51
Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Notices
FR Citation		83 FR 64383