as mentioned earlier, Section 18 does not create strict liability for
misstatements in ``filed'' information and requires that a plaintiff
establish that it relied on the misleading information in purchasing or
selling a security and suffered damages caused by that reliance. On the
other hand, under the final rule, this potential liability for
misleading pay ratio disclosure could make registrants more accountable
for the disclosure than if we instead permitted the disclosure to be
`furnished' and result overall in fewer inaccuracies in the required
pay ratio disclosure. To the extent that registrants perceive there to
be a greater likelihood of private litigation under the final rule than
if they were permitted to ``furnish'' the information, registrants may
decide to apply a more costly process to identify the median employee,
or retain additional counsel, thus increasing compliance costs.
l. Compliance Date
    Section 953(b) does not specify a date when registrants must begin
to comply with the final rule. In a change from the Proposing Release,
the final rule requires that a registrant must begin to comply with
Item 402(u) with respect to compensation for the registrant's first
full fiscal year commencing on or after January 1, 2017.
    As discussed above, the change from the proposal provides calendar
year-end filers and registrants with fiscal years beginning January 1,
2015 until the day before the final rule's effectiveness one additional
year to provide their pay ratio disclosure relative to the proposal.
The final rule also changes the compliance schedule for registrants
with fiscal years starting on or after effectiveness through December
30, 2015. These registrants will receive two additional years to
provide their pay ratio disclosure relative to the proposal. Assuming a
hypothetical effective date of November 1, 2015, we estimate that this
change will lead to a one-time cost deferral of approximately $147
million for two years and to savings of approximately between $27.3
million and $212 million for 223 registrants subject to the final rule
that have fiscal

years that end from October 31, 2015, through December 30, 2015 \694\
and a one-time cost deferral of approximately $1,169 million for one
year and to savings of approximately between $109 million and $842
million for the remaining 3,348 registrants subject to the final
rule.\695\ For this estimation, we identified the fiscal year ends for
all affected registrants. We found that 223 registrants have fiscal
years that end between October 31 and December 30, of which 130 are
multinational registrants and 93 are registrants with U.S.-only
segments. We found that of the remaining 3,348 registrants estimated to
be subject to the final rule, 1,340 are multinational registrants and
2,008 are registrants with U.S.-only segments.\696\
---------------------------------------------------------------------------

    \694\ For these registrants, the initial compliance cost is
assumed to be deferred for two years. There are 130 multinational
registrants and 93 registrants with U.S.-only segments. The annual
cost for the 130 multinational registrants is equal to the product
of their cumulative number of employees (3,354,869) and the cost per
employee ($38.04), or a total of approximately $128 million. The
annual cost for the 93 registrants with U.S.-only segments is equal
to the product of their cumulative number of employees (1,018,780)
and the cost per employee ($19.02), or a total of approximately $19
million. Thus, the total initial compliance cost for the 223
registrants that is deferred for two years is approximately $147
million. These registrants also will not have to incur two years of
ongoing compliance costs. Assuming the ongoing cost as a percentage
of the initial cost is between one-third of 28% (9.3%) and 72% of
the initial cost, the cost savings are estimated to be between ($147
million*9.3%)*2 = $27.3 million and ($147 million*72%)*2 = $212
million. See Sections III.C.2.c and III.D.2.e.
    \695\ For these registrants, the initial compliance cost is
assumed to be deferred for one year. Of the 3,348 registrants, 1,340
are multinational registrants with 24,240,445 employees in total and
a total annual cost of $922 million; 1,691 are registrants with
U.S.-only segments with 12,530,180 employees in total and a total
annual cost of $238 million; and 317 are registrants with U.S.-only
segments with missing employee data and a total annual cost of $9
million. Thus, the total cost for the 3,348 registrants is
approximately $1,169 million over one year. These registrants also
will not have to incur one year of ongoing compliance costs.
Assuming the ongoing cost as a percentage of the initial cost is
between one-third of 28% (9.3%) and 72% of the initial cost, the
cost savings are estimated to be between ($1,169 million*9.3%) =
$109 million and ($1,169 million*72%) = $842 million. See Sections
III.C.2.c and III.D.2.e.
    \696\ For registrants without segment or employee data, we
followed the same approach as in Table 3.
---------------------------------------------------------------------------

m. Transition Periods
    The final rule also includes a transition period for new
registrants because we are sensitive to the impact that the rule could
have on capital formation. We note that the requirements of Section
953(b), as amended by the JOBS Act, distinguish between certain newly
public companies and all other registrants by providing an exemption
for emerging growth companies. We also note that the incremental time
needed to compile pay ratio disclosure could cause registrants that are
not emerging growth companies to delay an initial public offering,
which could have a negative impact on capital formation.\697\ In this
regard, we expect that registrants that are not emerging growth
companies are likely to be businesses with more extensive operations
and a greater number of employees than many emerging growth companies,
which could increase the initial efforts needed to comply with the
final rule. We believe that providing a transition period for these
newly public companies could mitigate this potential impact on capital
formation.
---------------------------------------------------------------------------

    \697\ See, e.g., letters from ABA (``Although we doubt that a
company considering an initial public offering of its securities
would decide to forego such a transaction simply because of the pay
ratio disclosure obligation, in some situations, the time and costs
associated with Item 402(u) compliance could certainly weigh in the
timing of the offering.''), Lou (``The competitive disadvantages
raise the costs of raising capital through public trading markets
and thereafter discourage companies to go public. The additional
monetary cost obviously makes an initial public offering (`IPO') [a]
less attractive mean[s] to raise capital though the negative impact
might not constitute a fatal factor that would kill the IPO. However
a CEO would feel reluctant to list the company because of the
threatening embarrassment of pay ratio disclosure. Therefore the pay
ratio exerts a negative effect on IPOs.''), and PM&P (``We agree
with the proposed transition period that new registrants should not
be required to include pay ratio disclosure in their initial
registration statements, and that to do so could significantly delay
the IPO.'').
---------------------------------------------------------------------------

    To address these concerns, the final rule also includes
instructions that would permit new registrants to delay compliance, so
that pay ratio disclosure would not be required in a registration
statement on Form S-1 or S-11 for an initial public offering or a
registration statement on Form 10. Instead, such a registrant would be
required to first comply with Item 402(u) with respect to compensation
for the first fiscal year commencing on or after the year in which the
registrant first becomes subject to the requirements of Section 13(a)
or Section 15(d) of the Exchange Act, but no earlier than the year
commencing January 1, 2017. Additionally, in response to comments, the
final rule provides that a registrant that ceases to be a smaller
reporting company or an emerging growth company will not be required to
provide pay ratio disclosure until the first fiscal year after exiting
such status, but no earlier than the year commencing January 1, 2017.
This change from the proposed rule allows registrants exiting smaller
reporting company or an emerging growth company status to delay their
initial compliance by a year, and will give them additional time to
decide how they will identify their median employee and prepare the
necessary disclosure. Further, the final rule permits registrants that
engage in business combinations and/or acquisitions to not include in
the median employee determination employees of a newly-acquired entity
for the fiscal year in which the business combination or acquisition
occurs. We believe that the exercise of discretion used in allowing
these additional transitional periods will result in cost savings for
the affected registrants and will further mitigate any effects of the
rule on capital formation.

IV. Paperwork Reduction Act

A. Background

    Certain provisions of the final amendments contain ``collection of
information'' requirements within the meaning of the Paperwork
Reduction Act of 1995 (the ``PRA'').\698\ We published a notice
requesting comment on the collection of information requirements in the
Proposing Release for the rule amendments, and we submitted these
collections of information requirements to the Office of Management and
Budget (``OMB'') for review in accordance with the PRA.\699\ The titles
for the collections of information are:
---------------------------------------------------------------------------

    \698\ 44 U.S.C. 3501 et seq.
    \699\ 44 U.S.C. 3507(d) and 5 CFR 1320.11.
---------------------------------------------------------------------------

     ``Regulation S-K'' (OMB Control No. 3235-0071);
     ``Form 10-K'' (OMB Control No. 3235-0063);
     ``Regulation 14A and Schedule 14A'' (OMB Control No. 3235-
0059);
     ``Regulation 14C and Schedule 14C'' (OMB Control No. 3235-
0057);
     ``Form 8-K'' (OMB Control No. 3235-0060);
     ``Form S-1'' (OMB Control No. 3235-0065);
     ``Form S-4'' (OMB Control No. 3235-0324);
     ``Form S-11'' (OMB Control No. 3235-0067);
     ``Form 10'' (OMB Control No. 3235-0064); and
     ``Form N-2'' (OMB Control No. 3235-0026).
    These regulations, schedules and forms were adopted under the
Securities Act and the Exchange Act, and in the case of Form N-2,\700\
the Investment Company Act of 1940.\701\ The regulations, forms and
schedules set forth the disclosure requirements for periodic reports,
registration statements,

and proxy and information statements filed by companies to help
investors make informed investment and voting decisions. The hours and
costs associated with preparing, filing and sending the form or
schedule constitute reporting and cost burdens imposed by each
collection of information. 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 OMB control number.
---------------------------------------------------------------------------

    \700\ 17 CFR 239.14 and 274.11a-1.
    \701\ 15 U.S.C. 80a-1 et seq.
---------------------------------------------------------------------------

    Our amendments to the forms and regulations are intended to satisfy
the requirements of Section 953(b) of the Dodd-Frank Act, which directs
the Commission to amend Item 402 of Regulation S-K to add the pay ratio
disclosure requirements specified by that provision. Compliance with
the final rule will be mandatory for affected registrants. Responses to
the information collections will not be kept confidential, and there
will be no mandatory retention period for the information disclosed.

B. Summary of Information Collections

    In order to satisfy the legislative mandate in Section 953(b), we
are adopting new paragraph (u) to Item 402 of Regulation S-K. This new
paragraph (u) will require registrants to disclose:
     the median of the annual total compensation of all
employees of the registrant (excluding the PEO);
     the annual total compensation of the registrant's PEO; and
     the ratio between these two amounts.
    For this purpose, Section 953(b) specifies that total compensation
is to be determined in accordance with Item 402(c)(2)(x). Item 402
already requires registrants to disclose the annual total compensation
of the PEO in accordance with Item 402(c)(2)(x).\702\ The median of the
annual total compensation of all employees and the ratio are new,
incremental disclosure burdens and will require affected registrants to
collect compensation information for employees that is not currently
required to be disclosed.
---------------------------------------------------------------------------

    \702\ As of the date of this release, the requirements for the
calculation of total compensation under Item 402(c)(2)(x) are the
same as those in effect on July 20, 2010. Therefore, for purposes of
this PRA analysis, we have assumed that registrants would not need
to recalculate the annual total compensation for the PEO in
connection with the pay ratio disclosure.
---------------------------------------------------------------------------

    The additional disclosure under new paragraph (u) of Item 402 will
be required in any annual report, proxy or information statement, or
registration statement that requires executive compensation disclosure
pursuant to Item 402 of Regulation S-K.\703\ In addition, the
requirements will allow certain registrants to omit the disclosure
otherwise required by Item 402(u) from filings made during a specified
transition period.
---------------------------------------------------------------------------

    \703\ Consistent with the scope of Section 953(b), the new
requirements will not apply to the annual reports and proxy and
information statements of emerging growth companies, smaller
reporting companies or foreign private issuers. In addition,
consistent with the instructions J and I of Form 10-K, the new
requirements will not apply to the annual reports of issuers of
asset-backed securities or to wholly-owned subsidiary registrants.
---------------------------------------------------------------------------

    Finally, in order to conform the amendments to current rules for
the disclosure of PEO compensation when certain elements of
compensation are not yet known, we are adopting a conforming amendment
to Item 5.02 of Form 8-K. New paragraph (1) of Item 5.02(f) will also
require registrants that are disclosing PEO total compensation in
accordance with Item 5.02 of Form 8-K to provide in that filing the
updated pay ratio disclosure required by Item 402(u). Because Item 5.02
of Form 8-K provides a delayed method of filing information that would
otherwise be required in the registrant's proxy or information
statement or annual report, the PRA analysis assumes that the burden
and cost of compliance with new Item 402(u) would be associated
primarily with those forms and schedules rather than Form 8-K.

C. Summary of Comment Letters and Revisions to Proposals

    In the Proposing Release, we requested comment on the PRA analysis.
We received letters from two commenters that directly addressed the PRA
estimates,\704\ as well as a number of other comment letters and
submissions that discussed the costs and burdens to issuers that would
have an effect on the PRA analysis.\705\ A detailed discussion of these
comments is included in the Section III above.\706\
---------------------------------------------------------------------------

    \704\ See letters from COEC I, COEC II, and Chamber II.
    \705\ See letters from Avery Dennison, ExxonMobil, FEI and KBR.
    \706\ See Section III.C.2.b.
---------------------------------------------------------------------------

    One of the two commenters analyzed data from a survey of 118
companies to conclude that it would take registrants an average of 952
hours per year to comply with the pay ratio disclosure requirement at
an average labor cost of $185,600, which we assume refers to external
costs only.\707\ The other commenter disagreed with the our assumption
in the Proposing Release that ongoing compliance costs in the second
and third year would significantly decrease from the initial compliance
costs in the first year.\708\ Based on the proposed rule, which did not
include several accommodations adopted in the final rule, that
commenter estimated that ongoing compliance costs would be 80% (mid-
range) or 72% (average) of the initial compliance costs for each
successive year. This commenter also cited a survey completed by 128
public companies, the majority of which were large companies with
assets well over $2 billion, to assert that the average cost of outside
securities compliance counsel is $700 per hour, rather than the $400
per hour used in the PRA estimates.\709\
---------------------------------------------------------------------------

    \707\ See letter from Chamber II. This commenter estimated that
the annual cost of compliance would be $710.9 million and an annual
compliance time of 3.6 million hours. The commenter also stated that
we may have underestimated costs by more than 870% and
underestimated compliance time by 560%. From this information, we
infer that the average labor cost of $185,600 refers to external
costs, as multiplying the number of registrants estimated to be
subject to the proposed rule (3,830) by the average labor cost
estimated by this commenter ($185,600) equals $710,848,000.
    \708\ See letters from COEC I and COEC II.
    \709\ As noted in our Economic Analysis, we continue to believe
that $400 per hour is the appropriate rate to use for PRA purposes.
This is the rate we typically estimate for outside legal services
used in connection with public company reporting and is intended to
represent an average to cover all registrants of varying sizes. In
addition, some commenters indicated that they would retain external
advisors such as payroll specialists, human resource consultants,
and compensation consultants. See letters from Avery Dennison
(stating that it expects to retain two to three external advisors,
including legal advisers and HR consultants) and General Mills
(indicating that it expects to hire outside advisors, such as
compensation consultants and payroll specialists). Generally, we
expect the hourly fees for such external advisors to be much lower
than those of legal counsel.
---------------------------------------------------------------------------

    Several companies submitted estimates of burdens and costs without
commenting on the our estimates. One company estimated that compliance
with the proposed rule would require 100-150 hours of work by internal
staff and 20 to 40 hours of external consulting time at a total
``internal cost'' of $1 million to $1.5 million.\710\ Another company
estimated that it would take over 1,000 internal burden hours to
develop the database and methodology to derive the pay ratio
information, and that ongoing burden hours would be approximately 50%
(500 hours) of the initial compliance burden hours.\711\ It also
asserted that this represents an approximate cost of over $250,000 on
an initial basis and $100,000 on an ongoing

basis.\712\ Another large corporate commenter asserted that it would
require up to approximately 3,000 internal burden hours to comply with
the proposed rule in the initial year of compliance, and that ongoing
compliance burdens after the initial compliance year would be
approximately 28% of the initial burden hours (850 hours per year
thereafter).\713\ Another global issuer estimated that it may take
between $500,000 and $1 million to establish and automate the process
to comply with the proposed rule.\714\
---------------------------------------------------------------------------

    \710\ See letter from Avery Dennison. Although this commenter
used the phrase ``internal cost'' of compliance, we assume that this
cost includes more than internal staff time. Otherwise, the internal
cost of compliance could range from approximately $6,667 to $15,000
per hour ($1 million divided by 150 hours or $1.5 million divided by
100 hours).
    \711\ See letter from FEI.
    \712\ Id.
    \713\ See letter from ExxonMobil.
    \714\ See letter from KBR.
---------------------------------------------------------------------------

    We are adopting the final rule as proposed with modifications that
may help mitigate compliance costs and burdens. First, we provide two
tailored exemptions for non-U.S. employees from the definition of
``employee'': an exemption for circumstances in which a foreign
jurisdiction's laws or regulations governing privacy are such that,
despite its reasonable efforts to obtain or process the information
necessary for compliance with the final rule, the registrant is unable
to do so without violating such data privacy laws or regulations and a
de minimis exemption. Second, the final rule defines ``employee'' to
include only the employees of the registrant's consolidated
subsidiaries, instead of all subsidiaries as proposed. Third, to
provide consistency and flexibility, the final rule permits registrants
to use any date within three months of the last day of their last
completed fiscal year to identify the median employee. Fourth, the
final rule allows registrants to identify the median employee every
three years, instead of every year, if there has been no change in
their employee population or employee compensation arrangements that
they reasonably believe would result in a significant change in their
pay ratio disclosure.

D. Revisions to PRA Reporting and Cost Burden Estimates

    For purposes of the PRA, in the Proposing Release, we estimated
that the total annual increase in the paperwork burden for all affected
companies to prepare the disclosure that would be required under the
adopted amendments would be approximately 545,792 hours of company
personnel time and a cost of approximately $72,772,200 for the services
of outside professionals. As discussed in more detail below, we are
revising our PRA burden and cost estimates to reflect the responses of
commenters, as well as the modifications we have made to the final rule
to reduce compliance burdens.
    For purposes of the PRA for the final rule, we estimate the total
annual increase in the paperwork burden for all affected companies to
comply with the collection of information requirements in our final
rule is approximately 2,367,573 hours of company personnel time and
approximately $315,390,720 for the services of outside
professionals.\715\ These estimates include the time and the cost of
implementing data gathering systems and disclosure controls and
procedures, compiling necessary data, preparing and reviewing
disclosure, filing documents and retaining records.
---------------------------------------------------------------------------

    \715\ We describe how we derived the three-year average hour and
cost burdens per response below. The portion of the burden carried
by outside professionals is reflected as a cost, while the portion
of the burden carried by the company internally is reflected in
hours. For administrative convenience, the presentation of the
totals related to the paperwork burden hours have been rounded to
the nearest whole number and the cost totals have been rounded to
the nearest dollar.
---------------------------------------------------------------------------

    In deriving these estimates, we have assumed that:
     Registrants subject to the final rule would satisfy the
new requirements by either including the information directly in annual
reports on Form 10-K or incorporating the information by reference from
a proxy statement on Schedule 14A or information statement on Schedule
14C. Our estimates assume that substantially all of the burden relating
to the new disclosure requirements would be associated with Form 10-K;
     For registrants that would be permitted to provide their
pay ratio disclosure in a filing made in accordance with Item 5.02 of
Form 8-K, rather than in Form 10-K, the burden relating to the new
disclosure requirements would be associated primarily with Form 10-K
rather than Form 8-K; \716\ and
---------------------------------------------------------------------------

    \716\ Our PRA estimates for Form 8-K include an estimated one
hour burden to account for the inclusion of the new pay ratio
disclosure.
---------------------------------------------------------------------------

     100% of new registrants would use the transition
provisions allowing them to omit the required disclosure from their
initial registration statements and, for follow-on offerings by these
registrants, the burden relating to the new disclosure requirements
would be associated primarily with Form 10-K rather than Forms S-1, S-
11 or N-2 as applicable (because registrants would incorporate the
disclosure from Form 10-K).
    We understand from commenters that the burdens and costs of
compliance will likely vary among individual companies based on a
number of factors, including the size and complexity of their
organizations, the nature of their operations and workforce, the
location of their operations, and, significantly, the extent that their
existing payroll systems collect the information necessary to identify
the median of the annual total compensation of their employees. Because
the final rule provides additional flexibility in identifying the
median and the annual total compensation of employees, the actual
burden could be lower if the methodology used is able to reduce the
effort needed to collect the data or if the registrant is able to use
information that it collects for other purposes.\717\ We believe that
the actual burdens will likely vary significantly among individual
companies based on these factors. Our estimates in this PRA analysis
reflect average burdens, and, therefore, some companies may experience
costs in excess of our estimates and some companies may experience
costs that are lower than our estimates.\718\
---------------------------------------------------------------------------

    \717\ See Section II of this release for a discussion of the
requirements.
    \718\ As in our Economic Analysis, we estimated the PRA costs
and burdens to reflect a broad range of registrants.
---------------------------------------------------------------------------

1. Estimated Internal Burden Hours
    Commenters estimated that registrants would spend anywhere from 100
burden hours \719\ to 3000 burden hours to prepare and review the pay
ratio disclosure.\720\ One commenter estimated that affected companies
would on average spend 952 hours per year to comply with the new
disclosure requirement.\721\ This estimate was based on a survey of a
range of companies, some with operations in more than 50 countries and
others with operations in fewer than 10 countries, and did not take
into account the modifications that were made to the rule to reduce
compliance costs.
---------------------------------------------------------------------------

    \719\ See letter from Avery Dennison.
    \720\ See letter from ExxonMobil.
    \721\ See letter from Chamber II.
---------------------------------------------------------------------------

    In our analysis of the economic costs and benefits of the rule, we
estimated that the total initial compliance costs would be
$1,314,694,544 or approximately $368,159 per registrant.\722\ Our
estimate did not break down the costs between internal burden hours and
external costs, which is how the burdens and costs are described for
PRA purposes. As discussed later in our analysis of the estimated cost
and hour burdens for each collection of

information,\723\ we believe that substantially all of the burden
relating to the new disclosure requirements will be associated with
Form 10-K. For Exchange Act reports on Form 10-K, we estimate that 75%
of the burden of preparation is carried by the company internally and
that 25% of the burden of preparation is carried by outside
professionals. Using that formula, we estimate that the average
registrant will spend 1,105 internal burden hours preparing and
reviewing the disclosure for the initial year of compliance.\724\
---------------------------------------------------------------------------

    \722\ See discussion in Section III.C.2.c. $1,314,694,544/3,571
= $368,159.
    \723\ See discussion in Section IV.D.3.
    \724\ We did not receive any estimates of the cost per hour
related to preparation of disclosures by the company internally, but
expect that such costs will be less than the cost of hiring outside
professionals. For ease of analysis, we assume that internal hourly
costs will be approximately half the cost of hiring outside
professionals ($400/2 = $200). Assuming 75% of burden hours are
carried internally and 25% are carried externally, the average
compliance cost of $368,159 per registrant corresponds to $368,159/
((.75)$200 + (.25)$400) = 1,473 hours, of which 1,105 hours
(1,473(.75)) are internal and 368 hours (1,473(.25)) are external.
---------------------------------------------------------------------------

    In the Proposing Release, we estimated that the internal burden
hours would be greatest during the first year of compliance with the
rule and would diminish in subsequent years. As discussed above, we
received few estimates of ongoing compliance costs from commenters, and
the estimates we received varied widely. Some commenters suggested that
the internal burden hours and external professional costs would not
decrease after the initial compliance year.\725\ As discussed earlier,
we believe that part of the initial compliance costs would decline
after the first year.\726\ Other commenters provided estimates of
ongoing compliance costs that ranged from 28% to 80% of the initial
compliance costs. For example, one commenter estimated that its burden
would decrease by approximately 72%, from 3,000 internal hours during
the first year to 850 internal hours in subsequent years, approximately
28% of the initial burden.\727\ Another commenter suggested, based on
results from a survey that it conducted, that ongoing costs could be
about 80% (median) or 72% (average) of the initial compliance
costs.\728\ Yet another commenter estimated its initial burden at 1,000
internal hours and ongoing burden at 50% of the initial compliance
costs (500 internal hours).\729\ This commenter also estimated initial
compliance costs at $250,000 with ongoing compliance costs of $100,000,
or 40% of the initial compliance costs.
---------------------------------------------------------------------------

    \725\ See letters from Chamber II and Intel.
    \726\ See discussion in Section III.C.2.c.
    \727\ See letter from ExxonMobil.
    \728\ See letter from COEC I.
    \729\ See letter from FEI.
---------------------------------------------------------------------------

    Because of the limited number of ongoing cost estimates and their
wide dispersion, for the purposes of the PRA we assume that ongoing
compliance burdens and costs will be approximately 40% (the median of
the estimates) of the initial compliance burdens and costs. Thus, we
used one commenter's estimated ongoing burden of 40% of the initial
burden for our estimated three-year average burden. We utilize an
estimated burden of 1,105 hours in the initial year and 442 \730\ hours
in the two years thereafter, for a three-year average burden of 663
hours.\731\
---------------------------------------------------------------------------

    \730\ 1,105 x 40% = 442 burden hours.
    \731\ (1,105 + 442 + 442)/3 = 663 burden hours.
---------------------------------------------------------------------------

 2. Estimated Cost Burdens
    Commenters provided a wide range of estimated external cost
burdens. Commenters provided estimates of $185,600 per year on average
for each company,\732\ $250,000 on an initial basis and $100,000 on an
ongoing basis,\733\ and 20-40 hours of external consulting time.\734\
Another commenter estimated that it may cost between $500,000 and $1
million for each company to establish and automate the process to
comply with the proposed rule, although it is not clear whether this
includes both internal and external costs and burdens.\735\ As
discussed above, we estimate that total compliance burdens for the
initial year of compliance will be $1,314,694,544 or $368,159 per
registrant. Assuming that 25% of the burden of preparing the disclosure
is carried by outside professionals, we estimate that the average
registrant will incur $147,200 in outside professional costs in the
first year to comply with the disclosure requirement.\736\
---------------------------------------------------------------------------

    \732\ See letter from Chamber II.
    \733\ See letter from FEI.
    \734\ See letter from Avery Dennison.
    \735\ See letter from KBR.
    \736\ 368 x $400 = $147,200.
---------------------------------------------------------------------------

    As with the estimated internal burden hours, we assume that the
compliance costs after the initial year will be reduced because a
substantial portion of the costs will be related to establishing
systems and processes to collect the payroll data in the initial year
of compliance. Applying the same assumption used above that the ongoing
compliance costs will be approximately 40% of the estimate for the
initial compliance year, we estimate that ongoing compliance costs will
be approximately $58,880 per year on average for each affected company
\737\ so that the three-year average cost of compliance is
$88,320.\738\
---------------------------------------------------------------------------

    \737\ $147,200x 40% = $58,880.
    \738\ ($147,200 + 58,880 + 58,880)/3 = $88,320.
---------------------------------------------------------------------------

3. Estimated Cost and Hour Burdens for Each Collection of Information
    For each collection of information, we estimate the following cost
and hour burdens:
a. Regulation S-K
    While the adopted amendments would make revisions to Regulation S-
K, the collection of information requirements for that regulation are
reflected in the burden hours estimated for the forms and schedules
listed below. The rules in Regulation S-K do not impose any separate
burden. Consistent with historical practice, we are retaining an
estimate of one burden hour to Regulation S-K for administrative
convenience.
b. Form 10-K
    Only Forms 10-K that are filed by registrants that are not smaller
reporting companies or emerging growth companies will be required to
include the pay ratio disclosure. For purposes of our PRA estimates, we
have assumed that 100% of asset-backed securities issuers will omit
Item 402 disclosure from Form 10-K pursuant to Instruction J of Form
10-K and 100% of wholly-owned subsidiary registrants will omit Item 402
disclosure from Form 10-K pursuant to Instruction I of Form 10-K, and,
accordingly, these registrants will also not be subject to the new
disclosure requirements. Based on a review of EDGAR filings in calendar
year 2014, we estimate that of the approximately 7,619 annual reports
filed in that year, approximately 3,571 annual reports are filed by
registrants that would be subject to the new disclosure
requirements.\739\ We estimate that the new disclosure requirements
will add an average of 663 burden hours \740\ to the total burden hours
required to produce each Form 10-K that is subject to the new
requirements and approximately $88,320 for outside professionals.\741\
---------------------------------------------------------------------------

    \739\ Based on a review of EDGAR filings in 2014, approximately
678 annual reports were filed by EGCs, 2,958 by SRCs, and 412 by ABS
issuers. See Section III.D.2.b above.
    \740\ As we discuss below, we estimate that 10 of the Forms 8-K
filed in a given year would require one additional hour for
preparing the disclosure required by the amendments. Thus,
substantially all of the internal burden of the pay ratio disclosure
is allocated to Form 10-K: 663(3,571)-(110) = 2,367,563 or
approximately 663 (2,367,563/3,571) per response. Burden hours are
rounded to the next hour.
    \741\ As discussed below, we estimate that the requirement to
provide updated pay ratio disclosure on Form 8-K will result in one
additional burden hour for that form. We attribute the external
costs of the required pay ratio disclosure proportionately between
Form 10-K and Form 8-K based on the estimated internal burden hours
for each form. [1/(663+1)] x $88,320 = $133 per Form 8-K response.
The remaining costs have been attributed to Form 10-K:
$88,320)3,571--$133(10) = $315,389,390 in aggregate or $88,320
($315,389,390/3,571) per response. Costs are rounded up to the next
dollar.

---------------------------------------------------------------------------

    We estimate that the preparation of annual reports currently
results in a total annual compliance burden of 12,198,095 hours and an
annual cost of outside professionals of $1,627,400,000. Under the final
rule, we estimate that the total incremental cost of outside
professionals for annual reports will be approximately $315,389,390 per
year and the total incremental internal burden will be approximately
2,367,563 hours per year.
c. Form 8-K
    As described in this release, the final rule will require a
registrant that is filing its PEO total compensation on a delayed basis
due to the unavailability of certain components of compensation on Form
8-K (in accordance with Instruction 1 to Items 402(c)(2)(iii) and (iv)
of Regulation S-K and Item 5.02(f) of Form 8-K) to provide the pay
ratio disclosure at the same time. The final rule also includes a
conforming amendment to Item 5.02 of Form 8-K that will require a
registrant to include updated pay ratio disclosure in the Form 8-K that
it files to disclose its PEO total compensation information.\742\ We
estimate that the burden for adding the pay ratio disclosure to that
Form 8-K filing will be one hour per registrant.\743\ We also estimate
that the Form 8-K amendment will not result in additional Form 8-K
filings because registrants who omit disclosure in reliance on
Instruction 1 to Items 402(c)(2)(iii) and (iv) are already required to
file a Form 8-K. The amendments will, however, add pay ratio disclosure
requirements to that Form 8-K filing.
---------------------------------------------------------------------------

    \742\ See Section II.B.6.b.
    \743\ As noted above, we have assumed that the burden relating
to the new pay ratio requirements would remain associated with the
registrant's proxy or information statement or annual report, and,
therefore, our PRA estimates for those forms reflect that burden.
---------------------------------------------------------------------------

    Based on a review of EDGAR filings for calendar years 2012 and
2013, we estimate that on average approximately 11 Forms 8-K are filed
pursuant to Item 5.02(f) annually and approximately 10 of these relate
to disclosure of PEO compensation. As a result, we estimate that 10 of
the Forms 8-K filed in a given year will require one additional hour
for preparing the disclosure required by the amendments, in addition to
the total burden hours required to produce each Form 8-K.
    We estimate that the preparation of current reports on Form 8-K
currently results in a total annual compliance burden of 507,675 hours
and an annual cost of outside professionals of $67,688,700. As result
of the rule, we estimate that the incremental company burden will be
approximately 10 hours per year and approximately $1,330 in the
incremental cost of outside professionals for current reports on Form
8-K.
d. Proxy Statements on Schedule 14A
    Only proxy statements on Schedule 14A that are required to include
Item 402 information, and that are not filed by smaller reporting
companies or emerging growth companies, will be required to include the
new pay ratio disclosure. For purposes of our PRA estimates, consistent
with past amendments to Item 402,\744\ we have assumed that all of the
burden relating to the new disclosure requirements will be associated
with Form 10-K, even if registrants include the new disclosure required
in Form 10-K by incorporating that disclosure by reference from a proxy
statement on Schedule 14A.
---------------------------------------------------------------------------

    \744\ We took a similar approach in connection with the rules
for Summary Compensation Table disclosure required by the 2006
amendments to Item 402. See 2006 Adopting Release, supra note 9.
---------------------------------------------------------------------------

e. Information Statements on Schedule 14C
    Only information statements on Schedule 14C that are required to
include Item 402 information, and that are not filed by smaller
reporting companies or emerging growth companies, are required to
include the pay ratio disclosure. For purposes of our PRA estimates,
consistent with past amendments to Item 402, we have assumed that all
of the burden relating to the disclosure requirements will be
associated with Form 10-K, even if registrants include the disclosure
required in Form 10-K by incorporating that disclosure by reference
from an information statement on Schedule 14C.
f. Form S-1
    Because we have assumed that all new registrants will take
advantage of the transition period afforded to them under the final
rule, so that all of the registration statements on Form S-1 that will
be required to include the pay ratio disclosure will incorporate by
reference the registrant's disclosure contained in its annual report,
we have assumed that all of the burden relating to the new disclosure
requirements will be associated with Form 10-K.
g. Form S-4
    We have assumed that registrants filing on Form S-4 for whom
executive compensation information under Item 402 is required pursuant
to Items 18 or 19 of Form S-4 will incorporate by reference the pay
ratio disclosure contained in the registrant's annual report. Thus, we
have assumed that all of the burden relating to the new disclosure
requirements will be associated with Form 10-K.
h. Form S-11
    Because we have assumed that all new registrants will take
advantage of the transition period afforded to them under the final
rule, so that all of the registration statements on Form S-11 that will
be required to include the pay ratio disclosure will incorporate by
reference the registrant's pay ratio disclosure contained in its annual
report, we have assumed that all of the burden relating to the new
disclosure requirements will be associated with Form 10-K.
i. Form N-2
    Only Forms N-2 filed by business development companies (BDCs) will
be subject to the new disclosure requirements. Furthermore, the final
rule will apply only to BDCs internally managed such that they
compensate their own employees. Rather, such employees are generally
compensated by the BDC's investment adviser. Because we assume that all
of the Forms N-2 that will be filed by internally managed BDCs will
incorporate by reference the registrant's disclosure contained in its
annual report, we have assumed that all of the burden relating to the
new disclosure requirements would be associated with Form 10-K.
j. Form 10
    Because we have assumed that all new registrants would take
advantage of the transition period afforded to them under the final
rule, we estimate no annual incremental increase in the paperwork
burden associated with Form 10 as a result of the new requirements.

E. Summary of Changes to Annual Compliance Burden in Collection of
Information

    Tables 1 and 2 below illustrate the total annual compliance burden
of the collection of information in hours and in cost under the final
rule for annual reports on Form 10-K and current reports on Form 8-K
under the Exchange Act. \745\ The burden estimates

were calculated by multiplying the estimated number of annual responses
by the estimated average number of hours it would take a company to
prepare and review the new disclosure.
---------------------------------------------------------------------------

    \745\ Figures in both tables have been rounded to the nearest
whole number.
---------------------------------------------------------------------------

    As discussed above, there is no change to the estimated burden of
the collection of information under Forms S-1, S-4, S-11 or N-2 or
under Schedule 14A and 14C because we have assumed that the burden
relating to the new disclosure requirements would be associated
primarily with Form 10-K. In addition, there is no change to the
estimated burden of the collection of information under Form 10 because
we have assumed that all new registrants would take advantage of the
transition period. There is no change to the estimated burden of the
collection of information under Regulation S-K because the burdens that
Regulation S-K imposes are reflected in our revised estimates for the
forms.\746\
---------------------------------------------------------------------------

    \746\ Estimates in columns C and E of Table 1 are affected by
rounding to the next burden hour. See Section III.D.1. and 2. above
for an analysis of the derivation of the estimated incremental
burden hours and costs.

                           Table 1--Incremental Paperwork Burden under the Final Rule
----------------------------------------------------------------------------------------------------------------
                                                                       Total                           Total
                                     Number of      Hour burden     incremental     Incremental     incremental
                                      annual       per response   company burden   professional    professional
                                   responses (A)        (B)         hours (C) =      costs (D)      costs (E) =
                                                                     (A) * (B)                       (A) * (D)
----------------------------------------------------------------------------------------------------------------
Form 10-K.......................           3,571             663       2,367,563      $88,319.63    $315,389,390
Form 8-K........................              10               1              10            $133          $1,330
                                 -------------------------------------------------------------------------------
    Total.......................  ..............  ..............       2,367,573  ..............    $315,390,720
----------------------------------------------------------------------------------------------------------------

                                                   Table 2--Calculation of Total PRA Burden Estimates
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                  Current                 Increase in
                                                   annual      Current       burden       Burden         Current         Increase in      Professional
                                                 responses      burden     hours (C)   hours (D) =     professional     professional   costs (G) = (E) +
                                                  (A)\747\    hours (B)      \748\      (B) + (C)       costs (E)         costs (F)           (F)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Form 10-K.....................................        8,137   12,198,095    2,367,563   14,565,658     $1,627,400,000    $315,389,390     $1,942,789,390
Form 8-K......................................       74,911      507,665           10      507,675        $67,688,700          $1,330        $67,690,030
                                               ---------------------------------------------------------------------------------------------------------
    Total.....................................       83,048   12,705,760    2,367,573   15,073,333     $1,695,088,700    $315,390,720     $2,010,479,420
--------------------------------------------------------------------------------------------------------------------------------------------------------

V. Final Regulatory Flexibility Act Certification

    The Regulatory Flexibility Act of 1980 (``RFA'') \749\ requires us,
in promulgating rules, to consider the impact of those rules on small
entities. The Commission certified in the Proposing Release, pursuant
to Section 605(b) \750\ of the RFA, that the proposed rule, if adopted,
would not have a significant economic impact on a substantial number of
small entities. We received no comments on this certification.
---------------------------------------------------------------------------

    \747\ For these forms, the number of current annual responses
reflected in the table equals the three-year average of the number
of forms filed with us and currently reported by us to OMB.
    \748\ The increase in burden hours reflected in the table is
based on the aggregate incremental burden hours per form multiplied
by the annual responses that will be required to include additional
disclosure under the new rules as adopted. As explained in the
discussion above, for purposes of determining the total increase in
burden hours, we have reduced the current number of annual responses
to reflect that the disclosure requirements will not apply to all
forms filed. See Table 1 for estimates per response.
    \749\ 5 U.S.C. 601 et seq.
    \750\ 5 U.S.C. 605(b).
---------------------------------------------------------------------------

    The final rule amends Item 402 by adding paragraph (u) to implement
Section 953(b) of the Dodd-Frank Act. Specifically, the final rule
requires registrants, other than emerging growth companies, smaller
reporting companies and foreign private issuers, to disclose the median
of the annual total compensation of all employees of the registrant
(excluding the PEO), the annual total compensation of the registrant's
PEO, and the ratio between these two amounts. The disclosure is
required in any filing described in Item 10(a) of Reg. S-K that
requires executive compensation disclosure pursuant to Item 402.
    For purposes of the RFA, under our rules, an issuer, other than an
investment company,\751\ is a ``small business'' or ``small
organization'' if it has total assets of $5 million or less as of the
end of its most recent fiscal year and is engaged or proposing to
engage in an offering of securities which does not exceed $5
million.\752\ We believe that the final rule will affect some small
entities that are business development companies that have a class of
securities registered under Section 12 of the Exchange Act. We estimate
that there are approximately five of those business development
companies that may be considered small entities.\753\ As discussed
above, emerging growth companies and smaller reporting companies are
excluded from the final rule. An ``emerging growth company'' is an
issuer that had total annual gross revenues of less than $1 billion
during its most recently completed fiscal year.\754\ A smaller
reporting company is an issuer, other than certain classes of issuers
(including investment companies), that had a public float of less than
$75 million as of the end of its most recently completed second fiscal
quarter, or in the case of an initial registration statement under the
Securities Act or Exchange Act for the shares of its common equity, had
a public float of less than $75 million as of a date within 30 days of
the date of filing of the registration statement.\755\ To

the extent that a small entity is a registrant, we believe that there
are few, if any, small entities that do not qualify as emerging growth
companies or smaller reporting companies because it is unlikely that an
entity with total assets of $5 million or less would have total annual
gross revenues of $1 billion or more, or would have a public float of
$75 million or more. Because emerging growth companies and smaller
reporting companies are excluded from the new disclosure requirement,
we believe that the final rule applies to few, if any, small entities,
other than the five business development companies.
---------------------------------------------------------------------------

    \751\ For purposes of the RFA, an investment company is a
``small business'' or ``small organization'' that, together with
other investment companies in the same group of related investment
companies, has net assets of $50 million or less as of the end of
its most recent fiscal year. 17 CFR 270.0-10.
    \752\ See Securities Act Rule 157 [17 CFR 230.157] and Exchange
Act Rule 0-10(a) [17 CFR 240.0-10(a)].
    \753\ We estimate that there are 13 business development
companies that will be subject to the final rule, five of which may
be considered small entities for purposes of the RFA.
    \754\ See Securities Act Section 2(a)(19) [15 U.S.C.
77b(a)(19)].
    \755\ See Securities Act Rule 405 [17 CFR 230.405]. In the case
of an issuer whose public float was zero, the issuer could qualify
as a smaller reporting company if it had annual revenues of less
than $50 million during the most recently completed fiscal year for
which audited financial statements are available.
---------------------------------------------------------------------------

    For the above reasons, we again certify, pursuant to 5 U.S.C.
605(b), that the final rule will not have a significant economic impact
on a substantial number of small entities.

VI. Statutory Authority

    The amendments contained herein are being proposed pursuant to
Sections 7, 10, 19(a), and 28 of the Securities Act, Sections 3(b), 12,
13, 14, 15(d), 23(a), and 36(a) of the Exchange Act, Section 953(b) of
the Dodd-Frank Act, as amended, and Section 102(a)(3) of the JOBS Act.

List of Subjects

17 CFR Part 229

    Reporting and recordkeeping requirements, Securities.

17 CFR Part 240

    Brokers, Confidential business information, Fraud, Reporting and
recordkeeping requirements, Securities.

17 CFR Part 249

    Brokers, Reporting and recordkeeping requirements, Securities.

Text of the Amendments

    In accordance with the foregoing, title 17, chapter II of the Code
of Federal Regulations, is amended as follows:

PART 229 --STANDARD INSTRUCTIONS FOR FILING FORMS UNDER SECURITIES
ACT OF 1933, SECURITIES EXCHANGE ACT OF 1934 AND ENERGY POLICY AND
CONSERVATION ACT OF 1975--REGULATION S-K

0
1. The authority citation for part 229 is revised to read as follows:

    Authority:  15 U.S.C. 77e, 77f, 77g, 77h, 77j, 77k, 77s, 77z-2,
77z-3, 77aa(25), 77aa(26), 77ddd, 77eee, 77ggg, 77hhh, 77iii, 77jjj,
77nnn, 77sss, 78c, 78i, 78j, 78j-3, 78l, 78m, 78n, 78n-1, 78o, 78u-
5, 78w, 78ll, 78 mm, 80a-8, 80a-9, 80a-20, 80a-29, 80a-30, 80a-
31(c), 80a-37, 80a-38(a), 80a-39, 80b-11 and 7201 et seq.; 18 U.S.C.
1350; Sec. 953(b), Pub. L. 111-203, 124 Stat. 1904; and Sec.
102(a)(3), Pub. L. 112-106, 126 Stat. 309.

0
2. Amend Sec.  229.402 by:
0
a. In paragraph (l), removing ``(k) and (s)'' and adding in its place
``(k), (s), and (u)''; and
0
b. Adding paragraph (u) directly after the Instructions to Item 402(t).
    The addition reads as follows:

Sec.  229.402  (Item 402) Executive compensation.

* * * * *
    (u) Pay ratio disclosure--(1) Disclose. (i) The median of the
annual total compensation of all employees of the registrant, except
the PEO of the registrant;
    (ii) The annual total compensation of the PEO of the registrant;
and
    (iii) The ratio of the amount in paragraph (u)(1)(i) of this Item
to the amount in paragraph (u)(1)(ii) of this Item. For purposes of the
ratio required by this paragraph (u)(1)(iii), the amount in paragraph
(u)(1)(i) of this Item shall equal one, or, alternatively, the ratio
may be expressed narratively as the multiple that the amount in
paragraph (u)(1)(ii) of this Item bears to the amount in paragraph
(u)(1)(i) of this Item.
    (2) For purposes of this paragraph (u):
    (i) Total compensation for the median of annual total compensation
of all employees of the registrant and the PEO of the registrant shall
be determined in accordance with paragraph (c)(2)(x) of this Item. In
determining the total compensation, all references to ``named executive
officer'' in this Item and the instructions thereto may be deemed to
refer instead, as applicable, to ``employee'' and, for non-salaried
employees, references to ``base salary'' and ``salary'' in this Item
and the instructions thereto may be deemed to refer instead, as
applicable, to ``wages plus overtime'';
    (ii) Annual total compensation means total compensation for the
registrant's last completed fiscal year; and
    (iii) Registrant means the registrant and its consolidated
subsidiaries.
    (3) For purposes of this paragraph (u), employee or employee of the
registrant means an individual employed by the registrant or any of its
consolidated subsidiaries, whether as a full-time, part-time, seasonal,
or temporary worker, as of a date chosen by the registrant within the
last three months of the registrant's last completed fiscal year. The
definition of employee or employee of the registrant does not include
those workers who are employed, and whose compensation is determined,
by an unaffiliated third party but who provide services to the
registrant or its consolidated subsidiaries as independent contractors
or ``leased'' workers.
    (4) For purposes of this paragraph (u), an employee located in a
jurisdiction outside the United States (a ``non-U.S. employee'') may be
exempt from the definition of employee or employee of the registrant
under either of the following conditions:
    (i) The employee is employed in a foreign jurisdiction in which the
laws or regulations governing data privacy are such that, despite its
reasonable efforts to obtain or process the information necessary for
compliance with this paragraph (u), the registrant is unable to do so
without violating such data privacy laws or regulations. The
registrant's reasonable efforts shall include, at a minimum, using or
seeking an exemption or other relief under any governing data privacy
laws or regulations. If the registrant chooses to exclude any employees
using this exemption, it shall list the excluded jurisdictions,
identify the specific data privacy law or regulation, explain how
complying with this paragraph (u) violates such data privacy law or
regulation (including the efforts made by the registrant to use or seek
an exemption or other relief under such law or regulation), and provide
the approximate number of employees exempted from each jurisdiction
based on this exemption. In addition, if a registrant excludes any non-
U.S. employees in a particular jurisdiction under this exemption, it
must exclude all non-U.S. employees in that jurisdiction. Further, the
registrant shall obtain a legal opinion from counsel that opines on the
inability of the registrant to obtain or process the information
necessary for compliance with this paragraph (u) without violating the
jurisdiction's laws or regulations governing data privacy, including
the registrant's inability to obtain an exemption or other relief under
any governing laws or regulations. The registrant shall file the legal
opinion as an exhibit to the filing in which the pay ratio disclosure
is included.
    (ii) The registrant's non-U.S. employees account for 5% or less of
the registrant's total employees. In that circumstance, if the
registrant chooses to exclude any non-U.S. employees under this
exemption, it must exclude all non-U.S. employees. Additionally, if a
registrant's non-U.S. employees exceed 5% of the registrant's total
U.S. and non-U.S. employees, it may exclude

up to 5% of its total employees who are non-U.S. employees; provided,
however, if a registrant excludes any non-U.S. employees in a
particular jurisdiction, it must exclude all non-U.S. employees in that
jurisdiction. If more than 5% of a registrant's employees are located
in any one non-U.S. jurisdiction, the registrant may not exclude any
employees in that jurisdiction under this exemption.
    (A) In calculating the number of non-U.S. employees that may be
excluded under this Item 402(u)(4)(ii) (``de minimis'' exemption), a
registrant shall count against the total any non-U.S. employee exempted
under the data privacy law exemption under Item 402(u)(4)(i) (``data
privacy'' exemption). A registrant may exclude any non-U.S. employee
from a jurisdiction that meets the data privacy exemption, even if the
number of excluded employees exceeds 5% of the registrant's total
employees. If, however, the number of employees excluded under the data
privacy exemption equals or exceeds 5% of the registrant's total
employees, the registrant may not use the de minimis exemption.
Additionally, if the number of employees excluded under the data
privacy exemption is less than 5% of the registrant's total employees,
the registrant may use the de minimis exemption to exclude no more than
the number of non-U.S. employees that, combined with the data privacy
exemption, does not exceed 5% of the registrant's total employees.
    (B) If a registrant excludes non-U.S. employees under the de
minimis exemption, it must disclose the jurisdiction or jurisdictions
from which those employees are being excluded, the approximate number
of employees excluded from each jurisdiction under the de minimis
exemption, the total number of its U.S. and non-U.S. employees
irrespective of any exemption (data privacy or de minimis), and the
total number of its U.S. and non-U.S. employees used for its de minimis
calculation.
    Instruction 1 to Item 402(u)--Disclosing the date chosen for
identifying the median employee. A registrant shall disclose the date
within the last three months of its last completed fiscal year that it
selected pursuant to paragraph (u)(3) of this Item to identify its
median employee. If the registrant changes the date it uses to identify
the median employee from the prior year, the registrant shall disclose
this change and provide a brief explanation about the reason or reasons
for the change.
    Instruction 2 to Item 402(u)--Identifying the median employee. A
registrant is required to identify its median employee only once every
three years and calculate total compensation for that employee each
year; provided that, during a registrant's last completed fiscal year
there has been no change in its employee population or employee
compensation arrangements that it reasonably believes would result in a
significant change to its pay ratio disclosure. If there have been no
changes that the registrant reasonably believes would significantly
affect its pay ratio disclosure, the registrant shall disclose that it
is using the same median employee in its pay ratio calculation and
describe briefly the basis for its reasonable belief. For example, the
registrant could disclose that there has been no change in its employee
population or employee compensation arrangements that it believes would
significantly impact the pay ratio disclosure. If there has been a
change in the registrant's employee population or employee compensation
arrangements that the registrant reasonably believes would result in a
significant change in its pay ratio disclosure, the registrant shall
re-identify the median employee for that fiscal year. If it is no
longer appropriate for the registrant to use the median employee
identified in year one as the median employee in years two or three
because of a change in the original median employee's circumstances
that the registrant reasonably believes would result in a significant
change in its pay ratio disclosure, the registrant may use another
employee whose compensation is substantially similar to the original
median employee based on the compensation measure used to select the
original median employee.
    Instruction 3 to Item 402(u)--Updating for the last completed
fiscal year. Pay ratio information (i.e., the disclosure called for by
paragraph (u)(1) of this Item) with respect to the registrant's last
completed fiscal year is not required to be disclosed until the filing
of its annual report on Form 10-K for that last completed fiscal year
or, if later, the filing of a definitive proxy or information statement
relating to its next annual meeting of shareholders (or written
consents in lieu of such a meeting) following the end of such fiscal
year; provided that, the required pay ratio information must, in any
event, be filed as provided in General Instruction G(3) of Form 10-K
(17 CFR 249.310) not later than 120 days after the end of such fiscal
year.
    Instruction 4 to Item 402(u)--Methodology and use of estimates. 1.
Registrants may use reasonable estimates both in the methodology used
to identify the median employee and in calculating the annual total
compensation or any elements of total compensation for employees other
than the PEO.
    2. In determining the employees from which the median employee is
identified, a registrant may use its employee population or statistical
sampling and/or other reasonable methods.
    3. A registrant may identify the median employee using annual total
compensation or any other compensation measure that is consistently
applied to all employees included in the calculation, such as
information derived from the registrant's tax and/or payroll records.
In using a compensation measure other than annual total compensation to
identify the median employee, if that measure is recorded on a basis
other than the registrant's fiscal year (such as information derived
from tax and/or payroll records), the registrant may use the same
annual period that is used to derive those amounts. Where a
compensation measure other than annual total compensation is used to
identify the median employee, the registrant must disclose the
compensation measure used.
    4. In identifying the median employee, whether using annual total
compensation or any other compensation measure that is consistently
applied to all employees included in the calculation, the registrant
may make cost-of-living adjustments to the compensation of employees in
jurisdictions other than the jurisdiction in which the PEO resides so
that the compensation is adjusted to the cost of living in the
jurisdiction in which the PEO resides. If the registrant uses a cost-
of-living adjustment to identify the median employee, and the median
employee identified is an employee in a jurisdiction other than the
jurisdiction in which the PEO resides, the registrant must use the same
cost-of-living adjustment in calculating the median employee's annual
total compensation and disclose the median employee's jurisdiction. The
registrant also shall briefly describe the cost-of-living adjustments
it used to identify the median employee and briefly describe the cost-
of-living adjustments it used to calculate the median employee's annual
total compensation, including the measure used as the basis for the
cost-of-living adjustment. A registrant electing to present the pay
ratio in this manner also shall disclose the median employee's annual
total compensation and pay ratio without the cost-of-living adjustment.
To calculate this pay ratio, the registrant will need to identify the

median employee without using any cost-of-living adjustments.
    5. The registrant shall briefly describe the methodology it used to
identify the median employee. It shall also briefly describe any
material assumptions, adjustments (including any cost-of-living
adjustments), or estimates it used to identify the median employee or
to determine total compensation or any elements of total compensation,
which shall be consistently applied. The registrant shall clearly
identify any estimates used. The required descriptions should be a
brief overview; it is not necessary for the registrant to provide
technical analyses or formulas. If a registrant changes its methodology
or its material assumptions, adjustments, or estimates from those used
in its pay ratio disclosure for the prior fiscal year, and if the
effects of any such change are significant, the registrant shall
briefly describe the change and the reasons for the change. Registrants
must also disclose if they changed from using the cost-of-living
adjustment to not using that adjustment and if they changed from not
using the cost-of-living adjustment to using it.
    6. Registrants may, at their discretion, include personal benefits
that aggregate less than $10,000 and compensation under non-
discriminatory benefit plans in calculating the annual total
compensation of the median employee as long as these items are also
included in calculating the PEO's annual total compensation. The
registrant shall also explain any difference between the PEO's annual
total compensation used in the pay ratio disclosure and the total
compensation amounts reflected in the Summary Compensation Table, if
material.
    Instruction 5 to Item 402(u)--Permitted annualizing adjustments. A
registrant may annualize the total compensation for all permanent
employees (full-time or part-time) that were employed by the registrant
for less than the full fiscal year (such as newly hired employees or
permanent employees on an unpaid leave of absence during the period). A
registrant may not annualize the total compensation for employees in
temporary or seasonal positions. A registrant may not make a full-time
equivalent adjustment for any employee.
    Instruction 6 to Item 402(u)--PEO compensation not available. A
registrant that is relying on Instruction 1 to Item 402(c)(2)(iii) and
(iv) in connection with the salary or bonus of the PEO for the last
completed fiscal year, shall disclose that the pay ratio required by
paragraph (u) of this Item is not calculable until the PEO salary or
bonus, as applicable, is determined and shall disclose the date that
the PEO's actual total compensation is expected to be determined. The
disclosure required by paragraph (u) of this Item shall then be
disclosed in the filing under Item 5.02(f) of Form 8-K (17 CFR 249.308)
that discloses the PEO's salary or bonus in accordance with Instruction
1 to Item 402(c)(2)(iii) and (iv).
    Instruction 7 to Item 402(u)--Transition periods for registrants.
1. Upon becoming subject to the requirements of Section 13(a) or 15(d)
of the Exchange Act (15 U.S.C. 78m or 78o(d)), a registrant shall
comply with paragraph (u) of this Item with respect to compensation for
the first fiscal year following the year in which it became subject to
such requirements, but not for any fiscal year commencing before
January 1, 2017. The registrant may omit the disclosure required by
paragraph (u) of this Item from any filing until the filing of its
annual report on Form 10-K (17 CFR 249.310) for such fiscal year or, if
later, the filing of a proxy or information statement relating to its
next annual meeting of shareholders (or written consents in lieu of
such a meeting) following the end of such year; provided that, such
disclosure shall, in any event, be filed as provided in General
Instruction G(3) of Form 10-K not later than 120 days after the end of
such fiscal year.
    2. A registrant may omit any employees that became its employees as
the result of the business combination or acquisition of a business for
the fiscal year in which the transaction becomes effective, but the
registrant must disclose the approximate number of employees it is
omitting. Those employees shall be included in the total employee count
for the triennial calculations of the median employee in the year
following the transaction for purposes of evaluating whether a
significant change had occurred. The registrant shall identify the
acquired business excluded for the fiscal year in which the business
combination or acquisition becomes effective.
    3. A registrant shall comply with paragraph (u) of this Item with
respect to compensation for the first fiscal year commencing on or
after the date the registrant ceases to be a smaller reporting company,
but not for any fiscal year commencing before January 1, 2017.
    Instruction 8 to Item 402(u)--Emerging growth companies. A
registrant is not required to comply with paragraph (u) of this Item if
it is an emerging growth company as defined in Section 2(a)(19) of the
Securities Act (15 U.S.C. 77(b)(a)(19)) or Section 3(a)(80) of the
Exchange Act (15 U.S.C. 78c(a)(80)). A registrant shall comply with
paragraph (u) of this Item with respect to compensation for the first
fiscal year commencing on or after the date the registrant ceases to be
an emerging growth company, but not for any fiscal year commencing
before January 1, 2017.
    Instruction 9 to Item 402(u)--Additional information. Registrants
may present additional information, including additional ratios, to
supplement the required ratio, but are not required to do so. Any
additional information shall be clearly identified, not misleading, and
not presented with greater prominence than the required ratio.
    Instruction 10 to Item 402(u)--Multiple PEOs during the year. A
registrant with more than one non-concurrent PEO serving during its
fiscal year may calculate the annual total compensation for its PEO in
either of the following manners:
    1. The registrant may calculate the compensation provided to each
person who served as PEO during the year for the time he or she served
as PEO and combine those figures; or
    2. The registrant may look to the PEO serving in that position on
the date it selects to identify the median employee and annualize that
PEO's compensation.
    Regardless of the alternative selected, the registrant shall
disclose which option it chose and how it calculated its PEO's annual
total compensation.
    Instruction 11 to Item 402(u)--Employees' personally identifiable
information. Registrants are not required to, and should not, disclose
any personally identifiable information about that employee other than
his or her compensation. Registrants may choose to generally identify
an employee's position to put the employee's compensation in context,
but registrants are not required to provide this information and should
not do so if providing the information could identify any specific
individual.
* * * * *

PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF
1934

0
3. The authority citation for part 240 continues to read, in part, as
follows:

    Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3,
77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78c-3, 78c-5, 78d, 78e, 78f,
78g, 78i, 78j, 78j-1, 78k, 78k-1, 78m, 78n, 78n-1, 78o, 78o-4, 78o-
10, 78p, 78q, 78q-1, 78s, 78u-5, 78w, 78x, 78ll, 78mm, 80a-20, 80a-
23, 80a-29, 80a-37, 80b-3, 80b-4, 80b-

11, and 7210 et seq., and 8302; 7 U.S.C. 2(c)(2)(E); 12 U.S.C.
5521(e)(3); 18 U.S.C. 1350; and Pub. L. 111-203, 939A, 124 Stat.
1376 (2010), unless otherwise noted.
* * * * *

0
4. Amend Sec.  240.14a-101 by adding Item 25 at the end to read as
follows:

Sec.  240.14a-101  Schedule 14A. Information required in proxy
statement.

    SCHEDULE 14A INFORMATION
* * * * *
    Item 25. Exhibits. Provide the legal opinion required to be filed
by Item 402(u)(4)(i) of Regulation S-K (17 CFR 229.402(u)) in an
exhibit to this Schedule 14A.

PART 249 -- FORMS, SECURITIES EXCHANGE ACT OF 1934

0
5. The authority citation for part 249 is revised, in part, to read as
follows:

    Authority:  15 U.S.C. 78a et seq. and 7201 et seq.; 12 U.S.C.
5461 et seq.; 18 U.S.C. 1350; Sec. 953(b), Pub. L. 111-203, 124
Stat. 1904; and Sec. 102(a)(3), Pub. L. 112-106, 126 Stat. 309,
unless otherwise noted.
* * * * *

0
6. Form 8-K (referenced in Sec.  249.308) is amended by redesignating
paragraph (f) as (f)(1) and adding paragraph (f)(2) to read as follows:
    Form 8-K
* * * * *
    Item 5.02 Departure of Directors or Certain Officers; Election of
Directors; Appointment of Certain Officers; Compensatory Arrangements
of Certain Officers.
* * * * *
    (f)(1) * * *
    (2) As specified in Instruction 6 to Item 402(u) of Regulation S-K
(17 CFR 229.402(u)), disclosure under this Item 5.02(f) with respect to
the salary or bonus of a principal executive officer shall include pay
ratio disclosure pursuant to Item 402(u) of Regulation S-K calculated
using the new total compensation figure for the principal executive
officer. Pay ratio disclosure is not required under this Item 5.02(f)
until the omitted salary or bonus amounts for such principal executive
officer become calculable in whole.
* * * * *

    Note:  The text of Form 8-K does not, and this amendment will
not, appear in the Code of Federal Regulations.

    By the Commission.
    Dated: August 5, 2015.
Brent J. Fields,
Secretary.
[FR Doc. 2015-19600 Filed 8-17-15; 8:45 am]
BILLING CODE 8011-01-P