[Federal Register Volume 76, Number 112 (Friday, June 10, 2011)]
[Notices]
[Pages 34110-34111]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-14390]
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SECURITIES AND EXCHANGE COMMISSION
Proposed Collection; Comment Request
Upon Written Request, Copies Available From: Securities and Exchange
Commission, Office of Investor Education and Advocacy, Washington, DC
20549.
Extension:
Rule 32a-4; SEC File No. 270-473; OMB Control No. 3235-0530.
Notice is hereby given that, pursuant to the Paperwork Reduction
Act of 1995 (44 U.S.C. 3501 et seq.), the Securities and Exchange
Commission (``Commission'') is soliciting comments on the collections
of information summarized below. The Commission plans to submit these
existing collections of information to the Office of Management and
Budget (``OMB'') for extension and approval.
Section 32(a)(2) of the Investment Company Act (15 U.S.C. 80a-
31(a)(2)) requires that shareholders of a registered investment
management or face-amount certificate company (collectively, ``funds'')
ratify or reject the selection of the fund's independent public
accountant. Rule 32a-4 (17 CFR 270.32a-4) exempts funds from this
requirement if (i) The fund's board of directors establishes an audit
committee composed solely of independent directors with responsibility
for overseeing the fund's accounting and auditing processes,\1\ (ii)
the fund's board of directors adopts an audit committee charter setting
forth the committee's structure, duties, powers and methods of
operation, or sets forth such provisions in the fund's charter or
bylaws,\2\ and (iii) the fund maintains a copy of such an audit
committee charter, and any modifications to the charter, permanently in
an easily accessible place.\3\
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\1\ Rule 32a-4(a).
\2\ Rule 32a-4(b).
\3\ Rule 32a-4(c).
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Each fund that chooses to rely on rule 32a-4 incurs two collection
of information burdens. The first, related to the board of directors'
adoption of the audit committee charter, occurs once, when the
committee is established. The second, related to the fund's maintenance
and preservation of a copy of the charter in an easily accessible
place, is an ongoing annual burden. The information collection
requirement in rule 32a-4 enables the Commission to monitor the duties
and responsibilities of an independent audit committee formed by a fund
relying on the rule.
Commission staff estimates that, on average, the board of directors
takes 15 minutes to adopt the audit committee charter. Commission staff
has estimated that with an average of 8 directors on the board,\4\
total director time to adopt the charter is 2 hours. Combined with an
estimated 1 hour of paralegal time to prepare the charter for board
review, the staff estimates a total one-time collection of information
burden of 3 hours for each fund. Once a board adopts an audit committee
charter, a fund generally maintains it in a file cabinet or as a
computer file. Commission staff has estimated that there is no annual
hourly burden associated with maintaining the charter in this form.\5\
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\4\ This estimate is based on staff discussions with a
representative of an entity that surveys funds and calculates fund
board statistics based on responses to its surveys.
\5\ No hour burden related to such maintenance of the charter
was identified by the funds the Commission staff surveyed.
Commission staff understands that many audit committee charters have
been significantly revised after their adoption in response to the
Sarbanes-Oxley Act (Pub. L. 107-204, 116 Stat. 745) and other
developments. However, the costs associated with these revisions are
not attributable to the requirements of rule 32a-4.
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Because virtually all funds extant have now adopted audit committee
charters, the annual one-time collection of information burden
associated with adopting audit committee charters is limited to the
burden incurred by newly established funds. Commission staff estimates
that fund sponsors establish approximately 117 new funds each year,\6\
and that all of these funds will adopt an audit committee charter in
order to rely on rule 32a-4. Thus, Commission staff estimates that the
annual one-time hour burden associated with adopting an audit committee
charter under rule 32a-4 going forward will be approximately 351
hours.\7\
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\6\ This estimate is based on the number of Form N-8As filed
from January 2010 through December 2010.
\7\ This estimate is based on the following calculation: (3.0
burden hours for establishing charter x 117 new funds = 351 burden
hours).
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As noted above, all funds that rely on rule 32a-4 are subject to
the ongoing collection of information requirement to preserve a copy of
the charter in an easily accessible place. This ongoing requirement,
which Commission staff has estimated has no hourly burden, applies to
new funds that adopt an audit committee charter each year and to all
funds that have previously adopted the charter and continue to maintain
it.
When funds adopt an audit committee charter in order to rely on
rule 32a-4, they also may incur one-time costs related to hiring
outside counsel to prepare the charter. Commission staff estimates that
those costs average approximately $1500 per fund.\8\
[[Page 34111]]
Commission staff understands that virtually all funds now rely on rule
32a-4 and have adopted audit committee charters, and thus estimates
that the annual cost burden related to hiring outside legal counsel is
limited to newly established funds.
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\8\ Costs may vary based on the individual needs of each fund.
However, based on the staff's conversations with outside counsel
that prepare these charters, legal fees related to the preparation
and adoption of an audit committee charter usually average $1500 or
less. The Commission also understands that the ICI has prepared a
model audit committee charter, which most legal professionals use
when establishing audit committees, thereby reducing the costs
associated with drafting a charter.
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As noted above, Commission staff estimates that approximately 117
new funds each year will adopt an audit committee charter in order to
rely on rule 32a-4. Thus, Commission staff estimates that the ongoing
annual cost burden associated with rule 32a-4 in the future will be
approximately $175,500.\9\
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\9\ This estimate is based on the following calculations: ($1500
cost of adopting charter x 117 newly established funds = $175,500).
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The estimates of average burden hours and costs are made solely for
the purposes of the Paperwork Reduction Act, and are not derived from a
comprehensive or even a representative survey or study of the costs of
Commission rules and forms.
The collections of information required by rule 32a-4 are necessary
to obtain the benefits of the rule. The Commission is seeking OMB
approval, because an agency may not conduct or sponsor, and a person is
not required to respond to, a collection of information unless it
displays a currently valid control number.
Written comments are invited on: (a) Whether the collection of
information is necessary for the proper performance of the functions of
the Commission, including whether the information has practical
utility; (b) the accuracy of the Commission's estimates of the burdens
of the collections of information; (c) ways to enhance the quality,
utility, and clarity of the information collected; and (d) ways to
minimize the burdens of the collections 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.
Please direct your written comments to Thomas Bayer, Director/Chief
Information Officer, Securities and Exchange Commission, c/o Remi
Pavlik-Simon, 6432 General Green Way, Alexandria, VA 22312; or send an
e-mail to: [email protected].
Dated: June 6, 2011.
Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-14390 Filed 6-9-11; 8:45 am]
BILLING CODE 8011-01-P