[Federal Register Volume 77, Number 236 (Friday, December 7, 2012)]
[Notices]
[Pages 73063-73064]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-29571]
[[Page 73063]]
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SECURITIES AND EXCHANGE COMMISSION
Submission for OMB Review; Comment Request
Upon Written Request Copies Available From: Securities and Exchange
Commission, Office of Investor Education and Advocacy, Washington, DC
20549-0213.
Extension:
Rule 2a-7, OMB Control No. 3235-0268, SEC File No. 270-258.
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 (the ``Commission'') is soliciting comments on the
collection of information summarized below. The Commission plans to
submit this existing collection of information to the Office of
Management and Budget for extension and approval.
Rule 2a-7 (17 CFR 270.2a-7) under the Investment Company Act of
1940 (15 U.S.C. 80a) (the ``Act'') governs money market funds. Money
market funds are open-end management investment companies that differ
from other open-end management investment companies in that they seek
to maintain a stable price per share, usually $1.00. The rule exempts
money market funds from the valuation requirements of the Act, and,
subject to certain risk-limiting conditions, permits money market funds
to use the ``amortized cost method'' of asset valuation or the ``penny-
rounding method'' of share pricing.
Rule 2a-7 also imposes certain recordkeeping and reporting
obligations on money market funds. The board of directors of a money
market fund, in supervising the fund's operations, must establish
written procedures designed to stabilize the fund's net asset value
(``NAV''). The board must also adopt guidelines and procedures relating
to certain responsibilities it delegates to the fund's investment
adviser. These procedures and guidelines typically address various
aspects of the fund's operations. The fund must maintain and preserve
for six years a written copy of both these procedures and guidelines.
The fund also must maintain and preserve for six years a written record
of the board's considerations and actions taken in connection with the
discharge of its responsibilities, to be included in the board's
minutes. In addition, the fund must maintain and preserve for three
years written records of certain credit risk analyses, evaluations with
respect to securities subject to demand features or guarantees, and
determinations with respect to adjustable rate securities and asset
backed securities. If the board takes action with respect to defaulted
securities, events of insolvency, or deviations in share price, the
fund must file with the Commission an exhibit to Form N-SAR describing
the nature and circumstances of the action. If any portfolio security
fails to meet certain eligibility standards under the rule, the fund
also must identify those securities in an exhibit to Form N-SAR. After
certain events of default or insolvency relating to a portfolio
security, the fund must notify the Commission of the event and the
actions the fund intends to take in response to the situation.
The 2010 amendments to rule 2a-7 also added new collection of
information requirements. First, money market fund boards must adopt
written procedures that provide for periodic testing (and reporting to
the board) of the fund's ability to maintain a stable NAV per share
based on certain hypothetical events. Second, funds must post monthly
portfolio information on their Web sites. Third, funds must maintain
records of creditworthiness evaluations on counterparties to repurchase
agreements that the fund intends to ``look through'' for purposes of
rule 2a-7's diversification limitations. Finally, money market funds
must promptly notify the Commission of the purchase of any money market
fund's portfolio security by an affiliated person in reliance on rule
17a-9 under the Act and explain the reasons for such purchase.
The recordkeeping requirements in rule 2a-7 are designed to enable
Commission staff in its examinations of money market funds to determine
compliance with the rule, as well as to ensure that money market funds
have established procedures for collecting the information necessary to
make adequate credit reviews of securities in their portfolios. The
reporting requirements of rule 2a-7 are intended to assist Commission
staff in overseeing money market funds and reduce the likelihood that a
fund is unable to maintain a stable NAV.
Commission staff estimates that there are 664 money market funds
(136 fund complexes), all of which are subject to rule 2a-7. Commission
staff further estimates that there will be approximately 10 new money
market funds established each year. Commission staff estimates that
rule 2a-7 contains the following collection of information
requirements:
Record of credit risk analyses, and determinations
regarding adjustable rate securities, asset backed securities,
securities subject to a demand feature or guarantee, and counterparties
to repurchase agreements. Commission staff estimates a total annual
hour burden for 664 funds to be 451,520 hours.
Establishment of written procedures designed to stabilize
NAV and guidelines and procedures for board delegation of authority.
Commission staff estimates a total annual hour burden for 10 new money
market funds to be 155 hours.
Board review of procedures and guidelines of any
investment adviser or officers to whom the fund's board has delegated
responsibility under rule 2a-7 and amendment of such procedures and
guidelines. Commission staff estimates a total annual hour burden for
166 funds to be 830 hours.
Written record of board determinations and actions related
to failure of a security to meet certain eligibility standards or an
event of default or insolvency and notice to the Commission of an event
of default or insolvency. Commission staff estimates a total annual
hour burden for 20 funds to be 30 hours.
Establishment of written procedures to test periodically
the ability of the fund to maintain a stable NAV per share based on
certain hypothetical events (``stress testing''). Commission staff
estimates a total annual hour burden for 10 new money market funds to
be 220 hours.
Review, revise, and approve written procedures to stress
test a fund's portfolio. Commission staff estimates a total annual hour
burden for 136 fund complexes to be 1,632 hours.
Reports to fund boards on the results of stress testing.
Commission staff estimates a total annual hour burden for 136 fund
complexes to be 6,800 hours.
Monthly posting of money market fund portfolio information
on a fund's Web site. Commission staff estimates a total annual hour
burden for 664 funds and 10 new money market funds to be 56,016 hours.
Notice to the Commission of the purchase of a money market
fund's portfolio security by certain affiliated persons in reliance on
rule 17a-9. Commission staff estimates a total annual hour burden for
25 fund complexes to be 25 hours.
Thus, the Commission estimates the total annual burden of the
rule's information collection requirements is 517,228 hours.\1\
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\1\ This estimate is based on the following calculation: 451,520
hours + 155 hours + 830 hours + 30 hours + 220 hours + 1,632 hours +
6,800 hours + 56,016 hours + 25 hours = 517,228 hours.
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The estimated total annual burden is being increased from 395,779
hours to 517,228 hours. This net increase is attributable to a
combination of factors, including a decrease in the number of money
market funds and fund complexes, and updated information from money
market funds regarding hourly burdens, including revised staff
estimates of the burden hours required to comply with rule 2a-7 as a
result of new information received from surveyed fund representatives.
These estimates of burden hours are made solely for the purposes of
the Paperwork Reduction Act. The estimates are not derived from a
comprehensive or even a representative survey or study of Commission
rules.
Commission staff estimates that in addition to the costs described
above, money market funds will incur costs to preserve records, as
required under rule 2a-7. These costs will vary significantly for
individual funds, depending on the amount of assets under fund
management and whether the fund preserves its records in a storage
facility in hard copy or has developed and maintains a computer system
to create and preserve compliance records. Commission staff estimates
that the amount an individual fund may spend ranges from $100 per year
to $300,000. Based on a cost of $0.0051295 per dollar of assets under
management for small funds, $0.0005041 per dollar assets under
management for medium funds, and $0.0000009 per dollar of assets under
management for large funds, the staff estimates compliance with the
record storage requirements of rule 2a-7 costs the fund industry
approximately $57.3 million per year. Based on responses from
individuals in the money market fund industry, the staff estimates that
some of the largest fund complexes have created computer programs for
maintaining and preserving compliance records for rule 2a-7. Based on a
cost of $0.0000132 per dollar of assets under management for large
funds, the staff estimates that total annualized capital/startup costs
range from $0 for small funds to $35.6 million for all large funds.
Commission staff further estimates that, even absent the requirements
of rule 2a-7, money market funds would spend at least half of the
amount for capital costs ($17.8 million) and for record preservation
($28.65 million) to establish and maintain these records and the
systems for preserving them as a part of sound business practices to
ensure diversification and minimal credit risk in a portfolio for a
fund that seeks to maintain a stable price per share.
The collections of information required by rule 2a-7 are necessary
to obtain the benefits described above. Notices to the Commission will
not be kept confidential. 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 proposed
collection of information is necessary for the proper performance of
the functions of the agency, including whether the information will
have practical utility; (b) the accuracy of the agency's estimate of
the burden of the collection of information; (c) ways to enhance the
quality, utility, and clarity of the information collected; and (d)
ways to minimize the burden of the collection of information on
respondents, including through the use of automated collection
techniques or other forms of information technology. 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, Chief
Information Officer, Securities and Exchange Commission, c/o Remi
Pavlik-Simon, 6432 General Green Way, Alexandria, VA 22312; or send an
email to: [email protected].
Dated: December 3, 2012.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-29571 Filed 12-6-12; 8:45 am]
BILLING CODE 8011-01-P