[Federal Register Volume 78, Number 251 (Tuesday, December 31, 2013)]
[Notices]
[Pages 79714-79715]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-31242]
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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
20549-0213.
Extension:
Rule 17f-5 OMB Control No.: 3235-0269, SEC File No. 270-259
Notice is hereby given that, pursuant to the Paperwork Reduction
Act of 1995 (44 U.S.C. 350l-3520), the Securities and Exchange
Commission (``Commission'') is soliciting comments on the collection of
information summarized below. The Commission plans to submit the
existing collection of information to the Office of
[[Page 79715]]
Management and Budget for extension and approval.
Rule 17f-5 (17 CFR 270.17f-5) under the Investment Company Act of
1940 [15 U.S.C. 80a] (the ``Act'') governs the custody of the assets of
registered management investment companies (``funds'') with custodians
outside the United States. Under rule 17f-5, a fund or its foreign
custody manager (as delegated by the fund's board) may maintain the
fund's foreign assets in the care of an eligible fund custodian under
certain conditions. If the fund's board delegates to a foreign custody
manager authority to place foreign assets, the fund's board must find
that it is reasonable to rely on each delegate the board selects to act
as the fund's foreign custody manager. The delegate must agree to
provide written reports that notify the board when the fund's assets
are placed with a foreign custodian and when any material change occurs
in the fund's custody arrangements. The delegate must agree to exercise
reasonable care, prudence, and diligence, or to adhere to a higher
standard of care. When the foreign custody manager selects an eligible
foreign custodian, it must determine that the fund's assets will be
subject to reasonable care if maintained with that custodian, and that
the written contract that governs each custody arrangement will provide
reasonable care for fund assets. The contract must contain certain
specified provisions or others that provide at least equivalent care.
The foreign custody manager must establish a system to monitor the
performance of the contract and the appropriateness of continuing to
maintain assets with the eligible foreign custodian.
The collection of information requirements in rule 17f-5 are
intended to provide protection for fund assets maintained with a
foreign bank custodian whose use is not authorized by statutory
provisions that govern fund custody arrangements,\1\ and that is not
subject to regulation and examination by U.S. regulators. The
requirement that the fund board determine that it is reasonable to rely
on each delegate is intended to ensure that the board carefully
considers each delegate's qualifications to perform its
responsibilities. The requirement that the delegate provide written
reports to the board is intended to ensure that the delegate notifies
the board of important developments concerning custody arrangements so
that the board may exercise effective oversight. The requirement that
the delegate agree to exercise reasonable care is intended to provide
assurances to the fund that the delegate will properly perform its
duties.
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\1\ See section 17(f) of the Act. 15 U.S.C. 80a-17(f).
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The requirements that the foreign custody manager determine that
fund assets will be subject to reasonable care with the eligible
foreign custodian and under the custody contract, and that each
contract contain specified provisions or equivalent provisions, are
intended to ensure that the delegate has evaluated the level of care
provided by the custodian, that it weighs the adequacy of contractual
provisions, and that fund assets are protected by minimal contractual
safeguards. The requirement that the foreign custody manager establish
a monitoring system is intended to ensure that the manager periodically
reviews each custody arrangement and takes appropriate action if
developing custody risks may threaten fund assets.\2\
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\2\ The staff believes that subcustodian monitoring does not
involve ``collection of information'' within the meaning of the
Paperwork Reduction Act of 1995 (44 U.S.C. 3501--3520) (``Paperwork
Reduction Act'').
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Commission staff estimates that each year, approximately 130
registrants \3\ could be required to make an average of one response
per registrant under rule 17f-5, requiring approximately 2.5 hours of
board of director time per response, to make the necessary findings
concerning foreign custody managers. The total annual burden associated
with these requirements of the rule is up to approximately 325 hours
(130 registrants x 2.5 hours per registrant). The staff further
estimates that during each year, approximately 15 global custodians \4\
are required to make an average of 4 responses per custodian concerning
the use of foreign custodians other than depositories. The staff
estimates that each response will take approximately 270 hours,
requiring approximately 1080 total hours annually per custodian. The
total annual burden associated with these requirements of the rule is
approximately 16,200 hours (15 global custodians x 1080 hours per
custodian). Therefore, the total annual burden of all collection of
information requirements of rule 17f-5 is estimated to be up to 16,525
hours (325 + 16,200). The total annual cost of burden hours is
estimated to be $5,609,200 (325 hours x $4000/hour for board of
director's time, plus 16,200 hours x $266/hour for a trust
administrator's time).\5\ Compliance with the collection of information
requirements of the rule is necessary to obtain the benefit of relying
on the rule's permission for funds to maintain their assets in foreign
custodians.
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\3\ This figure is an estimate of the number of new funds each
year, based on data reported by funds in 2012 on Forms N-1A, N-2, N-
4, N-6, and S-6. In practice, not all funds will use foreign custody
managers, and the actual figure may be smaller.
\4\ This estimate is based on staff research.
\5\ The board hourly rate is based on fund industry
representations. The $266/hour figure for a trust administrator is
from SIFMA's Management & Professional Earnings in the Securities
Industry 2012, modified by Commission staff to account for an 1800-
hour work-year and multiplied by 5.35 to account for bonuses, firm
size, employee benefits, and overhead.
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The estimate of average burden hours is made solely for the
purposes of the Paperwork Reduction Act. The estimate is not derived
from a comprehensive or even a representative survey or study of the
costs of Commission rules and forms.
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 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, 100 F Street NE., Washington, DC 20549; or send an email
to: [email protected].
Dated: December 24, 2013.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2013-31242 Filed 12-30-13; 8:45 am]
BILLING CODE 8011-01-P