[Federal Register Volume 79, Number 94 (Thursday, May 15, 2014)]
[Notices]
[Pages 27941-27942]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-11163]
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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
20549-0004.
Extension:
Rule 32a-4, OMB Control No. 3235-0530, SEC File No. 270-473.
Notice is hereby given that, pursuant to the Paperwork Reduction
Act of 1995 (44 U.S.C. 350l et seq.), the Securities and Exchange
Commission (``Commission'') has submitted to the Office of Management
and Budget requests for extension of the previously approved
collections of information discussed below.
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 and preserves permanently in an
easily accessible place a copy of the audit committee charter, and any
modifications to the charter.\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
[[Page 27942]]
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, the charter is preserved as part of
the fund's records. Commission staff estimates that there is no annual
hourly burden associated with preserving the charter in accordance with
the rule.\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.
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Because virtually all existing funds 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 139 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 417 hours.\7\
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\6\ This estimate is based on the average number of
notifications of registration on Form N-8A filed from January 2011
through December 2013.
\7\ This estimate is based on the following calculation: (3.0
burden hours for establishing charter x 139 new funds = 417 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 estimates has no hourly burden, applies to new
funds that adopt an audit committee charter each year and to all of the
funds that have previously adopted the charter and continue to maintain
it.
Funds incur internal costs associated with the one-time collection
of information burden related to adopting an audit committee charter.
As noted above, Commission staff estimates that it takes approximately
2 hours of aggregate directors' time at $4000 per hour, and 1 hour of
paralegal time at $175 per hour,\8\ to adopt an audit committee
charter. Thus, Commission staff estimates a total internal cost of
$8175 per fund to adopt the charter \9\ and a total annual cost of
$1,136,325.\10\
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\8\ The $175/hour figure for a paralegal 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.
\9\ This estimate is based on the following calculations: ($4000
per hour for directors' time x 2 hours = $8000); ($8000 + $175 =
$8175).
\10\ This estimate is based on the following calculations:
($8175 cost of hour burden per fund x 139 new funds = $1,136,325).
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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.\11\
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\11\ Costs may vary based on the individual needs of each fund.
However, based on the staff's experience and 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 139
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 $208,500.\12\
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\12\ This estimate is based on the following calculations:
($1500 cost of adopting charter x 139 newly established funds =
$208,500).
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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.
The public may view the background documentation for this
information collection at the following Web site, www.reginfo.gov.
Comments should be directed to: (i) Desk Officer for the Securities and
Exchange Commission, Office of Information and Regulatory Affairs,
Office of Management and Budget, Room 10102, New Executive Office
Building, Washington, DC 20503, or by sending an email to: [email protected]; and (ii) 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].
Comments must be submitted to OMB within 30 days of this notice.
Dated: May 9, 2014.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-11163 Filed 5-14-14; 8:45 am]
BILLING CODE 8011-01-P