[Federal Register Volume 79, Number 131 (Wednesday, July 9, 2014)]
[Notices]
[Pages 39000-39001]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-15966]
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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 17a-7, OMB Control No. 3235-0214, SEC File No. 270-238.
Notice is hereby given that, pursuant to the Paperwork Reduction
Act of 1995 (44 U.S.C. 3501-3520), the Securities and Exchange
Commission (``Commission'') is soliciting comments on the collections
of information summarized below. The Commission plans to submit the
existing collection of information to the Office of Management and
Budget for extension and approval.
Rule 17a-7 (17 CFR 270.17a-7) (the ``rule'') under the Investment
Company Act of 1940 (15 U.S.C. 80a-1 et seq.) (the ``Act'') is entitled
``Exemption of certain purchase or sale transactions between an
investment company and certain affiliated persons thereof.'' It
provides an exemption from section 17(a) of the Act for purchases and
sales of securities between registered investment companies
(``funds''), that are affiliated persons (``first-tier affiliates'') or
affiliated persons of affiliated persons (``second-tier affiliates''),
or between a fund and a first- or second-tier affiliate other than
another fund, when the affiliation arises solely because of a common
investment adviser, director, or officer. Rule 17a-7 requires funds to
keep various records in connection with purchase or sale transactions
effected in reliance on the rule. The rule requires the fund's board of
directors to establish procedures reasonably designed to ensure that
the rule's conditions have been satisfied. The board is also required
to determine, at least on a quarterly basis, that all affiliated
transactions effected during the preceding quarter in reliance on the
rule were made in compliance with these established procedures. If a
fund enters into a purchase or sale transaction with an affiliated
person, the rule requires the fund to compile and maintain written
records of the transaction.\1\ The Commission's
[[Page 39001]]
examination staff uses these records to evaluate for compliance with
the rule.
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\1\ The written records are required to set forth a description
of the security purchased or sold, the identity of the person on the
other side of the transaction, and the information or materials upon
which the board of directors' determination that the transaction was
in compliance with the procedures was made.
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While most funds do not commonly engage in transactions covered by
rule 17a-7, the Commission staff estimates that nearly all funds have
adopted procedures for complying with the rule.\2\ Of the approximately
3318 currently active funds, the staff estimates that virtually all
have already adopted procedures for compliance with rule 17a-7. This is
a one-time burden, and the staff therefore does not estimate an ongoing
burden related to the policies and procedures requirement of the rule
for funds.\3\ The staff estimates that there are approximately 150 new
funds that register each year, and that each of these funds adopts the
relevant policies and procedures. The staff estimates that it takes
approximately 4 hours to develop and adopt these policies and
procedures. Therefore, the total annual burden related to developing
and adopting these policies and procedures would be approximately 600
hours.\4\
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\2\ Unless stated otherwise, these estimates are based on
conversations with the examination and inspections staff of the
Commission and fund representatives.
\3\ Based on our reviews and conversations with fund
representatives, we understand that funds rarely, if ever, need to
make changes to these policies and procedures once adopted, and
therefore we do not estimate a paperwork burden for such updates.
\4\ This estimate is based on the following calculations: (4
hours x 150 new funds = 600 hours).
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Of the 3318 existing funds, the staff assumes that approximately
25%, (or 830) enter into transactions affected by rule 17a-7 each year
(either by the fund directly or through one of the fund's series), and
that the same percentage (25%, or 38 funds) of the estimated 150 funds
that newly register each year will also enter into these transactions,
for a total of 868 \5\ companies that are affected by the recordkeeping
requirements of rule 17a-7. These funds must keep records of each of
these transactions, and the board of directors must quarterly determine
that all relevant transactions were made in compliance with the
company's policies and procedures. The rule generally imposes a minimal
burden of collecting and storing records already generated for other
purposes.\6\ The staff estimates that the burden related to making
these records and for the board to review all transactions would be 3
hours annually for each respondent, (2 hours spent by compliance
attorneys and 1 hour spent by the board of directors) \7\ or 2604 total
hours each year.\8\
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\5\ This estimate is based on the following calculation: (830 +
38 = 868).
\6\ Commission staff believes that rule 17a-7 does not impose
any costs associated with record preservation in addition to the
costs that funds already incur to comply with the record
preservation requirements of rule 31a-2 under the Act. Rule 31a-2
requires companies to preserve certain records for specified periods
of time.
\7\ The staff estimates that funds that rely on rule 17a-7
annually enter into an average of 8 rule 17a-7 transactions each
year. The staff estimates that the compliance attorneys of the
companies spend approximately 15 minutes per transaction on this
recordkeeping, and the board of directors spends a total of 1 hour
annually in determining that all transactions made that year were
done in compliance with the company's policies and procedures.
\8\ This estimate is based on the following calculation: (3
hours x 868 companies = 2604 hours).
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Based on these estimates, the staff estimates the combined total
annual burden hours associated with rule 17a-7 is 3204 hours.\9\ The
staff also estimates that there are approximately 1018 respondents and
7094 total responses.\10\
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\9\ This estimate is based on the following calculation: (600
hours + 2604 hours = 3204 total hours).
\10\ This estimate is based on the following calculations: (150
newly registered funds + 868 funds that engage in rule 17a-7
transactions = 1018); (868 funds that engage in rule 17a-7
transactions x 8 times per year = 6944); (6944 + 150 = 7094
responses).
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The estimates of burden hours 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. The collection of information required by rule 17a-7 is
necessary to obtain the benefits of the rule. Responses 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 collections of
information are 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 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, 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: July 2, 2014.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2014-15966 Filed 7-8-14; 8:45 am]
BILLING CODE 8011-01-P