[Federal Register Volume 80, Number 66 (Tuesday, April 7, 2015)]
[Notices]
[Pages 18664-18665]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-07852]
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SECURITIES AND EXCHANGE COMMISSION
Proposed Collection; Comment Request
Upon Written Request Copies Available From: U.S. Securities and
Exchange Commission, Office of FOIA Services, 100 F Street NE.,
Washington, DC 20549-2736.
Extension: Rule 17f-2. SEC File No. 270-233, OMB Control No. 3235-
0223.
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 (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 17f-2 (17 CFR 270.17f-2), entitled ``Custody of Investments by
Registered Management Investment Company,'' was adopted in 1940 under
section 17(f) of the Investment Company Act of 1940 (15 U.S.C. 80a-
17(f)) (the ``Act''), and was last amended
[[Page 18665]]
materially in 1947. Rule 17f-2 establishes safeguards for arrangements
in which a registered management investment company (``fund'') is
deemed to maintain custody of its own assets, such as when the fund
maintains its assets in a facility that provides safekeeping but not
custodial services.\1\ The rule includes several recordkeeping or
reporting requirements. The fund's directors must prepare a resolution
designating not more than five fund officers or responsible employees
who may have access to the fund's assets. The designated access persons
(two or more of whom must act jointly when handling fund assets) must
prepare a written notation providing certain information about each
deposit or withdrawal of fund assets, and must transmit the notation to
another officer or director designated by the directors. An independent
public accountant must verify the fund's assets three times each year,
and two of those examinations must be unscheduled.\2\
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\1\ The rule generally requires all assets to be deposited in
the safekeeping of a ``bank or other company whose functions and
physical facilities are supervised by Federal or State authority.''
The fund's securities must be physically segregated at all times
from the securities of any other person.
\2\ The accountant must transmit to the Commission promptly
after each examination a certificate describing the examination on
Form N-17f-2. The third (scheduled) examination may coincide with
the annual verification required for every fund by section 30(g) of
the Act (15 U.S.C. 80a-29(g)).
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Rule 17f-2's requirement that directors designate access persons is
intended to ensure that directors evaluate the trustworthiness of
insiders who handle fund assets. The requirements that access persons
act jointly in handling fund assets, prepare a written notation of each
transaction, and transmit the notation to another designated person are
intended to reduce the risk of misappropriation of fund assets by
access persons, and to ensure that adequate records are prepared,
reviewed by a responsible third person, and available for examination
by the Commission. The requirement that auditors verify fund assets
without notice twice each year is intended to provide an additional
deterrent to the misappropriation of fund assets and to detect any
irregularities.
The Commission staff estimates that each fund makes 974 responses
and spends an average of 252 hours annually in complying with the
rule's requirements.\3\ Commission staff estimates that on an annual
basis it takes: (i) 0.5 hours of fund accounting personnel at a total
cost of $99 to draft director resolutions; \4\ (ii) 0.5 hours of the
fund's board of directors at a total cost of $2200 to adopt the
resolution; \5\ (iii) 244 hours for the fund's accounting personnel at
a total cost of $63,797 to prepare written notations of transactions;
\6\ and (iv) 7 hours for the fund's accounting personnel at a total
cost of $1386 to assist the independent public accountants when they
perform verifications of fund assets.\7\ Commission staff estimates
that approximately 188 funds file Form N-17f-2 each year.\8\ Thus, the
total annual hour burden for rule 17f-2 is estimated to be 47,376
hours.\9\ Based on the total costs per fund listed above, the total
cost of rule 17f-2's collection of information requirements is
estimated to be approximately $12.7 million.\10\
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\3\ The 974 responses are: 1 (one) response to draft and adopt
the resolution and 973 notations. Estimates of the number of hours
are based on conversations with individuals in the fund industry.
The actual number of hours may vary significantly depending on
individual fund assets.
\4\ This estimate is based on the following calculation: 0.5
(burden hours per fund) x $198 (senior accountant's hourly rate) =
$99. Unless otherwise indicated, the hourly wage figures used herein
are from the Securities Industry and Financial Markets Association's
Management & Professional Earnings in the Securities Industry 2013,
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.
\5\ The estimate for the cost of board time as a whole is
derived from estimates made by the staff regarding typical board
size and compensation that is based on information received from
fund representatives and publicly available sources.
\6\ Respondents estimated that each fund makes 974 responses on
an annual basis and spends a total of 0.25 hours per response. The
fund personnel involved are Accounts Payable Manager ($186 hourly
rate), Operations Manager ($334 hourly rate) and Accounting Manager
($265 hourly rate). The average hourly rate of these personnel is
$262. The estimated cost of preparing notations is based on the
following calculation: 974 x 0.25 x $262 = $63,797.
\7\ This estimate is based on the following calculation: 7 x
$198 (senior accountant's hourly rate) = $1386.
\8\ On average, each year approximately 188 funds filed Form N-
17f-2 with the Commission during calendar years 2011-2013.
\9\ This estimate is based on the following calculation: 188
(funds) x 252 (total annual hourly burden per fund) = 47,376 hours
for rule. The annual burden for rule 17f-2 does not include time
spent preparing Form N-17f-2. The burden for Form N-17f-2 is
included in a separate collection of information.
\10\ This estimate is based on the following calculation:
$67,482 (total annual cost per fund) x 188 funds = $12,686,616.
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The estimate of average burden hours is made solely for the
purposes of the Paperwork Reduction Act, and is not derived from a
comprehensive or even a representative survey or study of the costs of
Commission rules and forms. Complying with the collections of
information required by rule 17f-2 is mandatory for those funds that
maintain custody of their own assets. 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 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 Pamela Dyson, Director/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: April 1, 2015.
Brent J. Fields,
Secretary.
[FR Doc. 2015-07852 Filed 4-6-15; 8:45 am]
BILLING CODE CODE 8011-01-P