[Federal Register Volume 81, Number 20 (Monday, February 1, 2016)]
[Notices]
[Pages 5148-5149]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-01717]
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SECURITIES AND EXCHANGE COMMISSION
Proposed Collection; Comment Request
Upon Written Request, Copies Available From: Securities and Exchange
Commission, Office of FOIA Services, 100 F Street NE., Washington, DC
20549-2736.
Extension:
Rule 17e-1; SEC File No. 270-224, OMB Control No. 3235-0217.
Notice is hereby given that, pursuant to the Paperwork Reduction
Act of 1995 (44 U.S.C. 3501 et seq.) (``Paperwork Reduction Act''), 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
[[Page 5149]]
Management and Budget (``OMB'') for extension and approval.
Rule 17e-1 (17 CFR 270.17e-1) under the Investment Company Act of
1940 (15 U.S.C. 80a-1 et seq.) (the ``Investment Company Act'') deems a
remuneration as ``not exceeding the usual and customary broker's
commission'' for purposes of Section 17(e)(2)(A) if, among other
things, a registered investment company's (``fund's'') board of
directors has adopted procedures reasonably designed to provide that
the remuneration to an affiliated broker is a reasonable and fair
amount compared to that received by other brokers in connection with
comparable transactions involving similar securities being purchased or
sold on a securities exchange during a comparable period of time and
the board makes and approves such changes as it deems necessary. In
addition, each quarter, the board must determine that all transactions
effected under the rule during the preceding quarter complied with the
established procedures. Rule 17e-1 also requires the fund to (i)
maintain permanently a written copy of the procedures adopted by the
board for complying with the requirements of the rule; and (ii)
maintain for a period of six years, the first two in an easily
accessible place, a written record of each transaction subject to the
rule, setting forth the amount and source of the commission, fee, or
other remuneration received; the identity of the broker; the terms of
the transaction; and the materials used to determine that the
transactions were effected in compliance with the procedures adopted by
the board. The recordkeeping requirements under rule 17e-1 enable the
Commission to ensure that affiliated brokers receive compensation that
does not exceed the usual and customary broker's commission. Without
the recordkeeping requirements, Commission inspectors would have
difficulty ascertaining whether funds were complying with rule 17e-1.
Based on an analysis of fund filings, the staff estimates that
approximately 320 funds enter into subadvisory agreements each year.\1\
Based on discussions with industry representatives, the staff estimates
that it will require approximately 3 attorney hours to draft and
execute additional clauses in new subadvisory contracts in order for
funds and subadvisers to be able to rely on the exemptions in rule 17e-
1. Because these additional clauses are identical to the clauses that a
fund would need to insert in their subadvisory contracts to rely on
rules 12d3-1, 10f-3, and 17a-10, and because we believe that funds that
use one such rule generally use all of these rules, we apportion this 3
hour time burden equally to all four rules. Therefore, we estimate that
the burden allocated to rule 17e-1 for this contract change would be
0.75 hours.\2\ Assuming that all 320 funds enter into new subadvisory
contracts each year make the modification to their contract required by
the rule, we estimate that the rule's contract modification requirement
will result in 240 burden hours annually.\3\
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\1\ Based on data from Morningstar, as of September, 2015, there
are 12,426 registered funds (open-end funds, closed-end funds, and
exchange-traded funds), 4,683 funds of which have subadvisory
relationships (approximately 38%). Based on data from the 2015 ICI
Factbook, 843 new funds were established in 2014 (654 open-end funds
+ 176 exchange-traded funds + 13 closed-end funds (from the ICI
Research Perspective, April 2015)). 843 new funds x 38% = 320 funds.
\2\ 3 hours / 4 rules = 0.75 hours.
\3\ This estimate is based on the following calculation: 0.75
hours x 320 funds = 240 burden hours.
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Based on an analysis of fund filings, we estimate that
approximately 1,696 funds use at least one affiliated broker. Based on
staff experience and conversations with fund representatives, the staff
estimates approximately 40 percent of transactions (and thus, 40% of
funds) that occur under the rule 17e-1 would be exempt from its
recordkeeping and review requirements. This would leave approximately
1,018 funds \4\ still subject to the rule's recordkeeping and review
requirements. Based on staff experience and conversations with fund
representatives, we estimate that the burden of compliance with rule
17e-1 is approximately 50 hours per fund per year. This time is spent,
for example, reviewing the applicable transactions and maintaining
records. Accordingly, we calculate the total estimated annual internal
burden of complying with the review and recordkeeping requirements of
rule 17e-1 to be approximately 50,900 hours \5\ and the total annual
burden of the rule's paperwork requirements is 51,140 hours.\6\
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\4\ 1,696 funds x 0.6 = 1,018 funds.
\5\ 1,018 funds x 50 hours per fund = 50,900 hours.
\6\ 240 hours + 50,900 hours = 51,140 hours.
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Estimates of average 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 and forms. The collection of information under rule 17e-1 is
mandatory. The information provided under rule 17e-1 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 OMB 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 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: January 25, 2016.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-01717 Filed 1-29-16; 8:45 am]
BILLING CODE 8011-01-P