[Federal Register Volume 73, Number 214 (Tuesday, November 4, 2008)]
[Rules and Regulations]
[Pages 65516-65526]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-26183]
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SECURITIES AND EXCHANGE COMMISSION
17 CFR Parts 232 and 270
[Release Nos. 33-8981; 34-58874; IC-28476 File No. S7-25-07]
RIN 3235-AJ81
Mandatory Electronic Submission of Applications for Orders Under
the Investment Company Act and Filings Made Pursuant to Regulation E
AGENCY: Securities and Exchange Commission.
ACTION: Final rule.
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SUMMARY: We are adopting several amendments to rules regarding our
Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system.
Specifically, we are amending our rules to make mandatory the
electronic submission on EDGAR of applications for orders under any
section of the Investment Company Act of 1940 (``Investment Company
Act'') as well as Regulation E filings of small business investment
companies and business development companies. We also are amending the
electronic filing rules to make the temporary hardship exemption
unavailable for submission of applications under the Investment Company
Act. Finally, we are amending Rule 0-2 under the Investment Company
Act, eliminating the requirement that certain documents accompanying an
application be notarized and the requirement that applicants submit a
draft notice as an exhibit to an application.
DATES: Effective Date: January 1, 2009.
FOR FURTHER INFORMATION CONTACT: If you have questions about the rules,
please contact one of the following members of our staff in the
Division of Investment Management, at the Securities and Exchange
Commission, 100 F Street, NE., Washington, DC 20549-0506: in the Office
of Legal and Disclosure, Ruth Armfield Sanders, Senior Special Counsel
(EDGAR), at (202) 551-6989; in the Office of Investment Company
Regulation, Michael W. Mundt, Assistant Director, at (202) 551-6821;
or, in the Office of Insurance Products, Keith Carpenter, Senior
Special Counsel, at (202) 551-6766; for technical questions relating to
the EDGAR system, in the Office of Information Technology, Richard D.
Heroux, EDGAR Program Manager, at (202) 551-8168.
SUPPLEMENTARY INFORMATION: The Securities and Exchange Commission
(``Commission'') is adopting amendments to Rules 101 and 201 of
Regulation S-T \1\ relating to electronic filing on the EDGAR system
and to Rule 0-2 \2\ under the Investment Company Act.\3\
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\1\ 17 CFR 232.101 and 232.201.
\2\ 17 CFR 270.0-2.
\3\ We proposed these amendments in November 2007. See
Rulemaking for EDGAR System; Mandatory Electronic Submission of
Applications for Orders under the Investment Company Act and Filings
Made Pursuant to Regulation E, Release No. 33-8859 (Nov. 1, 2007)
[72 FR 63513 (Nov. 9, 2007)] (``Proposing Release'').
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I. Background
In the last several years, we initiated a series of amendments to
keep EDGAR current technologically and to make it more useful to the
investing public and Commission staff.\4\ In April 2000, we adopted
rule and form amendments in connection with the modernization of
EDGAR.\5\ In the Modernization Proposing Release, we noted that, as the
use of electronic databases grows, it becomes increasingly important
for members of the public to have electronic access to our filings. We
also stated that we were contemplating future rulemaking to require
more of our filings to be filed on EDGAR. In May 2002, we adopted rules
requiring foreign private issuers and foreign governments to file most
of their documents electronically.\6\ In May 2003, we adopted rules
requiring electronic filing of beneficial ownership reports filed by
officers, directors and principal security holders under section 16(a)
\7\ of the Securities Exchange Act of 1934 (``Exchange Act'').\8\ In
July 2005, we adopted rules requiring certain open-end management
investment companies and insurance companies separate accounts to
identify in their EDGAR submissions information relating to their
series and classes (or contracts, in the case of separate accounts) and
mandating that fidelity bonds filed under section 17(g) \9\ and sales
literature filed with us under section 24(b) \10\ be
[[Page 65517]]
made by electronic submission on the EDGAR system.\11\ In December
2006, we adopted amendments to the rules and forms under section 17A of
the Exchange Act requiring that the forms filed with respect to
transfer agent registration, annual reporting, and withdrawal from
registration be filed with the Commission electronically on EDGAR.\12\
On February 6, 2008, we adopted amendments to make mandatory the
electronic submission of Form D on the EDGAR system.\13\
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\4\ We recently announced the successor to the EDGAR Database.
The new system is called IDEA, short for Interactive Data Electronic
Applications, and will at first supplement and then eventually
replace the EDGAR system. See ``SEC Announces Successor to EDGAR
Database; ``IDEA'' Will Make Company and Fund Information
Interactive,'' Press Release No. 2008-179, Aug. 19, 2008.
\5\ See Rulemaking for EDGAR System, Release No. 33-7855 (Apr.
27, 2000) [65 FR 24788] (the ``Modernization Adopting Release'').
See also Release No. 33-7803 (Mar. 3, 2000) [65 FR 11507]
(``Modernization Proposing Release'').
\6\ See Mandated EDGAR Filing for Foreign Issuers, Release No.
33-8099 (May 14, 2002) [67 FR 36678].
\7\ 15 U.S.C. 78p(a).
\8\ See Mandated EDGAR Filing and Web Site Posting for Forms 3,
4 and 5, Release No. 33-8230 (May 7, 2003) [68 FR 25788] (the
``EDGAR Section 16 Release'').
\9\ 15 U.S.C. 80a-17(g).
\10\ 15 U.S.C. 80a-24(b).
\11\ See Rulemaking for EDGAR System, Release No. 33-8590 (July
18, 2005) [70 FR 43558 (July 27, 2005)].
\12\ See Electronic Filing of Transfer Agent Forms, Release No.
34-54864 (Dec. 4, 2006) [71 FR 74698 (Dec. 12, 2006)].
\13\ See Electronic Filing and Revisions of Form D, Release No.
33-8891 (Feb. 6, 2008) [73 FR 10592 (Feb. 27, 2008)].
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Today, we are amending our rules to require that applicants submit
electronically on the EDGAR system their applications for orders under
any section of the Investment Company Act (``applications''). In
addition, we are adding Regulation E filings to the list of those that
must be filed electronically through EDGAR. These amendments are
designed to facilitate the efficient submission of applications and
Regulation E filings, to enable the public to access them more quickly
and search them more easily, and to improve the Commission's ability to
track and process such applications and Regulation E filings. We are
also making related amendments to Regulation S-T, our electronic filing
rules, and revising Rule 0-2.
II. Mandatory Electronic Submission of Investment Company Applications
The rules under Regulation S-T previously provided that
applications for exemptive relief under any section of the Investment
Company Act shall not be made in electronic format.\14\ The only
applications under the Investment Company Act that were mandatory EDGAR
submissions were applications for deregistration filed by investment
companies.\15\ Applicants for orders under the Investment Company Act
can include registered investment companies, affiliated persons of
registered investment companies, and issuers seeking to avoid
investment company status, among other entities.\16\ These applications
were submitted in paper and available only from the Commission's public
reference room or electronically from private services. Private
services usually charge fees for electronic copies of applications;
also, there is a delay of about thirty days between the submission of
applications to the Commission and their electronic availability from
the private sources.
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\14\ Rule 101(a)(1)(iv) and (c)(11) of Regulation S-T [17 CFR
232.101(a)(1)(iv) and (c)(11)].
\15\ These include applications and amendments submitted on Form
N-8F [17 CFR 274.218] (EDGAR submission types N-8F and N-8F/A) and
those submitted pursuant to Investment Company Act Rule 0-2 [17 CFR
270.0-2] (EDGAR submission types 40-8F-2 and 40-8F-2/A). See Release
No. IC-23786 (Apr. 15, 1999) [76 19469 (Apr. 21, 1999)].
\16\ There are several sections of the Investment Company Act
pursuant to which entities may make applications for relief. For
example, Section 6(c) [15 U.S.C. 80a-6(c)] provides the Commission
with authority to exempt persons, securities or transactions from
any provision of the Investment Company Act, or the regulations
thereunder, if and to the extent that such exemption is in the
public interest and consistent with the protection of investors and
the purposes fairly intended by the policy and provisions of the
Investment Company Act.
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We are amending certain provisions of Regulation S-T and Investment
Company Act Rule 0-2 \17\ to require electronic submission on EDGAR of
applications pursuant to Rule 0-2 under the Investment Company Act. We
are amending Rule 101(a)(1)(iv) of Regulation S-T to include within its
mandatory electronic filing provisions any application for an order
under any section of the Investment Company Act.\18\
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\17\ Rule 0-2 is the Investment Company Act rule under which
applications are submitted.
\18\ See amendment to Rule 101(a)(1)(iv) under Regulation S-T.
Paragraph (11) of Rule 101(c) provided that filings under Section
6(c) of the Investment Company Act, i.e., applications for orders,
be submitted in paper format only. As proposed, we are removing and
reserving this paragraph.
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In the Proposing Release, we requested comment on the impact of our
making the submission of requests for orders under the Investment
Company Act mandatory electronic submissions and whether we should
implement this rule. We requested comment on whether it would be
burdensome for us to require applicants to submit applications
electronically. We also sought comments as to which applications the
rule should apply. We asked commenters to address the issue of what the
transition period should be for investment companies and other
applicants to prepare for the mandatory electronic submission of these
applications.
We requested comment not only on the specific issues that we
discussed in the Proposing Release, but on any other approaches or
issues that we should consider in connection with the submission of
applications for orders and Regulation E filings on the EDGAR system.
We sought comment from any interested person, including those required
to file information with us on the EDGAR system, as well as investors,
disseminators of EDGAR data, EDGAR filing agents, and other members of
the public who have access to and use information from the EDGAR
system.
We asked commenters to provide detailed information on any
difficulties and considerations unique to these proposed requirements.
In the event commenters believed that any aspect of the proposed
requirements would be burdensome, we asked for specific details and
alternative approaches.
We received two comment letters in response to our requests for
comment. Both commenters expressed support for the rulemaking proposal
to require that all applications be submitted electronically through
the EDGAR system.\19\ Both commenters expressed views about
applications that are sent to the staff in draft that have not been
officially filed. One commenter inquired about applications made under
both the Investment Company Act and the Investment Advisers Act of 1940
(``Investment Advisers Act'') \20\ and had certain concerns about
amendments to Rule 0-2.\21\ We received no comments in connection with
the portion of our proposal related to Regulation E filings.
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\19\ In support of the proposal, one commenter stated:
Like the Commission, the Institute believes that the proposal
will help to facilitate both the efficient submission of
applications and the retrieval of those applications by interested
parties. We also applaud this effort by the Commission to improve
its ability to track and process exemptive applications, which are
of vital importance to the fund industry and, ultimately, to fund
investors.
See Comment Letter dated Dec. 14, 2007, of Karrie McMillan,
General Counsel, Investment Company Institute (the ``ICI Comment
Letter''). See also Comment Letter dated Dec. 14, 2007, of Mercer
Bullard, Founder and President, Fund Democracy (the ``Fund Democracy
Comment Letter'').
\20\ 15 U.S.C. 80b-1 et seq.
\21\ See ICI Comment Letter.
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We are adopting these amendments, in light of the primary goals of
the EDGAR system, to facilitate the rapid dissemination of financial
and business information in connection with filings, including filings
by investment companies. Requiring applications to be submitted
electronically will benefit members of the investing public and the
financial community by making information contained in these filings
readily available and more easily searchable. In this age of
information, we believe that filings and applications made with the
Commission are more valuable to the public if they are available in
electronic form and that adding applications to the EDGAR database will
provide a more complete picture for the investing public. We believe
that the amendments will benefit the public by making the EDGAR
[[Page 65518]]
page of our Web site a more comprehensive resource for most information
on file with us related to the operation of investment companies.
Both of the commenters on the Proposing Release raised the issue of
applications submitted to the Commission's staff in draft form. One
commenter strongly believed that ``the Commission staff's willingness
to consider exemptive applications in draft form and to grant requests
for confidential treatment, when appropriate, is critical to
encouraging innovation in the fund industry.'' \22\ The other commenter
was concerned that the new filing requirement might result in an
increase of the use of draft applications to the detriment of the
public interest.\23\
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\22\ See ICI Comment Letter. In support of its position, the
commenter stated:
The development of new investment products and more efficient
and effective business practices can be a costly and time-consuming
endeavor for fund sponsors and other applicants. In return for their
investment of intellectual and financial capital, applicants should
be rewarded for their innovation and creativity by being the ``first
to market'' with their new product or practice.
\23\ Noting this concern, the commenter stated that:
Permitting applicants to file draft applications is contrary to
fundamental principles of administrative law and the public
interest. It also is unfair to other applicants for Commission staff
to spend time on draft applications while applications that have
been properly filed are left on hold. In its adopting release, the
Commission should clarify that the staff will not accept or review
draft applications, and that concerns regarding the confidentiality
of proprietary information should be addressed by appropriate
redactions in a filed request.
See Fund Democracy Comment Letter.
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The staff's policy, as first stated in a Commission release in
1985, is that the staff will not, except in the most extraordinary
situations, review draft applications.\24\ Consistent with this policy,
the staff will continue to accept draft applications only in situations
where the applicant clearly demonstrates the extraordinary
circumstances that necessitate the submission of a draft
application.\25\ We believe that this approach continues to strike an
appropriate balance between encouraging innovation in the fund
industry, making effective use of staff resources, and serving the
interests of the public. While it is possible that applicants will seek
permission to submit more applications as draft applications, as
discussed above the staff's policy of reviewing draft applications only
in the most extraordinary situations will not change, and as a result,
we do not believe that the number of draft applications will increase.
The new filing requirement will only change the format (from paper to
electronic) of documents that were and will be publicly available.
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\24\ See Commission Policy and Guidelines for Filing of
Applications for Exemption, Investment Company Act Release No. 14492
(Apr. 30, 1985).
\25\ See IM Exemptive Application Processing, SEC Office of the
Inspector General, Audit Report No. 408, Recommendation C (Sept. 29,
2006).
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As we noted in the Proposing Release, from time to time, an
applicant may wish to submit an application for exemption under both
the Investment Company Act and the Investment Advisers Act.\26\ We did
not propose to require that applications under the Investment Advisers
Act be made on EDGAR. We noted that any document that is intended as an
application for an order under both the Investment Company Act and the
Investment Advisers Act should be submitted separately under each Act.
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\26\ See footnote 18 of the Proposing Release.
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One commenter expressed the view that we should consider
alternative approaches that would allow a single EDGAR filing for an
application requesting relief under both Acts.\27\ We note that, to
date, the EDGAR system has not been a vehicle for the submission of
Investment Advisers Act filings. Further, based on staff review of the
contents of all Advisers Act applications submitted to us, we are not
aware of any within the past ten years that also requested relief from
Investment Company Act provisions. Therefore, we believe it is not
cost-effective for us to make the programming changes at this time so
that EDGAR would accept applications under both Acts, given that
recently no applications requested relief from both statutes. EDGAR
will accept applications under the Investment Company Act as proposed.
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\27\ See ICI Comment Letter.
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As with other entities that make submissions on EDGAR, applicants
will be subject to the provisions of Regulation S-T \28\ and the EDGAR
Filer Manual. Regulation S-T includes detailed rules concerning
mandatory and permissive electronic EDGAR submissions; it also makes
clear that requests for confidential treatment must be made in paper
format.\29\
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\28\ For a comprehensive discussion of Regulation S-T and
electronic filing, see ``Electronic Filing and the EDGAR System: A
Regulatory Overview,'' available on the Information for EDGAR Filers
page of the Commission's Web site, http://www.sec.gov/info/edgar.shtml.
\29\ See Rule 101 of Regulation S-T [17 CFR 232.101].
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Regulation S-T requires the electronic filing of any amendments and
related correspondence and supplemental information pertaining to a
document that is the subject of mandated EDGAR submission.\30\ These
requirements also apply to companies and persons who submit
applications.\31\ The requirement to file amendments electronically
applies to applications filed electronically on EDGAR as well as to
pending applications initially filed in paper.\32\
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\30\ Regulation S-T Rule 101(a)(2) [17 CFR 232.101(a)(2)].
\31\ See amendments to paragraphs (a)(2) and (3) of Rule 101 of
Regulation S-T. Related correspondence and supplemental information
are not automatically disseminated publicly through the EDGAR system
but are immediately available to the Commission staff.
\32\ This provision dates back to 1993. See text at footnote 83
of Rulemaking for EDGAR System, Release No. 33-6977 (Feb. 23, 1993)
[58 FR 14628 (Mar. 18, 1993)] (``Once a filer becomes subject to the
mandated electronic filing rules, any documents, including
amendments and supplements to documents previously filed in paper,
will be required to be filed in electronic format, absent a hardship
exemption.'').
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The Regulation also covers such matters as providing for the
override of formatting requirements applicable to paper
submissions.\33\ The EDGAR Filer Manual contains detailed technical
specifications concerning EDGAR submissions. The Manual also provides
technical guidance concerning how to commence submissions on EDGAR by
submitting Form ID to obtain a CIK \34\ and confidential access codes
and how to maintain and update company data, e.g., how to change
company names and contact information.\35\
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\33\ The paper formatting requirements continue to be applicable
to paper submissions made pursuant to temporary and continuing
hardship exemptions under Rules 201 and 202 of Regulation S-T [17
CFR 232.201 and 232.202].
\34\ A filer's CIK (or ``central index key'') is a ten-digit
number uniquely identifying that filer.
\35\ We remind filers that, in the case of name changes, the
changes must be made via the EDGAR filing Web site in advance of the
change being reflected on an EDGAR submission. The name on past
submissions will not change. The CIK and file number(s) of the
company will provide a link to filings under the old name.
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One technical specification that the EDGAR Filer Manual includes is
the electronic ``submission type'' for each submission made on EDGAR.
The EDGAR electronic submission types for applications are designed to
facilitate and expedite the review of these applications.
Consistent with our amendments, the EDGAR Filer Manual and the
EDGARLink software provide for three EDGAR electronic submission types
for applications: 40-APP, 40-OIP, and 40-6B. Applicants whose
applications are typically processed by the Division of Investment
Management's Office of Investment Company Regulation will use EDGAR
submission type 40-APP; these applicants will submit amendments using
EDGAR submission
[[Page 65519]]
type 40-APP/A. Applicants whose applications are typically processed by
the Division's Office of Insurance Products will use the new EDGAR
submission type 40-OIP; these applicants will submit amendments using
EDGAR submission type 40-OIP/A. Employees' securities company
applications (also processed by the Office of Investment Company
Regulation) will use EDGAR submission type 40-6B and submission type
40-6B/A for amendments. Applicants that have currently pending
applications that were submitted in paper and recorded as submission
type 40-6C will submit amendments to their applications using either
EDGAR submission type 40-APP/A or 40-OIP/A, as appropriate.
The EDGAR Filer Manual provides guidance for applicants in choosing
the correct submission type. Most applicants will submit their
applications under EDGAR submission type 40-APP, the submission type
designated for the Office of Investment Company Regulation. Applicants
submitting the following categories of applications will use EDGAR
submission type 40-OIP, the submission type for the Office of Insurance
Products:
(1) Applications with regard to mixed and shared funding filed
under section 6(c) of the Investment Company Act, for exemptions from
the provisions of sections 9(a), 13(a), 15(a) and 15(b) of the
Investment Company Act,\36\ and Rules 6e-2(b)(15) and 6e-3(T)(b)(15);
\37\
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\36\ 15 U.S.C. 80a-9(a), 80a-13(a), 80a-15(a), 80a-15(b).
\37\ 17 CFR 270.6e-2(b)(15), 270.6e-3(T)(b)(15).
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(2) Applications relating to the recapture of bonus credits filed
under section 6(c) of the Investment Company Act for exemptions from
the provisions of sections 2(a)(32) and 27(i)(2)(A) of the Investment
Company Act \38\ and Rule 22c-1; \39\
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\38\ 15 U.S.C. 80a-2(a)(32), 80a-27(i)(2)(A).
\39\ 17 CFR 270.22c-1.
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(3) Applications relating to the substitution of securities held by
a variable insurance separate account filed under section 26(c) of the
Investment Company Act; \40\ and
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\40\ 15 U.S.C. 80a-26(c).
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(4) Applications for approval of the terms of an exchange offer
involving variable insurance contracts filed under section 11(a) of the
Investment Company Act.\41\
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\41\ 15 U.S.C. 80a-11(a).
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These three submission types are designed to facilitate and
expedite staff review of the submissions. Our internal system will
quickly route the application to the appropriate Office. If applicants
have any questions as to the appropriate EDGAR submission type, we
encourage them to verify in advance the correct submission type so that
the application can be routed automatically to the appropriate
Office.\42\ As proposed, for applications with multiple co-applicants,
the applicants will submit the application with all co-applicants
included in one submission. The applicants will choose one applicant to
list first as the ``primary'' co-applicant. Then, they will include in
the EDGAR template the information for all other co-applicants, i.e.,
the CIK of each co-applicant and, for amendments, the file number
assigned to each co-applicant when the original application was filed.
Applicants can be dropped from or added to an application with each
amendment submission.\43\
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\42\ In case of doubt, applicants may call the IM EDGAR Inquiry
Line (202-551-6989) in the Division of Investment Management for
assistance.
\43\ As is the case currently with paper applications, for each
application, an applicant will receive a unique file number which
will begin with the prefix ``812,'' or ``813'' in the case of
applications made by employees'' securities companies. As also is
currently the case with paper filings, each co-applicant's file
number will be composed of the primary applicant's file number with
an appended numerical suffix unique to that co-applicant. Each
applicant or co-applicant will include this file number, in addition
to its CIK, in the EDGAR template of all amendments to the
application, which will also be required electronic submissions.
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Our internal EDGAR system has been enhanced to allow for the upload
and public dissemination via the EDGAR system of notices and orders in
connection with applications. These documents will, of course, still be
available in the Federal Register. The staff will commence the upload
and dissemination of notice and orders on the EDGAR system as of the
effective date of the amendments. The staff will upload and disseminate
any notice or order issued on or after the effective date, regardless
of whether the application, or any amendment to it, was submitted in
paper or on EDGAR.
We asked commenters to address the issue of what the transition
period should be for investment companies and other applicants to
prepare for the mandatory electronic submission of these applications.
We received no comments in response to this request other than the
comments regarding draft applications. We believe applicants are
prepared to submit their applications electronically on EDGAR as soon
as our amendments become effective.
III. Amendments to Rule 0-2 and to Temporary Hardship Exemption of
Regulation S-T
Rule 0-2 requires that every application for an order for which a
form is not specifically prescribed and which is executed by a
corporation, partnership or other company and filed with the Commission
contain a statement of the applicable provisions of the articles of
incorporation, bylaws or similar documents, relating to the right of
the person signing and filing such application to take such action on
behalf of the applicant, and a statement that all such requirements
have been complied with and that the person signing and filing the
application is fully authorized to do so. If such authorization is
dependent on resolutions of stockholders, directors, or other bodies,
such resolutions must be attached as an exhibit to or quoted in the
application. Any amendment to the application must contain a similar
statement as to the applicability of the original statement of
authorization. When any application or amendment is signed by an agent
or attorney, Rule 0-2 requires that the power of attorney evidencing
his authority to sign shall state the basis for the agent's authority
and shall be filed with the Commission. Every application subject to
Rule 0-2 must be verified by the person executing the application by
providing a notarized signature in substantially the form specified in
the rule. Each application subject to Rule 0-2 must state the reasons
why the applicant is deemed to be entitled to the action requested, the
name and address of each applicant, and the name and address of any
person to whom any questions regarding the application should be
directed. Rule 0-2 requires that a proposed notice of the proceeding
initiated by the filing of the application accompany each application
as an exhibit and, if necessary, be modified to reflect any amendment
to the application.
We proposed three amendments to Rule 0-2 governing the form of
applications under the Investment Company Act and requested comment on
these proposed amendments. The commenters supported the proposed
amendments to Rule 0-2, and we are adopting these amendments as
proposed. First, we are eliminating the requirement to have
verifications of applications and statements of facts made in
connection with applications notarized.\44\ We believe that this
requirement is unnecessary in the
[[Page 65520]]
context of an electronic filing.\45\ Second, we are eliminating the
requirement that applicants include draft notices as exhibits to
applications.\46\ The staff has found these exhibits to be of limited
value because the staff prefers to draft its own notices of
applications. Finally, we are amending Rule 0-2 to remove the last
sentence of paragraph (b),\47\ which was added in the initial EDGAR
rulemaking and is inconsistent with mandatory electronic submission of
applications on EDGAR.\48\
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\44\ See Rule 0-2(d).
\45\ Regulation S-T requires that each signatory to an
electronic filing manually sign a signature page or other document
authenticating, acknowledging or otherwise adopting his or her
signature that appears in typed form in the electronic filing. This
document must be executed before or at the time the electronic
filing is made, must be retained by the filer for a period of five
years, and must be made available to the Commission upon request.
See Rule 302(b) of Regulation S-T [17 CFR 232.302(b)]. We believe
that this requirement provides sufficient assurance of the
legitimacy of signatures contained in the electronic filings so that
notarization is unnecessary.
\46\ See Rule 0-2(g).
\47\ The last sentence of Rule 0-2(b) read as follows: ``Every
application for an order under any provision of the Act and every
amendment to such application shall be submitted to the Commission
in paper only, whether or not the applicant is otherwise required to
file in electronic format, unless instructions for electronic filing
are included on the form, if any, prescribed for such application.''
\48\ See Rulemaking for EDGAR System--Investment Companies and
Institutional Investment Managers, Release No. 33-6978 (Feb. 23,
1993) [58 FR 14848 (Mar. 18, 1993)].
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One commenter suggested that we further amend Rule 0-2 by
eliminating from paragraph (c)(1) the requirement that a copy of any
board resolution authorizing the actions of the person signing and
filing the application be included as an exhibit to the application
(or, alternatively, that the pertinent provisions of such resolution be
quoted in the application).\49\
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\49\ See ICI Comment Letter. The commenter also noted:
In our view, this requirement is unnecessary because the person
signing the application is required to attest to such resolutions in
the verification required by paragraph (d) of the rule. We further
note that board resolutions do not have to be submitted with other
types of filings with the Commission, such as fund registration
statements and proxy statements, nor are we aware of any history of
abuse that would suggest this requirement must be maintained.
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Because this suggestion goes beyond the scope of our proposal, we
are not adopting the recommendation at this time. We may consider this
recommendation in the future.
We proposed and are adopting an amendment to Rule 201 of Regulation
S-T. Rules 201 and 202 \50\ of Regulation S-T address hardship
exemptions from EDGAR filing requirements, and Rule 13(b) of Regulation
S-T \51\ addresses the related issue of filing date adjustments.
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\50\ 17 CFR 232.202.
\51\ 17 CFR 232.13(b).
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A filer may obtain a temporary hardship exemption under Rule 201 if
it experiences unanticipated technical difficulties that prevent the
timely preparation and submission of an electronic filing by filing a
properly legended paper copy \52\ of the filing under cover of Form
TH.\53\ This process is self-executing. A filer who files in paper
under the temporary hardship exemption must submit an electronic format
copy of the filed paper document within six business days of the filing
of the paper format document.\54\
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\52\ See 17 CFR 232.201(a).
\53\ 17 CFR 239.65, 249.447, 269.10, and 274.404.
\54\ See 17 CFR 232.201(b).
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A filer may apply for a continuing hardship exemption under Rule
202 if it cannot file all or part of a filing without undue burden or
expense.\55\ In contrast to the self-executing temporary hardship
exemption process, a filer can obtain a continuing hardship exemption
only by submitting a written application, upon which the Commission, or
Commission staff pursuant to delegated authority, may then act.
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\55\ See 17 CFR 232.202(a).
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We proposed making the temporary hardship exemption unavailable for
submission of applications under the Investment Company Act, since
there is generally no submission exigency or submission deadline
associated with these submissions. We asked for comments on this
proposed amendment. We received one comment questioning whether, if
this provision were adopted, the staff would work with applicants that
need additional time to file amendments, to prevent applications from
being placed in an inactive status.\56\ As has been the practice in the
past, the staff will continue to work with applicants experiencing
unanticipated technical or other difficulties to establish appropriate
timeframes for the submission of amendments and ensure the timely
processing of all applications.
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\56\ See ICI Comment Letter. The staff typically places
applications in an inactive status if the applicant does not respond
to staff comments within sixty days of receiving the comments, such
as by filing an amendment.
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We are amending Rule 201(a) of Regulation S-T as proposed to make
the temporary hardship exemption unavailable for submission of
applications under the Investment Company Act.\57\ We restate our
belief that there is generally no submission exigency or submission
deadline associated with these submissions. An applicant will continue
to have the ability to apply for a continuing hardship exemption under
Rule 202 if it cannot submit all or part of an application without
undue burden or expense. Also, while we expect the circumstances to be
rare, the staff could use its delegated authority to grant a filing
date adjustment pursuant to Rule 13(b) of Regulation S-T [17 CFR
232.13(b)]. While we do not expect an applicant to need a filing date
adjustment in the context of an application, it will be available in
the unlikely event it is needed. And, as stated above, the staff will
continue to work with applicants experiencing unanticipated
difficulties.
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\57\ See amendment to Rule 201(a) of Regulation S-T. As we noted
in the Proposing Release, we have previously made unavailable the
ability for filers to use the temporary hardship exemption for EDGAR
submissions of beneficial ownership reports filed by officers,
directors and principal security holders under Section 16(a) of the
Exchange Act [15 U.S.C. 78p(a)]. See Mandated EDGAR Filing and Web
Site Posting for Forms 3, 4 and 5, Release No. 33-8230 (May 7, 2003)
[68 FR 25788].
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IV. Amendments To Mandate That Certain Filings of Small Business
Investment Companies and Business Development Companies Be Made
Electronically
Regulation E \58\ provides for the exemption from registration of
securities issued by small business investment companies registered
under the Investment Company Act and business development companies
regulated under the Investment Company Act, subject to the terms and
conditions of the regulation. Rule 604 \59\ of Regulation E requires
the filing of notification on Form 1-E \60\ of sales of securities
under Regulation E. Rule 607 \61\ of Regulation E requires the filing
of sales material used in connection with the offering. Rule 609 \62\
of Regulation E requires the filing of reports of sales on Form 2-
E.\63\
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\58\ 17 CFR 230.601 to 230.610a.
\59\ 17 CFR 230.604.
\60\ 17 CFR 239.200.
\61\ 17 CFR 230.607.
\62\ 17 CFR 230.609.
\63\ 17 CFR 239.201.
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We proposed that Regulation E filings be mandatory electronic
filings on the EDGAR system. Regulation E filers make most of their
filings electronically on the EDGAR system. Since these filers are
already EDGAR filers and most will have available electronic copies of
their Form 1-E (and any related sales material) \64\ and Form 2-E, we
believe that making these filings electronically
[[Page 65521]]
on EDGAR will impose very little burden or cost on these companies. We
requested but received no comment on this proposal. We are adopting the
amendments as proposed, making these filings mandatory electronic
submissions.\65\
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\64\ Requiring electronic filing on EDGAR of Rule 607 sales
literature is consistent with the requirement to file electronically
on EDGAR omitting prospectuses under Rule 482 of the Securities Act
of 1933 (the ``Securities Act'') (referred to as ``482 ads'') and
sales literature under Section 24(b) of the Investment Company Act.
\65\ See amendments to paragraphs (a)(1)(v) and (c)(6) of Rule
101 of Regulation S-T.
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V. Effective Date
Beginning on January 1, 2009, applications for orders under the
Investment Company Act and Regulation E filings will become mandatory
electronic submissions on the EDGAR system. This effective date will
provide time for filers to prepare for the mandatory requirements.
Also, since the effective date will be the start of a calendar year,
the public will have a clear reference point for determining whether
any particular application or Regulation E filing has been submitted
either in paper or electronically.
VI. Cost-Benefit Analysis
We are sensitive to the costs and burdens of our rules. The rules
we are adopting today reflect the addition of applications under the
Investment Company Act as mandatory electronic submissions on EDGAR. In
addition, they amend Rule 0-2 and make unavailable to applicants
Regulation S-T's provision for temporary hardship exemptions. They also
add Regulation E filings to the list of those that must be filed
electronically through EDGAR.
A. Expected Benefits
We expect that the addition of applications under the Investment
Company Act as mandatory electronic submissions on EDGAR will result in
considerable benefits to the securities markets, investors, and other
members of the public, by expanding the accessibility of information,
and increasing the types of information, filed and made available for
public review through the EDGAR system. The primary goal of the EDGAR
system since its inception has been to facilitate the rapid
dissemination of financial and business information in connection with
filings, including filings by investment companies. The amendments will
benefit investors, financial analysts and others by increasing the
efficiency of retrieving and disseminating these applications. The
mandated electronic transmission of these documents will enable the
public to access them more quickly and search them more easily. Instead
of having to come in person or through an agent to the Commission's
public reference room to conduct a search for a particular submission
that is in paper or microfiche, the public will be able to find and
review the application on any computer with an Internet connection by
accessing the EDGAR system through the Commission's Web site or through
a third party Web site that links to EDGAR. We received one comment
stating the belief that it is unlikely that investors would choose to
access and review exemptive applications available via EDGAR.\66\ We
believe that these documents should be publicly available via EDGAR for
any investors who do choose to access and review them.
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\66\ See ICI Comment Letter at footnote 7.
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The amendments will benefit the public by making the EDGAR page of
our Web site a more comprehensive resource for most information on file
with us related to the operation of investment companies. A further
benefit will be to ensure that all applications are available to the
public free of charge on our Web site without the cost of paying a
third party for a copy.
Persons who may consider requesting a hearing on an application on
the basis of a notice will be able to more easily obtain the actual
application so that they can better evaluate the issues raised by the
application. We believe this will be a significant improvement in the
applications process.
We also expect that applicants will benefit from the increased
efficiencies in the filing process for these submissions resulting from
the amendments. By electronically transmitting these documents directly
to the Commission, applicants will avoid the uncertainties and delays
that can occur with the manual delivery of paper documents; we believe
that it will be a simpler and more efficient means to submit
applications. Applicants also will benefit from no longer having to
submit multiple copies of paper documents to the Commission.
Because the Commission's staff will be able to retrieve and analyze
information contained in these submissions more readily than under our
current paper system, mandated electronic submission of these documents
should facilitate the staff's retrieval and review of a particular
document. Applicants and investors should benefit from increased
efficiencies in the Commission's storage, retrieval, and analysis of
these submissions which should result from the amendments.
We believe the amendments to Rule 0-2 will benefit applicants.
Removing the notarization requirement will remove a requirement from
filers that is unnecessary for electronic filings, and removing the
requirement to include a draft notice as an exhibit will result in a
cost-savings to applicants. And, we believe that making unavailable to
applicants Regulation S-T's Rule 201 provision for temporary hardship
exemptions will benefit applicants because applicants will not bear the
cost of both submitting an application in paper and in electronic form
as a confirming copy within six business days as required by the
temporary hardship exemption rule. This is true in light of the fact
that there is no deadline for the submission of an application.
We also expect that the addition of Regulation E filings as
mandatory electronic submissions on EDGAR will result in benefits to
the securities markets, investors, and other members of the public, by
expanding the accessibility of information, and increasing the types of
information, filed and made available for public review through the
EDGAR system. Requiring these Regulation E filings to be submitted on
EDGAR will benefit members of the investing public and the financial
community by making information contained in these Commission filings
more easily searchable and readily available to them. The amendments
will result in the benefit to the public of the EDGAR page of our Web
site being a comprehensive source from which to find filings of small
business investment companies and business development companies.
We also expect that Regulation E filers will benefit from the
amendments by increased efficiencies in the filing process for these
submissions. By electronically transmitting these documents directly to
the Commission, these filers will avoid the uncertainties and delays
that can occur with the manual delivery of paper documents; we believe
that it will be a simpler and more efficient means to submit these
Regulation E filings. Regulation E filers also will benefit from no
longer having to submit multiple copies of paper documents to the
Commission.
The amendments will benefit investors, financial analysts and
others by increasing the efficiency of retrieving and disseminating
these filings. The mandated electronic transmission of these documents
will enable the public to access them more quickly. Instead of having
to come in person or through an agent to the Commission's public
reference room to conduct a search for a particular submission that is
in paper or microfiche, the public will be able to find and review the
filing on any computer with an Internet connection
[[Page 65522]]
by accessing the EDGAR system through the Commission's Web site or
through a third party Web site that links to EDGAR. The amendments will
also enable financial analysts and others to retrieve, analyze and
disseminate more rapidly this information.
An investor will be able to more efficiently gather information of
interest about Regulation E filers. Also, Regulation E filers and
investors should benefit from the amendments by increased efficiencies
in the Commission's storage, retrieval, and analysis of these
submissions. Mandated EDGAR submission of these documents will result
in their addition to the Commission's central electronic repository of
filings that is free to anyone who has access to a computer linked to
the Internet. Because the Commission's staff will be able to retrieve
and analyze information contained in these Regulation E submissions
more readily than under our current paper system, mandated electronic
submission of these documents should facilitate the staff's retrieval
and review of a particular document.
In the Paperwork Reduction Act section we estimate that, the
amendments to Rule 0-2 will reduce the total burden by approximately
$52,550 annually.
B. Expected Costs
We expect that the amendments will result in some initial and
ongoing costs to applicants. We also expect, however, that many
applicants will not bear the full range of costs that will result from
the amendments for the reasons described below. Initial costs are those
associated with filing a Form ID in order to obtain the access codes
needed to submit an application electronically and otherwise preparing
to make an application submission.\67\ In order to file a Form ID, an
applicant will need to learn the related electronic filing
requirements, obtain access to a computer and the Internet, use the
computer to access the Commission's EDGAR Filer Management Web site,
respond to Form ID's information requirements and fax to the Commission
a notarized authenticating document.
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\67\ Applicants that already have EDGAR access codes will not
need to file a Form ID. As further discussed in Part IX, however, we
assume that a small number of applicants per year will not already
have the codes.
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Ongoing costs are those associated with maintaining the framework
developed through the initial costs (for example, updating information
required by Form ID) and additional costs arising from each subsequent
submission of an application.
We expect that the vast majority of applicants will need to incur
few, if any, additional costs related to obtaining computer and
Internet access. We believe that the vast majority of applicants
already will have access to a computer and the Internet.\68\
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\68\ An applicant that did not already own a computer with
Internet access could, for example, go to a public library to use
its computer and obtain Internet access.
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We expect no additional costs to applicants from amendments to Rule
0-2. We requested but received no comment on whether our amendments to
Rule 0-2 to remove the current requirements for notarization and
provision of a draft notice as an exhibit will result in any additional
costs, although the two commenters supported these proposals. We expect
no additional costs to applicants from our amendment to make
unavailable to applicants Regulation S-T's Rule 201 provision for
temporary hardship exemption. An applicant will still be able to
request a continuing hardship exemption under Regulation S-T Rule 202
under appropriate circumstances.
We believe that mandatory EDGAR submission of Regulation E filings
will result in minimal cost to these filers. For the following reasons,
we also expect that Regulation E filers will not bear the full range of
costs frequently associated with new electronic filing requirements.
Initial costs are those associated with the purchase of compatible
computer equipment and software, including EDGAR software if obtained
from a third-party vendor and not from the Commission's Web site.
Initial costs also include those resulting from the training of
existing employees to be EDGAR proficient or the hiring of additional
employees or agents that are already skilled in EDGAR processing.
Initial costs further include those associated with the formatting and
transmission of an applicant's first document submitted on EDGAR. These
transmission costs may include those related to subscribing to an
Internet service provider. Regulation E filers already file on EDGAR
and will have minimal or no initial costs.
Ongoing costs are those associated with the electronic formatting
and transmission of subsequent EDGAR filings. Regulation E filers may
also incur future costs resulting from the training or hiring of
employees regarding updated EDGAR filing requirements. The magnitude of
these costs will depend on the filers' levels of technological
proficiency and their previous familiarity with EDGAR filing
requirements. Regulation E filers will incur the ongoing costs
associated with formatting and transmitting their subsequent EDGAR
filings. Consequently, the mandated EDGAR requirements should result
only in costs related primarily to the electronic formatting of these
documents in a format compatible with EDGAR, and transmission of the
EDGAR formatted documents to the Commission. In any event, we believe
that any costs for transmission, formatting, and education will be
comparable to savings from not having to incur similar costs related to
paper submissions.
VII. Burden on Competition; Promotion of Efficiency, Competition, and
Capital Formation
Section 23(a)(2) of the Exchange Act requires us, in adopting rules
under the Exchange Act, to consider the anti-competitive effects of any
rules that we adopt thereunder. Furthermore, section 2(b) of the
Securities Act,\69\ section 3(f) of the Exchange Act,\70\ and section
2(c) \71\ of the Investment Company Act require us, when engaging in
rulemaking, and considering or determining whether an action is
necessary or appropriate in the public interest, to consider whether
the action will promote efficiency, competition, and capital formation.
We requested comment on whether the amendments, if adopted, will burden
competition and whether they will promote efficiency, competition, and
capital formation. We encouraged commenters to provide empirical data
or other facts to support their views. We received no comments in
response.
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\69\ 15 U.S.C. 77b(b).
\70\ 15 U.S.C. 78c(f).
\71\ 15 U.S.C. 80a-2(c).
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The amendments regarding mandated electronic filing of applications
and the related amendments to Rule 0-2 and Regulation S-T's Rule 201
are intended to simplify the requirements for submitting applications
and facilitate more efficient transmission, analysis, storage and
retrieval of information. We believe this will improve the
accessibility and usefulness of information available to all applicants
and the public, including those wishing to request a hearing on an
application. It may make the investment products offered by applicants
more competitive, since all applicants will have ready access to the
applications of others. We believe the amendments will also improve the
accessibility of information available to the public and investors
about the operation of investment
[[Page 65523]]
companies. We believe the amendments will not impose a burden on
competition and will not have an adverse impact on capital formation.
The amendments regarding mandated electronic filings under
Regulation E by small business investment companies and business
development companies are intended to facilitate more efficient
transmission, analysis, storage and retrieval of information. We
believe this will improve the accessibility and usefulness of
information available for use by filers, investors, and the public. It
may make the investment products offered by filers more competitive,
since all filers will have immediate on-line access to Regulation E
filings of their competitors. We believe that the amendments will also
improve the accessibility of information available to the public about
the operation of small business investment companies and business
development companies and thereby improve investors' ability to make
informed investment decisions. We believe the amendments will not
impose a burden on competition and will not have an adverse impact on
capital formation.
VIII. Final Regulatory Flexibility Act Analysis
This Final Regulatory Flexibility Act Analysis has been prepared in
accordance with 5 U.S.C. 603. It relates to our amendments adding
applications for orders under the Investment Company Act to the list of
submissions that must be made electronically, amendments to amend Rule
0-2 and make unavailable to applicants the provision for temporary
hardship exemptions in Rule 201 of Regulation S-T, and amendments
adding Regulation E filings to the list of those that must be filed
electronically through EDGAR.
A. Need for the Rule Amendments
The amendments will require applications for orders under any
section of the Investment Company Act to be submitted electronically on
EDGAR. The amendments to Rule 0-2 remove the requirements for
notarization and provision of a draft notice, and the amendments to
Rule 201 of Regulation S-T make applications ineligible for temporary
hardship exemptions. We make these amendments because the absence of an
electronic system for submitting applications for orders in the past
limited the usefulness of the information collected and to reduce the
burdens of submitting applications.
The amendments add Regulation E filings made by small business
investment companies and business development companies to the list of
those that must be filed electronically through EDGAR. We also make
these amendments because the absence of an electronic system for
submitting Regulation E filings in the past limited the usefulness of
the information collected.
B. Significant Issues Raised by Public Comment
In the Initial Regulatory Flexibility Act Analysis (``IRFA'') for
the proposed amendments, we encouraged the submission of written
comments with respect to any aspect of the IRFA. We requested
specifically comment on the number of small entities that will be
affected by the amendments and the likely impact on small entities. We
asked commenters to describe the nature of any impact and provide
empirical data supporting the extent of the impact. We received no
comments with respect to this section of the proposal.
C. Small Entities Subject to the Rule
For purposes of the Regulatory Flexibility Act, an investment
company is a small entity if it, together with other investment
companies in the same group of related investment companies, has net
assets of $50 million or less as of the end of its most recent fiscal
year.\72\ Approximately 159 registered investment companies meet this
definition.\73\ Approximately 38 business development companies may be
considered small entities.\74\ We estimate that few, if any, separate
accounts registered on Form N-3, N-4, or N-6 are small entities.\75\
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\72\ Rule 0-10(a) under the Investment Company Act [17 CFR
240.0-10(a)].
\73\ The estimated number of reporting investment companies that
may be considered small entities is based on December 2007 data from
the Commission's EDGAR database and a third-party data provider.
\74\ This estimate is based on analysis by the Division of
Investment Management staff of information from databases compiled
by third-party information providers.
\75\ This estimate is based on figures compiled by the Division
of Investment Management staff regarding separate accounts
registered on Forms N-3, N-4, and N-6. In determining whether an
insurance company separate account is a small entity for purposes of
the Regulatory Flexibility Act, the assets of insurance company
separate accounts are aggregated with the assets of their sponsoring
insurance companies. Rule 0-10(b) under the Investment Company Act
[17 CFR 270.0-10(b)].
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D. Projected Reporting, Recordkeeping, and Other Compliance
Requirements
The amendments require applicants to submit requests for orders and
small business investment companies and business development companies
to submit Regulation E filings electronically on the EDGAR system. The
Commission estimates some one-time formatting and ongoing burdens that
will be imposed on all applicants and Regulation E filers, including
those that are small entities. We note, however, that all Regulations E
filers and most applicants currently make other filings on EDGAR.
Furthermore, we believe that non-investment company applicants will
have no greater burden than that of those filers of Section 16 reports
or Schedules 13D and 13G \76\ who will not otherwise make EDGAR filings
and that the electronic submission should create only a de minimis
burden.
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\76\ 17 CFR 240.13d-101 and 240.13d-102.
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There will be no change in reporting or recordkeeping requirements.
The amendments to Rule 0-2 reduce compliance requirements to the extent
that they will remove the requirements for notarization of the
application and provision of a draft notice with the application.
We solicited comment on the effect the amendments would have on
small entities. We received no comments in response.
E. Agency Action To Minimize Effect on Small Entities
The Regulatory Flexibility Act directs us to consider significant
alternatives that will accomplish our stated objectives, while
minimizing any significant adverse impact on small entities. In
connection with the amendments, the Commission considered the following
alternatives: (i) The establishment of differing compliance or
reporting requirements or timetables that take into account the
resources available to small entities; (ii) the clarification,
consolidation, or simplification of compliance and reporting
requirements under the amendments for small entities; (iii) the use of
performance rather than design standards; and (iv) an exemption from
coverage of the amendments, or any part thereof, for small entities.
The Commission believes at the present time that special compliance
or reporting requirements for small entities, or an exemption from
coverage for small entities, is not appropriate or consistent with
investor protection. Different requirements for applicants or
Regulation E filers that are small entities could make it more
difficult for the public to locate Commission filings and disclosure
documents for these applicants. We believe it is important that the
benefits resulting from the amendments be provided to the public
[[Page 65524]]
for all applications and Regulation E filings, not just for
applications and Regulation E filings for entities that are not
considered small entities.
We have endeavored throughout the amendments to minimize the
regulatory burden on all applicants and Regulation E filers, including
small entities, while meeting our regulatory objectives. Small entities
should benefit from the Commission's reasoned approach to the
amendments to the same degree as others. The Commission believes that
further clarification, consolidation, or simplification of the
amendments for those that are small entities would be inconsistent with
the Commission's concern for investor protection. Further
clarification, consolidation, or simplification of the amendments for
those that are small entities would result in less information
available about them. Similarly, we conclude that using performance
rather than design standards would not be consistent with our statutory
mandate of investor protection. We believe that the standard provided
in the amendments (EDGAR filing) is already sufficiently clear and
appropriately simple. A major goal of making these mandatory EDGAR
submissions is a more complete and searchable EDGAR database of
filings; we do not believe that there is a comparable performance
standard that will achieve this goal.
IX. Paperwork Reduction Act
The rule amendments contain ``collection of information''
requirements within the meaning of the Paperwork Reduction Act of 1995
(``PRA'').\77\ We submitted the collections of information to the
Office of Management and Budget (``OMB'') for review in accordance with
44 U.S.C. 3507(d) and 5 CFR 1320.11. 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.
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\77\ 44 U.S.C. 3501 et seq.
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A. Rule 0-2
The title for the collection of information is ``General
Requirements of Papers and Applications.'' OMB approved this collection
of information under control number 3235-0636 (expiring on February 28,
2011). Provision of information under the rule is necessary to obtain a
benefit. The information is not kept confidential. Respondents to the
collection are applying for orders of the Commission under the
Investment Company Act. The Commission uses the information required by
Rule 0-2 to decide whether the applicant should be deemed to be
entitled to the action requested by the application. The amendments to
Rule 0-2 eliminate the requirement to have verifications of
applications and statements of facts made in connection with
applications notarized \78\ and eliminate the requirement that
applicants include draft notices as exhibits to applications.\79\
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\78\ See Rule 0-2(d).
\79\ See Rule 0-2(g).
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Burden Estimate for Rule 0-2
Applicants file applications as they deem necessary. The Commission
receives approximately 125 applications per year under the Investment
Company Act. Although each application typically is submitted on behalf
of multiple entities, the entities in the vast majority of cases are
related companies and are treated as a single applicant for purposes of
this analysis.
Much of the work of preparing an application is performed by
outside counsel. The cost outside counsel charges applicants depends on
the complexity of the issues covered by the application and the time
required for preparation. Based on conversations with applicants and
attorneys, the cost ranges from approximately $7,000 for preparing a
well-precedented, routine application to approximately $80,000 to
prepare a complex and/or novel application. We estimate that the
Commission receives 20 of the most time-consuming applications
annually, 80 applications of medium difficulty, and 25 of the least
difficult applications. This distribution gives a total estimated
annual cost burden to applicants of filing all applications of
$5,255,000 [(20 x $80,000) + (80 x $43,500) + (25 x $7,000)].
In addition, based on conversations with applicants, we estimate
that in-house counsel spend from ten to fifty hours helping to draft
and review an application. We estimate a total annual hour burden to
all respondents of 3,650 hours (50 hours x 20 applications) + (30 hours
x 80 applications) + (10 hours x 25 applications).
We have decreased the burden associated with the existing
collection of information for Rule 0-2 to reflect the amendments. The
amendments to Rule 0-2 eliminate the requirement to have verifications
of applications and statements of facts made in connection with
applications notarized. The notary service was provided by a secretary
or similar administrative employee of the applicant or the outside
counsel preparing the application and represented a negligible cost or
hour burden to the applicant, so elimination of the notarization
requirement will not be likely to decrease the burden measurably.
The amendments also eliminate the requirement that applicants
include proposed notices as exhibits to applications. A proposed notice
is merely a summary of the statements in the application. We estimate
that preparation of the proposed notice by outside counsel represents
approximately 1% of the cost of preparing an application. Elimination
of this requirement will reduce the estimated cost burden by
approximately $52,550 (1% of $5,255,000). The amendments will not
change the hour burden.
We estimate the total reduction in the burden will be approximately
$52,550.
B. Regulation S-T
The title for the collection of information is ``General Rules and
Regulations for Electronic Filing.'' (OMB Control No. 3235-0424,
expiring on September 30, 2008). The purpose of Regulation S-T is to
implement the Commission's EDGAR system. The EDGAR system enables the
Commission to receive, store, process and disseminate information filed
with the Commission under the provisions of the federal securities
laws. The Commission's forms and rules require filings that make
information available to the investing public and that permit the
Commission to verify compliance with the federal securities laws.
Electronic filing improves the availability to the public and to the
Commission of information filed with the Commission. Regulation S-T
specifies the requirements that govern the electronic submission of
documents to the Commission. Provision of the information required by
the Regulation is mandatory. Responses are not kept confidential.
Burden Estimate for Regulation S-T
The amendments to Regulation S-T revise Rule 101 under Regulation
S-T to require electronic filing of applications for orders of the
Commission under the Investment Company Act and of forms required by
Regulation E under the Securities Act of 1933. The burden associated
with the filing of applications under Rule 0-2 is reflected in the
collection of information entitled ``General Requirements of Papers and
Applications.'' We are not amending Regulation E. The burden associated
with the filing of documents required by Regulation E is reflected in
the collections of information required by
[[Page 65525]]
Regulation E, and will not change as a result of the amendments to
Regulation S-T. We are also amending Rule 201 under Regulation S-T,
which governs temporary hardship exemptions from electronic filing.
Rule 201 is part of Regulation S-T and does not impose any burden on
respondents separate from Regulation S-T. The amendments to Rule 201
will not change the burden of Regulation S-T. The Paperwork Reduction
Act requires that we obtain OMB approval for a collection of
information, whether the collection has a burden or not. Regulation S-T
is a collection of information with no burden to respondents. OMB
requires us to assign a burden of one hour to Regulation S-T and to
indicate that the Regulation has one respondent so the automated OMB
system will be able to handle approval of the Regulation. OMB has
already approved a burden of one hour for one respondent to the
Regulation.
C. Form ID
The Commission estimates that each year a small number of
applicants for orders under the Investment Company Act will need to
file a Form ID (OMB Control Number 3235-0328, expiring April 30, 2009)
with the Commission in order to gain access to EDGAR. Form ID is used
to request the assignment of access codes to file on EDGAR. Most
applicants will not need to file a Form ID because any applicant that
has made at least one filing with the Commission since 2002 has been
entered into the EDGAR system by the Commission and will not need to
file Form ID to file electronically on EDGAR. However, applicants that
have never made a filing with the Commission will need to file Form ID.
The Commission estimates that it will receive approximately 10
Forms ID a year under the amendments. Because the actual number of
Forms ID the Commission receives each year is less than the current
estimate, we are not revising the estimated number of respondents that
file a Form ID.
We received no comments on the PRA section of the proposal.
X. Statutory Basis
We adopt the rule amendments outlined above under sections 6, 7, 8,
10 and 19(a) of the Securities Act [15 U.S.C. 77f, 77g, 77h, 77j, and
77s(a)], sections 3, 12, 13, 14, 15(d), 23(a) and 35A of the Exchange
Act [15 U.S.C. 78c, 78l, 78m, 78n, 78o(d), 78w(a), and 78ll], and
sections 8, 30, 31 and 38 of the Investment Company Act [15 U.S.C. 80a-
8, 80a-29, 80a-30, and 80a-37].
List of Subjects
17 CFR Part 232
Reporting and recordkeeping requirements, Securities.
17 CFR Part 270
Investment companies, Reporting and recordkeeping requirements,
Securities.
Text of the Rule Amendments
0
In accordance with the foregoing, the Commission amends Title 17,
Chapter II of the Code of Federal Regulations as follows.
PART 232--REGULATION S-T--GENERAL RULES AND REGULATIONS FOR
ELECTRONIC FILINGS
0
1. The authority citation for part 232 continues to read, in part, as
follows:
Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s(a), 77sss(a),
78c(b), 78l, 78m, 78n, 78o(d), 78w(a), 78ll (d), 80a-8, 80a-29, 80a-
30, 80a-37, and 7201 et seq.; and 18 U.S.C. 1350.
* * * * *
0
2. Section 232.101 is amended by:
0
a. Revising paragraphs (a)(1)(iv) and (v), the introductory text of
paragraph (a)(2), paragraph (a)(2)(i), the first sentence of paragraph
(a)(3);
0
b. Removing ``and Regulation E (Sec. Sec. 230.601-230.610a of this
chapter)'' from paragraph (c)(6); and
0
c. Removing and reserving paragraph (c)(11).
The revisions read as follows:
Sec. 232.101 Mandated electronic submissions and exceptions.
(a) * * *
(1) * * *
(iv) Documents filed with the Commission pursuant to sections 8,
17, 20, 23(c), 24(b), 24(e), 24(f), and 30 of the Investment Company
Act (15 U.S.C. 80a-8, 80a-17, 80a-20, 80a-23(c), 80a-24(b), 80a-24(e),
80a-24(f), and 80a-29) and any application for an order under any
section of the Investment Company Act (15 U.S. C. 80a-1 et seq.);
(v) Documents relating to offerings exempt from registration under
the Securities Act filed with the Commission pursuant to Regulation E
(Sec. Sec. 230.601-230.610a of this chapter);
* * * * *
(2) The following amendments to filings and applications, including
any related correspondence and supplemental information except as
otherwise provided, shall be submitted as follows:
(i) Any amendment to a filing or application submitted by or
relating to a registrant or an applicant that is required to file
electronically, including any amendment to a paper filing or
application, shall be submitted in electronic format;
* * * * *
(3) Supplemental information, including documents related to
applications under any section of the Investment Company Act, shall be
submitted in electronic format except as provided in paragraph (c)(2)
of this section. * * *
* * * * *
0
3. Amend Sec. 232.201 by revising paragraph (a) introductory text to
read as follows:
Sec. 232.201 Temporary hardship exemption.
(a) If an electronic filer experiences unanticipated technical
difficulties preventing the timely preparation and submission of an
electronic filing other than a Form 3 (Sec. 249.103 of this chapter),
a Form 4 (Sec. 249.104 of this chapter), a Form 5 (Sec. 249.105 of
this chapter), a Form ID (Sec. Sec. 239.63, 249.446, 269.7 and 274.402
of this chapter), a Form TA-1 (Sec. 249.100 of this chapter), a Form
TA-2 (Sec. 249.102 of this chapter), a Form TA-W (Sec. 249.101 of
this chapter), a Form D (Sec. 239.500 of this chapter), or an
application for an order under any section of the Investment Company
Act (15 U.S.C. 80a-1 et seq.), the electronic filer may file the
subject filing, under cover of Form TH (Sec. Sec. 239.65, 249.447,
269.10 and 274.404 of this chapter), in paper format no later than one
business day after the date on which the filing was to be made.
* * * * *
PART 270--RULES AND REGULATIONS, INVESTMENT COMPANY ACT OF 1940
0
4. The authority citation for Part 270 continues to read in part as
follows:
Authority: 15 U.S.C. 80a-1 et seq., 80a-34(d), 80a-37, and 80a-
39, unless otherwise noted.
* * * * *
0
5. Amend Sec. 270.0-2 by:
0
a. Removing the last sentence in paragraph (b):
0
b. Revising paragraph (d);
0
c. Removing paragraph (g);
0
d. Redesignating paragraph (h) as paragraph (g); and
0
e. Removing the authority citation following the section.
The revision reads as follows:
Sec. 270.0-2 General requirements of papers and applications.
* * * * *
(d) Verification of applications and statements of fact. Every
application for an order under any provision of the Act, for which a
form with instructions is not
[[Page 65526]]
specifically prescribed and every amendment to such application, and
every statement of fact formally filed in support of, or in opposition
to, any application or declaration shall be verified by the person
executing the same. An instrument executed on behalf of a corporation
shall be verified in substantially the following form, but suitable
changes may be made in such form for other kinds of companies and for
individuals:
The undersigned states that he or she has duly executed the
attached ------------ dated ------------, 20 ------ for and on behalf
of (name of company); that he or she is (title of officer) of such
company; and that all action by stockholders, directors, and other
bodies necessary to authorize the undersigned to execute and file such
instrument has been taken. The undersigned further states that he or
she is familiar with such instrument, and the contents thereof, and
that the facts therein set forth are true to the best of his or her
knowledge, information and belief.
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(Signature)
* * * * *
Dated: October 29, 2008.
By the Commission.
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-26183 Filed 11-3-08; 8:45 am]
BILLING CODE 8011-01-P