[Federal Register Volume 75, Number 187 (Tuesday, September 28, 2010)]
[Notices]
[Pages 59751-59752]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-24187]
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SECURITIES AND EXCHANGE COMMISSION
Submission for OMB Review; Comment Request
Upon Written Request, Copies Available From: Securities and Exchange
Commission, Office of Investor Education and Advocacy, Washington, DC
20549-0213.
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. 3501-3520), the Securities and Exchange
Commission (the ``Commission'') has submitted to the Office of
Management and Budget (``OMB'') a request for extension of the
previously approved collection of information described below.
Rule 17e-1 (17 CFR 270.17e-1) under the Investment Company Act of
1940 (15 U.S.C. 80a) (the ``Act'') is entitled ``Brokerage Transactions
on a Securities Exchange.'' The rule governs the remuneration that a
broker affiliated with a registered investment company (``fund'') may
receive in connection with securities transactions by the fund. The
rule requires a fund's board of directors to establish, and review as
necessary, procedures reasonably designed to provide that the
remuneration to an affiliated broker is a fair amount compared to that
received by other brokers in connection with transactions in similar
securities during a comparable period of time. Each quarter, the board
must determine that all transactions with affiliated brokers during the
preceding quarter complied with the procedures established under the
rule. 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 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 Commission's examination staff uses these records to evaluate
transactions between funds and their affiliated brokers for compliance
with the rule.
Based on an analysis of fund filings, the staff estimates that
approximately 252 fund portfolios 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, 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 252 funds that 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 189 burden hours annually, with
an associated cost of approximately $59,724.\3\
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\1\ Based on information in Commission filings, we estimate that
42.5 percent of funds are advised by subadvisers.
\2\ This estimate is based on the following calculation (3 hours
/ 4 rules = .75 hours).
\3\ These estimates are based on the following calculations:
(0.75 hours x 252 portfolios = 189 burden hours); ($316 per hour x
189 hours = $59,724 total cost). The Commission staff's estimates
concerning the wage rates for attorney time are based on salary
information for the securities industry compiled by the Securities
Industry Association. The $316 per hour figure for an attorney is
from the SIFMA Report on Management & Professional Earnings in the
Securities Industry 2009, modified to account for an 1800-hour work-
year and multiplied by 5.35 to account for bonuses, firm size,
employee benefits and overhead.
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Based on an analysis of fund filings, the staff estimates that
approximately 1935 funds use at least one affiliated broker. Based on
conversations with fund representatives, the staff estimates that rule
17e-1's exemption would free approximately 40 percent of transactions
that occur under rule 17e-1 from the rule's recordkeeping and review
requirements. This would leave approximately 1161 funds (1935 funds x
.6 = 1161) still subject to the rule's recordkeeping and review
requirements. The staff estimates that each of these funds spends
approximately 59 hours per year (40 hours by accounting staff, 15 hours
by an attorney, and 4 director hours) at a cost of approximately
$25,500 per year to comply with rule 17e-1's requirements that (i) the
fund retain records of transactions entered into pursuant to the rule,
and (ii) the fund's directors review those transactions quarterly.\4\
We estimate, therefore, that the total yearly hourly burden for all
funds relying on this exemption is 68,499 hours,\5\ with yearly costs
of approximately $29,605,500.\6\ Therefore, the estimated annual
aggregate burden hour associated with rule 17e-1 is 68,688,\7\ and the
estimated annual aggregate cost associated with it is $29,665,224.\8\
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\4\ This estimate is based on the following calculations: (40
hours accounting staff x $119 per hour = $4760) (15 hours by an
attorney x $316 per hour = $4740); (4 hours by directors x $4000 =
$16,000) ($4760 + $4740 + $16,000 = $25,500 total cost). The
Commission staff's estimates concerning the wage rate for
professional time are based on salary information for the securities
industry compiled by the Securities Industry Association, except for
the estimate of $4000 per hour for a board of directors. The $316
per hour estimate for an attorney and the $119 per hour estimate for
accountant time is from the SIFMA Report on Management &
Professional Earnings in the Securities Industry 2009, modified to
account for an 1800-hour work-year and multiplied by 5.35 to account
for bonuses, firm size, employee benefits and overhead.
\5\ This estimate is based on the following calculation: (1161
funds x 59 hours = 68,499).
\6\ This estimate is based on the following calculation:
($25,500 x 1161 funds = $29,605,500).
\7\ This estimate is based on the following calculation: (189
hours + 68,499 hours = 68,688 total hours).
\8\ This estimate is based on the following calculation:
($59,724 + $29,605,500 = $29,665,224).
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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. 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. These collection of information requirements are
mandatory. Responses will not be kept confidential.
[[Page 59752]]
Please direct general comments regarding the above information to
the following persons: (i) Desk Officer for the Securities and Exchange
Commission, Office of Management and Budget, Room 10102, New Executive
Office Building, Washington, DC 20503 or send an email to Shagufta
Ahmed at [email protected]; and (ii) Jeff Heslop, Acting
Director/Chief Information Officer, Securities and Exchange Commission,
C/O Remi Pavlik-Simon, 6432 General Green Way, Alexandria, VA, 22312;
or send an e-mail to: [email protected]. Comments must be submitted
to OMB within 30 days of this notice.
Dated: September 20, 2010.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-24187 Filed 9-27-10; 8:45 am]
BILLING CODE 8010-01-P