[Federal Register Volume 76, Number 53 (Friday, March 18, 2011)]
[Notices]
[Pages 15006-15007]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-6364]
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SECURITIES AND EXCHANGE COMMISSION
Proposed Collection; Comment Request
Upon Written Request, Copies Available From: Securities and Exchange
Commission, Office of Investor Education and Advocacy, Washington, DC
20549-0213.
Extension:
Rule 17f-7; SEC File No. 270-470; OMB Control No. 3235-0529.
Notice is hereby given that, pursuant to the Paperwork Reduction
Act of 1995 (44 U.S.C. 3501-3520), the Securities and Exchange
Commission (``Commission'') is soliciting comments on the collections
of information summarized below. The Commission plans to submit these
existing collections of information to the Office of Management and
Budget (``OMB'') for extension and approval.
Rule 17f-7 (17 CFR 270.17f-7) permits funds to maintain their
assets in
[[Page 15007]]
foreign securities depositories based on conditions that reflect the
operations and role of these depositories.\1\ Rule 17f-7 contains some
``collection of information'' requirements. An eligible securities
depository has to meet minimum standards for a depository. The fund or
its investment adviser generally determines whether the depository
complies with those requirements based on information provided by the
fund's primary custodian (a bank that acts as global custodian). The
depository custody arrangement has to meet certain risk limiting
requirements. The fund can obtain indemnification or insurance
arrangements that adequately protect the fund against custody risks.
The fund or its investment adviser generally determines whether
indemnification or insurance provisions are adequate. If the fund does
not rely on indemnification or insurance, the fund's contract with its
primary custodian is required to state that the custodian will provide
to the fund or its investment adviser a custody risk analysis of each
depository, monitor risks on a continuous basis, and promptly notify
the fund or its adviser of material changes in risks. The primary
custodian and other custodians also are required to agree to exercise
reasonable care.
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\1\ Custody of Investment Company Assets Outside the United
States, Investment Company Act Release No. IC-23815 (April 29, 1999)
(64 FR 24489 (May 6, 1999)).
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The collection of information requirements in rule 17f-7 are
intended to provide workable standards that protect funds from the
risks of using securities depositories while assigning appropriate
responsibilities to the fund's primary custodian and investment adviser
based on their capabilities. The requirement that the depository meet
specified minimum standards is intended to ensure that the depository
is subject to basic safeguards deemed appropriate for all depositories.
The requirement that the custody contract state that the fund's primary
custodian will provide an analysis of the custody risks of depository
arrangements, monitor the risks, and report on material changes is
intended to provide essential information about custody risks to the
fund's investment adviser as necessary for it to approve the continued
use of the depository. The requirement that the primary custodian agree
to exercise reasonable care is intended to provide assurances that its
services and the information it provides will meet an appropriate
standard of care. The alternative requirement that the funds obtain
adequate indemnification or insurance against the custody risks of
depository arrangements is intended to provide another, potentially
less burdensome means to protect assets held in depository
arrangements.
The staff estimates that each of approximately 836 investment
advisers \2\ will make an average of 8 responses annually under the
rule to address depository compliance with minimum requirements, any
indemnification or insurance arrangements, and reviews of risk analyses
or notifications. The staff estimates each response will take 6 hours,
requiring a total of approximately 48 hours for each adviser. The total
annual burden associated with these requirements of the rule will be
approximately 40,128 hours (836 advisers x 48 hours per adviser). The
staff further estimates that during each year, each of approximately 15
global custodians will make an average of 4 responses to analyze
custody risks and provide notice of any material changes to custody
risk under the rule. The staff estimates that each response will take
260 hours, requiring approximately 1040 hours annually per
custodian.\3\ The total annual burden associated with these
requirements is approximately 15,600 hours (15 custodians x 1040
hours). Therefore, the staff estimates that the total annual burden
associated with all collection of information requirements of the rule
is 55,728 hours (40,128 + 15,600). The total annual cost of burden
hours is estimated to be $14,948,736 (40,128 x $287 for a portfolio
manager, plus 15,600 hours x $220/hour for a trust administrator's
time).\4\ The estimate of average burden hours is made solely for the
purposes of the Paperwork Reduction Act. The estimate is not derived
from a comprehensive or even a representative survey or study of the
costs of Commission rules and forms. Compliance with the collection of
information requirements of the rule is necessary to obtain the benefit
of relying on the rule's permission for funds to maintain their assets
in foreign custodians.
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\2\ At the start of 2011, 836 investment advisers managed or
sponsored open-end (including ETFs) portfolios and closed-end
registered funds.
\3\ These estimates are based on conversations with
representatives of the fund industry.
\4\ The salaries for a portfolio manager and a trust
administrator are from SIFMA's Management & Professional Earnings in
the Securities Industry 2010, 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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Written comments are invited on: (a) Whether the collection of
information is necessary for the proper performance of the functions of
the Commission, including whether the information has practical
utility; (b) the accuracy of the Commission's estimate of the burden of
the collection of information; (c) ways to enhance the quality,
utility, and clarity of the information collected; and (d) ways to
minimize the burden of the collection of information on respondents,
including through the use of automated collection techniques or other
forms of information technology. Consideration will be given to
comments and suggestions submitted in writing within 60 days of this
publication.
Please direct your written comments to Thomas Bayer, 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].
Dated: March 15, 2011.
Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-6364 Filed 3-17-11; 8:45 am]
BILLING CODE 8011-01-P