[Federal Register Volume 76, Number 53 (Friday, March 18, 2011)]
[Notices]
[Pages 15004-15005]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-6366]
-----------------------------------------------------------------------
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 19b-1; SEC File No. 270-312; OMB Control No. 3235-0354.
Notice is hereby given that, pursuant to the Paperwork Reduction
Act of 1995 (44 U.S.C. 350l-3520), the Securities and Exchange
Commission (``Commission'') is soliciting comments on the collection of
information summarized below. The Commission plans to submit this
existing collection of information to the Office of Management and
Budget (``OMB'') for extension and approval.
Section 19(b) of the Investment Company Act of 1940 (the ``Act'')
(15 U.S.C. 80a-19(b)) authorizes the Commission to regulate registered
investment company (``fund'') distributions of long-term capital gains
made more frequently than once every twelve months. Rule 19b-1 under
the Act \1\ prohibits funds from distributing long-term capital gains
more than once every twelve months unless certain conditions are met.
Rule 19b-1(c)(17 CFR 270.19b-1(c)) permits unit investment trusts
(``UITs'') engaged exclusively in the business of investing in certain
eligible fixed-income securities to distribute long-term capital gains
more than once every twelve months, if: (i) The capital gains
distribution falls within one of several categories specified in the
rule \2\ and (ii) the distribution is accompanied by a report to the
unit holder that clearly describes the distribution as a capital gains
distribution (the ``notice requirement'').\3\ Rule 19b-1(e) (17 CFR
270.19b-1(e)) permits a fund to apply to
[[Page 15005]]
the Commission for permission to distribute long-term capital gains
more than once a year if the fund did not foresee the circumstances
that created the need for the distribution. The application must set
forth the pertinent facts and explain the circumstances that justify
the distribution.\4\ An application that meets those requirements is
deemed to be granted unless the Commission denies the request within 15
days after the Commission receives the application.
---------------------------------------------------------------------------
\1\ 17 CFR 270.19b-1.
\2\ 17 CFR 270.19b-1(c)(1).
\3\ The notice requirement in rule 19b-1(c)(2) (17 CFR 270.19b-
1(c)(2)) supplements the notice requirement of section 19(a) [15
U.S.C. 80a-19(a)] and rule 19a-1 [17 CFR 270.19a-1], which requires
any distribution in the nature of a dividend payment made by a fund
to its investors to be accompanied by a notice disclosing the source
of the distribution.
\4\ Rule 19b-1(e) also requires that the application comply with
rule 0-2 [17 CFR 270.02], which sets forth the general requirements
for papers and applications filed with the Commission.
---------------------------------------------------------------------------
Commission staff estimates that, on average, each year six funds
file an application under rule 19b-1(e). The staff understands that
funds that file an application generally use outside counsel to prepare
the application. The cost burden of using outside counsel is discussed
below. The staff estimates that, on average, the fund's investment
adviser spends a total of approximately 4 hours to review an
application, including 3.5 hours by an assistant general counsel, 0.5
hours by an administrative assistant, and the fund's board of directors
spends an additional 1 hour, for a total of 5 hours. Thus, the
Commission staff estimates that the annual hour burden of the
collection of information imposed by rule 19b-1 is approximately five
hours per fund, for a total burden of 30 hours.
The Commission staff estimates that there is no hourly burden
associated with complying with the collection of information component
of rule 19b-1(c).
As noted above, the Commission staff understands that funds that
file an application under rule 19b-1(e) generally use outside counsel
to prepare the application.\5\ The staff estimates that, on average,
outside counsel spends 10 hours preparing a rule 19b-1(e) application,
including eight hours by an associate and two hours by a partner.
Outside counsel billing arrangements and rates vary based on numerous
factors, but the staff has estimated the average cost of outside
counsel as $400 per hour, based on information received from funds,
intermediaries, and their counsel. The staff therefore estimates that
the average cost of outside counsel preparation of the 19b-(e)
exemptive application is $4,000.\6\ Thus, the staff estimates that the
total annual cost burden imposed by the exemptive application
requirements of rule 19b-1(e) is $24,000.\7\
---------------------------------------------------------------------------
\5\ This understanding is based on conversations with
representatives from the fund industry.
\6\ This estimate is based on the following calculation: 10
hours multiplied by $400 per hour equals $4,000.
\7\ This estimate is based on the following calculation: $4,000
multiplied by 6 (funds) equals $24,000.
---------------------------------------------------------------------------
The Commission staff estimates that there are approximately 3759
UITs \8\ that may rely on rule 19b-1(c) to make capital gains
distributions. The staff estimates that, on average, these UITs rely on
rule 19b-1(c) once a year to make a capital gains distribution.\9\ In
most cases, the trustee of the UIT is responsible for preparing and
sending the notices that must accompany a capital gains distribution
under rule 19b-1(c)(2). These notices require limited preparation, the
cost of which accounts for only a small, indiscrete portion of the
comprehensive fee charged by the trustee for its services to the UIT.
The staff believes that as a matter of good business practices, and for
tax preparation reasons, UITs would collect and distribute the capital
gains information required to be sent to unitholders under rule 19b-
1(c) even in the absence of the rule. The staff estimates that the cost
of preparing a notice for a capital gains distribution under rule 19b-
1(c)(2) is approximately $50. There is no separate cost to mail the
notices because they are mailed with the capital gains distribution.
Thus, the staff estimates that the capital gains distribution notice
requirement imposes an annual cost on UITs of approximately
$187,950.\10\ The staff therefore estimates that the total cost imposed
by rule 19b-1 is $211,950 ($187,950 plus $24,000 equals $211,950).
---------------------------------------------------------------------------
\8\ The Investment Company Institute, Unit Investment Trust
Data, (January 2011).
\9\ The number of times UITs rely on the rule to make capital
gains distributions depends on a wide range of factors and, thus,
can vary greatly across years. A number of UITs are organized as
grantor trusts, and therefore do not generally make capital gains
distributions under rule 19b-1(c), or may not rely on rule 19b-1(c)
as they do not meet the rule's requirements. Other UITs may
distribute capital gains biannually, annually, quarterly, or at
other intervals.
\10\ This estimate is based on the following calculation: 3,759
UITs multiplied by $50 equals $187,950.
---------------------------------------------------------------------------
Based on these calculations, the total number of respondents for
rule 19b-1 is estimated to be 3,765 (3759 UIT portfolios + 6 funds
filing an application under rule 19b-1(e)), the total annual hour
burden is estimated to be 30 hours, and the total annual cost burden is
estimated to be $211,950. These estimates of average annual burden
hours and costs are made solely for purposes of the Paperwork Reduction
Act. The collections of information required by 19b-1(c) and 19b-1(e)
are necessary to obtain the benefits described above. Responses will
not be kept confidential.
An agency may not conduct or sponsor, and a person is not required
to respond to, a collection of information unless it displays a
currently valid control number.
Written comments are invited on: (a) Whether the collection of
information is necessary for the proper performance of the functions of
the Commission, including whether the information has practical
utility; (b) the accuracy of the Commission's estimate of the burden of
the collection of information; (c) ways to enhance the quality,
utility, and clarity of the information collected; and (d) ways to
minimize the burden of the collection of information on respondents,
including through the use of automated collection techniques or other
forms of information technology. Consideration will be given to
comments and suggestions submitted in writing within 60 days of this
publication.
Please direct your written comments to 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. 2011-6366 Filed 3-17-11; 8:45 am]
BILLING CODE 8011-01-P