80 FR 31426 - Submission for OMB Review; Comment Request

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 105 (June 2, 2015)

Page Range		31426-31427
FR Document		2015-13381
Federal Register, Volume 80 Issue 105 (Tuesday, June 2, 2015)
[Federal Register Volume 80, Number 105 (Tuesday, June 2, 2015)]
[Notices]
[Pages 31426-31427]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-13381]


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SECURITIES AND EXCHANGE COMMISSION

[Extension: Rule 10f-3; OMB Control No. 3235-0226, SEC File No. 270-
237]


Submission for OMB Review; Comment Request

Upon Written Request, Copies Available From: Securities and Exchange 
Commission, Office of FOIA Services, 100 F Street NE., Washington, DC 
20549-2736.

    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'') has submitted to the Office of Management 
and Budget a request for extension and approval of the collections of 
information discussed below.
    Section 10(f) of the Investment Company Act of 1940 (15 U.S.C. 80a) 
(the ``Act'') prohibits a registered investment company (``fund'') from 
purchasing any security during an underwriting or selling syndicate if 
the fund has certain relationships with a principal underwriter for the 
security. Congress enacted this provision in 1940 to protect funds and 
their shareholders by preventing underwriters from ``dumping'' 
unmarketable securities on affiliated funds.
    Rule 10f-3 (17 CFR 270.10f-3) permits a fund to engage in a 
securities transaction that otherwise would violate section 10(f) if, 
among other things: (i) Each transaction effected under the rule is 
reported on Form N-SAR; (ii) the

[[Page 31427]]

fund's directors have approved procedures for purchases made in 
reliance on the rule, regularly review fund purchases to determine 
whether they comply with these procedures, and approve necessary 
changes to the procedures; and (iii) a written record of each 
transaction effected under the rule is maintained for six years, the 
first two of which in an easily accessible place. The written record 
must state: (i) From whom the securities were acquired; (ii) the 
identity of the underwriting syndicate's members; (iii) the terms of 
the transactions; and (iv) the information or materials on which the 
fund's board of directors has determined that the purchases were made 
in compliance with procedures established by the board.
    The rule also conditionally allows managed portions of fund 
portfolios to purchase securities offered in otherwise off-limits 
primary offerings. To qualify for this exemption, rule 10f-3 requires 
that the subadviser that is advising the purchaser be contractually 
prohibited from providing investment advice to any other portion of the 
fund's portfolio and consulting with any other of the fund's advisers 
that is a principal underwriter or affiliated person of a principal 
underwriter concerning the fund's securities transactions.
    These requirements provide a mechanism for fund boards to oversee 
compliance with the rule. The required recordkeeping facilitates the 
Commission staff's review of rule 10f-3 transactions during routine 
fund inspections and, when necessary, in connection with enforcement 
actions.
    The staff estimates that approximately 270 funds engage in a total 
of approximately 3,350 rule 10f-3 transactions each year.\1\ Rule 10f-3 
requires that the purchasing fund create a written record of each 
transaction that includes, among other things, from whom the securities 
were purchased and the terms of the transaction. The staff estimates 
\2\ that it takes an average fund approximately 30 minutes per 
transaction and approximately 1,675 hours \3\ in the aggregate to 
comply with this portion of the rule.
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    \1\ These estimates are based on staff extrapolations from 
filings with the Commission.
    \2\ Unless stated otherwise, the information collection burden 
estimates are based on conversations between the staff and 
representatives of funds.
    \3\ This estimate is based on the following calculation: (0.5 
hours x 3,350 = 1,675 hours).
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    The funds also must maintain and preserve these transactional 
records in accordance with the rule's recordkeeping requirement, and 
the staff estimates that it takes a fund approximately 20 minutes per 
transaction and that annually, in the aggregate, funds spend 
approximately 1,117 hours \4\ to comply with this portion of the rule.
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    \4\ This estimate is based on the following calculations: (20 
minutes x 3,350 transactions = 67,000 minutes; 67,000 minutes/60 = 
1,117 hours).
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    In addition, fund boards must, no less than quarterly, examine each 
of these transactions to ensure that they comply with the fund's 
policies and procedures. The information or materials upon which the 
board relied to come to this determination also must be maintained and 
the staff estimates that it takes a fund 1 hour per quarter and, in the 
aggregate, approximately 1,080 hours \5\ annually to comply with this 
rule requirement.
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    \5\ This estimate is based on the following calculation: (1 hour 
per quarter x 4 quarters x 270 funds = 1,080 hours).
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    The staff estimates that reviewing and revising as needed written 
procedures for rule 10f-3 transactions takes, on average for each fund, 
two hours of a compliance attorney's time per year.\6\ Thus, annually, 
in the aggregate, the staff estimates that funds spend a total of 
approximately 540 hours \7\ on monitoring and revising rule 10f-3 
procedures.
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    \6\ These averages take into account the fact that in most 
years, fund attorneys and boards spend little or no time modifying 
procedures and in other years, they spend significant time doing so.
    \7\ This estimate is based on the following calculation: (270 
funds x 2 hours = 540 hours).
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    Based on an analysis of fund filings, the staff estimates that 
approximately 251 fund portfolios enter into subadvisory agreements 
each year.\8\ 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 10f-3. 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, 17a-10, and 17e-1, 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 10f-3 for this contract 
change would be 0.75 hours.\9\ Assuming that all 251 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 188 burden hours annually.\10\
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    \8\ Based on information in Commission filings, we estimate that 
38 percent of funds are advised by subadvisers.
    \9\ This estimate is based on the following calculation (3 hours 
/ 4 rules = .75 hours).
    \10\ These estimates are based on the following calculations: 
(0.75 hours x 251 portfolios = 188 burden hours).
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    The staff estimates, therefore, that rule 10f-3 imposes an 
information collection burden of 4,060 hours.\11\ This estimate does 
not include the time spent filing transaction reports on Form N-SAR, 
which is encompassed in the information collection burden estimate for 
that form.
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    \11\ This estimate is based on the following calculation: (1,675 
hours + 1,117 hours + 1,080 hours + 188 hours = 4,060 total burden 
hours).
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    The collection of information required by rule 10f-3 is necessary 
to obtain the benefits of the rule. 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 OMB control number.
    The public may view the background documentation for this 
information collection at the following Web site, www.reginfo.gov. 
Comments should be directed to: (i) Desk Officer for the Securities and 
Exchange Commission, Office of Information and Regulatory Affairs, 
Office of Management and Budget, Room 10102, New Executive Office 
Building, Washington, DC 20503, or by sending an email to: 
[email protected]; and (ii) Pamela Dyson, Director/Chief 
Information Officer, Securities and Exchange Commission, c/o Remi 
Pavlik-Simon, 100 F Street NE., Washington, DC 20549 or send an email 
to: [email protected]. Comments must be submitted to OMB within 30 
days of this notice.

    Dated: May 28, 2015.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-13381 Filed 6-1-15; 8:45 am]
 BILLING CODE 8011-01-P
31426 Federal Register / Vol. 80, No. 105 / Tuesday, June 2, 2015 / Notices

with all other Participating Insurance VA Account and VLI Account or more of the assets of a Fund unless
Companies investing in that Fund. prospectuses or Qualified Plan the Qualified Plan executes an
The obligation to calculate voting documents. Each Fund will disclose, in agreement with the Fund governing
privileges as provided in the its prospectus that: (a) shares of the participation in the Fund that includes
Application shall be a contractual Fund may be offered to both VA the conditions set forth herein to the
obligation of all Participating Insurance Accounts and VLI Accounts and, if extent applicable. A Qualified Plan will
Companies under their participation applicable, to Qualified Plans; (b) due to execute an application containing an
agreement with the Fund. Each differences in tax treatment and other acknowledgement of this condition at
Participating Insurance Company will considerations, the interests of various the time of its initial purchase of shares.
vote shares of each Fund held in its Variable Contract owners participating
Separate Accounts for which no timely in the Fund and the interests of Conclusion
voting instructions are received, as well Qualified Plan participants investing in Applicants submit, for all of the
as shares held in its General Account or the Fund, if applicable, may conflict; reasons explained above, that the
otherwise attributed to it, in the same and (c) the Fund’s Board will monitor exemptions requested are appropriate in
proportion as those shares for which events in order to identify the existence the public interest and consistent with
voting instructions are received. Each of any material irreconcilable conflicts the protection of investors and the
Qualified Plan will vote as required by and to determine what action, if any, purposes fairly intended by the policy
applicable law, governing Qualified should be taken in response to any such and provisions of the 1940 Act.
Plan documents and as provided in the conflicts. For the Commission, by the Division of
Application. 11. If and to the extent Rule 6e–2 and Investment Management, pursuant to
7. As long as the Commission Rule 6e–3(T) under the 1940 Act are delegated authority.
continues to interpret the 1940 Act as amended, or proposed Rule 6e–3 under Robert W. Errett,
requiring that pass-through voting the 1940 Act is adopted, to provide
Deputy Secretary.
privileges be provided to Variable exemptive relief from any provision of
Contract owners, a Fund Adviser or any [FR Doc. 2015–13176 Filed 6–1–15; 8:45 am]
the 1940 Act, or the rules thereunder,
General Account will vote its respective with respect to mixed or shared BILLING CODE 8011–01–P
shares of a Fund in the same proportion funding, on terms and conditions
as all votes cast on behalf of all Variable materially different from any
Contract owners having voting rights; exemptions granted in the order SECURITIES AND EXCHANGE
provided, however, that such an requested in the Application, then each COMMISSION
Adviser or General Account shall vote Fund and/or Participating Insurance [Extension: Rule 10f–3; OMB Control No.
its shares in such other manner as may Companies, as appropriate, shall take 3235–0226, SEC File No. 270–237]
be required by the Commission or its such steps as may be necessary to
staff. comply with Rules 6e–2 or 6e–3(T), as Submission for OMB Review;
8. Each Fund will comply with all amended, or Rule 6e–3, to the extent Comment Request
provisions of the 1940 Act requiring such rules are applicable.
voting by shareholders (which, for these Upon Written Request, Copies Available
12. Each Participant, at least annually,
purposes, shall be the persons having a From: Securities and Exchange
shall submit to the Board of each Fund
voting interest in its shares), and, in Commission, Office of FOIA Services,
such reports, materials or data as the
particular, the Fund will either provide 100 F Street NE., Washington, DC
Board reasonably may request so that
for annual meetings (except to the 20549–2736.
the directors/trustees may fully carry
extent that the Commission may out the obligations imposed upon the Notice is hereby given that, pursuant
interpret section 16 of the 1940 Act not Board by the conditions contained in to the Paperwork Reduction Act of 1995
to require such meetings) or comply the Application. Such reports, materials (44 U.S.C. 3501–3520), the Securities
with section 16(c) of the 1940 Act and data shall be submitted more and Exchange Commission
(although each Fund is not, or will not frequently if deemed appropriate by the (‘‘Commission’’) has submitted to the
be, one of those trusts of the type Board. The obligations of the Office of Management and Budget a
described in section 16(c) of the 1940 Participants to provide these reports, request for extension and approval of
Act), as well as with section 16(a) of the materials and data to the Board, when the collections of information discussed
1940 Act and, if and when applicable, it so reasonably requests, shall be a below.
section 16(b) of the 1940 Act. Further, contractual obligation of all Participants Section 10(f) of the Investment
each Fund will act in accordance with under their participation agreement Company Act of 1940 (15 U.S.C. 80a)
the Commission’s interpretations of the with the Fund. (the ‘‘Act’’) prohibits a registered
requirements of section 16(a) with 13. All reports of potential or existing investment company (‘‘fund’’) from
respect to periodic elections of conflicts received by a Board, and all purchasing any security during an
directors/trustees and with whatever Board action with regard to determining underwriting or selling syndicate if the
rules the Commission may promulgate the existence of a conflict, notifying fund has certain relationships with a
thereunder. Participants of a conflict and principal underwriter for the security.
9. A Fund will make its shares determining whether any proposed Congress enacted this provision in 1940
available to the VLI Accounts, VA action adequately remedies a conflict, to protect funds and their shareholders
Accounts, and Qualified Plans at or will be properly recorded in the minutes by preventing underwriters from
asabaliauskas on DSK5VPTVN1PROD with NOTICES

about the time it accepts any seed of the Board or other appropriate ‘‘dumping’’ unmarketable securities on
capital from its Adviser or from the records, and such minutes or other affiliated funds.
General Account of a Participating records shall be made available to the Rule 10f–3 (17 CFR 270.10f–3)
Insurance Company. Commission upon request. permits a fund to engage in a securities
10. Each Fund has notified, or will 14. Each Fund will not accept a transaction that otherwise would violate
notify, all Participants that disclosure purchase order from a Qualified Plan if section 10(f) if, among other things: (i)
regarding potential risks of mixed and such purchase would make the Each transaction effected under the rule
shared funding may be appropriate in Qualified Plan an owner of 10 percent is reported on Form N–SAR; (ii) the

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Federal Register / Vol. 80, No. 105 / Tuesday, June 2, 2015 / Notices 31427

fund’s directors have approved approximately 20 minutes per required by the rule, we estimate that
procedures for purchases made in transaction and that annually, in the the rule’s contract modification
reliance on the rule, regularly review aggregate, funds spend approximately requirement will result in 188 burden
fund purchases to determine whether 1,117 hours 4 to comply with this hours annually.10
they comply with these procedures, and portion of the rule. The staff estimates, therefore, that rule
approve necessary changes to the In addition, fund boards must, no less 10f–3 imposes an information collection
procedures; and (iii) a written record of than quarterly, examine each of these burden of 4,060 hours.11 This estimate
each transaction effected under the rule transactions to ensure that they comply does not include the time spent filing
is maintained for six years, the first two with the fund’s policies and procedures. transaction reports on Form N–SAR,
of which in an easily accessible place. The information or materials upon which is encompassed in the
The written record must state: (i) From which the board relied to come to this information collection burden estimate
whom the securities were acquired; (ii) determination also must be maintained for that form.
the identity of the underwriting and the staff estimates that it takes a The collection of information required
syndicate’s members; (iii) the terms of fund 1 hour per quarter and, in the by rule 10f–3 is necessary to obtain the
the transactions; and (iv) the aggregate, approximately 1,080 hours 5 benefits of the rule. Responses will not
information or materials on which the annually to comply with this rule be kept confidential. An agency may not
fund’s board of directors has determined requirement. conduct or sponsor, and a person is not
that the purchases were made in The staff estimates that reviewing and required to respond to, a collection of
compliance with procedures established revising as needed written procedures information unless it displays a
by the board. for rule 10f–3 transactions takes, on currently valid OMB control number.
The rule also conditionally allows average for each fund, two hours of a The public may view the background
managed portions of fund portfolios to compliance attorney’s time per year.6 documentation for this information
purchase securities offered in otherwise Thus, annually, in the aggregate, the collection at the following Web site,
off-limits primary offerings. To qualify staff estimates that funds spend a total www.reginfo.gov. Comments should be
for this exemption, rule 10f–3 requires of approximately 540 hours 7 on directed to: (i) Desk Officer for the
that the subadviser that is advising the monitoring and revising rule 10f–3 Securities and Exchange Commission,
purchaser be contractually prohibited procedures. Office of Information and Regulatory
from providing investment advice to Based on an analysis of fund filings, Affairs, Office of Management and
any other portion of the fund’s portfolio the staff estimates that approximately Budget, Room 10102, New Executive
and consulting with any other of the 251 fund portfolios enter into Office Building, Washington, DC 20503,
fund’s advisers that is a principal subadvisory agreements each year.8 or by sending an email to: Shagufta_
underwriter or affiliated person of a Based on discussions with industry Ahmed@omb.eop.gov; and (ii) Pamela
principal underwriter concerning the representatives, the staff estimates that Dyson, Director/Chief Information
fund’s securities transactions. it will require approximately 3 attorney Officer, Securities and Exchange
These requirements provide a hours to draft and execute additional Commission, c/o Remi Pavlik-Simon,
mechanism for fund boards to oversee clauses in new subadvisory contracts in 100 F Street NE., Washington, DC 20549
compliance with the rule. The required order for funds and subadvisers to be or send an email to: PRA_Mailbox@
recordkeeping facilitates the able to rely on the exemptions in rule sec.gov. Comments must be submitted to
Commission staff’s review of rule 10f– 10f–3. Because these additional clauses OMB within 30 days of this notice.
3 transactions during routine fund are identical to the clauses that a fund
inspections and, when necessary, in Dated: May 28, 2015.
would need to insert in their Robert W. Errett,
connection with enforcement actions. subadvisory contracts to rely on rules
The staff estimates that approximately Deputy Secretary.
12d3–1, 17a–10, and 17e–1, and because
270 funds engage in a total of [FR Doc. 2015–13381 Filed 6–1–15; 8:45 am]
we believe that funds that use one such
approximately 3,350 rule 10f–3 BILLING CODE 8011–01–P
rule generally use all of these rules, we
transactions each year.1 Rule 10f–3
apportion this 3 hour time burden
requires that the purchasing fund create
equally to all four rules. Therefore, we
a written record of each transaction that SECURITIES AND EXCHANGE
estimate that the burden allocated to
includes, among other things, from COMMISSION
rule 10f–3 for this contract change
whom the securities were purchased
would be 0.75 hours.9 Assuming that all
and the terms of the transaction. The [Release No. 34–75051; File No. SR–BX–
251 funds that enter into new
staff estimates 2 that it takes an average 2015–030]
subadvisory contracts each year make
fund approximately 30 minutes per
the modification to their contract Self-Regulatory Organizations;
transaction and approximately 1,675
hours 3 in the aggregate to comply with 4 This estimate is based on the following
NASDAQ OMX BX, Inc.; Notice of Filing
this portion of the rule. calculations: (20 minutes × 3,350 transactions =
of Proposed Rule Change To Amend
The funds also must maintain and 67,000 minutes; 67,000 minutes/60 = 1,117 hours). the Amended and Restated Certificate
preserve these transactional records in 5 This estimate is based on the following of Incorporation and By-Laws of The
accordance with the rule’s calculation: (1 hour per quarter × 4 quarters × 270 NASDAQ OMX Group, Inc.
funds = 1,080 hours).
recordkeeping requirement, and the staff 6 These averages take into account the fact that in May 27, 2015.
asabaliauskas on DSK5VPTVN1PROD with NOTICES

estimates that it takes a fund most years, fund attorneys and boards spend little Pursuant to section 19(b)(1) of the
or no time modifying procedures and in other years,
1 These estimates are based on staff extrapolations they spend significant time doing so. Securities Exchange Act of 1934 (the
from filings with the Commission. 7 This estimate is based on the following
2 Unless stated otherwise, the information calculation: (270 funds × 2 hours = 540 hours). 10 These estimates are based on the following

collection burden estimates are based on 8 Based on information in Commission filings, we calculations: (0.75 hours × 251 portfolios = 188
conversations between the staff and representatives estimate that 38 percent of funds are advised by burden hours).
of funds. subadvisers. 11 This estimate is based on the following
3 This estimate is based on the following 9 This estimate is based on the following calculation: (1,675 hours + 1,117 hours + 1,080
calculation: (0.5 hours × 3,350 = 1,675 hours). calculation (3 hours ÷ 4 rules = .75 hours). hours + 188 hours = 4,060 total burden hours).

VerDate Sep<11>2014 17:26 Jun 01, 2015 Jkt 235001 PO 00000 Frm 00079 Fmt 4703 Sfmt 4703 E:\FR\FM\02JNN1.SGM 02JNN1
Document Created: 2015-12-15 15:11:59
Document Modified: 2015-12-15 15:11:59
Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Notices
FR Citation		80 FR 31426