80 FR 33319 - Submission for OMB Review; Comment Request

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 112 (June 11, 2015)

Page Range		33319-33320
FR Document		2015-14244
Federal Register, Volume 80 Issue 112 (Thursday, June 11, 2015)
[Federal Register Volume 80, Number 112 (Thursday, June 11, 2015)]
[Notices]
[Pages 33319-33320]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-14244]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION


Submission for OMB Review; Comment Request

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

Extension:
    Rule 17f-2; OMB Control No. 3235-0223, SEC File No. 270-233.

    Notice is hereby given that, pursuant to the Paperwork Reduction 
Act of 1995 (44 U.S.C. 350l et seq.), the Securities and Exchange 
Commission (the ``Commission'') has submitted to the Office of 
Management and Budget a request for extension of the previously 
approved collection of information discussed below.
    Rule 17f-2 (17 CFR 270.17f-2), entitled ``Custody of Investments by 
Registered Management Investment Company,'' was adopted in 1940 under 
section 17(f) of the Investment Company Act of 1940 (15 U.S.C. 80a-
17(f)) (the ``Act''), and was last amended materially in 1947. Rule 
17f-2 establishes safeguards for arrangements in which a registered 
management investment company (``fund'') is deemed to maintain custody 
of its own assets, such as when the fund maintains its assets in a 
facility that provides safekeeping but not custodial services.\1\ The 
rule includes several recordkeeping or reporting requirements. The 
fund's directors must prepare a resolution designating not more than 
five fund officers or responsible employees who may have access to the 
fund's assets. The designated access persons (two or more of whom must 
act jointly when handling fund assets) must prepare a written notation 
providing certain information about each deposit or withdrawal of fund 
assets, and must transmit the notation to another officer or director 
designated by the directors. An independent public accountant must 
verify the fund's assets three times each year, and two of those 
examinations must be unscheduled.\2\
---------------------------------------------------------------------------

    \1\ The rule generally requires all assets to be deposited in 
the safekeeping of a ``bank or other company whose functions and 
physical facilities are supervised by Federal or State authority.'' 
The fund's securities must be physically segregated at all times 
from the securities of any other person.
    \2\ The accountant must transmit to the Commission promptly 
after each examination a certificate describing the examination on 
Form N-17f-2. The third (scheduled) examination may coincide with 
the annual verification required for every fund by section 30(g) of 
the Act (15 U.S.C. 80a-29(g)).
---------------------------------------------------------------------------

    Rule 17f-2's requirement that directors designate access persons is 
intended to ensure that directors evaluate the trustworthiness of 
insiders who handle fund assets. The requirements that access persons 
act jointly in handling fund assets, prepare a written notation of each 
transaction, and transmit the notation to another designated person are 
intended to reduce the risk of misappropriation of fund assets by 
access persons, and to ensure that adequate records are prepared, 
reviewed by a responsible third person, and available for examination 
by the Commission. The requirement that auditors verify fund assets 
without notice twice each year is intended to provide an additional 
deterrent to the misappropriation of

[[Page 33320]]

fund assets and to detect any irregularities.
    The Commission staff estimates that each fund makes 974 responses 
and spends an average of 252 hours annually in complying with the 
rule's requirements.\3\ Commission staff estimates that on an annual 
basis it takes: (i) 0.5 hours of fund accounting personnel at a total 
cost of $99 to draft director resolutions; \4\ (ii) 0.5 hours of the 
fund's board of directors at a total cost of $2200 to adopt the 
resolution; \5\ (iii) 244 hours for the fund's accounting personnel at 
a total cost of $63,797 to prepare written notations of transactions; 
\6\ and (iv) 7 hours for the fund's accounting personnel at a total 
cost of $1386 to assist the independent public accountants when they 
perform verifications of fund assets.\7\ Commission staff estimates 
that approximately 188 funds file Form N-17f-2 each year.\8\ Thus, the 
total annual hour burden for rule 17f-2 is estimated to be 47,376 
hours.\9\ Based on the total costs per fund listed above, the total 
cost of rule 17f-2's collection of information requirements is 
estimated to be approximately $12.7 million.\10\
---------------------------------------------------------------------------

    \3\ The 974 responses are: 1 (one) response to draft and adopt 
the resolution and 973 notations. Estimates of the number of hours 
are based on conversations with individuals in the fund industry. 
The actual number of hours may vary significantly depending on 
individual fund assets.
    \4\ This estimate is based on the following calculation: 0.5 
(burden hours per fund) x $198 (senior accountant's hourly rate) = 
$99. Unless otherwise indicated, the hourly wage figures used herein 
are from the Securities Industry and Financial Markets Association's 
Management & Professional Earnings in the Securities Industry 2013, 
modified by Commission staff to account for an 1800-hour work-year 
and multiplied by 5.35 to account for bonuses, firm size, employee 
benefits and overhead.
    \5\ The estimate for the cost of board time as a whole is 
derived from estimates made by the staff regarding typical board 
size and compensation that is based on information received from 
fund representatives and publicly available sources.
    \6\ Respondents estimated that each fund makes 974 responses on 
an annual basis and spends a total of 0.25 hours per response. The 
fund personnel involved are Accounts Payable Manager ($186 hourly 
rate), Operations Manager ($334 hourly rate) and Accounting Manager 
($265 hourly rate). The average hourly rate of these personnel is 
$262. The estimated cost of preparing notations is based on the 
following calculation: 974 x 0.25 x $262 = $63,797.
    \7\ This estimate is based on the following calculation: 7 x 
$198 (senior accountant's hourly rate) = $1386.
    \8\ On average, each year approximately 188 funds filed Form N-
17f-2 with the Commission during calendar years 2011-2013.
    \9\ This estimate is based on the following calculation: 188 
(funds) x 252 (total annual hourly burden per fund) = 47,376 hours 
for rule. The annual burden for rule 17f-2 does not include time 
spent preparing Form N-17f-2. The burden for Form N-17f-2 is 
included in a separate collection of information.
    \10\ This estimate is based on the following calculation: 
$67,482 (total annual cost per fund) x 188 funds = $12,686,616.
---------------------------------------------------------------------------

    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 of the costs of 
Commission rules and forms. Complying with the collections of 
information required by rule 17f-2 is mandatory for those funds that 
maintain custody of their own assets. 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.
    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: June 5, 2015.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-14244 Filed 6-10-15; 8:45 am]
BILLING CODE 8011-01-P
Federal Register / Vol. 80, No. 112 / Thursday, June 11, 2015 / Notices 33319

FCMs, Commission staff estimates there professional (attorney) time, Office of Management and Budget a
are no costs related to existing contracts Commission staff estimates that the request for extension of the previously
between funds and FCMs. This estimate annual dollar cost for the 39 hours is approved collection of information
does not include the time required by an $14,820.5 These estimates are made discussed below.
FCM to comply with the rule’s contract solely for the purposes of the Paperwork Rule 17f–2 (17 CFR 270.17f–2),
requirements because, to the extent that Reduction Act, and are not derived from entitled ‘‘Custody of Investments by
complying with the contract provisions a comprehensive or even a Registered Management Investment
could be considered ‘‘collections of representative survey or study of the Company,’’ was adopted in 1940 under
information,’’ the burden hours for costs of Commission rules and forms. section 17(f) of the Investment Company
compliance are already included in Compliance with the collection of Act of 1940 (15 U.S.C. 80a–17(f)) (the
other PRA submissions.1 information requirements of the rule is ‘‘Act’’), and was last amended
Thus, Commission staff estimates that necessary to obtain the benefit of relying materially in 1947. Rule 17f–2
any burden of the rule would be borne on the rule. An agency may not conduct establishes safeguards for arrangements
by funds and FCMs entering into new or sponsor, and a person is not required in which a registered management
contracts pursuant to the rule. to respond to, a collection of investment company (‘‘fund’’) is
Commission staff estimates that information unless it displays a deemed to maintain custody of its own
approximately 291 fund complexes and currently valid control number. assets, such as when the fund maintains
965 funds currently effect commodities The public may view the background its assets in a facility that provides
transactions and could deposit margin documentation for this information safekeeping but not custodial services.1
with FCMs in connection with those collection at the following Web site, The rule includes several recordkeeping
transactions pursuant to rule 17f–6.2 www.reginfo.gov. Comments should be or reporting requirements. The fund’s
Staff further estimates that of this directed to: (i) Desk Officer for the directors must prepare a resolution
number, 29 fund complexes and 97 Securities and Exchange Commission, designating not more than five fund
funds enter into new contracts with Office of Information and Regulatory officers or responsible employees who
FCMs each year.3 Affairs, Office of Management and may have access to the fund’s assets.
Based on conversations with fund Budget, Room 10102, New Executive The designated access persons (two or
representatives, Commission staff Office Building, Washington, DC 20503, more of whom must act jointly when
understands that fund complexes or by sending an email to: Shagufta_ handling fund assets) must prepare a
typically enter into contracts with FCMs Ahmed@omb.eop.gov; and (ii) Pamela written notation providing certain
on behalf of all funds in the fund Dyson, Director/Chief Information information about each deposit or
complex that engage in commodities Officer, Securities and Exchange withdrawal of fund assets, and must
transactions. Funds covered by the Commission, c/o Remi Pavlik-Simon, transmit the notation to another officer
contract are typically listed in an 100 F Street NE., Washington, DC 20549 or director designated by the directors.
attachment, which may be amended to or send an email to: PRA_Mailbox@ An independent public accountant must
encompass new funds. Commission staff sec.gov. Comments must be submitted to verify the fund’s assets three times each
estimates that the burden for a fund OMB within 30 days of this notice. year, and two of those examinations
complex to enter into a contract with an must be unscheduled.2
Dated: June 5, 2015. Rule 17f–2’s requirement that
FCM that contains the contract
requirements of rule 17f–6 is one hour, Robert W. Errett, directors designate access persons is
and further estimates that the burden to Deputy Secretary. intended to ensure that directors
add a fund to an existing contract [FR Doc. 2015–14245 Filed 6–10–15; 8:45 am] evaluate the trustworthiness of insiders
between a fund complex and an FCM is BILLING CODE 8011–01–P who handle fund assets. The
6 minutes. requirements that access persons act
Accordingly, Commission staff jointly in handling fund assets, prepare
estimates that funds and FCMs spend 39 SECURITIES AND EXCHANGE a written notation of each transaction,
burden hours annually complying with COMMISSION and transmit the notation to another
the information collection requirements designated person are intended to
of rule 17f–6.4 At $380 per hour of Submission for OMB Review; reduce the risk of misappropriation of
Comment Request fund assets by access persons, and to
1 The rule requires a contract with the FCM to
Upon Written Request Copies Available ensure that adequate records are
contain two provisions requiring the FCM to prepared, reviewed by a responsible
comply with existing requirements under the CEA From: U.S. Securities and Exchange
and rules adopted thereunder. Thus, to the extent Commission, Office of FOIA Services, third person, and available for
these provisions could be considered collections of 100 F Street NE., Washington, DC examination by the Commission. The
information, the hours required for compliance 20549–2736. requirement that auditors verify fund
would be included in the collection of information assets without notice twice each year is
burden hours submitted by the CFTC for its rules. Extension:
2 This estimate is based on the number of funds Rule 17f–2; OMB Control No. 3235–0223,
intended to provide an additional
that reported on Form N–SAR from June 1, 2014– SEC File No. 270–233. deterrent to the misappropriation of
November 30, 2014, in response to items (b)
through (i) of question 70, that they engaged in Notice is hereby given that, pursuant 1 The rule generally requires all assets to be
futures and commodity option transactions. to the Paperwork Reduction Act of 1995 deposited in the safekeeping of a ‘‘bank or other
3 These estimates are based on the assumption company whose functions and physical facilities
(44 U.S.C. 350l et seq.), the Securities
that 10% of fund complexes and funds enter into are supervised by Federal or State authority.’’ The
mstockstill on DSK4VPTVN1PROD with NOTICES

new FCM contracts each year. This assumption
and Exchange Commission (the fund’s securities must be physically segregated at
encompasses fund complexes and funds that enter ‘‘Commission’’) has submitted to the all times from the securities of any other person.
into FCM contracts for the first time, as well as fund 2 The accountant must transmit to the
complexes and fund that change the FCM with 5 The $380 per hour figure for an attorney is from Commission promptly after each examination a
whom they maintain margin accounts for SIFMA’s Management & Professional Earnings in certificate describing the examination on Form
commodities transactions. the Securities Industry 2013, modified by N–17f–2. The third (scheduled) examination may
4 This estimate is based upon the following Commission staff to account for an 1800-hour work- coincide with the annual verification required for
calculation: (29 fund complexes × 1 hour) + (97 year and multiplied by 5.35 to account for bonuses, every fund by section 30(g) of the Act (15 U.S.C.
funds × 0.1 hours) = 39 hours. firm size, employee benefits and overhead. 80a–29(g)).

VerDate Sep<11>2014 17:06 Jun 10, 2015 Jkt 235001 PO 00000 Frm 00092 Fmt 4703 Sfmt 4703 E:\FR\FM\11JNN1.SGM 11JNN1
Document Created: 2015-12-15 15:07:18
Document Modified: 2015-12-15 15:07:18
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 33319