80 FR 36013 - Submission for OMB Review; Comment Request

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 120 (June 23, 2015)

Page Range		36013-36014
FR Document		2015-15378
Federal Register, Volume 80 Issue 120 (Tuesday, June 23, 2015)
[Federal Register Volume 80, Number 120 (Tuesday, June 23, 2015)]
[Notices]
[Pages 36013-36014]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-15378]


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SECURITIES AND EXCHANGE COMMISSION

[Extension: Rule 12b-1]; OMB Control No. 3235-0212, SEC File No. 270-
188]


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 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 12b-1 under the Investment Company Act of 1940 (17 CFR 
270.12b-1) permits a registered open-end investment company (``fund'' 
or ``mutual fund'') to bear expenses associated with the distribution 
of its shares, provided that the mutual fund complies with certain 
requirements, including, among other things, that it adopt a written 
plan (``rule 12b-1 plan'') and that it has in writing any agreements 
relating to the rule 12b-1 plan. The rule in part requires that (i) the 
adoption or material amendment of a rule 12b-1 plan be approved by the 
mutual fund's directors, including its independent directors, and, in 
certain circumstances, its shareholders; (ii) the board review 
quarterly reports of

[[Page 36014]]

amounts spent under the rule 12b-1 plan; and (iii) the board, including 
the independent directors, consider continuation of the rule 12b-1 plan 
and any related agreements at least annually. Rule 12b-1 also requires 
mutual funds relying on the rule to preserve for six years, the first 
two years in an easily accessible place, copies of the rule 12b-1 plan 
and any related agreements and reports, as well as minutes of board 
meetings that describe the factors considered and the basis for 
adopting or continuing a rule 12b-1 plan.
    Rule 12b-1 also prohibits funds from paying for distribution of 
fund shares with brokerage commissions on their portfolio transactions. 
The rule requires funds that use broker-dealers that sell their shares 
to also execute their portfolio securities transactions, to implement 
policies and procedures reasonably designed to prevent: (i) The persons 
responsible for selecting broker-dealers to effect transactions in fund 
portfolio securities from taking into account broker-dealers' 
promotional or sales efforts when making those decisions; and (ii) a 
fund, its adviser or principal underwriter, from entering into any 
agreement under which the fund directs brokerage transactions or 
revenue generated by those transactions to a broker-dealer to pay for 
distribution of the fund's (or any other fund's) shares.
    The board and shareholder approval requirements of rule 12b-1 are 
designed to ensure that fund shareholders and directors receive 
adequate information to evaluate and approve a rule 12b-1 plan and, 
thus, are necessary for investor protection. The requirement of 
quarterly reporting to the board is designed to ensure that the rule 
12b-1 plan continues to benefit the fund and its shareholders. The 
recordkeeping requirements of the rule are necessary to enable 
Commission staff to oversee compliance with the rule. The requirement 
that funds or their advisers implement, and fund boards approve, 
policies and procedures in order to prevent persons charged with 
allocating fund brokerage from taking distribution efforts into account 
is designed to ensure that funds' selection of brokers to effect 
portfolio securities transactions is not influenced by considerations 
about the sale of fund shares.
    Based on information filed with the Commission by funds, Commission 
staff estimates that there are approximately 7837 mutual fund 
portfolios that have at least one share class subject to a rule 12b-1 
plan.\1\ However, many of these portfolios are part of an affiliated 
group of funds or mutual fund family that is overseen by a common board 
of directors. Although the board must review and approve the rule 12b-1 
plan for each fund separately, we have allocated the costs and hourly 
burden related to rule 12b-1 based on the number of fund families that 
have at least one fund that charges rule 12b-1 fees, rather than on the 
total number of mutual fund portfolios that individually have a rule 
12b-1 plan.\2\ Based on information filed with the Commission, the 
staff estimates that there are approximately 330 fund families with 
common boards of directors that have at least one fund with a rule 12b-
1 plan.
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    \1\ This estimate is based on information from the Commission's 
NSAR database.
    \2\ This allocation is based on previous conversations with fund 
representatives on how fund boards comply with the requirements of 
rule 12b-1. Despite this allocation of hourly burdens and costs, the 
number of annual responses each year will continue to depend on the 
number of fund portfolios with rule 12b-1 plans rather than the 
number of fund families with rule 12b-1 plans. The staff estimates 
that the number of annual responses per fund portfolio will be four 
per year (quarterly, with the annual reviews taking place at one of 
the quarterly intervals). Thus, we estimate that funds will make 
31,348 responses (7837 fund portfolios x 4 responses per fund 
portfolio = 31,348 responses) each year.
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    Based on previous conversations with fund representatives, 
Commission staff estimates that for each of the 330 mutual fund 
families with a portfolio that has a rule 12b-1 plan, the average 
annual burden of complying with the rule is 425 hours. This estimate 
takes into account the time needed to prepare quarterly reports to the 
board of directors, the board's consideration of those reports, and the 
board's initial or annual consideration of whether to continue the 
plan.\3\ We therefore estimate that the total hourly burden per year 
for all funds to comply with current information collection 
requirements under rule 12b-1, is 140,250 hours (330 fund families x 
425 hours per fund family = 140,250 hours).
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    \3\ We do not estimate any costs or time burden related to the 
recordkeeping requirements in rule 12b-1, as funds are either 
required to maintain these records pursuant to other rules or would 
keep these records in any case as a matter of business practice.
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    If a currently operating fund seeks to (i) adopt a new rule 12b-1 
plan or (ii) materially increase the amount it spends for distribution 
under its rule 12b-1 plan, rule 12b-1 requires that the fund obtain 
shareholder approval. As a consequence, the fund will incur the cost of 
a proxy.\4\ Based on previous conversations with fund representatives, 
Commission staff estimates that approximately three funds per year 
prepare a proxy in connection with the adoption or material amendment 
of a rule 12b-1 plan. Funds typically hire outside legal counsel and 
proxy solicitation firms to prepare, print, and mail such proxies. The 
staff further estimates that the cost of each fund's proxy is $34,372. 
Thus the total annual cost burden of rule 12b-1 to the fund industry is 
$103,116 (3 funds requiring a proxy x $34,372 per proxy).
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    \4\ In general, a fund adopts a rule 12b-1 plan before it begins 
operations. Therefore, the fund is not required to obtain the 
approval of its public shareholders because the fund's shares have 
not yet been offered to the public.
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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 of the costs of 
Commission rules and forms.
    The collections of information required by rule 12b-1 are necessary 
to obtain the benefits of the rule. Notices to the Commission 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: 
Shagufta_Ahmed@omb.eop.gov; 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: PRA_Mailbox@sec.gov. Comments must be submitted to OMB within 30 
days of this notice.

    Dated: June 18, 2015.
Brent Fields,
Secretary.
[FR Doc. 2015-15378 Filed 6-22-15; 8:45 am]
 BILLING CODE 8011-01-P
Federal Register / Vol. 80, No. 120 / Tuesday, June 23, 2015 / Notices 36013

place, a written record of each purchase Master Fund) under rule 12b–1 under receives securities of another
of securities in Affiliated Underwritings the Act) received from an Underlying investment company as a dividend or as
once an investment by an Unrelated Fund (or its respective Master Fund) by a result of a plan of reorganization of a
Fund of Funds in the securities of an the Unrelated Fund of Funds Adviser, company (other than a plan devised for
Underlying Fund exceeds the limit in or an affiliated person of the Unrelated the purpose of evading section 12(d)(1)
section 12(d)(1)(A)(i) of the Act, setting Fund of Funds Adviser, other than any of the Act); or (c) acquires (or is deemed
forth from whom the securities were advisory fees paid to the Unrelated to have acquired) securities of another
acquired, the identity of the Fund of Funds Adviser or its affiliated investment company pursuant to
underwriting syndicate’s members, the person by the Underlying Fund (or its exemptive relief from the Commission
terms of the purchase and the respective Master Fund), in connection permitting such Underlying Fund or its
information or materials upon which with the investment by the Unrelated respective Master Fund to: (i) Acquire
the Board’s determinations were made. Fund of Funds in the Underlying Fund. securities of one or more investment
8. Before investing in shares of an Any Unrelated Fund of Funds Sub- companies for short-term cash
Underlying Fund in excess of the limits Adviser will waive fees otherwise management purposes, or (ii) engage in
in section 12(d)(1)(A), each Unrelated payable to the Unrelated Fund of Funds inter-fund borrowing and lending
Fund of Funds and Underlying Fund Sub-Adviser, directly or indirectly, by transactions.
will execute a Participation Agreement the Unrelated Fund of Funds in an For the Commission, by the Division of
stating, without limitation, that their amount at least equal to any Investment Management, pursuant to
boards of directors or trustees and their compensation received from any delegated authority.
investment advisers understand the Underlying Fund (or its respective Brent J. Fields,
terms and conditions of the order and Master Fund) by the Unrelated Fund of Secretary.
agree to fulfill their responsibilities Funds Sub-Adviser, or an affiliated [FR Doc. 2015–15337 Filed 6–22–15; 8:45 am]
under the order. At the time of its person of the Unrelated Fund of Funds BILLING CODE 8011–01–P
investment in shares of an Underlying Sub-Adviser, other than any advisory
Fund in excess of the limit in section fees paid to the Unrelated Fund of
12(d)(1)(A)(i), an Unrelated Fund of Funds Sub-Adviser or its affiliated SECURITIES AND EXCHANGE
Funds will notify the Underlying Fund person by the Underlying Fund (or its COMMISSION
of the investment. At such time, the respective Master Fund), in connection
Unrelated Fund of Funds will also [Extension: Rule 12b–1]; OMB Control No.
with the investment by the Unrelated 3235–0212, SEC File No. 270–188]
transmit to the Underlying Fund a list Fund of Funds in the Underlying Fund
of the names of each Unrelated Fund of made at the direction of the Unrelated Submission for OMB Review;
Funds Affiliate and Underwriting Fund of Funds Sub-Adviser. In the Comment Request
Affiliate. The Unrelated Fund of Funds event that the Unrelated Fund of Funds
will notify the Underlying Fund of any Sub-Adviser waives fees, the benefit of Upon Written Request, Copies Available
changes to the list of the names as soon the waiver will be passed through to the From: Securities and Exchange
as reasonably practicable after a change Unrelated Fund of Funds. Commission, Office of FOIA Services,
occurs. The Underlying Fund and the 11. With respect to registered separate 100 F Street NE., Washington, DC
Unrelated Fund of Funds will maintain accounts that invest in an Unrelated 20549–2736.
and preserve a copy of the order, the Fund of Funds, no sales load will be Notice is hereby given that, pursuant
Participation Agreement and the list charged at the Unrelated Fund of Funds to the Paperwork Reduction Act of 1995
with any updated information for the level or at the Underlying Fund level. (44 U.S.C. 3501 et seq.), the Securities
duration of the investment and for a Other sales charges and service fees, as and Exchange Commission (the
period of not less than six years defined in NASD Conduct Rule 2830, if ‘‘Commission’’) has submitted to the
thereafter, the first two years in an any, will only be charged at the Office of Management and Budget a
easily accessible place. request for extension of the previously
Unrelated Fund of Funds level or at the
9. Prior to approving any advisory approved collection of information
Underlying Fund level, not both. With
contract under section 15 of the Act, the discussed below.
board of directors or trustees of each respect to other investments in an
Unrelated Fund of Funds, any sales Rule 12b–1 under the Investment
Unrelated Fund of Funds, including a Company Act of 1940 (17 CFR 270.12b–
majority of the Independent Trustees, charges and/or service fees charged with
respect to shares of the Unrelated Fund 1) permits a registered open-end
will find that the advisory fees charged investment company (‘‘fund’’ or
under such advisory contracts are based of Funds will not exceed the limits
applicable to a fund of funds as set forth ‘‘mutual fund’’) to bear expenses
on services provided that will be in associated with the distribution of its
addition to, rather than duplicative of, in NASD Conduct Rule 2830.
12. No Underlying Fund or its shares, provided that the mutual fund
the services provided under the complies with certain requirements,
advisory contract(s) of any Underlying respective Master Fund will acquire
securities of any other investment including, among other things, that it
Fund (or its respective Master Fund) in adopt a written plan (‘‘rule 12b–1 plan’’)
which the Unrelated Fund of Funds company or company relying on section
3(c)(1) or 3(c)(7) of the Act in excess of and that it has in writing any
may invest. These findings and their agreements relating to the rule 12b–1
basis will be recorded fully in the the limits contained in section
12(d)(1)(A) of the Act, except to the plan. The rule in part requires that (i)
minute books of the appropriate the adoption or material amendment of
extent that such Underlying Fund or its
mstockstill on DSK4VPTVN1PROD with NOTICES

Unrelated Fund of Funds. a rule 12b–1 plan be approved by the
10. An Unrelated Fund of Funds respective Master Fund: (a) Acquires
such securities in compliance with mutual fund’s directors, including its
Adviser will waive fees otherwise independent directors, and, in certain
payable to it by the Unrelated Fund of section 12(d)(1)(E) of the Act; 13 (b)
circumstances, its shareholders; (ii) the
Funds in an amount at least equal to any 13 Solely for the purposes of condition 12, the board review quarterly reports of
compensation (including fees received investment by a Managed Risk Fund in a Managed
pursuant to any plan adopted by an Risk Acquired Fund will be deemed to have been notwithstanding the fact that such arrangement
Underlying Fund (or its respective made pursuant to section 12(d)(1)(E), does not comply with section 12(d)(1)(E)(ii).

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Document Created: 2018-02-22 11:15:32
Document Modified: 2018-02-22 11:15:32
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 36013