80 FR 73849 - Order Granting a Conditional Exemption Under the Securities Exchange Act of 1934 From the Confirmation Requirements of Exchange Act Rule 10b-10(a) for Certain Transactions in Money Market Funds
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 80, Issue 227 (November 25, 2015)
Federal Register Volume 80, Issue 227 (November 25, 2015)
| Page Range | 73849-73851 | |
| FR Document | 2015-29928 |
[Federal Register Volume 80, Number 227 (Wednesday, November 25, 2015)] [Notices] [Pages 73849-73851] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2015-29928] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-76480; File No. S7-08-14] Order Granting a Conditional Exemption Under the Securities Exchange Act of 1934 From the Confirmation Requirements of Exchange Act Rule 10b-10(a) for Certain Transactions in Money Market Funds November 19, 2015. I. Introduction On July 23, 2014, the Securities and Exchange Commission (``Commission'') published a notice requesting comment on a proposal to grant a conditional exemption to broker-dealers, subject to certain conditions, from the immediate confirmation requirements of Rule 10b-10 of the Securities Exchange Act of 1934 (``Exchange Act'') for transactions effected in shares of institutional prime money market funds.\1\ Concurrent with the issuance of the Notice, the Commission adopted amendments to Rule 2a-7 of the Investment Company Act of 1940 (``Investment Company Act'') \2\ that, among other things, require institutional prime money market funds \3\ to sell and redeem fund shares based on the current market-based value of the securities held in their portfolios (i.e., transact at a ``floating'' net asset value (``NAV'')).\4\ The Commission received two comments in response to the Notice.\5\ After careful consideration the Commission is granting the proposed exemption pursuant to Exchange Act Section 36(a) \6\ and Rule 10b-10(f),\7\ and providing certain clarifications to address comments received. --------------------------------------------------------------------------- \1\ See Notice of Proposed Exemptive Order Granting Permanent Exemptions Under the Securities Exchange Act of 1934 from the Confirmation Requirements of Exchange Act Rule 10b-10 for Certain Money Market Funds, Exchange Act Release No. 72658 (July 23, 2014), 79 FR 44076 (July 29, 2014) (``Notice''). \2\ 17 CFR 270.2a-7. \3\ ``Institutional prime money market funds'' are money market funds operating in accordance with Investment Company Act Rule 2a- 7(c)(1)(ii), which include funds that are often referred to as (i) ``tax exempt'' or (ii) ``municipal'' funds that do not qualify as a ``retail money market fund'' as defined in Rule 2a-7(a)(25). \4\ See Money Market Fund Reform; Amendments to Form PF, Securities Act Release No. 9616, Investment Advisers Act Release No. 3879, Investment Company Act Release No. 31166 (July 23, 2014), 79 FR 47736, at section III.B (Aug. 14, 2014) (``Money Market Fund Reform Adopting Release''). \5\ See Letters to Kevin M. O'Neill, Deputy Secretary, Commission, from J. Charles Cardona, President, The Dreyfus Corporation (Aug. 19, 2014) (``Dreyfus Letter''), http://www.sec.gov/comments/s7-08-14/s70814-2.pdf; and Dorothy Donohue, Acting General Counsel, Investment Company Institute (Aug. 15, 2014) (``ICI Letter''), http://www.sec.gov/comments/s7-08-14/s70814-1.pdf. \6\ Section 36(a) of the Exchange Act generally authorizes the Commission to conditionally or unconditionally exempt any person, security, or transaction, or any class or classes of persons, securities, or transactions, from certain provisions of the Exchange Act or certain rules or regulations thereunder, by rule, regulation, or order, to the extent that such exemption is necessary or appropriate in the public interest, and is consistent with the protection of investors. 15 U.S.C. 78mm. \7\ Exchange Act Rule 10b-10(f) provides that the Commission may conditionally or unconditionally exempt any broker or dealer from the requirements of paragraphs (a) and (b) of Rule 10b-10 with regard to specific transactions or specific classes of transactions for which the broker or dealer will provide alternative procedures to effect the purposes of the rule. 17 CFR 240.10b-10(f). --------------------------------------------------------------------------- II. Proposal for Exemptions Pursuant to Notice Exchange Act Rule 10b-10(a) generally requires broker-dealers to provide customers with specified information relating to their securities transactions at or before the completion of the transactions.\8\ Rule 10b-10(b), however, provides an exception from this requirement for certain transactions in money market funds that attempt to maintain a stable NAV when no sales load or redemption fee is charged.\9\ The exception permits broker-dealers to provide transaction information to money market fund shareholders on a monthly, rather than immediate, basis, subject to the conditions set forth in paragraphs (2) and (3) of Rule 10b-10(b).\10\ Accordingly, customers historically have received information about their transactions in shares of money market funds, including institutional prime money market funds, on a monthly basis. --------------------------------------------------------------------------- \8\ 17 CFR 240.10b-10(a). \9\ 17 CFR 240.10b-10(b). \10\ With respect to such money market funds, Exchange Act Rule 10b-10(b)(2) requires a broker-dealer to give or send to a customer within five business days after the end of each monthly period: A written statement disclosing, each purchase or redemption, effected for or with, and each dividend or distribution credited to or reinvested for, the account of such customer during the month; the date of such transaction; the identity, number, and price of any securities purchased or redeemed by such customer in each such transaction; the total number of shares of such securities in such customer's account; any remuneration received or to be received by the broker or dealer in connection therewith; and that any other information required by [Rule 10b-10(a)] will be furnished upon written request: Provided, however, that the written statement may be delivered to some other person designated by the customer for distribution to the customer. 17 CFR 240.10b-10(b)(2). Exchange Act Rule 10b-10(b)(3) requires the customer to be provided with prior notification in writing disclosing the intention to send the written information referred to in Rule 10b-10(b)(1) in lieu of an immediate confirmation. 17 CFR 240.10b-10(b)(3). --------------------------------------------------------------------------- Given that share prices of institutional prime money market funds likely will fluctuate under the Commission's amendments to Investment Company Act Rule 2a-7,\11\ absent an exemption, broker-dealers would not be able to continue to rely on the exception under Exchange Act Rule 10b-10(b) for transactions in money market funds operating in accordance with Rule 2a-7(c)(1)(ii).\12\ Instead, broker-dealers would be required to provide immediate confirmations for such transactions in accordance with Rule 10b-10(a). --------------------------------------------------------------------------- \11\ 17 CFR 270.2a-7. \12\ See generally Money Market Fund Reform; Amendments to Form PF, Securities Act Release No. 9408, Investment Advisers Act Release No. 3616, Investment Company Act Release No. 30551 (June 5, 2013), 78 FR 36834, 36934 (June 19, 2013); see also Exchange Act Rule 10b- 10(b)(1), 17 CFR 240.10b-10(b)(1) (limiting alternative monthly reporting to money market funds that attempt to maintain a stable NAV). As adopted, government and retail money market funds are exempt from the Investment Company Act Rule 2a-7(c)(1)(ii) floating NAV requirement, and therefore, will continue to maintain a stable NAV. See Money Market Fund Reform Adopting Release, supra note 4, at sections III.C.1 and III.C.2. Accordingly, for investor transactions in the exempt funds, broker-dealers would continue to qualify for the exception under Rule 10b-10 and be permitted to send monthly transaction reports. --------------------------------------------------------------------------- To address the potential burdens created by such a requirement, the Commission published the Notice proposing to exempt broker-dealers from the requirements of Exchange Act Rule 10b-10(a) when effecting transactions in money market funds operating in accordance with Investment Company Act Rule 2a-7(c)(1)(ii), for or with the account of a customer, where: (i) no sales load is deducted upon the purchase or redemption of shares in the money market fund, (ii) the broker-dealer complies with the provisions of Rule 10b-10(b)(2) and Rule 10b-10(b)(3) that are applicable to money market funds that attempt to maintain a stable NAV referenced in Rule 10b-10(b)(1),\13\ and (iii) the broker- dealer has notified the customer of its ability to request delivery of an immediate confirmation consistent with the written notification requirements of Exchange Act Rule 10b- [[Page 73850]] 10(a) and has not received such a request from the customer. --------------------------------------------------------------------------- \13\ The proposed conditions under ``(i)'' and ``(ii)'' are consistent with the confirmation delivery requirements in Exchange Act Rule 10b-10(b) for all transactions in investment company securities that attempt to maintain a stable NAV where no sales load or redemption fee is charged. 17 CFR 240.10b-10(b). --------------------------------------------------------------------------- III. Comments on Proposal The Commission received two comments on the Notice, both expressing general support for the proposal.\14\ However, both commenters requested clarification regarding the third condition, which would require a broker-dealer to notify its customer of the customer's ability to request delivery of an immediate confirmation consistent with the written notification requirements of Exchange Act Rule 10b- 10(a). Specifically, commenters questioned whether the notification may be made on a one-time basis or whether it would need to be made on a transaction-by-transaction basis.\15\ In response, the Commission is clarifying that these notifications may be made on a one-time basis. --------------------------------------------------------------------------- \14\ See Dreyfus Letter; ICI Letter, supra note 5. \15\ Dreyfus Letter, at 1; ICI Letter, at 2. --------------------------------------------------------------------------- IV. Discussion of the Exemption The Commission finds that it is necessary and appropriate in the public interest, and consistent with the protection of investors to allow broker-dealers, subject to certain conditions, to provide transaction information to investors in any money market fund operating pursuant to Rule 2a-7(c)(1)(ii) on a monthly basis in lieu of providing immediate confirmations as required under Exchange Act Rule 10b-10(a). In making this finding, the Commission considered several factors, as discussed more fully below as well as in the Notice. First, the attributes of institutional prime money market funds mitigate the need for the protections intended by confirmation delivery under Rule 10b-10(a).\16\ For example, institutional prime money market funds will continue to be subject to the ``risk limiting'' provisions of Rule 2a-7, including those provisions governing the credit quality, liquidity, diversification, and maturity of fund investments.\17\ Under those ``risk limiting'' provisions, mutual funds that hold themselves out as money market funds--including institutional prime money market funds--may acquire only investments that are short-term, high-quality, dollar-denominated instruments.\18\ As a result, while the prices of institutional prime money market funds likely will fluctuate, they are not likely to exhibit regular day-to-day fluctuations, primarily due to the high quality and short duration of these funds' underlying portfolio securities.\19\ --------------------------------------------------------------------------- \16\ See Notice, 79 FR at 44077. \17\ Investment Company Act Rule 2a-7(d), 17 CFR 270.2a-7(d) (risk-limiting conditions). \18\ Id.; see also Money Market Fund Reform Adopting Release, 79 FR at 47775. \19\ Money Market Fund Reform Adopting Release, 79 FR at 47779 n.491. --------------------------------------------------------------------------- Second, customers that need daily pricing information may obtain it through means other than confirmation statements.\20\ For example, under the fund disclosure requirements of Investment Company Act Rule 2a-7(h)(10)(iii), customers--including institutional investors--will be able to access an institutional prime money market fund's daily mark- to-market NAV per share through the fund's Web site.\21\ --------------------------------------------------------------------------- \20\ Id., at section III.E.9.c; see also Notice, 79 FR at 44078. \21\ 17 CFR 270.2a-7(h)(10)(iii). --------------------------------------------------------------------------- Third, absent an exemption, broker-dealers are likely to incur significant costs associated with providing immediate, rather than monthly, confirmations for transactions in shares of institutional prime money market funds. Such costs, in turn, would likely be passed along to investors.\22\ --------------------------------------------------------------------------- \22\ An analysis of the costs and benefits of providing immediate trade confirmations requirements under Rule 10b-10 with respect to institutional prime money market funds is discussed in the Money Market Fund Reform Adopting Release. See Money Market Fund Reform Adopting Release, 79 FR at 47785-86; Notice, 79 FR at 44077- 78. --------------------------------------------------------------------------- However, given that there likely will be some price fluctuations in institutional prime money market funds, the Commission believes that it is also necessary and appropriate in the public interest and consistent with the protection of investors to condition the exemption on a broker-dealer providing immediate confirmations upon a customer's request. Accordingly, to be eligible for the exemption, a broker-dealer must (1) provide an initial written notification to the customer of its ability to request delivery of immediate confirmations consistent with the written notification requirements of Exchange Act Rule 10b-10(a), and (2) not receive any such request from the customer.\23\ In addition, consistent with conditions applicable to confirmation delivery requirements provided in Exchange Act Rule 10b-10(b) for all transactions in investment company securities that attempt to maintain a stable NAV where no sales load or redemption fee is charged, the Commission is imposing the conditions that no sales load is deducted upon the purchase or redemption of shares in the institutional prime money market fund, and that the broker-dealer complies with the provisions of paragraphs (2) and (3) of Rule 10b-10(b) that are applicable to money market funds that attempt to maintain a stable NAV referenced in Rule 10b-10(b)(1). --------------------------------------------------------------------------- \23\ This Order has been modified from the proposal to specify that, to meet the notification condition, the broker-dealer must provide an ``initial written notification to the customer of such account.'' The condition was modified to clarify that the notification may be made on a one-time basis for each applicable account and not on a transaction-by-transaction basis. --------------------------------------------------------------------------- V. Conclusion In light of the above, and in accordance with Exchange Act Section 36 \24\ and Rule 10b-10(f),\25\ the Commission finds that conditionally exempting broker-dealers from the requirements of Exchange Act Rule 10b-10(a) for transactions in institutional prime money market funds is necessary and appropriate in the public interest, and consistent with the protection of investors. --------------------------------------------------------------------------- \24\ 15 U.S.C. 78mm. \25\ 17 CFR 240.10b-10(f). --------------------------------------------------------------------------- Therefore, it is hereby ordered, pursuant to Section 36 of the Exchange Act and Exchange Act Rule 10b-10(f), that broker-dealers shall be exempt from the written notification requirements under Exchange Act Rule 10b-10(a) when effecting transactions in money market funds operating in accordance with Investment Company Act Rule 2a- 7(c)(1)(ii), for or with the account of a customer, where: (i) No sales load is deducted upon the purchase or redemption of shares in the money market fund, (ii) the broker-dealer complies with the provisions of Rule 10b-10(b)(2) and Rule 10b-10(b)(3) that are applicable to money market funds that attempt to maintain a stable NAV referenced in Rule 10b-10(b)(1), and (iii) the broker-dealer has provided an initial written notification to the customer of such account of its ability to request delivery of immediate confirmations consistent with the written notification requirements of Exchange Act Rule 10b-10(a) and has not received such a request from the customer. VI. Paperwork Reduction Act This Order contains ``collection of information requirements'' within the meaning of the Paperwork Reduction Act of 1995 (``PRA''). The Commission has submitted the information to the Office of Management and Budget (``OMB'') for review in accordance with 44 U.S.C. 3507 and 5 CFR 1320.10. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a current valid control number. The title of this collection is ``Money Market Fund Reform/Exchange Act Rule [[Page 73851]] 10b-10.'' We are applying for a new OMB Control Number for this collection in accordance with 44 U.S.C. 3507(j). A. Summary of Collection of Information In addition to the conditions typically applicable under Rule 10b- 10(b),\26\ under the terms of this Order, to be exempt from the immediate confirmation requirements of Exchange Act Rule 10b-10(a) for purposes of an institutional prime money market fund, a broker-dealer must also (1) notify the customer of its ability to request delivery of an immediate confirmation, consistent with the written notification requirements of Rule 10b-10(a), and (2) not receive any such request from the customer.\27\ The condition of notifying the customer of its ability to request delivery of an immediate confirmation creates a burden under the PRA, and must be satisfied by sending a notification to a customer on a one-time basis for each applicable account. --------------------------------------------------------------------------- \26\ The Commission has previously estimated the PRA burdens associated with providing immediate confirmations and/or monthly statements to customers under Rule 10b-10 regarding securities transactions, including money market funds. See Submission for OMB Review; Comment Request, 78 FR 39023 (June 28, 2013). That submission, however, does not address the PRA burden associated with the notification condition set forth in this Order. \27\ If the conditions of this Order are satisfied, broker- dealers will be eligible to provide monthly statements for transactions in institutional prime money market funds in lieu of the immediate confirmation requirements of Exchange Act Rule 10b- 10(a)--as has historically been the case for money market funds prior to the adoption of the money market fund reform amendments. When requested by a customer, the broker-dealer would be required under this Order to provide immediate confirmations in accordance with Exchange Act Rule 10b-10(a). --------------------------------------------------------------------------- B. Proposed Use of Information The notification condition in this Order will alert customers of their ability to request immediate confirmations, consistent with the terms of Exchange Act Rule 10b-10(a). The notification condition allows customers to obtain immediate confirmations should they choose to request them. C. Respondents As stated in the Money Market Fund Reform Adopting Release, based on FOCUS report data as of December 31, 2013, the Commission estimates that there are approximately 320 broker-dealers that clear customer transactions or carry customer funds and securities.\28\ In the Money Market Fund Reform Adopting Release, the Commission also conservatively estimated that those broker-dealers are the respondents that would provide trade confirmations to customers in institutional prime money market funds.\29\ --------------------------------------------------------------------------- \28\ Money Market Fund Reform Adopting Release, 79 FR at 47785 & n.563. \29\ Id. --------------------------------------------------------------------------- D. Total Burden Estimates Relating to This Order The Commission estimates that the initial one-time burden required to implement, modify, or reprogram existing systems to generate and transmit the required notifications to customers would be 36 hours for each of the 320 broker-dealers that clear customer transactions or carry customer funds and securities.\30\ Thus, the Commission estimates that the initial burden for issuance of the notifications in accordance with this Order, including burdens to implement, modify, or reprogram existing systems to generate such notifications will be approximately 11,520 burden hours.\31\ The Commission anticipates that after broker- dealers incur the initial costs to establish systems to generate and transmit the notifications to existing customers, broker-dealers will be able to minimize any additional costs, such as by providing the notifications as part of a new account application.\32\ As a result, the Commission anticipates that any additional annual burdens arising from the notification condition will be minimal,\33\ and conservatively estimates that broker-dealers will, on average, incur annual costs of 5% of those initial costs, or 576 burden hours.\34\ --------------------------------------------------------------------------- \30\ In the Money Market Fund Reform Adopting Release, the Commission estimated that the initial one-time burden to implement, modify, or reprogram existing systems to generate immediate confirmations (rather than monthly statements) would be 355 burden hours for each of the 320 broker-dealers that clear customer transactions or carry customer funds and securities. Id. at 47785 & n.562. Given the non-repeat nature of the notification requirement and substantial savings in resources noted by commenters, the Commission estimates that the burdens to develop system changes to provide the notices to all applicable customers would be no more than 10% of the prior 355 burden hours estimate associated with requiring immediate confirmations. \31\ This estimate is based on the following: 36 hours x 320 firms = 11,520 hours. \32\ See, e.g., ICI Letter, supra note 5, at 2. \33\ As stated, supra note 26, other than the notification condition set forth in this Order, the Commission has previously estimated the additional burdens associated with providing immediate confirmations and/or monthly statements under Rule 10b-10. See Submission for OMB Review; Comment Request, 78 FR 39023 (June 28, 2013). \34\ This estimate is based on the following: 11,520 hours x 5% = 576 hours. --------------------------------------------------------------------------- E. The Collection of Information Is Required To Obtain a Benefit The collection of information results from a condition of this Order and will be required for a broker-dealer to be exempt from the immediate confirmation requirements of Exchange Act Rule 10b-10(a). F. Confidentiality The notification would be provided by a broker-dealer directly to a customer and thus would not be kept confidential. G. Request for Comment Pursuant to 44 U.S.C. 3506(c)(2)(A), the Commission solicits comment to: 1. Evaluate whether the proposed collection is necessary for the proper performance of our functions, including whether the information shall have practical utility; 2. Evaluate the accuracy of our estimate of the burden of the proposed collection of information; 3. Determine whether there are ways to enhance the quality, utility, and clarity of the information to be collected; and 4. Evaluate whether there are ways to minimize the burden of collection of information on those who are to respond, including through the use of automated collection techniques or other forms of information technology. Persons submitting comments on the collection of information requirements should direct them to the Office of Management and Budget, Attention: Desk Officer for the Securities and Exchange Commission, Office of Information and Regulatory Affairs, Washington, DC 20503, and should also send a copy of their comments to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090, with reference to File No. S7-08-14. Requests for materials submitted to OMB by the Commission with regard to this collection of information should be in writing, with reference to File No. S7-08-14, and be submitted to the Securities and Exchange Commission, Records Management, Office of Filings and Information Services, 100 F Street NE., Washington, DC 20549. As OMB is required to make a decision concerning the collections of information between 30 and 60 days after publication in the Federal Register, a comment to OMB is best assured of having its full effect if OMB receives it within 30 days of publication. By the Commission. Brent J. Fields, Secretary. [FR Doc. 2015-29928 Filed 11-24-15; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 80, No. 227 / Wednesday, November 25, 2015 / Notices 73849
For the Commission, by the Division of the Commission is granting the historically have received information
Trading and Markets, pursuant to delegated proposed exemption pursuant to about their transactions in shares of
authority.54 Exchange Act Section 36(a) 6 and Rule money market funds, including
Brent J. Fields, 10b–10(f),7 and providing certain institutional prime money market funds,
Secretary. clarifications to address comments on a monthly basis.
[FR Doc. 2015–29926 Filed 11–24–15; 8:45 am] received. Given that share prices of institutional
BILLING CODE 8011–01–P
II. Proposal for Exemptions Pursuant to prime money market funds likely will
Notice fluctuate under the Commission’s
amendments to Investment Company
SECURITIES AND EXCHANGE Exchange Act Rule 10b-10(a) Act Rule 2a–7,11 absent an exemption,
COMMISSION generally requires broker-dealers to broker-dealers would not be able to
provide customers with specified continue to rely on the exception under
[Release No. 34–76480; File No. S7–08–14]
information relating to their securities Exchange Act Rule 10b–10(b) for
Order Granting a Conditional transactions at or before the completion transactions in money market funds
Exemption Under the Securities of the transactions.8 Rule 10b-10(b),
operating in accordance with Rule 2a–
Exchange Act of 1934 From the however, provides an exception from
7(c)(1)(ii).12 Instead, broker-dealers
Confirmation Requirements of this requirement for certain transactions
would be required to provide immediate
Exchange Act Rule 10b–10(a) for in money market funds that attempt to
confirmations for such transactions in
Certain Transactions in Money Market maintain a stable NAV when no sales
accordance with Rule 10b–10(a).
Funds load or redemption fee is charged.9 The
exception permits broker-dealers to To address the potential burdens
November 19, 2015. provide transaction information to created by such a requirement, the
money market fund shareholders on a Commission published the Notice
I. Introduction proposing to exempt broker-dealers
monthly, rather than immediate, basis,
On July 23, 2014, the Securities and subject to the conditions set forth in from the requirements of Exchange Act
Exchange Commission (‘‘Commission’’) paragraphs (2) and (3) of Rule 10b– Rule 10b–10(a) when effecting
published a notice requesting comment 10(b).10 Accordingly, customers transactions in money market funds
on a proposal to grant a conditional operating in accordance with
exemption to broker-dealers, subject to President, The Dreyfus Corporation (Aug. 19, 2014) Investment Company Act Rule 2a–
certain conditions, from the immediate (‘‘Dreyfus Letter’’), http://www.sec.gov/comments/ 7(c)(1)(ii), for or with the account of a
confirmation requirements of Rule 10b– s7-08-14/s70814-2.pdf; and Dorothy Donohue, customer, where: (i) no sales load is
Acting General Counsel, Investment Company
10 of the Securities Exchange Act of Institute (Aug. 15, 2014) (‘‘ICI Letter’’), http://
deducted upon the purchase or
1934 (‘‘Exchange Act’’) for transactions www.sec.gov/comments/s7-08-14/s70814-1.pdf. redemption of shares in the money
effected in shares of institutional prime 6 Section 36(a) of the Exchange Act generally market fund, (ii) the broker-dealer
money market funds.1 Concurrent with authorizes the Commission to conditionally or complies with the provisions of Rule
the issuance of the Notice, the unconditionally exempt any person, security, or 10b–10(b)(2) and Rule 10b–10(b)(3) that
transaction, or any class or classes of persons,
Commission adopted amendments to securities, or transactions, from certain provisions are applicable to money market funds
Rule 2a–7 of the Investment Company of the Exchange Act or certain rules or regulations that attempt to maintain a stable NAV
Act of 1940 (‘‘Investment Company thereunder, by rule, regulation, or order, to the referenced in Rule 10b-10(b)(1),13 and
Act’’) 2 that, among other things, require extent that such exemption is necessary or (iii) the broker-dealer has notified the
appropriate in the public interest, and is consistent
institutional prime money market with the protection of investors. 15 U.S.C. 78mm. customer of its ability to request
funds 3 to sell and redeem fund shares 7 Exchange Act Rule 10b–10(f) provides that the delivery of an immediate confirmation
based on the current market-based value Commission may conditionally or unconditionally consistent with the written notification
of the securities held in their portfolios exempt any broker or dealer from the requirements requirements of Exchange Act Rule 10b–
(i.e., transact at a ‘‘floating’’ net asset of paragraphs (a) and (b) of Rule 10b–10 with regard
to specific transactions or specific classes of
value (‘‘NAV’’)).4 The Commission transactions for which the broker or dealer will of an immediate confirmation. 17 CFR 240.10b–
received two comments in response to provide alternative procedures to effect the 10(b)(3).
the Notice.5 After careful consideration purposes of the rule. 17 CFR 240.10b–10(f). 11 17 CFR 270.2a–7.
8 17 CFR 240.10b–10(a). 12 See generally Money Market Fund Reform;
54 17 CFR 200.30–3(a)(12). 9 17 CFR 240.10b–10(b). Amendments to Form PF, Securities Act Release
1 See Notice of Proposed Exemptive Order 10 With respect to such money market funds, No. 9408, Investment Advisers Act Release No.
Granting Permanent Exemptions Under the Exchange Act Rule 10b–10(b)(2) requires a broker- 3616, Investment Company Act Release No. 30551
Securities Exchange Act of 1934 from the dealer to give or send to a customer within five (June 5, 2013), 78 FR 36834, 36934 (June 19, 2013);
Confirmation Requirements of Exchange Act Rule business days after the end of each monthly period: see also Exchange Act Rule 10b–10(b)(1), 17 CFR
10b–10 for Certain Money Market Funds, Exchange A written statement disclosing, each purchase or 240.10b-10(b)(1) (limiting alternative monthly
Act Release No. 72658 (July 23, 2014), 79 FR 44076 redemption, effected for or with, and each dividend reporting to money market funds that attempt to
(July 29, 2014) (‘‘Notice’’). or distribution credited to or reinvested for, the maintain a stable NAV).
2 17 CFR 270.2a–7. account of such customer during the month; the As adopted, government and retail money market
3 ‘‘Institutional prime money market funds’’ are date of such transaction; the identity, number, and funds are exempt from the Investment Company
money market funds operating in accordance with price of any securities purchased or redeemed by Act Rule 2a–7(c)(1)(ii) floating NAV requirement,
Investment Company Act Rule 2a–7(c)(1)(ii), which such customer in each such transaction; the total and therefore, will continue to maintain a stable
include funds that are often referred to as (i) ‘‘tax number of shares of such securities in such NAV. See Money Market Fund Reform Adopting
exempt’’ or (ii) ‘‘municipal’’ funds that do not customer’s account; any remuneration received or Release, supra note 4, at sections III.C.1 and III.C.2.
qualify as a ‘‘retail money market fund’’ as defined to be received by the broker or dealer in connection Accordingly, for investor transactions in the exempt
in Rule 2a–7(a)(25). therewith; and that any other information required funds, broker-dealers would continue to qualify for
4 See Money Market Fund Reform; Amendments by [Rule 10b–10(a)] will be furnished upon written the exception under Rule 10b–10 and be permitted
tkelley on DSK3SPTVN1PROD with NOTICES
to Form PF, Securities Act Release No. 9616, request: Provided, however, that the written to send monthly transaction reports.
Investment Advisers Act Release No. 3879, statement may be delivered to some other person 13 The proposed conditions under ‘‘(i)’’ and ‘‘(ii)’’
Investment Company Act Release No. 31166 (July designated by the customer for distribution to the are consistent with the confirmation delivery
23, 2014), 79 FR 47736, at section III.B (Aug. 14, customer. 17 CFR 240.10b–10(b)(2). Exchange Act requirements in Exchange Act Rule 10b–10(b) for
2014) (‘‘Money Market Fund Reform Adopting Rule 10b–10(b)(3) requires the customer to be all transactions in investment company securities
Release’’). provided with prior notification in writing that attempt to maintain a stable NAV where no
5 See Letters to Kevin M. O’Neill, Deputy disclosing the intention to send the written sales load or redemption fee is charged. 17 CFR
Secretary, Commission, from J. Charles Cardona, information referred to in Rule 10b–10(b)(1) in lieu 240.10b–10(b).
VerDate Sep<11>2014 19:15 Nov 24, 2015 Jkt 238001 PO 00000 Frm 00152 Fmt 4703 Sfmt 4703 E:\FR\FM\25NON1.SGM 25NON1](https://thefederalregister.org/doc/80_FR_74076/page/1.svg)
![Federal Register / Vol. 80, No. 227 / Wednesday, November 25, 2015 / Notices 73851
10b–10.’’ We are applying for a new estimated that those broker-dealers are be required for a broker-dealer to be
OMB Control Number for this collection the respondents that would provide exempt from the immediate
in accordance with 44 U.S.C. 3507(j). trade confirmations to customers in confirmation requirements of Exchange
institutional prime money market Act Rule 10b–10(a).
A. Summary of Collection of
funds.29
Information F. Confidentiality
D. Total Burden Estimates Relating to
In addition to the conditions typically The notification would be provided
This Order
applicable under Rule 10b–10(b),26 by a broker-dealer directly to a customer
under the terms of this Order, to be The Commission estimates that the and thus would not be kept
exempt from the immediate initial one-time burden required to confidential.
confirmation requirements of Exchange implement, modify, or reprogram
Act Rule 10b–10(a) for purposes of an existing systems to generate and G. Request for Comment
institutional prime money market fund, transmit the required notifications to
customers would be 36 hours for each Pursuant to 44 U.S.C. 3506(c)(2)(A),
a broker-dealer must also (1) notify the the Commission solicits comment to:
customer of its ability to request of the 320 broker-dealers that clear
delivery of an immediate confirmation, customer transactions or carry customer 1. Evaluate whether the proposed
consistent with the written notification funds and securities.30 Thus, the collection is necessary for the proper
requirements of Rule 10b–10(a), and (2) Commission estimates that the initial performance of our functions, including
not receive any such request from the burden for issuance of the notifications whether the information shall have
customer.27 The condition of notifying in accordance with this Order, practical utility;
the customer of its ability to request including burdens to implement, 2. Evaluate the accuracy of our
delivery of an immediate confirmation modify, or reprogram existing systems estimate of the burden of the proposed
creates a burden under the PRA, and to generate such notifications will be collection of information;
must be satisfied by sending a approximately 11,520 burden hours.31 3. Determine whether there are ways
notification to a customer on a one-time The Commission anticipates that after to enhance the quality, utility, and
basis for each applicable account. broker-dealers incur the initial costs to clarity of the information to be
establish systems to generate and collected; and
B. Proposed Use of Information transmit the notifications to existing
customers, broker-dealers will be able to 4. Evaluate whether there are ways to
The notification condition in this
minimize any additional costs, such as minimize the burden of collection of
Order will alert customers of their
by providing the notifications as part of information on those who are to
ability to request immediate
a new account application.32 As a result, respond, including through the use of
confirmations, consistent with the terms
the Commission anticipates that any automated collection techniques or
of Exchange Act Rule 10b–10(a). The
additional annual burdens arising from other forms of information technology.
notification condition allows customers
to obtain immediate confirmations the notification condition will be Persons submitting comments on the
should they choose to request them. minimal,33 and conservatively estimates collection of information requirements
that broker-dealers will, on average, should direct them to the Office of
C. Respondents incur annual costs of 5% of those initial Management and Budget, Attention:
As stated in the Money Market Fund costs, or 576 burden hours.34 Desk Officer for the Securities and
Reform Adopting Release, based on E. The Collection of Information Is Exchange Commission, Office of
FOCUS report data as of December 31, Required To Obtain a Benefit Information and Regulatory Affairs,
2013, the Commission estimates that Washington, DC 20503, and should also
The collection of information results send a copy of their comments to Brent
there are approximately 320 broker-
from a condition of this Order and will J. Fields, Secretary, Securities and
dealers that clear customer transactions
or carry customer funds and 29 Id.
Exchange Commission, 100 F Street NE.,
securities.28 In the Money Market Fund 30 In the Money Market Fund Reform Adopting
Washington, DC 20549–1090, with
Reform Adopting Release, the Release, the Commission estimated that the initial reference to File No. S7–08–14.
Commission also conservatively one-time burden to implement, modify, or Requests for materials submitted to
reprogram existing systems to generate immediate OMB by the Commission with regard to
confirmations (rather than monthly statements)
26 The Commission has previously estimated the
would be 355 burden hours for each of the 320
this collection of information should be
PRA burdens associated with providing immediate broker-dealers that clear customer transactions or in writing, with reference to File No.
confirmations and/or monthly statements to carry customer funds and securities. Id. at 47785 & S7–08–14, and be submitted to the
customers under Rule 10b–10 regarding securities n.562. Given the non-repeat nature of the
transactions, including money market funds. See Securities and Exchange Commission,
notification requirement and substantial savings in
Submission for OMB Review; Comment Request, 78 resources noted by commenters, the Commission Records Management, Office of Filings
FR 39023 (June 28, 2013). That submission, estimates that the burdens to develop system and Information Services, 100 F Street
however, does not address the PRA burden changes to provide the notices to all applicable NE., Washington, DC 20549. As OMB is
associated with the notification condition set forth customers would be no more than 10% of the prior
in this Order. 355 burden hours estimate associated with
required to make a decision concerning
27 If the conditions of this Order are satisfied, requiring immediate confirmations. the collections of information between
broker-dealers will be eligible to provide monthly 31 This estimate is based on the following: 36 30 and 60 days after publication in the
statements for transactions in institutional prime hours × 320 firms = 11,520 hours. Federal Register, a comment to OMB is
money market funds in lieu of the immediate 32 See, e.g., ICI Letter, supra note 5, at 2.
confirmation requirements of Exchange Act Rule 33 As stated, supra note 26, other than the
best assured of having its full effect if
10b–10(a)—as has historically been the case for notification condition set forth in this Order, the
OMB receives it within 30 days of
tkelley on DSK3SPTVN1PROD with NOTICES
money market funds prior to the adoption of the Commission has previously estimated the publication.
money market fund reform amendments. When additional burdens associated with providing
requested by a customer, the broker-dealer would immediate confirmations and/or monthly
By the Commission.
be required under this Order to provide immediate statements under Rule 10b-10. See Submission for Brent J. Fields,
confirmations in accordance with Exchange Act OMB Review; Comment Request, 78 FR 39023 (June Secretary.
Rule 10b–10(a). 28, 2013).
28 Money Market Fund Reform Adopting Release, 34 This estimate is based on the following: 11,520 [FR Doc. 2015–29928 Filed 11–24–15; 8:45 am]
79 FR at 47785 & n.563. hours × 5% = 576 hours. BILLING CODE 8011–01–P
VerDate Sep<11>2014 19:15 Nov 24, 2015 Jkt 238001 PO 00000 Frm 00154 Fmt 4703 Sfmt 9990 E:\FR\FM\25NON1.SGM 25NON1](https://thefederalregister.org/doc/80_FR_74076/page/3.svg)
Document Created: 2018-03-01 11:15:09
Document Modified: 2018-03-01 11:15:09
| 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 73849 |
2025 Federal Register | Disclaimer | Privacy Policy
USC | CFR | eCFR