81 FR 18931 - Submission for OMB Review; Comment Request

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 63 (April 1, 2016)

[Federal Register Volume 81, Number 63 (Friday, April 1, 2016)]
[Notices]
[Pages 18931-18932]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-07356]


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SECURITIES AND EXCHANGE COMMISSION

[OMB Control No. 3235-0217, SEC File No. 270-224]


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.

Extension:
    Rule 17e-1.

    Notice is hereby given that, pursuant to the Paperwork Reduction 
Act of 1995 (44 U.S.C. 3501 et seq.) (``Paperwork Reduction Act''), the 
Securities and Exchange Commission (the ``Commission'') has submitted 
to the Office of Management and Budget (``OMB'') a request for 
extension of the previously approved collection of information 
described below.
    Rule 17e-1 (17 CFR 270.17e-1) under the Investment Company Act of 
1940 (15 U.S.C. 80a-1 et seq.) (the ``Investment Company Act'') deems a 
remuneration as ``not exceeding the usual and customary broker's 
commission'' for purposes of Section 17(e)(2)(A) if, among other 
things, a registered investment company's (``fund's'') board of 
directors has adopted procedures reasonably designed to provide that 
the remuneration to an affiliated broker is a reasonable and fair 
amount compared to that received by other brokers in connection with 
comparable transactions involving similar securities being purchased or 
sold on a securities exchange during a comparable period of time and 
the board makes and approves such changes as it deems necessary. In 
addition, each quarter, the board must determine that all transactions 
effected under the rule during the preceding quarter complied with the 
established procedures. Rule 17e-1 also requires the fund to (i) 
maintain permanently a written copy of the procedures adopted by the 
board for complying with the requirements of the rule; and (ii) 
maintain for a period of six years, the first two in an easily 
accessible place, a written record of each transaction subject to the 
rule, setting forth the amount and source of the commission, fee, or 
other remuneration received; the identity of the broker; the terms of 
the transaction; and the materials used to determine that the 
transactions were effected in compliance with the procedures adopted by 
the board. The recordkeeping requirements under rule 17e-1 enable the 
Commission to ensure that affiliated brokers receive compensation that 
does not exceed the usual and customary broker's commission. Without 
the recordkeeping requirements, Commission inspectors would have 
difficulty ascertaining whether funds were complying with rule 17e-1.
    Based on an analysis of fund filings, the staff estimates that 
approximately 320 funds enter into subadvisory agreements each year.\1\ 
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 17e-
1. 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, 10f-3, and 17a-10, 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 17e-1 for this contract change would be 
0.75 hours.\2\ Assuming that all 320 funds 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 240 burden hours annually.\3\
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    \1\ Based on data from Morningstar, as of September, 2015, there 
are 12,426 registered funds (open-end funds, closed-end funds, and 
exchange-traded funds), 4,683 funds of which have subadvisory 
relationships (approximately 38%). Based on data from the 2015 ICI 
Factbook, 843 new funds were established in 2014 (654 open-end funds 
+ 176 exchange-traded funds + 13 closed-end funds (from the ICI 
Research Perspective, April 2015)). 843 new funds x 38% = 320 funds.
    \2\ 3 hours / 4 rules = 0.75 hours.
    \3\ This estimate is based on the following calculation: 0.75 
hours x 320 funds = 240 burden hours.
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    Based on an analysis of fund filings, we estimate that 
approximately 1,696 funds use at least one affiliated broker. Based on 
staff experience and conversations with fund representatives, the staff 
estimates approximately 40 percent of transactions (and thus, 40% of 
funds) that occur under the rule 17e-

[[Page 18932]]

1 would be exempt from its recordkeeping and review requirements. This 
would leave approximately 1,018 funds \4\ still subject to the rule's 
recordkeeping and review requirements. Based on staff experience and 
conversations with fund representatives, we estimate that the burden of 
compliance with rule 17e-1 is approximately 50 hours per fund per year. 
This time is spent, for example, reviewing the applicable transactions 
and maintaining records. Accordingly, we calculate the total estimated 
annual internal burden of complying with the review and recordkeeping 
requirements of rule 17e-1 to be approximately 50,900 hours,\5\ and the 
total annual burden of the rule's paperwork requirements is 51,140 
hours.\6\
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    \4\ 1,696 funds x 0.6 = 1,018 funds.
    \5\ 1,018 funds x 50 hours per fund = 50,900 hours.
    \6\ 240 hours + 50,900 hours = 51,140 hours.
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    Estimates of the average burden hours are made solely for the 
purposes of the Paperwork Reduction Act and are not derived from a 
comprehensive or even a representative survey or study of the costs of 
Commission rules and forms. The collection of information under rule 
17e-1 is mandatory. The information provided under rule 17e-1 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: March 29, 2016.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-07356 Filed 3-31-16; 8:45 am]
 BILLING CODE 8011-01-P