81 FR 2933 - Submission for OMB Review; Comment Request
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 11 (January 19, 2016)
Federal Register Volume 81, Issue 11 (January 19, 2016)
| Page Range | 2933-2935 | |
| FR Document | 2016-00788 |
[Federal Register Volume 81, Number 11 (Tuesday, January 19, 2016)] [Notices] [Pages 2933-2935] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-00788] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION 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: [[Page 2934]] Rule 17f-4, SEC File No. 270-232, OMB Control No. 3235-0225. Notice is hereby given that, pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 350l-3520) (the ``Paperwork Reduction Act''), 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. Section 17(f) (15 U.S.C. 80a-17(f)) under the Investment Company Act of 1940 (the ``Act'') \1\ permits registered management investment companies and their custodians to deposit the securities they own in a system for the central handling of securities (``securities depositories''), subject to rules adopted by the Commission. --------------------------------------------------------------------------- \1\ 15 U.S.C. 80a. --------------------------------------------------------------------------- Rule 17f-4 (17 CFR 270.17f-4) under the Act specifies the conditions for the use of securities depositories by funds \2\ and their custodians. --------------------------------------------------------------------------- \2\ As amended in 2003, rule 17f-4 permits any registered investment company, including a unit investment trust or a face- amount certificate company, to use a security depository. See Custody of Investment Company Assets With a Securities Depository, Investment Company Act Release No. 25934 (Feb. 13, 2003) (68 FR 8438 (Feb. 20, 2003)). The term ``fund'' is used in this Notice to mean a registered investment company. --------------------------------------------------------------------------- The Commission staff estimates that 152 respondents (including an estimated 81 active funds that may deal directly with a securities depository, an estimated 50 custodians, and 21 possible securities depositories) \3\ are subject to the requirements in rule 17f-4. The rule is elective, but most, if not all, funds use depository custody arrangements.\4\ --------------------------------------------------------------------------- \3\ The Commission staff estimates that, as permitted by the rule, an estimated 2% of all active funds may deal directly with a securities depository instead of using an intermediary. The number of custodians is estimated based on information from Morningstar Direct\SM\. The Commission staff estimates the number of possible securities depositories by adding the 12 Federal Reserve Banks and 9 active registered clearing agencies. The Commission staff recognizes that not all of these entities may currently be acting as a securities depository for fund securities. \4\ Based on responses to Item 18 of Form N-SAR (17 CFR 274.101), approximately 97 percent of funds' custodians maintain some or all fund securities in a securities depository pursuant to rule 17f-4. --------------------------------------------------------------------------- Rule 17f-4 contains two general conditions. First, a fund's custodian must be obligated, at a minimum, to exercise due care in accordance with reasonable commercial standards in discharging its duty as a securities intermediary to obtain and thereafter maintain financial assets.\5\ This obligation does not contain a collection of information because it does not impose identical reporting, recordkeeping or disclosure requirements. Funds and custodians may determine the specific measures the custodian will take to comply with this obligation.\6\ If the fund deals directly with a depository, the depository's contract or written rules for its participants must provide that the depository will meet similar obligations,\7\ which is a collection of information for purposes of the Paperwork Reduction Act. All funds that deal directly with securities depositories in reliance on rule 17f-4 should have either modified their contracts with the relevant securities depository, or negotiated a modification in the securities depository's written rules when the rule was amended. Therefore, we estimate there is no ongoing burden associated with this collection of information.\8\ --------------------------------------------------------------------------- \5\ Rule 17f-4(a)(1). This provision incorporates into the rule the standard of care provided by section 504(c) of Article 8 of the Uniform Commercial Code when the parties have not agreed to a standard. Rule 17f-4 does not impose any substantive obligations beyond those contained in Article 8. Uniform Commercial Code, Revised Article 8--Investment Securities (1994 Official Text with Comments) (``Revised Article 8''). \6\ Moreover, the rule does not impose any requirement regarding evidence of the obligation. \7\ Rule 17f-4(b)(1)(i). \8\ The Commission staff assumes that new funds relying on 17f-4 would choose to use a custodian instead of directly dealing with a securities depository because of the high costs associated with maintaining an account with a securities depository. Thus, new funds would not be subject to this condition. --------------------------------------------------------------------------- Second, the custodian must provide, promptly upon request by the fund, such reports as are available about the internal accounting controls and financial strength of the custodian.\9\ If a fund deals directly with a depository, the depository's contract with or written rules for its participants must provide that the depository will provide similar financial reports,\10\ which is a collection of information for purposes of the Paperwork Reduction Act. Custodians and depositories usually transmit financial reports to funds twice each year.\11\ The Commission staff estimates that 50 custodians spend approximately 926 hours (by support staff) annually in transmitting such reports to funds.\12\ In addition, approximately 81 funds (i.e., two percent of all funds) deal directly with a securities depository and may request periodic reports from their depository. Commission staff estimates that depositories spend approximately 19 hours (by support staff) annually transmitting reports to the 81 funds.\13\ The total annual burden estimate for compliance with rule 17f-4's reporting requirement is therefore 945 hours.\14\ --------------------------------------------------------------------------- \9\ Rule 17f-4(a)(2). \10\ Rule 17f-4(b)(1)(ii). \11\ The estimated 50 custodians would handle requests for reports from an estimated 3,968 fund clients (approximately 80 fund clients per custodian) and the depositories from the remaining 81 funds that choose to deal directly with a depository. It is our understanding based on staff conversations with industry representatives that custodians and depositories transmit these reports to clients in the normal course of their activities as a good business practice regardless of whether they are requested. Therefore, for purposes of this Paperwork Reduction Act estimate, the Commission staff assumes that custodians transmit the reports to all fund clients. \12\ (3,968 fund clients x 2 reports) = 7,936 transmissions. The staff estimates that each transmission would take approximately 7 minutes for a total of approximately 926 hours (7 minutes x 7,936 transmissions). \13\ (81 fund clients who may deal directly with a securities depository x 2 reports) = 162 transmissions. The staff estimates that each transmission would take approximately 7 minutes for a total of approximately 19 hours (7 minutes x 162 transmissions). \14\ 926 hours for custodians and 19 hours for securities depositories. --------------------------------------------------------------------------- If a fund deals directly with a securities depository, rule 17f-4 requires that the fund implement internal control systems reasonably designed to prevent an unauthorized officer's instructions (by providing at least for the form, content, and means of giving, recording, and reviewing all officers' instructions).\15\ All funds that seek to rely on rule 17f-4 should have already implemented these internal control systems when the rule was amended. Therefore, there is no ongoing burden associated with this collection of information requirement.\16\ --------------------------------------------------------------------------- \15\ Rule 17f-4(b)(2). \16\ The Commission staff assumes that new funds relying on 17f- 4 would choose to use a custodian instead of directly dealing with a securities depository because of the high costs associated with maintaining an account with a securities depository. Thus new funds would not be subject to this condition. --------------------------------------------------------------------------- Based on the foregoing, the Commission staff estimates that the total annual hour burden of the rule's collection of information requirement is 945 hours. The estimate of average burden hours is made solely for the purposes of the Paperwork Reduction Act. This estimate is not derived from a comprehensive or even representative survey or study of the costs of Commission rules. 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, [[Page 2935]] 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: January 12, 2016. Robert W. Errett, Deputy Secretary. [FR Doc. 2016-00788 Filed 1-15-16; 8:45 am] BILLING CODE 8011-01-P
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2. Statutory Basis market participants while preserving the Paper Comments
The Exchange believes the proposed integrity its CE Programs. In general,
reduction in cost and removal of • Send paper comments in triplicate
rule change is consistent with the Act to Secretary, Securities and Exchange
and the rules and regulations barriers to entry encourages competition
among market participants, particularly Commission, 100 F Street NE.,
thereunder applicable to the Exchange Washington, DC 20549–1090.
and, in particular, the requirements of in situations where such rules are
Section 6(b) of the Act.16 Specifically, consistently employed across the All submissions should refer to File
the Exchange believes the proposed rule markets. By bringing the Exchange’s fees Number SR–CBOE–2015–119. This file
change is consistent with the Section structure in line with that of FINRA, the number should be included on the
6(b)(5) 17 requirements that the rules of Exchange believes it is removing subject line if email is used. To help the
an exchange be designed to prevent impediments to free and open markets Commission process and review your
fraudulent and manipulative acts and and encouraging competition between comments more efficiently, please use
practices, to promote just and equitable the Exchange and other markets that only one method. The Commission will
principles of trade, to foster cooperation utilize FINRA’s CE Programs. For the post all comments on the Commission’s
and coordination with persons engaged foregoing reasons, the Exchange believes Internet Web site (http://www.sec.gov/
in regulating, clearing, settling, that the proposed rule change will rules/sro.shtml). Copies of the
processing information with respect to, relieve burdens on, and otherwise submission, all subsequent
and facilitating transactions in promote, competition. amendments, all written statements
securities, to remove impediments to with respect to the proposed rule
C. Self-Regulatory Organization’s change that are filed with the
and perfect the mechanism of a free and Statement on Comments on the
open market and a national market Commission, and all written
Proposed Rule Change Received From communications relating to the
system, and, in general, to protect Members, Participants, or Others
investors and the public interest. proposed rule change between the
Additionally, the Exchange believes the The Exchange neither solicited nor Commission and any person, other than
proposed rule change is consistent with received written comments on the those that may be withheld from the
the Section 6(b)(5) 18 requirement that proposed rule change. public in accordance with the
the rules of an exchange not be designed provisions of 5 U.S.C. 552, will be
III. Date of Effectiveness of the available for Web site viewing and
to permit unfair discrimination between
Proposed Rule Change and Timing for printing in the Commission’s Public
customers, issuers, brokers, or dealers.
Commission Action Reference Room, 100 F Street NE.,
In particular, the Exchange believes
that Web-based administration of the The foregoing rule change has become Washington, DC 20549 on official
Regulatory Element of the Exchange’s effective pursuant to Section 19(b)(3)(A) business days between the hours of
CE Program and the lower costs of the Act 19 and paragraph (f) of Rule 10:00 a.m. and 3:00 p.m. Copies of the
associated with Web-based 19b–4 20 thereunder. At any time within filing also will be available for
administration of the Regulatory 60 days of the filing of the proposed rule inspection and copying at the principal
Element of the Exchange’s CE Program change, the Commission summarily may office of the Exchange. All comments
are ends that may serve to increase temporarily suspend such rule change if received will be posted without change;
access to the markets, which is in the it appears to the Commission that such the Commission does not edit personal
interests of investors and consistent action is necessary or appropriate in the identifying information from
with the Act. In general, Web-based public interest, for the protection of submissions. You should submit only
delivery of the Regulatory Element of investors, or otherwise in furtherance of information that you wish to make
the Exchange’s CE Programs at a the purposes of the Act. If the available publicly. All submissions
reduced cost lowers barriers to entry Commission takes such action, the should refer to File Number SR–CBOE–
[sic] and removes impediments to a free Commission will institute proceedings 2015–119 and should be submitted on
and open market and national market to determine whether the proposed rule or before February 9, 2016.
system by making it easier and less change should be approved or For the Commission, by the Division of
costly for TPHs to participate in the disapproved. Trading and Markets, pursuant to delegated
markets. Accordingly, the Exchange authority.21
believes that offering Web-based IV. Solicitation of Comments
Robert W. Errett,
delivery of the Regulatory Element of Interested persons are invited to Deputy Secretary.
Exchange’s CE Program at a reduced submit written data, views, and [FR Doc. 2016–00784 Filed 1–15–16; 8:45 am]
cost and that lowering the cost of CE in arguments concerning the foregoing, BILLING CODE 8011–01–P
general are goals that are consistent with including whether the proposed rule
the Act. change is consistent with the Act.
B. Self-Regulatory Organization’s Comments may be submitted by any of SECURITIES AND EXCHANGE
Statement on Burden on Competition the following methods: COMMISSION
The Exchange does not believe that Electronic Comments
Submission for OMB Review;
the proposed rule change will impose
any burden on competition that is not • Use the Commission’s Internet Comment Request
comment form (http://www.sec.gov/
asabaliauskas on DSK5VPTVN1PROD with NOTICES
necessary or appropriate in furtherance Upon Written Request, Copies Available
of the purposes of the Act. As FINRA rules/sro.shtml); or
• Send an email to rule- From: Securities and Exchange
has stated, the proposed rule change is Commission, Office of FOIA Services,
specifically intended to reduce the comments@sec.gov. Please include File
Number SR–CBOE–2015–119 on the 100 F Street NE., Washington, DC
burdens of continuing education on 20549–2736.
subject line.
16 15 U.S.C. 78f(b). Extension:
17 15 U.S.C. 78f(b)(5). 19 15 U.S.C. 78s(b)(3)(A).
18 Id. 20 17 CFR 240.19b–4(f). 21 17 CFR 200.30–3(a)(12).
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![Federal Register / Vol. 81, No. 11 / Tuesday, January 19, 2016 / Notices 2935
Office of Information and Regulatory the Regulatory Element). The person is required to retake the
Affairs, Office of Management and Exchange’s proposal is materially Regulatory Element in the event that
Budget, Room 10102, New Executive similar to a recent FINRA filing to such person (A) is subject to any
Office Building, Washington, DC 20503, amend FINRA Rule 1250, which was statutory disqualification as defined in
or by sending an email to: Shagufta_ recently approved by the Securities and Section 3(a)(39) of the Act; (B) is subject
Ahmed@omb.eop.gov; and (ii) Pamela Exchange Commission.3 The proposed to suspension or to the imposition of a
Dyson, Director/Chief Information rule change will become operative fine of $5,000 or more for violation of
Officer, Securities and Exchange January 4, 2016. any provision of any securities law or
Commission, c/o Remi Pavlik-Simon, The text of the proposed rule change regulation, or any agreement with or
100 F Street NE., Washington, DC 20549 is available on the Exchange’s Web site rule or standard of conduct of any
or send an email to: PRA_Mailbox@ at http://nasdaq.cchwallstreet.com, at securities governmental agency,
sec.gov. Comments must be submitted to the principal office of the Exchange, and securities self-regulatory organization,
OMB within 30 days of this notice. at the Commission’s Public Reference or as imposed by any such regulatory or
Room. self-regulatory organization in
Dated: January 12, 2016.
II. Self-Regulatory Organization’s connection with a disciplinary
Robert W. Errett,
Statement of the Purpose of, and proceeding; or (C) is ordered as a
Deputy Secretary. sanction in a disciplinary action to
[FR Doc. 2016–00788 Filed 1–15–16; 8:45 am] Statutory Basis for, the Proposed Rule
Change retake the Regulatory Element by any
BILLING CODE 8011–01–P securities governmental agency or self-
In its filing with the Commission, the regulatory organization. Rule 1120(a)(1)
Exchange included statements provides that the following Regulatory
SECURITIES AND EXCHANGE concerning the purpose of and basis for Elements administered by FINRA shall
COMMISSION the proposed rule change and discussed be required: the S201 Supervisor
any comments it received on the Program for registered principals and
[Release No. 34–76874; File No. SR–
NASDAQ–2015–167]
proposed rule change. The text of these supervisors, the S501 Series 56
statements may be examined at the Proprietary Trader continuing education
Self-Regulatory Organizations; The places specified in Item IV below. The program for Series 56 registered
NASDAQ Stock Market LLC; Notice of Exchange has prepared summaries, set persons, and the S101 General Program
Filing and Immediate Effectiveness of forth in sections A, B, and C below, of for Series 7 and all other registered
Proposed Rule Change To Amend the most significant aspects of such persons. Currently, the Regulatory
Section (a)(6) of Rule 1120, Continuing statements. Element may be administered in a test
Education Requirements A. Self-Regulatory Organization’s center or in-firm subject to specified
Statement of the Purpose of, and procedures.8
January 12, 2016. The Firm Element consists of annual,
Statutory Basis for, the Proposed Rule
Pursuant to Section 19(b)(1) of the member-developed and administered
Change
Securities Exchange Act of 1934 training programs for covered registered
(‘‘Act’’),1 and Rule 19b–4 2 thereunder, 1. Purpose persons,9 which must be appropriate for
notice is hereby given that, on December The CE requirements under Rule 1120
30, 2015, The NASDAQ Stock Market consist of a Regulatory Element 4 and a otherwise prescribed by the Exchange. On each
LLC (‘‘NASDAQ’’ or ‘‘Exchange’’) filed Firm Element.5 The Regulatory Element occasion, the Regulatory Element must be
completed within 120 days after the person’s
with the Securities and Exchange applies to all registered persons 6 and registration anniversary date. A person’s initial
Commission (‘‘SEC’’ or ‘‘Commission’’) consists of periodic computer-based registration date, also known as the ‘‘base date,’’
the proposed rule change as described training on regulatory, compliance, shall establish the cycle of anniversary dates for
in Items I and II below, which Items purposes of the Rule. The content of the Regulatory
ethical, and supervisory subjects and Element of the program shall be determined by
have been prepared by the Exchange. sales practice standards, which must be Nasdaq and shall be appropriate to either the
The Commission is publishing this completed within prescribed registered representative or principal status of the
notice to solicit comments on the timeframes.7 In addition, a registered person subject to the Rule.
proposed rule change from interested 8 Pursuant to Rule 1120(a)(6), Nasdaq Members
that are also FINRA members are currently
persons. 3 See Securities Exchange Act Release No. 75581
permitted to administer the continuing education
(July 31, 2015), 80 FR 47018 (August 6, 2015) Regulatory Element program to their registered
I. Self-Regulatory Organization’s (Order Approving a Proposed Rule Change to persons by instituting an in-firm program to the
Statement of the Terms of Substance of Provide a Web-based Delivery Method for extent such program has been deemed acceptable to
the Proposed Rule Change Completing the Regulatory Element of the FINRA in accordance with NASD Rule 1120(a)(6).
Continuing Education Requirements) (SR–FINRA– (The Exchange notes that NASD Rule 1120 has
The Exchange proposes to amend 2015–015). See also Securities Exchange Act previously been superseded by FINRA Rule 1250
section (a)(6) of Rule 1120 (Continuing Release No. 76107 (October 8, 2015), 80 FR 62139 which FINRA has amended, as discussed above, to
(October 15, 2015) (Notice of Filing and Immediate
Education Requirements) to provide for Effectiveness of a Proposed Rule Change Relating to
delete the in-firm CE option on a phased basis.)
web-based delivery of the Exchange’s Nasdaq and FINRA are parties to the Regulatory
Delivery of the Regulatory Element of the Contract pursuant to which FINRA has agreed to
continuing education (‘‘CE’’) program. Exchange’s Continuing Education Program) (SR– perform certain functions on behalf of Nasdaq.
The proposed rule change would phase CBOE–2015–084). Therefore, Nasdaq members are complying with
4 See Rule 1120(a) (Regulatory Element).
out the current option of completing the Nasdaq Rule 1120(a)(6) by complying with NASD
5 See Rule 1120(b) (Firm Element).
Rule 1250. In addition, functions performed by
asabaliauskas on DSK5VPTVN1PROD with NOTICES
Regulatory Element in a test center, and 6 For purposes of the Regulatory Element, a FINRA, FINRA departments, and FINRA staff under
eliminate the current option for in- ‘‘registered person’’ means any person registered Nasdaq Rule 1120(a)(6) are being performed by
house delivery of the Regulatory with Nasdaq as a representative, principal, or FINRA on behalf of Nasdaq. Nasdaq Members that
Element of the CE program. The assistant representative pursuant to the Rule 1020, are not FINRA members are not permitted to
amendments will delete the current text 1030, 1040, and 1110 Series. See Rule 1120(a)(5). institute in-firm delivery of the Regulatory Element
7 Pursuant to Rule 1120(a)(1), each registered program.
of Rule 1120(a)(6) (In-Firm Delivery of person shall complete the Regulatory Element of the 9 Under Rule 1120(b)(1) (Persons Subject to the
continuing education program beginning with the Firm Element), a ‘‘covered registered person’’
1 15 U.S.C. 78s(b)(1). occurrence of their second registration anniversary means any person registered with a member who
2 17 CFR 240.19b–4. date and every three years thereafter, or as Continued
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Document Created: 2016-01-16 01:11:31
Document Modified: 2016-01-16 01:11:31
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
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| Section | Notices | |
| FR Citation | 81 FR 2933 |
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