81 FR 540 - Submission for OMB Review; Comment Request

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 3 (January 6, 2016)

Page Range		540-541
FR Document		2015-33211
Federal Register, Volume 81 Issue 3 (Wednesday, January 6, 2016)
[Federal Register Volume 81, Number 3 (Wednesday, January 6, 2016)]
[Notices]
[Pages 540-541]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-33211]


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

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: Rule 206(4)-2.
    OMB Control No. 3235-0241, SEC File No. 270-217.

    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 (``Commission'') has submitted to the Office of Management 
and Budget (``OMB'') a request for extension and revision of the 
previously approved collection of information discussed below.
    The title for the collection of information is ``Rule 206(4)-2 
under the Investment Advisers Act of 1940--Custody of Funds or 
Securities of Clients by Investment Advisers.'' Rule 206(4)-2 (17 CFR 
275.206(4)-2) under the Investment Advisers Act of 1940 (15 U.S.C. 80b-
1 et seq.) governs the custody of funds or securities of clients by 
Commission-registered investment advisers. Rule 206(4)-2 requires each 
registered investment adviser that has custody of client funds or 
securities to maintain those client funds or securities with a broker-
dealer, bank or other ``qualified custodian.'' \1\ The rule requires 
the adviser to promptly notify clients as to the place and manner of 
custody, after opening an account for the client and following any 
changes.\2\ If an adviser sends account statements to its clients, it 
must insert a legend in the notice and in subsequent account statements 
sent to those clients urging them to compare the account statements 
from the custodian with those from the adviser.\3\ The adviser also 
must have a reasonable basis, after due inquiry, for believing that the 
qualified custodian maintaining client funds and securities sends 
account statements directly to the advisory clients, and undergo an 
annual surprise examination by an independent public accountant to 
verify client assets pursuant to a written agreement with the 
accountant that specifies certain duties.\4\ Unless client assets are 
maintained by an independent custodian (i.e., a custodian that is not 
the adviser itself or a related person), the adviser also is required 
to obtain or receive a report of the internal controls relating to the 
custody of those assets from an independent public accountant that is 
registered with and subject to regular inspection by the Public Company 
Accounting Oversight Board (``PCAOB'').\5\
---------------------------------------------------------------------------

    \1\ Rule 206(4)-2(a)(1).
    \2\ Rule 206(4)-2(a)(2).
    \3\ Rule 206(4)-2(a)(2).
    \4\ Rule 206(4)-2(a)(3), (4).
    \5\ Rule 206(4)-2(a)(6).
---------------------------------------------------------------------------

    The rule exempts advisers from the rule with respect to clients 
that are registered investment companies. Advisers to limited 
partnerships, limited liability companies and other pooled investment 
vehicles are excepted from the account statement delivery and deemed to 
comply with the annual surprise examination requirement if the limited 
partnerships, limited liability companies or pooled investment vehicles 
are subject to annual audit by an independent public accountant 
registered with, and subject to regular inspection by the PCAOB, and 
the audited financial statements are distributed to investors in the 
pools.\6\ The rule also provides an exception to the surprise 
examination requirement for advisers that have custody because they 
have authority to deduct advisory fees from client accounts and 
advisers that have custody solely because a related person holds the 
adviser's client assets and the related person is operationally 
independent of the adviser.\7\
---------------------------------------------------------------------------

    \6\ Rule 206(4)-2(b)(4).
    \7\ Rule 206(4)-2(b)(3), (b)(6).
---------------------------------------------------------------------------

    Advisory clients use this information to confirm proper handling of 
their accounts. The Commission's staff uses the information obtained 
through these collections in its enforcement, regulatory and 
examination programs. Without the information collected under the rule, 
the Commission would be less efficient and effective in its programs 
and clients would not have information valuable for monitoring an 
adviser's handling of their accounts.
    The respondents to this information collection are investment 
advisers registered with the Commission and have custody of clients' 
funds or securities. We estimate that 5,228 advisers would be subject 
to the information collection burden under the rule 206(4)-2. The 
number of responses under rule 206(4)-2 will vary considerably 
depending on the number of clients for which an adviser has custody of 
funds or securities, and the number of investors in pooled investment 
vehicles that the adviser manages. It is estimated that the average 
number of responses annually for each respondent would be 6,830, and an 
average time of 0.02286 hour per response. The annual aggregate burden 
for all respondents to the requirements of rule 206(4)-2 is estimated 
to be 816,285 hours.
    This collection of information is found at 17 CFR 275.206(4)-2 and 
is mandatory. Responses to the collection of information are not kept 
confidential. Commission-registered investment advisers are required to 
maintain and preserve certain information required under rule 206(4)-2 
for five years. The long-term retention of these records is necessary 
for the Commission's examination program to ascertain compliance with 
the Investment Advisers Act.
    The estimated average burden hours are made solely for the purposes 
of Paperwork Reduction Act and are not derived from a comprehensive or 
even representative survey or study of the cost of Commission rules and 
forms. 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

[[Page 541]]

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: December 30, 2015.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2015-33211 Filed 1-5-16; 8:45 am]
 BILLING CODE 8011-01-P
540 Federal Register / Vol. 81, No. 3 / Wednesday, January 6, 2016 / Notices

communications relating to the by Commission-registered investment related person holds the adviser’s client
proposed rule change between the advisers. Rule 206(4)–2 requires each assets and the related person is
Commission and any person, other than registered investment adviser that has operationally independent of the
those that may be withheld from the custody of client funds or securities to adviser.7
public in accordance with the maintain those client funds or securities Advisory clients use this information
provisions of 5 U.S.C. 552, will be with a broker-dealer, bank or other to confirm proper handling of their
available for Web site viewing and ‘‘qualified custodian.’’ 1 The rule accounts. The Commission’s staff uses
printing in the Commission’s Public requires the adviser to promptly notify the information obtained through these
Reference Room, 100 F Street NE., clients as to the place and manner of collections in its enforcement,
Washington, DC 20549, on official custody, after opening an account for regulatory and examination programs.
business days between the hours of the client and following any changes.2 Without the information collected under
10:00 a.m. and 3:00 p.m. Copies of the If an adviser sends account statements the rule, the Commission would be less
filing will also be available for to its clients, it must insert a legend in efficient and effective in its programs
inspection and copying at the NYSE’s the notice and in subsequent account and clients would not have information
principal office and on its Internet Web statements sent to those clients urging valuable for monitoring an adviser’s
site at www.nyse.com. All comments them to compare the account statements handling of their accounts.
received will be posted without change; from the custodian with those from the The respondents to this information
the Commission does not edit personal adviser.3 The adviser also must have a collection are investment advisers
identifying information from reasonable basis, after due inquiry, for registered with the Commission and
submissions. You should submit only believing that the qualified custodian have custody of clients’ funds or
information that you wish to make maintaining client funds and securities securities. We estimate that 5,228
available publicly. All submissions sends account statements directly to the advisers would be subject to the
should refer to File Number SR–NYSE– advisory clients, and undergo an annual information collection burden under the
2015–67 and should be submitted on or surprise examination by an independent rule 206(4)–2. The number of responses
before January 27, 2016. public accountant to verify client assets under rule 206(4)–2 will vary
For the Commission, by the Division of pursuant to a written agreement with considerably depending on the number
Trading and Markets, pursuant to delegated the accountant that specifies certain of clients for which an adviser has
authority.16 duties.4 Unless client assets are custody of funds or securities, and the
Jill M. Peterson, maintained by an independent number of investors in pooled
Assistant Secretary. custodian (i.e., a custodian that is not investment vehicles that the adviser
the adviser itself or a related person), manages. It is estimated that the average
[FR Doc. 2015–33217 Filed 1–5–16; 8:45 am]
the adviser also is required to obtain or number of responses annually for each
BILLING CODE 8011–01–P
receive a report of the internal controls respondent would be 6,830, and an
relating to the custody of those assets average time of 0.02286 hour per
SECURITIES AND EXCHANGE from an independent public accountant response. The annual aggregate burden
COMMISSION that is registered with and subject to for all respondents to the requirements
regular inspection by the Public of rule 206(4)–2 is estimated to be
Submission for OMB Review; Company Accounting Oversight Board 816,285 hours.
Comment Request (‘‘PCAOB’’).5 This collection of information is
The rule exempts advisers from the found at 17 CFR 275.206(4)–2 and is
Upon Written Request, Copies Available mandatory. Responses to the collection
rule with respect to clients that are
From: Securities and Exchange of information are not kept confidential.
registered investment companies.
Commission, Office of FOIA Services, Commission-registered investment
Advisers to limited partnerships,
100 F Street NE., Washington, DC advisers are required to maintain and
20549–2736. limited liability companies and other
pooled investment vehicles are excepted preserve certain information required
Extension: Rule 206(4)–2. from the account statement delivery and under rule 206(4)–2 for five years. The
OMB Control No. 3235–0241, SEC File No. deemed to comply with the annual long-term retention of these records is
270–217. necessary for the Commission’s
surprise examination requirement if the
Notice is hereby given that pursuant limited partnerships, limited liability examination program to ascertain
to the Paperwork Reduction Act of 1995 companies or pooled investment compliance with the Investment
(44 U.S.C. 3501 et seq.), the Securities vehicles are subject to annual audit by Advisers Act.
and Exchange Commission an independent public accountant The estimated average burden hours
(‘‘Commission’’) has submitted to the registered with, and subject to regular are made solely for the purposes of
Office of Management and Budget inspection by the PCAOB, and the Paperwork Reduction Act and are not
(‘‘OMB’’) a request for extension and audited financial statements are derived from a comprehensive or even
revision of the previously approved distributed to investors in the pools.6 representative survey or study of the
collection of information discussed The rule also provides an exception to cost of Commission rules and forms. An
below. the surprise examination requirement agency may not conduct or sponsor, and
The title for the collection of for advisers that have custody because a person is not required to respond to,
information is ‘‘Rule 206(4)–2 under the they have authority to deduct advisory a collection of information unless it
Investment Advisers Act of 1940— fees from client accounts and advisers displays a currently valid control
mstockstill on DSK4VPTVN1PROD with NOTICES

Custody of Funds or Securities of that have custody solely because a number.
Clients by Investment Advisers.’’ Rule The public may view the background
206(4)–2 (17 CFR 275.206(4)–2) under 1 Rule 206(4)–2(a)(1).
documentation for this information
the Investment Advisers Act of 1940 (15 2 Rule 206(4)–2(a)(2). collection at the following Web site,
U.S.C. 80b–1 et seq.) governs the 3 Rule 206(4)–2(a)(2). www.reginfo.gov. Comments should be
custody of funds or securities of clients 4 Rule 206(4)–2(a)(3), (4). directed to: (i) Desk Officer for the
5 Rule 206(4)–2(a)(6).
16 17 CFR 200.30–3(a)(12). 6 Rule 206(4)–2(b)(4). 7 Rule 206(4)–2(b)(3), (b)(6).

VerDate Sep<11>2014 17:32 Jan 05, 2016 Jkt 238001 PO 00000 Frm 00082 Fmt 4703 Sfmt 4703 E:\FR\FM\06JAN1.SGM 06JAN1
Federal Register / Vol. 81, No. 3 / Wednesday, January 6, 2016 / Notices 541

Securities and Exchange Commission, may also assist Commission staff in SECURITIES AND EXCHANGE
Office of Information and Regulatory assessing investment advisers’ COMMISSION
Affairs, Office of Management and compliance programs.
Budget, Room 10102, New Executive This collection of information is [Release No. 34–76801; File No. SR–Phlx–
Office Building, Washington, DC 20503,
mandatory. The information collected 2015–99]
or by sending an email to: Shagufta_
pursuant to the rule 206(4)–7 is
Ahmed@omb.eop.gov; and (ii) Pamela Self-Regulatory Organizations;
Dyson, Director/Chief Information reviewed by the Commission’s
examination staff; it will be accorded NASDAQ OMX PHLX LLC; Notice of
Officer, Securities and Exchange Filing and Immediate Effectiveness of
Commission, c/o Remi Pavlik-Simon, the same level of confidentiality
accorded to other responses provided to Proposed Rule Change Regarding
100 F Street NE., Washington, DC 20549 Order Exposure
or send an email to: PRA_Mailbox@ the Commission in the context of its
sec.gov. Comments must be submitted to examination and oversight program. December 30, 2015.
OMB within 30 days of this notice. The respondents to this information Pursuant to section 19(b)(1) of the
Dated: December 30, 2015. collection are investment advisers Securities Exchange Act of 1934
Jill M. Peterson, registered with the Commission. Our (‘‘Act’’),1 and Rule 19b–4 thereunder,2
Assistant Secretary. latest data indicate that there were notice is hereby given that on December
[FR Doc. 2015–33211 Filed 1–5–16; 8:45 am] 12,026 advisers registered with the 15, 2015, NASDAQ OMX PHLX LLC
BILLING CODE 8011–01–P Commission as of November 1, 2015. (‘‘Phlx’’ or ‘‘Exchange’’) filed with the
The Commission has estimated that Securities and Exchange Commission
compliance with rule 206(4)–7 imposes (‘‘SEC’’ or ‘‘Commission’’) the proposed
SECURITIES AND EXCHANGE an annual burden of approximately 87 rule change as described in Items I, II,
COMMISSION hours per respondent. Based on this and III, below, which Items have been
[OMB Control No. 3235–0585, SEC File No. figure, the Commission estimates a total prepared by the Exchange. The
270–523] annual burden of 1,046,262 hours for Commission is publishing this notice to
this collection of information. solicit comments on the proposed rule
Proposed Collection; Comment Written comments are invited on: (a) change from interested persons.
Request
Whether the collection of information is I. Self-Regulatory Organization’s
Upon Written Request, Copies Available necessary for the proper performance of Statement of the Terms of Substance of
From: Securities and Exchange the functions of the agency, including the Proposed Rule Change
Commission, Office of FOIA Services, whether the information will have
100 F Street NE., Washington, DC practical utility; (b) the accuracy of the The Exchange proposes to amend
20549–2736. agency’s estimate of the burden of the Phlx Rule 1080, entitled ‘‘Phlx XL and
Extension: Rule 206(4)–7. collection of information; (c) ways to Phlx XL II,’’ to account for potential
Notice is hereby given that, pursuant enhance the quality, utility, and clarity internal conflicts with other Exchange
to the Paperwork Reduction Act of 1995 of the information collected; and (d) Rules, which are exceptions to the order
(44 U.S.C. 3501 et seq.), the Securities ways to minimize the burden of the exposure rule regarding principle orders
and Exchange Commission collection of information on the Order Entry Firm represents as agent
(‘‘Commission’’) is soliciting comments respondents, including through the use from being exposed.
on the collection of information of automated collection techniques or The text of the proposed rule change
summarized below. The Commission other forms of information technology. is available on the Exchange’s Web site
plans to submit this existing collection Consideration will be given to at http://
of information to the Office of comments and suggestions submitted in nasdaqomxphlx.cchwallstreet.com, at
Management and Budget for extension writing within 60 days of this the principal office of the Exchange, and
and approval. publication. An agency may not conduct at the Commission’s Public Reference
The title for the collection of or sponsor a collection of information Room.
information is ‘‘Investment Advisers Act unless it displays a currently valid OMB
rule 206(4)–7 (17 CFR 275.206(4)–7), II. Self-Regulatory Organization’s
control number. No person shall be
Compliance procedures and practices.’’ Statement of the Purpose of, and
subject to any penalty for failing to
Rule 206(4)–7 requires each investment Statutory Basis for, the Proposed Rule
comply with a collection of information
adviser registered with the Commission Change
to (i) adopt and implement internal subject to the PRA that does not display
compliance policies and procedures, (ii) a valid OMB control number. In its filing with the Commission, the
review those policies and procedures Please direct your written comments Exchange included statements
annually, (iii) designate a chief to Pamela Dyson, Director/Chief concerning the purpose of and basis for
compliance officer, and (iv) maintain Information Officer, Securities and the proposed rule change and discussed
certain compliance records. The rule is Exchange Commission, C/O Remi any comments it received on the
designed to protect investors by Pavlik-Simon, 100 F Street NE., proposed rule change. The text of these
fostering better compliance with the Washington, DC 20549; or send an email statements may be examined at the
places specified in Item IV below. The
mstockstill on DSK4VPTVN1PROD with NOTICES

securities laws. The collection of to: PRA_Mailbox@sec.gov.
information under rule 206(4)–7 is Exchange has prepared summaries, set
Dated: December 30, 2015. forth in sections A, B, and C below, of
necessary to assure that investment
advisers maintain comprehensive Jill M. Peterson, the most significant aspects of such
internal programs that promote the Assistant Secretary. statements.
advisers’ compliance with the [FR Doc. 2015–33210 Filed 1–5–16; 8:45 am]
Investment Advisers Act of 1940. The BILLING CODE 8011–01–P
1 15 U.S.C. 78s(b)(1).
information collected under this rule 2 17 CFR 240.19b–4.

VerDate Sep<11>2014 17:32 Jan 05, 2016 Jkt 238001 PO 00000 Frm 00083 Fmt 4703 Sfmt 4703 E:\FR\FM\06JAN1.SGM 06JAN1
Document Created: 2016-01-06 04:02:24
Document Modified: 2016-01-06 04:02:24
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		81 FR 540