81_FR_87871 81 FR 87638 - Proposed Collection; Comment Request

81 FR 87638 - Proposed Collection; Comment Request

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 233 (December 5, 2016)

Page Range87638-87639
FR Document2016-29085

Federal Register, Volume 81 Issue 233 (Monday, December 5, 2016) 
[Federal Register Volume 81, Number 233 (Monday, December 5, 2016)]
[Notices]
[Pages 87638-87639]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-29085]



[[Page 87638]]

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SECURITIES AND EXCHANGE COMMISSION


Proposed Collection; Comment Request

Upon Written Request Copies Available From: Securities and Exchange 
Commission, Office of Investor Education and Advocacy, Washington, DC 
20549-0213

Extension:
    Rule 17a-10, SEC File No. 270-507, OMB Control No. 3235-0563

    Notice is hereby given that pursuant to the Paperwork Reduction Act 
of 1995 (44 U.S.C. 3501 et seq.) the Securities and Exchange Commission 
(the ``Commission'') is soliciting comments on the collections of 
information summarized below. The Commission plans to submit these 
existing collections of information to the Office of Management and 
Budget (``OMB'') for extension and approval.
    Section 17(a) of the Investment Company Act of 1940 (the ``Act''), 
generally prohibits affiliated persons of a registered investment 
company (``fund'') from borrowing money or other property from, or 
selling or buying securities or other property to or from, the fund or 
any company that the fund controls.\1\ Section 2(a)(3) of the Act 
defines ``affiliated person'' of a fund to include its investment 
advisers.\2\ Rule 17a-10 (17 CFR 270.17a-10) permits (i) a subadviser 
\3\ of a fund to enter into transactions with funds the subadviser does 
not advise but that are affiliated persons of a fund that it does 
advise (e.g., other funds in the fund complex), and (ii) a subadviser 
(and its affiliated persons) to enter into transactions and 
arrangements with funds the subadviser does advise, but only with 
respect to discrete portions of the subadvised fund for which the 
subadviser does not provide investment advice.
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    \1\ 15 U.S.C. 80a-17(a).
    \2\ 15 U.S.C. 80a-2(a)(3)(E).
    \3\ As defined in rule 17a-10(b)(2). 17 CFR 270.17a-10(b)(2).
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    To qualify for the exemptions in rule 17a-10, the subadvisory 
relationship must be the sole reason why section 17(a) prohibits the 
transaction. In addition, the advisory contracts of the subadviser 
entering into the transaction, and any subadviser that is advising the 
purchasing portion of the fund, must prohibit the subadvisers from 
consulting with each other concerning securities transactions of the 
fund, and limit their responsibility to providing advice with respect 
to discrete portions of the fund's portfolio.\4\ Section 17(a) of the 
Investment Company Act of 1940 (the ``Act''), generally prohibits 
affiliated persons of a registered investment company (``fund'') from 
borrowing money or other property from, or selling or buying securities 
or other property to or from, the fund or any company that the fund 
controls. Section 2(a)(3) of the Act defines ``affiliated person'' of a 
fund to include its investment advisers. Rule 17a-10 permits (i) a 
subadviser of a fund to enter into transactions with funds the 
subadviser does not advise but that are affiliated persons of a fund 
that it does advise (e.g., other funds in the fund complex), and (ii) a 
subadviser (and its affiliated persons) to enter into transactions and 
arrangements with funds the subadviser does advise, but only with 
respect to discrete portions of the subadvised fund for which the 
subadviser does not provide investment advice.
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    \4\ 17 CFR 270.17a-10(a)(2).
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    To qualify for the exemptions in rule 17a-10, the subadvisory 
relationship must be the sole reason why section 17(a) prohibits the 
transaction. In addition, the advisory contracts of the subadviser 
entering into the transaction, and any subadviser that is advising the 
purchasing portion of the fund, must prohibit the subadvisers from 
consulting with each other concerning securities transactions of the 
fund, and limit their responsibility to providing advice with respect 
to discrete portions of the fund's portfolio. This requirement 
regarding the prohibitions and limitations in advisory contracts of 
subadvisers relying on the rule constitutes a collection of information 
under the Paperwork Reduction Act of 1995 (``PRA'').\5\
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    \5\ 44 U.S.C. 3501.
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    The staff assumes that all existing funds with subadvisory 
contracts amended those contracts to comply with the adoption of rule 
17a-10 in 2003, which conditioned certain exemptions upon these 
contractual alterations, and therefore there is no continuing burden 
for those funds.\6\ However, the staff assumes that all newly formed 
subadvised funds, and funds that enter into new contracts with 
subadvisers, will incur the one-time burden by amending their contracts 
to add the terms required by the rule.
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    \6\ Transactions of Investment Companies With Portfolio and 
Subadviser Affiliates, Investment Company Act Release No. 25888 
(Jan. 14, 2003) [68 FR 3153, (Jan. 22, 2003)]. We assume that funds 
formed after 2003 that intended to rely on rule 17a-10 would have 
included the required provision as a standard element in their 
initial subadvisory contracts.
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    Based on an analysis of fund filings, the staff estimates that 
approximately 319 funds enter into new subadvisory agreements each 
year.\7\ 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 
17a-10. Because these additional clauses are identical to the clauses 
that a fund would need to insert in their subadvisory contracts to rely 
on rules 10f-3, 12d3-1, and 17e-1, 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 among all four rules. Therefore, we 
estimate that the burden allocated to rule 17a-10 for this contract 
change would be 0.75 hours.\8\ Assuming that all 319 funds that 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 239 burden hours annually, with 
an associated cost of approximately $90,820.\9\
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    \7\ Based on data from Morningstar, as of June 2016, there are 
12,485 registered funds (open-end funds, closed-end funds, and 
exchange-traded funds), 4,629 funds of which have subadvisory 
relationships (approximately 37%). Based on data from the 2016 ICI 
Factbook, 862 new funds were established in 2015 (594 open-end funds 
+ 258 exchange-traded funds + 10 closed-end funds (from the ICI 
Research Perspective, April 2016)). 862 new funds x 37% = 319 funds.
    \8\ This estimate is based on the following calculation: 3 hours 
/ 4 rules = 0.75 hours.
    \9\ These estimates are based on the following calculations: 
(0.75 hours x 319 portfolios = 239 burden hours); ($380 per hour x 
239 hours = $90,820 total cost). The Commission's estimates 
concerning the wage rates for attorney time are based on salary 
information for the securities industry compiled by the Securities 
Industry and Financial Markets Association. The estimated wage 
figure is based on published rates for in-house attorneys, modified 
to account for a 1,800-hour work-year and multiplied by 5.35 to 
account for bonuses, firm size, employee benefits, and overhead, 
yielding an effective hourly rate of $380. See Securities Industry 
and Financial Markets Association, Report on Management & 
Professional Earnings in the Securities Industry 2013.
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    The estimate of average burden hours is made solely for the 
purposes of the Paperwork Reduction Act. The estimate is not derived 
from a comprehensive or even a representative survey or study of the 
costs of Commission rules. Complying with this collection of 
information requirement is necessary to obtain the benefit of relying 
on rule 17a-10. Responses will not be kept confidential. An agency may 
not conduct or sponsor, and a person is not required to respond to, a 
collection of information unless it displays a currently valid control 
number.
    Written comments are invited on: (a) Whether the proposed 
collection of

[[Page 87639]]

information is necessary for the proper performance of the functions of 
the agency, including whether the information will have practical 
utility; (b) the accuracy of the agency's estimate of the burden of the 
collection of information; (c) ways to enhance the quality, utility, 
and clarity of the information collected; and (d) ways to minimize the 
burden of the collection of information on respondents, including 
through the use of automated collection techniques or other forms of 
information technology. Consideration will be given to comments and 
suggestions submitted in writing within 60 days of this publication.
    Please direct your written comments to 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].

    Dated: November 22, 2016.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-29085 Filed 12-2-16; 8:45 am]
 BILLING CODE 8011-01-P

87638 Federal Register / Vol. 81, No. 233 / Monday, December 5, 2016 / Notices SECURITIES AND EXCHANGE Investment Company Act of 1940 (the agreements each year.7 Based on COMMISSION ‘‘Act’’), generally prohibits affiliated discussions with industry persons of a registered investment representatives, the staff estimates that Proposed Collection; Comment company (‘‘fund’’) from borrowing it will require approximately 3 attorney Request money or other property from, or selling hours to draft and execute additional or buying securities or other property to clauses in new subadvisory contracts in Upon Written Request Copies Available or from, the fund or any company that order for funds and subadvisers to be From: Securities and Exchange the fund controls. Section 2(a)(3) of the able to rely on the exemptions in rule Commission, Office of Investor Act defines ‘‘affiliated person’’ of a fund 17a–10. Because these additional Education and Advocacy, to include its investment advisers. Rule clauses are identical to the clauses that Washington, DC 20549–0213 17a–10 permits (i) a subadviser of a a fund would need to insert in their Extension: fund to enter into transactions with subadvisory contracts to rely on rules Rule 17a–10, SEC File No. 270–507, OMB funds the subadviser does not advise 10f–3, 12d3–1, and 17e–1, and because Control No. 3235–0563 we believe that funds that use one such but that are affiliated persons of a fund Notice is hereby given that pursuant that it does advise (e.g., other funds in rule generally use all of these rules, we to the Paperwork Reduction Act of 1995 the fund complex), and (ii) a subadviser apportion this 3 hour time burden (44 U.S.C. 3501 et seq.) the Securities (and its affiliated persons) to enter into equally among all four rules. Therefore, and Exchange Commission (the transactions and arrangements with we estimate that the burden allocated to ‘‘Commission’’) is soliciting comments funds the subadviser does advise, but rule 17a–10 for this contract change on the collections of information only with respect to discrete portions of would be 0.75 hours.8 Assuming that all summarized below. The Commission the subadvised fund for which the 319 funds that enter into new plans to submit these existing subadviser does not provide investment subadvisory contracts each year make collections of information to the Office advice. the modification to their contract of Management and Budget (‘‘OMB’’) for To qualify for the exemptions in rule required by the rule, we estimate that extension and approval. 17a–10, the subadvisory relationship the rule’s contract modification Section 17(a) of the Investment must be the sole reason why section requirement will result in 239 burden Company Act of 1940 (the ‘‘Act’’), 17(a) prohibits the transaction. In hours annually, with an associated cost generally prohibits affiliated persons of addition, the advisory contracts of the of approximately $90,820.9 a registered investment company subadviser entering into the transaction, The estimate of average burden hours (‘‘fund’’) from borrowing money or other and any subadviser that is advising the is made solely for the purposes of the property from, or selling or buying purchasing portion of the fund, must Paperwork Reduction Act. The estimate securities or other property to or from, prohibit the subadvisers from consulting is not derived from a comprehensive or the fund or any company that the fund with each other concerning securities even a representative survey or study of controls.1 Section 2(a)(3) of the Act transactions of the fund, and limit their the costs of Commission rules. defines ‘‘affiliated person’’ of a fund to responsibility to providing advice with Complying with this collection of include its investment advisers.2 Rule respect to discrete portions of the fund’s information requirement is necessary to 17a–10 (17 CFR 270.17a–10) permits (i) portfolio. This requirement regarding obtain the benefit of relying on rule a subadviser 3 of a fund to enter into the prohibitions and limitations in 17a–10. Responses will not be kept transactions with funds the subadviser advisory contracts of subadvisers confidential. An agency may not does not advise but that are affiliated relying on the rule constitutes a conduct or sponsor, and a person is not persons of a fund that it does advise collection of information under the required to respond to, a collection of (e.g., other funds in the fund complex), Paperwork Reduction Act of 1995 information unless it displays a and (ii) a subadviser (and its affiliated (‘‘PRA’’).5 currently valid control number. persons) to enter into transactions and The staff assumes that all existing Written comments are invited on: (a) arrangements with funds the subadviser funds with subadvisory contracts Whether the proposed collection of does advise, but only with respect to amended those contracts to comply with 7 Based on data from Morningstar, as of June discrete portions of the subadvised fund the adoption of rule 17a–10 in 2003, 2016, there are 12,485 registered funds (open-end for which the subadviser does not which conditioned certain exemptions funds, closed-end funds, and exchange-traded provide investment advice. upon these contractual alterations, and funds), 4,629 funds of which have subadvisory To qualify for the exemptions in rule therefore there is no continuing burden relationships (approximately 37%). Based on data from the 2016 ICI Factbook, 862 new funds were 17a–10, the subadvisory relationship for those funds.6 However, the staff established in 2015 (594 open-end funds + 258 must be the sole reason why section assumes that all newly formed exchange-traded funds + 10 closed-end funds (from 17(a) prohibits the transaction. In subadvised funds, and funds that enter the ICI Research Perspective, April 2016)). 862 new addition, the advisory contracts of the into new contracts with subadvisers, funds × 37% = 319 funds. 8 This estimate is based on the following subadviser entering into the transaction, will incur the one-time burden by calculation: 3 hours ÷ 4 rules = 0.75 hours. and any subadviser that is advising the amending their contracts to add the 9 These estimates are based on the following purchasing portion of the fund, must terms required by the rule. calculations: (0.75 hours × 319 portfolios = 239 prohibit the subadvisers from consulting Based on an analysis of fund filings, burden hours); ($380 per hour × 239 hours = with each other concerning securities the staff estimates that approximately $90,820 total cost). The Commission’s estimates concerning the wage rates for attorney time are transactions of the fund, and limit their 319 funds enter into new subadvisory based on salary information for the securities responsibility to providing advice with industry compiled by the Securities Industry and sradovich on DSK3GMQ082PROD with NOTICES respect to discrete portions of the fund’s 5 44 U.S.C. 3501. Financial Markets Association. The estimated wage 6 Transactions of Investment Companies With figure is based on published rates for in-house portfolio.4 Section 17(a) of the Portfolio and Subadviser Affiliates, Investment attorneys, modified to account for a 1,800-hour 1 15 Company Act Release No. 25888 (Jan. 14, 2003) [68 work-year and multiplied by 5.35 to account for U.S.C. 80a–17(a). FR 3153, (Jan. 22, 2003)]. We assume that funds bonuses, firm size, employee benefits, and 2 15 U.S.C. 80a–2(a)(3)(E). formed after 2003 that intended to rely on rule 17a– overhead, yielding an effective hourly rate of $380. 3 As defined in rule 17a–10(b)(2). 17 CFR 10 would have included the required provision as See Securities Industry and Financial Markets 270.17a–10(b)(2). a standard element in their initial subadvisory Association, Report on Management & Professional 4 17 CFR 270.17a–10(a)(2). contracts. Earnings in the Securities Industry 2013. VerDate Sep<11>2014 19:12 Dec 02, 2016 Jkt 241001 PO 00000 Frm 00109 Fmt 4703 Sfmt 4703 E:\FR\FM\05DEN1.SGM 05DEN1

Federal Register / Vol. 81, No. 233 / Monday, December 5, 2016 / Notices 87639 information is necessary for the proper Increments),3 to extend through June 30, site at http:// performance of the functions of the 2017 or the date of permanent approval, nasdaqomxbx.cchwallstreet.com, at the agency, including whether the if earlier, the Penny Pilot Program in principal office of the Exchange, and at information will have practical utility; options classes in certain issues (‘‘Penny the Commission’s Public Reference (b) the accuracy of the agency’s estimate Pilot’’ or ‘‘Pilot’’), and to change the Room. of the burden of the collection of date when delisted classes may be II. Self-Regulatory Organization’s information; (c) ways to enhance the replaced in the Penny Pilot. The text of the proposed rule change Statement of the Purpose of, and quality, utility, and clarity of the is set forth below. Statutory Basis for, the Proposed Rule information collected; and (d) ways to Proposed new language is italicized Change minimize the burden of the collection of information on respondents, including and deleted text is in brackets. In its filing with the Commission, the through the use of automated collection Exchange included statements NASDAQ BX Rules techniques or other forms of information concerning the purpose of and basis for technology. Consideration will be given Options Rules the proposed rule change and discussed to comments and suggestions submitted * * * * * any comments it received on the in writing within 60 days of this proposed rule change. The text of these publication. Chapter VI Trading Systems statements may be examined at the Please direct your written comments * * * * * places specified in Item IV below. The to Pamela Dyson, Director/Chief Exchange has prepared summaries, set Sec. 5 Minimum Increments forth in sections A, B, and C below, of Information Officer, Securities and Exchange Commission, C/O Remi (a) The Board may establish minimum the most significant aspects of such Pavlik-Simon, 100 F Street NE., quoting increments for options contracts statements. Washington, DC 20549; or send an email traded on BX Options. Such minimum A. Self-Regulatory Organization’s to: PRA_Mailbox@sec.gov. increments established by the Board Statement of the Purpose of, and will be designated as a stated policy, Dated: November 22, 2016. Statutory Basis for, the Proposed Rule practice, or interpretation with respect Robert W. Errett, Change to the administration of this Section Deputy Secretary. within the meaning of Section 19 of the 1. Purpose [FR Doc. 2016–29085 Filed 12–2–16; 8:45 am] Exchange Act and will be filed with the The purpose of this filing is to amend BILLING CODE 8011–01–P SEC as a rule change for effectiveness Chapter VI, Section 5, to extend the upon filing. Until such time as the Penny Pilot through June 30, 2017 or the Board makes a change in the date of permanent approval, if earlier,4 SECURITIES AND EXCHANGE increments, the following principles COMMISSION and to change the date when delisted shall apply: classes may be replaced in the Penny (1)–(2) No Change. Pilot. The Exchange believes that [Release No. 34–79420; File No. SR–BX– (3) For a pilot period scheduled to extending the Penny Pilot will allow for 2016–062] expire on [December 31, 2016] June 30, further analysis of the Penny Pilot and 2017 or the date of permanent approval, a determination of how the program Self-Regulatory Organizations; if earlier, if the options series is trading NASDAQ BX, Inc.; Notice of Filing and should be structured in the future. pursuant to the Penny Pilot program one Under the Penny Pilot, the minimum Immediate Effectiveness of Proposed (1) cent if the options series is trading Rule Change To Amend Chapter VI, price variation for all participating at less than $3.00, five (5) cents if the options classes, except for the Nasdaq- Section 5 To Extend the Penny Pilot options series is trading at $3.00 or Program 100 Index Tracking Stock (‘‘QQQQ’’), higher, unless for QQQQs, SPY and the SPDR S&P 500 Exchange Traded November 29, 2016. IWM where the minimum quoting Fund (‘‘SPY’’) and the iShares Russell increment will be one cent for all series 2000 Index Fund (‘‘IWM’’), is $0.01 for Pursuant to Section 19(b)(1) of the regardless of price. A list of such all quotations in options series that are Securities Exchange Act of 1934 options shall be communicated to quoted at less than $3 per contract and (‘‘Act’’),1 and Rule 19b–4 thereunder,2 membership via an Options Trader Alert $0.05 for all quotations in options series notice is hereby given that on November (‘‘OTA’’) posted on the Exchange’s Web that are quoted at $3 per contract or 16, 2016, NASDAQ BX, Inc. (‘‘BX’’ or site. greater. QQQQ, SPY and IWM are ‘‘Exchange’’) filed with the Securities The Exchange may replace any pilot and Exchange Commission (‘‘SEC’’ or quoted in $0.01 increments for all issues that have been delisted with the ‘‘Commission’’) the proposed rule options series. The Penny Pilot is next most actively traded multiply change as described in Items I, II, and currently scheduled to expire on listed options classes that are not yet III below, which Items have been December 31, 2016. included in the pilot, based on trading The Exchange proposes to extend the prepared by the Exchange. The activity in the previous six months. The Commission is publishing this notice to time period of the Penny Pilot through replacement issues may be added to the June 30, 2017 or the date of permanent solicit comments on the proposed rule pilot on the second trading day change from interested persons. approval, if earlier, and to provide a following [July 1, 2016] January 1, 2017. revised date for adding replacement I. Self-Regulatory Organization’s (4) No Change. issues to the Penny Pilot. The Exchange sradovich on DSK3GMQ082PROD with NOTICES Statement of the Terms of Substance of (b) No Change. proposes that any Penny Pilot Program the Proposed Rule Change * * * * * issues that have been delisted may be The text of the proposed rule change The Exchange proposes to amend is also available on the Exchange’s Web 4 The options exchanges in the U.S. that have Chapter VI, Section 5 (Minimum pilot programs similar to the Penny Pilot (together 3 References herein to Chapter and Series refer to ‘‘pilot programs’’) are currently working on a 1 15 U.S.C. 78s(b)(1). rules of the BX Options Market (‘‘BX Options’’), proposal for permanent approval of the respective 2 17 CFR 240.19b–4. unless otherwise noted. pilot programs. VerDate Sep<11>2014 19:12 Dec 02, 2016 Jkt 241001 PO 00000 Frm 00110 Fmt 4703 Sfmt 4703 E:\FR\FM\05DEN1.SGM 05DEN1


Document Created: 2016-12-03 00:25:50
Document Modified: 2016-12-03 00:25:50
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionNotices
FR Citation81 FR 87638 
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