82 FR 11384 - Proposed Collection; Comment Request

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 34 (February 22, 2017)

Page Range		11384-11385
FR Document		2017-03421
Federal Register, Volume 82 Issue 34 (Wednesday, February 22, 2017)
[Federal Register Volume 82, Number 34 (Wednesday, February 22, 2017)]
[Notices]
[Pages 11384-11385]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-03421]


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SECURITIES AND EXCHANGE COMMISSION

[SEC File No. 270-259, OMB Control No. 3235-0269]


Proposed Collection; 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 17f-5.

    Notice is hereby given that, pursuant to the Paperwork Reduction 
Act of 1995 (44 U.S.C. 3501-3520), the Securities and Exchange 
Commission (``Commission'') is soliciting comments on the collection of 
information summarized below. The Commission plans to submit the 
existing collection of information to the Office of Management and 
Budget for extension and approval.
    Rule 17f-5 (17 CFR 270.17f-5) under the Investment Company Act of 
1940 [15 U.S.C. 80a] (the ``Act'') governs the custody of the assets of 
registered management investment companies (``funds'') with custodians 
outside the United States. Under rule 17f-5, a fund or its foreign 
custody manager (as delegated by the fund's board) may maintain the 
fund's foreign assets in the care of an eligible fund custodian under 
certain conditions. If the fund's board delegates to a foreign custody 
manager authority to place foreign assets, the fund's board must find 
that it is reasonable to rely on each delegate the board selects to act 
as the fund's foreign custody manager. The delegate must agree to 
provide written reports that notify the board when the fund's assets 
are placed with a foreign custodian and when any material change occurs 
in the fund's custody arrangements. The delegate must agree to exercise 
reasonable care, prudence, and diligence, or to adhere to a higher 
standard of care. When the foreign custody manager selects an eligible 
foreign custodian, it must determine that the fund's assets will be 
subject to reasonable care if maintained with that custodian, and that 
the written contract that governs each custody arrangement will provide 
reasonable care for fund assets. The contract must contain certain 
specified provisions or others that provide at least equivalent care. 
The foreign custody manager must establish a system to monitor the 
performance of the contract and the appropriateness of continuing to 
maintain assets with the eligible foreign custodian.
    The collection of information requirements in rule 17f-5 are 
intended to provide protection for fund assets maintained with a 
foreign bank custodian whose use is not authorized by statutory 
provisions that govern fund custody arrangements,\1\ and that is not 
subject to regulation and examination by U.S. regulators. The 
requirement that the fund board determine that it is reasonable to rely 
on each delegate is intended to ensure that the board carefully 
considers each delegate's qualifications to perform its 
responsibilities. The requirement that the delegate provide written 
reports to the board is intended to ensure that the delegate notifies 
the board of important developments concerning custody arrangements so 
that the board may exercise effective oversight. The requirement that 
the delegate agree to exercise reasonable care is intended to provide 
assurances to the fund that the delegate will properly perform its 
duties.
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    \1\ See section 17(f) of the Act. 15 U.S.C. 80a-17(f).
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    The requirements that the foreign custody manager determine that 
fund assets will be subject to reasonable care with the eligible 
foreign custodian and under the custody contract, and that each 
contract contain specified provisions or equivalent provisions, are 
intended to ensure that the delegate has evaluated the level of care 
provided by the custodian, that it weighs the adequacy of contractual 
provisions, and that fund assets are protected by minimal contractual 
safeguards. The requirement that the foreign custody manager establish 
a monitoring system is intended to ensure that the manager periodically 
reviews each custody arrangement and takes appropriate action if 
developing custody risks may threaten fund assets.\2\
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    \2\ The staff believes that subcustodian monitoring does not 
involve ``collection of information'' within the meaning of the 
Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) (``Paperwork 
Reduction Act'').
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    Commission staff estimates that each year, approximately 97 
registrants \3\ could be required to make an average of one response 
per registrant under rule 17f-5, requiring approximately 2.5 hours of 
board of director time per response, to make the necessary findings 
concerning foreign custody managers. The total annual burden associated 
with these requirements of the rule is up to approximately 243 hours 
(97 registrants x 2.5 hours per registrant). The staff further 
estimates that during each year, approximately 15 global custodians \4\ 
are required to make an average of 4 responses per custodian concerning 
the use of foreign custodians other than depositories. The staff 
estimates that each response will take approximately 270 hours, 
requiring approximately 1080 total hours annually per custodian (270 
hours x 4 responses per custodian). The total annual burden associated 
with these requirements of the rule is approximately 16,200 hours (15 
global custodians x 1080 hours per custodian). Therefore, the total 
annual burden of all collection of information requirements of rule 
17f-5 is estimated to be up to 16,443 hours (243 + 16,200). The total 
annual cost of burden hours is estimated to be $4,522,392 ((243 hours x 
$4,144/hour for board of director's time) + (16,200 hours x $217/hour 
for a trust administrator's time)).\5\ Compliance with the collection 
of information requirements of the rule is necessary to obtain the 
benefit of relying on the

[[Page 11385]]

rule's permission for funds to maintain their assets in foreign 
custodians.
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    \3\ This figure is an estimate of the number of new funds each 
year, based on data reported by funds for 2014, 2015, and 2016. In 
practice, not all funds will use foreign custody managers. The 
actual figure therefore may be smaller.
    \4\ This estimate is based on staff research.
    \5\ Based on fund industry representations, the staff estimated 
in 2014 that the average cost of board of director time, for the 
board as a whole, was $4,000 per hour. Adjusting for inflation, the 
staff estimates that the current average cost of board of director 
time is approximately $4,144 per hour. The $217/hour figure for a 
trust administrator is from SIFMA's Management & Professional 
Earnings in the Securities Industry 2013, modified by Commission 
staff to account for an 1800-hour work-year and inflation, and 
multiplied by 5.35 to account for bonuses, firm size, employee 
benefits, and overhead.
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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 and forms.
    Written comments are invited on: (a) Whether the collection of 
information is necessary for the proper performance of the functions of 
the Commission, including whether the information has practical 
utility; (b) the accuracy of the Commission'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: February 15, 2017.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-03421 Filed 2-21-17; 8:45 am]
 BILLING CODE 8011-01-P
11384 Federal Register / Vol. 82, No. 34 / Wednesday, February 22, 2017 / Notices

(b) the accuracy of the agency’s estimate reasonable to rely on each delegate the requirement that the foreign custody
of the burden of the collection of board selects to act as the fund’s foreign manager establish a monitoring system
information; (c) ways to enhance the custody manager. The delegate must is intended to ensure that the manager
quality, utility, and clarity of the agree to provide written reports that periodically reviews each custody
information collected; and (d) ways to notify the board when the fund’s assets arrangement and takes appropriate
minimize the burden of the collection of are placed with a foreign custodian and action if developing custody risks may
information on respondents, including when any material change occurs in the threaten fund assets.2
through the use of automated collection fund’s custody arrangements. The
techniques or other forms of information delegate must agree to exercise Commission staff estimates that each
technology. Consideration will be given reasonable care, prudence, and year, approximately 97 registrants 3
to comments and suggestions submitted diligence, or to adhere to a higher could be required to make an average of
in writing within 60 days of this standard of care. When the foreign one response per registrant under rule
publication. custody manager selects an eligible 17f–5, requiring approximately 2.5
Please direct your written comments foreign custodian, it must determine hours of board of director time per
to Pamela Dyson, Director/Chief that the fund’s assets will be subject to response, to make the necessary
Information Officer, Securities and reasonable care if maintained with that findings concerning foreign custody
Exchange Commission, C/O Remi custodian, and that the written contract managers. The total annual burden
Pavlik-Simon, 100 F Street NE., that governs each custody arrangement associated with these requirements of
Washington, DC 20549; or send an email will provide reasonable care for fund the rule is up to approximately 243
to: PRA_Mailbox@sec.gov. assets. The contract must contain hours (97 registrants × 2.5 hours per
Dated: February 15, 2017. certain specified provisions or others registrant). The staff further estimates
Eduardo A. Aleman, that provide at least equivalent care. that during each year, approximately 15
Assistant Secretary.
The foreign custody manager must global custodians 4 are required to make
establish a system to monitor the an average of 4 responses per custodian
[FR Doc. 2017–03393 Filed 2–21–17; 8:45 am]
performance of the contract and the concerning the use of foreign custodians
BILLING CODE 8011–01–P
appropriateness of continuing to other than depositories. The staff
maintain assets with the eligible foreign estimates that each response will take
custodian. approximately 270 hours, requiring
SECURITIES AND EXCHANGE
The collection of information approximately 1080 total hours
COMMISSION
requirements in rule 17f–5 are intended annually per custodian (270 hours × 4
[SEC File No. 270–259, OMB Control No. to provide protection for fund assets
3235–0269]
responses per custodian). The total
maintained with a foreign bank
annual burden associated with these
custodian whose use is not authorized
Proposed Collection; Comment requirements of the rule is
by statutory provisions that govern fund
Request approximately 16,200 hours (15 global
custody arrangements,1 and that is not
subject to regulation and examination custodians × 1080 hours per custodian).
Upon Written Request, Copies Available Therefore, the total annual burden of all
From: Securities and Exchange by U.S. regulators. The requirement that
the fund board determine that it is collection of information requirements
Commission, Office of FOIA Services, of rule 17f–5 is estimated to be up to
100 F Street NE., Washington, DC reasonable to rely on each delegate is
intended to ensure that the board 16,443 hours (243 + 16,200). The total
20549–2736.
carefully considers each delegate’s annual cost of burden hours is estimated
Extension:
qualifications to perform its to be $4,522,392 ((243 hours × $4,144/
Rule 17f–5. hour for board of director’s time) +
responsibilities. The requirement that
Notice is hereby given that, pursuant the delegate provide written reports to (16,200 hours × $217/hour for a trust
to the Paperwork Reduction Act of 1995 the board is intended to ensure that the administrator’s time)).5 Compliance
(44 U.S.C. 3501–3520), the Securities delegate notifies the board of important with the collection of information
and Exchange Commission developments concerning custody requirements of the rule is necessary to
(‘‘Commission’’) is soliciting comments arrangements so that the board may obtain the benefit of relying on the
on the collection of information exercise effective oversight. The
summarized below. The Commission requirement that the delegate agree to 2 The staff believes that subcustodian monitoring

plans to submit the existing collection exercise reasonable care is intended to does not involve ‘‘collection of information’’ within
of information to the Office of provide assurances to the fund that the the meaning of the Paperwork Reduction Act of
1995 (44 U.S.C. 3501–3520) (‘‘Paperwork Reduction
Management and Budget for extension delegate will properly perform its Act’’).
and approval. duties. 3 This figure is an estimate of the number of new
Rule 17f–5 (17 CFR 270.17f–5) under The requirements that the foreign funds each year, based on data reported by funds
the Investment Company Act of 1940 custody manager determine that fund for 2014, 2015, and 2016. In practice, not all funds
[15 U.S.C. 80a] (the ‘‘Act’’) governs the assets will be subject to reasonable care will use foreign custody managers. The actual figure
therefore may be smaller.
custody of the assets of registered with the eligible foreign custodian and 4 This estimate is based on staff research.
management investment companies under the custody contract, and that 5 Based on fund industry representations, the staff
(‘‘funds’’) with custodians outside the each contract contain specified estimated in 2014 that the average cost of board of
United States. Under rule 17f–5, a fund provisions or equivalent provisions, are director time, for the board as a whole, was $4,000
or its foreign custody manager (as per hour. Adjusting for inflation, the staff estimates
sradovich on DSK3GMQ082PROD with NOTICES

intended to ensure that the delegate has
that the current average cost of board of director
delegated by the fund’s board) may evaluated the level of care provided by time is approximately $4,144 per hour. The $217/
maintain the fund’s foreign assets in the the custodian, that it weighs the hour figure for a trust administrator is from
care of an eligible fund custodian under adequacy of contractual provisions, and SIFMA’s Management & Professional Earnings in
certain conditions. If the fund’s board that fund assets are protected by the Securities Industry 2013, modified by
Commission staff to account for an 1800-hour work-
delegates to a foreign custody manager minimal contractual safeguards. The year and inflation, and multiplied by 5.35 to
authority to place foreign assets, the account for bonuses, firm size, employee benefits,
fund’s board must find that it is 1 See section 17(f) of the Act. 15 U.S.C. 80a–17(f). and overhead.

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Federal Register / Vol. 82, No. 34 / Wednesday, February 22, 2017 / Notices 11385

rule’s permission for funds to maintain ‘‘Commission’’) the proposed rule Only order would be posted in the same
their assets in foreign custodians. change as described in Items I and II manner as a Price to Comply Order.
The estimate of average burden hours below, which Items have been prepared However, the Post-Only Order would
is made solely for the purposes of the by the Exchange. The Commission is execute if (i) it is priced at $1.00 or
Paperwork Reduction Act. The estimate publishing this notice to solicit more, or (ii) it is priced below $1.00 and
is not derived from a comprehensive or comments on the proposed rule change the value of price improvement
even a representative survey or study of from interested persons. associated with executing against an
the costs of Commission rules and I. Self-Regulatory Organization’s Order on the Exchange Book (as
forms. Statement of the Terms of Substance of measured against the original limit price
Written comments are invited on: (a) the Proposed Rule Change of the Order) equals or exceeds the sum
Whether the collection of information is of fees charged for such execution and
necessary for the proper performance of The Exchange proposes to extend the the value of any rebate that would be
the functions of the Commission, implementation date of its functionality provided if the Order posted to the
including whether the information has relating to Post-Only Orders and Orders Exchange Book and subsequently
practical utility; (b) the accuracy of the with Midpoint Pegging, and its Trade- provided liquidity.5
Commission’s estimate of the burden of Now functionality. Additionally, if the Post-Only Order
the collection of information; (c) ways to There is no rule text for this proposed would not lock or cross a Protected
enhance the quality, utility, and clarity rule change. Quotation but would lock or cross a
of the information collected; and (d) II. Self-Regulatory Organization’s Non-Displayed Order on the Exchange’s
ways to minimize the burden of the Statement of the Purpose of, and Book, the Post-Only Order would be
collection of information on Statutory Basis for, the Proposed Rule posted, ranked, and displayed at its
respondents, including through the use Change limit price. The Post-Only Order would
of automated collection techniques or In its filing with the Commission, the execute if (i) it is priced at $1.00 or
other forms of information technology. Exchange included statements more, or (ii) it is priced below $1.00 and
Consideration will be given to concerning the purpose of and basis for the value of price improvement
comments and suggestions submitted in the proposed rule change and discussed associated with executing against an
writing within 60 days of this any comments it received on the Order on the Exchange Book equals or
publication. proposed rule change. The text of these exceeds the sum of fees charged for such
Please direct your written comments statements may be examined at the execution and the value of any rebate
to Pamela Dyson, Director/Chief places specified in Item IV below. The that would be provided if the Order
Information Officer, Securities and Exchange has prepared summaries, set posted to the Exchange Book and
Exchange Commission, C/O Remi forth in sections A, B, and C below, of subsequently provided liquidity.6
Pavlik-Simon, 100 F Street NE., the most significant aspects of such BX also proposed to change its
Washington, DC 20549; or send an email statements. Midpoint Peg Post-Only Order, so that,
to: PRA_Mailbox@sec.gov. if the Inside Bid and Inside Offer are
A. Self-Regulatory Organization’s crossed, any existing Order with
Dated: February 15, 2017.
Statement of the Purpose of, and Midpoint Pegging would be rejected and
Eduardo A. Aleman, Statutory Basis for, the Proposed Rule any new Order with Midpoint Pegging
Assistant Secretary. Change would be cancelled.7
[FR Doc. 2017–03421 Filed 2–21–17; 8:45 am]
1. Purpose Under BX’s Trade-Now functionality,
BILLING CODE 8011–01–P
participants could enter an instruction
BX is filing this proposal to extend
to have a locked resting buy (sell) order
the implementation date of its
execute against the locking sell (buy)
SECURITIES AND EXCHANGE functionality relating to Post-Only
order. BX proposed to offer the
COMMISSION Orders and Orders with Midpoint
functionality on its OUCH, RASH,
Pegging, and its Trade-Now
[Release No. 34–80046; File No. SR–BX–
functionality. The functionality relating FLITE and FIX protocols. Depending on
2017–008] the protocol used by the participant to
to Post-Only Orders and Orders with
Midpoint Pegging was approved by the access the BX system, the participant
Self-Regulatory Organizations; could either specify that the order
NASDAQ BX, Inc.; Notice of Filing and SEC on November 10, 2016,3 and the
Trade-Now functionality was submitted execute against locking interest
Immediate Effectiveness of Proposed automatically, or the participant would
Rule Change To Extend the on an immediately effective basis on
November 8, 2016.4 be required to send a Trade Now
Implementation Date of Its instruction to the Exchange once the
Functionality Relating to Post-Only Under the new Post-Only
functionality, the behavior of Post-Only order has become locked. BX proposed
Orders and Orders With Midpoint to offer the Trade Now instruction for
Pegging, and Its Trade-Now orders would be altered when the
adjusted price of such orders lock or all orders that may be sent to the BX
Functionality book and that are not subject to other
cross a non-displayed price on the
February 15, 2017. Exchange’s Book. Specifically, if the BX rules regarding the display and
Pursuant to Section 19(b)(1) of the adjusted price of the Post-Only Order execution of those orders.8
Securities Exchange Act of 1934 would lock or cross a non-displayed BX initially proposed to implement
the new Post-Only, Midpoint Pegging
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(‘‘Act’’),1 and Rule 19b–4 thereunder,2 price on the Exchange’s Book, the Post-
notice is hereby given that on February and Trade-Now functionality on
3, 2017, NASDAQ BX, Inc. (‘‘BX’’ or 3 See Securities Exchange Act Release No. 79290
5 See
(November 10, 2016), 81 FR 81184 (November 17, Post-Only Approval Order, supra note 3.
‘‘Exchange’’) filed with the Securities 6 Id.
2016) (SR–BX–2016–046) (‘‘Post-Only Approval
and Exchange Commission (‘‘SEC’’ or Order’’). 7 Id.
4 See Securities Exchange Act Release No. 79281 8 See Securities Exchange Act Release No. 79281
1 15 U.S.C. 78s(b)(1). (November 10, 2016), 81 FR 81203 (November 17, (November 10, 2016), 81 FR 81203 (November 17,
2 17 CFR 240.19b–4. 2016) (SR–BX–2016–059). 2016) (SR–BX–2016–059).

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Document Created: 2017-02-22 00:08:40
Document Modified: 2017-02-22 00:08:40
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		82 FR 11384