82 FR 20401 - Submission for OMB Review; Comment Request

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 82 (May 1, 2017)

Page Range		20401-20402
FR Document		2017-08760
Federal Register, Volume 82 Issue 82 (Monday, May 1, 2017)
[Federal Register Volume 82, Number 82 (Monday, May 1, 2017)]
[Notices]
[Pages 20401-20402]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-08760]


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SECURITIES AND EXCHANGE COMMISSION

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


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 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'') has submitted to the Office of Management 
and Budget (``OMB'') requests for extension of the previously approved 
collections of information discussed below.
    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 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

[[Page 20402]]

the costs of Commission rules and forms.
    The public may view the background documentation for this 
information collection at the following Web site, www.reginfo.gov. 
Comments should be directed to: (i) Desk Officer for the Securities and 
Exchange Commission, Office of Information and Regulatory Affairs, 
Office of Management and Budget, Room 10102, New Executive Office 
Building, Washington, DC 20503, or by sending an email to: 
[email protected]; and (ii) Pamela Dyson, Director/Chief 
Information Officer, Securities and Exchange Commission, c/o Remi 
Pavlik-Simon, 100 F Street, NE., Washington, DC 20549 or send an email 
to: [email protected]. Comments must be submitted to OMB within 30 
days of this notice.

    Dated: April 25, 2017.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-08760 Filed 4-28-17; 8:45 am]
BILLING CODE 8011-01-P
Federal Register / Vol. 82, No. 82 / Monday, May 1, 2017 / Notices 20401

Officers, and this process is not be when any material change occurs in the action if developing custody risks may
affected by this proposed rule change. fund’s custody arrangements. The threaten fund assets.2
For the reasons noted above, the delegate must agree to exercise Commission staff estimates that each
Commission finds that the proposed reasonable care, prudence, and year, approximately 97 registrants 3
rule change is consistent with the Act. diligence, or to adhere to a higher could be required to make an average of
standard of care. When the foreign one response per registrant under rule
IV. Conclusion 17f–5, requiring approximately 2.5
custody manager selects an eligible
It is therefore ordered, pursuant to foreign custodian, it must determine hours of board of director time per
Section 19(b)(2) of the Act,21 that the that the fund’s assets will be subject to response, to make the necessary
proposed rule change (SR–CBOE–2017– reasonable care if maintained with that findings concerning foreign custody
017) be, and hereby is, approved. custodian, and that the written contract managers. The total annual burden
For the Commission, by the Division of that governs each custody arrangement associated with these requirements of
Trading and Markets, pursuant to delegated will provide reasonable care for fund the rule is up to approximately 243
authority.22 assets. The contract must contain hours (97 registrants × 2.5 hours per
Eduardo A. Aleman, certain specified provisions or others registrant). The staff further estimates
Assistant Secretary. that provide at least equivalent care. that during each year, approximately 15
[FR Doc. 2017–08700 Filed 4–28–17; 8:45 am] 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
BILLING CODE 8011–01–P
performance of the contract and the concerning the use of foreign custodians
appropriateness of continuing to other than depositories. The staff
SECURITIES AND EXCHANGE maintain assets with the eligible foreign estimates that each response will take
COMMISSION custodian. approximately 270 hours, requiring
The collection of information approximately 1080 total hours
[SEC File No. 270–259, OMB Control No.
requirements in rule 17f–5 are intended annually per custodian (270 hours × 4
3235–0269] responses per custodian). The total
to provide protection for fund assets
maintained with a foreign bank annual burden associated with these
Submission for OMB Review; requirements of the rule is
Comment Request custodian whose use is not authorized
by statutory provisions that govern fund approximately 16,200 hours (15 global
Upon Written Request, Copies Available custody arrangements,1 and that is not custodians × 1080 hours per custodian).
From: Securities and Exchange subject to regulation and examination Therefore, the total annual burden of all
Commission, Office of FOIA Services, by U.S. regulators. The requirement that collection of information requirements
100 F Street, NE.,Washington, DC the fund board determine that it is of rule 17f–5 is estimated to be up to
20549–2736. reasonable to rely on each delegate is 16,443 hours (243 + 16,200). The total
intended to ensure that the board annual cost of burden hours is estimated
Extension:
Rule 17f–5. carefully considers each delegate’s to be $4,522,392 ((243 hours × $4,144/
qualifications to perform its hour for board of director’s time) +
Notice is hereby given that, pursuant (16,200 hours × $217/hour for a trust
to the Paperwork Reduction Act of 1995 responsibilities. The requirement that
the delegate provide written reports to administrator’s time)).5 Compliance
(44 U.S.C. 3501–3520), the Securities with the collection of information
and Exchange Commission the board is intended to ensure that the
delegate notifies the board of important requirements of the rule is necessary to
(‘‘Commission’’) has submitted to the obtain the benefit of relying on the
Office of Management and Budget developments concerning custody
arrangements so that the board may rule’s permission for funds to maintain
(‘‘OMB’’) requests for extension of the their assets in foreign custodians.
previously approved collections of exercise effective oversight. The
The estimate of average burden hours
information discussed below. requirement that the delegate agree to
is made solely for the purposes of the
Rule 17f–5 (17 CFR 270.17f–5) under exercise reasonable care is intended to
Paperwork Reduction Act. The estimate
the Investment Company Act of 1940 provide assurances to the fund that the
is not derived from a comprehensive or
[15 U.S.C. 80a] (the ‘‘Act’’) governs the delegate will properly perform its
even a representative survey or study of
custody of the assets of registered duties.
management investment companies The requirements that the foreign 2 The staff believes that subcustodian monitoring

(‘‘funds’’) with custodians outside the custody manager determine that fund does not involve ‘‘collection of information’’ within
United States. Under rule 17f–5, a fund assets will be subject to reasonable care the meaning of the Paperwork Reduction Act of
with the eligible foreign custodian and 1995 (44 U.S.C. 3501–3520) (‘‘Paperwork Reduction
or its foreign custody manager (as Act’’).
delegated by the fund’s board) may under the custody contract, and that 3 This figure is an estimate of the number of new

maintain the fund’s foreign assets in the each contract contain specified funds each year, based on data reported by funds
care of an eligible fund custodian under provisions or equivalent provisions, are for 2014, 2015, and 2016. In practice, not all funds
certain conditions. If the fund’s board intended to ensure that the delegate has will use foreign custody managers. The actual figure
evaluated the level of care provided by therefore may be smaller.
delegates to a foreign custody manager 4 This estimate is based on staff research.
authority to place foreign assets, the the custodian, that it weighs the 5 Based on fund industry representations, the staff

fund’s board must find that it is adequacy of contractual provisions, and estimated in 2014 that the average cost of board of
reasonable to rely on each delegate the that fund assets are protected by director time, for the board as a whole, was $4,000
minimal contractual safeguards. The per hour. Adjusting for inflation, the staff estimates
srobinson on DSK5SPTVN1PROD with NOTICES

board selects to act as the fund’s foreign that the current average cost of board of director
custody manager. The delegate must requirement that the foreign custody
time is approximately $4,144 per hour. The $217/
agree to provide written reports that manager establish a monitoring system hour figure for a trust administrator is from
notify the board when the fund’s assets is intended to ensure that the manager SIFMA’s Management & Professional Earnings in
are placed with a foreign custodian and periodically reviews each custody the Securities Industry 2013, modified by
arrangement and takes appropriate Commission staff to account for an 1800-hour work-
year and inflation, and multiplied by 5.35 to
21 15 U.S.C. 78s(b)(2). account for bonuses, firm size, employee benefits,
22 17 CFR 200.30–3(a)(12). 1 See section 17(f) of the Act. 15 U.S.C. 80a–17(f). and overhead.

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20402 Federal Register / Vol. 82, No. 82 / Monday, May 1, 2017 / Notices

the costs of Commission rules and (generally, fixed-income securities), Thus, the staff estimates that the annual
forms. provided that: (i) The capital gains hour burden of the collection of
The public may view the background distribution falls within one of five information imposed by rule 19b–1(e)
documentation for this information categories specified in the rule 1 and (ii) would be approximately five hours per
collection at the following Web site, the distribution is accompanied by a fund, at a cost of $6017.50.6 Because the
www.reginfo.gov. Comments should be report to the unitholder that clearly staff estimates that, each year, five funds
directed to: (i) Desk Officer for the describes the distribution as a capital will file an application pursuant to rule
Securities and Exchange Commission, gains distribution (the ‘‘notice 19b–1(e), the total burden for the
Office of Information and Regulatory requirement’’).2 Rule 19b–1(e) permits a information collection is 40 hours at a
Affairs, Office of Management and fund to apply to the Commission for cost of $30,087.50.7
Budget, Room 10102, New Executive permission to distribute long-term Commission staff estimates that there
Office Building, Washington, DC 20503, capital gains that would otherwise be is no hour burden associated with
or by sending an email to: Shagufta_ prohibited by the rule if the fund did complying with the collection of
Ahmed@omb.eop.gov; and (ii) Pamela not foresee the circumstances that information component of rule 19b–1(c).
Dyson, Director/Chief Information created the need for the distribution. As noted above, Commission staff
Officer, Securities and Exchange The application must set forth the understands that funds that file an
Commission, c/o Remi Pavlik-Simon, pertinent facts and explain the application under rule 19b–1(e)
100 F Street, NE., Washington, DC circumstances that justify the generally use outside counsel to prepare
20549 or send an email to: PRA_ distribution.3 An application that meets the application.8 The staff estimates
Mailbox@sec.gov. Comments must be those requirements is deemed to be that, on average, outside counsel spends
submitted to OMB within 30 days of granted unless the Commission denies 10 hours preparing a rule 19b–1(e)
this notice. the request within 15 days after the application, including eight hours by an
Dated: April 25, 2017. Commission receives the application. associate and two hours by a partner.
Commission staff estimates that five Outside counsel billing arrangements
Eduardo A. Aleman,
funds will file an application under rule and rates vary based on numerous
Assistant Secretary.
19b–1(e) each year.4 The staff factors, but the staff has estimated the
[FR Doc. 2017–08760 Filed 4–28–17; 8:45 am] average cost of outside counsel as $400
understands that if a fund files an
BILLING CODE 8011–01–P application it generally uses outside per hour, based on information received
counsel to prepare the application. The from funds, intermediaries, and their
cost burden of using outside counsel is counsel. The staff therefore estimates
SECURITIES AND EXCHANGE that the average cost of outside counsel
discussed below. The staff estimates
COMMISSION that, on average, a fund’s investment preparation of the rule 19b–1(e)
[SEC File No. 270–312, OMB Control No. adviser would spend approximately 4 exemptive application is $4,000.9
3235–0354] hours to review an application, Because the staff estimates that, each
including 3.5 hours by an assistant year, five funds will file an application
Submission for OMB Review; general counsel at a cost of $433 per pursuant to rule 19b–1(e), the total
Comment Request hour and 0.5 hours by an administrative annual cost burden imposed by the
Upon Written Request, Copies Available assistant at a cost of $74 per hour, and exemptive application requirements of
From: Securities and Exchange the fund’s board of directors would rule 19b–1(e) is estimated to be
Commission, Office of FOIA Services, spend an additional 1 hour at a cost of $20,000.10
100 F Street NE., Washington, DC $4,465 per hour, for a total of 5 hours.5 The Commission staff estimates that
20549–2736. there are approximately 2,579 UITs 11
1 17 CFR 270.19b–1(c)(1). that may rely on rule 19b–1(c) to make
Extension: 2 The notice requirement in rule 19b–1(c)(2) capital gains distributions. The staff
Rule 19b–1. supplements the notice requirement of section 19(a) estimates that, on average, these UITs
Notice is hereby given that, pursuant [15 U.S.C. 80a–19(a)], which requires any
distribution in the nature of a dividend payment to rely on rule 19b–1(c) once a year to
to the Paperwork Reduction Act of 1995 be accompanied by a notice disclosing the source make a capital gains distribution.12 In
(44 U.S.C. 3501–3520), the Securities of the distribution.
and Exchange Commission 3 Rule 19b–1(e) also requires that the application
cost of board of director time is approximately
(‘‘Commission’’) has submitted to the comply with rule 0–2 [17 CFR 270.02] under the $4,465.
Act, which sets forth the general requirements for 6 This estimate is based on the following
Office of Management and Budget papers and applications filed with the Commission calculations: $1515.50 (3.5 hours × $433 =
(‘‘OMB’’) a request for extension of the pursuant to the Act and rules thereunder. $1515.50) plus $37 (0.5 hours × $74 = $37) plus
previously approved collection of 4 This estimate is based on the average number of
$4465 equals $6017.50 (cost of one application).
information discussed below. applications filed with the Commission pursuant to 7 This estimate is based on the following
rule 19b–1(e) in the prior three-year period.
Section 19(b) of the Investment 5 The estimate for assistant general counsels is
calculation: $6017.50 (cost of one application)
Company Act of 1940 (the ‘‘Act’’) (15 multiplied by 5 applications = $30,087.50 total cost.
from SIFMA’s Management & Professional Earnings 8 This understanding is based on conversations
U.S.C. 80a–19(b)) authorizes the in the Securities Industry 2013, modified by with representatives from the fund industry.
Commission to regulate registered Commission staff to account for an 1800-hour work- 9 This estimate is based on the following
investment company (‘‘fund’’) year and inflation (as of January 2016) and
calculation: 10 hours multiplied by $400 per hour
multiplied by 5.35 to account for bonuses, firm size,
distributions of long-term capital gains employee benefits and overhead. The estimate for
equals $4,000.
10 This estimate is based on the following
made more frequently than once every administrative assistants is from SIFMA’s Office
Salaries in the Securities Industry 2013, modified calculation: $4,000 multiplied by five (funds)
twelve months. Accordingly, rule 19b–
srobinson on DSK5SPTVN1PROD with NOTICES

by Commission staff to account for an 1800-hour equals $20,000.
1 under the Act (17 CFR 270.19b–1) work-year and inflation (as of January 2016) and 11 See 2016 Investment Company Fact Book,
regulates the frequency of fund multiplied by 2.93 to account for bonuses, firm size, Investment Company Institute, available at https://
distributions of capital gains. Rule 19b– employee benefits and overhead. The staff www.ici.org/pdf/2016_factbook.pdf.
previously estimated in 2009 that the average cost 12 The number of times UITs rely on the rule to
1(c) states that the rule does not apply
of board of director time was $4,000 per hour for make capital gains distributions depends on a wide
to a unit investment trust (‘‘UIT’’) if it the board as a whole, based on information received range of factors and, thus, can vary greatly across
is engaged exclusively in the business of from funds and their counsel. Adjusting for years and UITs. UITs may distribute capital gains
investing in certain eligible securities inflation, the staff estimates that the current average biannually, annually, quarterly, or at other

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Document Created: 2017-04-29 03:16:19
Document Modified: 2017-04-29 03:16:19
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 20401