82 FR 42565 - Submission for OMB Review; Comment Request

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 173 (September 8, 2017)

Page Range		42565-42566
FR Document		2017-19071

Federal Register, Volume 82 Issue 173 (Friday, September 8, 2017)

[Federal Register Volume 82, Number 173 (Friday, September 8, 2017)]
[Notices]
[Pages 42565-42566]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-19071]


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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 17Ad-3(b),
    SEC File No. 270-424, OMB Control No. 3235-0473.

    Notice is hereby given that pursuant to the Paperwork Reduction Act 
of 1995 (``PRA'') (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 approval of extension of the 
previously approved collection of information provided for in Rule 
17Ad-3(b) (17 CFR 240.17Ad-3(b)), under the Securities Exchange Act of 
1934 (15 U.S.C. 78a et seq.).
    Rule 17Ad-3(b) requires registered transfer agents to send a copy 
of the written notice required under Rules 17Ad-2(c), (d), and (h) to 
the chief executive officer of each issuer for which the transfer agent 
acts when it has failed to turnaround at least 75% of all routine items 
in accordance with the requirements of Rule 17Ad-2(a), or to process at 
least 75% of all items in accordance with the requirements of Rule 
17Ad-2(b), for two consecutive months. The issuer may use the 
information contained in the notices: (1) As an early warning of the 
transfer agent's non-compliance with the Commission's minimum 
performance standards regarding registered transfer agents; and (2) to 
become aware of certain problems and poor performances with respect to 
the transfer agents that are servicing the issuer's issues. If the 
issuer does not receive notice of a registered transfer agent's failure 
to comply with the Commission's minimum performance standards then the 
issuer will be unable to take remedial action to correct the problem or 
to find another registered transfer agent. Pursuant to Rule 17Ad-3(b), 
a transfer agent that has already filed a Notice of Non-Compliance with 
the Commission pursuant to Rule 17Ad-2 will only be required to send a 
copy of that notice to issuers for which it acts when that transfer 
agent fails to turnaround 75% of all routine items or to process 75% of 
all items.
    The Commission estimates that only one transfer agent will meet the 
requirements of Rule 17Ad-3(b) each year. If a transfer agent fails to 
meet those turnaround and processing performance requirements under 
17Ad-3(b), it would simply send a copy of the notice to its issuer-
clients that had already been produced for the Commission pursuant to 
Rule 17Ad-2(c) or (d). The Commission estimates

[[Page 42566]]

the requirement will take each respondent approximately four hours to 
complete. The Commission staff estimates that compliance staff work at 
registered transfer agents to comply with the third party disclosure 
requirement will result in an internal cost of compliance, at an 
estimated hourly wage of $283, of $1,128 per year per transfer agent (4 
hours x $283 per hour = $1,128 per year). Therefore, the aggregate 
annual internal cost of compliance for the approximately one registered 
transfer agent each year to comply with Rule 17Ad-3(b) is also $1,128. 
There are no external labor costs associated with sending the notice to 
issuers.
    An agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information under the PRA unless it 
displays a currently valid OMB control number.
    The public may view 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 by sending an 
email to: [email protected]. Comments must be submitted to OMB within 
30 days of this notice.

    Dated: September 5, 2017.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-19071 Filed 9-7-17; 8:45 am]
 BILLING CODE 8011-01-P

Federal Register / Vol. 82, No. 173 / Friday, September 8, 2017 / Notices 42565

shareholders following the discovery of hours × $205 = $1,615,195) + (15,757 Commission, Office of FOIA Services,
the inaccuracy. hours × $66 = $1,039,962)). 100 F Street NE., Washington, DC
The purpose of rule 19a–1 is to afford To comply with state law, many 20549–2736.
fund shareholders adequate disclosure investment companies already must Extension:
of the sources from which distribution distinguish the different sources from Rule 17Ad–3(b),
payments are made. The rule is which a shareholder distribution is paid SEC File No. 270–424, OMB Control No.
intended to prevent shareholders from and disclose that information to 3235–0473.
confusing income dividends with shareholders. Thus, many investment
Notice is hereby given that pursuant
distributions made from capital sources. companies would be required to
to the Paperwork Reduction Act of 1995
Absent rule 19a–1, shareholders might distinguish the sources of shareholder
(‘‘PRA’’) (44 U.S.C. 3501 et seq.), the
receive a false impression of fund gains. dividends whether or not the
Securities and Exchange Commission
Commission required them to do so
Based on a review of filings made (‘‘Commission’’) has submitted to the
under rule 19a–1.
with the Commission, the staff estimates The estimate of average burden hours Office of Management and Budget
that approximately 11,818 series of is made solely for the purposes of the (‘‘OMB’’) a request for approval of
registered investment companies that Paperwork Reduction Act, and is not extension of the previously approved
are management companies may be derived from a comprehensive or even collection of information provided for in
subject to rule 19a–1 each year,3 and a representative survey or study of the Rule 17Ad–3(b) (17 CFR 240.17Ad–
that each portfolio on average mails two costs of Commission rules. Compliance 3(b)), under the Securities Exchange Act
statements per year to meet the with the collection of information of 1934 (15 U.S.C. 78a et seq.).
requirements of the rule.4 The staff required by rule 19a–1 is mandatory for Rule 17Ad–3(b) requires registered
further estimates that the time needed to management companies that make transfer agents to send a copy of the
make the determinations required by the statements to shareholders pursuant to written notice required under Rules
rule and to prepare the statement section 19(a) of the Act. An agency may 17Ad–2(c), (d), and (h) to the chief
required under the rule is not conduct or sponsor, and a person is executive officer of each issuer for
approximately 1 hour per statement. not required to respond to, a collection which the transfer agent acts when it
The total annual burden for all of information unless it displays a has failed to turnaround at least 75% of
portfolios therefore is estimated to be currently valid control number. all routine items in accordance with the
approximately 23,636 burden hours.5 Written comments are invited on: (a) requirements of Rule 17Ad–2(a), or to
The staff estimates that approximately Whether the collections of information process at least 75% of all items in
one-third of the total annual burden are necessary for the proper accordance with the requirements of
(7,879 hours) would be incurred by a performance of the functions of the Rule 17Ad–2(b), for two consecutive
paralegal with an average hourly wage Commission, including whether the months. The issuer may use the
rate of approximately $205 per hour,6 information has practical utility; (b) the information contained in the notices: (1)
and approximately two-thirds of the accuracy of the Commission’s estimate As an early warning of the transfer
annual burden (15,757 hours) would be of the burdens of the collections of agent’s non-compliance with the
incurred by a compliance clerk with an information; (c) ways to enhance the Commission’s minimum performance
average hourly wage rate of $66 per quality, utility, and clarity of the standards regarding registered transfer
hour.7 The staff therefore estimates that information collected; and (d) ways to agents; and (2) to become aware of
the aggregate annual cost of complying minimize the burdens of the collections certain problems and poor performances
with the paperwork requirements of the of information on respondents, with respect to the transfer agents that
rule is approximately $2,655,157 ((7,879 including through the use of automated are servicing the issuer’s issues. If the
collection techniques or other forms of issuer does not receive notice of a
3 This estimate is based on statistics compiled by information technology. Consideration registered transfer agent’s failure to
Commission staff as of April 30, 2017. The number will be given to comments and comply with the Commission’s
of management investment company portfolios that suggestions submitted in writing within minimum performance standards then
make distributions for which compliance with rule
60 days of this publication. the issuer will be unable to take
19a–1 is required depends on a wide range of remedial action to correct the problem
factors and can vary greatly across years. Therefore, Please direct your written comments
the calculation of estimated burden hours is based to Pamela Dyson, Director/Chief or to find another registered transfer
on the total number of management investment Information Officer, Securities and agent. Pursuant to Rule 17Ad–3(b), a
company portfolios, each of which may be subject Exchange Commission, C/O Remi transfer agent that has already filed a
to rule 19a–1. Notice of Non-Compliance with the
4 A few portfolios make monthly distributions
Pavlik-Simon, 100 F Street NE.,
from sources other than net income, so the rule Washington, DC 20549; or send an email Commission pursuant to Rule 17Ad–2
requires them to send out a statement 12 times a to: PRA_Mailbox@sec.gov. will only be required to send a copy of
year. Other portfolios never make such that notice to issuers for which it acts
distributions. Dated: September 5, 2017.
when that transfer agent fails to
5 This estimate is based on the following Eduardo A. Aleman,
turnaround 75% of all routine items or
calculation: 11,818 management investment Assistant Secretary.
company portfolios × 2 statements per year × 1 hour to process 75% of all items.
[FR Doc. 2017–19070 Filed 9–7–17; 8:45 am] The Commission estimates that only
per statement = 23,636 burden hours.
6 Hourly rates are derived from the Securities BILLING CODE 8011–01–P one transfer agent will meet the
Industry and Financial Markets Association requirements of Rule 17Ad–3(b) each
(‘‘SIFMA’’), Management and Professional Earnings year. If a transfer agent fails to meet
sradovich on DSK3GMQ082PROD with NOTICES

in the Securities Industry 2013, modified to account SECURITIES AND EXCHANGE
for an 1,800-hour work-year and inflation, and those turnaround and processing
multiplied by 5.35 to account for bonuses, firm size,
COMMISSION performance requirements under 17Ad–
employee benefits, and overhead. 3(b), it would simply send a copy of the
7 Hourly rates are derived from SIFMA’s Office Submission for OMB Review;
notice to its issuer-clients that had
Salaries in the Securities Industry 2013, modified Comment Request
to account for an 1,800-hour work-year and
already been produced for the
multiplied by 2.93 to account for bonuses, firm size, Upon Written Request, Copies Available Commission pursuant to Rule 17Ad–
employee benefits and overhead. From: Securities and Exchange 2(c) or (d). The Commission estimates

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42566 Federal Register / Vol. 82, No. 173 / Friday, September 8, 2017 / Notices

the requirement will take each (‘‘Commission’’) plans to submit to the any fund that relies on any of the
respondent approximately four hours to Office of Management and Budget a exemptive rules must be an
complete. The Commission staff request for extension of the previous ‘‘independent legal counsel.’’ This
estimates that compliance staff work at approved collection of information requirement was added because
registered transfer agents to comply discussed below. independent directors can better
with the third party disclosure The Investment Company Act of 1940 perform the responsibilities assigned to
requirement will result in an internal (the ‘‘Act’’) 1 establishes a them under the Act and the rules if they
cost of compliance, at an estimated comprehensive framework for regulating have the assistance of truly independent
hourly wage of $283, of $1,128 per year the organization and operation of legal counsel.
per transfer agent (4 hours × $283 per investment companies (‘‘funds’’). A If the board’s counsel has represented
hour = $1,128 per year). Therefore, the principal objective of the Act is to the fund’s investment adviser, principal
aggregate annual internal cost of protect fund investors by addressing the underwriter, administrator (collectively,
compliance for the approximately one conflicts of interest that exist between ‘‘management organizations’’) or their
registered transfer agent each year to funds and their investment advisers and ‘‘control persons’’ 6 during the past two
comply with Rule 17Ad–3(b) is also other affiliated persons. The Act places years, rule 0–1 requires that the board’s
$1,128. There are no external labor costs significant responsibility on the fund independent directors make a
associated with sending the notice to board of directors in overseeing the determination about the adequacy of the
issuers. operations of the fund and policing the counsel’s independence. A majority of
An agency may not conduct or relevant conflicts of interest.2 the board’s independent directors are
sponsor, and a person is not required to In one of its first releases, the required to reasonably determine, in the
respond to, a collection of information Commission exercised its rulemaking exercise of their judgment, that the
under the PRA unless it displays a authority pursuant to sections 38(a) and counsel’s prior or current representation
currently valid OMB control number. 40(b) of the Act by adopting rule 0–1 (17 of the management organizations or
The public may view background CFR 270.0–1).3 Rule 0–1, as their control persons was sufficiently
documentation for this information subsequently amended on numerous limited to conclude that it is unlikely to
collection at the following Web site: occasions, provides definitions for the adversely affect the counsel’s
www.reginfo.gov. Comments should be terms used by the Commission in the professional judgment and legal
directed to: (i) Desk Officer for the rules and regulations it has adopted representation. Rule 0–1 also requires
Securities and Exchange Commission, pursuant to the Act. The rule also that a record for the basis of this
Office of Information and Regulatory contains a number of rules of determination is made in the minutes of
Affairs, Office of Management and construction for terms that are defined the directors’ meeting. In addition, the
Budget, Room 10102, New Executive either in the Act itself or elsewhere in independent directors must have
Office Building, Washington, DC 20503, the Commission’s rules and regulations. obtained an undertaking from the
or by sending an email to: Shagufta_ Finally, rule 0–1 defines terms that counsel to provide them with the
Ahmed@omb.eop.gov; and (ii) Pamela serve as conditions to the availability of information necessary to make their
Dyson, Director/Chief Information certain of the Commission’s exemptive determination and to update promptly
Officer, Securities and Exchange rules. More specifically, the term that information when the person begins
Commission, c/o Remi Pavlik-Simon, ‘‘independent legal counsel,’’ as defined to represent a management organization
100 F Street NE., Washington, DC in rule 0–1, sets out conditions that or control person, or when he or she
20549, or by sending an email to: PRA_ funds must meet in order to rely on any materially increases his or her
Mailbox@sec.gov. Comments must be of ten exemptive rules (‘‘exemptive representation. Generally, the
submitted to OMB within 30 days of rules’’) under the Act.4 independent directors must re-evaluate
The Commission amended rule 0–1 to
this notice. their determination no less frequently
include the definition of the term
Dated: September 5, 2017. than annually.
‘‘independent legal counsel’’ in 2001.5 Any fund that relies on one of the
Eduardo A. Aleman, This amendment was designed to exemptive rules must comply with the
Assistant Secretary. enhance the effectiveness of fund boards requirements in the definition of
[FR Doc. 2017–19071 Filed 9–7–17; 8:45 am] of directors and to better enable ‘‘independent legal counsel’’ under rule
BILLING CODE 8011–01–P investors to assess the independence of 0–1. We assume that approximately
those directors. The Commission also 3,108 funds rely on at least one of the
amended the exemptive rules to require
exemptive rules annually.7 We further
SECURITIES AND EXCHANGE that any person who serves as legal
assume that the independent directors
COMMISSION counsel to the independent directors of
of approximately one-third (1,036) of
those funds would need to make the
Proposed Collection; Comment 1 15 U.S.C. 80a.
required determination in order for their
Request 2 For example, fund directors must approve
investment advisory and distribution contracts. See counsel to meet the definition of
Upon Written Request, Copies Available 15 U.S.C. 80a–15(a), (b), and (c).
3 Investment Company Act Release No. 4 (Oct. 29,
From: Securities and Exchange 6 A ‘‘control person’’ is any person—other than a
1940) (5 FR 4316 (Oct. 31, 1940)). Note that rule 0– fund—directly or indirectly controlling, controlled
Commission, Office of FOIA Services, 1 was originally adopted as rule N–1. by, or under common control, with any of the
100 F Street NE., Washington, DC 4 The relevant exemptive rules are: Rule 10f–3 (17 fund’s management organizations. See 17 CFR
20549–2736. CFR 270.10f–3), rule 12b–1 (17 CFR 270.12b–1), 270.01(a)(6)(iv)(B).
sradovich on DSK3GMQ082PROD with NOTICES

rule 15a–4(b)(2) (17 CFR 270.15a–4(b)(2)), rule 17a– 7 Based on statistics compiled by Commission
Extension:
7 (17 CFR 270.17a–7), rule 17a–8 (17 CFR 270.17a– staff, we estimate that there are approximately 3,453
Rule 0–1, SEC File No. 270–472, OMB 8), rule 17d–1(d)(7) (17 CFR 270.17d–1(d)(7)), rule funds that could rely on one or more of the
Control No. 3235–0531 17e–1(c) (17 CFR 270.17e–1(c)), rule 17g–1 (17 CFR exemptive rules (this figure reflects the three-year
Notice is hereby given that, pursuant 270.17g–1), rule 18f–3 (17 CFR 270.18f–3), and rule average of open-end and closed-end funds (3,349)
23c–3 (17 CFR 270.23c–3). and business development companies (104)). Of
to the Paperwork Reduction Act of 1995 5 See Role of Independent Directors of Investment those funds, we assume that approximately 90
(44 U.S.C. 350l et seq.), the Securities Companies, Investment Company Act Release No. percent (3,108) actually rely on at least one
and Exchange Commission 24816 (Jan. 2, 2001) (66 FR 3735 (Jan. 16, 2001)). exemptive rules annually.

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Document Created: 2018-10-24 14:08:54
Document Modified: 2018-10-24 14:08:54

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 42565