82 FR 53538 - Submission for OMB Review; Comment Request

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 220 (November 16, 2017)

Page Range		53538-53539
FR Document		2017-24755
Federal Register, Volume 82 Issue 220 (Thursday, November 16, 2017)
[Federal Register Volume 82, Number 220 (Thursday, November 16, 2017)]
[Notices]
[Pages 53538-53539]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-24755]


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

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 0-1, SEC File No. 270-472, OMB Control No. 3235-0531

    Notice is hereby given that, pursuant to the Paperwork Reduction 
Act of 1995 (44 U.S.C. 3501 et. seq.), the Securities and Exchange 
Commission (``Commission'') has submitted to the Office of Management 
and Budget a request for extension of the previous approved collection 
of information discussed below.
    The Investment Company Act of 1940 (the ``Act'') \1\ establishes a 
comprehensive framework for regulating the organization and operation 
of investment companies (``funds''). A principal objective of the Act 
is to protect fund investors by addressing the conflicts of interest 
that exist between funds and their investment advisers and other 
affiliated persons. The Act places significant responsibility on the 
fund board of directors in overseeing the operations of the fund and 
policing the relevant conflicts of interest.\2\
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 80a.
    \2\ For example, fund directors must approve investment advisory 
and distribution contracts. See 15 U.S.C. 80a-15(a), (b), and (c).
---------------------------------------------------------------------------

    In one of its first releases, the Commission exercised its 
rulemaking authority pursuant to sections 38(a) and 40(b) of the Act by 
adopting rule 0-1 (17 CFR 270.0-1).\3\ Rule 0-1, as subsequently 
amended on numerous occasions, provides definitions for the terms used 
by the Commission in the rules and regulations it has adopted pursuant 
to the Act. The rule also contains a number of rules of construction 
for terms that are defined either in the Act itself or elsewhere in the 
Commission's rules and regulations. Finally, rule 0-1 defines terms 
that serve as conditions to the availability of certain of the 
Commission's exemptive rules. More specifically, the term ``independent 
legal counsel,'' as defined in rule 0-1, sets out conditions that funds 
must meet in order to rely on any of ten exemptive rules (``exemptive 
rules'') under the Act.\4\
---------------------------------------------------------------------------

    \3\ Investment Company Act Release No. 4 (Oct. 29, 1940) (5 FR 
4316 (Oct. 31, 1940)). Note that rule 0-1 was originally adopted as 
rule N-1.
    \4\ The relevant exemptive rules are: Rule 10f-3 (17 CFR 
270.10f-3), rule 12b-1 (17 CFR 270.12b-1), rule 15a-4(b)(2) (17 CFR 
270.15a-4(b)(2)), rule 17a-7 (17 CFR 270.17a-7), rule 17a-8 (17 CFR 
270.17a-8), rule 17d-1(d)(7) (17 CFR 270.17d-1(d)(7)), rule 17e-1(c) 
(17 CFR 270.17e-1(c)), rule 17g-1 (17 CFR 270.17g-1), rule 18f-3 (17 
CFR 270.18f-3), and rule 23c-3 (17 CFR 270.23c-3).
---------------------------------------------------------------------------

    The Commission amended rule 0-1 to include the definition of the 
term ``independent legal counsel'' in 2001.\5\ This amendment was 
designed to enhance the effectiveness of fund boards of directors and 
to better enable investors to assess the independence of those 
directors. The Commission also amended the exemptive rules to require 
that any person who serves as legal counsel to the independent 
directors of any fund that relies on any of the exemptive rules must be 
an ``independent legal counsel.'' This requirement was added because 
independent directors can better perform the responsibilities assigned 
to them under the Act and the rules if they have the assistance of 
truly independent legal counsel.
---------------------------------------------------------------------------

    \5\ See Role of Independent Directors of Investment Companies, 
Investment Company Act Release No. 24816 (Jan. 2, 2001) (66 FR 3735 
(Jan. 16, 2001)).
---------------------------------------------------------------------------

    If the board's counsel has represented the fund's investment 
adviser, principal underwriter, administrator (collectively, 
``management organizations'') or their ``control persons'' \6\ during 
the past two years, rule 0-1 requires that the board's independent 
directors make a determination about the adequacy of the counsel's 
independence. A majority of the board's independent directors are 
required to reasonably determine, in the exercise of their judgment, 
that the counsel's prior or current representation of the management 
organizations or their control persons was sufficiently limited to 
conclude that it is unlikely to adversely affect the counsel's 
professional judgment and legal representation. Rule 0-1 also requires 
that a record for the basis of this determination is made in the 
minutes of the directors' meeting. In addition, the independent 
directors must have obtained an undertaking from the counsel to provide 
them with the information necessary to make their determination and to 
update promptly that information when the person begins to represent a 
management organization or control person, or when he or she materially 
increases his or her representation. Generally, the independent 
directors must re-evaluate their determination no less frequently than 
annually.
---------------------------------------------------------------------------

    \6\ A ``control person'' is any person--other than a fund--
directly or indirectly controlling, controlled by, or under common 
control, with any of the fund's management organizations. See 17 CFR 
270.01(a)(6)(iv)(B).
---------------------------------------------------------------------------

    Any fund that relies on one of the exemptive rules must comply with 
the requirements in the definition of ``independent legal counsel'' 
under rule 0-1. We assume that approximately 3,108 funds rely on at 
least one of the exemptive rules annually.\7\ We further

[[Page 53539]]

assume that the independent directors of approximately one-third 
(1,036) of those funds would need to make the required determination in 
order for their counsel to meet the definition of independent legal 
counsel.\8\ We estimate that each of these 1,036 funds would be 
required to spend, on average, 0.75 hours annually to comply with the 
recordkeeping requirement associated with this determination, for a 
total annual burden of approximately 777 hours. Based on this estimate, 
the total annual cost for all funds' compliance with this rule is 
approximately $168,350. To calculate this total annual cost, the 
Commission staff assumed that approximately two-thirds of the total 
annual hour burden (518 hours) would be incurred by a compliance 
manager with an average hourly wage rate of $292 per hour,\9\ and one-
third of the annual hour burden (259 hours) would be incurred by 
compliance clerk with an average hourly wage rate of $66 per hour.\10\
---------------------------------------------------------------------------

    \7\ Based on statistics compiled by Commission staff, we 
estimate that there are approximately 3,453 funds that could rely on 
one or more of the exemptive rules (this figure reflects the three-
year average of open-end and closed-end funds (3,349) and business 
development companies (104)). Of those funds, we assume that 
approximately 90 percent (3,108) actually rely on at least one 
exemptive rules annually.
    \8\ We assume that the independent directors of the remaining 
two-thirds of those funds will choose not to have counsel, or will 
rely on counsel who has not recently represented the fund's 
management organizations or control persons. In both circumstances, 
it would not be necessary for the fund's independent directors to 
make a determination about their counsel's independence.
    \9\ The estimated hourly wages used in this PRA analysis were 
derived from the Securities Industry and Financial Markets 
Association Reports on Management and Professional Earnings in the 
Securities Industry (2013) (modified to account for an 1800-hour 
work year and multiplied by 5.35 to account for bonuses, firm size, 
employee benefits and overhead) (adjusted for inflation), and Office 
Salaries in the Securities Industry (2013) (modified to account for 
an 1800-hour work year and multiplied by 2.93 to account for 
bonuses, firm size, employee benefits and overhead) (adjusted for 
inflation).
    \10\ (518 x $292/hour) + (259 x $66/hour) = $168,350.
---------------------------------------------------------------------------

    These burden hour estimates are based upon the Commission staff's 
experience and discussions with the fund industry. The estimates of 
average burden hours are made solely for the purposes of the Paperwork 
Reduction Act. These estimates are not derived from a comprehensive or 
even a representative survey or study of the costs of Commission rules.
    Compliance with the collection of information requirements of the 
rule is mandatory and is necessary to comply with the requirements of 
the rule in general. An agency may not conduct or sponsor, and a person 
is not required to respond to, a collection of information unless it 
displays a currently valid control number.
    The public may view the background documentation for this 
information collection at the following Web site, www.reginfo.gov. 
Comments should be directed to: (i) Desk Officer for the 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: November 9, 2017.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-24755 Filed 11-15-17; 8:45 am]
BILLING CODE P
53538 Federal Register / Vol. 82, No. 220 / Thursday, November 16, 2017 / Notices

The estimated total annual burden for Extension: enhance the effectiveness of fund boards
all 4,029 funds subject to the rule Rule 0–1, SEC File No. 270–472, OMB of directors and to better enable
therefore is approximately 28,203,000 Control No. 3235–0531 investors to assess the independence of
hours. Based on conversations with Notice is hereby given that, pursuant those directors. The Commission also
fund representatives, however, the to the Paperwork Reduction Act of 1995 amended the exemptive rules to require
Commission staff estimates that even (44 U.S.C. 3501 et. seq.), the Securities that any person who serves as legal
absent the requirements of rule 31a–1, and Exchange Commission counsel to the independent directors of
90 percent of the records created (‘‘Commission’’) has submitted to the any fund that relies on any of the
pursuant to the rule are the type that Office of Management and Budget a exemptive rules must be an
generally would be created as a matter request for extension of the previous ‘‘independent legal counsel.’’ This
of normal business practice and to approved collection of information requirement was added because
prepare financial statements. Thus, the discussed below. independent directors can better
Commission staff estimates that the total The Investment Company Act of 1940 perform the responsibilities assigned to
annual burden associated with rule 31a– (the ‘‘Act’’) 1 establishes a them under the Act and the rules if they
1 is 2,820,300 hours. comprehensive framework for regulating have the assistance of truly independent
The estimate of average burden hours the organization and operation of legal counsel.
is made solely for the purposes of the investment companies (‘‘funds’’). A If the board’s counsel has represented
Paperwork Reduction Act, and is not principal objective of the Act is to the fund’s investment adviser, principal
derived from a comprehensive or even protect fund investors by addressing the underwriter, administrator (collectively,
a representative survey or study. An conflicts of interest that exist between ‘‘management organizations’’) or their
agency may not conduct or sponsor, and funds and their investment advisers and ‘‘control persons’’ 6 during the past two
a person is not required to respond to, other affiliated persons. The Act places years, rule 0–1 requires that the board’s
a collection of information unless it significant responsibility on the fund independent directors make a
displays a currently valid OMB control board of directors in overseeing the determination about the adequacy of the
number. operations of the fund and policing the counsel’s independence. A majority of
Written comments are requested on: relevant conflicts of interest.2 the board’s independent directors are
(a) Whether the collection of In one of its first releases, the required to reasonably determine, in the
information is necessary for the proper Commission exercised its rulemaking exercise of their judgment, that the
performance of the functions of the authority pursuant to sections 38(a) and counsel’s prior or current representation
Commission, including whether the 40(b) of the Act by adopting rule 0–1 (17 of the management organizations or
information has practical utility; (b) the CFR 270.0–1).3 Rule 0–1, as their control persons was sufficiently
accuracy of the Commission’s estimate subsequently amended on numerous limited to conclude that it is unlikely to
of the burden(s) of the collection of occasions, provides definitions for the adversely affect the counsel’s
information; (c) ways to enhance the terms used by the Commission in the professional judgment and legal
quality, utility, and clarity of the rules and regulations it has adopted representation. Rule 0–1 also requires
information collected; and (d) ways to pursuant to the Act. The rule also that a record for the basis of this
minimize the burden of the collection of contains a number of rules of determination is made in the minutes of
information on respondents, including construction for terms that are defined the directors’ meeting. In addition, the
through the use of automated collection either in the Act itself or elsewhere in independent directors must have
techniques or other forms of information the Commission’s rules and regulations. obtained an undertaking from the
technology. Consideration will be given Finally, rule 0–1 defines terms that counsel to provide them with the
to comments and suggestions submitted serve as conditions to the availability of information necessary to make their
in writing within 60 days of this certain of the Commission’s exemptive determination and to update promptly
publication. rules. More specifically, the term that information when the person begins
Please direct your written comments ‘‘independent legal counsel,’’ as defined to represent a management organization
to Pamela Dyson, Director/Chief in rule 0–1, sets out conditions that or control person, or when he or she
Information Officer, Securities and funds must meet in order to rely on any materially increases his or her
Exchange Commission, C/O Remi of ten exemptive rules (‘‘exemptive representation. Generally, the
Pavlik-Simon, 100 F Street NE., rules’’) under the Act.4 independent directors must re-evaluate
Washington, DC 20549; or send an email The Commission amended rule 0–1 to their determination no less frequently
to: PRA_Mailbox@sec.gov. include the definition of the term than annually.
‘‘independent legal counsel’’ in 2001.5 Any fund that relies on one of the
Dated: November 9, 2017.
This amendment was designed to exemptive rules must comply with the
Eduardo A. Aleman,
requirements in the definition of
Assistant Secretary. 1 15 U.S.C. 80a. ‘‘independent legal counsel’’ under rule
[FR Doc. 2017–24751 Filed 11–15–17; 8:45 am] 2 For example, fund directors must approve 0–1. We assume that approximately
BILLING CODE 8011–01–P investment advisory and distribution contracts. See
15 U.S.C. 80a–15(a), (b), and (c). 3,108 funds rely on at least one of the
3 Investment Company Act Release No. 4 (Oct. 29, exemptive rules annually.7 We further
1940) (5 FR 4316 (Oct. 31, 1940)). Note that rule 0–
SECURITIES AND EXCHANGE 1 was originally adopted as rule N–1. 6 A ‘‘control person’’ is any person—other than a
COMMISSION
asabaliauskas on DSKBBXCHB2PROD with NOTICES

4 The relevant exemptive rules are: Rule 10f–3 (17 fund—directly or indirectly controlling, controlled
CFR 270.10f–3), rule 12b–1 (17 CFR 270.12b–1), by, or under common control, with any of the
Submission for OMB Review; rule 15a–4(b)(2) (17 CFR 270.15a–4(b)(2)), rule 17a– fund’s management organizations. See 17 CFR
Comment Request 7 (17 CFR 270.17a–7), rule 17a–8 (17 CFR 270.17a– 270.01(a)(6)(iv)(B).
8), rule 17d–1(d)(7) (17 CFR 270.17d–1(d)(7)), rule 7 Based on statistics compiled by Commission

Upon Written Request, Copies Available 17e–1(c) (17 CFR 270.17e–1(c)), rule 17g–1 (17 CFR staff, we estimate that there are approximately 3,453
From: Securities and Exchange 270.17g–1), rule 18f–3 (17 CFR 270.18f–3), and rule funds that could rely on one or more of the
23c–3 (17 CFR 270.23c–3). exemptive rules (this figure reflects the three-year
Commission, Office of FOIA Services, 5 See Role of Independent Directors of Investment average of open-end and closed-end funds (3,349)
100 F Street NE., Washington, DC Companies, Investment Company Act Release No. and business development companies (104)). Of
20549–2736 24816 (Jan. 2, 2001) (66 FR 3735 (Jan. 16, 2001)). those funds, we assume that approximately 90

VerDate Sep<11>2014 16:52 Nov 15, 2017 Jkt 244001 PO 00000 Frm 00089 Fmt 4703 Sfmt 4703 E:\FR\FM\16NON1.SGM 16NON1
Federal Register / Vol. 82, No. 220 / Thursday, November 16, 2017 / Notices 53539

assume that the independent directors collection at the following Web site, definition of ‘‘investment company’’ by
of approximately one-third (1,036) of www.reginfo.gov. Comments should be Section 3(c)(1) because it has fewer than
those funds would need to make the directed to: (i) Desk Officer for the one hundred shareholders and is not
required determination in order for their Securities and Exchange Commission, making a public offering of its securities
counsel to meet the definition of Office of Information and Regulatory may lose such an exclusion solely
independent legal counsel.8 We Affairs, Office of Management and because it proposes to make a public
estimate that each of these 1,036 funds Budget, Room 10102, New Executive offering of securities as a business
would be required to spend, on average, Office Building, Washington, DC 20503, development company. Such company,
0.75 hours annually to comply with the or by sending an email to: Shagufta_ under certain conditions, would not
recordkeeping requirement associated Ahmed@omb.eop.gov; and (ii) Pamela lose its exclusion if it notifies the
with this determination, for a total Dyson, Director/Chief Information Commission on Form N–6F of its intent
annual burden of approximately 777 Officer, Securities and Exchange to make an election to be regulated as
hours. Based on this estimate, the total Commission, c/o Remi Pavlik-Simon,
a business development company. The
annual cost for all funds’ compliance 100 F Street NE., Washington, DC 20549
company only has to file a Form N–6F
with this rule is approximately or send an email to: PRA_Mailbox@
$168,350. To calculate this total annual sec.gov. Comments must be submitted to once.
cost, the Commission staff assumed that OMB within 30 days of this notice. The Commission estimates that on
approximately two-thirds of the total Dated: November 9, 2017. average approximately 12 companies
annual hour burden (518 hours) would Eduardo A. Aleman, file these notifications each year. Each
be incurred by a compliance manager of those companies need only make a
Assistant Secretary.
with an average hourly wage rate of single filing of Form N–6F. The
[FR Doc. 2017–24755 Filed 11–15–17; 8:45 am]
$292 per hour,9 and one-third of the Commission further estimates that this
BILLING CODE P
annual hour burden (259 hours) would information collection imposes burden
be incurred by compliance clerk with an of 0.5 hours, resulting in a total annual
average hourly wage rate of $66 per SECURITIES AND EXCHANGE PRA burden of 6 hours. Based on the
hour.10 COMMISSION estimated wage rate, the total cost to the
These burden hour estimates are industry of the hour burden for
based upon the Commission staff’s Submission for OMB Review; complying with Form N–6F would be
experience and discussions with the Comment Request approximately $2,070.
fund industry. The estimates of average
burden hours are made solely for the Upon Written Request, Copies Available The collection of information under
purposes of the Paperwork Reduction From: Securities and Exchange Form N–6F is mandatory. The
Act. These estimates are not derived Commission, Office of FOIA Services, information provided under the form is
from a comprehensive or even a 100 F Street NE., Washington, DC not kept confidential. An agency may
representative survey or study of the 20549–2736 not conduct or sponsor, and a person is
costs of Commission rules. Extension: not required to respond to, a collection
Compliance with the collection of Form N–6F; SEC File No. 270–185, OMB of information unless it displays a
information requirements of the rule is Control No. 3235–0238 currently valid OMB control number.
mandatory and is necessary to comply Notice is hereby given that, pursuant The public may view the background
with the requirements of the rule in to the Paperwork Reduction Act of 1995 documentation for this information
general. An agency may not conduct or (44 U.S.C. 3501 et seq.), the Securities collection at the following Web site,
sponsor, and a person is not required to and Exchange Commission
respond to, a collection of information www.reginfo.gov. Comments should be
(‘‘Commission’’) has submitted to the directed to: (i) Desk Officer for the
unless it displays a currently valid Office of Management and Budget a
control number. Securities and Exchange Commission,
request for extension of the previously Office of Information and Regulatory
The public may view the background approved collection of information
documentation for this information Affairs, Office of Management and
discussed below.
The title for the collection of Budget, Room 10102, New Executive
percent (3,108) actually rely on at least one
information is ‘‘Form N–6F (17 CFR Office Building, Washington, DC 20503,
exemptive rules annually. or by sending an email to: Shagufta_
8 We assume that the independent directors of the 274.15), Notice of Intent to Elect to be
Subject to Sections 55 through 65 of the Ahmed@omb.eop.gov; and (ii) Pamela
remaining two-thirds of those funds will choose not
to have counsel, or will rely on counsel who has Investment Company Act of 1940.’’ The Dyson, Director/Chief Information
not recently represented the fund’s management purpose of Form N–6F is to notify the Officer, Securities and Exchange
organizations or control persons. In both Commission, c/o Remi Pavlik-Simon,
circumstances, it would not be necessary for the Commission of a company’s intent to
fund’s independent directors to make a file a notification of election to become 100 F Street NE., Washington, DC 20549
determination about their counsel’s independence. subject to Sections 55 through 65 of the or send an email to: PRA_Mailbox@
9 The estimated hourly wages used in this PRA
Investment Company Act of 1940 (15 sec.gov. Comments must be submitted to
analysis were derived from the Securities Industry OMB within 30 days of this notice.
and Financial Markets Association Reports on
U.S.C. 80a–1 et seq.) (‘‘1940 Act’’).
Management and Professional Earnings in the Certain companies may have to make a Dated: November 9, 2017.
filing with the Commission before they
asabaliauskas on DSKBBXCHB2PROD with NOTICES

Securities Industry (2013) (modified to account for
an 1800-hour work year and multiplied by 5.35 to Eduardo A. Aleman,
are ready to elect to be regulated as a
account for bonuses, firm size, employee benefits
business development company.1 A Assistant Secretary.
and overhead) (adjusted for inflation), and Office [FR Doc. 2017–24754 Filed 11–15–17; 8:45 am]
Salaries in the Securities Industry (2013) (modified company that is excluded from the
to account for an 1800-hour work year and BILLING CODE 8011–01–P
multiplied by 2.93 to account for bonuses, firm size, 1A company might not be prepared to elect to be
employee benefits and overhead) (adjusted for subject to Sections 55 through 65 of the 1940 Act
inflation). because its capital structure or management
10 (518 × $292/hour) + (259 × $66/hour) = compensation plan is not yet in compliance with
$168,350. the requirements of those sections.

VerDate Sep<11>2014 16:52 Nov 15, 2017 Jkt 244001 PO 00000 Frm 00090 Fmt 4703 Sfmt 9990 E:\FR\FM\16NON1.SGM 16NON1
Document Created: 2017-11-16 03:52:54
Document Modified: 2017-11-16 03:52:54
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 53538