82 FR 60264 - Submission for OMB Review; Comment Request
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 82, Issue 242 (December 19, 2017)
Federal Register Volume 82, Issue 242 (December 19, 2017)
| Page Range | 60264-60265 | |
| FR Document | 2017-27313 |
[Federal Register Volume 82, Number 242 (Tuesday, December 19, 2017)] [Notices] [Pages 60264-60265] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2017-27313] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [SEC File No. 270-385, OMB Control No. 3235-0441] 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 18f-3. Notice is hereby given that, pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.) (``Paperwork Reduction Act''), the Securities and Exchange Commission (``the Commission'') has submitted to the Office of Management and Budget (``OMB'') a request for extension of the previously approved collection of information discussed below. Rule 18f-3 (17 CFR 270.18f-3) under the Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.) exempts from section 18(f)(1) a fund that issues multiple classes of shares representing interests in the same portfolio of securities (a ``multiple class fund'') if the fund satisfies the conditions of the rule. In general, each class must differ in its arrangement for shareholder services or distribution or both, and must pay the related expenses of that different arrangement. The rule includes one requirement for the collection of information. A multiple class fund must prepare, and fund directors must approve, a written plan setting forth the separate arrangement and expense allocation of each class, and any related conversion features or exchange privileges (``rule 18f-3 plan''). Approval of the plan must occur before the fund issues any shares of multiple classes and whenever the fund materially amends the plan. In approving the plan, the fund board, including a majority of the independent directors, must determine that the plan is in the best interests of each class and the fund as a whole. The requirement that the fund prepare and directors approve a written rule 18f-3 plan is intended to ensure that the fund compiles information relevant to [[Page 60265]] the fairness of the separate arrangement and expense allocation for each class, and that directors review and approve the information. Without a blueprint that highlights material differences among classes, directors might not perceive potential conflicts of interests when they determine whether the plan is in the best interests of each class and the fund. In addition, the plan may be useful to Commission staff in reviewing the fund's compliance with the rule. Based on an analysis of fund filings, the Commission estimates that there are approximately 7,743 multiple class funds offered by 1,045 registrants. The Commission estimates that each of the 1,045 registrants will make an average of 0.5 responses annually to prepare and approve a written 18f-3 plan.\1\ The Commission estimates each response will take 6 hours, requiring a total of 3 hours per registrant per year.\2\ Thus the total annual hour burden associated with these requirements of the rule is approximately 3,135 hours.\3\ --------------------------------------------------------------------------- \1\ The Commission estimates that each registrant prepares and approves a rule 18f-3 plan every two years when issuing a new fund or new class or amending a plan (or that 522.5 of all 1,045 registrants prepare and approve a plan each year). \2\ 0.5 responses per registrant x 6 hours per response = 3 hours per registrant. \3\ 3 hours per registrant per year x 1,045 registrants = 3,135 hours per year. --------------------------------------------------------------------------- Estimates of the average burden hours are made solely for the purposes of the Paperwork Reduction Act and are not derived from a comprehensive or even a representative survey or study of the costs of Commission rules and forms. The collection of information under rule 18f-3 is mandatory. The information provided under rule 18f-3 will not be kept confidential. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number. The public may view the background documentation for this information collection at the following website, 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: December 14, 2017. Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017-27313 Filed 12-18-17; 8:45 am] BILLING CODE 8011-01-P
![60264 Federal Register / Vol. 82, No. 242 / Tuesday, December 19, 2017 / Notices
proposed rule change is consistent with prompt and accurate clearance and For the Commission, by the Division of
the requirements of the Act and the settlement of securities transactions, Trading and Markets, pursuant to delegated
rules and regulations thereunder and is therefore consistent with Section authority.16
applicable to such organization. The 17A(b)(3)(F) of the Act.12 Eduardo A. Aleman,
Commission finds that the proposal is Assistant Secretary.
consistent with Section 17A(b)(3)(F) of B. Consistency With Rule 17Ad– [FR Doc. 2017–27228 Filed 12–18–17; 8:45 am]
the Act 9 and Rule 17Ad–22(e)(7)(viii) 10 22(e)(7)(viii) Under the Act BILLING CODE 8011–01–P
thereunder, as described in detail
The Commission further believes that
below.
the proposed rule change is consistent SECURITIES AND EXCHANGE
A. Consistency With Section with Rule 17Ad–22(e)(7)(viii), which COMMISSION
17A(b)(3)(F) of the Act requires that a covered clearing agency
The Commission finds that the establish, implement, maintain, and [SEC File No. 270–385, OMB Control No.
enforce written policies and procedures 3235–0441]
proposed change is consistent with
Section 17A(b)(3)(F) of the Act,11 which reasonably designed to, as applicable, Submission for OMB Review;
requires, among other things, that the effectively measure, monitor, and Comment Request
rules of a clearing agency be designed to manage liquidity risk that arises in or is
promote the prompt and accurate borne by the covered clearing agency, Upon Written Request, Copies Available
clearance and settlement of securities including measuring, monitoring, and From: Securities and Exchange
transactions. The Commission managing its settlement and funding Commission, Office of FOIA Services,
understands that the proposed rule flows on an ongoing and timely basis, 100 F Street NE, Washington, DC
change constitutes a limited expansion and its use of intraday liquidity by, at 20549–2736.
of OCC’s ability to address liquidity a minimum, addressing foreseeable Extension:
needs that arise from scenarios that, Rule 18f–3.
liquidity shortfalls that would not be
while relatively less extreme than a
covered by its liquid resources and seek Notice is hereby given that, pursuant
Settlement Entity suffering a
bankruptcy, insolvency, resolution, to avoid unwinding, revoking, or to the Paperwork Reduction Act of 1995
suspension of operations, or similar delaying the same-day settlement of (44 U.S.C. 3501 et seq.) (‘‘Paperwork
event, nevertheless can prevent daily payment obligations.13 Reduction Act’’), the Securities and
settlement from occurring. The The Commission believes that the Exchange Commission (‘‘the
Commission therefore believes that the proposed rule change is designed to Commission’’) has submitted to the
proposed rule change is designed to improve OCC’s ability to address a Office of Management and Budget
enhance OCC’s ability to access liquid temporary liquidity need resulting from (‘‘OMB’’) a request for extension of the
resources under such circumstances, previously approved collection of
the failure of a Settlement Entity to
which, in turn, would allow OCC to information discussed below.
achieve timely settlement. The
continue to meet its settlement Rule 18f–3 (17 CFR 270.18f–3) under
Commission believes that the proposed the Investment Company Act of 1940
obligations to its Clearing Members in a rule change is designed to provide OCC
timely fashion, thereby promoting (15 U.S.C. 80a–1 et seq.) exempts from
with additional tools to address a section 18(f)(1) a fund that issues
prompt and accurate clearance and foreseeable, temporary liquidity
settlement of securities transactions. multiple classes of shares representing
shortfall to prevent the unwinding, interests in the same portfolio of
Specifically, the Commission believes
revoking, or delaying of same-day securities (a ‘‘multiple class fund’’) if
that the proposed rule change is
designed to expand OCC’s existing settlement should that scenario the fund satisfies the conditions of the
borrowing authority in a scenario where materialize, and is therefore consistent rule. In general, each class must differ
a Settlement Entity is temporarily with Rule 17Ad–22(e)(7)(viii) under the in its arrangement for shareholder
unable to achieve daily settlement, but Act. services or distribution or both, and
is not facing bankruptcy, insolvency, must pay the related expenses of that
III. Conclusion
resolution, suspension of operations, or different arrangement. The rule includes
similar event. Therefore, the proposed On the basis of the foregoing, the one requirement for the collection of
rule change is designed to provide OCC Commission finds that the proposed information. A multiple class fund must
with an alternative tool with which to change is consistent with the prepare, and fund directors must
address what OCC describes as an requirements of the Act, and in approve, a written plan setting forth the
‘‘extraordinary circumstance’’ that particular, with the requirements of separate arrangement and expense
would enable OCC to borrow against the Section 17A of the Act 14 and the rules allocation of each class, and any related
Clearing Fund in order to avoid conversion features or exchange
and regulations thereunder.
disrupting its ordinary settlement cycle. privileges (‘‘rule 18f–3 plan’’). Approval
The Commission believes that the It is therefore ordered, pursuant to of the plan must occur before the fund
authority to take such action is designed Section 19(b)(2) of the Act,15 that the issues any shares of multiple classes
to avoid imposing a disruption on proposed rule change (SR–OCC–2017– and whenever the fund materially
Clearing Members and reduce the need 017) be, and it hereby is, approved. amends the plan. In approving the plan,
to extend the settlement window, which the fund board, including a majority of
the independent directors, must
sradovich on DSK3GMQ082PROD with NOTICES
could allow OCC to settle transactions 12 Id.
in a more timely fashion. Accordingly, 13 17 CFR 240.17Ad–22(e)(7)(viii).
determine that the plan is in the best
the Commission finds that the proposed 14 Inapproving this proposed rule change, the
interests of each class and the fund as
rule change is designed to promote the Commission has considered the proposed rule’s a whole.
impact on efficiency, competition, and capital The requirement that the fund prepare
9 15 U.S.C. 78q–1(b)(3)(F). formation. See 15 U.S.C. 78c(f). and directors approve a written rule
10 17 CFR 240.17Ad–22(e)(7)(viii). 15 15 U.S.C. 78s(b)(2). 18f–3 plan is intended to ensure that the
11 15 U.S.C. 78q–1(b)(3)(F). 16 17 CFR 200.30–3(a)(12). fund compiles information relevant to
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![Federal Register / Vol. 82, No. 242 / Tuesday, December 19, 2017 / Notices 60265
the fairness of the separate arrangement Dated: December 14, 2017. steps that OCC has authority to take
and expense allocation for each class, Eduardo A. Aleman, depending upon the facts and
and that directors review and approve Assistant Secretary. circumstances of a default. The DM
the information. Without a blueprint [FR Doc. 2017–27313 Filed 12–18–17; 8:45 am] Policy focuses on Clearing Member
that highlights material differences BILLING CODE 8011–01–P default, which OCC believes is
among classes, directors might not appropriate because Clearing Member
perceive potential conflicts of interests default represents a substantial part of
when they determine whether the plan SECURITIES AND EXCHANGE the overall default risk that is posed to
is in the best interests of each class and COMMISSION OCC in connection with its central
the fund. In addition, the plan may be counterparty clearing services.6 OCC
[Release No. 34–82310; File No. SR–OCC–
useful to Commission staff in reviewing notes that the DM Policy is part of a
2017–010]
the fund’s compliance with the rule. broader framework used by OCC to
Based on an analysis of fund filings, Self-Regulatory Organizations; the manage the default of a Clearing
the Commission estimates that there are Options Clearing Corporation; Order Member, settlement bank, or FMU,
approximately 7,743 multiple class Approving Proposed Rule Change including OCC’s By-Laws, Rules, and
funds offered by 1,045 registrants. The Relating to The Options Clearing other policies and procedures. The
Commission estimates that each of the Corporation’s Default Management broader framework is designed to
1,045 registrants will make an average of Policy collectively ensure that OCC would
0.5 responses annually to prepare and appropriately manage any such default
December 13, 2017. consistent with OCC’s obligations as a
approve a written 18f–3 plan.1 The
Commission estimates each response On October 12, 2017, The Options covered clearing agency.7
will take 6 hours, requiring a total of 3 Clearing Corporation (‘‘OCC’’) filed with The DM Policy describes the authority
the Securities and Exchange of OCC’s Board of Directors (‘‘Board’’) or
hours per registrant per year.2 Thus the
Commission (‘‘Commission’’) proposed a Designated Officer 8 to summarily
total annual hour burden associated
rule change SR–OCC–2017–010 suspend a Clearing Member pursuant to
with these requirements of the rule is
pursuant to Section 19(b)(1) of the OCC Rule 1102(a) in the event the
approximately 3,135 hours.3
Securities Exchange Act of 1934 Clearing Member defaults. The DM
Estimates of the average burden hours (‘‘Act’’),1 and Rule 19b–4 thereunder.2 Policy further provides that, pursuant to
are made solely for the purposes of the The proposed rule change was OCC Rule 707, OCC may suspend a
Paperwork Reduction Act and are not published for comment in the Federal Clearing Member that participates in a
derived from a comprehensive or even Register on November 1, 2017.3 The cross-margining program in the event of
a representative survey or study of the Commission did not receive any a default regarding its cross-margining
costs of Commission rules and forms. comment letters on the proposed rule accounts. Upon any suspension of a
The collection of information under rule change. This order approves the Clearing Member, the DM Policy states
18f–3 is mandatory. The information proposed rule change. that OCC would immediately notify a
provided under rule 18f–3 will not be number of parties, including the
kept confidential. An agency may not I. Description of the Proposed Rule suspended Clearing Member, regulatory
conduct or sponsor, and a person is not Change authorities, participant and other
required to respond to, a collection of This proposed rule change by OCC exchanges (as applicable) in which the
information unless it displays a will formalize OCC’s Default suspended Clearing Member is a
currently valid OMB control number. Management Policy (‘‘DM Policy’’). The common member, other Clearing
The public may view the background proposed rule change does not require Members,9 and OCC’s Board.10
documentation for this information any changes to the text of OCC’s By- In the event of a Clearing Member
collection at the following website, Laws or Rules.4 suspension, the DM Policy provides that
www.reginfo.gov. Comments should be As described by OCC, the DM Policy
directed to: (i) Desk Officer for the would apply in the event of a default by 6 For purposes of the DM Policy, references to a
Securities and Exchange Commission, a Clearing Member, settlement bank, or Clearing Member suspension or default contemplate
the circumstances specified in OCC Rule 1102,
Office of Information and Regulatory a financial market utility (‘‘FMU’’) with which constitute events of ‘‘default’’ under
Affairs, Office of Management and which OCC has a relationship.5 The Interpretation and Policy .01 to the Rule.
Budget, Room 10102, New Executive purpose of the DM Policy is to outline 7 On September 28, 2016, the Commission
Office Building, Washington, DC 20503, OCC’s default management framework amended Rule 17Ad-22 under the Act by adding
new Rule 17Ad-22(e) to establish requirements for
or by sending an email to: Shagufta_ and describe the default management the operation and governance of registered clearing
Ahmed@omb.eop.gov; and (ii) Pamela agencies that meet the definition of a covered
Dyson, Director/Chief Information 1 15 U.S.C. 78s(b)(1). clearing agency, as defined by Rule 17Ad-22(a)(5).
2 17 CFR 240.19b–4. Standards for Covered Clearing Agencies, Securities
Officer, Securities and Exchange
3 See Securities Exchange Act Release No. 34– Exchange Act Release No. 34–78961 (Sept. 28,
Commission, c/o Remi Pavlik-Simon, 2016), 81 FR 70786 (Oct. 13, 2016).
81955 (Oct. 26, 2017), 82 FR 50707 (Nov. 1, 2017)
100 F Street NE, Washington, DC 20549 (File No. SR–OCC–2017–010). 8 For this purpose, the term Designated Officer
or send an email to: PRA_Mailbox@ 4 All terms with initial capitalization that are not includes the Executive Chairman, Chief
sec.gov. Comments must be submitted to otherwise defined herein have the same meaning as Administrative Officer (‘‘CAO’’), Chief Operating
OMB within 30 days of this notice. set forth in the OCC By-Laws and Rules. Officer (‘‘COO’’), Chief Risk Officer (‘‘CRO’’), and
5 The DM Policy identifies the following Executive Vice President—Financial Risk
securities or commodities clearing organizations as Management (‘‘EVP–FRM’’).
sradovich on DSK3GMQ082PROD with NOTICES
1 The Commission estimates that each registrant 9 OCC Rule 1103 requires OCC to notify all
examples of such FMUs: The Depository Trust
prepares and approves a rule 18f–3 plan every two Company, National Securities Clearing Corporation, Clearing Members of the suspension as soon as
years when issuing a new fund or new class or and the Chicago Mercantile Exchange. In an event possible.
amending a plan (or that 522.5 of all 1,045 of default by one of these securities or commodities 10 With respect to pending transactions of a
registrants prepare and approve a plan each year). clearing organizations, or by a settlement bank, OCC suspended Clearing Member, the DM Policy
2 0.5 responses per registrant × 6 hours per
has authority under certain conditions pursuant to provides that these will be handled pursuant to
response = 3 hours per registrant. Article VIII, Sections 1(a)(vii) and 5(b) of the By- OCC Rule 1105, provided that OCC has no
3 3 hours per registrant per year × 1,045 Laws to manage the default using Clearing Member obligation to accept the trades effected by a
registrants = 3,135 hours per year. contributions to the Clearing Fund. suspended Clearing Member post-suspension.
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Document Created: 2017-12-19 01:31:08
Document Modified: 2017-12-19 01:31:08
| 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 60264 |
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