83 FR 35304 - Proposed Collection; Comment Request

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 143 (July 25, 2018)

Page Range		35304-35305
FR Document		2018-15853
Federal Register, Volume 83 Issue 143 (Wednesday, July 25, 2018)
[Federal Register Volume 83, Number 143 (Wednesday, July 25, 2018)]
[Notices]
[Pages 35304-35305]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-15853]


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SECURITIES AND EXCHANGE COMMISSION


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 10f-3; SEC File No. 270-237, OMB Control No. 3235-0226

    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 collections 
of information discussed below. The Commission plans to submit these 
existing collections of information to the Office of Management and 
Budget (``OMB'') for extension and approval.
    Section 10(f) of the Investment Company Act of 1940 (15 U.S.C. 80a) 
(the ``Act'') prohibits a registered investment company (``fund'') from 
purchasing any security during an underwriting or selling syndicate if 
the fund has certain relationships with a principal underwriter for the 
security.\1\ Congress enacted this provision in 1940 to protect funds 
and their shareholders by preventing underwriters from ``dumping'' 
unmarketable securities on affiliated funds.
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    \1\ 15 U.S.C. 80a-10(f).
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    Rule 10f-3 permits a fund to engage in a securities transaction 
that otherwise would violate section 10(f) if, among other things: (i) 
The fund's directors have approved procedures for purchases made in 
reliance on the rule, regularly review fund purchases to determine 
whether they comply with these procedures, and approve necessary 
changes to the procedures; and (ii) a written record of each 
transaction effected under the rule is maintained for six years, the 
first two of which in an easily accessible place.\2\ The written record 
must state: (i) From whom the securities were acquired; (ii) the 
identity of the underwriting syndicate's members; (iii) the terms of 
the transactions; and (iv) the information or materials on which the 
fund's board of directors has determined that the purchases were made 
in compliance with procedures established by the board.
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    \2\ 17 CFR 270.10f-3.
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    Rule 10f-3 also conditionally allows managed portions of fund 
portfolios to purchase securities offered in otherwise off-limits 
primary offerings. To qualify for this exemption, rule 10f-3 requires 
that the subadviser that is advising the purchaser be contractually 
prohibited from providing investment advice to any other portion of the 
fund's portfolio and consulting with any other of the fund's advisers 
that is a principal underwriter or affiliated person of a principal 
underwriter concerning the fund's securities transactions.
    These requirements provide a mechanism for fund boards to oversee 
compliance with the rule. The required recordkeeping facilitates the 
Commission staff's review of rule 10f-3 transactions during routine 
fund inspections and, when necessary, in connection with enforcement 
actions.
    The staff estimates that approximately 236 funds engage in a total 
of approximately 2,928 rule 10f-3 transactions each year.\3\ Rule 10f-3 
requires that the purchasing fund create a written record of each 
transaction that includes, among other things, from whom the securities 
were purchased and the terms of the transaction. The staff estimates 
\4\ that it takes an average fund approximately 30 minutes per 
transaction and approximately 1,464 hours \5\ in the aggregate to 
comply with this portion of the rule.
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    \3\ These estimates are based on staff extrapolations from 
filings with the Commission.
    \4\ Unless stated otherwise, the information collection burden 
estimates are based on conversations between the staff and 
representatives of funds.
    \5\ This estimate is based on the following calculation: (0.5 
hours x 2,928 = 1,464 hours).
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    The funds also must maintain and preserve these transactional 
records in accordance with the rule's recordkeeping requirement, and 
the staff estimates that it takes a fund approximately 20 minutes per 
transaction and that annually, in the aggregate, funds spend 
approximately 976 hours \6\ to comply with this portion of the rule.
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    \6\ This estimate is based on the following calculations: (20 
minutes x 2,928 transactions = 58,560 minutes; 58,560 minutes/60 = 
976 hours).
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    In addition, fund boards must, no less than quarterly, examine each 
of these transactions to ensure that they comply with the fund's 
policies and procedures. The information or materials upon which the 
board relied to come to this determination also must be maintained and 
the staff estimates that it takes a fund 1 hour per quarter and, in the 
aggregate, approximately 944 hours \7\ annually to comply with this 
rule requirement.
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    \7\ This estimate is based on the following calculation: (1 hour 
per quarter x 4 quarters x 236 funds = 944 hours).
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    The staff estimates that reviewing and revising as needed written 
procedures for rule 10f-3 transactions takes, on average for each fund, 
two hours of a compliance attorney's time per year.\8\ Thus, annually, 
in the aggregate, the staff estimates that funds spend a total of 
approximately 472 hours \9\ on monitoring and revising rule 10f-3 
procedures.
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    \8\ These averages take into account the fact that in most 
years, fund attorneys and boards spend little or no time modifying 
procedures and in other years, they spend significant time doing so.
    \9\ This estimate is based on the following calculation: (236 
funds x 2 hours = 472 hours).
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    Based on an analysis of fund filings, the staff estimates that 
approximately 299 fund portfolios enter into

[[Page 35305]]

subadvisory agreements each year.\10\ Based on discussions with 
industry representatives, the staff estimates that it will require 
approximately 3 attorney hours to draft and execute additional clauses 
in new subadvisory contracts in order for funds and subadvisers to be 
able to rely on the exemptions in rule 10f-3. Because these additional 
clauses are identical to the clauses that a fund would need to insert 
in their subadvisory contracts to rely on rules 12d3-1, 17a-10, and 
17e-1, and because we believe that funds that use one such rule 
generally use all of these rules, we apportion this 3 hour time burden 
equally to all four rules. Therefore, we estimate that the burden 
allocated to rule 10f-3 for this contract change would be 0.75 
hours.\11\ Assuming that all 299 funds that enter into new subadvisory 
contracts each year make the modification to their contract required by 
the rule, we estimate that the rule's contract modification requirement 
will result in 224 burden hours annually.\12\
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    \10\ Based on information in Commission filings, we estimate 
that 38 percent of funds are advised by subadvisers.
    \11\ This estimate is based on the following calculation (3 
hours / 4 rules = .75 hours).
    \12\ These estimates are based on the following calculations: 
(0.75 hours x 299 portfolios = 224 burden hours).
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    The staff estimates, therefore, that rule 10f-3 imposes an 
information collection burden of 4,080 hours.\13\
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    \13\ This estimate is based on the following calculation: (1,464 
hours + 976 hours + 944 hours + 472 + 224 hours = 4,080 total burden 
hours).
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    Written comments are invited on: (a) Whether the collections of 
information are 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 burdens 
of the collections of information; (c) ways to enhance the quality, 
utility, and clarity of the information collected; and (d) ways to 
minimize the burdens of the collections 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 Candace 
Kenner, 100 F Street NE, Washington, DC 20549; or send an email to: 
[email protected].

    Dated: July 19, 2018.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-15853 Filed 7-24-18; 8:45 am]
 BILLING CODE 8011-01-P
35304 Federal Register / Vol. 83, No. 143 / Wednesday, July 25, 2018 / Notices

Commission’s experience with and Exchange Commission inspections and, when necessary, in
disclosure documents, we estimate that (‘‘Commission’’) is soliciting comments connection with enforcement actions.
the burden from compliance with Form on the collections of information The staff estimates that approximately
1–E and the offering circular requires discussed below. The Commission plans 236 funds engage in a total of
approximately 100 hours per filing. The to submit these existing collections of approximately 2,928 rule 10f–3
annual burden hours for compliance information to the Office of transactions each year.3 Rule 10f–3
with Form 1–E and the offering circular Management and Budget (‘‘OMB’’) for requires that the purchasing fund create
would be 200 hours (2 responses × 100 extension and approval. a written record of each transaction that
hours per response). Estimates of the Section 10(f) of the Investment includes, among other things, from
burden hours are made solely for the Company Act of 1940 (15 U.S.C. 80a) whom the securities were purchased
purposes of the PRA, and are not (the ‘‘Act’’) prohibits a registered and the terms of the transaction. The
derived from a comprehensive or even investment company (‘‘fund’’) from staff estimates 4 that it takes an average
a representative survey or study of the purchasing any security during an fund approximately 30 minutes per
costs of SEC rules and forms. underwriting or selling syndicate if the transaction and approximately 1,464
Compliance with the information fund has certain relationships with a hours 5 in the aggregate to comply with
collection requirements of the rules is principal underwriter for the security.1 this portion of the rule.
necessary to obtain the benefit of relying Congress enacted this provision in 1940 The funds also must maintain and
on the rules. The information provided to protect funds and their shareholders preserve these transactional records in
on Form 1–E and in the offering circular by preventing underwriters from accordance with the rule’s
will not be kept confidential. An agency ‘‘dumping’’ unmarketable securities on recordkeeping requirement, and the staff
may not conduct or sponsor, and a affiliated funds. estimates that it takes a fund
person is not required to respond to, a Rule 10f–3 permits a fund to engage approximately 20 minutes per
collection of information unless it in a securities transaction that otherwise transaction and that annually, in the
displays a currently valid OMB control would violate section 10(f) if, among aggregate, funds spend approximately
number. other things: (i) The fund’s directors 976 hours 6 to comply with this portion
The public may view the background have approved procedures for purchases of the rule.
documentation for this information In addition, fund boards must, no less
made in reliance on the rule, regularly
collection at the following website, than quarterly, examine each of these
review fund purchases to determine
www.reginfo.gov. Comments should be transactions to ensure that they comply
whether they comply with these
directed to: (i) Desk Officer for the with the fund’s policies and procedures.
procedures, and approve necessary
Securities and Exchange Commission, The information or materials upon
changes to the procedures; and (ii) a
Office of Information and Regulatory which the board relied to come to this
written record of each transaction
Affairs, Office of Management and determination also must be maintained
effected under the rule is maintained for
Budget, Room 10102, New Executive and the staff estimates that it takes a
six years, the first two of which in an
Office Building, Washington, DC 20503, fund 1 hour per quarter and, in the
easily accessible place.2 The written
or by sending an email to: Shagufta_ aggregate, approximately 944 hours 7
record must state: (i) From whom the
Ahmed@omb.eop.gov; and (ii) Pamela annually to comply with this rule
securities were acquired; (ii) the identity
Dyson, Director/Chief Information requirement.
of the underwriting syndicate’s The staff estimates that reviewing and
Officer, Securities and Exchange members; (iii) the terms of the
Commission, c/o Candace Kenner, 100 F revising as needed written procedures
transactions; and (iv) the information or for rule 10f-3 transactions takes, on
Street NE, Washington, DC 20549 or materials on which the fund’s board of
send an email to: PRA_Mailbox@ average for each fund, two hours of a
directors has determined that the compliance attorney’s time per year.8
sec.gov. Comments must be submitted to purchases were made in compliance
OMB within 30 days of this notice. Thus, annually, in the aggregate, the
with procedures established by the staff estimates that funds spend a total
Dated: July 19, 2018. board. of approximately 472 hours 9 on
Eduardo A. Aleman, Rule 10f–3 also conditionally allows monitoring and revising rule 10f–3
Assistant Secretary. managed portions of fund portfolios to procedures.
[FR Doc. 2018–15855 Filed 7–24–18; 8:45 am] purchase securities offered in otherwise Based on an analysis of fund filings,
BILLING CODE 8011–01–P
off-limits primary offerings. To qualify the staff estimates that approximately
for this exemption, rule 10f-3 requires 299 fund portfolios enter into
that the subadviser that is advising the
SECURITIES AND EXCHANGE purchaser be contractually prohibited 3 These estimates are based on staff extrapolations

COMMISSION from providing investment advice to from filings with the Commission.
any other portion of the fund’s portfolio 4 Unless stated otherwise, the information

Proposed Collection; Comment and consulting with any other of the collection burden estimates are based on
conversations between the staff and representatives
Request fund’s advisers that is a principal of funds.
underwriter or affiliated person of a 5 This estimate is based on the following
Upon Written Request, Copies Available principal underwriter concerning the calculation: (0.5 hours × 2,928 = 1,464 hours).
From: Securities and Exchange fund’s securities transactions. 6 This estimate is based on the following
Commission, Office of FOIA Services, These requirements provide a calculations: (20 minutes × 2,928 transactions =
100 F Street NE, Washington, DC mechanism for fund boards to oversee
58,560 minutes; 58,560 minutes/60 = 976 hours).
daltland on DSKBBV9HB2PROD with NOTICES

7 This estimate is based on the following
20549–2736 compliance with the rule. The required calculation: (1 hour per quarter × 4 quarters × 236
Extension: recordkeeping facilitates the funds = 944 hours).
Rule 10f–3; SEC File No. 270–237, OMB Commission staff’s review of rule 10f– 8 These averages take into account the fact that in

Control No. 3235–0226 3 transactions during routine fund most years, fund attorneys and boards spend little
or no time modifying procedures and in other years,
Notice is hereby given that, pursuant they spend significant time doing so.
to the Paperwork Reduction Act of 1995 1 15 U.S.C. 80a-10(f). 9 This estimate is based on the following

(44 U.S.C. 3501–3520), the Securities 2 17 CFR 270.10f–3. calculation: (236 funds × 2 hours = 472 hours).

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Federal Register / Vol. 83, No. 143 / Wednesday, July 25, 2018 / Notices 35305

subadvisory agreements each year.10 Dated: July 19, 2018. burden is estimated to be approximately
Based on discussions with industry Eduardo A. Aleman, 125 burden-hours per year.
representatives, the staff estimates that Assistant Secretary. An agency may not conduct or
it will require approximately 3 attorney [FR Doc. 2018–15853 Filed 7–24–18; 8:45 am] sponsor, and a person is not required to
hours to draft and execute additional BILLING CODE 8011–01–P
respond to, a collection of information
clauses in new subadvisory contracts in under the PRA unless it displays a
order for funds and subadvisers to be currently valid OMB control number.
able to rely on the exemptions in rule SECURITIES AND EXCHANGE The public may view background
10f–3. Because these additional clauses COMMISSION documentation for this information
are identical to the clauses that a fund collection at the following website,
would need to insert in their Submission for OMB Review; www.reginfo.gov. Comments should be
subadvisory contracts to rely on rules Comment Request directed to: (i) Desk Officer for the
12d3–1, 17a–10, and 17e–1, and because Securities and Exchange Commission,
Upon Written Request, Copies Available Office of Information and Regulatory
we believe that funds that use one such From: Securities and Exchange
rule generally use all of these rules, we Affairs, Office of Management and
Commission, Office of FOIA Services, Budget, Room 10102, New Executive
apportion this 3 hour time burden 100 F Street NE, Washington, DC
equally to all four rules. Therefore, we Office Building, Washington, DC 20503,
20549–2736 or by sending an email to: Shagufta_
estimate that the burden allocated to
Extension: Ahmed@omb.eop.gov; and (ii) Pamela
rule 10f–3 for this contract change Interagency Statement on Sound Practices,
would be 0.75 hours.11 Assuming that Dyson, Director/Chief Information
SEC File No. 270–560, OMB Control No. Officer, Securities and Exchange
all 299 funds that enter into new 3235–0622
subadvisory contracts each year make Commission, c/o Candace Kenner 100 F
the modification to their contract Notice is hereby given that pursuant Street NE Washington, DC 20549, or by
to the Paperwork Reduction Act of 1995 sending an email to: PRA_Mailbox@
required by the rule, we estimate that
(‘‘PRA’’) (44 U.S.C. 3501 et seq.) the sec.gov. Comments must be submitted to
the rule’s contract modification
Securities and Exchange Commission OMB within 30 days of this notice.
requirement will result in 224 burden
(‘‘Commission’’) has submitted to the Dated: July 19, 2018.
hours annually.12
Office of Management and Budget Eduardo A. Aleman,
The staff estimates, therefore, that rule (‘‘OMB’’) a request for approval of
10f–3 imposes an information collection Assistant Secretary.
extension of the previously approved
burden of 4,080 hours.13 [FR Doc. 2018–15856 Filed 7–24–18; 8:45 am]
collection of information provided for in
BILLING CODE 8011–01–P
Written comments are invited on: (a) the Interagency Statement on Sound
Whether the collections of information Practices Concerning Elevated Risk
are necessary for the proper Complex Structured Finance Activities
SECURITIES AND EXCHANGE
performance of the functions of the (‘‘Statement’’) under the Securities
COMMISSION
Commission, including whether the Exchange Act of 1934 (15 U.S.C. 78a et
information has practical utility; (b) the seq.) (‘‘Exchange Act’’) and the [Release No. 34–83672; File No. SR–CBOE–
accuracy of the Commission’s estimate Investment Advisers Act of 1940 (15 2018–052]
of the burdens of the collections of U.S.C. 80b et seq.) (‘‘Advisers Act’’).
The Statement was issued by the Self-Regulatory Organizations; Cboe
information; (c) ways to enhance the
Commission, together with the Office of Exchange, Inc.; Notice of Filing and
quality, utility, and clarity of the
the Comptroller of the Currency, the Immediate Effectiveness of a Proposed
information collected; and (d) ways to
Board of Governors of the Federal Rule Change To Extend the Credit
minimize the burdens of the collections
Reserve System, the Federal Deposit Option Margin Pilot Program Through
of information on respondents,
Insurance Corporation, and the Office of July 18, 2019
including through the use of automated
collection techniques or other forms of Thrift Supervision (together, the July 19, 2018.
information technology. Consideration ‘‘Agencies’’), in May 2006. The Pursuant to Section 19(b)(1) of the
will be given to comments and Statement describes the types of internal Securities Exchange Act of 1934 (the
suggestions submitted in writing within controls and risk management ‘‘Act’’),1 and Rule 19b–4 thereunder,2
60 days of this publication. procedures that the Agencies believe are notice is hereby given that on July 18,
particularly effective in assisting 2018, Cboe Exchange, Inc. (the
Please direct your written comments financial institutions to identify and
to Pamela Dyson, Director/Chief ‘‘Exchange’’ or ‘‘Cboe Options’’) filed
address the reputational, legal, and with the Securities and Exchange
Information Officer, Securities and other risks associated with elevated risk
Exchange Commission, C/O Candace Commission (the ‘‘Commission’’) the
complex structured finance proposed rule change as described in
Kenner, 100 F Street NE, Washington, transactions.
DC 20549; or send an email to: PRA_ Items I and II below, which Items have
The primary purpose of the Statement been prepared by the Exchange. The
Mailbox@sec.gov. is to ensure that these transactions Exchange filed the proposal as a ‘‘non-
receive enhanced scrutiny by the controversial’’ proposed rule change
10 Based on information in Commission filings,
institution and to ensure that the pursuant to Section 19(b)(3)(A)(iii) of
we estimate that 38 percent of funds are advised by
subadvisers. institution does not participate in illegal the Act3 and Rule 19b–4(f)(6)
daltland on DSKBBV9HB2PROD with NOTICES

11 This estimate is based on the following or inappropriate transactions. thereunder.4 The Commission is
calculation (3 hours ÷ 4 rules = .75 hours). The Commission estimates that publishing this notice to solicit
12 These estimates are based on the following
approximately 5 registered broker-
calculations: (0.75 hours × 299 portfolios = 224 dealers or investment advisers will 1 15 U.S.C. 78s(b)(1).
burden hours).
13 This estimate is based on the following spend an average of approximately 25 2 17 CFR 240.19b–4.
calculation: (1,464 hours + 976 hours + 944 hours hours per year complying with the 3 15 U.S.C. 78s(b)(3)(A)(iii).

+ 472 + 224 hours = 4,080 total burden hours). Statement. Thus, the total compliance 4 17 CFR 240.19b–4(f)(6).

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Document Created: 2018-07-25 00:43:58
Document Modified: 2018-07-25 00:43:58
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		83 FR 35304