83 FR 4938 - Proposed Collection; Comment Request

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 23 (February 2, 2018)

Page Range		4938-4941
FR Document		2018-02118
Federal Register, Volume 83 Issue 23 (Friday, February 2, 2018)
[Federal Register Volume 83, Number 23 (Friday, February 2, 2018)]
[Notices]
[Pages 4938-4941]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-02118]


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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 12d1-1, SEC File No. 270-526, OMB Control No. 3235-0584

    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 (the ``Commission'') is soliciting comments on the 
collection of information summarized below. The Commission plans to 
submit this existing collection of information to the Office of 
Management and Budget for extension and approval.
    An investment company (``fund'') is generally limited in the amount 
of securities the fund (``acquiring fund'') can acquire from another 
fund (``acquired fund''). Section 12(d) of the Investment Company Act 
of 1940 (the ``Investment Company Act'' or ``Act'') \1\ provides that a 
registered fund (and companies it controls) cannot:
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    \1\ See 15 U.S.C. 80a.
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     Acquire more than three percent of another fund's 
securities;
     invest more than five percent of its own assets in another 
fund; or
     invest more than ten percent of its own assets in other 
funds in the aggregate.\2\
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    \2\ See 15 U.S.C. 80a-12(d)(1)(A). If an acquiring fund is not 
registered, these limitations apply only with respect to the 
acquiring fund's acquisition of registered funds.
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    In addition, a registered open-end fund, its principal underwriter, 
and any registered broker or dealer cannot sell that fund's shares to 
another fund if, as a result:
     The acquiring fund (and any companies it controls) owns 
more than three percent of the acquired fund's stock; or
     all acquiring funds (and companies they control) in the 
aggregate own more than ten percent of the acquired fund's stock.\3\
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    \3\ See 15 U.S.C. 80a-12(d)(1)(B).
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    Rule 12d1-1 under the Act provides an exemption from these 
limitations for ``cash sweep'' arrangements in which a fund invests all 
or a portion of its available cash in a money market fund rather than 
directly in short-term instruments.\4\ An acquiring fund relying on the 
exemption may not pay a sales load, distribution fee, or service fee on 
acquired fund shares, or if it does, the acquiring fund's investment 
adviser must waive a sufficient amount of its advisory fee to offset 
the cost of the loads or distribution fees.\5\ The acquired fund may be 
a fund in the same fund complex or in a different fund complex. In 
addition to providing an exemption from section 12(d)(1) of the Act, 
the rule provides exemptions from section 17(a) of the Act and rule 
17d-1 thereunder, which restrict a fund's ability to enter into 
transactions and joint arrangements with affiliated persons.\6\ These 
provisions would otherwise prohibit an acquiring fund from investing in 
a money market fund in the same fund complex,\7\ and prohibit a fund 
that acquires five percent or more of the securities of a money market 
fund in another fund complex from making any additional investments in 
the money market fund.\8\
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    \4\ See 17 CFR 270.12d1-1.
    \5\ See rule 12d1-1(b)(1).
    \6\ See 15 U.S.C. 80a-17(a), 15 U.S.C. 80a-17(d); 17 CFR 
270.17d-1.
    \7\ An affiliated person of a fund includes any person directly 
or indirectly controlling, controlled by, or under common control 
with such other person. See 15 U.S.C. 80a-2(a)(3) (definition of 
``affiliated person''). Most funds today are organized by an 
investment adviser that advises or provides administrative services 
to other funds in the same complex. Funds in a fund complex are 
generally under common control of an investment adviser or other 
person exercising a controlling influence over the management or 
policies of the funds. See 15 U.S.C. 80a-2(a)(9) (definition of 
``control''). Not all advisers control funds they advise. The 
determination of whether a fund is under the control of its adviser, 
officers, or directors depends on all the relevant facts and 
circumstances. See Investment Company Mergers, Investment Company 
Act Release No. 25259 (Nov. 8, 2001) [66 FR 57602 (Nov. 15, 2001)], 
at n.11. To the extent that an acquiring fund in a fund complex is 
under common control with a money market fund in the same complex, 
the funds would rely on the rule's exemptions from section 17(a) and 
rule 17d-1.
    \8\ See 15 U.S.C. 80a-2(a)(3)(A), (B).
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    The rule also permits a registered fund to rely on the exemption to 
invest in an unregistered money market fund that limits its investments 
to those in which a registered money market fund may invest under rule 
2a-7 under the Act, and undertakes to comply with all the other 
provisions of rule 2a-7.\9\ In addition, the acquiring fund must

[[Page 4939]]

reasonably believe that the unregistered money market fund (i) operates 
in compliance with rule 2a-7, (ii) complies with sections 17(a), (d), 
(e), 18, and 22(e) of the Act \10\ as if it were a registered open-end 
fund, (iii) has adopted procedures designed to ensure that it complies 
with these statutory provisions, (iv) maintains the records required by 
rules 31a-1(b)(1), 31a-1(b)(2)(ii), 31a-1(b)(2)(iv), and 31a-1(b)(9); 
\11\ and (v) preserves permanently, the first two years in an easily 
accessible place, all books and records required to be made under these 
rules.
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    \9\ See 17 CFR 270.2a-7.
    \10\ See 15 U.S.C. 80a-17(a), 15 U.S.C. 80a-17(d), 15 U.S.C. 
80a-17(e), 15 U.S.C. 80a-18, 15 U.S.C. 80a-22(e).
    \11\ See 17 CFR 270.31a-1(b)(1), 17 CFR 270.31a-1(b)(2)(ii), 17 
CFR 270.31a-1(b)(2)(iv), 17 CFR 270.31a-1(b)(9).
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    Rule 2a-7 contains certain collection of information requirements. 
An unregistered money market fund that complies with rule 2a-7 would be 
subject to these collection of information requirements. In addition, 
the recordkeeping requirements under rule 31a-1 with which the 
acquiring fund reasonably believes the unregistered money market fund 
complies are collections of information for the unregistered money 
market fund. The adoption of procedures by unregistered money market 
funds to ensure that they comply with sections 17(a), (d), (e), 18, and 
22(e) of the Act also constitute collections of information. By 
allowing funds to invest in registered and unregistered money market 
funds, rule 12d1-1 is intended to provide funds greater options for 
cash management. In order for a registered fund to rely on the 
exemption to invest in an unregistered money market fund, the 
unregistered money market fund must comply with certain collection of 
information requirements for registered money market funds. These 
requirements are intended to ensure that the unregistered money market 
fund has established procedures for collecting the information 
necessary to make adequate credit reviews of securities in its 
portfolio, as well as other recordkeeping requirements that will assist 
the acquiring fund in overseeing the unregistered money market fund 
(and Commission staff in its examination of the unregistered money 
market fund's adviser).
    The number of unregistered money market funds that are affected by 
rule 12d1-1 is an estimate based on the number of private liquidity 
funds reported on Form PF as of the fourth calendar quarter 2016.\12\ 
The hour burden estimates for the condition that an unregistered money 
market fund comply with rule 2a-7 are based on the burden hours 
included in the Commission's 2013 PRA submission regarding rule 2a-
7.\13\ The estimated average burden hours in this collection of 
information are made solely for purposes of the Paperwork Reduction Act 
and are not derived from a quantitative, comprehensive or even 
representative survey or study of the burdens associated with 
Commission rules and forms.
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    \12\ See U.S. Securities and Exchange Commission Annual Staff 
Report Relating to the Use of Form PF Data, Private Fund Statistics, 
Fourth Calendar Quarter 2016, available at https://www.sec.gov/files/im-private-fund-annual-report-101617.pdf.
    \13\ See Securities and Exchange Commission, Request for OMB 
Approval of Extension for Approved Collection for Rule 2a-7 under 
the Investment Company Act of 1940 (OMB Control No. 3235-0268) 
(approved Aug. 28, 2013). This was the most recent rule 2a-7 
submission that includes certain estimates with respect to aggregate 
annual hour and cost burdens for collections of information for each 
existing registered money market fund, fund complexes with 
registered money market funds, registered money market funds that 
experience an event of default or insolvency, and newly registered 
money market funds.
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    In the rule 2a-7 submission, Commission staff made the following 
estimates with respect to aggregate annual hour and cost burdens for 
collections of information for each existing registered money market 
fund:
    Record of credit risk analyses, and determinations regarding 
adjustable rate securities, asset backed securities, securities subject 
to a demand feature or guarantee, and counterparties to repurchase 
agreements:

85 responses
680 hours of professional time
Cost: $178,160 \14\

    \14\ This estimate is based on the following calculation: (680 
burden hours x $262 per hour for professional time) = $178,160 per 
fund.
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    Public website posting of monthly portfolio information:

12 responses
7 hours of professional time
Cost: $17,304 \15\

    \15\ This estimate is based on the following calculation: (12 x 
7 burden hours x $206 per hour for a webmaster) = $17,304 per fund.
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    Review of procedures and guidelines of any investment adviser to 
whom the fund's board has delegated responsibility under rule 2a-7 and 
amendment of such procedures:

1 response
5 hours of professional and director time
Cost: $5,960 \16\

    \16\ This estimate is based on the following calculation: (1 
hour x $4,500 per hour for board time) + (4 hours x $365 per hour 
for professional time) = $5,960 per fund.
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    Based on census data available on Form PF, the staff believes that 
the number of private liquidity funds reported on Form PF (69) is the 
most current and accurate estimate the number of unregistered money 
market funds affected by rule 12d1-1.\17\ Each of these unregistered 
money market funds engages in the collections of information described 
above. Accordingly, the staff estimates that unregistered money market 
funds complying with the collections of information described above 
engage in a total of 6,762 annual responses under rule 12d1-1,\18\ the 
aggregate annual burden hours associated with these responses is 
47,748,\19\ and the aggregate annual cost to funds is $13,898,256.\20\
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    \17\ See supra note 12. The staff notes, however, that this 
estimate may be overstated to the extent that a private liquidity 
fund reported on Form PF does not follow all of rule 2a-7's 
requirements (that include collections of information) or because no 
registered investment companies invest in such a fund. The staff 
also notes, however, that this estimate may be understated to the 
extent that there are additional unregistered money market funds 
that are not required to be reported on Form PF (because Form PF is 
filed only by certain investment advisers to private funds that have 
$150 million in private fund assets under management).
    \18\ The estimate is based on the following calculations: (69 
funds x 85 responses for documentation of credit analyses and other 
determinations) = 5,865 responses. (69 funds x 12 responses for 
public website posting) = 828 responses. (69 funds x 1 response for 
policies and procedures related to delegation to an investment 
adviser) = 69 responses. 5,865 responses + 828 responses + 69 
responses = 6,762 responses.
    \19\ This estimate is based on the following calculations: (69 
funds x 680 hours for documentation of credit analyses and other 
determinations) = 46,920 hours. (69 funds x 7 hours for public 
website posting) = 483 hours. (69 funds x 5 hours for policies and 
procedures related to delegation to an investment adviser) = 345 
hours. 46,920 hours + 483 hours + 345 hours = 47,748 hours.
    \20\ This estimate is based on the following calculations: (69 
funds x $178,160) = $12,293,040. (69 funds x $17,304) = $1,193,976. 
(69 funds x $5,960) = $411,240. $12,293,040 + $1,193,976 + $411,240 
= $13,898,256.
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    In the rule 2a-7 submission, Commission staff further estimated the 
aggregate annual hour and cost burdens for collections of information 
for fund complexes with registered money market funds as follows:
    Review, revise, and approve procedures concerning stress testing:

1 response
12 burden hours of professional and director time

Cost: $8,021 \21\
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    \21\ This estimate is based on the following calculation: (1 
hour x $4,500 per hour for board time) + (5 hours x $322 per hour 
for a portfolio manager) + (3 hours x $259 per hour for a risk 
management specialist) + (3 hours x $378 per hour for an attorney) = 
$8,021 per response.

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    Report to fund boards on the results of stress testing:


[[Page 4940]]


5 responses
10 burden hours of professional and support staff time
Cost: $15,490 \22\
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    \22\ This estimate is based on the following calculation: (5 
responses x 5 hours x $322 per hour for a portfolio manager) + (5 
responses x 2 hours x $279 per hour for a compliance manager) + (5 
responses x 2 hours x $378 per hour for an attorney) + (5 responses 
x 1 hour x $174 per hour for support staff) = $15,490 per fund 
complex.

    Reporting of rule 17a-9 transactions: \23\
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    \23\ See 17 CFR 270.17a-9.

1 response
1 burden hour of legal time
Cost: $378 \24\
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    \24\ The estimate is based on the following calculations: (1 
response x $378 per hour for an attorney) = $378 per response.

    Based on the number of liquidity fund advisers reported on Form PF, 
the staff estimates that there are 39 fund complexes with unregistered 
money market funds invested in by mutual funds in excess of the 
statutory limits under rule 12d1-1.\25\ Each of these fund complexes 
engages in the collections of information described above. Accordingly, 
the staff estimates that these fund complexes complying with the 
collections of information described above engage in a total of 273 
annual responses under rule 12d1-1,\26\ the aggregate annual burden 
hours associated with these responses is 897,\27\ and the aggregate 
annual cost to funds is $931,671.\28\
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    \25\ See supra note 12.
    \26\ The estimate is based on the following calculations: (39 
fund complexes x 1 response for revision of procedures concerning 
stress testing) = 39 responses. (39 fund complexes x 5 responses to 
provide stress testing reports) = 195 responses. (39 fund complexes 
x 1 response for reporting of rule 17a-9 transactions) = 39 
responses. 39 responses + 195 responses + 39 responses = 273 
responses.
    \27\ This estimate is based on the following calculations: (39 
fund complexes x 12 hours for revision of procedures concerning 
stress testing) = 468 hours. (39 fund complexes x 10 hours to 
provide stress testing reports) = 390 hours. (39 fund complexes x 1 
hour for reporting of rule 17a-9 transactions) = 39 hours. 468 hours 
+ 390 hours + 39 hours = 897 hours.
    \28\ This estimate is based on the following calculations: (39 
fund complexes x $8,021 for revision of procedures concerning stress 
testing) = $312,819. (39 fund complexes x $15,490 to provide stress 
testing reports) = $604,110. (39 fund complexes x $378 for reporting 
of rule 17a-9 transactions) = $14,742. $312,819 + $604,110 + $14,742 
= $931,671.
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    In the rule 2a-7 submission, Commission staff further estimated the 
aggregate annual burdens for registered money market funds that 
experience an event of default or insolvency as follows:
    Written record of board determinations and actions related to 
failure of a security to meet certain eligibility standards or an event 
of default of default or insolvency:

2 responses
1 burden hour of legal time
Cost: $378

    Notice to Commission of an event of default or insolvency:

1 response
0.5 burden hours of legal time
Cost: $189

    Consistent with the estimate in the rule 2a-7 submissions, 
Commission staff estimates that approximately 2 percent, or 1, 
unregistered money market fund experiences an event of default or 
insolvency each year. Accordingly, the staff estimates that one 
unregistered money market fund will comply with these collections of 
information requirements and engage in 3 annual responses under rule 
12d1-1,\29\ the aggregate annual burden hours associated with these 
responses is 1.5,\30\ and the aggregate annual cost to funds is 
$567.\31\
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    \29\ The estimate is based on the following calculations: (1 
fund x 2 responses) + (1 fund x 1 response) = 3 responses.
    \30\ This estimate is based on the following calculations: (1 
fund x 1 hour) + (1 fund x 0.5 hours) = 1.5 hours.
    \31\ This estimate is based on the following calculations: (1 
fund x $378) + (1 fund x $189) = $567.
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    In the rule 2a-7 submission, Commission staff further estimated the 
aggregate annual burdens for newly registered money market funds as 
follows:
    Establish written procedures and guidelines designed to stabilize 
the fund's net asset value and establish procedures for board 
delegation of authority:

1 response
15.5 hours of director, legal, and support staff time
Cost: $6,328 \32\
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    \32\ This estimate is based on the following calculation: (0.5 
hours x $4,500 per hour for board time) + (7.2 hours x $378 per hour 
for an attorney) + (7.8 hours x $174 per hour for support staff) = 
$6,328 per response.

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    Adopt procedures concerning stress testing:

1 response per fund complex
22 burden hours of professional and director time per fund complex
Cost: $19,373 per fund complex \33\
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    \33\ This estimate is based on the following calculation: (3 
hours x $4,500 per hour for board time) + (8 hours x $378 per hour 
for an attorney) + (11 hours x $259 per hour for a risk management 
specialist) = $19,373 per response. See also infra note 34.

    Commission staff estimates that the proportion of unregistered 
money market funds that intend to newly undertake the collection of 
information burdens of rule 2a-7 will be similar to the proportion of 
money market funds that are newly registered. Based on a projection of 
10 new money market funds per year (in the most recent rule 2a-7 
submission), the staff estimates that, similarly, there will be 10 new 
unregistered money market funds that undertake the above burden to 
establish written procedures and guidelines designed to stabilize the 
fund's net asset value and establish procedures for board delegation of 
authority.\34\ Accordingly, the staff estimates that 10 unregistered 
money market funds will comply with this collection of information 
requirement and engage in 10 annual responses under rule 12d1-1,\35\ 
the aggregate annual burden hours associated with these responses is 
155,\36\ and the aggregate annual cost to funds is $62,380.\37\
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    \34\ The staff's estimate is based on historical data provided 
in Lipper Inc.'s LANA database and projections about the growth of 
the money market mutual fund industry going forward. The actual 
number of new money market funds launched may vary significantly 
from our estimates depending upon developments in market interest 
rates and other factors. The staff does not estimate any new fund 
complexes being launched in the next year.
    \35\ The estimate is based on the following calculations: (10 
funds x 1 response) = 10 responses.
    \36\ This estimate is based on the following calculations: (10 
funds x 15.5 hours) = 155 hours.
    \37\ This estimate is based on the following calculations: (10 
funds x $6,238) = $62,380.
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    Accordingly, the estimated total number of annual responses under 
rule 12d1-1 for the collections of information described in the rule 
2a-7 submissions is 7,048, the aggregate annual burden hours associated 
with these responses is 48,801.5, and the aggregate cost to funds is 
$14,892,874.\38\
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    \38\ These estimates are based upon the following calculations: 
(6,762 + 273 + 3+ 10) = 7,048 annual responses; (47,748 + 897 + 1.5 
+ 155) = 48,801.5 burden hours; and ($13,898,256 + $931,671 + $567 + 
$62,380) = $14,892,874.
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    Rules 31a-1(b)(1), 31a-1(b)(2)(ii), 31a-1(b)(2)(iv), and 31a-
1(b)(9) require registered funds to keep certain records, which include 
journals and general and auxiliary ledgers, including ledgers for each 
portfolio security and each shareholder of record of the fund. Most of 
the records required to be maintained by the rule are the type that 
generally would be maintained as a matter of good business practice and 
to prepare the unregistered money market fund's financial statements. 
Accordingly, Commission staff estimates that the requirements under 
rules 31a-1(b)(1), 31a-1(b)(2)(ii), 31a-1(b)(2)(iv), and 31a-1(b)(9) 
would not impose any additional burden because the costs of maintaining 
these records would be incurred by unregistered money market funds in 
any case to keep books and records that are necessary to prepare 
financial statements for shareholders, to prepare

[[Page 4941]]

the fund's annual income tax returns, and as a normal business custom.
    Rule 12d1-1 also requires unregistered money market funds in which 
registered funds invest to adopt procedures designed to ensure that the 
unregistered money market funds comply with sections 17(a), (d), (e), 
and 22(e) of the Act. This is a one-time collection of information 
requirement that applies to unregistered money market funds that intend 
to comply with the requirements of rule 12d1-1. As discussed above, 
based on a projection of 10 new money market funds per year, the staff 
estimates that, similarly, there will be 10 new unregistered money 
market funds that undertake the above burden to establish written 
procedures and guidelines designed to ensure that the unregistered 
money market funds comply with sections 17(a), (d), (e), and 22(e) of 
the Act. The staff estimates the burden as follows:
    Establish written procedures and guidelines designed to ensure that 
the unregistered money market funds comply with sections 17(a), (d), 
(e), and 22(e) of the Act:

1 response
15.5 hours of director, legal, and support staff time
Cost: $6,328 \39\
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    \39\ This estimate is based on the following calculation: (0.5 
hours x $4,500 per hour for board time) + (7.2 hours x $378 per hour 
for an attorney) + (7.8 hours x $174 per hour for support staff) = 
$6,328 per response.

    Accordingly, the staff estimates that 10 unregistered money market 
funds will comply with this collection of information requirement and 
engage in 10 annual responses under rule 12d1-1,\40\ the aggregate 
annual burden hours associated with these responses is 155,\41\ and the 
aggregate annual cost to funds is $62,380.\42\
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    \40\ The estimate is based on the following calculations: (10 
funds x 1 response) = 10 responses.
    \41\ This estimate is based on the following calculations: (10 
funds x 15.5 hours) = 155 hours.
    \42\ This estimate is based on the following calculations: (10 
funds x $6,238) = $62,380.
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    Commission staff also estimates that unregistered money market 
funds will incur costs to preserve records, as required under rule 2a-
7. These costs will vary significantly for individual funds, depending 
on the amount of assets under fund management and whether the fund 
preserves its records in a storage facility in hard copy or has 
developed and maintains a computer system to create and preserve 
compliance records. In the rule 2a-7 submission, Commission staff 
estimated that the amount an individual money market fund may spend 
ranges from $100 per year to $300,000. We have no reason to believe the 
range is different for unregistered money market funds. Based on Form 
PF data as of the fourth calendar quarter 2016, private liquidity funds 
have $293 billion in gross asset value.\43\ The Commission does not 
have specific information about the proportion of assets held in small, 
medium-sized, or large unregistered money market funds. Because private 
liquidity funds are often used as cash management vehicles, the staff 
estimates that each private liquidity fund is a ``large'' fund (i.e., 
more than $1 billion in assets under management). Based on a cost of 
$0.0000009 per dollar of assets under management (for large funds),\44\ 
the staff estimates compliance with rule 2a-7 for these unregistered 
money market funds totals $263,700 annually.\45\
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    \43\ See supra note 12.
    \44\ The recordkeeping cost estimates are $0.0051295 per dollar 
of assets under management for small funds, and $0.0005041 per 
dollar of assets under management for medium-sized funds. The cost 
estimates are the same as those used in the most recently approved 
rule 2a-7 submission.
    \45\ This estimate is based on the following calculation: ($293 
billion x $0.0000009) = $263,700 billion for small funds.
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    Consistent with estimates made in the rule 2a-7 submission, 
Commission staff estimates that unregistered money market funds also 
incur capital costs to create computer programs for maintaining and 
preserving compliance records for rule 2a-7 of $0.0000132 per dollar of 
assets under management. Based on the assets under management figures 
described above, staff estimates annual capital costs for all 
unregistered money market funds of $3.87 million.\46\
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    \46\ This estimate is based on the following calculation: ($293 
billion x 0.0000132) = $3.87 million.
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    Commission staff further estimates that, even absent the 
requirements of rule 2a-7, money market funds would spend at least half 
of the amounts described above for record preservation ($131,850) and 
for capital costs ($1.94 million). Commission staff concludes that the 
aggregate annual costs of compliance with the rule are $131,850 for 
record preservation and $1.94 million for capital costs.
    The collections of information required for unregistered money 
market funds by rule 12d1-1 are necessary in order for acquiring funds 
to be able to obtain the benefits described above. Notices to the 
Commission 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 control number.
    Written comments are invited on: (a) Whether the proposed 
collection of information is necessary for the proper performance of 
the functions of the agency, including whether the information will 
have practical utility; (b) the accuracy of the agency's estimate of 
the burden of the collection of information; (c) ways to enhance the 
quality, utility, and clarity of the information collected; and (d) 
ways to minimize the burden of the collection 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 Remi 
Pavlik-Simon, 100 F Street NE, Washington, DC 20549; or send an email 
to: [email protected].

    Dated: January 30, 2018.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-02118 Filed 2-1-18; 8:45 am]
 BILLING CODE 8011-01-P
4938 Federal Register / Vol. 83, No. 23 / Friday, February 2, 2018 / Notices

Commission shall institute proceedings For the Commission, by the Division of than ten percent of the acquired fund’s
to determine whether the proposed rule Trading and Markets, pursuant to delegated stock.3
should be approved or disapproved. authority.16 Rule 12d1–1 under the Act provides
Eduardo A. Aleman, an exemption from these limitations for
IV. Solicitation of Comments Assistant Secretary. ‘‘cash sweep’’ arrangements in which a
Interested persons are invited to [FR Doc. 2018–02126 Filed 2–1–18; 8:45 am] fund invests all or a portion of its
submit written data, views, and BILLING CODE 8011–01–P available cash in a money market fund
arguments concerning the foregoing, rather than directly in short-term
including whether the proposed rule instruments.4 An acquiring fund relying
change is consistent with the Act. SECURITIES AND EXCHANGE on the exemption may not pay a sales
Comments may be submitted by any of COMMISSION load, distribution fee, or service fee on
the following methods: acquired fund shares, or if it does, the
Proposed Collection; Comment acquiring fund’s investment adviser
Electronic Comments Request must waive a sufficient amount of its
• Use the Commission’s internet advisory fee to offset the cost of the
Upon Written Request, Copies Available loads or distribution fees.5 The acquired
comment form (http://www.sec.gov/ From: Securities and Exchange fund may be a fund in the same fund
rules/sro.shtml); or Commission, Office of FOIA Services, complex or in a different fund complex.
• Send an email to rule-comments@ 100 F Street NE, Washington, DC In addition to providing an exemption
sec.gov. Please include File Number SR– 20549–2736 from section 12(d)(1) of the Act, the rule
GEMX–2018–02 on the subject line. Extension: provides exemptions from section 17(a)
Paper Comments Rule 12d1–1, SEC File No. 270–526, OMB of the Act and rule 17d–1 thereunder,
Control No. 3235–0584 which restrict a fund’s ability to enter
• Send paper comments in triplicate into transactions and joint arrangements
Notice is hereby given that, pursuant
to Secretary, Securities and Exchange with affiliated persons.6 These
to the Paperwork Reduction Act of 1995
Commission, 100 F Street NE, provisions would otherwise prohibit an
(44 U.S.C. 3501 et seq.), the Securities
Washington, DC 20549–1090. acquiring fund from investing in a
and Exchange Commission (the
All submissions should refer to File ‘‘Commission’’) is soliciting comments money market fund in the same fund
Number SR–GEMX–2018–02. This file on the collection of information complex,7 and prohibit a fund that
number should be included on the summarized below. The Commission acquires five percent or more of the
subject line if email is used. To help the plans to submit this existing collection securities of a money market fund in
Commission process and review your of information to the Office of another fund complex from making any
comments more efficiently, please use additional investments in the money
Management and Budget for extension
only one method. The Commission will market fund.8
and approval.
The rule also permits a registered
post all comments on the Commission’s An investment company (‘‘fund’’) is fund to rely on the exemption to invest
internet website (http://www.sec.gov/ generally limited in the amount of in an unregistered money market fund
rules/sro.shtml). Copies of the securities the fund (‘‘acquiring fund’’) that limits its investments to those in
submission, all subsequent can acquire from another fund which a registered money market fund
amendments, all written statements (‘‘acquired fund’’). Section 12(d) of the may invest under rule 2a–7 under the
with respect to the proposed rule Investment Company Act of 1940 (the Act, and undertakes to comply with all
change that are filed with the ‘‘Investment Company Act’’ or ‘‘Act’’) 1 the other provisions of rule 2a–7.9 In
Commission, and all written provides that a registered fund (and addition, the acquiring fund must
communications relating to the companies it controls) cannot:
proposed rule change between the • Acquire more than three percent of 3 See 15 U.S.C. 80a–12(d)(1)(B).
Commission and any person, other than another fund’s securities; 4 See 17 CFR 270.12d1–1.
those that may be withheld from the • invest more than five percent of its 5 See rule 12d1–1(b)(1).

public in accordance with the own assets in another fund; or
6 See 15 U.S.C. 80a–17(a), 15 U.S.C. 80a–17(d); 17

provisions of 5 U.S.C. 552, will be CFR 270.17d–1.
available for website viewing and • invest more than ten percent of its 7 An affiliated person of a fund includes any

printing in the Commission’s Public own assets in other funds in the person directly or indirectly controlling, controlled
aggregate.2 by, or under common control with such other
Reference Room, 100 F Street NE, person. See 15 U.S.C. 80a–2(a)(3) (definition of
Washington, DC 20549, on official In addition, a registered open-end ‘‘affiliated person’’). Most funds today are organized
business days between the hours of fund, its principal underwriter, and any by an investment adviser that advises or provides
10:00 a.m. and 3:00 p.m. Copies of the registered broker or dealer cannot sell administrative services to other funds in the same
that fund’s shares to another fund if, as complex. Funds in a fund complex are generally
filing also will be available for under common control of an investment adviser or
inspection and copying at the principal a result: other person exercising a controlling influence over
office of the Exchange. All comments • The acquiring fund (and any the management or policies of the funds. See 15
companies it controls) owns more than U.S.C. 80a–2(a)(9) (definition of ‘‘control’’). Not all
received will be posted without change. advisers control funds they advise. The
Persons submitting comments are three percent of the acquired fund’s determination of whether a fund is under the
cautioned that we do not redact or edit stock; or control of its adviser, officers, or directors depends
personal identifying information from • all acquiring funds (and companies on all the relevant facts and circumstances. See
sradovich on DSK3GMQ082PROD with NOTICES

they control) in the aggregate own more Investment Company Mergers, Investment
comment submissions. You should Company Act Release No. 25259 (Nov. 8, 2001) [66
submit only information that you wish FR 57602 (Nov. 15, 2001)], at n.11. To the extent
to make available publicly. All 16 17 CFR 200.30–3(a)(12). that an acquiring fund in a fund complex is under
submissions should refer to File 1 See 15 U.S.C. 80a. common control with a money market fund in the
2 See 15 U.S.C. 80a–12(d)(1)(A). If an acquiring same complex, the funds would rely on the rule’s
Number SR–GEMX–2018–02 and exemptions from section 17(a) and rule 17d–1.
fund is not registered, these limitations apply only
should be submitted on or before with respect to the acquiring fund’s acquisition of 8 See 15 U.S.C. 80a–2(a)(3)(A), (B).
February 23, 2018. registered funds. 9 See 17 CFR 270.2a–7.

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4940 Federal Register / Vol. 83, No. 23 / Friday, February 2, 2018 / Notices

5 responses 2 responses projection of 10 new money market
10 burden hours of professional and 1 burden hour of legal time funds per year (in the most recent rule
support staff time Cost: $378 2a–7 submission), the staff estimates
Cost: $15,490 22 Notice to Commission of an event of that, similarly, there will be 10 new
Reporting of rule 17a–9 default or insolvency: unregistered money market funds that
transactions: 23 1 response undertake the above burden to establish
1 response 0.5 burden hours of legal time written procedures and guidelines
1 burden hour of legal time Cost: $189 designed to stabilize the fund’s net asset
Cost: $378 24 Consistent with the estimate in the value and establish procedures for board
Based on the number of liquidity fund rule 2a–7 submissions, Commission delegation of authority.34 Accordingly,
advisers reported on Form PF, the staff staff estimates that approximately 2 the staff estimates that 10 unregistered
estimates that there are 39 fund percent, or 1, unregistered money money market funds will comply with
complexes with unregistered money market fund experiences an event of this collection of information
market funds invested in by mutual default or insolvency each year. requirement and engage in 10 annual
funds in excess of the statutory limits Accordingly, the staff estimates that one responses under rule 12d1–1,35 the
under rule 12d1–1.25 Each of these fund unregistered money market fund will aggregate annual burden hours
complexes engages in the collections of comply with these collections of associated with these responses is 155,36
information described above. information requirements and engage in and the aggregate annual cost to funds
Accordingly, the staff estimates that 3 annual responses under rule 12d1–1,29 is $62,380.37
these fund complexes complying with the aggregate annual burden hours Accordingly, the estimated total
the collections of information described associated with these responses is 1.5,30 number of annual responses under rule
above engage in a total of 273 annual and the aggregate annual cost to funds 12d1–1 for the collections of
responses under rule 12d1–1,26 the is $567.31 information described in the rule 2a–7
aggregate annual burden hours In the rule 2a–7 submission, submissions is 7,048, the aggregate
associated with these responses is 897,27 Commission staff further estimated the annual burden hours associated with
and the aggregate annual cost to funds aggregate annual burdens for newly these responses is 48,801.5, and the
is $931,671.28 registered money market funds as aggregate cost to funds is $14,892,874.38
In the rule 2a–7 submission, follows: Rules 31a–1(b)(1), 31a–1(b)(2)(ii),
Commission staff further estimated the Establish written procedures and 31a–1(b)(2)(iv), and 31a–1(b)(9) require
aggregate annual burdens for registered guidelines designed to stabilize the registered funds to keep certain records,
money market funds that experience an fund’s net asset value and establish which include journals and general and
event of default or insolvency as procedures for board delegation of auxiliary ledgers, including ledgers for
follows: authority: each portfolio security and each
Written record of board shareholder of record of the fund. Most
determinations and actions related to 1 response
15.5 hours of director, legal, and of the records required to be maintained
failure of a security to meet certain by the rule are the type that generally
eligibility standards or an event of support staff time
Cost: $6,328 32 would be maintained as a matter of good
default of default or insolvency: business practice and to prepare the
Adopt procedures concerning stress unregistered money market fund’s
22 This estimate is based on the following testing: financial statements. Accordingly,
calculation: (5 responses × 5 hours × $322 per hour 1 response per fund complex
for a portfolio manager) + (5 responses × 2 hours Commission staff estimates that the
22 burden hours of professional and requirements under rules 31a–1(b)(1),
× $279 per hour for a compliance manager) + (5
responses × 2 hours × $378 per hour for an attorney) director time per fund complex 31a–1(b)(2)(ii), 31a–1(b)(2)(iv), and 31a–
+ (5 responses × 1 hour × $174 per hour for support Cost: $19,373 per fund complex 33 1(b)(9) would not impose any additional
staff) = $15,490 per fund complex. Commission staff estimates that the
23 See 17 CFR 270.17a–9.
burden because the costs of maintaining
24 The estimate is based on the following
proportion of unregistered money these records would be incurred by
calculations: (1 response × $378 per hour for an market funds that intend to newly unregistered money market funds in any
attorney) = $378 per response. undertake the collection of information case to keep books and records that are
25 See supra note 12. burdens of rule 2a–7 will be similar to necessary to prepare financial
26 The estimate is based on the following
the proportion of money market funds statements for shareholders, to prepare
calculations: (39 fund complexes × 1 response for that are newly registered. Based on a
revision of procedures concerning stress testing) =
34 The staff’s estimate is based on historical data
39 responses. (39 fund complexes × 5 responses to
29 The estimate is based on the following provided in Lipper Inc.’s LANA database and
provide stress testing reports) = 195 responses. (39
fund complexes × 1 response for reporting of rule calculations: (1 fund × 2 responses) + (1 fund × 1 projections about the growth of the money market
17a–9 transactions) = 39 responses. 39 responses + response) = 3 responses. mutual fund industry going forward. The actual
195 responses + 39 responses = 273 responses. 30 This estimate is based on the following number of new money market funds launched may
27 This estimate is based on the following calculations: (1 fund × 1 hour) + (1 fund × 0.5 vary significantly from our estimates depending
calculations: (39 fund complexes × 12 hours for hours) = 1.5 hours. upon developments in market interest rates and
revision of procedures concerning stress testing) = 31 This estimate is based on the following other factors. The staff does not estimate any new
468 hours. (39 fund complexes × 10 hours to calculations: (1 fund × $378) + (1 fund × $189) = fund complexes being launched in the next year.
35 The estimate is based on the following
provide stress testing reports) = 390 hours. (39 fund $567.
complexes × 1 hour for reporting of rule 17a–9 32 This estimate is based on the following calculations: (10 funds × 1 response) = 10
transactions) = 39 hours. 468 hours + 390 hours + calculation: (0.5 hours × $4,500 per hour for board responses.
sradovich on DSK3GMQ082PROD with NOTICES

39 hours = 897 hours. time) + (7.2 hours × $378 per hour for an attorney) 36 This estimate is based on the following

28 This estimate is based on the following + (7.8 hours × $174 per hour for support staff) = calculations: (10 funds × 15.5 hours) = 155 hours.
calculations: (39 fund complexes × $8,021 for $6,328 per response. 37 This estimate is based on the following

revision of procedures concerning stress testing) = 33 This estimate is based on the following calculations: (10 funds × $6,238) = $62,380.
$312,819. (39 fund complexes × $15,490 to provide calculation: (3 hours × $4,500 per hour for board 38 These estimates are based upon the following

stress testing reports) = $604,110. (39 fund time) + (8 hours × $378 per hour for an attorney) calculations: (6,762 + 273 + 3+ 10) = 7,048 annual
complexes × $378 for reporting of rule 17a–9 + (11 hours × $259 per hour for a risk management responses; (47,748 + 897 + 1.5 + 155) = 48,801.5
transactions) = $14,742. $312,819 + $604,110 + specialist) = $19,373 per response. See also infra burden hours; and ($13,898,256 + $931,671 + $567
$14,742 = $931,671. note 34. + $62,380) = $14,892,874.

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Document Created: 2018-02-03 14:27:16
Document Modified: 2018-02-03 14:27:16
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
Action		\23\
FR Citation		83 FR 4938