83 FR 50720 - Submission for OMB Review; Comment Request

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 195 (October 9, 2018)

Page Range		50720-50721
FR Document		2018-21832
Federal Register, Volume 83 Issue 195 (Tuesday, October 9, 2018)
[Federal Register Volume 83, Number 195 (Tuesday, October 9, 2018)]
[Notices]
[Pages 50720-50721]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-21832]


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SECURITIES AND EXCHANGE COMMISSION


Submission for OMB Review; Comment Request

Upon Written Request, Copies Available From: Securities and Exchange 
Commission, Office of FOIA Services, 100 F Street NE, Washington, DC 
20549-2736

Extension:
    Rule 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'') has submitted to the Office of Management 
and Budget a request for extension and approval of the collections of 
information discussed below.
    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. Congress enacted this provision in 1940 to protect funds and 
their shareholders by preventing underwriters from ``dumping'' 
unmarketable securities on affiliated funds.
    Rule 10f-3 (17 CFR 270.10f-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. 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.
    The rule 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

[[Page 50721]]

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.\1\ 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 
\2\ that it takes an average fund approximately 30 minutes per 
transaction and approximately 1,464 hours \3\ in the aggregate to 
comply with this portion of the rule.
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    \1\ These estimates are based on staff extrapolations from 
filings with the Commission.
    \2\ Unless stated otherwise, the information collection burden 
estimates are based on conversations between the staff and 
representatives of funds.
    \3\ 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 \4\ to comply with this portion of the rule.
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    \4\ 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 \5\ annually to comply with this 
rule requirement.
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    \5\ 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.\6\ Thus, annually, 
in the aggregate, the staff estimates that funds spend a total of 
approximately 472 hours \7\ on monitoring and revising rule 10f-3 
procedures.
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    \6\ 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.
    \7\ 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 subadvisory agreements 
each year.\8\ 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.\9\ 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.\10\
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    \8\ Based on information in Commission filings, we estimate that 
38 percent of funds are advised by subadvisers.
    \9\ This estimate is based on the following calculation (3 hours 
/ 4 rules = .75 hours).
    \10\ 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.\11\
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    \11\ This estimate is based on the following calculation: (1,464 
hours + 976 hours + 944 hours + 472 + 244 hours = 4,080 total burden 
hours).
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    The collection of information required by rule 10f-3 is necessary 
to obtain the benefits of the rule. Responses 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) Charles Riddle, Acting 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]. Comments must be submitted to OMB within 30 
days of this notice.

    Dated: October 3, 2018.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-21832 Filed 10-5-18; 8:45 am]
 BILLING CODE 8011-01-P
50720 Federal Register / Vol. 83, No. 195 / Tuesday, October 9, 2018 / Notices

personal identifying information from determine whether to approve or SECURITIES AND EXCHANGE
comment submissions. You should disapprove the proposed rule change.8 COMMISSION
submit only information that you wish On September 19, 2017, the Exchange
to make available publicly. All filed Amendment No. 1 to the proposed Submission for OMB Review;
submissions should refer to File rule change.9 On October 18, 2017, the Comment Request
Number SR–BOX–2018–30, and should Exchange filed Amendment No. 2 to the Upon Written Request, Copies Available
be submitted on or before October 30, proposed rule change.10 On October 19, From: Securities and Exchange
2018. 2017, the Division of Trading and Commission, Office of FOIA Services,
For the Commission, by the Division of Markets, for the Commission pursuant 100 F Street NE, Washington, DC
Trading and Markets, pursuant to delegated to delegated authority,11 approved the 20549–2736
authority.14 proposed rule change, as modified by
Extension:
Eduardo A. Aleman, Amendments No. 1 and No. 2.12 Rule 10f–3; SEC File No. 270–237, OMB
Assistant Secretary. On October 24, 2017, the Secretary of Control No. 3235–0226
[FR Doc. 2018–21783 Filed 10–5–18; 8:45 am] the Commission notified the Exchange Notice is hereby given that, pursuant
BILLING CODE 8011–01–P that pursuant to Rule 431 of the to the Paperwork Reduction Act of 1995
Commission’s Rules of Practice,13 the (44 U.S.C. 3501–3520), the Securities
Commission would review the and Exchange Commission
SECURITIES AND EXCHANGE Delegated Order and that the Delegated (‘‘Commission’’) has submitted to the
COMMISSION Order was stayed until the Commission Office of Management and Budget a
[Securities Exchange Act of 1934; Release ordered otherwise.14 On November 8, request for extension and approval of
No. 34–84337/October 2, 2018] 2017, the Commission issued a the collections of information discussed
scheduling order allowing the filing of below.
In the Matter of Chicago Stock additional statements.15 Section 10(f) of the Investment
Exchange, Inc., 440 South LaSalle Company Act of 1940 (15 U.S.C. 80a)
Street, Suite 800, Chicago, IL 60605; On July 25, 2018, CHX withdrew the
proposed rule change (SR–CHX–2017– (the ‘‘Act’’) prohibits a registered
File No. SR–CHX–2017–04; Order investment company (‘‘fund’’) from
Setting Aside the Order by Delegated 04).16
purchasing any security during an
Authority Approving SR–CHX–2017–04 Under Commission Rule of Practice underwriting or selling syndicate if the
431(a), the Commission may ‘‘affirm, fund has certain relationships with a
On February 10, 2017, the Chicago
reverse, modify, set aside or remand for principal underwriter for the security.
Stock Exchange, Inc. (‘‘Exchange’’ or
‘‘CHX’’) filed with the Securities and further proceedings, in whole or in part, Congress enacted this provision in 1940
Exchange Commission (‘‘Commission’’), any action made pursuant to’’ delegated to protect funds and their shareholders
pursuant to Section 19(b)(1) of the authority.17 We find that, in light of the by preventing underwriters from
Securities Exchange Act of 1934 CHX’s withdrawal of the proposed rule ‘‘dumping’’ unmarketable securities on
(‘‘Exchange Act’’) 1 and Rule 19b–4 change, it is appropriate to set aside the affiliated funds.
thereunder,2 a proposed rule change to Delegated Order. Rule 10f–3 (17 CFR 270.10f–3)
adopt the CHX Liquidity Enhancing Accordingly, it is ordered that the permits a fund to engage in a securities
Access Delay on a pilot basis. The October 19, 2017 order approving by transaction that otherwise would violate
proposed rule change was published for delegated authority CHX’s proposed section 10(f) if, among other things: (i)
comment in the Federal Register on rule change number SR–CHX–2017–04, The fund’s directors have approved
February 21, 2017.3 On April 3, 2017, be, and it hereby is, set aside. procedures for purchases made in
the Commission designated a longer reliance on the rule, regularly review
By the Commission. fund purchases to determine whether
period within which to approve the
Eduardo A. Aleman, they comply with these procedures, and
proposed rule change, disapprove the
proposed rule change, or institute Assistant Secretary. approve necessary changes to the
proceedings to determine whether the [FR Doc. 2018–21761 Filed 10–5–18; 8:45 am] procedures; and (ii) a written record of
proposed rule change should be BILLING CODE 8011–01–P
each transaction effected under the rule
disapproved.4 On May 22, 2017, the is maintained for six years, the first two
Commission instituted proceedings 8 See Securities Exchange Act Release No. 81415,
of which in an easily accessible place.
under Section 19(b)(2)(B) of the 82 FR 40051 (August 23, 2017). The written record must state: (i) From
Exchange Act 5 to determine whether to 9 The amendments to the proposed rule change whom the securities were acquired; (ii)
approve or disapprove the proposed are available at: https://www.sec.gov/comments/sr- the identity of the underwriting
chx-2017-04/chx201704.htm. syndicate’s members; (iii) the terms of
rule change.6 On August 17, 2017, 10 See supra note 9.
pursuant to Section 19(b)(2) of the 11 17 CFR 200.30–3(a)(12).
the transactions; and (iv) the
Exchange Act,7 the Commission 12 See Exchange Act Release No. 81913, 82 FR
information or materials on which the
designated a longer period for 49433 (October 25, 2017) (‘‘Delegated Order’’). fund’s board of directors has determined
Commission action on proceedings to 13 17 CFR 201.431. that the purchases were made in
14 See Letter from Secretary of the Commission to compliance with procedures established
14 17 Albert (A.J.) Kim, VP and Associate General by the board.
CFR 200.30–3(a)(12).
1 15
Counsel, Chicago Stock Exchange, Inc., dated The rule also conditionally allows
U.S.C. 78s(b)(1). October 24, 2017, available at https://www.sec.gov/
2 17 CFR 240.19b–4. managed portions of fund portfolios to
amozie on DSK3GDR082PROD with NOTICES1

rules/sro/chx/2017/34-81913-letter-from-
3 See Securities Exchange Act Release No. 80041
secretary.pdf. purchase securities offered in otherwise
(February 14, 2017), 82 FR 11252. 15 See Exchange Act Release No. 80234, 82 FR off-limits primary offerings. To qualify
4 See Securities Exchange Act Release No. 80364,
52762 (November 14, 2017). for this exemption, rule 10f–3 requires
82 FR 17065 (April 7, 2017). 16 See letter from Albert J. Kim, Vice President
5 15 U.S.C. 78s(b)(2)(B). that the subadviser that is advising the
and Associate General Counsel, CHX, to Eduardo A.
6 See Securities Exchange Act Release No. 80740, Aleman, Assistant Secretary, Commission, dated purchaser be contractually prohibited
82 FR 24412 (May 26, 2017). July 25, 2018. from providing investment advice to
7 15 U.S.C. 78s(b)(2). 17 17 CFR 201.431(a). any other portion of the fund’s portfolio

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Federal Register / Vol. 83, No. 195 / Tuesday, October 9, 2018 / Notices 50721

and consulting with any other of the Thus, annually, in the aggregate, the Office Building, Washington, DC 20503,
fund’s advisers that is a principal staff estimates that funds spend a total or by sending an email to: Shagufta_
underwriter or affiliated person of a of approximately 472 hours 7 on Ahmed@omb.eop.gov; and (ii) Charles
principal underwriter concerning the monitoring and revising rule 10f–3 Riddle, Acting Director/Chief
fund’s securities transactions. procedures. Information Officer, Securities and
These requirements provide a Based on an analysis of fund filings, Exchange Commission, c/o Candace
mechanism for fund boards to oversee the staff estimates that approximately Kenner, 100 F Street NE, Washington,
compliance with the rule. The required 299 fund portfolios enter into DC 20549 or send an email to: PRA_
recordkeeping facilitates the subadvisory agreements each year.8 Mailbox@sec.gov. Comments must be
Commission staff’s review of rule 10f– Based on discussions with industry submitted to OMB within 30 days of
3 transactions during routine fund representatives, the staff estimates that this notice.
inspections and, when necessary, in it will require approximately 3 attorney Dated: October 3, 2018.
connection with enforcement actions. hours to draft and execute additional
Eduardo A. Aleman,
The staff estimates that approximately clauses in new subadvisory contracts in
Assistant Secretary.
236 funds engage in a total of order for funds and subadvisers to be
able to rely on the exemptions in rule [FR Doc. 2018–21832 Filed 10–5–18; 8:45 am]
approximately 2,928 rule 10f–3
transactions each year.1 Rule 10f–3 10f–3. Because these additional clauses BILLING CODE 8011–01–P

requires that the purchasing fund create are identical to the clauses that a fund
a written record of each transaction that would need to insert in their
subadvisory contracts to rely on rules SECURITIES AND EXCHANGE
includes, among other things, from
12d3–1, 17a–10, and 17e–1, and because COMMISSION
whom the securities were purchased
and the terms of the transaction. The we believe that funds that use one such [Release No. 34–84344; File No. SR–CBOE–
staff estimates 2 that it takes an average rule generally use all of these rules, we 2018–056]
fund approximately 30 minutes per apportion this 3 hour time burden
transaction and approximately 1,464 equally to all four rules. Therefore, we Self-Regulatory Organizations; Cboe
hours 3 in the aggregate to comply with estimate that the burden allocated to Exchange, Inc.; Order Approving a
rule 10f–3 for this contract change Proposed Rule Change To Adopt Rule
this portion of the rule.
The funds also must maintain and would be 0.75 hours.9 Assuming that all 6.57, Risk-Weighted Asset (‘‘RWA’’)
preserve these transactional records in 299 funds that enter into new Packages
accordance with the rule’s subadvisory contracts each year make October 2, 2018.
recordkeeping requirement, and the staff the modification to their contract
estimates that it takes a fund required by the rule, we estimate that I. Introduction
approximately 20 minutes per the rule’s contract modification On August 8, 2018, the Cboe
transaction and that annually, in the requirement will result in 224 burden Exchange, Inc. (the ‘‘Exchange’’ or
aggregate, funds spend approximately hours annually.10 ‘‘Cboe Options’’) filed with the
976 hours 4 to comply with this portion The staff estimates, therefore, that rule Securities and Exchange Commission
of the rule. 10f–3 imposes an information collection (the ‘‘Commission’’), pursuant to
In addition, fund boards must, no less burden of 4,080 hours.11 Section 19(b)(1) of the Securities
than quarterly, examine each of these The collection of information required Exchange Act of 1934 (the ‘‘Act’’) 1 and
transactions to ensure that they comply by rule 10f–3 is necessary to obtain the Rule 19b–4 thereunder,2 a proposal to
with the fund’s policies and procedures. benefits of the rule. Responses will not adopt Rule 6.57, Risk-Weighted Assets
The information or materials upon be kept confidential. An agency may not (‘‘RWA’’) Transactions. The proposed
which the board relied to come to this conduct or sponsor, and a person is not rule change was published for comment
determination also must be maintained required to respond to, a collection of in the Federal Register on August 23,
and the staff estimates that it takes a information unless it displays a 2018.3 The Commission did not receive
fund 1 hour per quarter and, in the currently valid OMB control number. any comment letters on the proposed
aggregate, approximately 944 hours 5 The public may view the background rule change. This order approves the
annually to comply with this rule documentation for this information proposed rule change.
requirement. collection at the following website,
www.reginfo.gov. Comments should be II. Description of the Proposed Rule
The staff estimates that reviewing and
directed to: (i) Desk Officer for the Change
revising as needed written procedures
for rule 10f–3 transactions takes, on Securities and Exchange Commission, As described in more detail in the
average for each fund, two hours of a Office of Information and Regulatory Notice,4 the Exchange proposes to adopt
compliance attorney’s time per year.6 Affairs, Office of Management and Rule 6.57 to provide a mechanism for
Budget, Room 10102, New Executive Cboe Options market makers to submit
1 These estimates are based on staff extrapolations an on-floor risk-weighted asset package
from filings with the Commission. or no time modifying procedures and in other years, (‘‘RWA Package’’) 5 in the SPX trading
2 Unless stated otherwise, the information they spend significant time doing so.
crowd for the purpose of reducing risk-
collection burden estimates are based on 7 This estimate is based on the following

conversations between the staff and representatives calculation: (236 funds × 2 hours = 472 hours). weighted asset (‘‘RWA’’) exposure in
of funds. 8 Based on information in Commission filings, we
3 This estimate is based on the following 1 15 U.S.C. 78s(b)(1).
estimate that 38 percent of funds are advised by
calculation: (0.5 hours × 2,928 = 1,464 hours).
amozie on DSK3GDR082PROD with NOTICES1

subadvisers. 2 17 CFR 240.19b–4.
4 This estimate is based on the following 9 This estimate is based on the following 3 See Securities Exchange Act Release No. 83870

calculations: (20 minutes × 2,928 transactions = calculation (3 hours ÷ 4 rules = .75 hours). (August 17, 2018), 83 FR 42725 (August 23, 2018)
58,560 minutes; 58,560 minutes/60 = 976 hours). 10 These estimates are based on the following (‘‘Notice’’).
5 This estimate is based on the following calculations: (0.75 hours × 299 portfolios = 224 4 See id.

calculation: (1 hour per quarter × 4 quarters × 236 burden hours). 5 An RWA Package is a set of SPX options
funds = 944 hours). 11 This estimate is based on the following positions with at least: 50 options series; 10
6 These averages take into account the fact that in calculation: (1,464 hours + 976 hours + 944 hours contracts per options series; and 10,000 total
most years, fund attorneys and boards spend little + 472 + 244 hours = 4,080 total burden hours). contracts. See id. at 42726.

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Document Created: 2018-10-06 00:58:24
Document Modified: 2018-10-06 00:58:24
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 50720