83 FR 62632 - Proposed Collection; Comment Request

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 233 (December 4, 2018)

Page Range		62632-62633
FR Document		2018-26327
Federal Register, Volume 83 Issue 233 (Tuesday, December 4, 2018)
[Federal Register Volume 83, Number 233 (Tuesday, December 4, 2018)]
[Notices]
[Pages 62632-62633]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-26327]


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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 17f-4, SEC File No. 270-232, OMB Control No. 3235-
0225.

    Notice is hereby given that, pursuant to the Paperwork Reduction 
Act of 1995 (44 U.S.C. 3501-3520) (the ``Paperwork Reduction Act''), 
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.
    Section 17(f) (15 U.S.C. 80a-17(f)) under the Investment Company 
Act of 1940 (the ``Act'') \1\ permits registered management investment 
companies and their custodians to deposit the securities they own in a 
system for the central handling of securities (``securities 
depositories''), subject to rules adopted by the Commission.
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    \1\ 15 U.S.C. 80a.
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    Rule 17f-4 (17 CFR 270.17f-4) under the Act specifies the 
conditions for the use of securities depositories by funds \2\ and 
their custodians.
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    \2\ As amended in 2003, rule 17f-4 permits any registered 
investment company, including a unit investment trust or a face-
amount certificate company, to use a security depository. See 
Custody of Investment Company Assets With a Securities Depository, 
Investment Company Act Release No. 25934 (Feb. 13, 2003) (68 FR 8438 
(Feb. 20, 2003)). The term ``fund'' is used in this Notice to mean a 
registered investment company.
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    The Commission staff estimates that 142 respondents (including an 
estimated 80 active funds that may deal directly with a securities 
depository, an estimated 49 custodians, and 13 possible securities 
depositories) \3\ are subject to the requirements in rule 17f-4. The 
rule is elective, but most, if not all, funds use depository custody 
arrangements.\4\
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    \3\ The Commission staff estimates that, as permitted by the 
rule, an estimated 2% of all active funds may deal directly with a 
securities depository instead of using an intermediary. The number 
of custodians is estimated based on information from Morningstar 
Direct\SM\. The Commission staff estimates the number of possible 
securities depositories by adding the 12 Federal Reserve Banks and 
one active registered clearing agency. The Commission staff 
recognizes that not all of these entities may currently be acting as 
a securities depository for fund securities.
    \4\ Based on responses to Item 18 of Form N-SAR (17 CFR 
274.101), approximately 97 percent of funds' custodians maintain 
some or all fund securities in a securities depository pursuant to 
rule 17f-4.

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[[Page 62633]]

    Rule 17f-4 contains two general conditions. First, a fund's 
custodian must be obligated, at a minimum, to exercise due care in 
accordance with reasonable commercial standards in discharging its duty 
as a securities intermediary to obtain and thereafter maintain 
financial assets. If the fund deals directly with a depository, the 
depository's contract or written rules for its participants must 
provide that the depository will meet similar obligations. All funds 
that deal directly with securities depositories in reliance on rule 
17f-4 should have either modified their contracts with the relevant 
securities depository, or negotiated a modification in the securities 
depository's written rules when the rule was amended. Therefore, we 
estimate there is no ongoing burden associated with this collection of 
information.\5\
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    \5\ The Commission staff assumes that new funds relying on 17f-4 
would choose to use a custodian instead of directly dealing with a 
securities depository because of the high costs associated with 
maintaining an account with a securities depository. Thus, new funds 
would not be subject to this condition.
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    Second, the custodian must provide, promptly upon request by the 
fund, such reports as are available about the internal accounting 
controls and financial strength of the custodian. If a fund deals 
directly with a depository, the depository's contract with or written 
rules for its participants must provide that the depository will 
provide similar financial reports. Custodians and depositories usually 
transmit financial reports to funds twice each year.\6\ The Commission 
staff estimates that 49 custodians spend approximately 914 hours (by 
support staff) annually in transmitting such reports to funds.\7\ In 
addition, approximately 80 funds (i.e., two percent of all funds) deal 
directly with a securities depository and may request periodic reports 
from their depository. Commission staff estimates that depositories 
spend approximately 19 hours (by support staff) annually transmitting 
reports to the 80 funds.\8\ The total annual burden estimate for 
compliance with rule 17f-4's reporting requirement is therefore 933 
hours.\9\
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    \6\ The estimated 49 custodians would handle requests for 
reports from 3,917 fund clients (approximately 80 fund clients per 
custodian) and the depositories from the remaining 80 funds that 
choose to deal directly with a depository. It is our understanding 
based on staff conversations with industry representatives that 
custodians and depositories transmit these reports to clients in the 
normal course of their activities as a good business practice 
regardless of whether they are requested. Therefore, for purposes of 
this PRA estimate, the Commission staff assumes that custodians 
transmit the reports to all fund clients.
    \7\ (3,917 fund clients x 2 reports) = 7,834 transmissions. The 
staff estimates that each transmission would take approximately 7 
minutes for a total of approximately 914 hours (7 minutes x 7,834 
transmissions).
    \8\ (80 fund clients who may deal directly with a securities 
depository x 2 reports) = 160 transmissions. The staff estimates 
that each transmission would take approximately 7 minutes for a 
total of approximately 19 hours (7 minutes x 160 transmissions).
    \9\ 914 hours for custodians and 19 hours for securities 
depositories.
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    If a fund deals directly with a securities depository, rule 17f-4 
requires that the fund implement internal control systems reasonably 
designed to prevent an unauthorized officer's instructions (by 
providing at least for the form, content, and means of giving, 
recording, and reviewing all officers' instructions). All funds that 
seek to rely on rule 17f-4 should have already implemented these 
internal control systems when the rule was amended. Therefore, there is 
no ongoing burden associated with this collection of information 
requirement.\10\
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    \10\ The Commission staff assumes that new funds relying on 17f-
4 would choose to use a custodian instead of directly dealing with a 
securities depository because of the high costs associated with 
maintaining an account with a securities depository. Thus new funds 
would not be subject to this condition.
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    Based on the foregoing, the Commission staff estimates that the 
total annual hour burden of the rule's collection of information 
requirements is 933 hours.
    The estimate of average burden hours is made solely for the 
purposes of the Paperwork Reduction Act. This estimate is not derived 
from a comprehensive or even representative survey or study of the 
costs of Commission rules.
    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 collection of 
information is necessary for the proper performance of the functions of 
the Commission, including whether the information will have practical 
utility; (b) the accuracy of the Commission's estimate of the burden 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 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 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].

    Dated: November 28, 2018.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-26327 Filed 12-3-18; 8:45 am]
 BILLING CODE 8011-01-P
62632 Federal Register / Vol. 83, No. 233 / Tuesday, December 4, 2018 / Notices

SYSTEM LOCATION: controlled-access areas under SECURITIES AND EXCHANGE
USPS National Customer Support supervision of program personnel. COMMISSION
Center (NCSC) and USPS IT Eagan Host Access to records is limited to
Computing Services Center. individuals whose official duties require Proposed Collection; Comment
such access. Contractors and licensees Request
CATEGORIES OF INDIVIDUALS COVERED BY THE are subject to contract controls and
SYSTEM: Upon Written Request, Copies Available
unannounced on-site audits and From: Securities and Exchange
Customers requesting Change of inspections.
Address mail forwarding, or Hold Mail Commission, Office of FOIA Services,
Computers are protected by 100 F Street NE, Washington, DC
services. mechanical locks, card key systems, or 20549–2736
CATEGORIES OF RECORDS IN THE SYSTEM:
other physical access control methods.
The use of computer systems is Extension: Rule 17f–4, SEC File No. 270–232,
1. Customer information: For Change OMB Control No. 3235–0225.
regulated with installed security
of Address requests, old and new Notice is hereby given that, pursuant
software, computer logon
address, email address(es), telephone to the Paperwork Reduction Act of 1995
identifications, and operating system
numbers and device identification; for (44 U.S.C. 3501–3520) (the ‘‘Paperwork
controls including access controls,
Hold Mail, address, email address(es), Reduction Act’’), the Securities and
terminal and transaction logging, and
and telephone numbers. Exchange Commission (the
file management software.
2. Online user information: Device ‘‘Commission’’) is soliciting comments
Online data transmission is protected
identification. on the collection of information
by encryption, dedicated lines, and
AUTHORITY FOR MAINTENANCE OF THE SYSTEM: authorized access codes. summarized below. The Commission
plans to submit this existing collection
18 U.S.C. 1341, 1343 and 3061; 39 RETENTION AND DISPOSAL: of information to the Office of
U.S.C. 401, 403, 404, 3003 and 3005.
COA and Hold Mail records are Management and Budget for extension
PURPOSE(S): retained in an electronic database for 10 and approval.
1. To enhance the customer years from the effective date. Section 17(f) (15 U.S.C. 80a–17(f))
experience by improving the security of Electronic records existing on under the Investment Company Act of
Change of Address (COA) and Hold computer storage media are destroyed 1940 (the ‘‘Act’’) 1 permits registered
Mail processes. according to the applicable USPS media management investment companies and
2. To protect USPS customers from sanitization practice. their custodians to deposit the securities
becoming potential victims of mail they own in a system for the central
SYSTEM MANAGER(S) AND ADDRESS: handling of securities (‘‘securities
fraud and identity theft.
3. To identify and mitigate potential Vice President, Product Innovation, depositories’’), subject to rules adopted
fraud in the COA and Hold Mail United States Postal Service, 475 by the Commission.
processes. L’Enfant Plaza SW, Washington, DC Rule 17f–4 (17 CFR 270.17f–4) under
4. To verify a customer’s identity 20260. the Act specifies the conditions for the
when applying for COA and Hold Mail use of securities depositories by funds 2
NOTIFICATION PROCEDURE: and their custodians.
services.
Customers wanting to know if The Commission staff estimates that
5. To facilitate mail fraud prevention
information about them is maintained in 142 respondents (including an
for COA and Hold Mail services through
this system of records must address estimated 80 active funds that may deal
address matching across USPS customer
inquiries in writing to the system directly with a securities depository, an
systems.
6. To facilitate the provision of manager. Inquiries must contain name, estimated 49 custodians, and 13
accurate and reliable mail and package address, email, and other identifying possible securities depositories) 3 are
delivery services. information. subject to the requirements in rule 17f–
4. The rule is elective, but most, if not
RECORD ACCESS PROCEDURES: all, funds use depository custody
ROUTINE USES OF RECORDS MAINTAINED IN THE
SYSTEM, INCLUDING CATEGORIES OF USERS AND Requests for access must be made in arrangements.4
THE PURPOSES OF SUCH USES: accordance with the Notification
Standard routine uses 1. through 7, 10 Procedure above and the USPS Privacy 1 15 U.S.C. 80a.
and 11. apply. Act regulations regarding access to 2 As amended in 2003, rule 17f–4 permits any
records and verification of identity registered investment company, including a unit
POLICIES AND PRACTICES FOR STORING, investment trust or a face-amount certificate
under 39 CFR 266.5. company, to use a security depository. See Custody
RETRIEVING, ACCESSING, RETAINING, AND
of Investment Company Assets With a Securities
DISPOSING OF RECORDS IN THE SYSTEM: CONTESTING RECORD PROCEDURES: Depository, Investment Company Act Release No.
STORAGE: See Notification Procedure and 25934 (Feb. 13, 2003) (68 FR 8438 (Feb. 20, 2003)).
The term ‘‘fund’’ is used in this Notice to mean a
Automated databases. Record Access Procedures above. registered investment company.
3 The Commission staff estimates that, as
RETRIEVABILITY: RECORD SOURCE CATEGORIES:
permitted by the rule, an estimated 2% of all active
Retrieval is accomplished by a Individual customers requesting funds may deal directly with a securities depository
computer-based system, using one or Change of Address, mail forwarding, or instead of using an intermediary. The number of
Hold Mail services and other USPS custodians is estimated based on information from
more of the following elements: ZIP Morningstar DirectSM. The Commission staff
Code(s), address, telephone number, customer systems. estimates the number of possible securities
email address, device identification * * * * * depositories by adding the 12 Federal Reserve
and/or IP address. Banks and one active registered clearing agency.
Brittany M. Johnson, The Commission staff recognizes that not all of
SAFEGUARDS: Attorney, Federal Compliance. these entities may currently be acting as a securities
depository for fund securities.
Electronic records, computers, and [FR Doc. 2018–26310 Filed 12–3–18; 8:45 am] 4 Based on responses to Item 18 of Form N–SAR

computer storage media are located in BILLING CODE P (17 CFR 274.101), approximately 97 percent of

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Federal Register / Vol. 83, No. 233 / Tuesday, December 4, 2018 / Notices 62633

Rule 17f–4 contains two general transmitting reports to the 80 funds.8 Information Officer, Securities and
conditions. First, a fund’s custodian The total annual burden estimate for Exchange Commission, C/O Candace
must be obligated, at a minimum, to compliance with rule 17f–4’s reporting Kenner, 100 F Street NE, Washington,
exercise due care in accordance with requirement is therefore 933 hours.9 DC 20549; or send an email to: PRA_
reasonable commercial standards in If a fund deals directly with a Mailbox@sec.gov.
discharging its duty as a securities securities depository, rule 17f–4
requires that the fund implement Dated: November 28, 2018.
intermediary to obtain and thereafter
maintain financial assets. If the fund internal control systems reasonably Eduardo A. Aleman,
deals directly with a depository, the designed to prevent an unauthorized Assistant Secretary.
depository’s contract or written rules for officer’s instructions (by providing at [FR Doc. 2018–26327 Filed 12–3–18; 8:45 am]
its participants must provide that the least for the form, content, and means of BILLING CODE 8011–01–P
depository will meet similar obligations. giving, recording, and reviewing all
All funds that deal directly with officers’ instructions). All funds that
securities depositories in reliance on seek to rely on rule 17f–4 should have SECURITIES AND EXCHANGE
rule 17f–4 should have either modified already implemented these internal COMMISSION
their contracts with the relevant control systems when the rule was
securities depository, or negotiated a amended. Therefore, there is no ongoing
burden associated with this collection of [Release No. 34–84671; File No. SR–
modification in the securities
information requirement.10 NASDAQ–2018–096]
depository’s written rules when the rule
was amended. Therefore, we estimate Based on the foregoing, the
Commission staff estimates that the total Self-Regulatory Organizations; The
there is no ongoing burden associated
annual hour burden of the rule’s Nasdaq Stock Market LLC; Notice of
with this collection of information.5
Second, the custodian must provide, collection of information requirements Filing and Immediate Effectiveness of
promptly upon request by the fund, is 933 hours. Proposed Rule Change To Amend Rule
such reports as are available about the The estimate of average burden hours 4756(c)(2)
internal accounting controls and is made solely for the purposes of the
November 28, 2018.
financial strength of the custodian. If a Paperwork Reduction Act. This estimate
fund deals directly with a depository, is not derived from a comprehensive or Pursuant to Section 19(b)(1) of the
the depository’s contract with or written even representative survey or study of Securities Exchange Act of 1934
rules for its participants must provide the costs of Commission rules. (‘‘Act’’),1 and Rule 19b–4 thereunder,2
that the depository will provide similar An agency may not conduct or notice is hereby given that on November
financial reports. Custodians and sponsor, and a person is not required to 16, 2018, The Nasdaq Stock Market LLC
depositories usually transmit financial respond to a collection of information (‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the
reports to funds twice each year.6 The unless it displays a currently valid Securities and Exchange Commission
Commission staff estimates that 49 control number. (‘‘Commission’’) the proposed rule
custodians spend approximately 914 Written comments are invited on: (a)
change as described in Items I and II
hours (by support staff) annually in Whether the collection of information is
necessary for the proper performance of below, which Items have been prepared
transmitting such reports to funds.7 In by the Exchange. The Commission is
addition, approximately 80 funds (i.e., the functions of the Commission,
including whether the information will publishing this notice to solicit
two percent of all funds) deal directly comments on the proposed rule change
with a securities depository and may have practical utility; (b) the accuracy of
the Commission’s estimate of the from interested persons.
request periodic reports from their
depository. Commission staff estimates burden of the collections of information; I. Self-Regulatory Organization’s
that depositories spend approximately (c) ways to enhance the quality, utility, Statement of the Terms of Substance of
19 hours (by support staff) annually and clarity of the information collected; the Proposed Rule Change
and (d) ways to minimize the burdens
funds’ custodians maintain some or all fund of the collection of information on The Exchange proposes to allow the
securities in a securities depository pursuant to rule respondents, including through the use Exchange to aggregate Displayed odd-lot
17f–4. of automated collection techniques or
5 The Commission staff assumes that new funds
Orders across price levels for
other forms of information technology. transmission to network processors as
relying on 17f–4 would choose to use a custodian
instead of directly dealing with a securities Consideration will be given to the Exchange’s best priced Order under
depository because of the high costs associated with comments and suggestions submitted in Rule 4756(c)(2). While these
maintaining an account with a securities writing within 60 days of this amendments are effective upon filing,
depository. Thus, new funds would not be subject publication.
to this condition. the Exchange has designated the
Please direct your written comments
6 The estimated 49 custodians would handle
to Charles Riddle, Acting Director/Chief proposed amendments to be operative
requests for reports from 3,917 fund clients in the first quarter of 2019, and will
(approximately 80 fund clients per custodian) and
the depositories from the remaining 80 funds that 8 (80 fund clients who may deal directly with a announce the precise date by Equity
choose to deal directly with a depository. It is our securities depository × 2 reports) = 160 Trader Alert at least thirty days prior to
understanding based on staff conversations with transmissions. The staff estimates that each implementation.
industry representatives that custodians and transmission would take approximately 7 minutes
depositories transmit these reports to clients in the for a total of approximately 19 hours (7 minutes × The text of the proposed rule change
normal course of their activities as a good business 160 transmissions). is available on the Exchange’s website at
practice regardless of whether they are requested. 9 914 hours for custodians and 19 hours for
Therefore, for purposes of this PRA estimate, the securities depositories.
http://nasdaq.cchwallstreet.com, at the
Commission staff assumes that custodians transmit 10 The Commission staff assumes that new funds principal office of the Exchange, and at
the reports to all fund clients. relying on 17f–4 would choose to use a custodian the Commission’s Public Reference
7 (3,917 fund clients × 2 reports) = 7,834 instead of directly dealing with a securities Room.
transmissions. The staff estimates that each depository because of the high costs associated with
transmission would take approximately 7 minutes maintaining an account with a securities
1 15 U.S.C. 78s(b)(1).
for a total of approximately 914 hours (7 minutes depository. Thus new funds would not be subject
× 7,834 transmissions). to this condition. 2 17 CFR 240.19b–4.

VerDate Sep<11>2014 17:36 Dec 03, 2018 Jkt 247001 PO 00000 Frm 00074 Fmt 4703 Sfmt 4703 E:\FR\FM\04DEN1.SGM 04DEN1
Document Created: 2018-12-04 00:42:09
Document Modified: 2018-12-04 00:42:09
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 62632