Submission for OMB Review; Comment Request, 52138-52140 [E5-4773]
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52138
Federal Register / Vol. 70, No. 169 / Thursday, September 1, 2005 / Notices
maintained will not include the
applicant’s name or other identifier.
Completion of one form will be
requested of each respondent.
Completion is voluntary.
Estimate of Annual Respondent Burden
The estimated annual respondent
burden is as follows:
Form No.
Annual
responses
Time
(min)
Burden
(hrs)
EEO–44 ...................................................................................................................................................
800
5
67
To
request more information or to obtain a
copy of the information collection
justification, form, and/or supporting
material, please call the RRB Clearance
Officer at (312) 751–3363 or send an email request to
Charles.Mierzwa@RRB.GOV. Comments
regarding the information collection
should be addressed to Ronald J.
Hodapp, Railroad Retirement Board, 844
N. Rush Street, Chicago, Illinois 60611–
2092 or send an e-mail to
Ronald.Hodapp@RRB.GOV. Comments
should be received within 60 days of
this notice.
FOR FURTHER INFORMATION CONTACT:
Charles Mierzwa,
Clearance Officer.
[FR Doc. 05–17388 Filed 8–31–05; 8:45 am]
BILLING CODE 7905–01–P
SECURITIES AND EXCHANGE
COMMISSION
Submission for OMB Review;
Comment Request
Upon Written Request, Copies Available
From: Securities and Exchange
Commission, Office of Filings and
Information Services, Washington, DC
20549.
Extension:
Rule 17f–5; SEC File No. 270–259; OMB
Control No. 3235–0269.
Rule 17f–7; SEC File No. 270–470; OMB
Control No. 3235–0529.
Form N–17D–1; SEC File No. 270–231;
OMB Control No. 3235–0229.
Rule 19b–1; SEC File No. 270–312; OMB
Control No. 3235–0354.
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
(‘‘OMB’’) requests for extension of the
previously approved collections of
information discussed below.
Rule 17f–5. Rule 17f–5 under the
Investment Company Act of 1940 [15
U.S.C. 80a] (‘‘Investment Company Act’’
or ‘‘Act’’) governs the custody of the
assets of registered management
investment companies (‘‘funds’’) with
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custodians outside the United States.1
Under rule 17f–5, the fund’s board of
directors must find that it is reasonable
to rely on each delegate it selects to act
as the fund’s foreign custody manager.
The delegate must agree to provide
written reports that notify the board
when the fund’s assets are placed with
a foreign custodian and when any
material change occurs in the fund’s
custody arrangements. The delegate
must agree to exercise reasonable care,
prudence, and diligence, or to adhere to
a higher standard of care. When the
foreign custody manager selects an
eligible foreign custodian, it must
determine that the fund’s assets will be
subject to reasonable care if maintained
with that custodian, and that the written
contract that governs each custody
arrangement will provide reasonable
care for fund assets. The contract must
contain certain specified provisions or
others that provide at least equivalent
care. The foreign custody manager must
establish a system to monitor the
contract and the appropriateness of
continuing to maintain assets with the
eligible foreign custodian.
The collection of information
requirements in rule 17f–5 are intended
to provide protection for fund assets
maintained with a foreign bank
custodian whose use is not authorized
by statutory provisions that govern fund
custody arrangements,2 and that is not
subject to regulation and examination
by U.S. regulators. The requirement that
the fund board determine that it is
reasonable to rely on each delegate is
intended to ensure that the board
carefully considers each delegate’s
qualifications to perform its
responsibilities. The requirement that
the delegate provide written reports to
the board is intended to ensure that the
delegate notifies the board of important
developments concerning custody
arrangements so that the board may
exercise effective oversight. The
requirement that the delegate agree to
exercise reasonable care is intended to
1 17 CFR 270.17f–5. All references to rules 17f–
5, 17f–7, 17d–1, or 19b–1 in this notice are to 17
CFR 270.17f–5, 17 CFR 270.17f–7, 17 CFR 270.17d–
1, and 17 CFR 270.19b–1, respectively.
2 See section 17(f) of the Investment Company Act
[15 U.S.C. 80a–17(f)].
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provide assurances to the fund that the
delegate will properly perform its
duties.
The requirements that the foreign
custody manager determine that fund
assets will be subject to reasonable care
with the eligible foreign custodian and
under the custody contract, and that
each contract contain specified
provisions or equivalent provisions, are
intended to ensure that the delegate has
evaluated the level of care provided by
the custodian, that it weighs the
adequacy of contractual provisions, and
that fund assets are protected by
minimal contractual safeguards. The
requirement that the foreign custody
manager establish a monitoring system
is intended to ensure that the manager
periodically reviews each custody
arrangement and takes appropriate
action if developing custody risks may
threaten fund assets.
The Commission’s staff estimates that
each year, approximately 207
registrants 3 could be required to make
an average of one response per registrant
under rule 17f–5, requiring
approximately 2 hours of director time
per response, to make the necessary
findings concerning foreign custody
managers. The total annual burden
associated with these requirements of
the rule would be up to approximately
414 hours (207 registrants × 2 hours per
registrant). The staff further estimates
that during each year, approximately 15
global custodians 4 would be required to
make an average of 4 responses per
custodian concerning the use of foreign
custodians other than depositories. The
staff estimates that each response would
take approximately 275 hours, requiring
approximately 1100 total hours
annually per custodian. The total
annual burden associated with these
requirements of the rule would be
approximately 16,500 hours (15 global
3 This figure is an estimate of the number of new
funds each year, based on data reported by funds
in 2004 on Form N–1A and Form N–2 [17 CFR
274.101]. In practice, not all funds will use foreign
custody managers, and the actual figure may be
smaller.
4 This estimate is the same used in connection
with the adoption of the amendments to rule 17f–
5 and of rule 17f–7 in 1999, based on staff review
of custody contracts and other research. The
number of global custodians has not changed
significantly since 1999.
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Federal Register / Vol. 70, No. 169 / Thursday, September 1, 2005 / Notices
custodians × 1100 hours per custodian).
Therefore, the total annual burden of all
collection of information requirements
of rule 17f–5 is estimated to be up to
16,914 hours (414 + 16,500). The total
annual cost of burden hours is estimated
to be $1,032,000 (414 hours × $500/hour
for director time, plus 16,500 hours ×
$50/hour of professional time).
Compliance with the collection of
information requirements of the rule is
necessary to obtain the benefit of relying
on the rule’s permission for funds to
maintain their assets in foreign
custodians.
Rule 17f–7. Rule 17f–7 permits funds
to maintain their assets in foreign
securities depositories based on
conditions that reflect the operations
and role of these depositories.5 Rule
17f–7 contains some ‘‘collection of
information’’ requirements. An eligible
securities depository has to meet
minimum standards for a depository.
The fund or its investment adviser
generally determines whether the
depository complies with those
requirements based on information
provided by the fund’s primary
custodian (a bank that acts as global
custodian). The depository custody
arrangement has to meet certain risk
limiting requirements. The fund can
obtain indemnification or insurance
arrangements that adequately protect
the fund against custody risks. The fund
or its investment adviser generally
determines whether indemnification or
insurance provisions are adequate. If the
fund does not rely on indemnification
or insurance, the fund’s contract with its
primary custodian is required to state
that the custodian will provide to the
fund or its investment adviser a custody
risk analysis of each depository, monitor
risks on a continuous basis, and
promptly notify the fund or its adviser
of material changes in risks. The
primary custodian and other custodians
also are required to agree to exercise
reasonable care.
The collection of information
requirements in rule 17f–7 are intended
to provide workable standards that
protect funds from the risks of using
securities depositories while assigning
appropriate responsibilities to the
fund’s primary custodian and
investment adviser based on their
capabilities. The requirement that the
depository meet specified minimum
standards is intended to ensure that the
depository is subject to basic safeguards
deemed appropriate for all depositories.
5 Custody of Investment Company Assets Outside
the United States, Investment Company Act Release
No. IC–23815 (April 29, 1999) [64 FR 24489 (May
6, 1999)].
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The requirement that the custody
contract state that the fund’s primary
custodian will provide an analysis of
the custody risks of depository
arrangements, monitor the risks, and
report on material changes is intended
to provide essential information about
custody risks to the fund’s investment
adviser as necessary for it to approve the
continued use of the depository. The
requirement that the primary custodian
agree to exercise reasonable care is
intended to provide assurances that its
services and the information it provides
will meet an appropriate standard of
care. The alternative requirement that
the fund obtain adequate
indemnification or insurance against the
custody risks of depository
arrangements is intended to provide
another, potentially less burdensome
means to protect assets held in
depository arrangements.
The staff estimates that each of
approximately 980 investment advisers 6
would make an average of 4 responses
annually under the rule to address
depository compliance with minimum
requirements, any indemnification or
insurance arrangements, and reviews of
risk analyses or notifications. The staff
estimates each response would take 5
hours, requiring a total of approximately
20 hours for each adviser. The total
annual burden associated with these
requirements of the rule would be
approximately 19,600 hours (980
advisers × 20 hours per adviser). The
staff further estimates that during each
year, each of approximately 15 global
custodians would make an average of 4
responses to analyze custody risks and
provide notice of any material changes
to custody risk under the rule. The staff
estimates that each response would take
500 hours, requiring approximately
2,000 hours annually per custodian.7
The total annual burden associated with
these requirements of the new rule
would be approximately 30,000 hours
(15 custodians × 2,000 hours).
Therefore, the staff estimates that the
total annual burden associated with all
collection of information requirements
of the rule would be 49,600 hours
(19,600 + 30,000). The total annual cost
of burden hours is estimated to be
$2,480,000 (49,600 hours × $50/hour of
professional time). The estimate of
average burden hours is made solely for
the purposes of the Paperwork
6 At the start of 2005, there were more than 36,800
investment company portfolios that were managed
or sponsored by more than 980 mutual fund
complexes. A fund complex is a group of funds, all
of which typically have the same adviser.
7 These estimates are based on conversations with
representatives of the fund industry and global
custodians.
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52139
Reduction Act. The estimate is not
derived from a comprehensive or even
a representative survey or study of the
costs of Commission rules and forms.
Compliance with the collection of
information requirements of the rule is
necessary to obtain the benefit of relying
on the rule’s permission for funds to
maintain their assets in foreign
custodians.
Form N–17D–1. Section 17(d) [15
U.S.C. 80a–17(d)] of the Investment
Company Act authorizes the
Commission to adopt rules that protect
funds and their security holders from
overreaching by affiliated persons when
the fund and the affiliated person
participate in any joint enterprise or
other joint arrangement or profit-sharing
plan. Rule 17d–1 under the Act
prohibits funds and their affiliated
persons from participating in a joint
enterprise, unless an application
regarding the transaction has been filed
with and approved by the Commission.
Subparagraph (d)(3) of the rule provides
an exemption from this requirement for
any loan or advance of credit to, or
acquisition of securities or other
property of, a small business concern, or
any agreement to do any of the foregoing
(‘‘investments’’) made by a small
business investment company (‘‘SBIC’’)
and an affiliated bank, provided that
reports about the investments are made
on forms the Commission may
prescribe. Rule 17d–2 designates Form
N–17D–1 (‘‘form’’) as the form for
reports required by rule 17d–1(3).
SBIC’s and their affiliated banks use
form N–17D–1 to report any
contemporaneous investments in a
small business concern. The form
provides shareholders and persons
seeking to make an informed decision
about investing in an SBIC an
opportunity to learn about transactions
of the SBIC that have the potential for
self dealing and other forms of
overreaching by affiliated persons at the
expense of shareholders.
Form N–17D–1 requires SBICs and
their affiliated banks to report
identifying information about the small
business concern and the affiliated
bank. The report must include, among
other things, the SBIC’s and affiliated
bank’s outstanding investments in the
small business concern, the use of the
proceeds of the investments made
during the reporting period, any
changes in the nature and amount of the
affiliated bank’s investment, the name of
any affiliated person of the SBIC or the
affiliated bank (or any affiliated person
of the affiliated person of the SBIC or
the affiliated bank) who has any interest
in the transactions, the basis of the
affiliation, the nature of the interest, and
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Federal Register / Vol. 70, No. 169 / Thursday, September 1, 2005 / Notices
the consideration the affiliated person
has received or will receive.
Up to five SBICs may file the form in
any year.8 The Commission estimates
the burden of filling out the form is
approximately one hour per response
and would likely be completed by an
accountant or other professional. Based
on past filings, the Commission
estimates that no more than one SBIC is
likely to use the form each year. The
estimated total annual burden of filling
out the form is one hour and the total
annual cost is $53.9 The Commission
will not keep responses on Form N–
17D–1 confidential.
Rule 19b–1. Rule 19b–1 prohibits
funds from distributing long-term
capital gains more than once every
twelve months unless certain conditions
are met. Rule 19b–1(c) permits unit
investment trusts (‘‘UITs’’) engaged
exclusively in the business of investing
in certain eligible fixed-income
securities to distribute long-term capital
gains more than once every twelve
months, if: (i) The capital gains
distribution falls within one of several
categories specified in the rule, and; (ii)
the distribution is accompanied by a
report to the unitholder that clearly
describes the distribution as a capital
gains distribution. The purpose of this
notice requirement is to ensure that
unitholders understand that the source
of the distribution is long-term capital
gains.
Rule 19b–1(e) permits a fund to apply
for permission to distribute long-term
capital gains more than once a year if
the fund did not foresee the
circumstances that created the need for
the distribution. The application must
set forth the pertinent facts and explain
the circumstances that justify the
distribution. An application that meets
those requirements is deemed to be
granted unless the Commission denies
the request within 15 days after the
Commission receives the application.
The Commission uses the information
required by rule 19b–1(e) to facilitate
the processing of requests from funds
for authorization to make a distribution
that would not otherwise be permitted
by the rule.
The staff understands that funds that
file an application generally use outside
counsel to prepare the 19b–1(e)
application. The staff estimates that, on
average, the fund’s investment adviser
spends approximately four hours to
review an application. The staff
estimates that, on average, seven funds
file an application per year under this
rule for an estimated annual collection
of information burden of 28 hours.
There is a cost burden associated with
rule 19b–1(e). As noted above, the staff
understands that funds that file for
exemption under rule 19b–1(e)
generally use outside counsel to prepare
the exemptive application. The staff
estimates that, on average, 10 hours is
required to prepare a rule 19b–1(e)
exemptive application by outside
counsel, including 8 hours by an
associate and 2 hours by a partner. The
staff estimates that the average cost of
outside counsel preparation of the 19b–
(e) exemptive application is $3,500. An
average of 7 funds file under 19b–1(e)
for an exemptive application each year,
therefore the staff estimates that the
annual cost burden imposed by rule
19b–1(e) is $24,500.
The Commission staff estimates that
there is no hour burden associated with
paragraph (c) of rule 19b–1. There is
also a cost burden associated with rule
19b–1(c). The staff estimates that there
are approximately 6,485 UITs. For
purposes of this Paperwork Reduction
Act analysis, the staff has assumed that
each of these UITs could rely on rule
19b–1(c) to make capital gains
distributions. The staff estimates that,
on average, UITs rely on rule 19b–1(c)
once a year to make a capital gains
distribution.10 The staff estimates that a
UIT incurs a cost of $50, which is
encompassed within the fee the UIT
pays its trustee, to prepare a notice for
a capital gains distribution under rule
19b–1(c). These notices require limited
preparation, the cost of which accounts
for only a small, indiscrete portion of
the comprehensive fee charged by the
trustee for its services to the UIT. There
is no separate cost to mail the notices
because they are mailed with the capital
gains distribution. Thus, the staff
estimates that the notice requirement
imposes an annual cost on UITs of
approximately $324,250.
Based on these calculations, the total
number of respondents for rule 19b–1 is
estimated to be 6,492 (6485 UIT
portfolios + 7 funds filing an application
8 As of April 22, 2005, five SBICs were registered
with the Commission.
9 Commission staff estimates that the annual
burden would be incurred by accounting
professionals with an average hourly wage rate of
$53.08 per hour. See Securities Industry
Association, Report on Management and
Professional Earnings in the Securities Industry—
2003 (2003) (reporting median salary paid to senior
accountants outside New York).
10 The number of times a UITs may rely on the
rule to make capital gains distributions depends on
a wide range of factors and, thus, can vary greatly
from one year to another. A number of UITs are
organized as grantor trusts, and therefore do not
generally make capital gains distributions under
rule 19b–1(c), or may not rely on rule 19b–1(c) as
they do not meet the rule’s requirements. Other
UITs may distribute capital gains biannually,
annually, quarterly, or at other intervals.
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under rule 19b–1(e)), the total annual
hour burden is estimated to be 28 hours,
and the total annual cost burden is
estimated to be $348,750. These
estimates of average annual burden
hours and costs are made solely for
purposes of the Paperwork Reduction
Act. The collections of information
required by 19b–1(c) and 19b–1(e) are
necessary to obtain the benefits
described above. 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
control number.
General comments regarding the
above information relating to rules 17f–
5, 17f–7, or 19b–1, or Form N–17D–1
should be directed to the following
persons: (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 e-mail to:
David_Rostker@omb.eop.gov; and (ii) R.
Corey Booth, Director/Chief Information
Officer, Office of Information
Technology, Securities and Exchange
Commission, 100 F Street, NE,
Washington, DC 20549. Comments must
be submitted to OMB within 30 days of
this notice.
Dated: August 24, 2005.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5–4773 Filed 8–31–05; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. IC–27050]
Notice of Applications for
Deregistration Under Section 8(f) of the
Investment Company Act of 1940
August 26, 2005.
The following is a notice of
applications for deregistration under
section 8(f) of the Investment Company
Act of 1940 for the month of August
2005. A copy of each application may be
obtained for a fee at the SEC’s Public
Reference Branch (tel. 202–551–5850).
An order granting each application will
be issued unless the SEC orders a
hearing. Interested persons may request
a hearing on any application by writing
to the SEC’s Secretary at the address
below and serving the relevant
applicant with a copy of the request,
personally or by mail. Hearing requests
should be received by the SEC by 5:30
E:\FR\FM\01SEN1.SGM
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]]>Agencies
[Federal Register Volume 70, Number 169 (Thursday, September 1, 2005)]
[Notices]
[Pages 52138-52140]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-4773]
=======================================================================
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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 Filings and Information Services, Washington, DC
20549.
Extension:
Rule 17f-5; SEC File No. 270-259; OMB Control No. 3235-0269.
Rule 17f-7; SEC File No. 270-470; OMB Control No. 3235-0529.
Form N-17D-1; SEC File No. 270-231; OMB Control No. 3235-0229.
Rule 19b-1; SEC File No. 270-312; OMB Control No. 3235-0354.
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 (``OMB'') requests for extension of the previously approved
collections of information discussed below.
Rule 17f-5. Rule 17f-5 under the Investment Company Act of 1940 [15
U.S.C. 80a] (``Investment Company Act'' or ``Act'') governs the custody
of the assets of registered management investment companies (``funds'')
with custodians outside the United States.\1\ Under rule 17f-5, the
fund's board of directors must find that it is reasonable to rely on
each delegate it selects to act as the fund's foreign custody manager.
The delegate must agree to provide written reports that notify the
board when the fund's assets are placed with a foreign custodian and
when any material change occurs in the fund's custody arrangements. The
delegate must agree to exercise reasonable care, prudence, and
diligence, or to adhere to a higher standard of care. When the foreign
custody manager selects an eligible foreign custodian, it must
determine that the fund's assets will be subject to reasonable care if
maintained with that custodian, and that the written contract that
governs each custody arrangement will provide reasonable care for fund
assets. The contract must contain certain specified provisions or
others that provide at least equivalent care. The foreign custody
manager must establish a system to monitor the contract and the
appropriateness of continuing to maintain assets with the eligible
foreign custodian.
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\1\ 17 CFR 270.17f-5. All references to rules 17f-5, 17f-7, 17d-
1, or 19b-1 in this notice are to 17 CFR 270.17f-5, 17 CFR 270.17f-
7, 17 CFR 270.17d-1, and 17 CFR 270.19b-1, respectively.
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The collection of information requirements in rule 17f-5 are
intended to provide protection for fund assets maintained with a
foreign bank custodian whose use is not authorized by statutory
provisions that govern fund custody arrangements,\2\ and that is not
subject to regulation and examination by U.S. regulators. The
requirement that the fund board determine that it is reasonable to rely
on each delegate is intended to ensure that the board carefully
considers each delegate's qualifications to perform its
responsibilities. The requirement that the delegate provide written
reports to the board is intended to ensure that the delegate notifies
the board of important developments concerning custody arrangements so
that the board may exercise effective oversight. The requirement that
the delegate agree to exercise reasonable care is intended to provide
assurances to the fund that the delegate will properly perform its
duties.
---------------------------------------------------------------------------
\2\ See section 17(f) of the Investment Company Act [15 U.S.C.
80a-17(f)].
---------------------------------------------------------------------------
The requirements that the foreign custody manager determine that
fund assets will be subject to reasonable care with the eligible
foreign custodian and under the custody contract, and that each
contract contain specified provisions or equivalent provisions, are
intended to ensure that the delegate has evaluated the level of care
provided by the custodian, that it weighs the adequacy of contractual
provisions, and that fund assets are protected by minimal contractual
safeguards. The requirement that the foreign custody manager establish
a monitoring system is intended to ensure that the manager periodically
reviews each custody arrangement and takes appropriate action if
developing custody risks may threaten fund assets.
The Commission's staff estimates that each year, approximately 207
registrants \3\ could be required to make an average of one response
per registrant under rule 17f-5, requiring approximately 2 hours of
director time per response, to make the necessary findings concerning
foreign custody managers. The total annual burden associated with these
requirements of the rule would be up to approximately 414 hours (207
registrants x 2 hours per registrant). The staff further estimates that
during each year, approximately 15 global custodians \4\ would be
required to make an average of 4 responses per custodian concerning the
use of foreign custodians other than depositories. The staff estimates
that each response would take approximately 275 hours, requiring
approximately 1100 total hours annually per custodian. The total annual
burden associated with these requirements of the rule would be
approximately 16,500 hours (15 global
[[Page 52139]]
custodians x 1100 hours per custodian). Therefore, the total annual
burden of all collection of information requirements of rule 17f-5 is
estimated to be up to 16,914 hours (414 + 16,500). The total annual
cost of burden hours is estimated to be $1,032,000 (414 hours x $500/
hour for director time, plus 16,500 hours x $50/hour of professional
time). Compliance with the collection of information requirements of
the rule is necessary to obtain the benefit of relying on the rule's
permission for funds to maintain their assets in foreign custodians.
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\3\ This figure is an estimate of the number of new funds each
year, based on data reported by funds in 2004 on Form N-1A and Form
N-2 [17 CFR 274.101]. In practice, not all funds will use foreign
custody managers, and the actual figure may be smaller.
\4\ This estimate is the same used in connection with the
adoption of the amendments to rule 17f-5 and of rule 17f-7 in 1999,
based on staff review of custody contracts and other research. The
number of global custodians has not changed significantly since
1999.
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Rule 17f-7. Rule 17f-7 permits funds to maintain their assets in
foreign securities depositories based on conditions that reflect the
operations and role of these depositories.\5\ Rule 17f-7 contains some
``collection of information'' requirements. An eligible securities
depository has to meet minimum standards for a depository. The fund or
its investment adviser generally determines whether the depository
complies with those requirements based on information provided by the
fund's primary custodian (a bank that acts as global custodian). The
depository custody arrangement has to meet certain risk limiting
requirements. The fund can obtain indemnification or insurance
arrangements that adequately protect the fund against custody risks.
The fund or its investment adviser generally determines whether
indemnification or insurance provisions are adequate. If the fund does
not rely on indemnification or insurance, the fund's contract with its
primary custodian is required to state that the custodian will provide
to the fund or its investment adviser a custody risk analysis of each
depository, monitor risks on a continuous basis, and promptly notify
the fund or its adviser of material changes in risks. The primary
custodian and other custodians also are required to agree to exercise
reasonable care.
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\5\ Custody of Investment Company Assets Outside the United
States, Investment Company Act Release No. IC-23815 (April 29, 1999)
[64 FR 24489 (May 6, 1999)].
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The collection of information requirements in rule 17f-7 are
intended to provide workable standards that protect funds from the
risks of using securities depositories while assigning appropriate
responsibilities to the fund's primary custodian and investment adviser
based on their capabilities. The requirement that the depository meet
specified minimum standards is intended to ensure that the depository
is subject to basic safeguards deemed appropriate for all depositories.
The requirement that the custody contract state that the fund's primary
custodian will provide an analysis of the custody risks of depository
arrangements, monitor the risks, and report on material changes is
intended to provide essential information about custody risks to the
fund's investment adviser as necessary for it to approve the continued
use of the depository. The requirement that the primary custodian agree
to exercise reasonable care is intended to provide assurances that its
services and the information it provides will meet an appropriate
standard of care. The alternative requirement that the fund obtain
adequate indemnification or insurance against the custody risks of
depository arrangements is intended to provide another, potentially
less burdensome means to protect assets held in depository
arrangements.
The staff estimates that each of approximately 980 investment
advisers \6\ would make an average of 4 responses annually under the
rule to address depository compliance with minimum requirements, any
indemnification or insurance arrangements, and reviews of risk analyses
or notifications. The staff estimates each response would take 5 hours,
requiring a total of approximately 20 hours for each adviser. The total
annual burden associated with these requirements of the rule would be
approximately 19,600 hours (980 advisers x 20 hours per adviser). The
staff further estimates that during each year, each of approximately 15
global custodians would make an average of 4 responses to analyze
custody risks and provide notice of any material changes to custody
risk under the rule. The staff estimates that each response would take
500 hours, requiring approximately 2,000 hours annually per
custodian.\7\ The total annual burden associated with these
requirements of the new rule would be approximately 30,000 hours (15
custodians x 2,000 hours). Therefore, the staff estimates that the
total annual burden associated with all collection of information
requirements of the rule would be 49,600 hours (19,600 + 30,000). The
total annual cost of burden hours is estimated to be $2,480,000 (49,600
hours x $50/hour of professional time). The estimate of average burden
hours is made solely for the purposes of the Paperwork Reduction Act.
The estimate is not derived from a comprehensive or even a
representative survey or study of the costs of Commission rules and
forms. Compliance with the collection of information requirements of
the rule is necessary to obtain the benefit of relying on the rule's
permission for funds to maintain their assets in foreign custodians.
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\6\ At the start of 2005, there were more than 36,800 investment
company portfolios that were managed or sponsored by more than 980
mutual fund complexes. A fund complex is a group of funds, all of
which typically have the same adviser.
\7\ These estimates are based on conversations with
representatives of the fund industry and global custodians.
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Form N-17D-1. Section 17(d) [15 U.S.C. 80a-17(d)] of the Investment
Company Act authorizes the Commission to adopt rules that protect funds
and their security holders from overreaching by affiliated persons when
the fund and the affiliated person participate in any joint enterprise
or other joint arrangement or profit-sharing plan. Rule 17d-1 under the
Act prohibits funds and their affiliated persons from participating in
a joint enterprise, unless an application regarding the transaction has
been filed with and approved by the Commission. Subparagraph (d)(3) of
the rule provides an exemption from this requirement for any loan or
advance of credit to, or acquisition of securities or other property
of, a small business concern, or any agreement to do any of the
foregoing (``investments'') made by a small business investment company
(``SBIC'') and an affiliated bank, provided that reports about the
investments are made on forms the Commission may prescribe. Rule 17d-2
designates Form N-17D-1 (``form'') as the form for reports required by
rule 17d-1(3).
SBIC's and their affiliated banks use form N-17D-1 to report any
contemporaneous investments in a small business concern. The form
provides shareholders and persons seeking to make an informed decision
about investing in an SBIC an opportunity to learn about transactions
of the SBIC that have the potential for self dealing and other forms of
overreaching by affiliated persons at the expense of shareholders.
Form N-17D-1 requires SBICs and their affiliated banks to report
identifying information about the small business concern and the
affiliated bank. The report must include, among other things, the
SBIC's and affiliated bank's outstanding investments in the small
business concern, the use of the proceeds of the investments made
during the reporting period, any changes in the nature and amount of
the affiliated bank's investment, the name of any affiliated person of
the SBIC or the affiliated bank (or any affiliated person of the
affiliated person of the SBIC or the affiliated bank) who has any
interest in the transactions, the basis of the affiliation, the nature
of the interest, and
[[Page 52140]]
the consideration the affiliated person has received or will receive.
Up to five SBICs may file the form in any year.\8\ The Commission
estimates the burden of filling out the form is approximately one hour
per response and would likely be completed by an accountant or other
professional. Based on past filings, the Commission estimates that no
more than one SBIC is likely to use the form each year. The estimated
total annual burden of filling out the form is one hour and the total
annual cost is $53.\9\ The Commission will not keep responses on Form
N-17D-1 confidential.
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\8\ As of April 22, 2005, five SBICs were registered with the
Commission.
\9\ Commission staff estimates that the annual burden would be
incurred by accounting professionals with an average hourly wage
rate of $53.08 per hour. See Securities Industry Association, Report
on Management and Professional Earnings in the Securities Industry--
2003 (2003) (reporting median salary paid to senior accountants
outside New York).
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Rule 19b-1. Rule 19b-1 prohibits funds from distributing long-term
capital gains more than once every twelve months unless certain
conditions are met. Rule 19b-1(c) permits unit investment trusts
(``UITs'') engaged exclusively in the business of investing in certain
eligible fixed-income securities to distribute long-term capital gains
more than once every twelve months, if: (i) The capital gains
distribution falls within one of several categories specified in the
rule, and; (ii) the distribution is accompanied by a report to the
unitholder that clearly describes the distribution as a capital gains
distribution. The purpose of this notice requirement is to ensure that
unitholders understand that the source of the distribution is long-term
capital gains.
Rule 19b-1(e) permits a fund to apply for permission to distribute
long-term capital gains more than once a year if the fund did not
foresee the circumstances that created the need for the distribution.
The application must set forth the pertinent facts and explain the
circumstances that justify the distribution. An application that meets
those requirements is deemed to be granted unless the Commission denies
the request within 15 days after the Commission receives the
application. The Commission uses the information required by rule 19b-
1(e) to facilitate the processing of requests from funds for
authorization to make a distribution that would not otherwise be
permitted by the rule.
The staff understands that funds that file an application generally
use outside counsel to prepare the 19b-1(e) application. The staff
estimates that, on average, the fund's investment adviser spends
approximately four hours to review an application. The staff estimates
that, on average, seven funds file an application per year under this
rule for an estimated annual collection of information burden of 28
hours.
There is a cost burden associated with rule 19b-1(e). As noted
above, the staff understands that funds that file for exemption under
rule 19b-1(e) generally use outside counsel to prepare the exemptive
application. The staff estimates that, on average, 10 hours is required
to prepare a rule 19b-1(e) exemptive application by outside counsel,
including 8 hours by an associate and 2 hours by a partner. The staff
estimates that the average cost of outside counsel preparation of the
19b-(e) exemptive application is $3,500. An average of 7 funds file
under 19b-1(e) for an exemptive application each year, therefore the
staff estimates that the annual cost burden imposed by rule 19b-1(e) is
$24,500.
The Commission staff estimates that there is no hour burden
associated with paragraph (c) of rule 19b-1. There is also a cost
burden associated with rule 19b-1(c). The staff estimates that there
are approximately 6,485 UITs. For purposes of this Paperwork Reduction
Act analysis, the staff has assumed that each of these UITs could rely
on rule 19b-1(c) to make capital gains distributions. The staff
estimates that, on average, UITs rely on rule 19b-1(c) once a year to
make a capital gains distribution.\10\ The staff estimates that a UIT
incurs a cost of $50, which is encompassed within the fee the UIT pays
its trustee, to prepare a notice for a capital gains distribution under
rule 19b-1(c). These notices require limited preparation, the cost of
which accounts for only a small, indiscrete portion of the
comprehensive fee charged by the trustee for its services to the UIT.
There is no separate cost to mail the notices because they are mailed
with the capital gains distribution. Thus, the staff estimates that the
notice requirement imposes an annual cost on UITs of approximately
$324,250.
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\10\ The number of times a UITs may rely on the rule to make
capital gains distributions depends on a wide range of factors and,
thus, can vary greatly from one year to another. A number of UITs
are organized as grantor trusts, and therefore do not generally make
capital gains distributions under rule 19b-1(c), or may not rely on
rule 19b-1(c) as they do not meet the rule's requirements. Other
UITs may distribute capital gains biannually, annually, quarterly,
or at other intervals.
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Based on these calculations, the total number of respondents for
rule 19b-1 is estimated to be 6,492 (6485 UIT portfolios + 7 funds
filing an application under rule 19b-1(e)), the total annual hour
burden is estimated to be 28 hours, and the total annual cost burden is
estimated to be $348,750. These estimates of average annual burden
hours and costs are made solely for purposes of the Paperwork Reduction
Act. The collections of information required by 19b-1(c) and 19b-1(e)
are necessary to obtain the benefits described above. 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 control number.
General comments regarding the above information relating to rules
17f-5, 17f-7, or 19b-1, or Form N-17D-1 should be directed to the
following persons: (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 e-mail to: David--Rostker@omb.eop.gov; and (ii)
R. Corey Booth, Director/Chief Information Officer, Office of
Information Technology, Securities and Exchange Commission, 100 F
Street, NE, Washington, DC 20549. Comments must be submitted to OMB
within 30 days of this notice.
Dated: August 24, 2005.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-4773 Filed 8-31-05; 8:45 am]
BILLING CODE 8010-01-P
