Submission for OMB Review; Comment Request, 5385-5386 [E6-1314]
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Federal Register / Vol. 71, No. 21 / Wednesday, February 1, 2006 / Notices
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certain of the Commission’s exemptive
rules. More specifically, the term
‘‘independent legal counsel,’’ as defined
in rule 0–1, sets out conditions that
funds must meet in order to rely on any
of ten exemptive rules under the Act
(‘‘exemptive rules’’).4
The Commission amended rule 0–1 to
include the definition of the term
‘‘independent legal counsel’’ in 2001.5
This amendment was designed to
enhance the effectiveness of fund boards
of directors and to better enable
investors to assess the independence of
those directors. The Commission also
amended the exemptive rules to require
that any person who serves as legal
counsel to the independent directors of
any fund that relies on any of the
exemptive rules must be an
‘‘independent legal counsel.’’ This
requirement was added because
independent directors can better
perform the responsibilities assigned to
them under the Act and the rules if they
have the assistance of truly independent
legal counsel.
If the board’s counsel has represented
the fund’s investment adviser, principal
underwriter, administrator (collectively,
‘‘management organizations’’) or their
‘‘control persons’’ 6 during the past two
years, rule 0–1 requires that the board’s
independent directors make a
determination about the adequacy of the
counsel’s independence. A majority of
the board’s independent directors are
required to reasonably determine, in the
exercise of their judgment, that the
counsel’s prior or current representation
of the management organizations or
their control persons was sufficiently
limited to conclude that it is unlikely to
adversely affect the counsel’s
professional judgment and legal
representation. Rule 0–1 also requires
that a record for the basis of this
determination is made in the minutes of
the directors’ meeting. In addition, the
independent directors must have
obtained an undertaking from the
counsel to provide them with the
information necessary to make their
determination and to update promptly
that information when the person begins
4 The relevant exemptive rules are: Rule 10f–3
[17 CFR 270.10f–3], Rule 12b–1 [17 CFR 270.12b–
1], Rule 15a–4(b)(2) [17 CFR 270.15a–4(b)(2)], Rule
17a–7 [17 CFR 270.17a–7], Rule 17a–8 [17 CFR
270.17a–8], Rule 17d–1(d)(7) [17 CFR 270.17d–
1(d)(7)], Rule 17e–1(c) [17 CFR 270.17e–1(c)], Rule
17g–1 [17 CFR 270.17g–1], Rule 18f–3 [17 CFR
270.18f–3], and Rule 23c–3 [17 CFR 270.23c–3].
5 See Role of Independent Directors of Investment
Companies, Investment Company Act Release No.
24816 (Jan. 2, 2001) [66 FR 3735 (Jan. 16, 2001)].
6 A ‘‘control person’’ is any person—other than a
fund—directly or indirectly controlling, controlled
by, or under common control, with any of the
fund’s management organizations. See 17 CFR
270.01(a)(6)(iv)(B).
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5385
to represent a management organization
or control person, or when he or she
materially increases his or her
representation. Generally, the
independent directors must re-evaluate
their determination no less frequently
than annually.
Any fund that relies on one of the
exemptive rules must comply with the
requirements in the definition of
‘‘independent legal counsel’’ under rule
0–1. We assume that approximately
3870 funds rely on at least one of the
exemptive rules annually.7 We further
assume that the independent directors
of approximately one-third (1290) of
those funds would need to make the
required determination in order for their
counsel to meet the definition of
independent legal counsel.8 We
estimate that each of these 1290 funds
would be required to spend, on average,
0.75 hours annually to comply with the
recordkeeping requirement associated
with this determination, for a total
annual burden of approximately 968
hours. Based on this estimate, the total
annual cost for all funds’ compliance
with this rule is approximately $66,126.
To calculate this total annual cost, the
Commission staff assumed that twothirds of the total annual hour burden
(645 hours) would be incurred by
compliance staff with an average hourly
wage rate of $89 per hour,9 and onethird of the annual hour burden (323
hours) would be incurred by clerical
staff with an average hourly wage rate
of $27 per hour.10
These burden hour estimates are
based upon the Commission staff’s
experience and discussions with the
fund industry. The estimates of average
burden hours are made solely for the
purposes of the Paperwork Reduction
Act. These estimates are not derived
from a comprehensive or even a
representative survey or study of the
costs of Commission rules.
Compliance with the collection of
information requirements of the rule is
mandatory and is necessary to comply
with the requirements of the rule in
general. 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 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.
7 Based on statistics compiled by Commission
staff, we estimate that there are approximately 4300
funds that could rely on one or more of the
exemptive rules. Of those funds, we assume that
approximately 90 percent (3870) actually rely on at
least one exemptive rules annually.
8 We assume that the independent directors of the
remaining two-thirds of those funds will choose not
to have counsel, or will rely on counsel who has
not recently represented the fund’s management
organizations or control persons. In both
circumstances, it would not be necessary for the
fund’s independent directors to make a
determination about their counsel’s independence.
9 The staff estimates concerning the wage rate for
professional time and for clerical time are based on
salary information complied by the Securities
Industry Association. We use the annual salaries
listed for the Director of Compliance and Executive
Secretary positions to make our estimates. See
Securities Industry Association, Report on
Management and Professional Earnings in the
Securities Industry (2004) (available in part at
https://www.careerjournal.com/salaryhiring (last
visited Sept. 14, 2005)). Note that the average
hourly wage rate estimates are modified for an
1800-hour work-year, 2.7% inflation and adjusted
upward by 35% to reflect possible overhead costs
and employee benefits.
10 (645 × $89/hour) + (323 × $27/hour) =
($66,126).
Submission for OMB Review;
Comment Request
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Dated: January 25, 2006.
Nancy M. Morris,
Secretary.
[FR Doc. E6–1310 Filed 1–31–06; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
Upon Written Request, Copies Available
From: Securities and Exchange
Commission, Office of Filings and
Information Services, Washington, DC
20549.
Extension: Rule 3a–8; SEC File No. 270–
516; OMB Control No. 3235–0574.
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
(‘‘Commission’’) has submitted to the
Office of Management and Budget
(‘‘OMB’’), a request for extension of the
previously approved collection of
information discussed below.
Rule 3a–8 of the Investment Company
Act of 1940 (the ‘‘Act’’), serves as a
nonexclusive safe harbor from
investment company status for certain
research and development companies
(‘‘R&D companies’’). The rule requires
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01FEN1
5386
Federal Register / Vol. 71, No. 21 / Wednesday, February 1, 2006 / Notices
cchase on PROD1PC60 with NOTICES
that the board of directors of an R&D
company seeking to rely on the safe
harbor adopt an appropriate resolution
evidencing that the company is
primarily engaged in a non-investment
business and record that resolution
contemporaneously in its minute books
or comparable documents.1 An R&D
company seeking to rely on the safe
harbor must retain these records only as
long as such records must be
maintained in accordance with state
law.
Rule 3a–8 contains an additional
requirement that is also a collection of
information within the meaning of the
PRA. The board of directors of a
company that relies on the safe harbor
under rule 3a–8 must adopt a written
policy with respect to the company’s
capital preservation investments. We
expect that the board of directors will
base its decision to adopt the resolution
discussed above, in part, on investment
guidelines that the company will follow
to ensure its investment portfolio is in
compliance with the rule’s
requirements.
The collection of information
imposed by rule 3a–8 is voluntary
because the rule is an exemptive safe
harbor, and therefore, R&D companies
may choose whether or not to rely on it.
The purposes of the information
collection requirements in rule 3a–8 are
to ensure that: (i) The board of directors
of an R&D company is involved in
determining whether the company
should be considered an investment
company and subject to regulation
under the Act, and (ii) adequate records
are available for Commission review, if
necessary. Rule 3a–8 would not require
the reporting of any information or the
filing of any documents with the
Commission.
Commission staff estimates that there
is no annual recordkeeping burden
associated with the rule’s requirements.
Nevertheless, the Commission requests
authorization to maintain an inventory
of one burden hour for administrative
purposes.
There are approximately 33,000 R&D
companies in the Unites States.2 Rule
3a–8 impacts non-manufacturing R&D
companies that would fall within the
definition of investment company
pursuant to section 3(a)(1)(C) of the Act
[15 U.S.C. 80a–3(a)(1)(C)].3 Of the
1 Rule 3a–8(a)(6). This requirement is modeled on
the requirement in rule 3a–2 under the Act that
provides a temporary exemption from the Act for
transient investment companies. 17 CFR 270.3a–2.
2 See National Science Board, Science and
Engineering Indicators 2004 (‘‘NSB Indicators’’)
(available at https://www.nsf.gov/statistics/seind04/).
3 The Act provides certain exclusions from the
definition of investment company for a company
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17:49 Jan 31, 2006
Jkt 208001
16,170 non-manufacturing R&D
Companies, the Commission believes
that companies in scientific R&D
services are more likely to use the
exemption provided by rule 3a–8.4 This
field comprises companies that
specialize in conducting R&D for other
organizations, such as many
biotechnology companies.5 It accounts
for 18%, or approximately 2910
companies.6 Given that the board
resolutions and investment guidelines
will generally need to be adopted only
once (unless relevant circumstances
change),7 the Commission believes that
all the companies that seek to rely on
rule 3a–8 would have adopted their
board resolutions and established
written investment guidelines in 2003
when the rule was adopted. We expect
that newly formed R&D companies
would adopt the board resolution and
investment guidelines simultaneously
with their formation documents in the
ordinary course of business.8 Therefore,
we estimate that rule 3a–8 will not
create additional time burdens.
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 should be directed to
the following persons: (i) Desk Officer
that is primarily engaged in a non-investment
business. 15 U.S.C. 80a–3(b)(1). For purposes of this
PRA analysis, we assume that all manufacturing
R&D companies are primarily engaged in the
manufacturing industry and, therefore, may rely on
the exclusion for companies primarily engaged in
a non-investment business. For example, the top
two manufacturing R&D companies in terms of
dollars spent are Ford Motor Company and General
Motors, which are primarily engaged in motor
vehicle manufacturing. See NSB Indicators, supra
note 2.
4 We believe that R&D Companies in this field are
most likely to rely on the rule because they often
raise and invest large amounts of capital to fund
their research and product development and may
make strategic investments in other R&D companies
to develop products jointly. These activities may
cause the R&D companies to fall within the
definition of investment company and fail to
qualify for statutory exclusions under the Act when
using the Commission’s traditional analysis. See
Certain Research and Development Companies,
Release No. 26077 (Jun. 16, 2003) [68 FR 37045
(Jun. 20, 2003)], at n. 12 and accompanying text
(‘‘Rule 3a–8 Release’’).
5 See NSB Indicators, supra note 2.
6 Id.
7 In the event of changed circumstances, the
Commission believes that the board resolution and
investment guidelines will be amended and
recorded in the ordinary course of business and
would not create additional time burdens.
8 In order for these companies to raise sufficient
capital to fund their product development stage, we
believe they will need to present potential investors
with investment guidelines. Investors would want
to be assured that the company’s funds are invested
consistent with the goals of capital preservation and
liquidity.
PO 00000
Frm 00155
Fmt 4703
Sfmt 4703
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: January 25, 2006.
Nancy M. Morris,
Secretary.
[FR Doc. E6–1314 Filed 1–31–06; 8:45 am]
BILLING CODE 8010–01–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 17a–7; SEC File No. 270–
238; OMB Control No. 3235–0214.
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’’) a request for extension of the
previously approved collection of
information described below.
Rule 17a–7 [17 CFR 270.17a–7] under
the Investment Company Act of 1940
(the ‘‘Act’’) is entitled ‘‘Exemption of
certain purchase or sale transactions
between an investment company and
certain affiliated persons thereof.’’ It
provides an exemption from section
17(a) of the Act for purchases and sales
of securities between registered
investment companies (‘‘funds’’), that
are affiliated persons (‘‘first-tier
affiliates’’) or affiliated persons of
affiliated persons (‘‘second-tier
affiliates’’), or between a fund and a
first- or second-tier affiliate other than
another fund, when the affiliation arises
solely because of a common investment
adviser, director, or officer. Rule 17a–7
requires funds to keep various records
in connection with purchase or sale
transactions effected in reliance on the
rule. The rule requires the fund’s board
of directors to establish procedures
reasonably designed to ensure that the
rule’s conditions have been satisfied.
E:\FR\FM\01FEN1.SGM
01FEN1
]]>Agencies
[Federal Register Volume 71, Number 21 (Wednesday, February 1, 2006)]
[Notices]
[Pages 5385-5386]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-1314]
-----------------------------------------------------------------------
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 3a-8; SEC File No. 270-516; OMB Control No.
3235-0574.
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 (``Commission'') has submitted to the Office of Management
and Budget (``OMB''), a request for extension of the previously
approved collection of information discussed below.
Rule 3a-8 of the Investment Company Act of 1940 (the ``Act''),
serves as a nonexclusive safe harbor from investment company status for
certain research and development companies (``R&D companies''). The
rule requires
[[Page 5386]]
that the board of directors of an R&D company seeking to rely on the
safe harbor adopt an appropriate resolution evidencing that the company
is primarily engaged in a non-investment business and record that
resolution contemporaneously in its minute books or comparable
documents.\1\ An R&D company seeking to rely on the safe harbor must
retain these records only as long as such records must be maintained in
accordance with state law.
---------------------------------------------------------------------------
\1\ Rule 3a-8(a)(6). This requirement is modeled on the
requirement in rule 3a-2 under the Act that provides a temporary
exemption from the Act for transient investment companies. 17 CFR
270.3a-2.
---------------------------------------------------------------------------
Rule 3a-8 contains an additional requirement that is also a
collection of information within the meaning of the PRA. The board of
directors of a company that relies on the safe harbor under rule 3a-8
must adopt a written policy with respect to the company's capital
preservation investments. We expect that the board of directors will
base its decision to adopt the resolution discussed above, in part, on
investment guidelines that the company will follow to ensure its
investment portfolio is in compliance with the rule's requirements.
The collection of information imposed by rule 3a-8 is voluntary
because the rule is an exemptive safe harbor, and therefore, R&D
companies may choose whether or not to rely on it. The purposes of the
information collection requirements in rule 3a-8 are to ensure that:
(i) The board of directors of an R&D company is involved in determining
whether the company should be considered an investment company and
subject to regulation under the Act, and (ii) adequate records are
available for Commission review, if necessary. Rule 3a-8 would not
require the reporting of any information or the filing of any documents
with the Commission.
Commission staff estimates that there is no annual recordkeeping
burden associated with the rule's requirements. Nevertheless, the
Commission requests authorization to maintain an inventory of one
burden hour for administrative purposes.
There are approximately 33,000 R&D companies in the Unites
States.\2\ Rule 3a-8 impacts non-manufacturing R&D companies that would
fall within the definition of investment company pursuant to section
3(a)(1)(C) of the Act [15 U.S.C. 80a-3(a)(1)(C)].\3\ Of the 16,170 non-
manufacturing R&D Companies, the Commission believes that companies in
scientific R&D services are more likely to use the exemption provided
by rule 3a-8.\4\ This field comprises companies that specialize in
conducting R&D for other organizations, such as many biotechnology
companies.\5\ It accounts for 18%, or approximately 2910 companies.\6\
Given that the board resolutions and investment guidelines will
generally need to be adopted only once (unless relevant circumstances
change),\7\ the Commission believes that all the companies that seek to
rely on rule 3a-8 would have adopted their board resolutions and
established written investment guidelines in 2003 when the rule was
adopted. We expect that newly formed R&D companies would adopt the
board resolution and investment guidelines simultaneously with their
formation documents in the ordinary course of business.\8\ Therefore,
we estimate that rule 3a-8 will not create additional time burdens.
---------------------------------------------------------------------------
\2\ See National Science Board, Science and Engineering
Indicators 2004 (``NSB Indicators'') (available at https://
www.nsf.gov/statistics/seind04/).
\3\ The Act provides certain exclusions from the definition of
investment company for a company that is primarily engaged in a non-
investment business. 15 U.S.C. 80a-3(b)(1). For purposes of this PRA
analysis, we assume that all manufacturing R&D companies are
primarily engaged in the manufacturing industry and, therefore, may
rely on the exclusion for companies primarily engaged in a non-
investment business. For example, the top two manufacturing R&D
companies in terms of dollars spent are Ford Motor Company and
General Motors, which are primarily engaged in motor vehicle
manufacturing. See NSB Indicators, supra note 2.
\4\ We believe that R&D Companies in this field are most likely
to rely on the rule because they often raise and invest large
amounts of capital to fund their research and product development
and may make strategic investments in other R&D companies to develop
products jointly. These activities may cause the R&D companies to
fall within the definition of investment company and fail to qualify
for statutory exclusions under the Act when using the Commission's
traditional analysis. See Certain Research and Development
Companies, Release No. 26077 (Jun. 16, 2003) [68 FR 37045 (Jun. 20,
2003)], at n. 12 and accompanying text (``Rule 3a-8 Release'').
\5\ See NSB Indicators, supra note 2.
\6\ Id.
\7\ In the event of changed circumstances, the Commission
believes that the board resolution and investment guidelines will be
amended and recorded in the ordinary course of business and would
not create additional time burdens.
\8\ In order for these companies to raise sufficient capital to
fund their product development stage, we believe they will need to
present potential investors with investment guidelines. Investors
would want to be assured that the company's funds are invested
consistent with the goals of capital preservation and liquidity.
---------------------------------------------------------------------------
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 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: January 25, 2006.
Nancy M. Morris,
Secretary.
[FR Doc. E6-1314 Filed 1-31-06; 8:45 am]
BILLING CODE 8010-01-P
