Rulemaking for EDGAR System; Mandatory Electronic Submission of Applications for Orders Under the Investment Company Act and Filings Made Pursuant to Regulation E, 63513-63523 [E7-21911]
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Federal Register / Vol. 72, No. 217 / Friday, November 9, 2007 / Proposed Rules
FAA’s Determination and Requirements
of the Proposed AD
We have evaluated all pertinent
information and identified an unsafe
condition that is likely to exist or
develop on other airplanes of this same
type design. For this reason, we are
proposing this AD, which would require
accomplishing the actions specified in
the service information described
previously.
Costs of Compliance
There are about 1,697 airplanes of the
affected design in the worldwide fleet.
This proposed AD would affect about
673 airplanes of U.S. registry. The
proposed actions would take up to 12
work hours per airplane, at an average
labor rate of $80 per work hour. Based
on these figures, the estimated cost of
the proposed AD for U.S. operators is
$646,080, or $960 per airplane.
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Authority for This Rulemaking
Title 49 of the United States Code
specifies the FAA’s authority to issue
rules on aviation safety. Subtitle I,
Section 106, describes the authority of
the FAA Administrator. Subtitle VII,
Aviation Programs, describes in more
detail the scope of the Agency’s
authority.
We are issuing this rulemaking under
the authority described in Subtitle VII,
Part A, Subpart III, Section 44701,
‘‘General requirements.’’ Under that
section, Congress charges the FAA with
promoting safe flight of civil aircraft in
air commerce by prescribing regulations
for practices, methods, and procedures
the Administrator finds necessary for
safety in air commerce. This regulation
is within the scope of that authority
because it addresses an unsafe condition
that is likely to exist or develop on
products identified in this rulemaking
action.
Regulatory Findings
We have determined that this
proposed AD would not have federalism
implications under Executive Order
13132. This proposed AD would not
have a substantial direct effect on the
States, on the relationship between the
national Government and the States, or
on the distribution of power and
responsibilities among the various
levels of government.
For the reasons discussed above, I
certify that the proposed regulation:
1. Is not a ‘‘significant regulatory
action’’ under Executive Order 12866;
2. Is not a ‘‘significant rule’’ under the
DOT Regulatory Policies and Procedures
(44 FR 11034, February 26, 1979); and
3. Will not have a significant
economic impact, positive or negative,
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on a substantial number of small entities
under the criteria of the Regulatory
Flexibility Act.
We prepared a regulatory evaluation
of the estimated costs to comply with
this proposed AD and placed it in the
AD docket. See the ADDRESSES section
for a location to examine the regulatory
evaluation.
List of Subjects in 14 CFR Part 39
Air transportation, Aircraft, Aviation
safety, Safety.
The Proposed Amendment
Accordingly, under the authority
delegated to me by the Administrator,
the FAA proposes to amend 14 CFR part
39 as follows:
PART 39—AIRWORTHINESS
DIRECTIVES
1. The authority citation for part 39
continues to read as follows:
Authority: 49 U.S.C. 106(g), 40113, 44701.
§ 39.13
[Amended]
2. The Federal Aviation
Administration (FAA) amends § 39.13
by adding the following new
airworthiness directive (AD):
Airbus: Docket No. FAA–2007–0175;
Directorate Identifier 2007–NM–184–AD.
63513
the compliance times specified, unless the
actions have already been done.
Fuel Boost Pump Wiring Change
(f) Within 60 months after the effective
date of this AD, change the wiring of the fuel
boost pump and do all other specified actions
as applicable, by accomplishing all of the
applicable actions specified in the
Accomplishment Instructions of Boeing
Special Attention Service Bulletin 757–28–
0095, dated June 18, 2007 (for Model 757–
200, –200PF, and –200CB series airplanes); or
Boeing Special Attention Service Bulletin
757–28–0096, dated June 18, 2007 (for Model
757–300 series airplanes); as applicable. The
other specified actions must be done before
further flight after changing the fuel boost
pump wiring.
Alternative Methods of Compliance
(AMOCs)
(g)(1) The Manager, Seattle Aircraft
Certification Office (ACO), FAA, has the
authority to approve AMOCs for this AD, if
requested in accordance with the procedures
found in 14 CFR 39.19.
(2) To request a different method of
compliance or a different compliance time
for this AD, follow the procedures in 14 CFR
39.19. Before using any approved AMOC on
any airplane to which the AMOC applies,
notify your appropriate principal inspector
(PI) in the FAA Flight Standards District
Office (FSDO), or lacking a PI, your local
FSDO.
Comments Due Date
(a) The FAA must receive comments on
this AD action by December 24, 2007.
Affected ADs
(b) None.
Issued in Renton, Washington, on
November 2, 2007.
Ali Bahrami,
Manager, Transport Airplane Directorate,
Aircraft Certification Service.
[FR Doc. E7–22009 Filed 11–8–07; 8:45 am]
BILLING CODE 4910–13–P
Applicability
(c) This AD applies to the airplanes
identified in paragraphs (c)(1) and (c)(2) of
this AD, certificated in any category.
(1) Boeing Model 757–200, –200PF, and
–200CB series airplanes, as identified in
Boeing Special Attention Service Bulletin
757–28–0095, dated June 18, 2007.
(2) Boeing Model 757–300 series airplanes,
as identified in Boeing Special Attention
Service Bulletin 757–28–0096, dated June 18,
2007.
Unsafe Condition
(d) This AD results from reports of short
circuits in an electrical connector at the
wing-to-body electrical disconnect panel. We
are issuing this AD to prevent a short circuit
of the electrical connector for the fuel boost
pump, which could cause the instruments for
the fuel, flap, slat, and aileron systems to
malfunction and create a potential ignition
source inside the fuel tank. A potential
ignition source inside the fuel tank in
combination with flammable fuel vapors
could result in a fuel tank explosion and
consequent loss of the airplane.
Compliance
(e) You are responsible for having the
actions required by this AD performed within
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SECURITIES AND EXCHANGE
COMMISSION
17 CFR Parts 232 and 270
[Release Nos. 33–8859; 34–56732; IC–28042
File No. S7–25–07]
RIN 3235–AJ81
Rulemaking for EDGAR System;
Mandatory Electronic Submission of
Applications for Orders Under the
Investment Company Act and Filings
Made Pursuant to Regulation E
Securities and Exchange
Commission.
ACTION: Proposed rule.
AGENCY:
SUMMARY: We propose several
amendments to rules regarding our
Electronic Data Gathering, Analysis, and
Retrieval (EDGAR) system. Specifically,
we propose to amend our rules to make
mandatory the electronic submission on
EDGAR of applications for orders under
any section of the Investment Company
Act of 1940 (‘‘Investment Company
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Federal Register / Vol. 72, No. 217 / Friday, November 9, 2007 / Proposed Rules
Washington, DC 20549–0506: In the
Office of Legal and Disclosure, Ruth
Armfield Sanders, Senior Special
Counsel (EDGAR), at (202) 551–6989; in
the Office of Investment Company
Regulation, Nadya Roytblat, Assistant
Director, at (202) 551–6821; or, in the
Office of Insurance Products, Keith
Carpenter, Senior Special Counsel, at
(202) 551–6766; for technical questions
relating to the EDGAR system, in the
Office of Information Technology,
Richard D. Heroux, EDGAR Program
Manager, at (202) 551–8168.
SUPPLEMENTARY INFORMATION: The
Securities and Exchange Commission
(‘‘Commission’’) is proposing for
comment amendments to Rules 101 and
201 of Regulation S–T 1 relating to
electronic filing on the EDGAR system
and to Rule 0–2 under the Investment
Company Act.2
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/proposed); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number S7–25–07 on the subject line;
or
• Use the Federal eRulemaking Portal
(https://www.regulations.gov). Follow the
instructions for submitting comments.
sroberts on PROD1PC70 with PROPOSALS
Act’’) and Regulation E filings of small
business investment companies and
business development companies. We
also propose to amend the electronic
filing rules to make the temporary
hardship exemption unavailable for
submission of applications under the
Investment Company Act. Finally, we
propose amendments to Rule 0–2 under
the Investment Company Act that would
eliminate the requirement that certain
documents accompanying an
application be notarized and the
requirement that applicants submit a
draft notice as an exhibit to an
application.
DATES: Comments should be submitted
on or before December 14, 2007.
ADDRESSES: Comments may be
submitted by any of the following
methods:
I. Background
Recently, we initiated a series of
amendments to keep EDGAR current
technologically and to make it more
useful to the investing public and
Commission staff. In April 2000, we
adopted rule and form amendments in
connection with the modernization of
EDGAR.3 In the modernization
proposing release, we noted that, as the
use of electronic databases grows, it
becomes increasingly important for
members of the public to have
electronic access to our filings. We also
stated that we were contemplating
future rulemaking to bring more of our
filings into the EDGAR system on a
mandatory basis. In May 2002, we
adopted rules requiring foreign private
issuers and foreign governments to file
most of their documents electronically.4
In May 2003, we adopted rules requiring
electronic filing of beneficial ownership
reports filed by officers, directors and
principal security holders under Section
16(a) 5 of the Securities Exchange Act of
1934 (‘‘Exchange Act’’).6 In July 2005,
we adopted rules requiring certain
open-end management investment
companies and insurance company
separate accounts to identify in their
EDGAR submissions information
relating to their series and classes (or
Paper Comments
• Send paper comments in triplicate
to Nancy M. Morris, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–1090.
All submissions should refer to File
Number S7–25–07. This file number
should be included on the subject line
if e-mail is used. To help us process and
review your comments more efficiently,
please use only one method. The
Commission will post all comments on
the Commission’s Internet Web site
(https://www.sec.gov/rules/
proposed.shtml). Comments are also
available for public inspection and
copying in the Commission’s Public
Reference Room, 100 F Street, NE.,
Washington, DC 20549, on official
business days between the hours of 10
a.m. and 3 p.m. All comments received
will be posted without change; we do
not edit personal identifying
information from submissions. You
should submit only information that
you wish to make available publicly.
FOR FURTHER INFORMATION CONTACT: If
you have questions about the proposed
rules, please contact one of the
following members of our staff in the
Division of Investment Management, at
the Securities and Exchange
Commission, 100 F Street, NE.,
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1 17
CFR 232.101 and 232.201.
CFR 270.0–2.
3 See Rulemaking for EDGAR System, Release No.
33–7855 (Apr. 27, 2000) [65 FR 24788] (the
modernization adopting release). See also Release
No. 33–7803 (Mar. 3, 2000) [65 FR 11507] (the
modernization proposing release).
4 See Mandated EDGAR Filing for Foreign Issuers,
Release No. 33–8099 (May 14, 2002) [67 FR 36678].
5 15 U.S.C. 78p(a).
6 See Mandated EDGAR Filing and Web Site
Posting for Forms 3, 4 and 5, Release No. 33–8230
(May 7, 2003) [68 FR 25788] (the EDGAR Section
16 release).
2 17
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contracts, in the case of separate
accounts) and mandating that fidelity
bonds filed under Section 17(g) 7 and
sales literature filed with us under
Section 24(b) 8 be made by electronic
submission on the EDGAR system.9 In
December 2006, we adopted
amendments to the rules and forms
under Section 7A of the Exchange Act
requiring that the forms filed with
respect to transfer agent registration,
annual reporting, and withdrawal from
registration be filed with the
Commission electronically on EDGAR.10
Today, we propose to require that
applicants submit electronically on the
EDGAR system their applications for
orders under any section of the
Investment Company Act
(‘‘applications’’). We make this proposal
to facilitate the efficient submission of
applications by applicants, to enable the
public to access them more quickly and
search them more easily, and to improve
the Commission’s ability to track and
process such applications. We also
propose to make revisions to Rule 0–2
and related amendments to Regulation
S–T, our electronic filing rules. In
addition, we are proposing to add
Regulation E filings to the list of those
that must be filed electronically through
EDGAR.
II. Proposed Mandatory Electronic
Submission of Investment Company
Applications
The rules under Regulation S–T
currently provide that submissions for
exemptive relief under any section of
the Investment Company Act shall not
be made in electronic format.11 The only
applications under the Investment
Company Act that are currently
mandatory EDGAR submissions are
applications for deregistration filed by
investment companies.12 Applicants for
orders under the Investment Company
Act can include registered investment
companies, affiliated persons of
registered investment companies, and
issuers seeking to avoid investment
7 15
U.S.C. 80a–17(g).
U.S.C. 80a–24(b).
9 See Rulemaking for EDGAR System, Release No.
33–8590 (July 18, 2005) [70 FR 43558 (July 27,
2005)].
10 See Electronic Filing of Transfer Agent Forms,
Release No. 34–54864 (Dec. 4, 2006) [71 FR 74698
(Dec. 12, 2006)].
11 Current Rule 101(a)(1)(iv) and (c)(11) of
Regulation S–T [17 CFR 232.101(a)(1)(iv) and
(c)(11)].
12 These include applications and amendments
submitted on Form N–8F [17 CFR 274.218] (EDGAR
submission types N–8F and N–8F/A) and those
submitted pursuant to Investment Company Act
Rule 0–2 [17 CFR 270.0–2] (EDGAR submission
types 40–8F–2 and 40–8F–2/A). See Release No. IC–
23786 (Apr. 15, 1999) [76 19469 (Apr. 21, 1999)].
8 15
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Federal Register / Vol. 72, No. 217 / Friday, November 9, 2007 / Proposed Rules
sroberts on PROD1PC70 with PROPOSALS
company status, among other entities.13
These applications are submitted in
paper and currently are available only
from the Commission’s public reference
room or electronically from private
services. Private services usually charge
fees for electronic copies of
applications; also, there is a delay of
about thirty days between the
submission of applications to the
Commission and their electronic
availability from the private sources.
We propose to amend certain
provisions of Regulation S–T and
Investment Company Act Rule 0–2 14 to
require electronic filing on EDGAR for
the submission of applications pursuant
to Rule 0–2 under the Investment
Company Act. We propose to amend
Rule 101(a)(1)(iv) of Regulation S–T to
include within its mandatory electronic
provisions any application for an order
under any section of the Investment
Company Act.15
Regulation S–T requires the electronic
filing of any amendments and related
correspondence and supplemental
information pertaining to a document
that is the subject of mandated EDGAR
submission.16 These requirements
would also apply to persons who submit
applications.17
We make this proposal, in light of the
primary goals of the EDGAR system, to
facilitate the rapid dissemination of
financial and business information in
connection with filings, including
filings by investment companies.
Requiring these applications to be
submitted electronically would benefit
members of the investing public and the
financial community by making
information contained in these filings
readily available to them and more
13 There are several sections of the Investment
Company Act pursuant to which entities may make
applications for relief. For example, Section 6(c) [15
U.S.C. 80a–6(c)] provides the Commission with
authority to exempt persons, securities or
transactions from any provision of the Investment
Company Act, or the regulations thereunder, if and
to the extent that such exemption is in the public
interest and consistent with the protection of
investors and the purposes fairly intended by the
policy and provisions of the Investment Company
Act.
14 Rule 0–2 is the Investment Company Act rule
under which applications are submitted.
15 See proposed amendment to Rule 101(a)(1)(iv)
under Regulation S–T. Paragraph (11) of Rule 101(c)
currently provides that filings under Section 6(c) of
the Investment Company Act, i.e., applications for
orders, be submitted in paper format only. We also
propose to remove and reserve this paragraph.
16 Regulation S–T Rule 101(a)(1) [17 CFR
232.101(a)(1)].
17 See proposed amendments to paragraphs (a)(2)
and (3) of Rule 101 of Regulation S–T. Related
correspondence and supplemental information are
not automatically disseminated publicly through
the EDGAR system but are immediately available to
the Commission staff.
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easily searchable.18 In this age of
information, we believe that filings and
applications made with the Commission
are more valuable to investors if they are
available in electronic form and that
adding applications to the EDGAR
database would provide a more
complete picture for the investing
public. We believe that the proposals
would benefit the public by making the
EDGAR page of our Web site a more
comprehensive resource for most
information on file with us related to
the operation of investment companies.
As with other entities that make
submissions on EDGAR, applicants
would be subject to the provisions of
Regulation S–T 19 and the EDGAR Filer
Manual. Regulation S–T includes
detailed rules concerning mandatory
and permissive electronic EDGAR
submissions; it also makes clear that
requests for confidential treatment must
be made in paper format.20 The
regulation also covers such matters as
providing for the override of formatting
requirements applicable to paper
submissions.21 The EDGAR Filer
Manual contains detailed technical
specifications concerning EDGAR
submissions. The Manual also provides
technical guidance concerning how to
commence submissions on EDGAR by
submitting Form ID to obtain a CIK 22
and confidential access codes and how
to maintain and update company data,
e.g., how to change company names and
contact information.23
One technical specification that the
EDGAR Filer Manual includes is the
electronic ‘‘submission type’’ for each
submission made on EDGAR. We expect
18 From time to time, an applicant may wish to
submit an application for exemption under both the
Investment Company Act and under the Investment
Advisers Act [15 U.S.C. 80b–1 et seq.]. We are not
proposing to require that Investment Advisers Act
submissions be made on EDGAR. Under our
proposal, any document that is intended as an
application for an order under both the Investment
Company Act and the Investment Advisers Act
would need to be submitted separately under each
Act.
19 For a comprehensive discussion of Regulation
S–T and electronic filing, see ‘‘Electronic Filing and
the EDGAR System: A Regulatory Overview,’’
available on the Commission’s Web site.
20 See Rule 101 of Regulation S–T [17 CFR
232.101].
21 The paper formatting requirements continue to
be applicable to paper submissions made pursuant
to temporary and continuing hardship exemptions
under Rules 201 and 202 of Regulation S–T [17 CFR
232.201 and 202].
22 A filer’s CIK (or ‘‘central index key’’) is a tendigit number uniquely identifying that filer.
23 We remind filers that, in the case of name
changes, the changes must be made via the EDGAR
filing Web site in advance; the new name would be
reflected in the next EDGAR submission. The name
on past submissions would not change. The CIK
and file number(s) of the company would provide
a link to filings under the old name.
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63515
that the EDGAR electronic submission
types for applications would be
designed to facilitate and expedite the
review of these applications.
Currently, the applications submitted
in paper typically reference the
provisions of the Investment Company
Act and of the rules and regulations
under which the application is made.24
Based on this information, our filer
support staff assign a paper ‘‘submission
type’’ for our internal recordkeeping of
the paper application on the EDGAR
system. We also disseminate this paper
submission type, which indicates that
the paper application has been filed
with us. The current paper submission
types for applications are the following:
40–APP, 40–6B, and 40–6C. We usually
record paper applications under
submission types 40–APP or 40–6C,
except for those submitted by
employees’ securities companies, for
which we use submission type 40–6B.
Consistent with our proposal, we
expect that the EDGAR Filer Manual
and the EDGARLink software would
provide for three EDGAR electronic
submission types for applications: 40–
APP, 40–OIP, and 40–6B. Submission
type 40–APP would be used for
submissions typically processed by the
Division’s Office of Investment
Company Regulation; a new submission
type 40–OIP would be used for
submissions typically processed by the
Division’s Office of Insurance Products.
We also would plan to use submission
type 40–6B for employees’ securities
company applications (also processed
by the Office of Investment Company
Regulation), since we have historically
kept records for these applicants
separately. We would discontinue use of
the paper submission type 40–6C;
applications formerly recorded under
this submission type would be
submitted as either 40–APP or 40–OIP,
as appropriate.
We anticipate that the EDGAR Filer
Manual would provide guidance for
applicants in choosing the correct
submission type. Most applications
would be submitted under EDGAR
submission type 40–APP, the
submission type designated for the
Office of Investment Company
Regulation. But, the following categories
of applications would be transmitted
under EDGAR submission type 40–OIP,
the submission type for the Office of
Insurance Products:
(1) Applications with regard to mixed and
shared funding filed under Section 6(c) of the
Investment Company Act, for exemptions
from the provisions of Sections 9(a), 13(a),
24 See paragraph (e) of Investment Company Act
Rule 0–2 [17 CFR 270.0–2].
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Federal Register / Vol. 72, No. 217 / Friday, November 9, 2007 / Proposed Rules
15(a) and 15(b) of the Investment Company
Act,25 and Rules 6e–2(b)(15) and 6e–
3(T)(b)(15); 26
(2) Applications relating to the recapture of
bonus credits filed under Section 6(c) of the
Investment Company Act for exemptions
from the provisions of Sections 2(a)(32) and
27(i)(2)(A) of the Investment Company Act 27
and Rule 22c–1 28;
(3) Applications relating to the substitution
of securities held by a variable insurance
separate account filed under Section 26(c) of
the Investment Company Act; 29 and
(4) Applications for approval of the terms
of an exchange offer involving variable
insurance contracts filed under Section 11(a)
of the Investment Company Act.30
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We believe that these three
submission types would facilitate and
expedite the review of submissions. Our
internal system will be able to quickly
route the application to the appropriate
office. If applicants have any questions
as to the appropriate EDGAR
submission type, we would encourage
them to verify in advance the correct
submission type so that the application
can be routed automatically to the
appropriate Office. We would provide
contact information in the EDGAR Filer
Manual and on the Commission’s Web
site so that, in case of doubt, applicants
may contact the staff.
We request comment on whether
these EDGAR submission types would
be sufficient or whether other or
additional submission types would be
helpful to applicants or the public in
connection with the submission of
applications.
For applications with multiple coapplicants, the applicants would be able
to submit the application with all coapplicants included in one submission.
The applicants would choose one
applicant to list first as the ‘‘primary’’
co-applicant. Then, they would include
in the EDGAR template the information
for all other co-applicants, i.e., the CIK
of each co-applicant and, for
amendments, file number of each coapplicant. Applicants could be dropped
from or added to an application with
each amendment submission.31
25 15 U.S.C. 80a–9(a), 80a–13(a), 80a–15(a), 80a–
15(b).
26 17 CFR 270.6e–2(b)(15), 270.6e–3(T)(b)(15).
27 15 U.S.C. 80a–2(a)(32), 80a–27(i)(2)(A).
28 17 CFR 270.22c–1.
29 15 U.S.C. 80a–26(c).
30 15 U.S.C. 80a–11(a).
31 As is the case currently with paper
applications, for each application, an applicant
would receive a unique file number which would
begin with the prefix ‘‘812,’’ or ‘‘813’’ in the case
of applications made by employees’ securities
companies. As also is currently the case with paper
filings, each co-applicant’s file number would be
composed of the primary applicant’s file number
with an appended two-digit suffix unique to that
co-applicant. Each applicant or co-applicant would
include this file number, in addition to its CIK, in
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We expect that the internal EDGAR
system would be enhanced to allow for
the upload and public dissemination via
the EDGAR system of notices and orders
in connection with specific
applications.
We request comment on the impact of
our making the submission of requests
for orders under the Investment
Company Act mandatory electronic
submissions. Should we implement this
rule? We request comment on whether
it would be burdensome for us to
require applicants to submit
applications electronically. To which
applications should the rule apply? We
ask commenters to address the issue of
what the transition period should be for
investment companies and other
applicants to prepare for the mandatory
electronic submission of these
applications.
We ask commenters to provide
detailed information on any difficulties
and considerations unique to these
proposed requirements. In the event
commenters believe that any aspect of
the proposed requirements would be
burdensome, we ask for specific details
and alternative approaches.
III. Proposed Amendments to Rule 0–2
and to Temporary Hardship Exemption
of Regulation S–T
Rule 0–2 currently requires that every
application for an order for which a
form is not specifically prescribed and
which is executed by a corporation,
partnership or other company and filed
with the Commission contain a
statement of the applicable provisions of
the articles of incorporation, bylaws or
similar documents, relating to the right
of the person signing and filing such
application to take such action on behalf
of the applicant, and a statement that all
such requirements have been complied
with and that the person signing and
filing the application is fully authorized
to do so. If such authorization is
dependent on resolutions of
stockholders, directors, or other bodies,
such resolutions must be attached as an
exhibit to or quoted in the application.
Any amendment to the application must
contain a similar statement as to the
applicability of the original statement of
authorization. When any application or
amendment is signed by an agent or
attorney, Rule 0–2 requires that the
power of attorney evidencing his
authority to sign shall state the basis for
the agent’s authority and shall be filed
with the Commission. Every application
subject to Rule 0–2 must be verified by
the EDGAR template of all amendments to the
application, which would also be required
electronic submissions.
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the person executing the application by
providing a notarized signature in
substantially the form specified in the
rule. Each application subject to Rule
0–2 must state the reasons why the
applicant is deemed to be entitled to the
action requested, the name and address
of each applicant, and the name and
address of any person to whom any
questions regarding the application
should be directed. Rule 0–2 requires
that a proposed notice of the proceeding
initiated by the filing of the application
accompany each application as an
exhibit and, if necessary, be modified to
reflect any amendment to the
application.
We are proposing three amendments
to Rule 0–2 governing the form of
applications under the Investment
Company Act. First, we propose to
eliminate the requirement to have
verifications of applications and
statements of facts made in connection
with applications notarized.32 We
believe that this requirement is
unnecessary in the context of an
electronic filing.33 Second, we propose
to eliminate the requirement that
applicants include draft notices as
exhibits to applications.34 The staff has
found these exhibits to be of limited
value because the staff prefers to draft
its own notices of applications. Finally,
we also propose to amend Rule 0–2 to
remove the last sentence of paragraph
(b),35 which was added in the initial
EDGAR rulemaking and would be
inconsistent with mandatory electronic
submission of applications on
EDGAR.36 We request comment on
these proposed amendments. Is there
32 See
Rule 0–2(d).
S–T requires that each signatory to
an electronic filing manually sign a signature page
or other document authenticating, acknowledging
or otherwise adopting his or her signature that
appears in typed form in the electronic filing. This
document must be executed before or at the time
the electronic filing is made, must be retained by
the filer for a period of five years, and must be made
available to the Commission upon request. See Rule
302(b) of Regulation S–T [17 CFR 232.302(b)]. We
believe that this requirement provides sufficient
assurance of the legitimacy of signatures contained
in the electronic filings so that notarization is
unnecessary.
34 See Rule 0–2(g).
35 The last sentence of Rule 0–2(b) currently reads
as follows: ‘‘Every application for an order under
any provision of the Act and every amendment to
such application shall be submitted to the
Commission in paper only, whether or not the
applicant is otherwise required to file in electronic
format, unless instructions for electronic filing are
included on the form, if any, prescribed for such
application.’’
36 See Rulemaking for EDGAR System—
Investment Companies and Institutional Investment
Managers, Release No. 33–6978 (Feb. 23, 1993) [58
FR 14848 (Mar. 18, 1993)].
33 Regulation
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any reason we should retain the notary
and draft notice requirements?
We are also proposing an amendment
to Rule 201 of Regulation S–T. Rules
201 and 202 37 of Regulation S–T
address hardship exemptions from
EDGAR filing requirements, and Rule
13(b) of Regulation S–T 38 addresses the
related issue of filing date adjustments.
A filer may obtain a temporary
hardship exemption under Rule 201 if it
experiences unanticipated technical
difficulties that prevent the timely
preparation and submission of an
electronic filing by filing a properly
legended paper copy 39 of the filing
under cover of Form TH.40 This process
is self-executing. A filer who files in
paper under the temporary hardship
exemption must submit an electronic
format copy of the filed paper document
within six business days of the filing of
the paper format document.41
A filer may apply for a continuing
hardship exemption under Rule 202 if it
cannot file all or part of a filing without
undue burden or expense.42 In contrast
to the self-executing temporary hardship
exemption process, a filer can obtain a
continuing hardship exemption only by
submitting a written application, upon
which the Commission, or Commission
staff pursuant to delegated authority,
must then act.
We are proposing to make the
temporary hardship exemption
unavailable for submission of
applications under the Investment
Company Act.43 We are proposing to
amend Rule 201(a) of Regulation S–T to
make temporary hardship exemptions
unavailable for these submissions, since
there is generally no submission
exigency or submission deadline
associated with these submissions. An
applicant would continue to have the
ability to apply for a continuing
hardship exemption under Rule 202 if it
cannot submit all or part of an
application without undue burden or
expense. Also, while we would expect
the circumstances and exercise to be
rare, the staff could use its delegated
CFR 232.202.
CFR 232.13(b).
39 See 17 CFR 232.201(a).
40 17 CFR 239.65, 249.447, 269.10,and 274.404.
41 See 17 CFR 232.201(b).
42 See 17 CFR 232.202(a).
43 See proposed amendment to rule 201(a) of
Regulation S–T.
We have previously made unavailable the ability
for filers to use the temporary hardship exemption
for EDGAR submissions of beneficial ownership
reports filed by officers, directors and principal
security holders under Section 16(a) of the
Exchange Act [15 U.S.C. 78p(a)]. See Mandated
EDGAR Filing and Web site Posting for Forms 3, 4
and 5, Release No. 33–8230 (May 7, 2003) [68 FR
25788].
authority to grant a filing date
adjustment pursuant to Rule 13(b) of
Regulation S–T [17 CFR 232.13(b)].
While we would not expect an applicant
to need a filing date adjustment in the
context of an application, it would be
available in the unlikely event it were
needed. We ask for comment on making
the temporary hardship exemption
unavailable for submission of
applications for orders under the
Investment Company Act.
IV. Proposed Amendments To Mandate
That Certain Filings of Small Business
Investment Companies and Business
Development Companies Be Made
Electronically
Regulation E 44 provides for the
exemption from registration of securities
issued by small business investment
companies registered under the
Investment Company Act and business
development companies regulated
under that Act, subject to the terms and
conditions of the regulation. Rule 604 45
of Regulation E requires the filing of
notification on Form 1–E 46 of sales of
securities under Regulation E. Rule
607 47 of Regulation E requires the filing
of sales material used in connection
with the offering. Rule 609 48 of
Regulation E requires the filing of
reports of sales on Form 2–E.49
Currently, these companies must
make most of their filings electronically
on the EDGAR system. However, they
must make their Regulation E 50 filings
in paper. Since these filers are already
EDGAR filers and most would have
available electronic copies of their Form
1–E (and any related sales material) 51
and Form 2–E, we believe that making
these filings electronically on EDGAR
would impose very little burden or cost
on these companies. We are therefore
proposing to make these filings
mandatory electronic submissions.52 We
request comment on any burdens or
costs that would result. Is there any
reason not to require that these
submissions be made electronically on
the EDGAR system?
37 17
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44 17
CFR 230.601 to 610a.
CFR 230.604.
46 17 CFR 239.200.
47 17 CFR 230.607.
48 17 CFR 230.609.
49 17 CFR 239.201.
50 17 CFR 230.601 to 610a.
51 Requiring electronic filing on EDGAR of Rule
607 sales literature would be consistent with the
current requirement to file electronically on EDGAR
omitting prospectuses under Rule 482 of the
Securities Act of 1933 (‘‘Securities Act’’) (referred
to as ‘‘482 ads’’) and sales literature under Section
24(b) of the Investment Company Act.
52 See proposed amendments to paragraphs
(a)(1)(v) and (c)(6) of Rule 101 of Regulation S–T.
45 17
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V. General Request for Comment
You are invited to submit written
comments relating to the rule proposals
set forth in this release. We request
comment not only on the specific issues
we discuss in this release, but on any
other approaches or issues that we
should consider in connection with the
submission of applications for orders
and Regulation E filings on the EDGAR
system. We seek comment from any
interested person, including those
required to file information with us on
the EDGAR system, as well as investors,
disseminators of EDGAR data, EDGAR
filing agents, and other members of the
public who have access to and use
information from the EDGAR system.
VI. Cost-Benefit Analysis
We are sensitive to the costs and
burdens of our rules. The rules we are
proposing today would reflect the
addition of applications under the
Investment Company Act as mandatory
electronic submissions on EDGAR. In
addition, the proposals would amend
Rule 0–2 and make unavailable to
applicants Regulation S–T’s provision
for temporary hardship exemptions. In
addition, the proposals would add
Regulation E filings to the list of those
that must be filed electronically through
EDGAR.
A. Expected Benefits
We expect that the addition of
applications under the Investment
Company Act as mandatory electronic
submissions on EDGAR would result in
considerable benefits to the securities
markets, investors, and other members
of the public, by expanding the
accessibility of information, and
increasing the types of information,
filed and made available for public
review through the EDGAR system. The
primary goal of the EDGAR system since
its inception has been to facilitate the
rapid dissemination of financial and
business information in connection with
filings, including filings by investment
companies. The proposed amendments
would benefit investors, financial
analysts and others by increasing the
efficiency of retrieving and
disseminating these applications. The
mandated electronic transmission of
these documents would enable the
public to access them more quickly and
search them more easily. Instead of
having to come in person or through an
agent to the Commission’s public
reference room to conduct a search for
a particular submission that is in paper
or microfiche, the public would be able
to find and review the application on
any computer with an Internet
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connection by accessing the EDGAR
system through the Commission’s Web
site or through a third party Web site
that links to EDGAR. The proposals
would benefit the public by making the
EDGAR page of our Web site a more
comprehensive resource for most
information on file with us related to
the operation of investment companies.
A further benefit would be to ensure
that all applications are available to the
public free of charge on our Web site
without the cost of paying a third party
for a copy.
Persons who may consider requesting
a hearing on an application on the basis
of a notice would be able to more easily
obtain the actual application so that
they could better understand the legal
issues. We believe this would be a
significant improvement in the
applications process.
We also expect that applicants would
benefit from the increased efficiencies
in the filing process for these
submissions resulting from the
proposed amendments. By
electronically transmitting these
documents directly to the Commission,
applicants would avoid the
uncertainties and delays that can occur
with the manual delivery of paper
documents; we believe that it would be
a simpler and more efficient means to
submit applications. Applicants also
would benefit from no longer having to
submit multiple copies of paper
documents to the Commission.
Because the Commission’s staff would
be able to retrieve and analyze
information contained in these
submissions more readily than under
our current paper system, mandated
electronic submission of these
documents should facilitate the staff’s
retrieval and review of a particular
document. Applicants and investors
should benefit from increased
efficiencies in the Commission’s storage,
retrieval, and analysis of these
submissions which would result from
the proposed amendments.
We believe the proposal to amend
Rule 0–2 would benefit applicants.
Removing the notarization requirement
would remove a requirement from filers
that is unnecessary, and removing the
requirement to include a draft notice as
an exhibit will result in a cost-savings
to applicants. And, we believe that
making unavailable to applicants
Regulation S–T’s Rule 201 provision for
temporary hardship exemptions would
benefit applicants because applicants
would not bear the cost of both
submitting an application in paper and
in electronic form as a confirming copy
within 6 business days as required by
the temporary hardship exemption rule.
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This is true in light of the fact that there
is no deadline for the submission of an
application.
We also expect that the addition of
Regulation E filings as mandatory
electronic submissions on EDGAR
would result in benefits to the securities
markets, investors, and other members
of the public, by expanding the
accessibility of information, and
increasing the types of information,
filed and made available for public
review through the EDGAR system.
Requiring these Regulation E filings to
be submitted on EDGAR would benefit
members of the investing public and the
financial community by making
information contained in these
Commission filings more easily
searchable and readily available to
them. The proposals would result in the
benefit to the public of the EDGAR page
of our Web site being a comprehensive
source from which to find filings of
small business investment companies
and business development companies.
We also expect that Regulation E filers
would benefit from the increased
efficiencies in the filing process for
these submissions resulting from the
proposed amendments. By
electronically transmitting these
documents directly to the Commission,
these filers would avoid the
uncertainties and delays that can occur
with the manual delivery of paper
documents; we believe that it would be
a simpler and more efficient means to
submit these Regulation E filings.
Regulation E filers also would benefit
from no longer having to submit
multiple copies of paper documents to
the Commission.
The proposed amendments would
benefit investors, financial analysts and
others by increasing the efficiency of
retrieving and disseminating these
filings. The mandated electronic
transmission of these documents would
enable the public to access them more
quickly. Instead of having to come in
person or through an agent to the
Commission’s public reference room to
conduct a search for a particular
submission that is in paper or
microfiche, the public would be able to
find and review the filing on any
computer with an Internet connection
by accessing the EDGAR system through
the Commission’s Web site or through a
third party Web site that links to
EDGAR. The proposed amendments
would also enable financial analysts and
others to retrieve, analyze and
disseminate more rapidly this
information.
An investor would be able to more
efficiently gather information of interest
about Regulation E filers. Also,
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Regulation E filers and investors should
benefit from increased efficiencies in
the Commission’s storage, retrieval, and
analysis of these submissions which
would result from the proposed
amendments. Mandated EDGAR
submission of these documents would
result in their addition to the
Commission’s central electronic
repository of filings that is free to
anyone who has access to a computer
linked to the Internet. Because the
Commission’s staff would be able to
retrieve and analyze information
contained in these Regulation E
submissions more readily than under
our current paper system, mandated
electronic submission of these
documents should facilitate the staff’s
retrieval and review of a particular
document.
In the Paperwork Reduction Act
section, we estimate that, if the
proposed amendments are adopted, the
total reduction in the burden would be
approximately $52,550.
B. Expected Costs
We expect that, if adopted, the
proposed amendments would result in
some initial and ongoing costs to
applicants. We also expect, however,
that many applicants would not bear the
full range of costs that would result
from the amendments for the reasons
described below. Initial costs are those
associated with filing a Form ID in order
to obtain the access codes needed to
submit an application electronically and
otherwise preparing to make an
application submission.53 In order to
file a Form ID, an applicant would need
to learn the related electronic filing
requirements, obtain access to a
computer and the Internet, use the
computer to access the Commission’s
EDGAR Filer Management Web site,
respond to Form ID’s information
requirements and fax to the Commission
a notarized authenticating document.
Ongoing costs are those associated
with maintaining the framework
developed through the initial costs (for
example, updating information required
by Form ID) and additional costs arising
from each subsequent submission of an
application.
We expect that the vast majority of
applicants would need to incur few, if
any, additional costs related to
obtaining computer and Internet access.
We believe that the vast majority of
53 Applicants that already have EDGAR access
codes would not need to file a Form ID. As further
discussed in Part IX, however, we assume that a
small number of applicants per year would not
already have the codes.
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applicants already would have access to
a computer and the Internet.54
We expect no additional costs to
applicants from our proposal to amend
Rule 0–2. We request comment on
whether our proposed amendments to
Rule 0–2 to remove the current
requirements for notarization of the
application and provision of a draft
notice as an exhibit would result in any
additional costs. We expect no
additional costs to applicants from our
proposal to make unavailable to
applicants Regulation S-T’s Rule 201
provision for temporary hardship
exemption. An applicant would still be
able to request a continuing hardship
exemption under Regulation S-T Rule
202 under appropriate circumstances.
We believe that mandatory EDGAR
submission of Regulation E filings
would result in minimal cost to these
filers. For the following reasons, we also
expect that Regulation E filers would
not bear the full range of costs
frequently associated with new
electronic filing requirements. Initial
costs are those associated with the
purchase of compatible computer
equipment and software, including
EDGAR software if obtained from a
third-party vendor and not from the
Commission’s Web site. Initial costs also
include those resulting from the training
of existing employees to be EDGAR
proficient or the hiring of additional
employees or agents that are already
skilled in EDGAR processing. Initial
costs further include those associated
with the formatting and transmission of
an applicant’s first document submitted
on EDGAR. These transmission costs
may include those related to subscribing
to an Internet service provider.
Regulation E filers already file on
EDGAR and would have minimal or no
initial costs.
Ongoing costs are those associated
with the electronic formatting and
transmission of subsequent EDGAR
filings. Regulation E filers may also
incur future costs resulting from the
training or hiring of employees
regarding updated EDGAR filing
requirements. The magnitude of these
costs would depend on the filers’ levels
of technological proficiency and their
previous familiarity with EDGAR filing
requirements. Regulation E filers would
incur the ongoing costs associated with
formatting and transmitting their
subsequent EDGAR filings.
Consequently, the mandated EDGAR
requirements should result only in costs
54 An applicant that did not already own a
computer with Internet access could, for example,
go to a public library to use its computer and obtain
Internet access.
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related primarily to the electronic
formatting of these documents in a
format compatible with EDGAR, and
transmission of the EDGAR formatted
documents to the Commission. In any
event, we believe that any costs for
transmission, formatting, and education
would be comparable to savings from
not having to incur similar costs related
to paper submissions.
C. Comment Solicited
We solicit comment on the costs and
benefits of the proposed amendments.
We request your views on the costs and
benefits described above as well as on
any other costs and benefits that could
result from adoption of these proposals.
Please identify any costs or benefits
associated with the rule proposal for the
mandatory electronic submission of
applications (and related proposed
amendments to Investment Company
Act Rule 0–2 and Rule 201 of Regulation
S-T) and Regulation E filings and any
impact that the rule proposals may have
on the ease of locating and using
EDGAR data. How much, if any,
expense would be avoided with the
removal of the notary and draft notice
requirements? What are the benefits that
investors, financial analysts, other
members of the financial community,
applicants, and small business
investment company and business
development company Regulation E
filers should realize from these
proposals? Would the proposed
amendments help an investor to gather
information about an applicant and its
operations? What are the likely expected
initial and ongoing costs of these added
categories of mandated EDGAR
submissions? Are there costs in addition
to those discussed above? Are there
unidentified costs associated with any
of the proposed amendments and, if so,
what are they?
We encourage commenters to identify
any costs or benefits associated with the
rule proposals. We also request data to
quantify the costs and the benefits
identified.
VII. Burden on Competition; Promotion
of Efficiency, Competition, and Capital
Formation
Section 23(a)(2) of the Exchange Act
requires us, in adopting rules under the
Exchange Act, to consider the anticompetitive effects of any rules that we
adopt thereunder. Furthermore, Section
2(b) of the Securities Act,55 Section 3(f)
of the Exchange Act,56 and Section
2(c) 57 of the Investment Company Act
55 15
U.S.C. 77b(b).
U.S.C. 78c(f).
57 15 U.S.C. 80a–2(c).
56 15
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63519
require us, when engaging in
rulemaking, and considering or
determining whether an action is
necessary or appropriate in the public
interest, to consider whether the action
would promote efficiency, competition,
and capital formation. In compliance
with our responsibilities under these
sections, we request comment on
whether the proposals, if adopted,
would burden competition and whether
they would promote efficiency,
competition, and capital formation. We
encourage commenters to provide
empirical data or other facts to support
their views.
The proposed amendments regarding
mandated electronic filing of
applications and the related
amendments to Rule 0–2 and Regulation
S–T’s Rule 201 are intended to simplify
the requirements for submitting
applications and facilitate more efficient
transmission, analysis, storage and
retrieval of information. This should
improve the accessibility and usefulness
of information available to all applicants
and the public, including those wishing
to request a hearing on an application.
It may make the investment products
offered by applicants more competitive,
since all applicants would have ready
access to the applications of others. The
proposed rules would also improve the
accessibility of information available to
the public about the operation of
investment companies and improve
investors’ ability to make informed
investment decisions. We believe the
proposed amendments would not
impose a burden on competition and
would not have an adverse impact on
capital formation. The proposed
amendments regarding mandated
electronic filings under Regulation E by
small business investment companies
and business development companies
are intended to facilitate more efficient
transmission, analysis, storage and
retrieval of information. This should
improve the accessibility and usefulness
of information available for use by filers,
investors, and the public. It may make
the investment products offered by filers
more competitive, since all filers would
have immediate online access to
Regulation E filings of their competitors.
We believe that the proposed rules
would also improve the accessibility of
information available to the public
about the operation of small business
investment companies and business
development companies and thereby
improve investors’ ability to make
informed investment decisions. We
believe the proposed amendments
would not impose a burden on
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competition and would not have an
adverse impact on capital formation.
We request comment on the impact
the proposed rule would have on
efficiency, competition and capital
formation. We request comment on
whether the proposed amendments, if
adopted, would impose a burden on
competition and whether they would
promote efficiency, competition, and
capital formation. We also request
commenters to provide empirical data
and other factual support for their views
if possible.
VIII. Initial Regulatory Flexibility Act
Analysis
This Initial Regulatory Flexibility Act
Analysis (Analysis) has been prepared
in accordance with 5 U.S.C. 603. It
relates to our proposed amendments to
add applications for orders under the
Investment Company Act to the list of
submissions that must be made
electronically, including proposals to
amend Rule 0–2 and make unavailable
to applicants the provision for
temporary hardship exemptions in Rule
201 of Regulation S–T, and to add
Regulation E filings to the list of those
that must be filed electronically through
EDGAR.
sroberts on PROD1PC70 with PROPOSALS
A. Reasons for, and Objectives of,
Proposed Amendments
The proposals would require
applications for orders under any
section of the Investment Company Act
to be submitted electronically on
EDGAR. The proposed amendments to
Rule 0–2 would remove the
requirements for notarization and
provision of a draft notice, and the
proposed amendments to Rule 201 of
Regulation S–T would make
applications ineligible for temporary
hardship exemptions. We make these
proposals because the absence of an
electronic system for submitting
applications for orders limits the
usefulness of the information collected.
The proposals would add Regulation
E filings made by small business
investment companies and business
development companies to the list of
those that must be filed electronically
through EDGAR. We also make this
proposal because the absence of an
electronic system for submitting
Regulation E filings limits the
usefulness of the information collected.
B. Legal Basis
We are proposing amendments to
Rules 101, and 201 of Regulation S–T
and Rule 0–2 under the Investment
Company Act pursuant to authority set
forth in Sections 6, 7, 8, 10 and 19(a) of
the Securities Act [15 U.S.C. 77f, 77g,
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77h, 77j, and 77s(a)], Sections 3, 12, 13,
14, 15(d), 23(a) and 35A of the Exchange
Act [15 U.S.C. 78c, 78l, 78m, 78n,
78o(d), 78w(a), and 78ll], and Sections
8, 30, 31 and 38 of the Investment
Company Act [15 U.S.C. 80a–8, 80a–29,
80a–30, and 80a–37].
C. Small Entities Subject to the Rule
For purposes of the Regulatory
Flexibility Act, an investment company
is a small entity if it, together with other
investment companies in the same
group of related investment companies,
has net assets of $50 million or less as
of the end of its most recent fiscal
year.58 Approximately 164 registered
investment companies meet this
definition.59 Approximately 51 business
development companies may be
considered small entities.60 We estimate
that few, if any, separate accounts
registered on Form N–3, N–4, or N–6 are
small entities.61
D. Reporting, Recordkeeping, and Other
Compliance Requirements
The proposed amendments would
require applicants to submit requests for
orders and small business investment
companies and business development
companies to submit Regulation E
filings electronically on the EDGAR
system. The Commission estimates
some one-time formatting and ongoing
burdens that would be imposed on all
applicants and Regulation E filers,
including those that are small entities.
We note, however, that all Regulation E
filers and many applicants currently
make other filings on EDGAR.
Furthermore, we believe that noninvestment company applicants would
have no greater burden than that of
those filers of Section 16 reports or
Schedules 13D and 13G 62 who would
not otherwise make EDGAR filings and
58 Rule 0–10(a) under the Investment Company
Act [17 CFR 240.0–10(a)].
59 The estimated number of reporting investment
companies that may be considered small entities is
based on December 2006 data from the
Commission’s EDGAR database and a third-party
data provider.
60 This estimate is based on analysis by the
Division of Investment Management staff of
information from databases compiled by third-party
information providers, including Morningstar, Inc.
and Lipper Inc.
61 This estimate is based on figures compiled by
the Division of Investment Management staff
regarding separate accounts registered on Forms N–
3, N–4, and N–6. In determining whether an
insurance company separate account is a small
entity for purposes of the Regulatory Flexibility Act,
the assets of insurance company separate accounts
are aggregated with the assets of their sponsoring
insurance companies. Rule 0–10(b) under the
Investment Company Act [17 CFR 270.0–10(b)].
62 17 CFR 240.13d–101 and 13d–102.
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that the electronic submission should
create only a de minimis burden.
There would be no change in
reporting or recordkeeping
requirements. The proposed
amendments to Rule 0–2 would reduce
compliance requirements to the extent
that they would remove the
requirements for notarization of the
application and provision of a draft
notice with the application.
We solicit comment on the effect the
proposed amendments would have on
small entities.
E. Duplicative, Overlapping or
Conflicting Federal Rules
The Commission believes that there
are no rules that duplicate, overlap, or
conflict with the proposed amendments.
F. Significant Alternatives
The Regulatory Flexibility Act directs
us to consider significant alternatives
that would accomplish our stated
objectives, while minimizing any
significant adverse impact on small
entities. In connection with the
proposed amendments, the Commission
considered the following alternatives: (i)
The establishment of differing
compliance or reporting requirements or
timetables that take into account the
resources available to small entities; (ii)
the clarification, consolidation, or
simplification of compliance and
reporting requirements under the
proposed amendments for small
entities; (iii) the use of performance
rather than design standards; and (iv) an
exemption from coverage of the
proposed amendments, or any part
thereof, for small entities.
The Commission believes at the
present time that special compliance or
reporting requirements for small
entities, or an exemption from coverage
for small entities, would not be
appropriate or consistent with investor
protection. Different requirements for
applicants or Regulation E filers that are
small entities could make it more
difficult for the public to locate
Commission filings and disclosure
documents for these applicants. We
believe it is important that the benefits
resulting from the proposal be provided
to the public for all applications and
Regulation E filings, not just the ones
from those that are not considered small
entities.
We have endeavored throughout the
proposed amendments to minimize the
regulatory burden on all applicants and
Regulation E filers, including small
entities, while meeting our regulatory
objectives. Small entities should benefit
from the Commission’s reasoned
approach to the proposed amendments
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Federal Register / Vol. 72, No. 217 / Friday, November 9, 2007 / Proposed Rules
to the same degree as others. The
Commission preliminarily believes that
further clarification, consolidation, or
simplification of the proposals for those
that are small entities would be
inconsistent with the Commission’s
concern for investor protection. Further
clarification, consolidation, or
simplification of the proposals for those
that are small entities would result in
less information available for them.
Similarly, we preliminarily conclude
that using performance rather than
design standards would not be
consistent with our statutory mandate of
investor protection. We believe that the
standard provided in the proposal
(EDGAR filing) is already sufficiently
clear and appropriately simple. A major
goal of making these mandatory EDGAR
submissions is a more complete and
searchable EDGAR database of filings;
we do not believe that there is a
comparable performance standard that
would achieve this goal.
G. Solicitation of Comments
The Commission encourages the
submission of written comments with
respect to any aspect of this analysis.
Comment is specifically requested on
the number of small entities that would
be affected by the proposed
amendments and the likely impact of
the proposals on small entities.
Commenters are asked to describe the
nature of any impact and provide
empirical data supporting the extent of
the impact. These comments will be
considered in the preparation of the
Final Regulatory Flexibility Act
Analysis if the proposed rule
amendments are adopted, and will be
placed in the same public file as
comments on the proposal.
sroberts on PROD1PC70 with PROPOSALS
IX. Paperwork Reduction Act
The proposed rule amendments
contain ‘‘collection of information’’
requirements within the meaning of the
Paperwork Reduction Act of 1995
(‘‘PRA’’).63 We are submitting the
proposed collection of information to
the Office of Management and Budget
(‘‘OMB’’) for review in accordance with
44 U.S.C. 3507(d) and 5 CFR 1320.11.
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.
A. Rule 0–2
The title for the collection of
information is ‘‘General Requirements of
63 44
U.S.C. 3501 et seq.
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Papers and Applications.’’ 64 Provision
of information under the rule is
necessary to obtain a benefit. The
information is not kept confidential.
Respondents to the collection are
applying for orders of the Commission
under the Investment Company Act.
Applicants for orders under the
Investment Company Act can include
registered investment companies,
affiliated persons of registered
investment companies, and issuers
seeking to avoid investment company
status, among other entities.65 The
Commission uses the information
required by rule 0–2 to decide whether
the applicant should be deemed to be
entitled to the action requested by the
application. The proposed amendments
to rule 0–2 would eliminate the
requirement to have verifications of
applications and statements of facts
made in connection with applications
notarized 66 and would eliminate the
requirement that applicants include
draft notices as exhibits to
applications.67
63521
Burden Estimate for Rule 0–2
Applicants file applications as they
deem necessary. The Commission
receives approximately 125 applications
per year under the Investment Company
Act of 1940. Although each application
typically is submitted on behalf of
multiple entities, the entities in the vast
majority of cases are related companies
and are treated as a single applicant for
purposes of this analysis.
Much of the work of preparing an
application is performed by outside
counsel. The cost outside counsel
charges applicants depends on the
complexity of the issues covered by the
application and the time required for
preparation. Based on conversations
with applicants and attorneys, the cost
ranges from approximately $7,000 for
preparing a well-precedented, routine
application to approximately $80,000 to
prepare a complex and/or novel
application. We estimate that the
Commission receives 20 of the most
time-consuming applications annually,
80 applications of medium difficulty,
and 25 of the least difficult applications.
This distribution gives a total estimated
annual cost burden to applicants of
filing all applications of $5,255,000 [(20
× $80,000) + (80 × $43,500) + (25 ×
$7,000)].
In addition, based on conversations
with applicants, we estimate that inhouse counsel would spend from ten to
fifty hours helping to draft and review
an application. We estimate a total
annual hour burden to all respondents
of 3,650 hours (50 hours × 20
applications) + (30 hours × 80
applications) + (10 hours × 25
applications). We are proposing to
decrease the burden associated with the
existing collection of information for
Rule 0–2 to reflect the proposed
amendments. The proposed
amendments to Rule 0–2 would, if
adopted, eliminate the requirement to
have verifications of applications and
statements of facts made in connection
with applications notarized. The notary
service would be provided by a
secretary or similar administrative
employee of the applicant or the outside
counsel preparing the application and
would represent a negligible cost or
hour burden to the applicant, so
elimination of the notarization
requirement would not be likely to
decrease the burden measurably.
The proposed amendments would
also eliminate the requirement that
applicants include proposed notices as
exhibits to applications. A proposed
notice is merely a summary of the
statements in the application. We
estimate that preparation of the
proposed notice by outside counsel
represents approximately 1% of the cost
of preparing an application. Elimination
of this requirement would reduce the
estimated cost burden by approximately
$52,550 (1% of $5,255,000). The
proposed amendments will not change
the hour burden.
If the proposed amendments are
adopted, we estimate the total reduction
in the burden would be approximately
$52,550.
64 Rule 0–2 is a collection of information
currently in use without a control number. We are
submitting the rule to OMB for approval under the
PRA.
65 There are several sections of the Investment
Company Act pursuant to which entities may make
applications for relief. Section 6(c) provides the
Commission with authority to exempt persons,
securities or transactions from any provision of the
Investment Company Act, or the regulations
thereunder, if and to the extent that such exemption
is in the public interest and consistent with the
protection of investors and the purposes fairly
intended by the policy and provisions of the
Investment Company Act.
66 See Rule 0–2(d).
67 See Rule 0–2(g).
B. Regulation S–T
The title for the collection of
information is ‘‘General Rules and
Regulations for Electronic Filing.’’
(OMB Control No. 3235–0424). The
purpose of Regulation S–T is to
implement the Commission’s EDGAR
system. The EDGAR system enables the
Commission to receive, store, process
and disseminate information filed with
the Commission under the provisions of
the federal securities laws. The
Commission’s forms and rules require
filings that make information available
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Federal Register / Vol. 72, No. 217 / Friday, November 9, 2007 / Proposed Rules
to the investing public and that permit
the Commission to verify compliance
with the federal securities laws.
Electronic filing improves the
availability to the public and to the
Commission of information filed with
the Commission. Regulation S–T
specifies the requirements that govern
the electronic submission of documents
to the Commission. Provision of the
information required by the Regulation
is mandatory. Responses are not kept
confidential.
sroberts on PROD1PC70 with PROPOSALS
Burden Estimate for Regulation S–T
The proposed amendments to
Regulation S–T would revise rule 101
under Regulation S–T to require
electronic filing of applications for
orders of the Commission under the
Investment Company Act and of forms
required by Regulation E under the
Securities Act of 1933. The burden
associated with the filing of applications
under rule 0–2, as proposed to be
amended, will be reflected in the
collection of information entitled
‘‘General Requirements of Papers and
Applications.’’ We are not proposing to
amend Regulation E. The burden
associated with the filing of documents
required by Regulation E is reflected in
the collections of information required
by Regulation E, and will not change as
a result of the proposed amendments to
Regulation S–T.
We are also proposing to amend rule
201 under Regulation S–T, which
governs temporary hardship exemptions
from electronic filing. Rule 201 is part
of Regulation S–T and does not impose
any burden on respondents separate
from Regulation S–T. The proposed
amendments to rule 201 will not change
the burden of Regulation S–T. The
Paperwork Reduction Act requires that
we obtain OMB approval for a collection
of information, whether the collection
has a burden or not. Regulation S–T is
a collection of information with no
burden to respondents. OMB requires us
to assign a burden of one hour to
Regulation S–T and to indicate that the
Regulation has one respondent so the
automated OMB system will be able to
handle approval of the Regulation. OMB
has already approved a burden of one
hour for one respondent to the
Regulation.
C. Form ID
The Commission estimates that each
year a small number of applicants
would need to file a Form ID (OMB
Control Number 3235–0328) with the
Commission in order to gain access to
EDGAR. Form ID is used to request the
assignment of access codes to file on
EDGAR. Most applicants would not
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17:12 Nov 08, 2007
Jkt 214001
need to file a Form ID because any
applicant that has made at least one
filing with the Commission since 2002
has been entered into the EDGAR
system by the Commission and would
not need to file Form ID to file
electronically on EDGAR. However,
applicants that have never made a filing
with the Commission would need to file
Form ID.
The Commission estimates that it
would receive approximately 10 Form
IDs a year under the proposed
amendments. This number fits within
the current number of respondents that
file a Form IDs each year because the
actual number of Forms ID the
Commission receives is less than the
current estimate.
D. Request for Comments
Pursuant to 44 U.S.C. 3506(c)(2)(B),
the Commission solicits comments as to:
(i) Whether the proposed collections of
information are necessary for the proper
performance of the functions of the
agency, including whether the
information will have practical utility;
(ii) the accuracy of the Commission’s
estimate of the burden of the proposed
collections of information; (iii) whether
there are ways to enhance the quality,
utility, and clarity of the information to
be collected; and (iv) whether there are
ways to minimize the burden of the
collection of information on those who
are to respond, including through the
use of automated collection techniques
or other forms of information
technology.
The Commission has submitted the
proposed collections of information to
OMB for approval. Persons submitting
comments on the collection of
information requirements should direct
them to the Office of Management and
Budget, Attention: Desk Officer for the
Securities and Exchange Commission,
Office of Information and Regulatory
Affairs, Washington, DC 20503, and
should also send a copy of their
comments to Nancy M. Morris,
Secretary, Securities and Exchange
Commission, 100 F Street, NE.,
Washington, DC 20549–0609, with
reference to File No. S7–25–07.
Requests for materials submitted to
OMB by the Commission with regard to
these collections of information should
be in writing, refer to File No. S7–25–
07, and be submitted to the Securities
and Exchange Commission, Public
Reference Room, 100 F Street, NE.,
Washington, DC 20549. As OMB is
required to make a decision concerning
the collections of information between
30 and 60 days after publication, a
comment to OMB is best assured of
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Fmt 4702
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having its full effect if OMB receives it
within 30 days of publication.
X. Consideration of Impact on the
Economy
For purposes of the Small Business
Regulatory Enforcement Fairness Act of
1996,68 a rule is ‘‘major’’ if it results or
is likely to result in:
• An annual effect on the economy of
$100 million or more;
• A major increase in costs or prices
for consumers or individual industries;
or
• Significant adverse effects on
competition, investment, or innovation.
We request comment on and
information regarding the potential
impact of the proposed amendments on
the economy on an annual basis. In
particular, comments should address
whether the proposed changes, if
adopted, would have a $100,000,000
annual effect on the economy, cause a
major increase in costs or prices, or have
a significant adverse effect on
competition, investment, or innovation.
We request that commenters provide
empirical data to support their views.
XI. Statutory Basis
We propose the rule amendments
outlined above under Sections 6, 7, 8,
10 and 19(a) of the Securities Act [15
U.S.C. 77f, 77g, 77h, 77j, and 77s(a)],
Sections 3, 12, 13, 14, 15(d), 23(a) and
35A of the Exchange Act [15 U.S.C. 78c,
78l, 78m, 78n, 78o(d), 78w(a), and 78ll],
and Sections 8, 30, 31 and 38 of the
Investment Company Act [15 U.S.C.
80a–8, 80a–29, 80a–30, and 80a–37].
List of Subjects
17 CFR Part 232
Reporting and recordkeeping
requirements, Securities.
17 CFR Part 270
Investment companies, Reporting and
recordkeeping requirements, Securities.
Text of the Proposed Rule Amendments
In accordance with the foregoing,
Title 17, Chapter II of the Code of
Federal Regulations is proposed to be
amended as follows.
PART 232—REGULATION S–T—
GENERAL RULES AND REGULATIONS
FOR ELECTRONIC FILINGS
1. The authority citation for part 232
continues to read, in part, as follows:
Authority: 15 U.S.C. 77f, 77g, 77h, 77j,
77s(a), 77sss(a), 78c(b), 78l, 78m, 78n, 78o(d),
78w(a), 78ll(d), 80a–8, 80a–29, 80a–30, 80a–
37, and 7201 et seq.; and 18 U.S.C. 1350.
*
*
68 Pub.
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*
*
*
L. 104–21, title II, 110 Stat. 857 (1996).
09NOP1
Federal Register / Vol. 72, No. 217 / Friday, November 9, 2007 / Proposed Rules
2. Section 232.101 is amended by:
a. Revising paragraphs (a)(1)(iv) and
(v), the introductory text of paragraph
(a)(2), paragraph (a)(2)(i), the first
sentence of paragraph (a)(3), and
paragraph (c)(6); and
b. Removing and reserving paragraph
(c)(11).
The revisions read as follows:
sroberts on PROD1PC70 with PROPOSALS
§ 232.101 Mandated electronic
submissions and exceptions.
(a) * * *
(1) * * *
(iv) Documents filed with the
Commission pursuant to sections 8, 17,
20, 23(c), 24(b), 24(e), 24(f), and 30 of
the Investment Company Act (15 U.S.C.
80a–8, 80a–17, 80a–20, 80a–23(c), 80a–
24(b), 80a–24(e), 80a–24(f), and 80a–29)
and any application for an order under
any section of the Investment Company
Act (15 U.S. C. 80a–1 et seq.);
(v) Documents relating to offerings
exempt from registration under the
Securities Act filed with the
Commission pursuant to Regulation E
(§§ 230.601–230.610a of this chapter);
*
*
*
*
*
(2) The following amendments to
filings and applications, including any
related correspondence and
supplemental information except as
otherwise provided, shall be submitted
as follows:
(i) Any amendment to a filing or
application submitted by or relating to
a registrant or an applicant that is
required to file electronically, including
any amendment to a paper filing or
application, shall be submitted in
electronic format;
*
*
*
*
*
(3) Supplemental information,
including documents related to
applications under any section of the
Investment Company Act, shall be
submitted in electronic format except as
provided in paragraph (c)(2) of this
section. * * *
*
*
*
*
*
(c) * * *
(6) Except as provided in paragraph
(a)(1)(v) of this section, filings relating
to offerings exempt from registration
under the Securities Act, including
filings made pursuant to Regulation A
(§§ 230.251–230.263 of this chapter) and
Regulation D (§§ 230.501–230.506 of
this chapter), as well as filings on Form
144 (§§ 239.144 of this chapter) where
the issuer of the securities is not subject
to the reporting requirements of section
13 or 15(d) of the Exchange Act (15
U.S.C. 78m or 78o(d), respectively);
*
*
*
*
*
3. Amend § 232.201 by revising
paragraph (a) introductory text.
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17:12 Nov 08, 2007
Jkt 214001
§ 232.201
Temporary hardship exemption.
(a) If an electronic filer experiences
unanticipated technical difficulties
preventing the timely preparation and
submission of an electronic filing other
than a Form 3 (§ 249.103 of this
chapter), a Form 4 (§ 249.104 of this
chapter), a Form 5 (§ 249.105 of this
chapter), a Form ID (§§ 239.63, 249.446,
269.7 and 274.402 of this chapter), a
Form TA–1 (§ 249.100 of this chapter),
a Form TA–2 (§ 249.102 of this chapter),
a Form TA–W (§ 249.101 of this
chapter), or an application for an order
under any section of the Investment
Company Act (15 U.S.C. 80a–1 et seq.),
the electronic filer may file the subject
filing, under cover of Form TH
(§§ 239.65, 249.447, 269.10 and 274.404
of this chapter), in paper format no later
than one business day after the date on
which the filing was to be made.
*
*
*
*
*
63523
that all action by stockholders,
directors, and other bodies necessary to
authorize the undersigned to execute
and file such instrument has been taken.
The undersigned further states that he
or she is familiar with such instrument,
and the contents thereof, and that the
facts therein set forth are true to the best
of his or her knowledge, information
and belief.
✖ lllllllllllllllll
(Signature)
*
*
*
*
*
By the Commission.
Dated: November 1, 2007.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7–21911 Filed 11–8–07; 8:45 am]
BILLING CODE 8011–01–P
DEPARTMENT OF THE TREASURY
PART 270—RULES AND
REGULATIONS, INVESTMENT
COMPANY ACT OF 1940
Internal Revenue Service
4. The authority citation for part 270
continues to read in part as follows:
[REG–127770–07]
Authority: 15 U.S.C. 80a–1 et seq., 80a–
34(d), 80a–37, and 80a–39, unless otherwise
noted.
RIN 1545–BG77
*
*
*
*
*
5. Amend § 270.0–2 by:
a. Removing the last sentence in
paragraph (b);
b. Revising paragraph (d);
c. Removing paragraph (g);
d. Redesignating paragraph (h) as
paragraph (g); and
e. Removing the authority citation
following the section.
The revision reads as follows:
§ 270.0–2 General requirements of papers
and applications.
*
*
*
*
*
(d) Verification of applications and
statements of fact. Every application for
an order under any provision of the Act,
for which a form with instructions is not
specifically prescribed and every
amendment to such application, and
every statement of fact formally filed in
support of, or in opposition to, any
application or declaration shall be
verified by the person executing the
same. An instrument executed on behalf
of a corporation shall be verified in
substantially the following form, but
suitable changes may be made in such
form for other kinds of companies and
for individuals:
The undersigned states that he or she
has duly executed the attached llll
dated lll, 20lll for and on behalf
of (name of company); that he or she is
(title of officer) of such company; and
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Fmt 4702
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26 CFR Part 1
Modifications of Commercial Mortgage
Loans Held by a Real Estate Mortgage
Investment Conduit (REMIC)
Internal Revenue Service (IRS),
Treasury.
ACTION: Notice of proposed rulemaking.
AGENCY:
SUMMARY: This document contains
proposed regulations that would expand
the list of permitted loan modifications
to include certain modifications of
commercial mortgages. Changes to the
regulations are necessary to better
accommodate evolving commercial
mortgage industry practices. These
changes will affect lenders, borrowers,
servicers, and sponsors of
securitizations of mortgages in REMICs.
DATES: Written or electronic comments
and requests for a public hearing must
be received by February 7, 2008.
ADDRESSES: Send submissions to:
CC:PA:LPD:PR (REG–127770–07), room
5203, Internal Revenue Service, PO Box
7604, Ben Franklin Station, Washington,
DC 20044. Submissions may be handdelivered Monday through Friday
between the hours of 8 a.m. and 4 p.m.
to CC:PA:LPD:PR (REG–127770–07),
Courier’s Desk, Internal Revenue
Service, 1111 Constitution Avenue,
NW., Washington, DC, or sent
electronically via the Federal
eRulemaking Portal at
www.regulations.gov (IRS REG–127770–
07).
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]]>Agencies
[Federal Register Volume 72, Number 217 (Friday, November 9, 2007)]
[Proposed Rules]
[Pages 63513-63523]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-21911]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
17 CFR Parts 232 and 270
[Release Nos. 33-8859; 34-56732; IC-28042 File No. S7-25-07]
RIN 3235-AJ81
Rulemaking for EDGAR System; Mandatory Electronic Submission of
Applications for Orders Under the Investment Company Act and Filings
Made Pursuant to Regulation E
AGENCY: Securities and Exchange Commission.
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: We propose several amendments to rules regarding our
Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system.
Specifically, we propose to amend our rules to make mandatory the
electronic submission on EDGAR of applications for orders under any
section of the Investment Company Act of 1940 (``Investment Company
[[Page 63514]]
Act'') and Regulation E filings of small business investment companies
and business development companies. We also propose to amend the
electronic filing rules to make the temporary hardship exemption
unavailable for submission of applications under the Investment Company
Act. Finally, we propose amendments to Rule 0-2 under the Investment
Company Act that would eliminate the requirement that certain documents
accompanying an application be notarized and the requirement that
applicants submit a draft notice as an exhibit to an application.
DATES: Comments should be submitted on or before December 14, 2007.
ADDRESSES: Comments may be submitted by any of the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://
www.sec.gov/rules/proposed); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number S7-25-07 on the subject line; or
Use the Federal eRulemaking Portal (https://
www.regulations.gov). Follow the instructions for submitting comments.
Paper Comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number S7-25-07. This file number
should be included on the subject line if e-mail is used. To help us
process and review your comments more efficiently, please use only one
method. The Commission will post all comments on the Commission's
Internet Web site (https://www.sec.gov/rules/proposed.shtml). Comments
are also available for public inspection and copying in the
Commission's Public Reference Room, 100 F Street, NE., Washington, DC
20549, on official business days between the hours of 10 a.m. and 3
p.m. All comments received will be posted without change; we do not
edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly.
FOR FURTHER INFORMATION CONTACT: If you have questions about the
proposed rules, please contact one of the following members of our
staff in the Division of Investment Management, at the Securities and
Exchange Commission, 100 F Street, NE., Washington, DC 20549-0506: In
the Office of Legal and Disclosure, Ruth Armfield Sanders, Senior
Special Counsel (EDGAR), at (202) 551-6989; in the Office of Investment
Company Regulation, Nadya Roytblat, Assistant Director, at (202) 551-
6821; or, in the Office of Insurance Products, Keith Carpenter, Senior
Special Counsel, at (202) 551-6766; for technical questions relating to
the EDGAR system, in the Office of Information Technology, Richard D.
Heroux, EDGAR Program Manager, at (202) 551-8168.
SUPPLEMENTARY INFORMATION: The Securities and Exchange Commission
(``Commission'') is proposing for comment amendments to Rules 101 and
201 of Regulation S-T \1\ relating to electronic filing on the EDGAR
system and to Rule 0-2 under the Investment Company Act.\2\
---------------------------------------------------------------------------
\1\ 17 CFR 232.101 and 232.201.
\2\ 17 CFR 270.0-2.
---------------------------------------------------------------------------
I. Background
Recently, we initiated a series of amendments to keep EDGAR current
technologically and to make it more useful to the investing public and
Commission staff. In April 2000, we adopted rule and form amendments in
connection with the modernization of EDGAR.\3\ In the modernization
proposing release, we noted that, as the use of electronic databases
grows, it becomes increasingly important for members of the public to
have electronic access to our filings. We also stated that we were
contemplating future rulemaking to bring more of our filings into the
EDGAR system on a mandatory basis. In May 2002, we adopted rules
requiring foreign private issuers and foreign governments to file most
of their documents electronically.\4\ In May 2003, we adopted rules
requiring electronic filing of beneficial ownership reports filed by
officers, directors and principal security holders under Section 16(a)
\5\ of the Securities Exchange Act of 1934 (``Exchange Act'').\6\ In
July 2005, we adopted rules requiring certain open-end management
investment companies and insurance company separate accounts to
identify in their EDGAR submissions information relating to their
series and classes (or contracts, in the case of separate accounts) and
mandating that fidelity bonds filed under Section 17(g) \7\ and sales
literature filed with us under Section 24(b) \8\ be made by electronic
submission on the EDGAR system.\9\ In December 2006, we adopted
amendments to the rules and forms under Section 7A of the Exchange Act
requiring that the forms filed with respect to transfer agent
registration, annual reporting, and withdrawal from registration be
filed with the Commission electronically on EDGAR.\10\
---------------------------------------------------------------------------
\3\ See Rulemaking for EDGAR System, Release No. 33-7855 (Apr.
27, 2000) [65 FR 24788] (the modernization adopting release). See
also Release No. 33-7803 (Mar. 3, 2000) [65 FR 11507] (the
modernization proposing release).
\4\ See Mandated EDGAR Filing for Foreign Issuers, Release No.
33-8099 (May 14, 2002) [67 FR 36678].
\5\ 15 U.S.C. 78p(a).
\6\ See Mandated EDGAR Filing and Web Site Posting for Forms 3,
4 and 5, Release No. 33-8230 (May 7, 2003) [68 FR 25788] (the EDGAR
Section 16 release).
\7\ 15 U.S.C. 80a-17(g).
\8\ 15 U.S.C. 80a-24(b).
\9\ See Rulemaking for EDGAR System, Release No. 33-8590 (July
18, 2005) [70 FR 43558 (July 27, 2005)].
\10\ See Electronic Filing of Transfer Agent Forms, Release No.
34-54864 (Dec. 4, 2006) [71 FR 74698 (Dec. 12, 2006)].
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Today, we propose to require that applicants submit electronically
on the EDGAR system their applications for orders under any section of
the Investment Company Act (``applications''). We make this proposal to
facilitate the efficient submission of applications by applicants, to
enable the public to access them more quickly and search them more
easily, and to improve the Commission's ability to track and process
such applications. We also propose to make revisions to Rule 0-2 and
related amendments to Regulation S-T, our electronic filing rules. In
addition, we are proposing to add Regulation E filings to the list of
those that must be filed electronically through EDGAR.
II. Proposed Mandatory Electronic Submission of Investment Company
Applications
The rules under Regulation S-T currently provide that submissions
for exemptive relief under any section of the Investment Company Act
shall not be made in electronic format.\11\ The only applications under
the Investment Company Act that are currently mandatory EDGAR
submissions are applications for deregistration filed by investment
companies.\12\ Applicants for orders under the Investment Company Act
can include registered investment companies, affiliated persons of
registered investment companies, and issuers seeking to avoid
investment
[[Page 63515]]
company status, among other entities.\13\ These applications are
submitted in paper and currently are available only from the
Commission's public reference room or electronically from private
services. Private services usually charge fees for electronic copies of
applications; also, there is a delay of about thirty days between the
submission of applications to the Commission and their electronic
availability from the private sources.
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\11\ Current Rule 101(a)(1)(iv) and (c)(11) of Regulation S-T
[17 CFR 232.101(a)(1)(iv) and (c)(11)].
\12\ These include applications and amendments submitted on Form
N-8F [17 CFR 274.218] (EDGAR submission types N-8F and N-8F/A) and
those submitted pursuant to Investment Company Act Rule 0-2 [17 CFR
270.0-2] (EDGAR submission types 40-8F-2 and 40-8F-2/A). See Release
No. IC-23786 (Apr. 15, 1999) [76 19469 (Apr. 21, 1999)].
\13\ There are several sections of the Investment Company Act
pursuant to which entities may make applications for relief. For
example, Section 6(c) [15 U.S.C. 80a-6(c)] provides the Commission
with authority to exempt persons, securities or transactions from
any provision of the Investment Company Act, or the regulations
thereunder, if and to the extent that such exemption is in the
public interest and consistent with the protection of investors and
the purposes fairly intended by the policy and provisions of the
Investment Company Act.
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We propose to amend certain provisions of Regulation S-T and
Investment Company Act Rule 0-2 \14\ to require electronic filing on
EDGAR for the submission of applications pursuant to Rule 0-2 under the
Investment Company Act. We propose to amend Rule 101(a)(1)(iv) of
Regulation S-T to include within its mandatory electronic provisions
any application for an order under any section of the Investment
Company Act.\15\
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\14\ Rule 0-2 is the Investment Company Act rule under which
applications are submitted.
\15\ See proposed amendment to Rule 101(a)(1)(iv) under
Regulation S-T. Paragraph (11) of Rule 101(c) currently provides
that filings under Section 6(c) of the Investment Company Act, i.e.,
applications for orders, be submitted in paper format only. We also
propose to remove and reserve this paragraph.
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Regulation S-T requires the electronic filing of any amendments and
related correspondence and supplemental information pertaining to a
document that is the subject of mandated EDGAR submission.\16\ These
requirements would also apply to persons who submit applications.\17\
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\16\ Regulation S-T Rule 101(a)(1) [17 CFR 232.101(a)(1)].
\17\ See proposed amendments to paragraphs (a)(2) and (3) of
Rule 101 of Regulation S-T. Related correspondence and supplemental
information are not automatically disseminated publicly through the
EDGAR system but are immediately available to the Commission staff.
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We make this proposal, in light of the primary goals of the EDGAR
system, to facilitate the rapid dissemination of financial and business
information in connection with filings, including filings by investment
companies. Requiring these applications to be submitted electronically
would benefit members of the investing public and the financial
community by making information contained in these filings readily
available to them and more easily searchable.\18\ In this age of
information, we believe that filings and applications made with the
Commission are more valuable to investors if they are available in
electronic form and that adding applications to the EDGAR database
would provide a more complete picture for the investing public. We
believe that the proposals would benefit the public by making the EDGAR
page of our Web site a more comprehensive resource for most information
on file with us related to the operation of investment companies.
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\18\ From time to time, an applicant may wish to submit an
application for exemption under both the Investment Company Act and
under the Investment Advisers Act [15 U.S.C. 80b-1 et seq.]. We are
not proposing to require that Investment Advisers Act submissions be
made on EDGAR. Under our proposal, any document that is intended as
an application for an order under both the Investment Company Act
and the Investment Advisers Act would need to be submitted
separately under each Act.
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As with other entities that make submissions on EDGAR, applicants
would be subject to the provisions of Regulation S-T \19\ and the EDGAR
Filer Manual. Regulation S-T includes detailed rules concerning
mandatory and permissive electronic EDGAR submissions; it also makes
clear that requests for confidential treatment must be made in paper
format.\20\ The regulation also covers such matters as providing for
the override of formatting requirements applicable to paper
submissions.\21\ The EDGAR Filer Manual contains detailed technical
specifications concerning EDGAR submissions. The Manual also provides
technical guidance concerning how to commence submissions on EDGAR by
submitting Form ID to obtain a CIK \22\ and confidential access codes
and how to maintain and update company data, e.g., how to change
company names and contact information.\23\
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\19\ For a comprehensive discussion of Regulation S-T and
electronic filing, see ``Electronic Filing and the EDGAR System: A
Regulatory Overview,'' available on the Commission's Web site.
\20\ See Rule 101 of Regulation S-T [17 CFR 232.101].
\21\ The paper formatting requirements continue to be applicable
to paper submissions made pursuant to temporary and continuing
hardship exemptions under Rules 201 and 202 of Regulation S-T [17
CFR 232.201 and 202].
\22\ A filer's CIK (or ``central index key'') is a ten-digit
number uniquely identifying that filer.
\23\ We remind filers that, in the case of name changes, the
changes must be made via the EDGAR filing Web site in advance; the
new name would be reflected in the next EDGAR submission. The name
on past submissions would not change. The CIK and file number(s) of
the company would provide a link to filings under the old name.
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One technical specification that the EDGAR Filer Manual includes is
the electronic ``submission type'' for each submission made on EDGAR.
We expect that the EDGAR electronic submission types for applications
would be designed to facilitate and expedite the review of these
applications.
Currently, the applications submitted in paper typically reference
the provisions of the Investment Company Act and of the rules and
regulations under which the application is made.\24\ Based on this
information, our filer support staff assign a paper ``submission type''
for our internal recordkeeping of the paper application on the EDGAR
system. We also disseminate this paper submission type, which indicates
that the paper application has been filed with us. The current paper
submission types for applications are the following: 40-APP, 40-6B, and
40-6C. We usually record paper applications under submission types 40-
APP or 40-6C, except for those submitted by employees' securities
companies, for which we use submission type 40-6B.
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\24\ See paragraph (e) of Investment Company Act Rule 0-2 [17
CFR 270.0-2].
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Consistent with our proposal, we expect that the EDGAR Filer Manual
and the EDGARLink software would provide for three EDGAR electronic
submission types for applications: 40-APP, 40-OIP, and 40-6B.
Submission type 40-APP would be used for submissions typically
processed by the Division's Office of Investment Company Regulation; a
new submission type 40-OIP would be used for submissions typically
processed by the Division's Office of Insurance Products. We also would
plan to use submission type 40-6B for employees' securities company
applications (also processed by the Office of Investment Company
Regulation), since we have historically kept records for these
applicants separately. We would discontinue use of the paper submission
type 40-6C; applications formerly recorded under this submission type
would be submitted as either 40-APP or 40-OIP, as appropriate.
We anticipate that the EDGAR Filer Manual would provide guidance
for applicants in choosing the correct submission type. Most
applications would be submitted under EDGAR submission type 40-APP, the
submission type designated for the Office of Investment Company
Regulation. But, the following categories of applications would be
transmitted under EDGAR submission type 40-OIP, the submission type for
the Office of Insurance Products:
(1) Applications with regard to mixed and shared funding filed
under Section 6(c) of the Investment Company Act, for exemptions
from the provisions of Sections 9(a), 13(a),
[[Page 63516]]
15(a) and 15(b) of the Investment Company Act,\25\ and Rules 6e-
2(b)(15) and 6e-3(T)(b)(15); \26\
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\25\ 15 U.S.C. 80a-9(a), 80a-13(a), 80a-15(a), 80a-15(b).
\26\ 17 CFR 270.6e-2(b)(15), 270.6e-3(T)(b)(15).
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(2) Applications relating to the recapture of bonus credits
filed under Section 6(c) of the Investment Company Act for
exemptions from the provisions of Sections 2(a)(32) and 27(i)(2)(A)
of the Investment Company Act \27\ and Rule 22c-1 \28\;
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\27\ 15 U.S.C. 80a-2(a)(32), 80a-27(i)(2)(A).
\28\ 17 CFR 270.22c-1.
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(3) Applications relating to the substitution of securities held
by a variable insurance separate account filed under Section 26(c)
of the Investment Company Act; \29\ and
---------------------------------------------------------------------------
\29\ 15 U.S.C. 80a-26(c).
---------------------------------------------------------------------------
(4) Applications for approval of the terms of an exchange offer
involving variable insurance contracts filed under Section 11(a) of
the Investment Company Act.\30\
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\30\ 15 U.S.C. 80a-11(a).
We believe that these three submission types would facilitate and
expedite the review of submissions. Our internal system will be able to
quickly route the application to the appropriate office. If applicants
have any questions as to the appropriate EDGAR submission type, we
would encourage them to verify in advance the correct submission type
so that the application can be routed automatically to the appropriate
Office. We would provide contact information in the EDGAR Filer Manual
and on the Commission's Web site so that, in case of doubt, applicants
may contact the staff.
We request comment on whether these EDGAR submission types would be
sufficient or whether other or additional submission types would be
helpful to applicants or the public in connection with the submission
of applications.
For applications with multiple co-applicants, the applicants would
be able to submit the application with all co-applicants included in
one submission. The applicants would choose one applicant to list first
as the ``primary'' co-applicant. Then, they would include in the EDGAR
template the information for all other co-applicants, i.e., the CIK of
each co-applicant and, for amendments, file number of each co-
applicant. Applicants could be dropped from or added to an application
with each amendment submission.\31\
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\31\ As is the case currently with paper applications, for each
application, an applicant would receive a unique file number which
would begin with the prefix ``812,'' or ``813'' in the case of
applications made by employees' securities companies. As also is
currently the case with paper filings, each co-applicant's file
number would be composed of the primary applicant's file number with
an appended two-digit suffix unique to that co-applicant. Each
applicant or co-applicant would include this file number, in
addition to its CIK, in the EDGAR template of all amendments to the
application, which would also be required electronic submissions.
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We expect that the internal EDGAR system would be enhanced to allow
for the upload and public dissemination via the EDGAR system of notices
and orders in connection with specific applications.
We request comment on the impact of our making the submission of
requests for orders under the Investment Company Act mandatory
electronic submissions. Should we implement this rule? We request
comment on whether it would be burdensome for us to require applicants
to submit applications electronically. To which applications should the
rule apply? We ask commenters to address the issue of what the
transition period should be for investment companies and other
applicants to prepare for the mandatory electronic submission of these
applications.
We ask commenters to provide detailed information on any
difficulties and considerations unique to these proposed requirements.
In the event commenters believe that any aspect of the proposed
requirements would be burdensome, we ask for specific details and
alternative approaches.
III. Proposed Amendments to Rule 0-2 and to Temporary Hardship
Exemption of Regulation S-T
Rule 0-2 currently requires that every application for an order for
which a form is not specifically prescribed and which is executed by a
corporation, partnership or other company and filed with the Commission
contain a statement of the applicable provisions of the articles of
incorporation, bylaws or similar documents, relating to the right of
the person signing and filing such application to take such action on
behalf of the applicant, and a statement that all such requirements
have been complied with and that the person signing and filing the
application is fully authorized to do so. If such authorization is
dependent on resolutions of stockholders, directors, or other bodies,
such resolutions must be attached as an exhibit to or quoted in the
application. Any amendment to the application must contain a similar
statement as to the applicability of the original statement of
authorization. When any application or amendment is signed by an agent
or attorney, Rule 0-2 requires that the power of attorney evidencing
his authority to sign shall state the basis for the agent's authority
and shall be filed with the Commission. Every application subject to
Rule 0-2 must be verified by the person executing the application by
providing a notarized signature in substantially the form specified in
the rule. Each application subject to Rule 0-2 must state the reasons
why the applicant is deemed to be entitled to the action requested, the
name and address of each applicant, and the name and address of any
person to whom any questions regarding the application should be
directed. Rule 0-2 requires that a proposed notice of the proceeding
initiated by the filing of the application accompany each application
as an exhibit and, if necessary, be modified to reflect any amendment
to the application.
We are proposing three amendments to Rule 0-2 governing the form of
applications under the Investment Company Act. First, we propose to
eliminate the requirement to have verifications of applications and
statements of facts made in connection with applications notarized.\32\
We believe that this requirement is unnecessary in the context of an
electronic filing.\33\ Second, we propose to eliminate the requirement
that applicants include draft notices as exhibits to applications.\34\
The staff has found these exhibits to be of limited value because the
staff prefers to draft its own notices of applications. Finally, we
also propose to amend Rule 0-2 to remove the last sentence of paragraph
(b),\35\ which was added in the initial EDGAR rulemaking and would be
inconsistent with mandatory electronic submission of applications on
EDGAR.\36\ We request comment on these proposed amendments. Is there
[[Page 63517]]
any reason we should retain the notary and draft notice requirements?
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\32\ See Rule 0-2(d).
\33\ Regulation S-T requires that each signatory to an
electronic filing manually sign a signature page or other document
authenticating, acknowledging or otherwise adopting his or her
signature that appears in typed form in the electronic filing. This
document must be executed before or at the time the electronic
filing is made, must be retained by the filer for a period of five
years, and must be made available to the Commission upon request.
See Rule 302(b) of Regulation S-T [17 CFR 232.302(b)]. We believe
that this requirement provides sufficient assurance of the
legitimacy of signatures contained in the electronic filings so that
notarization is unnecessary.
\34\ See Rule 0-2(g).
\35\ The last sentence of Rule 0-2(b) currently reads as
follows: ``Every application for an order under any provision of the
Act and every amendment to such application shall be submitted to
the Commission in paper only, whether or not the applicant is
otherwise required to file in electronic format, unless instructions
for electronic filing are included on the form, if any, prescribed
for such application.''
\36\ See Rulemaking for EDGAR System--Investment Companies and
Institutional Investment Managers, Release No. 33-6978 (Feb. 23,
1993) [58 FR 14848 (Mar. 18, 1993)].
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We are also proposing an amendment to Rule 201 of Regulation S-T.
Rules 201 and 202 \37\ of Regulation S-T address hardship exemptions
from EDGAR filing requirements, and Rule 13(b) of Regulation S-T \38\
addresses the related issue of filing date adjustments.
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\37\ 17 CFR 232.202.
\38\ 17 CFR 232.13(b).
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A filer may obtain a temporary hardship exemption under Rule 201 if
it experiences unanticipated technical difficulties that prevent the
timely preparation and submission of an electronic filing by filing a
properly legended paper copy \39\ of the filing under cover of Form
TH.\40\ This process is self-executing. A filer who files in paper
under the temporary hardship exemption must submit an electronic format
copy of the filed paper document within six business days of the filing
of the paper format document.\41\
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\39\ See 17 CFR 232.201(a).
\40\ 17 CFR 239.65, 249.447, 269.10,and 274.404.
\41\ See 17 CFR 232.201(b).
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A filer may apply for a continuing hardship exemption under Rule
202 if it cannot file all or part of a filing without undue burden or
expense.\42\ In contrast to the self-executing temporary hardship
exemption process, a filer can obtain a continuing hardship exemption
only by submitting a written application, upon which the Commission, or
Commission staff pursuant to delegated authority, must then act.
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\42\ See 17 CFR 232.202(a).
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We are proposing to make the temporary hardship exemption
unavailable for submission of applications under the Investment Company
Act.\43\ We are proposing to amend Rule 201(a) of Regulation S-T to
make temporary hardship exemptions unavailable for these submissions,
since there is generally no submission exigency or submission deadline
associated with these submissions. An applicant would continue to have
the ability to apply for a continuing hardship exemption under Rule 202
if it cannot submit all or part of an application without undue burden
or expense. Also, while we would expect the circumstances and exercise
to be rare, the staff could use its delegated authority to grant a
filing date adjustment pursuant to Rule 13(b) of Regulation S-T [17 CFR
232.13(b)]. While we would not expect an applicant to need a filing
date adjustment in the context of an application, it would be available
in the unlikely event it were needed. We ask for comment on making the
temporary hardship exemption unavailable for submission of applications
for orders under the Investment Company Act.
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\43\ See proposed amendment to rule 201(a) of Regulation S-T.
We have previously made unavailable the ability for filers to
use the temporary hardship exemption for EDGAR submissions of
beneficial ownership reports filed by officers, directors and
principal security holders under Section 16(a) of the Exchange Act
[15 U.S.C. 78p(a)]. See Mandated EDGAR Filing and Web site Posting
for Forms 3, 4 and 5, Release No. 33-8230 (May 7, 2003) [68 FR
25788].
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IV. Proposed Amendments To Mandate That Certain Filings of Small
Business Investment Companies and Business Development Companies Be
Made Electronically
Regulation E \44\ provides for the exemption from registration of
securities issued by small business investment companies registered
under the Investment Company Act and business development companies
regulated under that Act, subject to the terms and conditions of the
regulation. Rule 604 \45\ of Regulation E requires the filing of
notification on Form 1-E \46\ of sales of securities under Regulation
E. Rule 607 \47\ of Regulation E requires the filing of sales material
used in connection with the offering. Rule 609 \48\ of Regulation E
requires the filing of reports of sales on Form 2-E.\49\
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\44\ 17 CFR 230.601 to 610a.
\45\ 17 CFR 230.604.
\46\ 17 CFR 239.200.
\47\ 17 CFR 230.607.
\48\ 17 CFR 230.609.
\49\ 17 CFR 239.201.
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Currently, these companies must make most of their filings
electronically on the EDGAR system. However, they must make their
Regulation E \50\ filings in paper. Since these filers are already
EDGAR filers and most would have available electronic copies of their
Form 1-E (and any related sales material) \51\ and Form 2-E, we believe
that making these filings electronically on EDGAR would impose very
little burden or cost on these companies. We are therefore proposing to
make these filings mandatory electronic submissions.\52\ We request
comment on any burdens or costs that would result. Is there any reason
not to require that these submissions be made electronically on the
EDGAR system?
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\50\ 17 CFR 230.601 to 610a.
\51\ Requiring electronic filing on EDGAR of Rule 607 sales
literature would be consistent with the current requirement to file
electronically on EDGAR omitting prospectuses under Rule 482 of the
Securities Act of 1933 (``Securities Act'') (referred to as ``482
ads'') and sales literature under Section 24(b) of the Investment
Company Act.
\52\ See proposed amendments to paragraphs (a)(1)(v) and (c)(6)
of Rule 101 of Regulation S-T.
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V. General Request for Comment
You are invited to submit written comments relating to the rule
proposals set forth in this release. We request comment not only on the
specific issues we discuss in this release, but on any other approaches
or issues that we should consider in connection with the submission of
applications for orders and Regulation E filings on the EDGAR system.
We seek comment from any interested person, including those required to
file information with us on the EDGAR system, as well as investors,
disseminators of EDGAR data, EDGAR filing agents, and other members of
the public who have access to and use information from the EDGAR
system.
VI. Cost-Benefit Analysis
We are sensitive to the costs and burdens of our rules. The rules
we are proposing today would reflect the addition of applications under
the Investment Company Act as mandatory electronic submissions on
EDGAR. In addition, the proposals would amend Rule 0-2 and make
unavailable to applicants Regulation S-T's provision for temporary
hardship exemptions. In addition, the proposals would add Regulation E
filings to the list of those that must be filed electronically through
EDGAR.
A. Expected Benefits
We expect that the addition of applications under the Investment
Company Act as mandatory electronic submissions on EDGAR would result
in considerable benefits to the securities markets, investors, and
other members of the public, by expanding the accessibility of
information, and increasing the types of information, filed and made
available for public review through the EDGAR system. The primary goal
of the EDGAR system since its inception has been to facilitate the
rapid dissemination of financial and business information in connection
with filings, including filings by investment companies. The proposed
amendments would benefit investors, financial analysts and others by
increasing the efficiency of retrieving and disseminating these
applications. The mandated electronic transmission of these documents
would enable the public to access them more quickly and search them
more easily. Instead of having to come in person or through an agent to
the Commission's public reference room to conduct a search for a
particular submission that is in paper or microfiche, the public would
be able to find and review the application on any computer with an
Internet
[[Page 63518]]
connection by accessing the EDGAR system through the Commission's Web
site or through a third party Web site that links to EDGAR. The
proposals would benefit the public by making the EDGAR page of our Web
site a more comprehensive resource for most information on file with us
related to the operation of investment companies. A further benefit
would be to ensure that all applications are available to the public
free of charge on our Web site without the cost of paying a third party
for a copy.
Persons who may consider requesting a hearing on an application on
the basis of a notice would be able to more easily obtain the actual
application so that they could better understand the legal issues. We
believe this would be a significant improvement in the applications
process.
We also expect that applicants would benefit from the increased
efficiencies in the filing process for these submissions resulting from
the proposed amendments. By electronically transmitting these documents
directly to the Commission, applicants would avoid the uncertainties
and delays that can occur with the manual delivery of paper documents;
we believe that it would be a simpler and more efficient means to
submit applications. Applicants also would benefit from no longer
having to submit multiple copies of paper documents to the Commission.
Because the Commission's staff would be able to retrieve and
analyze information contained in these submissions more readily than
under our current paper system, mandated electronic submission of these
documents should facilitate the staff's retrieval and review of a
particular document. Applicants and investors should benefit from
increased efficiencies in the Commission's storage, retrieval, and
analysis of these submissions which would result from the proposed
amendments.
We believe the proposal to amend Rule 0-2 would benefit applicants.
Removing the notarization requirement would remove a requirement from
filers that is unnecessary, and removing the requirement to include a
draft notice as an exhibit will result in a cost-savings to applicants.
And, we believe that making unavailable to applicants Regulation S-T's
Rule 201 provision for temporary hardship exemptions would benefit
applicants because applicants would not bear the cost of both
submitting an application in paper and in electronic form as a
confirming copy within 6 business days as required by the temporary
hardship exemption rule. This is true in light of the fact that there
is no deadline for the submission of an application.
We also expect that the addition of Regulation E filings as
mandatory electronic submissions on EDGAR would result in benefits to
the securities markets, investors, and other members of the public, by
expanding the accessibility of information, and increasing the types of
information, filed and made available for public review through the
EDGAR system. Requiring these Regulation E filings to be submitted on
EDGAR would benefit members of the investing public and the financial
community by making information contained in these Commission filings
more easily searchable and readily available to them. The proposals
would result in the benefit to the public of the EDGAR page of our Web
site being a comprehensive source from which to find filings of small
business investment companies and business development companies.
We also expect that Regulation E filers would benefit from the
increased efficiencies in the filing process for these submissions
resulting from the proposed amendments. By electronically transmitting
these documents directly to the Commission, these filers would avoid
the uncertainties and delays that can occur with the manual delivery of
paper documents; we believe that it would be a simpler and more
efficient means to submit these Regulation E filings. Regulation E
filers also would benefit from no longer having to submit multiple
copies of paper documents to the Commission.
The proposed amendments would benefit investors, financial analysts
and others by increasing the efficiency of retrieving and disseminating
these filings. The mandated electronic transmission of these documents
would enable the public to access them more quickly. Instead of having
to come in person or through an agent to the Commission's public
reference room to conduct a search for a particular submission that is
in paper or microfiche, the public would be able to find and review the
filing on any computer with an Internet connection by accessing the
EDGAR system through the Commission's Web site or through a third party
Web site that links to EDGAR. The proposed amendments would also enable
financial analysts and others to retrieve, analyze and disseminate more
rapidly this information.
An investor would be able to more efficiently gather information of
interest about Regulation E filers. Also, Regulation E filers and
investors should benefit from increased efficiencies in the
Commission's storage, retrieval, and analysis of these submissions
which would result from the proposed amendments. Mandated EDGAR
submission of these documents would result in their addition to the
Commission's central electronic repository of filings that is free to
anyone who has access to a computer linked to the Internet. Because the
Commission's staff would be able to retrieve and analyze information
contained in these Regulation E submissions more readily than under our
current paper system, mandated electronic submission of these documents
should facilitate the staff's retrieval and review of a particular
document.
In the Paperwork Reduction Act section, we estimate that, if the
proposed amendments are adopted, the total reduction in the burden
would be approximately $52,550.
B. Expected Costs
We expect that, if adopted, the proposed amendments would result in
some initial and ongoing costs to applicants. We also expect, however,
that many applicants would not bear the full range of costs that would
result from the amendments for the reasons described below. Initial
costs are those associated with filing a Form ID in order to obtain the
access codes needed to submit an application electronically and
otherwise preparing to make an application submission.\53\ In order to
file a Form ID, an applicant would need to learn the related electronic
filing requirements, obtain access to a computer and the Internet, use
the computer to access the Commission's EDGAR Filer Management Web
site, respond to Form ID's information requirements and fax to the
Commission a notarized authenticating document.
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\53\ Applicants that already have EDGAR access codes would not
need to file a Form ID. As further discussed in Part IX, however, we
assume that a small number of applicants per year would not already
have the codes.
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Ongoing costs are those associated with maintaining the framework
developed through the initial costs (for example, updating information
required by Form ID) and additional costs arising from each subsequent
submission of an application.
We expect that the vast majority of applicants would need to incur
few, if any, additional costs related to obtaining computer and
Internet access. We believe that the vast majority of
[[Page 63519]]
applicants already would have access to a computer and the
Internet.\54\
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\54\ An applicant that did not already own a computer with
Internet access could, for example, go to a public library to use
its computer and obtain Internet access.
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We expect no additional costs to applicants from our proposal to
amend Rule 0-2. We request comment on whether our proposed amendments
to Rule 0-2 to remove the current requirements for notarization of the
application and provision of a draft notice as an exhibit would result
in any additional costs. We expect no additional costs to applicants
from our proposal to make unavailable to applicants Regulation S-T's
Rule 201 provision for temporary hardship exemption. An applicant would
still be able to request a continuing hardship exemption under
Regulation S-T Rule 202 under appropriate circumstances.
We believe that mandatory EDGAR submission of Regulation E filings
would result in minimal cost to these filers. For the following
reasons, we also expect that Regulation E filers would not bear the
full range of costs frequently associated with new electronic filing
requirements. Initial costs are those associated with the purchase of
compatible computer equipment and software, including EDGAR software if
obtained from a third-party vendor and not from the Commission's Web
site. Initial costs also include those resulting from the training of
existing employees to be EDGAR proficient or the hiring of additional
employees or agents that are already skilled in EDGAR processing.
Initial costs further include those associated with the formatting and
transmission of an applicant's first document submitted on EDGAR. These
transmission costs may include those related to subscribing to an
Internet service provider. Regulation E filers already file on EDGAR
and would have minimal or no initial costs.
Ongoing costs are those associated with the electronic formatting
and transmission of subsequent EDGAR filings. Regulation E filers may
also incur future costs resulting from the training or hiring of
employees regarding updated EDGAR filing requirements. The magnitude of
these costs would depend on the filers' levels of technological
proficiency and their previous familiarity with EDGAR filing
requirements. Regulation E filers would incur the ongoing costs
associated with formatting and transmitting their subsequent EDGAR
filings. Consequently, the mandated EDGAR requirements should result
only in costs related primarily to the electronic formatting of these
documents in a format compatible with EDGAR, and transmission of the
EDGAR formatted documents to the Commission. In any event, we believe
that any costs for transmission, formatting, and education would be
comparable to savings from not having to incur similar costs related to
paper submissions.
C. Comment Solicited
We solicit comment on the costs and benefits of the proposed
amendments. We request your views on the costs and benefits described
above as well as on any other costs and benefits that could result from
adoption of these proposals. Please identify any costs or benefits
associated with the rule proposal for the mandatory electronic
submission of applications (and related proposed amendments to
Investment Company Act Rule 0-2 and Rule 201 of Regulation S-T) and
Regulation E filings and any impact that the rule proposals may have on
the ease of locating and using EDGAR data. How much, if any, expense
would be avoided with the removal of the notary and draft notice
requirements? What are the benefits that investors, financial analysts,
other members of the financial community, applicants, and small
business investment company and business development company Regulation
E filers should realize from these proposals? Would the proposed
amendments help an investor to gather information about an applicant
and its operations? What are the likely expected initial and ongoing
costs of these added categories of mandated EDGAR submissions? Are
there costs in addition to those discussed above? Are there
unidentified costs associated with any of the proposed amendments and,
if so, what are they?
We encourage commenters to identify any costs or benefits
associated with the rule proposals. We also request data to quantify
the costs and the benefits identified.
VII. Burden on Competition; Promotion of Efficiency, Competition, and
Capital Formation
Section 23(a)(2) of the Exchange Act requires us, in adopting rules
under the Exchange Act, to consider the anti-competitive effects of any
rules that we adopt thereunder. Furthermore, Section 2(b) of the
Securities Act,\55\ Section 3(f) of the Exchange Act,\56\ and Section
2(c) \57\ of the Investment Company Act require us, when engaging in
rulemaking, and considering or determining whether an action is
necessary or appropriate in the public interest, to consider whether
the action would promote efficiency, competition, and capital
formation. In compliance with our responsibilities under these
sections, we request comment on whether the proposals, if adopted,
would burden competition and whether they would promote efficiency,
competition, and capital formation. We encourage commenters to provide
empirical data or other facts to support their views.
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\55\ 15 U.S.C. 77b(b).
\56\ 15 U.S.C. 78c(f).
\57\ 15 U.S.C. 80a-2(c).
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The proposed amendments regarding mandated electronic filing of
applications and the related amendments to Rule 0-2 and Regulation S-
T's Rule 201 are intended to simplify the requirements for submitting
applications and facilitate more efficient transmission, analysis,
storage and retrieval of information. This should improve the
accessibility and usefulness of information available to all applicants
and the public, including those wishing to request a hearing on an
application. It may make the investment products offered by applicants
more competitive, since all applicants would have ready access to the
applications of others. The proposed rules would also improve the
accessibility of information available to the public about the
operation of investment companies and improve investors' ability to
make informed investment decisions. We believe the proposed amendments
would not impose a burden on competition and would not have an adverse
impact on capital formation. The proposed amendments regarding mandated
electronic filings under Regulation E by small business investment
companies and business development companies are intended to facilitate
more efficient transmission, analysis, storage and retrieval of
information. This should improve the accessibility and usefulness of
information available for use by filers, investors, and the public. It
may make the investment products offered by filers more competitive,
since all filers would have immediate online access to Regulation E
filings of their competitors. We believe that the proposed rules would
also improve the accessibility of information available to the public
about the operation of small business investment companies and business
development companies and thereby improve investors' ability to make
informed investment decisions. We believe the proposed amendments would
not impose a burden on
[[Page 63520]]
competition and would not have an adverse impact on capital formation.
We request comment on the impact the proposed rule would have on
efficiency, competition and capital formation. We request comment on
whether the proposed amendments, if adopted, would impose a burden on
competition and whether they would promote efficiency, competition, and
capital formation. We also request commenters to provide empirical data
and other factual support for their views if possible.
VIII. Initial Regulatory Flexibility Act Analysis
This Initial Regulatory Flexibility Act Analysis (Analysis) has
been prepared in accordance with 5 U.S.C. 603. It relates to our
proposed amendments to add applications for orders under the Investment
Company Act to the list of submissions that must be made
electronically, including proposals to amend Rule 0-2 and make
unavailable to applicants the provision for temporary hardship
exemptions in Rule 201 of Regulation S-T, and to add Regulation E
filings to the list of those that must be filed electronically through
EDGAR.
A. Reasons for, and Objectives of, Proposed Amendments
The proposals would require applications for orders under any
section of the Investment Company Act to be submitted electronically on
EDGAR. The proposed amendments to Rule 0-2 would remove the
requirements for notarization and provision of a draft notice, and the
proposed amendments to Rule 201 of Regulation S-T would make
applications ineligible for temporary hardship exemptions. We make
these proposals because the absence of an electronic system for
submitting applications for orders limits the usefulness of the
information collected.
The proposals would add Regulation E filings made by small business
investment companies and business development companies to the list of
those that must be filed electronically through EDGAR. We also make
this proposal because the absence of an electronic system for
submitting Regulation E filings limits the usefulness of the
information collected.
B. Legal Basis
We are proposing amendments to Rules 101, and 201 of Regulation S-T
and Rule 0-2 under the Investment Company Act pursuant to authority set
forth in Sections 6, 7, 8, 10 and 19(a) of the Securities Act [15
U.S.C. 77f, 77g, 77h, 77j, and 77s(a)], Sections 3, 12, 13, 14, 15(d),
23(a) and 35A of the Exchange Act [15 U.S.C. 78c, 78l, 78m, 78n,
78o(d), 78w(a), and 78ll], and Sections 8, 30, 31 and 38 of the
Investment Company Act [15 U.S.C. 80a-8, 80a-29, 80a-30, and 80a-37].
C. Small Entities Subject to the Rule
For purposes of the Regulatory Flexibility Act, an investment
company is a small entity if it, together with other investment
companies in the same group of related investment companies, has net
assets of $50 million or less as of the end of its most recent fiscal
year.\58\ Approximately 164 registered investment companies meet this
definition.\59\ Approximately 51 business development companies may be
considered small entities.\60\ We estimate that few, if any, separate
accounts registered on Form N-3, N-4, or N-6 are small entities.\61\
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\58\ Rule 0-10(a) under the Investment Company Act [17 CFR
240.0-10(a)].
\59\ The estimated number of reporting investment companies that
may be considered small entities is based on December 2006 data from
the Commission's EDGAR database and a third-party data provider.
\60\ This estimate is based on analysis by the Division of
Investment Management staff of information from databases compiled
by third-party information providers, including Morningstar, Inc.
and Lipper Inc.
\61\ This estimate is based on figures compiled by the Division
of Investment Management staff regarding separate accounts
registered on Forms N-3, N-4, and N-6. In determining whether an
insurance company separate account is a small entity for purposes of
the Regulatory Flexibility Act, the assets of insurance company
separate accounts are aggregated with the assets of their sponsoring
insurance companies. Rule 0-10(b) under the Investment Company Act
[17 CFR 270.0-10(b)].
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D. Reporting, Recordkeeping, and Other Compliance Requirements
The proposed amendments would require applicants to submit requests
for orders and small business investment companies and business
development companies to submit Regulation E filings electronically on
the EDGAR system. The Commission estimates some one-time formatting and
ongoing burdens that would be imposed on all applicants and Regulation
E filers, including those that are small entities. We note, however,
that all Regulation E filers and many applicants currently make other
filings on EDGAR. Furthermore, we believe that non-investment company
applicants would have no greater burden than that of those filers of
Section 16 reports or Schedules 13D and 13G \62\ who would not
otherwise make EDGAR filings and that the electronic submission should
create only a de minimis burden.
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\62\ 17 CFR 240.13d-101 and 13d-102.
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There would be no change in reporting or recordkeeping
requirements. The proposed amendments to Rule 0-2 would reduce
compliance requirements to the extent that they would remove the
requirements for notarization of the application and provision of a
draft notice with the application.
We solicit comment on the effect the proposed amendments would have
on small entities.
E. Duplicative, Overlapping or Conflicting Federal Rules
The Commission believes that there are no rules that duplicate,
overlap, or conflict with the proposed amendments.
F. Significant Alternatives
The Regulatory Flexibility Act directs us to consider significant
alternatives that would accomplish our stated objectives, while
minimizing any significant adverse impact on small entities. In
connection with the proposed amendments, the Commission considered the
following alternatives: (i) The establishment of differing compliance
or reporting requirements or timetables that take into account the
resources available to small entities; (ii) the clarification,
consolidation, or simplification of compliance and reporting
requirements under the proposed amendments for small entities; (iii)
the use of performance rather than design standards; and (iv) an
exemption from coverage of the proposed amendments, or any part
thereof, for small entities.
The Commission believes at the present time that special compliance
or reporting requirements for small entities, or an exemption from
coverage for small entities, would not be appropriate or consistent
with investor protection. Different requirements for applicants or
Regulation E filers that are small entities could make it more
difficult for the public to locate Commission filings and disclosure
documents for these applicants. We believe it is important that the
benefits resulting from the proposal be provided to the public for all
applications and Regulation E filings, not just the ones from those
that are not considered small entities.
We have endeavored throughout the proposed amendments to minimize
the regulatory burden on all applicants and Regulation E filers,
including small entities, while meeting our regulatory objectives.
Small entities should benefit from the Commission's reasoned approach
to the proposed amendments
[[Page 63521]]
to the same degree as others. The Commission preliminarily believes
that further clarification, consolidation, or simplification of the
proposals for those that are small entities would be inconsistent with
the Commission's concern for investor protection. Further
clarification, consolidation, or simplification of the proposals for
those that are small entities would result in less information
available for them. Similarly, we preliminarily conclude that using
performance rather than design standards would not be consistent with
our statutory mandate of investor protection. We believe that the
standard provided in the proposal (EDGAR filing) is already
sufficiently clear and appropriately simple. A major goal of making
these mandatory EDGAR submissions is a more complete and searchable
EDGAR database of filings; we do not believe that there is a comparable
performance standard that would achieve this goal.
G. Solicitation of Comments
The Commission encourages the submission of written comments with
respect to any aspect of this analysis. Comment is specifically
requested on the number of small entities that would be affected by the
proposed amendments and the likely impact of the proposals on small
entities. Commenters are asked to describe the nature of any impact and
provide empirical data supporting the extent of the impact. These
comments will be considered in the preparation of the Final Regulatory
Flexibility Act Analysis if the proposed rule amendments are adopted,
and will be placed in the same public file as comments on the proposal.
IX. Paperwork Reduction Act
The proposed rule amendments contain ``collection of information''
requirements within the meaning of the Paperwork Reduction Act of 1995
(``PRA'').\63\ We are submitting the proposed collection of information
to the Office of Management and Budget (``OMB'') for review in
accordance with 44 U.S.C. 3507(d) and 5 CFR 1320.11. 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.
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\63\ 44 U.S.C. 3501 et seq.
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A. Rule 0-2
The title for the collection of information is ``General
Requirements of Papers and Applications.'' \64\ Provision of
information under the rule is necessary to obtain a benefit. The
information is not kept confidential. Respondents to the collection are
applying for orders of the Commission under the Investment Company Act.
Applicants for orders under the Investment Company Act can include
registered investment companies, affiliated persons of registered
investment companies, and issuers seeking to avoid investment company
status, among other entities.\65\ The Commission uses the information
required by rule 0-2 to decide whether the applicant should be deemed
to be entitled to the action requested by the application. The proposed
amendments to rule 0-2 would eliminate the requirement to have
verifications of applications and statements of facts made in
connection with applications notarized \66\ and would eliminate the
requirement that applicants include draft notices as exhibits to
applications.\67\
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\64\ Rule 0-2 is a collection of information currently in use
without a control number. We are submitting the rule to OMB for
approval under the PRA.
\65\ There are several sections of the Investment Company Act
pursuant to which entities may make applications for relief. Section
6(c) provides the Commission with authority to exempt persons,
securities or transactions from any provision of the Investment
Company Act, or the regulations thereunder, if and to the extent
that such exemption is in the public interest and consistent with
the protection of investors and the purposes fairly intended by the
policy and provisions of the Investment Company Act.
\66\ See Rule 0-2(d).
\67\ See Rule 0-2(g).
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Burden Estimate for Rule 0-2
Applicants file applications as they deem necessary. The Commission
receives approximately 125 applications per year under the Investment
Company Act of 1940. Although each application typically is submitted
on behalf of multiple entities, the entities in the vast majority of
cases are related companies and are treated as a single applicant for
purposes of this analysis.
Much of the work of preparing an application is performed by
outside counsel. The cost outside counsel charges applicants depends on
the complexity of the issues covered by the application and the time
required for preparation. Based on conversations with applicants and
attorneys, the cost ranges from approximately $7,000 for preparing a
well-precedented, routine application to approximately $80,000 to
prepare a complex and/or novel application. We estimate that the
Commission receives 20 of the most time-consuming applications
annually, 80 applications of medium difficulty, and 25 of the least
difficult applications. This distribution gives a total estimated
annual cost burden to applicants of filing all applications of
$5,255,000 [(20 x $80,000) + (80 x $43,500) + (25 x $7,000)].
In addition, based on conversations with applicants, we estimate
that in-house counsel would spend from ten to fifty hours helping to
draft and review an application. We estimate a total annual hour burden
to all respondents of 3,650 hours (50 hours x 20 applications) + (30
hours x 80 applications) + (10 hours x 25 applications). We are
proposing to decrease the burden associated with the existing
collection of information for Rule 0-2 to reflect the proposed
amendments. The proposed amendments to Rule 0-2 would, if adopted,
eliminate the requirement to have verifications of applications and
statements of facts made in connection with applications notarized. The
notary service would be provided by a secretary or similar
administrative employee of the applicant or the outside counsel
preparing the application and would represent a negligible cost or hour
burden to the applicant, so elimination of the notarization requirement
would not be likely to decrease the burden measurably.
The proposed amendm
