Proposed Collection; Comment Request, 15006-15007 [2011-6364]

Download as PDF Emcdonald on DSK2BSOYB1PROD with NOTICES 15006 Federal Register / Vol. 76, No. 53 / Friday, March 18, 2011 / Notices governs the custody of the assets of registered management investment companies (‘‘funds’’) with custodians outside the United States.1 Under Rule 17f–5, the fund’s board of directors must find that it is reasonable to rely on each delegate it selects to act as the fund’s foreign custody manager. The delegate must agree to provide written reports that notify the board when the fund’s assets are placed with a foreign custodian and when any material change occurs in the fund’s custody arrangements. The delegate must agree to exercise reasonable care, prudence, and diligence, or to adhere to a higher standard of care. When the foreign custody manager selects an eligible foreign custodian, it must determine that the fund’s assets will be subject to reasonable care if maintained with that custodian, and that the written contract that governs each custody arrangement will provide reasonable care for fund assets. The contract must contain certain specified provisions or others that provide at least equivalent care. The foreign custody manager must establish a system to monitor the performance of the contract and the appropriateness of continuing to maintain assets with the eligible foreign custodian. The collection of information requirements in rule 17f–5 are intended to provide protection for fund assets maintained with a foreign bank custodian whose use is not authorized by statutory provisions that govern fund custody arrangements,2 and that is not subject to regulation and examination by U.S. regulators. The requirement that the fund board determine that it is reasonable to rely on each delegate is intended to ensure that the board carefully considers each delegate’s qualifications to perform its responsibilities. The requirement that the delegate provide written reports to the board is intended to ensure that the delegate notifies the board of important developments concerning custody arrangements so that the board may exercise effective oversight. The requirement that the delegate agree to exercise reasonable care is intended to provide assurances to the fund that the delegate will properly perform its duties. The requirements that the foreign custody manager determine that fund assets will be subject to reasonable care with the eligible foreign custodian and 1 17 CFR 270.17f–5. All references to rules 17f– 5, 17f–7, 17d–1, or 19b–1 in this notice are to 17 CFR 270.17f–5, 17 CFR 270.17f–7, 17 CFR 270.17d– 1, and 17 CFR 270.19b–1, respectively. 2 See section 17(f) of the Investment Company Act (15 U.S.C. 80a–17(f)). VerDate Mar<15>2010 18:30 Mar 17, 2011 Jkt 223001 under the custody contract, and that each contract contain specified provisions or equivalent provisions, are intended to ensure that the delegate has evaluated the level of care provided by the custodian, that it weighs the adequacy of contractual provisions, and that fund assets are protected by minimal contractual safeguards. The requirement that the foreign custody manager establish a monitoring system is intended to ensure that the manager periodically reviews each custody arrangement and takes appropriate action if developing custody risks may threaten fund assets. Commission staff estimates that each year, approximately 135 registrants 3 could be required to make an average of one response per registrant under rule 17f–5, requiring approximately 2.5 hours of board of director time per response, to make the necessary findings concerning foreign custody managers. The total annual burden associated with these requirements of the rule is up to approximately 337.5 hours (135 registrants × 2.5 hours per registrant). The staff further estimates that during each year, approximately 15 global custodians 4 are required to make an average of 4 responses per custodian concerning the use of foreign custodians other than depositories. The staff estimates that each response will take approximately 270 hours, requiring approximately 1,080 total hours annually per custodian. The total annual burden associated with these requirements of the rule is approximately 16,200 hours (15 global custodians × 1,080 hours per custodian). Therefore, the total annual burden of all collection of information requirements of rule 17f–5 is estimated to be up to 16,537.5 hours (337.5 + 16,200). The total annual cost of burden hours is estimated to be $4,914,000 (337.5 hours × $4,000/hour for board of director’s time, plus 16,200 hours × $220/hour for a trust administrator’s time).5 Compliance with the collection of information requirements of the rule is necessary to obtain the benefit of relying on the rule’s permission for funds to 3 This figure is an estimate of the number of new funds each year, based on data reported by funds in 2010 on Form N–1A and Form N–2. In practice, not all funds will use foreign custody managers, and the actual figure may be smaller. 4 This estimate is based on staff research. 5 The board hourly rate is based on fund industry representations. The $220/hour figure for a trust administrator is from SIFMA’s Management & Professional Earnings in the Securities Industry 2010, modified to account for an 1,800-hour workyear and multiplied by 5.35 to account for bonuses, firm size, employee benefits and overhead. PO 00000 Frm 00113 Fmt 4703 Sfmt 4703 maintain their assets in foreign custodians. The estimate of average burden hours is made solely for the purposes of the Paperwork Reduction Act. The estimate is not derived from a comprehensive or even a representative survey or study of the costs of Commission rules and forms. Written comments are invited on: (a) Whether the collection of information is necessary for the proper performance of the functions of the Commission, including whether the information has practical utility; (b) the accuracy of the Commission’s estimate of the burden of the collection of information; (c) ways to enhance the quality, utility, and clarity of the information collected; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology. Consideration will be given to comments and suggestions submitted in writing within 60 days of this publication. Please direct your written comments to Thomas Bayer, Chief Information Officer, Securities and Exchange Commission, C/O Remi Pavlik-Simon, 6432 General Green Way, Alexandria, VA 22312; or send an e-mail to: PRA_Mailbox@sec.gov. Dated: March 15, 2011. Cathy H. Ahn, Deputy Secretary. [FR Doc. 2011–6365 Filed 3–17–11; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION Proposed Collection; Comment Request Upon Written Request, Copies Available From: Securities and Exchange Commission, Office of Investor Education and Advocacy, Washington, DC 20549–0213. Extension: Rule 17f–7; SEC File No. 270–470; OMB Control No. 3235–0529. Notice is hereby given that, pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501–3520), the Securities and Exchange Commission (‘‘Commission’’) is soliciting comments on the collections of information summarized below. The Commission plans to submit these existing collections of information to the Office of Management and Budget (‘‘OMB’’) for extension and approval. Rule 17f–7 (17 CFR 270.17f–7) permits funds to maintain their assets in E:\FR\FM\18MRN1.SGM 18MRN1 Emcdonald on DSK2BSOYB1PROD with NOTICES Federal Register / Vol. 76, No. 53 / Friday, March 18, 2011 / Notices foreign securities depositories based on conditions that reflect the operations and role of these depositories.1 Rule 17f–7 contains some ‘‘collection of information’’ requirements. An eligible securities depository has to meet minimum standards for a depository. The fund or its investment adviser generally determines whether the depository complies with those requirements based on information provided by the fund’s primary custodian (a bank that acts as global custodian). The depository custody arrangement has to meet certain risk limiting requirements. The fund can obtain indemnification or insurance arrangements that adequately protect the fund against custody risks. The fund or its investment adviser generally determines whether indemnification or insurance provisions are adequate. If the fund does not rely on indemnification or insurance, the fund’s contract with its primary custodian is required to state that the custodian will provide to the fund or its investment adviser a custody risk analysis of each depository, monitor risks on a continuous basis, and promptly notify the fund or its adviser of material changes in risks. The primary custodian and other custodians also are required to agree to exercise reasonable care. The collection of information requirements in rule 17f–7 are intended to provide workable standards that protect funds from the risks of using securities depositories while assigning appropriate responsibilities to the fund’s primary custodian and investment adviser based on their capabilities. The requirement that the depository meet specified minimum standards is intended to ensure that the depository is subject to basic safeguards deemed appropriate for all depositories. The requirement that the custody contract state that the fund’s primary custodian will provide an analysis of the custody risks of depository arrangements, monitor the risks, and report on material changes is intended to provide essential information about custody risks to the fund’s investment adviser as necessary for it to approve the continued use of the depository. The requirement that the primary custodian agree to exercise reasonable care is intended to provide assurances that its services and the information it provides will meet an appropriate standard of care. The alternative requirement that the funds obtain adequate 1 Custody of Investment Company Assets Outside the United States, Investment Company Act Release No. IC–23815 (April 29, 1999) (64 FR 24489 (May 6, 1999)). VerDate Mar<15>2010 18:30 Mar 17, 2011 Jkt 223001 indemnification or insurance against the custody risks of depository arrangements is intended to provide another, potentially less burdensome means to protect assets held in depository arrangements. The staff estimates that each of approximately 836 investment advisers 2 will make an average of 8 responses annually under the rule to address depository compliance with minimum requirements, any indemnification or insurance arrangements, and reviews of risk analyses or notifications. The staff estimates each response will take 6 hours, requiring a total of approximately 48 hours for each adviser. The total annual burden associated with these requirements of the rule will be approximately 40,128 hours (836 advisers × 48 hours per adviser). The staff further estimates that during each year, each of approximately 15 global custodians will make an average of 4 responses to analyze custody risks and provide notice of any material changes to custody risk under the rule. The staff estimates that each response will take 260 hours, requiring approximately 1040 hours annually per custodian.3 The total annual burden associated with these requirements is approximately 15,600 hours (15 custodians × 1040 hours). Therefore, the staff estimates that the total annual burden associated with all collection of information requirements of the rule is 55,728 hours (40,128 + 15,600). The total annual cost of burden hours is estimated to be $14,948,736 (40,128 × $287 for a portfolio manager, plus 15,600 hours × $220/hour for a trust administrator’s time).4 The estimate of average burden hours is made solely for the purposes of the Paperwork Reduction Act. The estimate is not derived from a comprehensive or even a representative survey or study of the costs of Commission rules and forms. Compliance with the collection of information requirements of the rule is necessary to obtain the benefit of relying on the rule’s permission for funds to maintain their assets in foreign custodians. Written comments are invited on: (a) Whether the collection of information is necessary for the proper performance of the functions of the Commission, 2 At the start of 2011, 836 investment advisers managed or sponsored open-end (including ETFs) portfolios and closed-end registered funds. 3 These estimates are based on conversations with representatives of the fund industry. 4 The salaries for a portfolio manager and a trust administrator are from SIFMA’s Management & Professional Earnings in the Securities Industry 2010, modified to account for an 1800-hour workyear and multiplied by 5.35 to account for bonuses, firm size, employee benefits and overhead. PO 00000 Frm 00114 Fmt 4703 Sfmt 4703 15007 including whether the information has practical utility; (b) the accuracy of the Commission’s estimate of the burden of the collection of information; (c) ways to enhance the quality, utility, and clarity of the information collected; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology. Consideration will be given to comments and suggestions submitted in writing within 60 days of this publication. Please direct your written comments to Thomas Bayer, Chief Information Officer, Securities and Exchange Commission, c/o Remi Pavlik-Simon, 6432 General Green Way, Alexandria, VA 22312; or send an e-mail to: PRA_Mailbox@sec.gov. Dated: March 15, 2011. Cathy H. Ahn, Deputy Secretary. [FR Doc. 2011–6364 Filed 3–17–11; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION Proposed Collection; Comment Request Upon Written Request, Copies Available From: Securities and Exchange Commission, Office of Investor Education and Advocacy, Washington, DC 20549–0213. Extension: Form N–17D–1; SEC File No. 270– 231; OMB Control No. 3235–0229. Notice is hereby given that, pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501–3520), the Securities and Exchange Commission (‘‘Commission’’) is soliciting comments on the collections of information summarized below. The Commission plans to submit these existing collections of information to the Office of Management and Budget (‘‘OMB’’) for extension and approval. Section 17(d) (15 U.S.C. 80a–17(d)) of the Investment Company Act of 1940 (‘‘Act’’) authorizes the Commission to adopt rules that protect funds and their security holders from overreaching by affiliated persons when the fund and the affiliated person participate in any joint enterprise or other joint arrangement or profit-sharing plan. Rule 17d–1 under the Act (17 CFR 270.17d–1) prohibits funds and their affiliated persons from participating in a joint enterprise, unless an application regarding the transaction has been filed with and approved by the E:\FR\FM\18MRN1.SGM 18MRN1

Agencies

[Federal Register Volume 76, Number 53 (Friday, March 18, 2011)]
[Notices]
[Pages 15006-15007]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-6364]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION


Proposed Collection; Comment Request

Upon Written Request, Copies Available From: Securities and Exchange 
Commission, Office of Investor Education and Advocacy, Washington, DC 
20549-0213.

Extension:
    Rule 17f-7; SEC File No. 270-470; OMB Control No. 3235-0529.

    Notice is hereby given that, pursuant to the Paperwork Reduction 
Act of 1995 (44 U.S.C. 3501-3520), the Securities and Exchange 
Commission (``Commission'') is soliciting comments on the collections 
of information summarized below. The Commission plans to submit these 
existing collections of information to the Office of Management and 
Budget (``OMB'') for extension and approval.
    Rule 17f-7 (17 CFR 270.17f-7) permits funds to maintain their 
assets in

[[Page 15007]]

foreign securities depositories based on conditions that reflect the 
operations and role of these depositories.\1\ Rule 17f-7 contains some 
``collection of information'' requirements. An eligible securities 
depository has to meet minimum standards for a depository. The fund or 
its investment adviser generally determines whether the depository 
complies with those requirements based on information provided by the 
fund's primary custodian (a bank that acts as global custodian). The 
depository custody arrangement has to meet certain risk limiting 
requirements. The fund can obtain indemnification or insurance 
arrangements that adequately protect the fund against custody risks. 
The fund or its investment adviser generally determines whether 
indemnification or insurance provisions are adequate. If the fund does 
not rely on indemnification or insurance, the fund's contract with its 
primary custodian is required to state that the custodian will provide 
to the fund or its investment adviser a custody risk analysis of each 
depository, monitor risks on a continuous basis, and promptly notify 
the fund or its adviser of material changes in risks. The primary 
custodian and other custodians also are required to agree to exercise 
reasonable care.
---------------------------------------------------------------------------

    \1\ Custody of Investment Company Assets Outside the United 
States, Investment Company Act Release No. IC-23815 (April 29, 1999) 
(64 FR 24489 (May 6, 1999)).
---------------------------------------------------------------------------

    The collection of information requirements in rule 17f-7 are 
intended to provide workable standards that protect funds from the 
risks of using securities depositories while assigning appropriate 
responsibilities to the fund's primary custodian and investment adviser 
based on their capabilities. The requirement that the depository meet 
specified minimum standards is intended to ensure that the depository 
is subject to basic safeguards deemed appropriate for all depositories. 
The requirement that the custody contract state that the fund's primary 
custodian will provide an analysis of the custody risks of depository 
arrangements, monitor the risks, and report on material changes is 
intended to provide essential information about custody risks to the 
fund's investment adviser as necessary for it to approve the continued 
use of the depository. The requirement that the primary custodian agree 
to exercise reasonable care is intended to provide assurances that its 
services and the information it provides will meet an appropriate 
standard of care. The alternative requirement that the funds obtain 
adequate indemnification or insurance against the custody risks of 
depository arrangements is intended to provide another, potentially 
less burdensome means to protect assets held in depository 
arrangements.
    The staff estimates that each of approximately 836 investment 
advisers \2\ will make an average of 8 responses annually under the 
rule to address depository compliance with minimum requirements, any 
indemnification or insurance arrangements, and reviews of risk analyses 
or notifications. The staff estimates each response will take 6 hours, 
requiring a total of approximately 48 hours for each adviser. The total 
annual burden associated with these requirements of the rule will be 
approximately 40,128 hours (836 advisers x 48 hours per adviser). The 
staff further estimates that during each year, each of approximately 15 
global custodians will make an average of 4 responses to analyze 
custody risks and provide notice of any material changes to custody 
risk under the rule. The staff estimates that each response will take 
260 hours, requiring approximately 1040 hours annually per 
custodian.\3\ The total annual burden associated with these 
requirements is approximately 15,600 hours (15 custodians x 1040 
hours). Therefore, the staff estimates that the total annual burden 
associated with all collection of information requirements of the rule 
is 55,728 hours (40,128 + 15,600). The total annual cost of burden 
hours is estimated to be $14,948,736 (40,128 x $287 for a portfolio 
manager, plus 15,600 hours x $220/hour for a trust administrator's 
time).\4\ The estimate of average burden hours is made solely for the 
purposes of the Paperwork Reduction Act. The estimate is not derived 
from a comprehensive or even a representative survey or study of the 
costs of Commission rules and forms. Compliance with the collection of 
information requirements of the rule is necessary to obtain the benefit 
of relying on the rule's permission for funds to maintain their assets 
in foreign custodians.
---------------------------------------------------------------------------

    \2\ At the start of 2011, 836 investment advisers managed or 
sponsored open-end (including ETFs) portfolios and closed-end 
registered funds.
    \3\ These estimates are based on conversations with 
representatives of the fund industry.
    \4\ The salaries for a portfolio manager and a trust 
administrator are from SIFMA's Management & Professional Earnings in 
the Securities Industry 2010, modified to account for an 1800-hour 
work-year and multiplied by 5.35 to account for bonuses, firm size, 
employee benefits and overhead.
---------------------------------------------------------------------------

    Written comments are invited on: (a) Whether the collection of 
information is necessary for the proper performance of the functions of 
the Commission, including whether the information has practical 
utility; (b) the accuracy of the Commission's estimate of the burden of 
the collection of information; (c) ways to enhance the quality, 
utility, and clarity of the information collected; and (d) ways to 
minimize the burden of the collection of information on respondents, 
including through the use of automated collection techniques or other 
forms of information technology. Consideration will be given to 
comments and suggestions submitted in writing within 60 days of this 
publication.
    Please direct your written comments to Thomas Bayer, Chief 
Information Officer, Securities and Exchange Commission, c/o Remi 
Pavlik-Simon, 6432 General Green Way, Alexandria, VA 22312; or send an 
e-mail to: PRA_Mailbox@sec.gov.

    Dated: March 15, 2011.
Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-6364 Filed 3-17-11; 8:45 am]
BILLING CODE 8011-01-P