Proposed Collection; Comment Request; Extension: Rule 17f-5, 14220-14221 [2023-04626]
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Federal Register / Vol. 88, No. 44 / Tuesday, March 7, 2023 / Notices
respond to, a collection of information
under the PRA unless it displays a
currently valid OMB control number.
Please direct your written comments
to: David Bottom, Acting Director/Chief
Information Officer, Securities and
Exchange Commission, c/o John
Pezzullo, 100 F Street NE, Washington,
DC 20549 or send an email to: PRA_
Mailbox@sec.gov.
Dated: March 2, 2023.
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–04627 Filed 3–6–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[SEC File No. 270–259, OMB Control No.
3235–0269]
ddrumheller on DSK120RN23PROD with NOTICES1
Proposed Collection; Comment
Request; Extension: Rule 17f–5
Upon Written Request, Copies Available
From: Securities and Exchange
Commission, Office of FOIA Services,
100 F Street NE, Washington, DC
20549–2736
Notice is hereby given that, pursuant
to the Paperwork Reduction Act of 1995
(44 U.S.C. 350l–3520), the Securities
and Exchange Commission
(‘‘Commission’’) is soliciting comments
on the collection of information
summarized below. The Commission
plans to submit the existing collection
of information to the Office of
Management and Budget for extension
and approval.
Rule 17f–5 (17 CFR 270.17f–5) under
the Investment Company Act of 1940
[15 U.S.C. 80a] (the ‘‘Act’’) governs the
custody of the assets of registered
management investment companies
(‘‘funds’’) with custodians outside the
United States. Under rule 17f–5, a fund
or its foreign custody manager (as
delegated by the fund’s board) may
maintain the fund’s foreign assets in the
care of an eligible fund custodian under
certain conditions. If the fund’s board
delegates to a foreign custody manager
authority to place foreign assets, the
fund’s board must find that it is
reasonable to rely on each delegate the
board 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, in performing the
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19:49 Mar 06, 2023
Jkt 259001
delegated services. 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,1 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
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.2
1 See
section 17(f) of the Act. 15 U.S.C. 80a–17(f).
staff believes that subcustodian monitoring
does not involve ‘‘collection of information’’ within
the meaning of the Paperwork Reduction Act of
1995 (44 U.S.C. 3501–3520) (‘‘Paperwork Reduction
Act’’).
2 The
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Frm 00107
Fmt 4703
Sfmt 4703
Commission staff estimates that each
year, approximately 62 registrants 3
could be required to make an average of
one response per registrant under rule
17f–5. A ‘‘response’’ may involve the
fund’s directors making certain findings
concerning foreign custody managers,
and the review and ratification of
custodial contracts. Commission staff
estimates a response relating to these
matters will require approximately 2.5
hours of board of director time per
response, to make the necessary
findings concerning foreign custody
managers, and 1 hour of related
compliance attorney time per response,
to assist the fund board.4 For registrants,
the total annual burden associated with
these requirements of the rule is up to
approximately 217 hours (62 responses
× 3.5 hours per response).
Foreign custody managers are also
affected by the collection of information
requirements under rule 17f–5.
Commission staff estimate that, in
connection with each registrant’s board
of directors making certain findings
concerning a foreign custody manager,
those findings will require
approximately 20 hours of trust
administrator time from the applicable
manager. This burden relates to the
foreign custody manager’s initial
considerations regarding custodial
arrangements with the registrant and
preparing reports to the fund board.5
Commission staff further estimate that
annually, approximately 15 foreign
custody managers will be required to
make an average of 4 responses per
manager concerning the use of foreign
custodians other than depositories.6
This ‘‘response’’ may involve the foreign
custody manager establishing bank
custody arrangements, negotiating/
renegotiating custodial contracts,
preparing reports to fund boards, and
3 This figure is an estimate of the number of new
management investment company registrants each
year, based on data reported on Form N–CEN as of
December 2019, 2020, and 2021. Commission staff
anticipates that the number of existing registrants
that change their foreign custody managers is
negligible and, therefore, the compliance burden of
rule 17f–5 falls primarily on new registrants. In
practice, not all registrants will use foreign custody
managers. The actual figure therefore may be
smaller.
4 As discussed below, Commission staff estimate
that a response from a registrant will also include
a related burden for the applicable foreign custody
manager chosen by the registrant’s board of
directors.
5 This estimate does not include burden hours
related to the establishment and/or amendment of
the foreign custody manager’s system for
monitoring custody arrangements for its clients,
which is accounted for separately as discussed
below.
6 This figure is based on the staff’s estimate of the
number of global custodians that may act as foreign
custody managers under rule 17f–5.
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07MRN1
Federal Register / Vol. 88, No. 44 / Tuesday, March 7, 2023 / Notices
ddrumheller on DSK120RN23PROD with NOTICES1
establishing and/or amending the
foreign custody manager’s system for
monitoring custody arrangements for its
clients. The staff estimates that each
response will take approximately 250
hours of trust administrator time,
requiring approximately 1,000 total
hours annually per foreign custody
manager (4 responses per foreign
custody manager × 250 hours per
response). Thus, the total annual burden
for foreign custody managers associated
with the requirements of the rule is
approximately 16,240 hours ((62
responses by foreign custody managers
× 20 hours per response) + (15 foreign
custody managers × 4 responses per
manager) × 250 hours per response).
Therefore, the total annual burden of
all collection of information
requirements of rule 17f–5 is estimated
to be up to 16,457 hours (217 hours +
16,240 hours). The total monetized
annual cost of burden hours is estimated
to be $5,166,833 ((217 hours × $3,529/
hour blended wage rate) + (16,240 hours
× $271/hour for a trust administrator’s
time)).7 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 with
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
representative survey or study of the
costs of Commission rules and forms.
Written comments are invited on: (a)
whether the proposed collection of
information is necessary for the proper
performance of the functions of the
Commission, including whether the
information shall have practical utility;
(b) the accuracy of the Commission’s
estimate of the burden of the collection
of information; (c) ways to enhance the
7 The rates used to create the blended rate are as
follow: board of director time ¥$4,770 and
compliance attorney time ¥$425. Staff estimates
concerning wage rates for the cost of board of
director time are based on fund industry
representations. Based on fund industry
representations, the staff estimated in 2014 that the
average cost of board of director time, for the board
as a whole, was $4,000 per hour. Adjusting for
inflation, the staff estimates that the current average
cost of board of director time is approximately
$4,770 per hour. Estimates concerning wage rates
for compliance attorneys and trust administrators
are based on salary information for the securities
industry compiled by the Securities Industry and
Financial Markets Association and modified by
Commission staff for 2023. The compliance attorney
and trust administrator wage figures are based on
published rates for each, modified to account for a
1800-hour work-year and inflation, and multiplied
by 5.35 to account for bonuses, firm size, employee
benefits and overhead. See Securities Industry and
Financial Markets Association, Report on
Management & Professional Earnings in the
Securities Industry 2013.
VerDate Sep<11>2014
19:49 Mar 06, 2023
Jkt 259001
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
by May 8, 2023.
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
under the PRA unless it displays a
currently valid OMB control number.
Please direct your written comments
to: David Bottom, Acting Director/Chief
Information Officer, Securities and
Exchange Commission, c/o John
Pezzullo, 100 F Street NE, Washington,
DC 20549 or send an email to: PRA_
Mailbox@sec.gov.
Dated: March 2, 2023.
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–04626 Filed 3–6–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–97009; File No. SR–DTC–
2023–002]
Self-Regulatory Organizations; The
Depository Trust Company; Notice of
Filing and Immediate Effectiveness of
a Proposed Rule Change To Modify the
Operational Arrangements
March 1, 2023.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on February
17, 2023, The Depository Trust
Company (‘‘DTC’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II and III
below, which Items have been prepared
by the clearing agency. DTC filed the
proposed rule change pursuant to
Section 19(b)(3)(A) of the Act 3 and Rule
19b–4(f)(4) thereunder.4 The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A).
4 17 CFR 240.19b–4(f)(4).
2 17
PO 00000
Frm 00108
Fmt 4703
Sfmt 4703
14221
I. Clearing Agency’s Statement of the
Terms of Substance of the Proposed
Rule Change
The proposed rule change 5 consists of
modifications to the DTC Operational
Arrangements (Necessary for Securities
to Become and Remain Eligible for DTC
Services) (‘‘OA’’) 6 to add to its existing
Legal Notice System (‘‘LENS’’) a means
of receiving certain index reference rate
information for posting to LENS.
Specifically, the proposal would
provide a Web-based, centralized
process to facilitate the receipt and
posting of LENS notice information, for
Participants, on benchmark replacement
rates and related details 7 (‘‘replacement
rate information’’) from issuers, trustees
and agents of Securities that are
currently benchmarked to the London
Inter-Bank Offered Rate (‘‘LIBOR’’)
index,8 as described in greater detail
below.
II. Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
In its filing with the Commission, the
clearing agency included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
5 Each capitalized term not otherwise defined
herein has its respective meaning as set forth the
Rules, By-Laws and Organization Certificate of DTC
(the ‘‘Rules’’), available at https://www.dtcc.com/
legal/rules-and-procedures.aspx.
6 Available at https://www.dtcc.com/∼/media/
Files/Downloads/legal/issue-eligibility/eligibility/
operational-arrangements.pdf. The OA is a
Procedure of DTC. Pursuant to the Rules, the term
‘‘Procedures’’ means the Procedures, service guides,
and regulations of DTC adopted pursuant to Rule
27, as amended from time to time. See Rule 1,
Section 1, supra note 5. They are binding on DTC
and each Participant in the same manner that they
are bound by the Rules. See Rule 27, supra note 5.
7 Details related to the replacement rate include,
but are not be limited to, (i) the replacement rate
selected; (ii) identifying information for the issue,
such as the CUSIP number; (iii) whether the
replacement rate information being submitted is
new or an update to a prior LENS submission; and
(iv) identifying details relating to the submitter of
the replacement rate information, including name
and entity type (e.g., paying agent, trustee, issuer,
etc.). See also DTCC LIBOR Replacement Index
Communication Tool User Guide, available at
https://www.dtcc.com/-/media/Files/Downloads/
Settlement-Asset-Services/Issuer-Services/LiborTool-User-Guide.pdf.
8 LIBOR is an indicative measure of the average
interest rate at which major global banks can
borrow from one another. LIBOR is quoted in
multiple currencies and multiple terms, or
‘‘maturities,’’ using data reported by private-sector
banks. See SEC Staff Statement on LIBOR
Transition—Key Considerations for Market
Participants (December 7, 2021), Staff of the
Securities and Exchange Commission, available at
https://www.sec.gov/news/statement/staffstatement-libor-transition-20211207.
E:\FR\FM\07MRN1.SGM
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]]>Agencies
[Federal Register Volume 88, Number 44 (Tuesday, March 7, 2023)]
[Notices]
[Pages 14220-14221]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-04626]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[SEC File No. 270-259, OMB Control No. 3235-0269]
Proposed Collection; Comment Request; Extension: Rule 17f-5
Upon Written Request, Copies Available From: Securities and Exchange
Commission, Office of FOIA Services, 100 F Street NE, Washington, DC
20549-2736
Notice is hereby given that, pursuant to the Paperwork Reduction
Act of 1995 (44 U.S.C. 350l-3520), the Securities and Exchange
Commission (``Commission'') is soliciting comments on the collection of
information summarized below. The Commission plans to submit the
existing collection of information to the Office of Management and
Budget for extension and approval.
Rule 17f-5 (17 CFR 270.17f-5) under the Investment Company Act of
1940 [15 U.S.C. 80a] (the ``Act'') governs the custody of the assets of
registered management investment companies (``funds'') with custodians
outside the United States. Under rule 17f-5, a fund or its foreign
custody manager (as delegated by the fund's board) may maintain the
fund's foreign assets in the care of an eligible fund custodian under
certain conditions. If the fund's board delegates to a foreign custody
manager authority to place foreign assets, the fund's board must find
that it is reasonable to rely on each delegate the board 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, in performing the delegated services. 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,\1\ 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.
---------------------------------------------------------------------------
\1\ See section 17(f) of the Act. 15 U.S.C. 80a-17(f).
---------------------------------------------------------------------------
The requirements that the foreign custody manager determine that
fund assets will be subject to reasonable care with the eligible
foreign custodian and under the custody contract, and that each
contract contain specified provisions or equivalent provisions, are
intended to ensure that the delegate has evaluated the level of care
provided by the custodian, that it weighs the adequacy of contractual
provisions, and that fund assets are protected by minimal contractual
safeguards. The requirement that the foreign custody manager establish
a monitoring system is intended to ensure that the manager periodically
reviews each custody arrangement and takes appropriate action if
developing custody risks may threaten fund assets.\2\
---------------------------------------------------------------------------
\2\ The staff believes that subcustodian monitoring does not
involve ``collection of information'' within the meaning of the
Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) (``Paperwork
Reduction Act'').
---------------------------------------------------------------------------
Commission staff estimates that each year, approximately 62
registrants \3\ could be required to make an average of one response
per registrant under rule 17f-5. A ``response'' may involve the fund's
directors making certain findings concerning foreign custody managers,
and the review and ratification of custodial contracts. Commission
staff estimates a response relating to these matters will require
approximately 2.5 hours of board of director time per response, to make
the necessary findings concerning foreign custody managers, and 1 hour
of related compliance attorney time per response, to assist the fund
board.\4\ For registrants, the total annual burden associated with
these requirements of the rule is up to approximately 217 hours (62
responses x 3.5 hours per response).
---------------------------------------------------------------------------
\3\ This figure is an estimate of the number of new management
investment company registrants each year, based on data reported on
Form N-CEN as of December 2019, 2020, and 2021. Commission staff
anticipates that the number of existing registrants that change
their foreign custody managers is negligible and, therefore, the
compliance burden of rule 17f-5 falls primarily on new registrants.
In practice, not all registrants will use foreign custody managers.
The actual figure therefore may be smaller.
\4\ As discussed below, Commission staff estimate that a
response from a registrant will also include a related burden for
the applicable foreign custody manager chosen by the registrant's
board of directors.
---------------------------------------------------------------------------
Foreign custody managers are also affected by the collection of
information requirements under rule 17f-5. Commission staff estimate
that, in connection with each registrant's board of directors making
certain findings concerning a foreign custody manager, those findings
will require approximately 20 hours of trust administrator time from
the applicable manager. This burden relates to the foreign custody
manager's initial considerations regarding custodial arrangements with
the registrant and preparing reports to the fund board.\5\ Commission
staff further estimate that annually, approximately 15 foreign custody
managers will be required to make an average of 4 responses per manager
concerning the use of foreign custodians other than depositories.\6\
This ``response'' may involve the foreign custody manager establishing
bank custody arrangements, negotiating/renegotiating custodial
contracts, preparing reports to fund boards, and
[[Page 14221]]
establishing and/or amending the foreign custody manager's system for
monitoring custody arrangements for its clients. The staff estimates
that each response will take approximately 250 hours of trust
administrator time, requiring approximately 1,000 total hours annually
per foreign custody manager (4 responses per foreign custody manager x
250 hours per response). Thus, the total annual burden for foreign
custody managers associated with the requirements of the rule is
approximately 16,240 hours ((62 responses by foreign custody managers x
20 hours per response) + (15 foreign custody managers x 4 responses per
manager) x 250 hours per response).
---------------------------------------------------------------------------
\5\ This estimate does not include burden hours related to the
establishment and/or amendment of the foreign custody manager's
system for monitoring custody arrangements for its clients, which is
accounted for separately as discussed below.
\6\ This figure is based on the staff's estimate of the number
of global custodians that may act as foreign custody managers under
rule 17f-5.
---------------------------------------------------------------------------
Therefore, the total annual burden of all collection of information
requirements of rule 17f-5 is estimated to be up to 16,457 hours (217
hours + 16,240 hours). The total monetized annual cost of burden hours
is estimated to be $5,166,833 ((217 hours x $3,529/hour blended wage
rate) + (16,240 hours x $271/hour for a trust administrator's
time)).\7\ 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 with foreign custodians.
---------------------------------------------------------------------------
\7\ The rates used to create the blended rate are as follow:
board of director time -$4,770 and compliance attorney time -$425.
Staff estimates concerning wage rates for the cost of board of
director time are based on fund industry representations. Based on
fund industry representations, the staff estimated in 2014 that the
average cost of board of director time, for the board as a whole,
was $4,000 per hour. Adjusting for inflation, the staff estimates
that the current average cost of board of director time is
approximately $4,770 per hour. Estimates concerning wage rates for
compliance attorneys and trust administrators are based on salary
information for the securities industry compiled by the Securities
Industry and Financial Markets Association and modified by
Commission staff for 2023. The compliance attorney and trust
administrator wage figures are based on published rates for each,
modified to account for a 1800-hour work-year and inflation, and
multiplied by 5.35 to account for bonuses, firm size, employee
benefits and overhead. See Securities Industry and Financial Markets
Association, Report on Management & Professional Earnings in the
Securities Industry 2013.
---------------------------------------------------------------------------
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 representative survey or study of the costs of
Commission rules and forms.
Written comments are invited on: (a) whether the proposed
collection of information is necessary for the proper performance of
the functions of the Commission, including whether the information
shall have 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 by May 8, 2023.
An agency may not conduct or sponsor, and a person is not required
to respond to, a collection of information under the PRA unless it
displays a currently valid OMB control number.
Please direct your written comments to: David Bottom, Acting
Director/Chief Information Officer, Securities and Exchange Commission,
c/o John Pezzullo, 100 F Street NE, Washington, DC 20549 or send an
email to: [email protected].
Dated: March 2, 2023.
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-04626 Filed 3-6-23; 8:45 am]
BILLING CODE 8011-01-P
