Proposed Collection; Comment Request; Extension: Rule 22e-4, 14219-14220 [2023-04627]
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Federal Register / Vol. 88, No. 44 / Tuesday, March 7, 2023 / Notices
SECURITIES AND EXCHANGE
COMMISSION
[SEC File No. 270–794, OMB Control No.
3235–0737]
ddrumheller on DSK120RN23PROD with NOTICES1
Proposed Collection; Comment
Request; Extension: Rule 22e–4
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, under the
Paperwork Reduction Act of 1995 (44
U.S.C. 3501–3520), the Securities and
Exchange Commission (‘‘Commission’’)
is soliciting comments on the collection
of information summarized below. The
Commission plans to submit this
existing collection of information to the
Office of Management and Budget for
extension and approval.
Section 22(e) of the Investment
Company Act of 1940 (‘‘Investment
Company Act’’) provides that no
registered investment company shall
suspend the right of redemption or
postpone the date of payment of
redemption proceeds for more than
seven days after tender of the security
absent specified unusual circumstances.
The provision was designed to prevent
funds and their investment advisers
from interfering with the redemption
rights of shareholders for improper
purposes, such as the preservation of
management fees. Although section
22(e) permits funds to postpone the date
of payment or satisfaction upon
redemption for up to seven days, it does
not permit funds to suspend the right of
redemption for any amount of time,
absent certain specified circumstances
or a Commission order.
Rule 22e–4 under the Act [17 CFR
270.22e–4] requires an open-end fund
and an exchange-traded fund that
redeems in kind (‘‘In-Kind ETF’’) to
establish a written liquidity risk
management program that is reasonably
designed to assess and manage the
fund’s or In-Kind ETF’s liquidity risk.
This program includes policies and
procedures that incorporate certain
program elements, including: (i) for
funds and In-Kind ETFs, the
assessment, management, and periodic
review of liquidity risk (with such
review occurring no less frequently than
annually); (ii) for funds, the
classification of the liquidity of a fund’s
portfolio investments, as well as atleast-monthly reviews of the fund’s
liquidity classifications; (iii) for funds
that do not primarily hold assets that are
highly liquid investments, the
determination of and periodic review of
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19:49 Mar 06, 2023
Jkt 259001
the fund’s highly liquid investment
minimum and establishment of policies
and procedures for responding to a
shortfall of the fund’s highly liquid
investment minimum, which includes
reporting to the fund’s board of
directors; (iv) for funds and In-Kind
ETFs, the limitation of the fund’s or InKind ETF’s investment in illiquid
investments that are assets to no more
than 15% of the fund’s or In-Kind ETF’s
net assets; and (iv) for funds and InKind ETFs, the establishment of policies
and procedures regarding redemptions
in kind, to the extent that the fund
engages in or reserves the right to
engage in redemptions in kind. The rule
also requires board approval and
oversight of a fund’s or In-Kind ETF’s
liquidity risk management program and
recordkeeping.
Rule 22e–4 also requires a limited
liquidity review, under which an unit
investment trust’s (‘‘UIT’’) principal
underwriter or depositor determines, on
or before the date of the initial deposit
of portfolio securities into the UIT, that
the portion of the illiquid investments
that the UIT holds or will hold at the
date of deposit that are assets is
consistent with the redeemable nature
of the securities it issues and retains a
record of such determination for the life
of the UIT and for five years thereafter.
The requirements under rule 22e–4
that a fund and In-Kind ETF, as
applicable, adopt a written liquidity risk
management program, report to the
board, maintain a written record of how
the highly liquid investment minimum
was determined and written policies
and procedures for responding to a
shortfall of the fund’s highly liquid
investment minimum, which includes
reporting to the fund’s board of directors
(for funds that do not primarily hold
highly liquid investments), establish
written policies and procedures
regarding how the fund will engage in
redemptions in kind, and retain certain
other records are all collections of
information. In addition, the
requirement under rule 22e–4 that the
principal underwriter or depositor of a
UIT assess the liquidity of the UIT on
or before the date of the initial deposit
of portfolio securities into the UIT and
retain a record of such determination for
the life of the UIT, and for five years
thereafter, is also a collection of
information.
The Commission staff estimates that
11,659 funds, 603 newly-registered
funds, and 8 UITs are subject to rule
22e–4. The internal annual burden
estimate is 16 hours for a fund, 11 for
a newly-registered fund, and 8 hours for
an UIT. Based on these estimates, the
total annual burden hours associated
PO 00000
Frm 00106
Fmt 4703
Sfmt 4703
14219
with the rule is estimated to be 193,241
hours. The estimated burden hours
associated with rule 22e–4 have
increased by 165,091 hours from the
current allocation of 28,150 hours. This
increase is due to an increase in the
estimated number of affected entities, as
well as revisions in the manner of
calculation. The external cost associated
with this collection of information is
approximately $3,124 per fund and
$2,000 per newly-registered fund, and
the total annual external cost burden is
$37,628,716. The estimated external
cost has increased by $37,628,716 from
the current estimate of $0. This increase
is due to the staff’s determination to
revise the manner in which it calculates
these estimates.
The estimate of average burden hours
is made solely for the purposes of the
Paperwork Reduction Act, and is not
derived from a comprehensive or even
a representative survey or study of the
costs of Commission rules. The
collection of information required by
rule 22e–4 is necessary to obtain the
benefits of the rule. Information
regarding a fund’s monthly positionlevel liquidity classification and its
highly liquid investment minimum
reported on Form N–PORT will be kept
confidential. Other information
provided to the Commission in
connection with staff examinations or
investigations is kept confidential
subject to the provisions of applicable
law. If information collected pursuant to
rule 22e–4 is reviewed by the
Commission’s examination staff, it is
accorded the same level of
confidentiality accorded to other
responses provided to the Commission
in the context of its examination and
oversight program. 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 OMB control number.
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
E:\FR\FM\07MRN1.SGM
07MRN1
14220
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.
E:\FR\FM\07MRN1.SGM
07MRN1
]]>Agencies
[Federal Register Volume 88, Number 44 (Tuesday, March 7, 2023)]
[Notices]
[Pages 14219-14220]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-04627]
[[Page 14219]]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[SEC File No. 270-794, OMB Control No. 3235-0737]
Proposed Collection; Comment Request; Extension: Rule 22e-4
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, under the Paperwork Reduction Act of
1995 (44 U.S.C. 3501-3520), the Securities and Exchange Commission
(``Commission'') is soliciting comments on the collection of
information summarized below. The Commission plans to submit this
existing collection of information to the Office of Management and
Budget for extension and approval.
Section 22(e) of the Investment Company Act of 1940 (``Investment
Company Act'') provides that no registered investment company shall
suspend the right of redemption or postpone the date of payment of
redemption proceeds for more than seven days after tender of the
security absent specified unusual circumstances. The provision was
designed to prevent funds and their investment advisers from
interfering with the redemption rights of shareholders for improper
purposes, such as the preservation of management fees. Although section
22(e) permits funds to postpone the date of payment or satisfaction
upon redemption for up to seven days, it does not permit funds to
suspend the right of redemption for any amount of time, absent certain
specified circumstances or a Commission order.
Rule 22e-4 under the Act [17 CFR 270.22e-4] requires an open-end
fund and an exchange-traded fund that redeems in kind (``In-Kind ETF'')
to establish a written liquidity risk management program that is
reasonably designed to assess and manage the fund's or In-Kind ETF's
liquidity risk. This program includes policies and procedures that
incorporate certain program elements, including: (i) for funds and In-
Kind ETFs, the assessment, management, and periodic review of liquidity
risk (with such review occurring no less frequently than annually);
(ii) for funds, the classification of the liquidity of a fund's
portfolio investments, as well as at-least-monthly reviews of the
fund's liquidity classifications; (iii) for funds that do not primarily
hold assets that are highly liquid investments, the determination of
and periodic review of the fund's highly liquid investment minimum and
establishment of policies and procedures for responding to a shortfall
of the fund's highly liquid investment minimum, which includes
reporting to the fund's board of directors; (iv) for funds and In-Kind
ETFs, the limitation of the fund's or In-Kind ETF's investment in
illiquid investments that are assets to no more than 15% of the fund's
or In-Kind ETF's net assets; and (iv) for funds and In-Kind ETFs, the
establishment of policies and procedures regarding redemptions in kind,
to the extent that the fund engages in or reserves the right to engage
in redemptions in kind. The rule also requires board approval and
oversight of a fund's or In-Kind ETF's liquidity risk management
program and recordkeeping.
Rule 22e-4 also requires a limited liquidity review, under which an
unit investment trust's (``UIT'') principal underwriter or depositor
determines, on or before the date of the initial deposit of portfolio
securities into the UIT, that the portion of the illiquid investments
that the UIT holds or will hold at the date of deposit that are assets
is consistent with the redeemable nature of the securities it issues
and retains a record of such determination for the life of the UIT and
for five years thereafter.
The requirements under rule 22e-4 that a fund and In-Kind ETF, as
applicable, adopt a written liquidity risk management program, report
to the board, maintain a written record of how the highly liquid
investment minimum was determined and written policies and procedures
for responding to a shortfall of the fund's highly liquid investment
minimum, which includes reporting to the fund's board of directors (for
funds that do not primarily hold highly liquid investments), establish
written policies and procedures regarding how the fund will engage in
redemptions in kind, and retain certain other records are all
collections of information. In addition, the requirement under rule
22e-4 that the principal underwriter or depositor of a UIT assess the
liquidity of the UIT on or before the date of the initial deposit of
portfolio securities into the UIT and retain a record of such
determination for the life of the UIT, and for five years thereafter,
is also a collection of information.
The Commission staff estimates that 11,659 funds, 603 newly-
registered funds, and 8 UITs are subject to rule 22e-4. The internal
annual burden estimate is 16 hours for a fund, 11 for a newly-
registered fund, and 8 hours for an UIT. Based on these estimates, the
total annual burden hours associated with the rule is estimated to be
193,241 hours. The estimated burden hours associated with rule 22e-4
have increased by 165,091 hours from the current allocation of 28,150
hours. This increase is due to an increase in the estimated number of
affected entities, as well as revisions in the manner of calculation.
The external cost associated with this collection of information is
approximately $3,124 per fund and $2,000 per newly-registered fund, and
the total annual external cost burden is $37,628,716. The estimated
external cost has increased by $37,628,716 from the current estimate of
$0. This increase is due to the staff's determination to revise the
manner in which it calculates these estimates.
The estimate of average burden hours is made solely for the
purposes of the Paperwork Reduction Act, and is not derived from a
comprehensive or even a representative survey or study of the costs of
Commission rules. The collection of information required by rule 22e-4
is necessary to obtain the benefits of the rule. Information regarding
a fund's monthly position-level liquidity classification and its highly
liquid investment minimum reported on Form N-PORT will be kept
confidential. Other information provided to the Commission in
connection with staff examinations or investigations is kept
confidential subject to the provisions of applicable law. If
information collected pursuant to rule 22e-4 is reviewed by the
Commission's examination staff, it is accorded the same level of
confidentiality accorded to other responses provided to the Commission
in the context of its examination and oversight program. 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 OMB
control number.
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
[[Page 14220]]
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. 2023-04627 Filed 3-6-23; 8:45 am]
BILLING CODE 8011-01-P
