Proposed Collection; Comment Request; Extension: Rule 3a-4, 87680-87681 [2024-25546]

Download as PDF 87680 Federal Register / Vol. 89, No. 213 / Monday, November 4, 2024 / Notices III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 15 and paragraph (f) of Rule 19b–4 16 thereunder. At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission will institute proceedings to determine whether the proposed rule change should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: lotter on DSK11XQN23PROD with NOTICES1 Electronic Comments • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include file number SR– CboeEDGX–2024–069 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090. All submissions should refer to file number SR–CboeEDGX–2024–069. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s internet website (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for website viewing and 15 15 16 17 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f). VerDate Sep<11>2014 17:28 Nov 01, 2024 printing 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. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. Do not include personal identifiable information in submissions; you should submit only information that you wish to make available publicly. We may redact in part or withhold entirely from publication submitted material that is obscene or subject to copyright protection. All submissions should refer to file number SR–CboeEDGX–2024–069 and should be submitted on or before November 25, 2024. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.17 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2024–25528 Filed 11–1–24; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [SEC File No. 270–401, OMB Control No. 3235–0459] Proposed Collection; Comment Request; Extension: Rule 3a–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, pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 350l-3520), the Securities and Exchange Commission (the ‘‘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. Rule 3a–4 (17 CFR 270.3a–4) under the Investment Company Act of 1940 (15 U.S.C. 80a) (‘‘Investment Company Act’’ or ‘‘Act’’) provides a nonexclusive safe harbor from the definition of investment company under the Act for certain investment advisory programs. These programs, which include ‘‘wrap fee’’ programs, generally are designed to provide professional portfolio management services on a discretionary basis to clients who are investing less than the minimum investments for individual accounts usually required by 17 17 Jkt 265001 PO 00000 CFR 200.30–3(a)(12). Frm 00144 Fmt 4703 Sfmt 4703 the investment adviser but more than the minimum account size of most mutual funds. Under wrap fee and similar programs, a client’s account is typically managed on a discretionary basis according to pre-selected investment objectives. Clients with similar investment objectives often receive the same investment advice and may hold the same or substantially similar securities in their accounts. Because of this similarity of management, some of these investment advisory programs may meet the definition of investment company under the Act. In 1997, the Commission adopted rule 3a–4, which clarifies that programs organized and operated in accordance with the rule are not required to register under the Investment Company Act or comply with the Act’s requirements.1 These programs differ from investment companies because, among other things, they provide individualized investment advice to the client. The rule’s provisions have the effect of ensuring that clients in a program relying on the rule receive advice tailored to the client’s needs. For a program to be eligible for the rule’s safe harbor, each client’s account must be managed on the basis of the client’s financial situation and investment objectives and in accordance with any reasonable restrictions the client imposes on managing the account. When an account is opened, the sponsor 2 (or its designee) must obtain information from each client regarding the client’s financial situation and investment objectives, and must allow the client an opportunity to impose reasonable restrictions on managing the account.3 In addition, the sponsor (or its designee) must contact the client annually to determine whether the client’s financial situation or investment objectives have changed and whether the client wishes to impose any reasonable restrictions on the 1 Status of Investment Advisory Programs Under the Investment Company Act of 1940, Investment Company Act Rel. No. 22579 (Mar. 24, 1997) [62 FR 15098 (Mar. 31,1997)] (‘‘Adopting Release’’); in addition, there are no registration requirements under section 5 of the Securities Act of 1933 for programs that meet the requirements of rule 3a–4. See 17 CFR 270.3a–4, introductory note. 2 For purposes of rule 3a–4, the term ‘‘sponsor’’ refers to any person who receives compensation for sponsoring, organizing or administering the program, or for selecting, or providing advice to clients regarding the selection of, persons responsible for managing the client’s account in the program. 3 Clients specifically must be allowed to designate securities that should not be purchased for the account or that should be sold if held in the account; the rule does not require that a client be able to require particular securities be purchased for the account. E:\FR\FM\04NON1.SGM 04NON1 Federal Register / Vol. 89, No. 213 / Monday, November 4, 2024 / Notices management of the account or reasonably modify existing restrictions. The sponsor (or its designee) must also notify the client quarterly, in writing, to contact the sponsor (or its designee) regarding changes to the client’s financial situation, investment objectives, or restrictions on the account’s management. Additionally, the sponsor (or its designee) must provide each client with a quarterly statement describing all activity in the client’s account during the previous quarter. The sponsor and personnel of the client’s account manager who know about the client’s account and its management must be reasonably available to consult with the client. Each client also must retain certain indicia of ownership of all securities and funds in the account. The Commission staff estimates that 27,979,460 clients participate each year in investment advisory programs relying on rule 3a–4.4 Of that number, the staff estimates that 2,127,147 are new clients and 25,852,313 are continuing clients.5 The staff estimates that each year the investment advisory program sponsors’ staff engage in 1.5 hours per new client and 1 hour per continuing client to prepare, conduct and/or review interviews regarding the client’s financial situation and investment objectives as required by the rule.6 Furthermore, the staff estimates that each year the investment advisory program sponsors’ staff spends 1 hour per client to prepare and mail quarterly client account statements, including notices to update information.7 Based on the estimates above, the Commission estimates that the total annual burden of the rule’s paperwork requirements is 57,022,493 hours.8 lotter on DSK11XQN23PROD with NOTICES1 4 These estimates are based on an analysis of the number of individual clients from Form ADV Item 5D(a)(1) and (b)(1) of advisers that report they provide portfolio management to wrap programs as indicated in Form ADV Item 5I(2)(b) and (c), and the number of individual clients of advisers that identify as internet advisers in Form ADV Item 2A(11); from analysis comparing reported individual client assets in Form ADV Item 5D(a)(3) and 5D(b)(3) to reported wrap portfolio manager assets in Form ADV Item 5I(2)(b) and (c), we discount the estimated number of individual clients of non-internet advisers providing portfolio management to wrap programs by 10%. 5 These estimates are based on the number of new clients expected due to average year-over-year growth in individual clients from Form ADV Item 5D(a)(1) and (b)(1) (about 9%) and an assumed rate of yearly client turnover of 10%. 6 These estimates are based upon consultation with investment advisers that operate investment advisory programs that rely on rule 3a–4. 7 The staff bases this estimate in part on the fact that, by business necessity, computer records already will be available that contain the information in the quarterly reports. 8 This estimate is based on the following calculation: (25,852,313 continuing clients × 1 VerDate Sep<11>2014 17:28 Nov 01, 2024 Jkt 265001 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. 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. 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 January 3, 2025. 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: Austin Gerig, Director/Chief Data Officer, Securities and Exchange Commission, c/o Tanya Ruttenberg, 100 F Street NE, Washington, DC 20549 or send an email to: PRA_Mailbox@ sec.gov. Dated: October 29, 2024. Sherry R. Haywood, Assistant Secretary. [FR Doc. 2024–25546 Filed 11–1–24; 8:45 am] BILLING CODE 8011–01–P 87681 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–101470; File No. SR– NYSEARCA–2024–87] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change To Adopt New NYSE Arca Rule 8.800–E To Provide for the Listing and Trading of Commodity- and Digital Asset-Based Investment Interests and To List and Trade Shares of the Grayscale Digital Large Cap Fund LLC October 29, 2024. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (‘‘Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that, on October 15, 2024, NYSE Arca, Inc. (‘‘NYSE Arca’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to adopt new NYSE Arca Rule 8.800–E to provide for the listing and trading of Commodityand Digital Asset-Based Investment Interests, which are securities issued by a trust, limited liability company, or other similar entity that holds specified commodities, digital assets, Derivative Securities Products, and/or cash. The Exchange also proposes to list and trade shares of the Grayscale Digital Large Cap Fund LLC (the ‘‘Fund’’) under proposed NYSE Arca Rule 8.800–E. The proposed rule change is available on the Exchange’s website at www.nyse.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization 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 those statements may be examined at the places specified in Item IV below. hour) + (2,127,147 new clients × 1.5 hours) + (27,979,460 total clients × (0.25 hours × 4 statements)) = 57,022,493 hours. PO 00000 Frm 00145 Fmt 4703 Sfmt 4703 1 15 U.S.C. 78s(b)(1). U.S.C. 78a. 3 17 CFR 240.19b–4. 2 15 E:\FR\FM\04NON1.SGM 04NON1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 89, Number 213 (Monday, November 4, 2024)]
[Notices]
[Pages 87680-87681]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-25546]


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SECURITIES AND EXCHANGE COMMISSION

[SEC File No. 270-401, OMB Control No. 3235-0459]


Proposed Collection; Comment Request; Extension: Rule 3a-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, pursuant to the Paperwork Reduction 
Act of 1995 (44 U.S.C. 350l-3520), the Securities and Exchange 
Commission (the ``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.
    Rule 3a-4 (17 CFR 270.3a-4) under the Investment Company Act of 
1940 (15 U.S.C. 80a) (``Investment Company Act'' or ``Act'') provides a 
nonexclusive safe harbor from the definition of investment company 
under the Act for certain investment advisory programs. These programs, 
which include ``wrap fee'' programs, generally are designed to provide 
professional portfolio management services on a discretionary basis to 
clients who are investing less than the minimum investments for 
individual accounts usually required by the investment adviser but more 
than the minimum account size of most mutual funds. Under wrap fee and 
similar programs, a client's account is typically managed on a 
discretionary basis according to pre-selected investment objectives. 
Clients with similar investment objectives often receive the same 
investment advice and may hold the same or substantially similar 
securities in their accounts. Because of this similarity of management, 
some of these investment advisory programs may meet the definition of 
investment company under the Act.
    In 1997, the Commission adopted rule 3a-4, which clarifies that 
programs organized and operated in accordance with the rule are not 
required to register under the Investment Company Act or comply with 
the Act's requirements.\1\ These programs differ from investment 
companies because, among other things, they provide individualized 
investment advice to the client. The rule's provisions have the effect 
of ensuring that clients in a program relying on the rule receive 
advice tailored to the client's needs.
---------------------------------------------------------------------------

    \1\ Status of Investment Advisory Programs Under the Investment 
Company Act of 1940, Investment Company Act Rel. No. 22579 (Mar. 24, 
1997) [62 FR 15098 (Mar. 31,1997)] (``Adopting Release''); in 
addition, there are no registration requirements under section 5 of 
the Securities Act of 1933 for programs that meet the requirements 
of rule 3a-4. See 17 CFR 270.3a-4, introductory note.
---------------------------------------------------------------------------

    For a program to be eligible for the rule's safe harbor, each 
client's account must be managed on the basis of the client's financial 
situation and investment objectives and in accordance with any 
reasonable restrictions the client imposes on managing the account. 
When an account is opened, the sponsor \2\ (or its designee) must 
obtain information from each client regarding the client's financial 
situation and investment objectives, and must allow the client an 
opportunity to impose reasonable restrictions on managing the 
account.\3\ In addition, the sponsor (or its designee) must contact the 
client annually to determine whether the client's financial situation 
or investment objectives have changed and whether the client wishes to 
impose any reasonable restrictions on the

[[Page 87681]]

management of the account or reasonably modify existing restrictions. 
The sponsor (or its designee) must also notify the client quarterly, in 
writing, to contact the sponsor (or its designee) regarding changes to 
the client's financial situation, investment objectives, or 
restrictions on the account's management.
---------------------------------------------------------------------------

    \2\ For purposes of rule 3a-4, the term ``sponsor'' refers to 
any person who receives compensation for sponsoring, organizing or 
administering the program, or for selecting, or providing advice to 
clients regarding the selection of, persons responsible for managing 
the client's account in the program.
    \3\ Clients specifically must be allowed to designate securities 
that should not be purchased for the account or that should be sold 
if held in the account; the rule does not require that a client be 
able to require particular securities be purchased for the account.
---------------------------------------------------------------------------

    Additionally, the sponsor (or its designee) must provide each 
client with a quarterly statement describing all activity in the 
client's account during the previous quarter. The sponsor and personnel 
of the client's account manager who know about the client's account and 
its management must be reasonably available to consult with the client. 
Each client also must retain certain indicia of ownership of all 
securities and funds in the account.
    The Commission staff estimates that 27,979,460 clients participate 
each year in investment advisory programs relying on rule 3a-4.\4\ Of 
that number, the staff estimates that 2,127,147 are new clients and 
25,852,313 are continuing clients.\5\ The staff estimates that each 
year the investment advisory program sponsors' staff engage in 1.5 
hours per new client and 1 hour per continuing client to prepare, 
conduct and/or review interviews regarding the client's financial 
situation and investment objectives as required by the rule.\6\ 
Furthermore, the staff estimates that each year the investment advisory 
program sponsors' staff spends 1 hour per client to prepare and mail 
quarterly client account statements, including notices to update 
information.\7\ Based on the estimates above, the Commission estimates 
that the total annual burden of the rule's paperwork requirements is 
57,022,493 hours.\8\
---------------------------------------------------------------------------

    \4\ These estimates are based on an analysis of the number of 
individual clients from Form ADV Item 5D(a)(1) and (b)(1) of 
advisers that report they provide portfolio management to wrap 
programs as indicated in Form ADV Item 5I(2)(b) and (c), and the 
number of individual clients of advisers that identify as internet 
advisers in Form ADV Item 2A(11); from analysis comparing reported 
individual client assets in Form ADV Item 5D(a)(3) and 5D(b)(3) to 
reported wrap portfolio manager assets in Form ADV Item 5I(2)(b) and 
(c), we discount the estimated number of individual clients of non-
internet advisers providing portfolio management to wrap programs by 
10%.
    \5\ These estimates are based on the number of new clients 
expected due to average year-over-year growth in individual clients 
from Form ADV Item 5D(a)(1) and (b)(1) (about 9%) and an assumed 
rate of yearly client turnover of 10%.
    \6\ These estimates are based upon consultation with investment 
advisers that operate investment advisory programs that rely on rule 
3a-4.
    \7\ The staff bases this estimate in part on the fact that, by 
business necessity, computer records already will be available that 
contain the information in the quarterly reports.
    \8\ This estimate is based on the following calculation: 
(25,852,313 continuing clients x 1 hour) + (2,127,147 new clients x 
1.5 hours) + (27,979,460 total clients x (0.25 hours x 4 
statements)) = 57,022,493 hours.
---------------------------------------------------------------------------

    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. 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.
    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 January 3, 2025.
    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: Austin Gerig, Director/
Chief Data Officer, Securities and Exchange Commission, c/o Tanya 
Ruttenberg, 100 F Street NE, Washington, DC 20549 or send an email to: 
[email protected].

    Dated: October 29, 2024.
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-25546 Filed 11-1-24; 8:45 am]
BILLING CODE 8011-01-P

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