[Federal Register Volume 64, Number 76 (Wednesday, April 21, 1999)]
[Rules and Regulations]
[Pages 19469-19479]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-9942]
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SECURITIES AND EXCHANGE COMMISSION
17 CFR Parts 232, 270 and 274
[Release No. IC-23786; File No. S7-31-98]
RIN 3235-AG29
Deregistration of Certain Registered Investment Companies
AGENCY: Securities and Exchange Commission.
ACTION: Final rule.
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SUMMARY: The Commission is adopting amendments to the rule and form
under the Investment Company Act of 1940 that govern the deregistration
of registered investment companies. The Commission also is adopting
amendments that require investment companies to file the form
electronically through the Commission's Electronic Data Gathering,
Analysis, and Retrieval (``EDGAR'') system. The amendments are designed
to expedite the process for deregistering investment companies.
EFFECTIVE DATE: The rule amendments will become effective June 1, 1999.
FOR FURTHER INFORMATION CONTACT: Robin Gross Lehv, Staff Attorney, or
Penelope Saltzman, Senior Counsel, at (202) 942-0690, Office of
Regulatory Policy, Division of Investment Management, Securities and
Exchange Commission, 450 5th Street, N.W.,
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Washington, D.C. 20549-0506. For additional information, including
questions about filing Form N-8F, contact the Office of Investment
Company Regulation, Division of Investment Management, at (202) 942-
0564, Securities and Exchange Commission, 450 5th Street, N.W.,
Washington, D.C. 20549-0506.
SUPPLEMENTARY INFORMATION: The Commission is adopting amendments to
rule 8f-1 [17 CFR 270.8f-1] and Form N-8F [17 CFR 274.218] under the
Investment Company Act of 1940 [15 U.S.C. 80a] (the ``Investment
Company Act'' or ``Act''), and to rule 101 of the Commission's
Regulation S-T [17 CFR 232.101].
I. Discussion
Under section 8(f) of the Investment Company Act, the Commission
may deregister a registered investment company (``fund'') if it
determines the fund is no longer an ``investment company.\1\ In order
to expedite the deregistration process and assist funds in preparing
their applications, in 1978 the Commission adopted rule 8f-1 and Form
N-8F.\2\ Rule 8f-1 describes the circumstances in which funds may use
Form N-8F to apply for a deregistration order, and Form N-8F specifies
the information that a fund must provide.
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\1\ 15 U.S.C. 80a-8(f).
\2\ See Deregistration of Certain Investment Companies and
Quarterly Reports of Management Investment Companies, Investment
Company Act Release No. 10237 (May 11, 1978) [43 FR 21664 (May 19,
1978)].
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In December 1998, the Commission proposed to revise Form N-8F to
simplify the form, eliminate unnecessary items, and refocus the
questions to better elicit the information we need to make the finding
under section 8(f) to deregister a fund.\3\ We also proposed to amend
rule 8f-1 to expand the types of circumstances in which a fund may use
Form N-8F to apply for a deregistration order.\4\ Finally, we proposed
to require that Form N-8F, like most other documents filed by funds, be
submitted electronically through the Commission's EDGAR system.
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\3\ See Deregistration of Certain Registered Investment
Companies, Investment Company Act Release No. 23588 (Dec. 4, 1998)
[63 FR 69236 (Dec. 16, 1998)] (``Proposing Release'').
\4\ Under the proposed amendments, a fund could use the form if
it (i) has sold substantially all of its assets to another fund or
merged into or consolidated with another fund, (ii) has distributed
substantially all of its assets to its shareholders and completed,
or is in the process of, winding up its affairs, (iii) qualifies for
an exclusion from the definition of investment company under section
3(c)(1) or section 3(c)(7) of the Act, or (iv) has decided to become
a business development company.
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The Commission received one comment letter, which supported the
proposed amendments and urged their prompt adoption.\5\ The commenter
agreed that the amendments would facilitate completion of the form and
expedite the deregistration process. We are adopting the amendments
substantially as proposed, with minor technical modifications \6\ in
response to issues raised by the commenter.\7\
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\5\ See Letter from Investment Company Institute (Feb. 5, 1999)
(placed in File No. S7-31-98).
\6\ Among other technical changes, we deleted the question
requesting the date that the fund filed a notice of registration,
because that information is not necessary to our determination under
section 8(f) if the fund provides its registration number, as
requested by the form. See Proposed Form N-8F, item 10; Amended Form
N-8F, item 3.
\7\ Form N-8F contains a reminder, but not a requirement, that a
deregistering fund must file a final Form N-SAR [17 CFR 274.101] in
accordance with other rules under the Act. See Amended Form N-8F,
instruction 6. The commenter suggested that the Commission eliminate
the obligation to file a final Form N-SAR in certain circumstances.
We are considering amendments to Form N-SAR, and will consider the
commenter's suggestion in the context of that rulemaking.
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II. Cost-Benefit Analysis
The Commission is sensitive to the costs and benefits that result
from its rules. The rule and form amendments are designed to decrease
the regulatory burdens for funds that apply for a deregistration order.
The amendments (i) revise the content and format of Form N-8F, making
it easier to understand and complete, (ii) expand the circumstances
under which funds may use the form to apply to deregister, and (iii)
require the form to be filed electronically.
As explained in greater detail in the cost-benefit analysis of the
Proposing Release, the Commission believes these changes will result in
cost and time savings for registered investment companies.
Specifically, we estimated that the amendments will reduce the average
time that it takes to complete the form by about 50 percent, and will
similarly reduce the number of applications that require the applicant
to provide additional or clarifying information.\8\ The one comment
letter we received agreed that the proposed amendments would expedite
the registration process, but did not provide specific estimates of any
costs or benefits of the amendments.
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\8\ The Commission believes the form typically is completed by
support staff. Based on an estimated cost of $15 per hour for a
clerical worker to complete Form N-8F and an estimate of 130
applications filed each year, the Commission estimates the current
total annual cost of filing the form is $11,700 (130 x $15 x 6
hrs.), while the total annual cost of filing the amended form would
be $5,850 (130 x $15 x 3 hrs.).
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III. Paperwork Reduction Act
Certain provisions of the amendments to rule 8f-1 and Form N-8F
constitute a ``collection of information'' requirement within the
meaning of the Paperwork Reduction Act of 1995 [44 U.S.C. 3501-3520].
The Commission solicited, but did not receive, comments on the
collection of information requirements in the Proposing Release. The
Commission submitted the proposed amendments to the Office of
Management and Budget (``OMB'') pursuant to 44 U.S.C. 3507(d) and
received approval of the amendments'' collection of information
requirements (OMB control number 3235-0157).\9\ An agency may not
conduct or sponsor, and a person is not required to respond to, a
collection of information unless it displays a currently valid control
number.
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\9\ As stated in the Proposing Release, the Commission estimates
that the amendments will reduce the reporting and recordkeeping
burden of the rule and form to 3 hours per respondent. Based on past
experience, we estimate that each year approximately 130 funds will
apply to deregister, and that each applicant will apply only once.
Therefore, we estimate that the annual reporting and recordkeeping
burden for the amended form will be 3 hours per applicant, and 390
hours total for all applicants.
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The collection of information is not mandatory but is recommended
for all funds that seek to deregister under the circumstances described
in rule 8f-1. The amended rule does not require that the collection of
information be made public or kept confidential by the parties.
IV. Summary of Final Regulatory Flexibility Analysis
A Final Regulatory Flexibility Analysis (``FRFA'') concerning rule
8f-1 and Form N-8F has been prepared in accordance with 5 U.S.C. 604.
An Initial Regulatory Flexibility Analysis (``IRFA'') was prepared in
accordance with 5 U.S.C. 603, and a summary of the IRFA was included in
the Proposing Release. The Commission received no comments on the IRFA.
The FRFA notes that the amendments are intended to improve the
quality of information provided on the form and to reduce the time and
effort required to complete the form. The amendments do not impose new
burdens on respondents other than the requirement that the form be
filed through the EDGAR system. The amendments will not impose any new
reporting or recordkeeping requirements.
As discussed more fully in the FRFA, the amendments will affect
small
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businesses or small organizations (collectively, ``small entities''),
as defined by the Commission's rules, in the same manner as all other
entities who use Form N-8F to deregister. The Commission believes the
amendments will decrease burdens on all funds by facilitating and
expediting the deregistration process, saving them time and money.
The FRFA states that for purposes of the Investment Company Act and
the Regulatory Flexibility Act, a small entity is a fund that, together
with other funds in the same group of related funds, has net assets of
$50 million or less as of the end of its most recent fiscal year.\10\
Of approximately 3900 active funds (including business development
companies), 339 funds are small entities. Any of these 339 funds that
applies to deregister under circumstances described in amended rule 8f-
1 could use Form N-8F.
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\10\ Rule 0-10 under the Investment Company Act [17 CFR 270.0-
10].
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Finally, the FRFA notes that the Commission considered various
alternatives that might minimize the economic impact of the amendments
on small entities. These include: (i) The establishment of differing
compliance requirements that take into account the resources available
to small entities; (ii) the clarification, consolidation, or
simplification of compliance requirements under the rule for small
entities; (iii) the use of performance rather than design standards;
and (iv) an exemption from coverage of the rule, or any part thereof,
for small entities. The FRFA concludes that alternative requirements or
simplification or consolidation of the requirements is unnecessary
because the amendments are designed to reduce the compliance burdens
for all funds, including small entities. In addition, an exemption from
any of the requirements for small entities would increase their
regulatory burden rather than decrease it.
A copy of the FRFA may be obtained by contacting Robin Gross Lehv,
Division of Investment Management, Securities and Exchange Commission,
450 5th Street, N.W., Washington, D.C. 20549-0506.
V. Statutory Authority
The Commission is amending rule 8f-1 and Form N-8F pursuant to the
authority set forth in section 38(a) [15 U.S.C. 80a-37(a)] of the
Investment Company Act.
List of Subjects
17 CFR Part 232
Reporting and recordkeeping requirements.
17 CFR Part 270
Investment companies, Securities.
17 CFR Part 274
Investment companies, Reporting and recordkeeping requirements.
Text of Rule and Form Amendments
For the reasons set out in the preamble, Title 17, Chapter II of
the Code of Federal Regulations is amended as follows:
PART 232--REGULATION S-T--GENERAL RULES AND REGULATIONS FOR
ELECTRONIC FILINGS
1. The authority citation for part 232 continues to read as
follows:
Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s(a), 77sss(a),
78c(b), 78l, 78m, 78n, 78o(d), 78w(a), 78ll(d), 79t(a), 80a-8, 80a-
29, 80-30 and 80a-37.
Sec. 232.101 [Amended]
2. Section 232.101 is amended in paragraph (a)(1)(iv) by removing
the phrase ``, 8(f)'' and by removing the phrase ``, 80a-8(f)''.
3. Section 232.101 is amended in paragraph (c)(11) by removing the
phrase ``8(f),'' and by removing the phrase ``80a-8(f),''.
PART 270--RULES AND REGULATIONS, INVESTMENT COMPANY ACT OF 1940
4. The authority citation for part 270 continues to read, in part,
as follows:
Authority: 15 U.S.C. 80a-1 et seq., 80a-34(d), 80a-37, 80a-39
unless otherwise noted;
* * * * *
5. Section 270.8f-1 is revised to read as follows:
Sec. 270.8f-1 Deregistration of certain registered investment
companies.
A registered investment company that seeks a Commission order
declaring that it is no longer an investment company may file an
application with the Commission on Form N-8F (17 CFR 274.218) if the
investment company:
(a) Has sold substantially all of its assets to another registered
investment company or merged into or consolidated with another
registered investment company;
(b) Has distributed substantially all of its assets to its
shareholders and has completed, or is in the process of, winding up its
affairs;
(c) Qualifies for an exclusion from the definition of ``investment
company'' under section 3(c)(1) (15 U.S.C. 80a-3(c)(1)) or section
3(c)(7) (15 U.S.C. 80a-3(c)(7)) of the Act; or
(d) Has become a business development company.
Note to Sec. 270.8f-1: Applicants who are not eligible to use
Form N-8F to file an application to deregister may follow the
general guidance for filing applications under rule 0-2 (17 CFR
270.0-2) of this chapter.
PART 274--FORMS PRESCRIBED UNDER THE INVESTMENT COMPANY ACT OF 1940
6. The authority citation for part 274 continues to read as
follows:
Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 78c(b), 78l, 78m,
78n, 78o(d), 80a-8, 80a-24, and 80a-29, unless otherwise noted.
7. Section 274.218 and Form N-8F are revised to read as follows:
Sec. 274.218 Form N-8F, application for deregistration of certain
registered investment companies.
This form must be used as the application for an order of the
Commission in cases in which the applicant is a registered investment
company that:
(a) Has sold substantially all of its assets to another registered
investment company or merged into or consolidated with another
registered investment company;
(b) Has distributed substantially all of its assets to its
shareholders and has completed, or is in the process of, winding up its
affairs;
(c) Qualifies for an exclusion from the definition of ``investment
company'' under section 3(c)(1) (15 U.S.C. 80a-3(c)(1)) or section
3(c)(7) (15 U.S.C. 80a-3(c)(7)) of the Act; or
(d) Has become a business development company.
Note: Form N-8F does not, and the amendments will not, appear in
the Code of Federal Regulations. A copy of Form N-8F is attached as
an Appendix to this document.
Dated: April 15, 1999.
By the Commission.
Jonathan G. Katz,
Secretary.
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3[FR Doc. 99-9942 Filed 4-20-99; 8:45 am]
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