[Federal Register Volume 64, Number 242 (Friday, December 17, 1999)]
[Notices]
[Pages 70750-70752]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-32711]
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SECURITIES AND EXCHANGE COMMISSION
Existing Collection; Comment Request
Upon written request, copies available from: Securities and Exchange
Commission, Office of Filings and Information Services, 450 5th Street,
NW, Washington, DC 20549.
Extension:
Rule 17a-7, SEC File No. 270-238, OMB Control No. 3235-0214
Rule 17a-8, SEC File No. 270-225, OMB Control No. 3235-0235
Rule 17e-1, SEC File No. 270-224, OMB Control No. 3235-0217
Rule 19a-1, SEC File No. 270-240, OMB Control No. 3235-0216
Rule 31a-1, SEC File No. 270-173, OMB Control No. 3235-0178
Notice is hereby given that, pursuant to the Paperwork Reduction
Act of 1995 (44 U.S.C. 3501-3520), the Securities and Exchange
Commission (the ``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 17a-7 (17 CFR 270.17a-7) under the Investment Company Act of
1940 (the ``Act'') is entitled ``Exemption of certain purchase or sale
transactions between an investment company and certain affiliated
persons thereof.'' It provides an exemption from section 17(a) of the
Act for purchases and sales of securities between registered investment
companies that are considered affiliates because of a common adviser,
director, or officer. Rule 17a-7 requires investment companies to keep
various records in connection with purchase or sale transactions
affected by the rule. The rule requires the board of directors of an
investment company to establish procedures reasonably designed to
ensure that all conditions of the rule have been satisfied, and
requires the investment company to maintain and preserve permanently a
written copy of those procedures. If an investment company enters into
a purchase or sale transaction with an affiliated person, the rule
requires the investment company to maintain written records of the
transaction for a period of not less than six years from the end of the
fiscal year in which the transaction occurred.\1\ In addition, under
the rule, the board is required to determine, at least on a quarterly
basis, that all affiliated transactions made during the preceding
quarter were made in compliance with these established procedures. The
Commission's examination staff uses these records to evaluate
transactions between affiliated investment companies for compliance
with the rule.
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\1\ The written records are required to set forth a description
of the security purchased or sold, the identity of the person on the
other side of the transaction, and the information or materials upon
which the board of directors' determination that the transaction was
in compliance with the procedures.
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The Commission estimates that approximately 750 investment
companies enter into transactions affected by rule 17a-7 each year.\2\
The average annual burden for rule 17a-7 is estimated to be
approximately two burden hours per respondents,\3\ for an annual total
of 1,500 burden hours for all respondents. The collection of
information required by rule 17a-7 is necessary to obtain the benefits
of the
[[Page 70751]]
rule. Responses will not be kept confidential.
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\2\ Based on the experience of the Commission's examination and
inspections staff, the Commission staff estimates that most
investment companies (3,000 of the estimated 3,560 registered
investment companies) have adopted procedures for compliance with
rule 17a-7. Of these 3,000 investment companies, the Commission
staff assumes that each year approximately 25% (750) enter into
transactions affected by rule 17a-7.
\3\ This estimate is based on conversations with attorneys
familiar with the information collection requirements of rule 17a-7
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Rule 17a-8 (17 CFR 270.17a-8) under the Act is entitled ``Mergers
of certain affiliated investment companies.'' Rule 17a-8 exempts
certain mergers and similar business combinations (``mergers'') of
affiliated registered investment companies (``funds'') from section
17(a)'s prohibitions on purchases and sales between a fund and its
affiliates. The rule requires fund directors to consider certain issues
and to record their findings in board minutes. The average annual
burden of meeting the requirements of rule 17a-8 is estimated to be 1.5
hours for each fund. The Commission staff estimates that approximately
80 funds rely each year on the rule. The estimated total average annual
burden for all respondents therefore is 120 hours.
Rule 17e-1 (17 CFR 270.17e-1) under the Act is entitled ``Brokerage
Transactions on a Securities Exchange.'' The rule governs the
remuneration that a broker affiliated with an investment company may
receive in connection with securities transactions by the investment
company. The rule requires an investment company's board of directors
to establish, and review as necessary, procedures reasonably designed
to provide that the remuneration to an affiliated broker is a fair
amount compared to that received by other brokers in connection with
transactions in similar securities during a comparable period of time.
Each quarter, the board must determine that all transactions with
affiliated brokers during the preceding quarter complied with the
procedures established under the rule. Rule 17e-1 also requires the
investment company to: (i) Maintain permanently a written copy of the
procedures adopted by the board for complying with the requirements of
the rule; and (ii) maintain for a period of six years a written record
of each transaction subject to the rule setting forth: the amount and
source of the commission, fee or other remuneration received; the
identity of the broker; the terms of the transaction; and the materials
used to determine that the transactions were effected in compliance
with the procedures adopted by the board. The Commission's examination
staff uses these records to evaluate transactions between investment
companies and their affiliated brokers for compliance with the rule.
The Commission staff estimates that approximately 1,850 investment
companies may rely on rule 17e-1 each year.\4\ The total average annual
burden for rule 17e-1 per respondent is estimated to be approximately
10 burden hours,\5\ for an annual total of approximately 18,500 burden
hours for all respondents.
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\4\ Item 14 of Form N-SAR requires investment companies to list
any affiliated brokers or dealers. Based on the Form N-SARs filed
for the six-month period ended August 31, 1999, it is estimated that
approximately 1,850 investment companies have affiliated broker
dealers, and may be subject to rule 17e-1 each year.
\5\ This estimate is based on conversions with attorneys
familiar with the information collection requirements of rule 17e-1.
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Section 19(a) (15 U.S.C. 80a-19(a)) of the Act makes it unlawful
for any registered investment company to pay any dividend or similar
distribution from any source other than the company's net income,
unless the payment is accompanied by a written statement to the
company's shareholders which adequately discloses the sources of the
payment. Section 19(a) authorizes the Commission to prescribe the form
of the statement by rule.
Rule 19a-1 (17 CFR 270.19a-1) under the Act is entitled ``Written
Statement to Accompany Dividend Payments by Management Companies.''
Rule 19a-1 sets forth specific requirements for the information that
must be included in statements made under section 19(a) by registered
investment companies. The rule requires that the statement indicate
what portions of the payment are made from net income, net profits and
paid-in capital.\6\ When any part of the payment is made from net
profits, the rule requires that the statement disclose certain other
information relating to the appreciation or depreciation of portfolio
securities. If an estimated portion is subsequently determined to be
significantly inaccurate, a correction must be made on a statement made
under section 19(a) or in the first report to shareholders following
the discovery of the inaccuracy. The proposed of rule 19a-1 is to
afford fund shareholders adequate disclosure of the sources from which
dividend payments are made.
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\6\ Rule 19a-1 requires, among other things, that every written
statement made under section 19 of the Act by or on behalf of a
management company clearly indicate what portion of the payment per
share is made from the following sources: net income for the current
or preceding fiscal year, or accumulated undistributed net income,
or both, not including in either case profits or losses from the
sale of securities or other properties; accumulated undistributed
not profits from the sale of securities or other properties; and
paid-in surplus or other capital source.
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The Commission staff estimates that approximately 6,700 portfolios
of management companies may be subject to rule 19a-1 each year.\7\ The
total average annual burden for rule 19a-1 per portfolio is estimated
to be approximately 30 minutes.\8\ The total annual burden for all
portfolios is therefore estimated to be approximately 3,350 burden
hours. Compliance with the collection of information required by rule
19a-1 is mandatory for management companies that make statements to
shareholders pursuant to section 19(a) of the Act. Responses will not
be kept confidential.
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\7\ The Commission staff estimates that there are approximately
3,000 registered investment companies that are ``management
companies'' as defined by the Act, and each may have one or more
separate portfolios that report dividends to shareholders. The
Commission's records indicate that those 3,000 management companies
have approximately 6,700 portfolios that report paying dividends,
and so may be subject to rule 19a-1.
\8\ According to respondents, no more than approximately 15
minutes is needed to make the determinations required by the rule
and include the required information in the shareholders' dividend
statements. The Commission staff estimates that, on average, each
portfolio mails two notices per year to meet the requirements of the
rule, for an average total annual burden of approximately 30
minutes.
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Rule 31a-1 (17 CFR 270.31a-1) under the Act is entitled ``Records
to be maintained by registered investment companies, certain majority-
owned subsidiaries thereof, and other persons having transactions with
registered investment companies.'' Rule 31a-1 requires registered
investment companies (``funds''), and every underwriter, broker,
dealer, or investment adviser that is a majority-owned subsidiary of a
fund, to maintain and keep current accounts, books, and other documents
which constitute the record forming the basis for financial statements
required to be filed pursuant to sect8ion 30 of the Act (15 U.S.C. 80a-
29) and of the auditor's certificates relating thereto. The rule lists
specific records to be maintained by funds. The rule also requires
certain underwriters, brokers, dealers, depositors, and investment
advisers to maintain the records that they are required to maintain
under federal securities laws.
There are approximately 4,295 investment companies registered with
the Commission, all of which are required to comply with rule 31a-1.
For purposes of determining the burden imposed by rule 31a-1, the
Commission staff estimates that each registered investment company is
divided into approximately four series, on average, and that each
series is required to comply with recordkeeping requirements of rule
31a-1. Based on conversations with fund representatives, it is
estimated that rule 31a-1 imposes an average burden of approximately
1,200 hours annually per series for a
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total of 4,800 annual hours per investment company. The estimated total
annual burden for all 4,295 investment companies subject to the rule
therefore is approximately 20,616,000 hours. Based on conversations
with fund representatives, however, the Commission staff estimates that
even absent the requirements of rule 31a-1, most of the records created
pursuant to the rule are the type that generally would be created as a
matter of normal business custom and to prepare financial statements.
The estimates of burden hours are made solely for the purposes of
the Paperwork Reduction Act, and are not derived from a comprehensive
or even a representative survey or study of the costs of Commission
rules. 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 collections of
information are 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 burdens
of the collections of information; (c) ways to enhance the quality,
utility, and clarity of the information collected; and (d) ways to
minimize the burdens of the collections 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 Michael E. Bartell,
Associate Executive Director, Office of Information Technology,
Securities and Exchange Commission, 450 5th Street, NW, Washington, DC
20549.
Dated: December 9, 1999.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-32711 Filed 12-16-99; 8:45 am]
BILLING CODE 8010-01-M
