[Federal Register Volume 60, Number 25 (Tuesday, February 7, 1995)]
[Proposed Rules]
[Pages 7146-7152]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-2901]
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SECURITIES AND EXCHANGE COMMISSION
17 CFR Parts 270 and 274
[Release Nos. 33-7133; IC-20874; S7-3-95]
RIN 3235-AG29
Registration Fees for Certain Investment Companies
AGENCY: Securities and Exchange Commission.
ACTION: Proposal of rule amendments.
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SUMMARY: The Commission is proposing amendments to rules 24f-1 and 24f-
2 under the Investment Company Act of 1940, the rules that permit
certain investment companies to register securities sold in excess of
the number of shares included in a registration statement and to
register an indefinite number of securities under the Securities Act of
1933. The Commission is also proposing a new form, Form 24F-2, which
would serve as the form for annual notices filed under rule 24f-2. The
proposed amendments and the new form would clarify the application of
certain provisions of rule 24f-2 and would make the rule's filing
deadlines more flexible under certain circumstances.
DATES: Comments on the proposed amendments should be received on or
before March 24, 1995.
ADDRESSES: Comments should be submitted in triplicate to Jonathan G.
Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street,
NW., Washington, DC. 20549. All comment letters should refer to File
No. S7-3-95. All comments received will be available for public
inspection and copying in the Commission's Public Reference Room, 450
Fifth Street, NW., Washington, DC. 20549.
FOR FURTHER INFORMATION CONTACT: Karen J. Garnett, Attorney, Office of
Disclosure and Adviser Regulation, (202) 942-0728, or Carolyn A.
Miller, Senior Financial Analyst, Office of Financial Analysis, (202)
942-0510, Division of Investment Management, Securities and Exchange
Commission, 450 Fifth Street, NW., Washington, DC. 20549.
SUPPLEMENTARY INFORMATION: The Commission is proposing amendments to
rules 24f-1 (17 CFR 270.24f-1) and 24f-2 (17 CFR 270.24f-2) under the
Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.) and a new Form
24F-2 (17 CFR 274.24).
Executive Summary
The Commission is proposing to amend rule 24f-2 under the
Investment Company Act of 1940 (``1940 Act''), the rule that permits
certain investment companies to register an indefinite number of
securities under the Securities Act of 1933 [15 U.S.C. 77a et seq.]
(``Securities Act''). The amendments would clarify that annual notices
required by rule 24f-2 will be deemed timely filed if the investment
company establishes that it timely transmitted the notice to a company
or governmental entity that guaranteed delivery to the Commission no
later than the filing date. The amendments would make it easier to
compute required filing dates and time periods and clarify the
operation of the termination provisions of rule 24f-2 in the case of
investment company business combination transactions. The Commission is
also proposing Form 24F-2, a standard form for annual notices required
by the rule. Form 24F-2 would request the information currently
required for annual notices by rule 24f-2 and would also include a work
sheet for calculating filing fees. The form would improve the accuracy
of information contained in Rule 24f-2 Notices and improve the
Commission's ability to process the notices. Finally, the Commission is
proposing conforming amendments to rule 24f-1, the rule that permits
certain investment companies to register securities sold in excess of
the number of shares included in a registration statement.
I. Background
Section 6(b) of the Securities Act (15 U.S.C. 77f(b)) specifies the
fees that must be paid in connection with registering securities with
the Commission under the Securities Act. Section 24 of the 1940 Act (15
U.S.C. 80a-24) modifies these provisions for certain investment
companies [[Page 7147]] (``funds'').\1\ Section 24 was intended to
address the problem of inadvertent ``oversales,'' i.e., sales in excess
of securities registered, that could easily occur with a fund that
continually issues and redeems securities.\2\
\1\These companies include face amount certificate companies,
open-end management investment companies, and unit investment
trusts. Rule 24f-2(a)(1) (17 CFR 270.24f-2(a)(1)).
\2\See Investment Company Act Rel. No. 15611 (Mar. 9, 1987) (52
FR 8302 (Mar. 17, 1987)) (proposing to revise the registration
requirements under rule 24f-2 for certain unit investment trusts).
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Rule 24f-2 under the 1940 Act permits funds to register an
indefinite number of securities. A fund that makes a declaration to be
governed by that rule (``Rule 24f-2 declaration'') pays an initial
election fee of $500. Once a fund makes its Rule 24f-2 declaration, it
must file a notice within six months after the close of each fiscal
year (``Rule 24f-2 Notice'') and pay a fee based upon the number of
shares sold during the fiscal year.\3\ If the fund files its Rule 24f-2
Notice within two months after the close of its fiscal year, paragraph
(c) of rule 24f-2 permits the fund to deduct the value of shares
redeemed from the value of shares sold in calculating the amount of
fees due.\4\ This netting provision can result in substantial savings
to funds and their shareholders.
\3\Rules 24f-2(a)(1), (a)(3), and (b)(1) (17 CFR 270.24f-
2(a)(1),(a)(3), and (b)(1)).
\4\Rule 24f-2(c) [17 CFR 270.24f-2(c)]. A more detailed
explanation of the operation of rule 24f-2 is set out in Investment
Company Act Rel. No. 15611 (Mar. 9, 1987) (52 FR 8302 (Mar. 17,
1987)).
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Since its adoption in 1977, rule 24f-2 has allowed funds to comply
with the registration requirements of the Securities Act without the
burden of estimating the number of shares they will sell each year or
filing post-effective amendments to register shares sold in excess of
such estimates. At the same time, certain questions have arisen in
connection with the rule. The Commission has reviewed the operation of
rule 24f-2 and has concluded that certain changes to the rule may be
appropriate.
II. Proposed Amendments to Rule 24f-2
A. Delayed Filings
The Commission is proposing new paragraph (f) to rule 24f-2 to
clarify the date on which a Rule 24f-2 Notice will be deemed filed with
the Commission. As with other filings under the 1940 Act, a Rule 24f-2
Notice is currently deemed filed with the Commission on the date it is
actually received by the Commission.\5\ The consequences of missing the
rule's filing deadlines can be severe. If a fund's Rule 24f-2 Notice
arrives at the Commission more than two months after the end of the
fund's fiscal year, the fund cannot use the netting provision of
paragraph (c) of the rule. If the fund misses the six month deadline,
its Rule 24f-2 declaration terminates.
\5\Rule 0-2 under the 1940 Act (17 CFR 270.02). Cf. section 6(c)
(15 U.S.C. 77f(c)) of the Securities Act (15 U.S.C. 77a et seq.),
rule 0-4 (17 CFR 275.04) under the Investment Advisers Act of 1940
(15 U.S.C. 80b-1 et seq.), and rule 0-3 (17 CFR 240.03) under the
Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.).
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Recently the Commission has had to address the consequences of late
filings by funds that made a good faith effort to file Rule 24f-2
Notices within the two month period but whose filings did not reach the
Commission until after the two-month deadline expired. The Commission
has issued exemptive orders pursuant to its authority under section
6(c) of the 1940 Act\6\ to allow these funds to take advantage of the
netting provisions.\7\ In four cases, the fund mailed its Rule 24f-2
Notice through the United States Postal Service at least seven days
before the expiration of the two month period. Three other funds
engaged a same-day courier service to deliver their Rule 24f-2 Notices
on the last day of the two-month period. In each case, the Rule 24f-2
Notice was not received by the Commission until after the deadline had
passed. The Commission determined in each case that the fund was not at
fault for the late filing, and that granting an exemption from the
provisions of rule 24f-2 was appropriate in the public interest and
consistent with the protection of investors and the purposes of the
1940 Act.
\6\15 U.S.C. 80a-6(c).
\7\The Flex Funds, Investment Company Act Rel. Nos. 19008 (Oct.
8, 1992) 57 FR 47361 (Oct. 15, 1992) (Notice of Application) and
19074 (Nov. 3, 1992) 52 SEC Docket 3632 (Order); Invesco Treasurer's
Series Trust, Investment Company Act Rel. Nos. 20503 (Aug. 25, 1994)
59 FR 45054 (Aug. 31, 1994) (Notice of Application) and 20564 (Sep.
20, 1994) 57 SEC Docket 1298 (Order); Kidder Peabody Premium Account
Fund and Kidder Peabody Government Money Fund, Inc., Investment
Company Act Rel. Nos. 20527 (Sep. 2, 1994) 59 FR 46873 (Sep. 12,
1994) (Notice of Application) and 20586 (Sep. 28, 1994) 57 SEC
Docket 20986 (Order); ACM Institutional Reserves, Inc., Investment
Company Act Rel. Nos. 20574 (Sep. 26, 1994) 59 FR 50312 (Oct. 3,
1994) (Notice of Application) and 20645 (Oct. 21, 1994) 57 SEC
Docket 2705 (Order); A.T. Ohio Municipal Money Fund and The Victory
Funds, Investment Company Act Rel. Nos. 20811 (Dec. 29, 1994) 60 FR
2166 (Jan. 6, 1995) (Notice of Application) and 20854 (Jan. 24,
1995) (Order).
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The netting provision of rule 24f-2(c) is intended to encourage
early filing of Rule 24f-2 Notices, not to penalize funds that file
Rule 24f-2 Notices more than two months after the close of their fiscal
year.\8\ The Commission's experience with rule 24f-2 demonstrates that
the purposes of the rule are best served if funds give prompt attention
to their filing requirements.\9\ Nevertheless, it may not be
appropriate for a fund's filing fees to increase substantially as a
result of the failure of a third party that guaranteed timely delivery
to the Commission.
\8\Investment Company Act Rel. No. 9989 (Nov. 3, 1977) (42 FR
58400 (Nov. 9, 1977) (adopting rule 24f-2).
\9\Investment Company Act Rel. No. 13624 (Nov. 14, 1983) (48 FR
52433 (Nov. 18, 1983) (adopting amendments to rule 24f-2).
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Proposed paragraph (f) to rule 24f-2 would permit a fund whose Rule
24f-2 Notice reaches the Commission after the expiration of the two
month period to take advantage of the netting provisions of rule 24f-
2(c), if the fund establishes that it timely transmitted the notice to
a company or governmental entity that guaranteed delivery to the
Commission no later than the filing date.\10\ This provision would
apply to both the six month deadline for filing Rule 24f-2 Notices and
the two month deadline for taking advantage of the netting
provision.\11\ If this provision is adopted, the Commission would not
expect to entertain further exemptive applications from late filers.
Comment is requested on whether there are other circumstances under
which filings that do not reach the Commission on a timely basis should
be deemed timely filed.
\10\This provision would be substantially the same as rule 16a-
3(h) under the Securities Exchange Act of 1934 (17 CFR 240.16a-3),
which governs filing of periodic reports of beneficial ownership of
stock (Forms 3, 4, and 5) by certain corporate ``insiders.'' See
Securities Act Rel. No. 6389 (Mar. 8, 1982) (47 FR 1125-01 (Mar. 16,
1982)) (adopting rule 16a-3(h)).
\11\The amendments would change the deadlines for filing Rule
24f-2 Notices from six months and two months to 180 days and 60
days, respectively. See infra ``Calculation of Time Periods.''
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Funds that file Rule 24f-2 Notices by direct transmission on the
Commission's EDGAR system (``electronic filers'') would not be affected
by this provision, since the timeliness of their filings does not
depend upon the mail or courier services.\12\ While an electronic
filing may be delayed for technical reasons, the rules governing
electronic filings contain adequate procedures to address transmission
problems.\13\
\12\The term ``direct transmission'' means the transmission of
electronic submissions via a telephonic communication session. 17
CFR 232.11(b).
\13\Regulation S-T provides that if an electronic filer in good
faith attempts to file a document in a timely manner but the filing
is delayed due to technical difficulties beyond the filer's control,
the electronic filer may request an adjustment of the filing date,
and the Commission, or the staff acting pursuant to delegated
authority, may grant the request if it appears that such adjustment
is appropriate. 17 CFR 232.13(b). [[Page 7148]]
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B. Dividend Reinvestment Shares
Shares issued in connection with dividend reinvestment plans
(``DRIP shares'') generally are not treated as ``sales'' of stock for
purposes of registration requirements under the Securities Act,\14\ and
many funds typically do not include DRIP shares as ``sales'' for
purposes of rule 24f-2. Some of these funds, however, include DRIP
shares in determining the amount of shares redeemed during the fiscal
year for purposes of rule 24f-2's netting provision. This method of
counting shares is inconsistent with the purpose of the netting
provision, which was intended to recognize that a substantial portion
of shares being registered were issued to replace redeemed shares that
had previously been registered under the Securities Act.\15\
\14\Securities Act Rel. No. 33-929 (July 29, 1936) (11 FR
10957).
\15\See Investment Company Act Rel. No. 9819 (June 16, 1977)[42
FR 31781 (June 23, 1977)] (adopting the netting provision of rule
24e-2 under the Investment Company Act).
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The Commission proposes to amend rule 24f-2 to require funds taking
advantage of the rule's netting provisions to include DRIP shares when
determining the amount of shares sold and redeemed during the fiscal
year.\16\ This amendment would ensure consistent treatment of DRIP
shares without imposing the recordkeeping burdens that might accompany
a requirement that these shares be excluded from redeemed shares for
purposes of rule 24f-2's netting provision. Comment is requested on
alternative approaches that would prevent inconsistent treatment of
DRIP shares under rule 24f-2's netting provisions. One approach would
require funds to determine the ratio of DRIP shares issued during the
period to shares sold in transactions registered under the Securities
Act and to apply that ratio to determine the amount of redeemed shares
that would be available under the rule's netting provision.
\16\The proposed requirement would not affect the Commission's
policy as stated in Securities Act Rel. No. 33-929 (Jul. 29, 1936);
fund DRIP shares would be included as sales only for purposes of the
netting provision of rule 24f-2.
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C. Mergers and Other Business Combinations
Paragraph (b)(3) of rule 24f-2 (17 CFR 270.24f-2(b)(3)) requires a
fund planning to cease operations to file a post-effective amendment
terminating the Rule 24f-2 declaration and file a Rule 24f-2 Notice
``before ceasing operations.'' In the case of investment company
business combination transactions, especially those involving a
liquidation, merger, or sale of assets, the operation of the rule is
unclear. While in most cases operations cease upon consummation of the
transaction, it may be impractical for the fund to file before the
transaction since sales and redemptions may be occurring until the time
of the transaction. In addition, paragraph (b)(3) is silent as to the
applicability of the netting provisions of paragraph (c) when a fund
files a Rule 24f-2 Notice in connection with ceasing operations.
The Commission is proposing to amend rule 24f-2 to delete the
requirement that a fund file its final Rule 24f-2 Notice prior to
ceasing operations and, in its place, provide that if a fund ceases
operations, the date it ceases operations is the end of its fiscal year
for purposes of rule 24f-2. As a result, a fund (or its successor)
would have to file a final Rule 24f-2 Notice within 180 days after
ceasing operations and pay registration fees on all shares sold during
the fiscal year. If a fund files the Rule 24f-2 Notice within sixty
days after ceasing operations, it would be permitted, under paragraph
(c), to net redemptions made during the period after the end of the
last fiscal year against sales during that period.17
\17\This approach is similar to that taken in rule 8f-1 under
the 1940 Act (17 CFR 270.8f-1), which requires a registered
investment company winding up its affairs or being merged into or
consolidated with another investment company to file an application
for an order declaring that the company has ceased to be a
registered investment company after the transaction has occurred.
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For funds involved in certain business combination transactions,
revised paragraph (b)(3) would specify that a fund ceases operations
for purposes of rule 24f-2 on the date that the fund's assets are
distributed in a liquidation, the effective date of a merger, or, when
there has been a sale of all or substantially all of the fund's assets,
the date those assets are transferred. The revised paragraph would also
clarify that certain other transactions--transactions for the purpose
of changing the fund's state of incorporation or form of organization--
would not result in the company ceasing operations.18 Instead,
under this type of reorganization the successor company would succeed
to all assets and liabilities of the fund, including the registration
fee liabilities (net of any redemption credits) under rule 24f-
2.19
\18\These transactions would be limited to those reorganizations
under which the successor issuer is permitted to succeed to the
registration statement of the fund under rule 414 of Regulation C of
the Securities Act (17 CFR 230.414). This provision would codify a
longstanding staff interpretation of rule 24f-2(b)(3). See, e.g.,
Lowry Market Timing Fund, Inc. (pub. avail. Jan. 9, 1985); Frank
Russell Investment Company (pub. avail. Dec. 3, 1984).
\19\Rule 414(b) (17 CFR 230.414(b)) requires that the succession
result in the successor issuer acquiring all of the assets of and
assuming all of the liabilities and obligations of the issuer. In
combinations other than this type of reorganization, while the
successor company would succeed to the fund's registration fee
liabilities (as it would all other liabilities), it may only use the
fund's redemption credits against the fund's registration fee
liabilities--not those of the successor company.
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D. Calculation of Time Periods
The Commission is proposing to revise paragraphs (b)(1) and (c) of
Rule 24f-2 to replace the ``six month'' and ``two month'' time periods
with ``180 day'' and ``60 day'' time periods, respectively. The current
rule's references to ``months'' has resulted in different periods
depending upon the months involved and is inconsistent with the timing
provisions in other Commission rules.20 This has, on occasion,
caused some confusion among funds about determining filing deadlines.
To further clarify how to calculate time periods, a new paragraph (e)
would be added to the rule specifying that the first day of the time
periods is the first calendar day of the fiscal year following the
fiscal year for which the Rule 24f-2 Notice is filed. The Commission is
proposing similar amendments to rule 24f-1, which permits funds with
effective registration statements to file a notification that has the
effect of registering shares sold in excess of the number of shares
previously registered.21
\20\See, e.g., rule 485 under the Securities Act (17 CFR
230.485).
\21\The six month time periods referred to in paragraphs (a) and
(c) of the rule (17 CFR 270.24f-1(a), 270.24f-1(c)) would be changed
to 180 days.
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III. Form 24F-2
Rule 24f-2 currently specifies the information which funds must
include in a Rule 24f-2 Notice, but generally does not require that the
information be presented in any particular format.22 The
Commission believes that a standard form for Rule 24f-2 Notices will
facilitate the calculation of fees due under rule 24f-2 and reduce
errors in the calculation of filing fees. The Commission's ability to
process Rule 24f-2 Notices and detect errors should also be improved by
a standard form.
\22\Paragraph (b)(1) of the rule currently specifies the
information that must appear in a Rule 24f-2 Notice. Most of these
items would be deleted from the rule if the form is adopted.
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Proposed Form 24F-2 consists of twelve items.23 The first four
items [[Page 7149]] require basic identifying information: The name and
address of the fund; the class of shares or series to which the filing
relates;24 the Securities Act file number of the registration
statement on which the shares are registered; and the last day of the
fiscal-year for which the Rule 24f-2 Notice is filed.
\23\The proposed Form also contains several instructions
concerning completion and filing of the Form which incorporate
provisions of the rule. For example, Instruction A.3 incorporates
the proposed amendments to paragraph (b)(3) of rule 24f-2 regarding
the filing requirements for companies that cease operations, and
Instruction D.3 incorporates proposed paragraph (f) of rule 24f-2,
under which a form would be deemed timely filed if the fund
establishes that it timely transmitted the form to a third party
that guaranteed delivery no later than the required filing date.
\24\The proposed instructions clarify how the rule applies to
funds that offer more than one class or series of securities.
Instruction A.3 of the form makes it clear that an issuer may file a
single Rule 24f-2 Notice for more than one class or series, provided
each class or series has the same fiscal year end and is registered
on the same Securities Act registration statement. See Letter to
Registrant, Feb. 25, 1994, at 3 (hereinafter, 1994 Generic Comment
Letter). This instruction would not affect the method of allocating
expenses among multiple classes of funds in accordance with existing
orders or proposed rule 18f-3 under the 1940 Act; a multiple class
fund could net credits for redemptions of shares of one class
against sales of shares of another class only if the fund's
exemptive order or plan under rule 18f-3 treats federal securities
registration fees as a fund expense and does not provide for the
allocation of those fees on a class by class basis. See Investment
Company Act Rel. No. 19955 (Dec. 15, 1993) (58 FR 68074 (Dec. 23,
1993)) (proposing rule 18f-3).
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Items 5 and 6 would be completed only if the fund fails to file its
Rule 24f-2 Notice within 180 days after its fiscal year end. In such
cases, the fund's declaration to register an indefinite number of
shares is terminated on the next business day.25 As under the
current rule, such fund must file a separate Form 24F-2 with respect to
sales of securities made pursuant to the declaration during (1) the
fiscal year for which the notice was not timely filed, and (2) the
period after the close of the fiscal year but before the declaration
was terminated. Item 5 would require the fund to indicate whether the
form is being filed for purposes of reporting securities sold after the
close of the fiscal year but before termination of the fund's Rule 24f-
2 declaration. The fund would report the date of termination of its
Rule 24f-2 declaration in Item 6.
\25\Rule 24f-2(b)(2) (17 CFR 270.24f-2(b)(2)).
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Items 7 through 11 would require funds to identify the shares sold
during the fiscal year for which registration fees have previously been
paid or which must be accounted for in determining the fee payable with
the Rule 24f-2 Notice. This information is substantially the same as
that currently required by a Rule 24f-2 Notice.26 The only
significant change would be that the form would require information
concerning DRIP shares. This item reflects the proposed amendment to
paragraph (c) of Rule 24f-2, which would require funds to include all
securities issued pursuant to DRIPs in the fund's aggregate sales for
purposes of calculating registration fees under the rule's netting
provisions.27
\26\The information to be provided in items 7 and 8 is not
required to determine the fee due, although rule 24f-2 currently
requires funds to report this information in annual notices. This
information assists the Commission staff and fund compliance
personnel in determining whether the issuer has complied with the
registration requirements of the Securities Act for shares other
than those that are covered by the fund's rule 24f-2 declaration.
\27\Instruction B.5 would clarify that this item should be
completed only if the issuer is using the netting provision of rule
24f-2(c) to calculate its registration fee. For further discussion
of the proposed amendment, see supra ``Dividend Reinvestment
Shares.''
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Proposed item 12 is a work sheet for calculating the fee payable
with the notice. The fee calculation is presented in tabular format to
facilitate the Commission staff's review of filing fees for purposes of
determining whether a fund has paid the appropriate amount. The work
sheet contains seven line items:
(i) The aggregate sale price of securities sold during the fiscal
year in reliance on Rule 24f-2;
(ii) The aggregate price of DRIP shares (if not included in (i));
(iii) The aggregate price of shares redeemed or repurchased during
the fiscal year;
(iv) The aggregate price of shares redeemed or repurchased and
previously applied as a reduction to filing fees pursuant to Rule 24e-
2;28
\28\Section 24(e)(1) of the 1940 Act permits a fund to file a
post-effective amendment to its Securities Act registration
statement to increase the number of securities registered. Rule 24e-
2 provides that the fee to be paid at the time of filing such post-
effective amendment will be based on the maximum aggregate offering
price at which the additional securities will be offered. This
filing fee may be reduced by the amount of securities redeemed or
repurchased by the issuer in its previous fiscal year, provided the
issuer did not use those redemptions or repurchases under the
netting provisions of rule 24f-2. Conversely, the issuer may not
count redemptions and repurchases used to reduce the filing fee
under rule 24e-2 for purposes of netting under rule 24f-2.
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(v) The net aggregate sale price of securities sold during the
fiscal year in reliance on Rule 24f-2 (line (i), plus line (ii), less
line (iii), plus line (iv));
(vi) The multiplier to be used to determine the fee;29 and
\29\In the act making appropriations for the Commission for
fiscal 1994, Congress increased the rate of fees prescribed by
section 6(b) of the Securities Act from one fiftieth of one percent
to one twenty-ninth of one percent. Pub.L. 103-121 (Oct. 27, 1993).
Congress extended the increased fee for fiscal year 1995. Pub.L.
103-352 (Oct. 13, 1994). The current fee rate will be in effect
through September 30, 1995, unless further extended by Congress;
otherwise, the rate will revert to one fiftieth of one percent.
Instruction C.4 to the Form would remind funds to determine the
current fee rate prior to filing, since the form may not be accepted
for filing if the law requires the fee to be calculated at a rate
higher than that used by the filer and an overpayment may result if
the statutory rate in effect is lower than the rate on the form.
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(vii) The fee due (line (i) (if the netting provision is not used)
or line (v) (if the netting provision is used) multiplied by line
(vi)).\30\
\30\Instruction C.2 specifies that the $100 minimum fee
prescribed by section 6(b) of the Securities Act does not apply to
fees payable under rule 24f-2. This provision would also be
incorporated into paragraph (c) of the rule.
Funds would complete lines (ii), (iii), (iv), and (v) only if the fund
is using the rule's netting provision. Thus, the work sheet can be used
whether or not the fund is using the rule's netting provision.
The work sheet provided in Item 12 is similar to the method for
reporting the calculation of Rule 24f-2 fees on the EDGAR system. Under
the EDGAR system, an electronic filer is required to prepare a header
for each Rule 24f-2 Notice. The header contains certain filing fee
information that is included in the accompanying Rule 24f-2 Notice. The
Commission's computer systems are programmed to ``check'' the filer's
fee calculation based on the information provided in the header. If the
computer cannot verify the fee calculation, Commission staff review the
accompanying notice to determine the source of the error. As proposed,
Form 24F-2 would not alter the headers for EDGAR filings. The
Commission requests comment whether it should modify its systems to
permit computer verification of the fee calculation based on
information in the notice rather than the header, thus avoiding the
need for filers to duplicate information.
IV. General Request for Comments
Any interested persons wishing to submit written comments on the
proposed rule changes and the proposed new form that are the subject of
this Release, to suggest additional changes (including changes to
provisions of the rules that the Commission is not proposing to amend),
or to submit comments on other matters that might have an effect on the
proposals described above, are requested to do so. Commenters
suggesting alternative approaches are encouraged to submit proposed
rule text.
V. Cost/Benefit Analysis
The rule amendments and new form proposed today would clarify the
operation of rule 24f-2 and would make the rule's filing deadlines more
flexible under certain circumstances. The [[Page 7150]] addition of
paragraph (f) to rule 24f-2 would provide a means for companies to
avoid late filings, which can result in significant costs to companies.
This provision would relieve companies of the cost of preparing
applications for exemption from the provisions of the rule and would
relieve the Commission of the cost of reviewing such applications.
Other proposed revisions to rule 24f-2 are intended to clarify the
operation of the rule when an extraordinary business transaction occurs
such as a merger or liquidation. The change in use of days rather than
months to measure the filing deadlines under rules 24f-1 and 24f-2
would, in most cases, shorten the period to make required filings by a
day or two, and thus could be viewed as a ``cost.'' The Commission
believes, however, that this ``cost'' is outweighed by the added
certainty and uniformity that such a change would bring to the
operation of the rule. Proposed Form 24F-2 would ensure that funds
provide consistent information in their Rule 24f-2 Notices and would
facilitate the staff's review of annual notices. The Commission
believes that the standard form and the interpretive guidance will
reduce the burden of preparing and reviewing Rule 24f-2 Notices. The
Commission invites specific comment on its assessment of the costs and
benefits with respect to today's proposals, including estimates of any
costs and benefits perceived by commenters.
VI. Summary of Regulatory Flexibility Act Analysis
The Commission has prepared an Initial Regulatory Flexibility Act
Analysis in accordance with 5 U.S.C. 603 regarding the proposed
amendments. The analysis explains that the proposed form and amendments
would result in a reduction of reporting and compliance requirements
for small entities. The proposed amendments would clarify several
issues that have arisen in connection with rule 24f-2, and the proposed
from would facilitate preparation of accurate Rule 24f-2 Notices. The
analysis states that there are no alternative means to achieve the
objectives of the proposed form and amendments. A copy of the Initial
Regulatory Flexibility Act Analysis may be obtained by contacting Karen
J. Garnett, Mail Stop 10-6, Securities and Exchange Commission, 450
Fifth Street, N.W., Washington, D.C. 20549.
Text of Proposed Rule Amendments
List of Subjects in 17 CFR Parts 270 and 274
Investment companies, Reporting and recordkeeping requirements,
Securities.
For the reasons set out in the preamble, Title 17 Chapter II of the
Code of Federal Regulations is proposed to be amended as follows:
Part 270--[AMENDED]
1. The authority citation for part 270 continues to read in part as
follows:
Authority: 15 U.S.C. 80a-1 et seq., 1unless otherwise noted.
* * * * *
Secs. 270.24f-1 and 270.24f-2 [Amended]
2. The authority citations following Secs. 270.24f-1 and 270.24f-2
are removed.
Sec. 270.24f-1 [Amended]
3. By amending Sec. 270.24f-1, paragraphs (a) and (c), by revising
the phrase ``6 months'' to read ``180 days''.
4. By amending Sec. 270.24f-2 by revising paragraphs (b)(1),
(b)(3), and (c) and by adding paragraphs (e) and (f) to read as
follows:
Sec. 270.24f-2 Registration under the Securities Act of 1933 of an
indefinite number of certain investment company securities.
* * * * *
(b)(1) If an issuer has filed a registration statement or post-
effective amendment with a declaration authorized by paragraph (a)(1)
of this section, it shall, with respect to such registration statement
and within 180 days after the close of any fiscal year during which
such declaration was in effect, file five copies of a notice (``Rule
24f-2 Notice'') with the Commission. The Rule 24f-2 Notice shall be
filed on Form 24F-2 (17 CFR 274.24) and shall be prepared in accordance
with the requirements of the form. The Rule 24f-2 Notice shall be
accompanied by an opinion of counsel indicating whether the securities
the registration of which the notice makes definite in number were
legally issued, fully paid, and non-assessable, and the additional
filing fee, if any, specified in paragraph (c) of this section.
* * * * *
(3) For purposes of this section, if a registrant ceases
operations, the date the registrant ceases operations shall be deemed
to be the close of its fiscal year. In the case of a liquidation,
merger, or sale of all or substantially all of the registrant's assets,
the registrant shall be deemed to have ceased operations for purposes
of this section on the date all or substantially all of the
registrant's assets are distributed, the date the merger becomes
effective under state law, or the date the assets are transferred;
provided, however, that a registrant whose registration statement is
succeeded to by another registrant in a transaction described by
Sec. 230.414 of this chapter shall not be deemed to have ceased
operations.
(c) A Rule 24f-2 Notice shall be accompanied by the payment of a
filing fee with respect to the securities sold during the fiscal year
in reliance upon registration pursuant to this section and shall be
based upon the actual aggregate sale price for which such securities
were sold. The filing fee shall be calculated in the manner specified
in section 6(b) of the Securities Act of 1933 and the rules and
regulations thereunder, except that the minimum filing fee required
under section 6(b) shall not apply to fees due under this section. When
the Rule 24f-2 Notice is filed not later than 60 days after the close
of the fiscal year during which such securities were sold pursuant to
this section, the filing fee to be paid as to such securities shall be
the fee, if any, calculated in the manner specified in section 6(b) of
the Securities Act of 1933 except that, for the purposes of such
calculation, such fee shall be based upon the actual aggregate sale
price for which securities (including, for this purpose, all securities
issued pursuant to a dividend reinvestment plan) were sold during the
issuer's previous fiscal year, reduced by the difference between
(1) The actual aggregate redemption or repurchase price of such
securities of the issuer redeemed or repurchased by the issuer during
such previous fiscal year; and
(2) The actual aggregate redemption or repurchase price of such
redeemed or repurchased securities previously applied by the issuer
pursuant to Sec. 270.24e-2(a) in filings made pursuant to section
24(e)(1) of the Investment Company Act of 1940.
* * * * *
(e) To determine the date on which a Rule 24f-2 Notice must be
filed with the Commission under paragraph (b)(1) of this section or the
date that a Rule 24f-2 Notice must be filed in order to permit the
issuer to calculate the fee due in accordance with the second sentence
of paragraph (c) of this section, the first day of the 180 day or 60
day period, as the case may be, shall be the first calendar day of the
fiscal year following the fiscal year for which the Rule 24f-2 Notice
is to be filed.
Note to Paragraph (e): For example, a Rule 24f-2 Notice for a
fiscal year ending on June [[Page 7151]] 30 must be filed no later
than December 28 or, if the issuer calculates the fee due in
accordance with the second sentence of paragraph (c), no later than
August 29. If the last day of the period falls on a non-business day
(a Saturday, Sunday or federal holiday), the period shall end on the
first business day thereafter, as provided by Sec. 270.02.
(f) The date of filing of a Rule 24f-2 Notice with the Commission
shall be the date on which the Rule 24f-2 Notice is actually received
by the Commission; provided, however, that other than in the case of a
Rule 24f-2 Notice filed by direct transmission (as such term is defined
in rule 11 of Regulation S-T [17 CFR 232.11]) a Rule 24f-2 Notice
received by the Commission after the date due under either paragraph
(b)(1) or paragraph (c) of this section shall be deemed to have been
timely filed if the issuer establishes that the Rule 24f-2 Notice had
been transmitted timely to a third party company or governmental entity
providing delivery services in the ordinary course of business, which
guaranteed delivery of the Notice to the Commission no later than the
required filing date.
Part 274--[AMENDED]
5. The authority citation for part 274 continues to read as
follows:
Authority: 15 U.S.C. 80a-1 et seq., unless otherwise noted.
6. Section 274.24 and Form 24F-2 are added to read as follows:
Note: The text of Form 24F-2 does not appear in the Code of
Federal Regulations. A copy of Form 24F-2 is attached as Appendix I
to this document.
Sec. 274.24 Form 24F-2, annual notice of securities sold pursuant to
registration of an indefinite number of certain investment company
securities.
Form 24F-2 shall be used as the annual report filed by face amount
certificate companies, open-end management companies, and unit
investment trusts pursuant to Sec. 270.24f-2 for reporting securities
sold during the fiscal year.
By the Commission.
Dated: February 1, 1995.
Margaret H. McFarland,
Deputy Secretary.
Appendix I
Form 24F-2--Annual Notice of Securities Sold Pursuant to Rule 24f-2
Read instructions at end of Form before preparing Form. Please
print or type.
1. Name and address of issuer:
----------------------------------------------------------------------
2. Name of each series or class of funds for which this notice is
filed:
----------------------------------------------------------------------
3. Investment Company Act File Number:
----------------------------------------------------------------------
Securities Act File Number:
----------------------------------------------------------------------
4. Last day of fiscal year for which this notice is filed:
----------------------------------------------------------------------
5. Check box if this notice is being filed more than 180 days after
the close of the issuer's fiscal year for purposes of reporting
securities sold after the close of the fiscal year but before
termination of the issuer's 24f-2 declaration: [ ]
6. Date of termination of issuer's declaration under rule 24f-
2(a)(1), if applicable (see Instruction A.5):
----------------------------------------------------------------------
7. Number and aggregate sale price of securities of the same class
or series sold during the fiscal year which had been registered
under the Securities Act of 1933 other than pursuant to rule 24f-2
in a prior fiscal year, but which remained unsold at the beginning
of the fiscal year:
----------------------------------------------------------------------
8. Number and aggregate sale price of securities registered during
the fiscal year other than pursuant to rule 24f-2:
----------------------------------------------------------------------
9. Number and aggregate sale price of securities sold during the
fiscal year in reliance upon registration pursuant to rule 24f-2:
----------------------------------------------------------------------
10. Number and aggregate sale price of securities issued during the
fiscal year in connection with dividend reinvestment plans, if
applicable (see Instruction B.5):
----------------------------------------------------------------------
11. Number and aggregate sale price of securities sold during the
fiscal year:
----------------------------------------------------------------------
12. Calculation of registration fee:
(i) Aggregate sale price of securities sold during the $____
fiscal year in reliance on rule 24f-2 (from Item 9):.
(ii) Aggregate price of shares issued in connection with +____
dividend reinvestment plans (from Item 10, if applicable):.
(iii) Aggregate price of shares redeemed or repurchased -____
during the fiscal year (if applicable):.
(iv) Aggregate price of shares redeemed or repurchased and +____
applied as a reduction to filing fees pursuant to rule 24e-
2 (if applicable):.
(v) Net aggregate sale price of securities sold during the ..........
fiscal year in reliance on rule 24f-2 [line (i), plus line
(ii), less line (iii), plus line (iv)] (if applicable):.
-----------
(vi) Multiplier prescribed by Section 6(b) under the x ____
Securities Act of 1933 or other applicable law or
regulation (see Instruction C.5):.
(vii) Fee due [line (vi) multiplied by line (vii)]:......... ..........
===========
Instruction: Issuers should complete lines (ii), (iii), (iv), and
(v) only if the form is being filed within 60 days after the close
of the issuer's fiscal year. See Instruction C.3.
13. Check box if fees are being remitted to the Commission's lockbox
depository as described in section 3a of the Commission's Rules of
Informal and Other Procedures (17 CFR 202.3a). [ ]
Date of mailing or wire transfer of filing fees to the Commission's
lockbox depository:
----------------------------------------------------------------------
Signatures
This report has been signed below by the following persons on behalf
of the issuer and in the capacities and on the dates indicated.
By (Signature and Title)*----------------------------------------------
----------------------------------------------------------------------
Date-------------------------------------------------------------------
* Please print the name and title of the signing officer below the
signature.
Form 24F-2--Annual Notice of Securities Sold Pursuant to Rule 24f-2
Instructions
A. Rule as to Use of Form 24F-2
1. This form shall be used for annual notices required by rule
24f-2 under the Investment Company Act of 1940 (``Act'') [17 CFR
270.24f-2]. Annual notices on this form shall be filed within 180
days after the close of any fiscal year during which the issuer has
in effect a declaration to register an indefinite number of
securities pursuant to rule 24f-2(a)(1) of the Act. If the notice is
being filed not later than 60 days after the close of the issuer's
fiscal year, the fees due with the notice may be reduced (see
Instruction C.3).
2. If the form contains insufficient space for the information
required in any item, issuers should attach additional pages as
necessary and indicate in the space provided on the form that
additional pages are attached.
3. The issuer named in Item 1 of this form is the face amount
certificate company, open-end management company, or unit investment
trust that has filed a registration statement under the Securities
Act of 1933 (``Securities Act'') [15 USC 77a et seq.] containing a
declaration to register an indefinite number of securities under
rule 24f-2(a)(1) of the Act. If the issuer has registered more than
one class or series on the same Securities Act registration
statement, the issuer may file a single Form 24F-2 for those classes
or series, provided each class or series has the same fiscal year
end. Issuers electing to calculate filing fees on a class-by-class
or series-by-series basis, however, should include in their filings
a separate Form 24F-2 for each class or series. All classes and
series for which the form is filed should be identified in Item 2.
4. The Investment Company Act file number reported in response
to Item 3 should be the number of the issuer's registration
statement filed under the Investment Company Act of 1940. The
[[Page 7152]] Securities Act file number in Item 3 refers to the
registration statement filed to register an indefinite number of
securities (beginning with either ``2-'' or ``33-'').
5. Item 4 requires issuers to report the date of the last day of
the fiscal year for which the notice is filed. In the case of an
issuer that ceases operations, the date it ceases operations is
deemed the last day of its fiscal year for purposes of rule 24f-2.
6. Items 5 and 6 should be completed only if the issuer fails to
file its Rule 24f-2 Notice within 180 days after the close of the
issuer's fiscal year. In such cases, the issuer's declaration to
register an indefinite number of shares will be terminated on the
next business day, and the issuer should report the date of
termination in Item 6. All such issuers must file a separate Form
24F-2 with respect to sales of securities made pursuant to the
declaration during (1) the fiscal year for which the notice was not
timely filed, and (2) the period after the close of the fiscal year
but before the declaration was terminated. Issuers should check the
box in Item 5 only if they are filing the form to report securities
sold during the 180-day period after the close of the fiscal year
but before the declaration was terminated.
B. Computation of Number of Securities
1. In response to Items 7 through 11, issuers may aggregate
sales and redemptions of all classes or series for which the notice
is being filed. Issuers must aggregate sales prices within each
class or series. If the registration fee paid for securities
reported in Items 7 and 8 was based on the offering price of those
securities, issuers should report the offering price instead of the
sale price.
2. Item 7 requires the issuer to report the number and dollar
amount of securities of the same class or series as those for which
the notice is being filed, if any, which were registered under the
Securities Act other than pursuant to rule 24f-2. Such securities
must have been registered prior to the fiscal year for which the
notice is being filed and must remain unsold at the beginning of the
fiscal year.
3. Item 8 refers to securities registered during the fiscal year
other than pursuant to rule 24f-2. This item includes securities
registered during the fiscal year by post-effective amendment
pursuant to rule 24e-2.
4. Item 9 requires the issuer to report the securities sold
during the fiscal year in reliance upon registration under rule 24f-
2. This number must exclude securities registered other than under
rule 24f-2 which were sold during the fiscal year, as reported in
Item 8.
5. Item 10 should be completed only if the issuer is using the
netting provision of Item 12. In such cases, the issuer should
report the number and dollar amount of securities not registered
under the Securities Act that were issued during the fiscal year in
connection with dividend reinvestment plans.
6. Item 11 should be the sum of Items 7 through 9, but should
not include Item 10. If the response does not equal the sum of those
items, the issuer should attach to the form an explanation of the
difference.
C. Computation of Registration Fees
1. Item 12 is a work sheet for calculating the filing fee due.
Items 12 (i) and (ii) should be the same as the responses provided
to Items 9 and 10, respectively.
2. The filing fee due shall be calculated in the manner
specified in Section 6(b) of the Securities Act [15 U.S.C. 77f(b)].
Except as provided below, fees shall be based on the actual
aggregate sale or redemption price at the date on which the
securities were sold or redeemed. The $100 minimum fee prescribed by
Section 6(b) does not apply to fees payable under rule 24f-2.
3. Lines (ii), (iii), (iv), and (v) of Item 12 (netting
provisions) apply only to issuers that file the form not later than
60 days after the close of the fiscal year during which securities
were sold. In such cases, the filing fee shall be based upon the net
aggregate sale price for which such securities were sold during the
issuer's previous fiscal year. Net aggregate sale price is the
actual aggregate sale price, plus the value of shares issued in
connection with dividend reinvestment plans, reduced by the
difference between (1) the actual aggregate redemption or repurchase
price of such securities of the registrant redeemed or repurchased
by the issuer during the fiscal year, and (2) the actual aggregate
redemption or purchase price of such redeemed or repurchased
securities previously applied by the issuer pursuant to rule 24e-
2(a) under the Act.
4. If the issuer's total redemptions and repurchases during the
fiscal year exceed the issuer's sales during the fiscal year, the
issuer may report on line (iii) of Item 12 only the amount of
redemptions equal to sales during the fiscal year, as reported on
line (i). The net aggregate sales price reported in line (v) of Item
12 cannot be less than zero.
5. The multiplier for calculation of the filing fee required by
line (vi) of Item 12 is prescribed by Section 6(b) of the Securities
Act. As of October 13, 1994, the multiplier was one twenty-ninth of
one percent of the maximum aggregate offering price of the
securities being registered. This multiplier is subject to change
from time to time, without notice, by act of Congress through
appropriations for the Commission or other laws. Issuers should
determine the current fee rate prior to the time of filing by
reference to Section 6(b) and any law or regulation affecting
Section 6(b). Unless otherwise specified by act of Congress, the fee
rate in effect at the time of filing applies to all securities sold
during the fiscal year, regardless of whether the fee rate changed
during the year.
6. Issuers are cautioned that rounding the percentage used to
compute the fee may result in payment of an incorrect amount. No
part of the filing fee is refundable. Fees must be paid by United
States postal money order, certified bank check, or cash. Issuers
should refer to rule 0-8 under the Act [17 CFR 270.0-8] and rule 3a
under the Commission's Rules of Informal and Other Procedures [17
CFR 202.3a] for instructions on payment of fees to the Commission.
D. Signature and Filing Form; Exhibit
1. The form shall be signed on behalf of the issuer by an
authorized officer of the issuer. The issuer shall file five copies
of the completed form, at least one of which has been manually
signed, with the Securities and Exchange Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549. Acknowledgement of receipt by
the Commission may be obtained by enclosing a self-addressed stamped
postcard identifying the issuer and the form filed.
2. This form must be accompanied by the appropriate filing fee
and an opinion of counsel indicating whether the securities were
legally issued, fully paid, and non-assessable, and payment of the
filing fee. (See paragraph (b)(1) of rule 24f-2.) A copy of the
opinion of counsel should be attached to each copy of the form filed
with the Commission. Electronic filers are reminded that the filing
fee must reach the Commission not later than the day the Rule 24f-2
Notice is filed with the Commission.
3. This form will be deemed filed with the Commission on the
date on which it is actually received by the Commission. Except in
the case of a Rule 24f-2 Notice filed by means of ``direct
transmission'' (as such term is defined in rule 11 of Regulation S-T
[17 CFR 232.11], this form shall be deemed to have been timely filed
if the issuer establishes that it timely transmitted the form and
required fees to a third party company or governmental entity
providing delivery services in the ordinary course of business,
which guaranteed delivery of the form to the Commission no later
than the required filing date. The Commission will not accept for
filing any form accompanied by insufficient payment for the filing
fee. Forms accompanied by insufficient payment shall be returned to
the issuer for proper payment and shall not be deemed filed until
receipt by the Commission of proper payment.
[FR Doc. 95-2901 Filed 2-6-95; 8:45 am]
BILLING CODE 8010-01-P
