[Federal Register Volume 64, Number 113 (Monday, June 14, 1999)]
[Notices]
[Pages 31883-31884]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-14986]
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SECURITIES AND EXCHANGE COMMISSION
Submission for OMB Review; Comment Request
Upon Written Request, Copies Available From: Securities and Exchange
Commission, Office of Filings and, Information Service, Washington,
D.C. 20549-0007
Extension:
Rule 17f-4 [17 CFR 270.17f-4] SEC File No. 270-232 OMB Control
No. 3235-025
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'') has submitted to the Office of
Management and Budget (``OMB'') a request for extension and approval of
the collection of information described below.
Section 17(f) \1\ of the Investment Company Act of 1940 \2\ (the
``Act'') permits registered management investment companies (``funds'')
and their custodians to maintain fund assets in a system for the
central handling of securities, subject to Commission rules. Rule 17f-4
\3\ under the Act defines this type of system as a ``securities
depository.'' The rule sets conditions for the use of certain
depositories, including U.S.-registered clearing agency that acts as a
depository, and the federal book-entry system for government
securities.\4\
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\1\ 15 U.S.C. 80a-17(f).
\2\ 15 U.S.C. 80a.
\3\ 17 CFR 270.17f-4.
\4\ Rule 17f-4 does not regulate the use of foreign securities
depositories. Funds that maintain securities in foreign depositories
must comply with rule 17f-5 under the Act [17 CFR 270.17f-5].
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Certain information collection requirements apply to the fund's
custodian when, as in the usual case, a fund uses a depository through
its custodian. Rule 17f-4 requires the custodian to send the fund a
written confirmation of each transfer of securities to or from the
fund's account with the custodian. When securities are transferred to
the fund's account, the custodian also must identify as belonging to
the fund (or ``earmark'') an appropriate quantity of securities that
the custodian holds in a fungible bulk with the depository (or with any
agent through which the custodian uses the depository). In addition,
the custodian or its agent must send the fund reports it receives
concerning the depository's internal accounting controls, and reports
on the custodian's or agent's own controls as the fund may reasonably
request.
[[Page 31884]]
Other information collection requirements apply to the fund. The
fund's board of directors must approve by resolution the custodian's
arrangement with each depository, and material changes in any
arrangement. In the unusual case when a fund deals directly with a
depository, the fund board must approve the arrangement with the
depository, and the fund must establish a system that is reasonably
designed to prevent unauthorized officer's instructions.\5\
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\5\ Officer's instructions are directions to the depository by
authorized personnel of the fund.
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Rule 17f-4 facilitates the safe use of depositories, which can
simplify the clearance and settlement of securities transactions and
reduce risks of loss, theft, and destruction of securities. The rule's
requirements that the custodian confirm transactions and earmark a
portion of its holdings for the fund help to document the fund's
transactions, and provide evidence of the fund's interest in
``omnibus'' depository accounts that may contain the pooled assets of
multiple owners. The requirement that the custodian and its agent send
the fund reports on internal controls helps the fund and its auditors
to evaluate the reliability of the custodian, its agent, and the
depository. The requirement that the fund board approve depository
arrangements and material changes encourages directors to review
periodically the safety of these arrangements. The requirement that the
fund have a system to prevent unauthorized officer's instructions helps
to protect fund assets from misappropriation.
The Commission staff estimates that 3,400 respondents (including
3,300 funds, 50 bank custodians, and 50 agents of the custodians) make
approximately 25,750 responses under the rule each year. The staff
estimates that on average, 50 custodians spend 500 hours each year in
transmitting daily confirmations to funds and 250 hours in earmarking
holdings for funds, and 100 custodians and agents spend 16 hours
annually in transmitting reports to funds. The staff estimates that on
average, 500 funds spend 6 hours each year in approving new depository
arrangements or changes in existing arrangements, and 50 funds spend 10
hours each year in implementing systems to prevent unauthorized
officer's instructions. The total annual burden of the rule's
requirements for all respondents therefore is estimated to be 42,600
hours ((50 custodians x 750 hours) + (100 custodians and agents x
16 hours) + (500 funds x 6 hours) + (50 funds x 10 hours)).\6\
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\6\ The estimated average burden hours do not reflect the costs
of operating computer systems used by custodians to provide
confirmations and earmark assets, and used by funds to help prevent
unauthorized officer's instructions.
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The estimated annual burden of 42,600 burden hours represents an
increase of 17,344 hours over the prior estimate of 25,256 hours. The
increase in annual burden hours is attributable to the staff's
recognition that the rule imposes information collection requirements
of funds as well as custodians, and to increases in the estimated time
spent by custodians and agents in collecting information relating to an
increasing number of fund transactions.
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. 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.
Please direct general comments regarding the above information to
the following persons: (i) Desk Officer for the Securities and Exchange
Commission, Office of Information and Regulatory Affairs, Office of
Management and Budget, Room 3208, New Executive Office Building,
Washington, DC 20503; and (ii) Michael E. Bartell, Associate Executive
Director, Office of Information Technology, Securities and Exchange
Commission, 450 5th Street, NW, Washington, DC 20549-0004. Comments
must be submitted to OMB within 30 days of this notice.
Dated: June 2, 1999.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-14986 Filed 6-11-99; 8:45 am]
BILLING CODE 8010-01-M
