[Federal Register Volume 62, Number 106 (Tuesday, June 3, 1997)]
[Notices]
[Pages 30358-30360]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-14352]
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SECURITIES AND EXCHANGE COMMISSION
Proposed Collection; Comment Request
Upon Written Request, Copies Available From: Securities and
Exchange Commission, Office of Filings and Information Services, 450
Fifth Street, N.W., Washington, D.C. 20549.
Extensions:
Rule 11a-3; SEC File No. 270-321; OMB Control No. 3235-0358
Rule 17g-1; SEC File No. 270-208; OMB Control No. 3235-0213
Rule 206(4)-3; SEC File No. 270-218; OMB Control No. 3235-0242
Rule 206(4)-4; SEC File No. 270-304; OMB Control No. 3235-0345
Notice is hereby given that, pursuant to the Paperwork Reduction
Act of 1995 (44 U.S.C. 3501 et seq.), the Securities
[[Page 30359]]
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 for extension and approval.
Rule 11a-3 under the Investment Company Act of 1940 [17 CFR
270.11a-3] is an exemptive rule that permits open-end investment
companies (``funds''), other than insurance company separate accounts,
and funds' principal underwriters, to make certain exchange offers to
fund shareholders and shareholders of other funds in the same group of
investment companies. The rule requires a fund, among other things, (i)
to disclose in its prospectus and advertising literature the amount of
any administrative or redemption fee imposed on an exchange
transaction, (ii) if the fund imposes an administrative fee on exchange
transactions, other than a nominal one, to maintain and preserve
records with respect to the actual costs incurred in connection with
exchanges for at least six years, and (iii) give the fund's
shareholders a sixty day notice of a termination of an exchange offer
or any material amendment to the terms of an exchange offer (unless the
only material effect of an amendment is to reduce or eliminate an
administrative fee, sales load or redemption fee payable at the time of
an exchange).
The rule's requirements are designed to protect investors against
abuses associated with exchange offers, provide fund shareholders with
information necessary to evaluate exchange offers and certain material
changes in the terms of exchange offers, and enable the Commission
staff to monitor funds' use of administrative fees charged in
connection with exchange transactions.
It is estimated that approximately 2,500 funds may choose to rely
on the rule, and each fund may spend one hour annually complying with
the recordkeeping requirement and another hour annually complying with
the notice requirement. The total annual burden associated with the
rule is estimated to be 5,000 hours. The burdens associated with the
disclosure requirement of the rule are accounted for in the burdens
associated with the Form N-1A registration statement for funds.
Rule 17g-1 under the Investment Company Act of 1940 governs the
fidelity bonding of officers and employees of registered management
investment companies (``funds''). Rule 17g-1 requires, among other
things, that:
(1) Fidelity Bond Content Requirements. The fidelity bond must
provide that it shall not be canceled, terminated or modified except
upon a 60-day written notice by the acting party to the affected party.
In the case of a ``joint bond'' covering several funds or certain other
parties, the notice also must be given to each fund and to the
Commission. In addition, a joint bond must provide that a copy of the
bond, any amendments to the bond, any formal filing of a claim on the
bond, and notification of the terms of any settlement on such claim,
will be furnished to each fund promptly after the execution.
(ii) Independent Directors' Approval Requirements. At least
annually, the independent directors of a fund must approve the form and
amount of the fidelity bond. The amount of any premium paid for any
joint bond also must be approved by the independent directors of a
fund.
(iii) Joint Bond Agreement Requirement. A fund that is insured by a
joint bond must enter into an agreement with all other parties insured
by the joint bond regarding recovery under the joint bond.
(iv) Required Filings with the Commission. Upon execution of a
fidelity bond or any amendment thereto, a fund must file with the
Commission a copy of: (i) the executed fidelity bond; (ii) the
resolution of the fund's directors approving the fidelity bond; and
(iii) a statement as to the period for which the fidelity bond premiums
have been paid. In the case of a joint bond, a fund also must file a
copy of: (i) a statement showing the amount of a single insured bond
the fund would have maintained under the rule had it not been named
under a joint bond; and (ii) each agreement between the fund and all
other insured parties. A fund also must notify the Commission in
writing within 5 days of any claim and settlement on a claim made under
a fidelity bond.
(v) Required Notices to Directors. A fund must notify by registered
mail each member of its board of directors (i) of any cancellation,
termination or modification of the fidelity bond at least 45 days prior
to the effective date; and (ii) of the filing or settlement of any
claim under the fidelity bond when the notification is filed with the
Commission.
The fidelity bond content requirements, the joint bond agreement
requirement, the independent directors' annual review requirement and
the required notices to directors are designed to ensure the safety of
fund assets against losses due to the conduct of persons who may obtain
access to those assets, and facilitate oversight of a fund's fidelity
bond. The rule's required filings with the Commission are designed to
assist the Commission in monitoring funds' compliance with the fidelity
bond requirements.
The Commission estimates that approximately 3,200 funds are subject
to the requirements of rule 17g-1, and that on average a fund spends
approximately one hour per year on complying with the rule's paperwork
requirements. The total annual burden of the rule's paperwork
requirements thus is estimated to be 3,200 hours.
Rule 206(4)-3, entitled ``Cash Payments for Client Solicitations''
provides restrictions on cash payments for client solicitations. The
rule imposes two sets of information collection requirements. Where
only impersonal advisory services are to be provided or an affiliation
between the solicitor and adviser exists, the rule requires that the
fee be paid pursuant to a written agreement and that the prospective
client be advised of any affiliation between the adviser and the
solicitor. Where individualized services are to be provided, the
solicitor must furnish the prospective client with a copy of the
adviser's brochure and a disclosure document containing specified
information. The information collection and disclosure requirements in
rule 206(4)-3 permit the Commission's inspection staff to monitor the
activities of investment advisers and protect investors. Rule 206(4)-3
is applicable to all registered investment advisers.
The Commission believes that approximately 4,577 of these advisers
have cash referral fee arrangements. Under the recently enacted
National Securities Markets Improvement Act of 1996 (the ``1996 Act''),
however, only about 1,281 advisers will be subject to the rule after
the legislation becomes effective on July 8, 1997. The rule requires
approximately 7.04 burden hours per year per adviser and would result,
after July 8, 1997, in a total of approximately 9,018 total burden
hours (7.04 x 1281) for all advisers.
Rule 206(4)-4, entitled ``Financial and Disciplinary Information
that Investment Advisers Must Disclose to Clients,'' requires advisers
to disclose certain financial and disciplinary information to clients.
The disclosure requirements in rule 206(4)-4 are designed so that a
client will have information about an adviser's financial condition and
disciplinary events that may be material to a client's evaluation of
the adviser's integrity or ability to meet contractual commitments to
clients. The Commission does not use the information disclosed to
clients.
[[Page 30360]]
It is estimated that approximately 3,222 advisers are currently
subject to this rule, but that after the 1996 Act becomes effective
only 902 advisers will be subject to the rule. The rule requires
approximately 7.5 burden hours per year per adviser and, after July 8,
1997, would amount to approximately 6,765 total burden hours (7.5 x
902) for all advisers.
Rule 206(4)-3 does not specify a retention period for its
recordkeeping requirements. The disclosure and recordkeeping
requirements of rule 206(4)-3 and the disclosure requirements of rule
206(4)-4 are mandatory. Information subject to the recordkeeping and
disclosure requirements of rules 206(4)-3 and -4 is not submitted to
the Commission, so confidentiality is not an issue.
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.
The estimate of average burden hours is made solely for the
purposes of the Paperwork Reduction Act, and is not derived from a
comprehensive or even a representative survey or study of the costs of
Commission rules and forms.
Written comments are invited on: (a) Whether the collection of
information is 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 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 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, N.W., Washington,
DC 20549.
Dated: May 20, 1997.
Margaret H. McMarland,
Deputy Secretary.
[FR Doc. 97-14352 Filed 6-2-97; 8:45 am]
BILLING CODE 8010-01-M
