[Federal Register Volume 60, Number 175 (Monday, September 11, 1995)]
[Rules and Regulations]
[Pages 47041-47051]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-22445]
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SECURITIES AND EXCHANGE COMMISSION
17 CFR Parts 270 and 274
[Release Nos. 33-7208; IC-21332; S7-3-95]
RIN 3235-AG29
Registration Fees for Certain Investment Companies
AGENCY: Securities and Exchange Commission.
ACTION: Adoption of rule amendments and form.
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SUMMARY: The Commission is adopting amendments to rule 24f-2 under the
Investment Company Act of 1940, the rule that permits certain
investment companies to register an indefinite number of securities
under the Securities Act of 1933. The Commission is also adopting a new
form, Form 24F-2, to provide a standard form for annual notices filed
under rule 24f-2. The amendments and the new form are intended to
clarify the application of certain provisions of rule 24f-2 and make
the rule's filing deadlines more flexible under certain circumstances.
DATES: The amendments are effective October 10, 1995. The rule
amendments and Form 24F-2 will apply to filings that cover fiscal
periods ending on or after the effective date, and to mergers and
reorganizations completed on or after the effective date.
FOR FURTHER INFORMATION CONTACT: Karen J. Garnett, Attorney, or Joseph
E. Price, Deputy Chief, (202) 942-0721, Office of Disclosure and
Investment Adviser Regulation, Division of Investment Management,
Securities and Exchange Commission, 450 Fifth Street NW., Washington,
DC 20549. After the effective date, questions concerning filings should
be addressed to Carolyn A. Miller, Senior Financial Analyst, (202) 942-
0510, Office of Financial Analysis, Securities and Exchange Commission,
450 Fifth Street NW., Washington, DC 20549.
SUPPLEMENTARY INFORMATION: The Securities and Exchange Commission
(``Commission'') today is adopting 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.) (``1940 Act'') and a new Form
24F-2 (17 CFR 274.24).
Table of Contents
Executive Summary
I. Background
II. Amendments to Rule 24f-2
A. Delayed Filings
B. Dividend Reinvestment Shares
C. Mergers and Other Business Combinations
D. Calculation of Time Periods
E. Investment Companies Funding Insurance Company Separate
Accounts
III. Form 24F-2
IV. Cost/Benefit Analysis
V. Summary of Regulatory Flexibility Act Analysis
Text of Rule Amendments
Appendix I
Executive Summary
The Commission is amending rule 24f-2 under the 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 provide 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. In addition, the amendments modify certain
filing periods under rule 24f-2 and clarify the operation of the rule's
termination provisions in the case of investment company business
combination transactions. The Commission also is adopting Form 24F-2, a
standard form for annual notices required by rule 24f-2. Form 24F-2
solicits the information currently required by rule 24f-2 for annual
notices and includes a work sheet for calculating filing fees. The form
is intended to 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 adopting 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 47042]]
(``funds'').1 Section 24 was intended to address the problem of
inadvertent ``oversales'' of fund securities, i.e., sales in excess of
securities registered, which could easily occur with a fund that
continually issues and redeems securities.
\1\These companies include face amount certificate companies,
open-end management companies, and 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 the 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 registration fee based upon the
number of shares sold during the fiscal year.2 If the fund files
its Rule 24f-2 Notice within two months after the close of its fiscal
year, the fund may deduct the value of shares redeemed from the value
of shares sold in calculating the amount of fees due.3 This
netting provision can result in substantial savings to funds and their
shareholders.
\2\Rules 24f-2(a)(1), (a)(3), and (b)(1) [17 CFR 270.24f-
2(a)(1), (a)(3), and (b)(1)].
\3\Rule 24f-2(c) (17 CFR 270.24f-2(c)).
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On February 1, 1995, the Commission issued a release (``Proposing
Release'') proposing for public comment amendments to rule 24f-2 that
would modify the method for determining when Rule 24f-2 Notices will be
deemed timely filed with the Commission.4 The proposed amendments
would also change the computation of filing deadlines and the operation
of rule 24f-2's termination provisions in the case of investment
company business combination transactions. In addition, the Commission
proposed a standard form for filing Rule 24f-2 Notices, which was
intended to improve the accuracy of information contained in the
notices. The Commission received six comment letters on the Proposing
Release,5 all of which supported the proposals.6 The
Commission is adopting the amendments and form substantially as
proposed.
\4\Investment Company Act Rel. No. 20874 (Feb. 1, 1995) (60 FR
7146 (Feb. 7, 1995)).
\5\The comment letters are available for public inspection and
copying in the Commission's public reference room in File No. S7-3-
95.
\6\One commenter, who supported the proposed rule amendments and
form, suggested further changes to accommodate unit investment
trusts (``UITs'') under certain circumstances. While such revisions
are beyond the scope of the current proposal, the Commission intends
to consider revisions to rule 24f-2 for UITs in the future.
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II. Amendments to Rule 24f-2
A. Delayed Filings
Under rule 24f-2, the consequences of filing a late Rule 24f-2
Notice can be severe.7 The Commission proposed an amendment to
rule 24f-2 to provide a means for funds to ensure that their Rule 24f-2
Notices are timely filed and thus to avoid the consequences of late
filings. The proposed amendment to rule 24f-2 provided that a Rule 24f-
2 Notice is deemed timely filed, regardless of when it reaches the
Commission, if the fund establishes that it timely transmitted the
notice to a third party company or governmental entity that guaranteed
delivery to the Commission no later than the filing date. All of the
commenters supported the amendment, which the Commission is adopting as
proposed.
\7\Rule 24f-2 currently provides that a fund cannot use the
netting provision of paragraph (c) of the rule, which may result in
substantially higher filing fees, if the fund's Rule 24f-2 Notice
arrives at the Commission more than two months after the end of the
fund's fiscal year. In addition, a fund's Rule 24f-2 declaration
will terminate if the fund files its Rule 24f-2 Notice more than six
months after its fiscal year end.
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As adopted, new paragraph (f) of rule 24f-2 (17 CFR 270.24f-2(f))
applies to both the deadline for using the rule's netting provision and
the deadline for filing Rule 24f-2 Notices.8 In order to rely on
this provision, a fund must retain a receipt or other writing from the
third party evidencing timely receipt by the third party for filing
with the Commission by the due date.9 By providing a means for
funds to ensure that they are not penalized for the failure of a third
party to timely file their Rule 24f-2 Notices, the amendments should
eliminate the need for such funds to seek exemptive relief from the
requirements of rule 24f-2.10 Consequently, the Commission does
not expect to entertain further exemptive applications from late
filers.
\8\The amendments change the deadline for filing in order to use
the netting provision from two months to 60 days and the deadline
for filing Rule 24f-2 Notices from six months to 180 days. See infra
section II.D (``Calculation of Time Periods'').
\9\Funds that file Rule 24f-2 Notices by direct transmission on
the Commission's EDGAR system (``electronic filers'') will not be
affected by this provision, since the timeliness of their filings
does not depend upon the mail or courier services. While an
electronic filing may be delayed for technical reasons, the rules
governing electronic filings contain adequate procedures to address
transmission problems. See 17 CFR 232.13(b).
\10\The Commission has recently issued exemptive orders pursuant
to its authority under section 6(c) of the 1940 Act (15 U.S.C. 80a-
6(c)) to allow funds filing after the two month deadline under
certain circumstances to use rule 24f-2's netting provision. See
Proposing Release, supra note 4, at n.7 and accompanying text.
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B. Dividend Reinvestment Shares
As discussed above, rule 24f-2 permits a fund to calculate the
registration fee due by deducting the amount of shares redeemed during
the fiscal year from the amount of shares sold during the period. In
determining the amount of shares sold during the fiscal year, some
funds have excluded shares issued in connection with dividend
reinvestment plans (``DRIP shares'').11 These funds, however, also
may have included DRIP shares in determining the amount of shares
redeemed during the fiscal year.12 In the Proposing Release, the
Commission explained that this method of counting shares is
inconsistent with the netting provision of rule 24f-2, which recognizes
that a substantial portion of shares being registered under rule 24f-2
were issued to replace redeemed shares that previously had been
registered under the Securities Act.13 To address this
inconsistency, the Commission proposed an amendment to rule 24f-2 to
require funds taking advantage of the rule's netting provision to
include DRIP shares when determining the amount of shares sold and
redeemed during the fiscal year.
\11\DRIP shares generally are not treated as ``sales'' of stock
for purposes of registration requirements under the Securities Act.
See Securities Act Rel. No. 929 (Jul. 29, 1936). Many funds,
therefore, do not include DRIP shares as ``sales'' for purposes of
rule 24f-2.
\12\Funds that do not separately track DRIP shares generally
have no means of determining whether shares redeemed during the
fiscal year include DRIP shares.
\13\Proposing Release, supra note 4, at section II.B.
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Five of the six commenters generally supported the proposed
amendment. The objecting commenter argued that including DRIP shares in
the amount of securities sold during the fiscal year would contradict
the Commission's long-standing position that the issuance of DRIP
shares is not a ``sale'' of securities for purposes of
registration.14 This commenter asserted that the proposed
amendments could require a fund to pay registration fees on DRIP shares
in years that the amount of DRIP shares issued exceeds redemptions. The
Commission acknowledges that in some years a fund could pay fees on
DRIP shares that would not be offset by redemptions. Those
circumstances would occur infrequently, however, and the fees typically
would be recaptured when those shares are redeemed in later years and
netted against other sales.15
\14\See supra note 11.
\15\Furthermore, in years when the fund has no sales but issues
DRIP shares, the fund would not be required to pay registration fees
on shares sold, regardless of redemptions in that year. This is
because the amendment does not require a fund to include DRIP shares
in the total amount of securities sold unless the fund is netting
redemptions against sales. See Instruction B.7 of Form 24F-2.
[[Page 47043]]
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The Commission considered alternatives to address the commenter's
concern, including requiring funds to track the redemption of DRIP
shares and exclude them from the amount redeemed in calculating net
sales. Industry commenters supported the proposed approach as being
less burdensome. The Commission is adopting the amendment as
proposed.16
\16\Paragraph (c) 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 final 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 has
been unclear. While in most cases a fund's operations cease upon
consummation of the transaction, it may be impractical for the fund to
file a final Rule 24f-2 Notice 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 provision of paragraph (c) when a fund files a Rule 24f-2
Notice in connection with ceasing operations.
To address these issues, the Commission proposed amendments to rule
24f-2 to remove 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 end of its fiscal year for purposes of rule
24f-2 is the date it ceases operations.17 Commenters supported the
proposal, and the Commission is adopting amendments to paragraph (b)(3)
of rule 24f-2 as proposed.
\17\Proposing Release, supra note 4, at section II.C.
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The rule, as amended, provides that the date a fund ceases
operations will be deemed the close of its fiscal year.\18\ Thus, a
fund must 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.\19\ If a fund files the Rule 24f-2 Notice within 60 days
after ceasing operations, it will be permitted, under paragraph (c), to
net redemptions made between the end of the previous fiscal year and
the date of ceasing operations against sales during that period.\20\
For funds involved in business combination transactions (other than
reorganizations described below), revised paragraph (b)(3) specifies
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.
\18\Rule 24f-2(b)(3).
\19\Rule 24f-2(b)(1).
\20\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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As proposed, paragraph (b)(3) also clarified that reorganizations
for the purpose of changing the fund's state of incorporation or form
of organization would not result in the company ceasing operations for
purposes of rule 24f-2. These transactions would be limited under the
proposed rule to reorganizations that satisfied the requirements of
rule 414 under Regulation C of the Securities Act.21 Under a rule
414 reorganization, the successor fund succeeds to all assets and
liabilities of the acquired fund, including the registration fee
liabilities (net of any redemption credits) under rule 24f-2.22
\21\17 CFR 230.414. Rule 414 generally provides that the
registration statement of a predecessor company will be deemed to be
the registration statement of the successor company when the purpose
of the reorganization is to change the company's domicile or form of
organization, provided certain conditions are satisfied. The
Commission staff has stated that rule 414 is applicable to certain
fund reorganizations. See, e.g., Lowry Market Timing Fund, Inc.
(pub. avail. Jan. 9, 1985); Frank Russell Investment Company (pub.
avail. Dec. 3, 1984).
\22\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.
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Two commenters recommended that the Commission expand the
application of paragraph (b)(3) of rule 24f-2 to permit the transfer of
redemption credits when the assets and liabilities of an existing fund
are merged or otherwise transferred into the portfolio of a newly-
created series of another fund.23 The Commission staff has
previously allowed a successor fund to use an acquired fund's
redemption credits when the successor fund was a newly-created series
of a series company.24 The Commission has decided to revise
paragraph (b)(3) to provide that a fund may transfer redemption credits
to a successor fund in the case of either a succession under rule 414
or a transfer of assets to a newly-created series of a series company.
\23\This type of transaction would not satisfy the requirements
of rule 414 because the successor series would be part of a
separately registered series company and would not adopt the
predecessor fund's registration statement as its own, as required by
rule 414. As a result, the acquired fund would cease to do business,
unlike the acquired fund in a rule 414 succession.
\24\The Victory Funds (pub. avail. Apr. 24, 1995). In The
Victory Funds, the staff stated that when a shell series assumes the
assets and liabilities of an acquired fund, the transaction is
similar to a reorganization under rule 414 because the successor
fund is continuing the acquired fund's business and each shareholder
of the acquired fund, following the transaction, owns the same pro
rata interest in the same portfolio of securities as the shareholder
owned before the transaction.
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D. Calculation of Time Periods
The Commission proposed amending paragraphs (b)(1) and (c) of Rule
24f-2 to replace the ``six month'' and ``two month'' time periods for
filing Rule 24f-2 Notices with ``180 day'' and ``60 day'' time periods,
respectively.25 The rule's references to ``months'' has resulted
in different filing periods depending upon the months involved and is
inconsistent with the timing provisions in other Commission
rules.26 This has, on occasion, caused some confusion among funds
about filing deadlines. Only one commenter objected to the proposed
revisions, arguing that the proposal to measure time periods in days
rather than months would create more confusion among filers about the
deadlines for filing Rule 24f-2 Notices. The Commission believes,
however, that the proposed amendments, which make rule 24f-2 consistent
with other filing requirements under the 1940 Act, will reduce
confusion among funds about the time periods for filing annual notices
under rule 24f-2. Therefore, the Commission is adopting the amendments
as proposed.27 To further clarify how to calculate time periods,
the Commission is also adopting, as proposed, a new paragraph
specifying
[[Page 47044]]
that the first day of the time period is the first calendar day of the
fiscal year following the fiscal year for which the Rule 24f-2 Notice
is filed.28
\25\Proposing Release, supra note 4, at section II.D.
\26\See, e.g., rule 30b1-1 under the 1940 Act (17 CFR 270.30b1-
1) (requiring funds to file semi-annual reports with the Commission
not more than 60 calendar days after the close of each fiscal year
and fiscal second quarter); rule 30d-1 under the 1940 Act (17 CFR
270.30d-1) (requiring funds to mail semi-annual reports to
stockholders within 60 days after the close of the period for which
the report is made); and rule 485 under the Securities Act (17 CFR
230.485) (providing that certain post-effective amendments will
become effective on the sixtieth day after filing).
\27\The Commission is adopting 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. The six month
time periods referred to in paragraphs (a)(1) and (c) of rule 24f-1
(17 CFR 270.24f-1(a)(1), 270.24f-1(c)) are changed to 180 days.
\28\Rule 24f-2(e) (17 CFR 270.24f-2(e)).
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E. Investment Companies Funding Insurance Company Separate Accounts
Variable insurance contracts typically are offered through two tier
arrangements in which contract premiums are pooled in an unmanaged
insurance company separate account and invested in an underlying
investment company (``Underlying Fund''). Many of the separate accounts
are registered as investment companies and organized as unit investment
trusts; others are eligible for exemption from the 1940 Act.
Pursuant to an interpretive letter recently issued by the Division
of Investment Management, Underlying Funds are not required to pay
registration fees on securities they sell to certain separate
accounts.29 These separate accounts are those organized as unit
investment trusts and registered as investment companies or separate
accounts that are exempt from registration under the 1940 Act but which
register their securities under the Securities Act and pay registration
fees thereon. The purpose of the interpretive letter was to prevent
payment of registration fees under the Securities Act for the same
aggregate proceeds from investors in variable insurance products that
results in ``double counting'' of assets on which such fees are paid.
\29\American Council of Life Insurance (pub. avail. June 20,
1995).
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The Commission is codifying this interpretive advice in two
instructions to new Form 24F-2.30 Under these instructions, an
Underlying Fund that files a Rule 24f-2 Notice generally is not
required to include securities sold to an unmanaged separate account
that issues interests therein that are registered under the Securities
Act and on which registration fees have been or will be paid.31 If
an Underlying Fund excludes such securities from the amount reported in
its Rule 24f-2 Notice, the Underlying Fund is not required to pay a
registration fee for those securities. An Underlying Fund relying on
this exemption may not include shares redeemed or repurchased from such
unmanaged separate accounts for purposes of netting sales under rule
24f-2.32
\30\Instructions B.5 and C.4 to Form 24F-2.
\31\American Council of Life Insurance (pub. avail. June 20,
1995). The letter and the new instructions do not apply to shares
sold to separate accounts whose interests are not registered under
the Securities Act or to pension plans.
\32\The Commission may, in the future, consider a separate form
designed specifically for variable insurance products to report
shares sold under rule 24f-2.
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III. Form 24F-2
The Commission is adopting Form 24F-2, substantially as proposed,
to provide a standard format for filing information required by Rule
24f-2.33 All of the commenters generally supported the proposed
form. 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 standard form
should also improve the Commission's ability to process Rule 24f-2
Notices and detect errors.
\33\Paragraph (b)(1) of the rule currently specifies the
information that must appear in a Rule 24f-2 Notice. Because Form
24F-2 solicits the same information, the amendments delete this
information from the rule.
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Instructions to the form as adopted specify that an issuer may file
a single Rule 24f-2 Notice for more than one class or series of
securities, provided each series has the same fiscal year end and each
class or series is registered on the same Securities Act registration
statement.34 One commenter objected to limiting the use of a
single Form 24F-2 to series with the same fiscal year end. This
commenter suggested that series funds with different fiscal year ends
be permitted to file a single Form 24F-2 for a specified 12-month
period, which would permit series with different fiscal year ends to
net sales of all series against redemptions of all series. The
Commission believes, however, that the limitation is appropriate.
Series having different year ends appear to operate more like separate
funds than a single fund and thus should not be treated as a single
fund for purposes of aggregating sales and redemptions. The Commission
has therefore decided not to expand the circumstances under which a
series fund is permitted to file a single Form 24F-2 for series within
the fund.35
\34\Instruction A.3. This instruction does not affect the method
of allocating expenses among multiple classes of funds in accordance
with existing orders or rule 18f-3 under the 1940 Act. A multiple
class fund is permitted to net credits for redemptions of shares of
one class against sales of shares of another class 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. 20915 (Feb. 23, 1995) (60 FR 11876 (Mar. 2,
1995)) (adopting rule 18f-3).
\35\This limitation on filing a single Rule 24f-2 Notice for
more than one series is not intended to suggest that all series of a
series company must have the same fiscal year end.
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As adopted, Form 24F-2 consists of twelve items and detailed
instructions for completing and filing the form. The first four items
require basic identifying information: the name and address of the
fund; the class of shares or series to which the filing relates; 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.
Items 5 and 6 must be completed only if the fund fails to file its
Rule 24f-2 Notice within 180 days after its fiscal year end. In such a
case, the fund's declaration to register an indefinite number of shares
is terminated on the next business day.36 As under the current
rule, the 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 requires 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. In
either case, the fund must report the date of termination of its Rule
24f-2 declaration in Item 6.
\36\Rule 24f-2(b)(2) (17 CFR 270.24f-2(b)(2)).
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Items 7 through 11 require a fund 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.37 This information is substantially the
same as that currently required for a Rule 24f-2 Notice. The only
significant change is that the form reflects amendments to paragraph
(c) of rule 24f-2 that require a fund 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.38
\37\As proposed, Item 7 required funds to report the 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 other than pursuant to rule 24f-2 in a prior fiscal
year, but which remained unsold at the beginning of the fiscal year.
One commenter asserted that it would be more meaningful, for
purposes of calculating filing fees due under rule 24f-2, not to
limit this item to securities sold during the fiscal year. The
Commission agrees and has omitted the limiting phrase from the form
as adopted.
\38\Instruction B.7 clarifies that this item should be completed
only if the fund is using the netting provision of rule 24f-2(c) to
calculate its registration fee. See supra section II.B (``Dividend
Reinvestment Shares'').
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Item 12 is a work sheet for calculating the fee payable with the
notice. The fee calculation is presented in tabular
[[Page 47045]]
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;39
\39\In the case of a fund with a front-end load, the aggregate
sale price includes the sales load.
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(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;40
\40\Section 24(e)(1) of the 1940 Act (15 U.S.C. 80a-24(e)(1))
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 (17 CFR 270.24e-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;41 and
\41\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.6 to the form reminds funds to determine the current
fee rate before filing.
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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)).42
\42\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 also has been
incorporated into paragraph (c) of the rule.
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A fund must complete lines (ii), (iii), (iv), and (v) only if it 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. As
adopted, Form 24F-2 does not alter the headers for EDGAR
filings.43
\43\The Proposing Release requested comment whether the
Commission should modify its systems to permit computer verification
of the fee calculation based on information in the form rather than
the header, thus avoiding the need for filers to duplicate
information. The only commenter to address this question supported
such a modification because it would relieve EDGAR filers of the
burden of manually transferring information from Form 24F-2 to the
header. The Commission agrees that such a modification could
simplify electronic submissions of Form 24F-2. As the staff further
develops the EDGAR system, the Commission may propose appropriate
modifications relating to Form 24F-2.
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IV. Cost/Benefit Analysis
The rule amendments and new form adopted today are intended to
clarify the operation of rule 24f-2 and make the rule's filing
deadlines more flexible under certain circumstances. The addition of
paragraph (f) to rule 24f-2 provides a means for funds to avoid late
filings, which can result in significant costs to the funds. This
provision will relieve funds of the cost of preparing applications for
exemption from the provisions of the rule and will relieve the
Commission of the cost of reviewing such applications. Other revisions
to rule 24f-2 adopted today are intended to clarify the operation of
the rule when an extraordinary business transaction occurs such as a
merger or liquidation. The change to use of days rather than months to
measure the filing deadlines under rules 24f-1 and 24f-2 will, 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'' will be minor and is outweighed by the added
certainty and uniformity that such a change brings to the operation of
the rule. Form 24F-2 is designed to ensure that funds provide
consistent information in their Rule 24f-2 Notices and to facilitate
the staff's review of annual notices. The Commission believes that the
standard form and the interpretive guidance provided in the form's
instructions will reduce the burden of preparing and reviewing Rule
24f-2 Notices.
V. Summary of Regulatory Flexibility Act Analysis
A summary of the Initial Regulatory Flexibility Act Analysis,
prepared in accordance with 5 U.S.C. 603, was published in the
Proposing Release. No comments were received on this analysis. The
Commission has prepared a Final Regulatory Flexibility Analysis, a copy
of which may be obtained by contacting Karen J. Garnett, Office of
Disclosure and Investment Adviser Regulation, Securities and Exchange
Commission, 450 Fifth Street NW., Washington, DC 20549.
Text of 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, Chapter II, Title 17 of
the Code of Federal Regulations is amended as follows:
PART 270--RULES AND REGULATIONS, INVESTMENT COMPANY ACT OF 1940
1. The authority citation for Part 270 continues to read in part as
follows:
Authority: 15 U.S.C. 80a-1 et seq., 80a-37, 80a-39, unless
otherwise noted;
* * * * *
2. The authority citations following Secs. 270.24f-1 and 270.24f-2
are removed.
Sec. 270.24e-2 [Amended]
3. By amending Sec. 270.24e-2, paragraph (a)(1), by revising the
reference ``Rule 457(c) (17 CFR 230.457(c))'' to read ``Rule 457(d) (17
CFR 230.457(d))''.
Sec. 270.24f-1 [Amended]
4. By amending Sec. 270.24f-1, paragraphs (a) and (c)(1), by
revising the phrase ``6 months'' to read ``180 days''.
5. 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,
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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 assets of the
registrant, 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 in the case of a merger of a registrant
(``Predecessor Fund'') with another registrant (``Successor Fund''), or
a sale of all or substantially all of a Predecessor Fund's assets and
liabilities to a Successor Fund, the Predecessor Fund shall not be
deemed to have ceased operations and the Successor Fund shall assume
the obligations, fees, and redemption credits of the Predecessor Fund
incurred pursuant to this section and Sec. 270.24e-2 if:
(i) The registration statement of the Predecessor Fund is deemed
the registration statement of the Successor Fund in a transaction
described by Sec. 230.414 of this chapter; or
(ii) The Successor Fund is a series of a series company (as defined
in Sec. 270.18f-2), and immediately prior to the transaction the
Successor Fund had no assets or liabilities, other than nominal assets
or liabilities, and no operating history.
(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 purpose 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 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. 270.0-2.
(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 was
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--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. 80a-1 et seq., unless otherwise noted.
7. 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 of this chapter for
reporting securities sold during the fiscal year.
Dated: September 1, 1995.
By the Commission.
Margaret H. McFarland,
Deputy Secretary.
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[FR Doc. 95-22445 Filed 9-8-95; 8:45 am]
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