2024-21427. Proposed Collection; Comment Request; Extension: Rule 17e-1

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Securities and Exchange Commission

1. [SEC File No. 270-224, OMB Control No. 3235-0217]

Upon Written Request, Copies Available From: Securities and Exchange Commission, Office of FOIA Services, 100 F Street NE, Washington, DC 20549-2736.

Notice is hereby given that, pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.) (“Paperwork Reduction Act”), the Securities and Exchange Commission (the “Commission”) is soliciting comments on the collection of information summarized below. The Commission plans to submit this existing collection of information to the Office of Management and Budget (“OMB”) for extension and approval.

Rule 17e-1 (17 CFR 270.17e-1) under the Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.) (the “Investment Company Act”) deems a remuneration as “not exceeding the usual and customary broker's commission” for purposes of Section 17(e)(2)(A) of the Investment Company Act (15 U.S.C. 80a-17(e)(2)(A)) if, among other things, a registered investment company's (“fund's”) board of directors, including a majority of the directors who are not interested persons of the fund, has adopted procedures reasonably designed to provide that the remuneration to an affiliated broker is reasonable and fair compared to that received by other brokers in connection with comparable transactions involving similar securities being purchased or sold on a securities exchange during a comparable period of time and the board makes and approves such changes as it deems necessary. In addition, each quarter, the board must determine that all transactions effected under the rule during the preceding quarter complied with the established procedures (“review requirement”). Rule 17e-1 also requires the fund to (i) maintain permanently in an easily accessible place a written copy of the procedures adopted by the board for complying with the requirements of the rule; and (ii) maintain for a period of six years, the first two in an easily accessible place, a written record of each transaction subject to the rule, setting forth the amount and source of the commission, fee, or other remuneration received; the identity of the broker; the terms of the transaction; and the materials used to determine that the transactions were effected in compliance with the procedures adopted by the board (“recordkeeping requirement”). The review and recordkeeping requirements of rule 17e-1 permit Commission staff to monitor the reasonableness and fairness of remuneration received by affiliated persons of the fund. Without the recordkeeping requirement, Commission inspectors would have difficulty ascertaining whether funds were complying with rule 17e-1.

Based upon an analysis of fund filings on Form N-CEN, approximately 1,614 funds report reliance on rule 17e-1.^[1] Based on staff experience and conversations with fund representatives, we estimate that the burden of compliance with rule 17e-1 is approximately 50 hours per fund per year. This time is spent, for example, reviewing the applicable transactions and maintaining records. Accordingly, we calculate the total estimated annual internal burden of complying with the review and recordkeeping requirements of rule 17e-1 to be approximately 80,700 hours.^[2] We further estimate that, of these:

• 60 percent (48,420 hours) are spent by senior accountants, at an estimated hourly wage of $266,^[3] for a total of approximately $12,879,720 per year; ^[4]

• 30 percent (24,210 hours) are spent by in-house attorneys at an estimated hourly wage of $511, for a total of approximately $12,371,310 per year; ^[5] and

• 10 percent (8,070) are spent by the funds' board of directors at an hourly cost of $4,770, for a total of approximately $38,493,900 per year.^[6]

Based on these estimated wage rates, the total cost to the industry of the hour burden for complying with the review and recordkeeping requirements of rule 17e-1 is approximately $63,744,930.^[7] The Commission staff estimates that there is no cost burden associated with the information collection requirement of rule 17e-1 other than this cost.

Estimates of average burden hours are made solely for the purposes of the Paperwork Reduction Act and are not derived from a comprehensive or even ( print page 76906) a representative survey or study of the costs of Commission rules and forms. The collection of information under rule 17e-1 is required to obtain the benefits of the rule. The information provided under rule 17e-1 will not be kept confidential. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number.

Written comments are invited on: (a) whether the proposed collection of information is necessary for the proper performance of the functions of the Commission, including whether the information shall have 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 by November 18, 2024.

An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information under the PRA unless it displays a currently valid OMB control number.

Please direct your written comments to: Austin Gerig, Director/Chief Data Officer, Securities and Exchange Commission, c/o Oluwaseun Ajayi, 100 F Street NE, Washington, DC 20549 or send an email to: [e-mail].

Dated: September 16, 2024.

Vanessa A. Countryman,

Secretary.

Footnotes

1.  Staff estimate is based on a three-year average of funds reporting reliance on rule 17e-1 covering calendar years 2022-2024.

2.  1,614 funds × 50 hours per fund = 80,700 hours.

3.  The Commission's estimates concerning the allocation of burden hours and the relevant wage rates are based on consultations with industry representatives and on salary information for the securities industry compiled by the Securities Industry and Financial Markets Association; the estimated wage figures are also based on published rates for senior accountants and in-house attorneys, modified to account for an 1800-hour work-year and multiplied by 5.35 to account for bonuses, firm size, employee benefits, and overhead, yielding effective hourly rates of $266 and $511, respectively; see Securities Industry and Financial Markets Association, Report on Management & Professional Earnings in the Securities Industry 2013.

4.  48,420 hours × $266 per hour = $12,879,720.

5.  24,210 hours × $511 per hour = $12,371,310.

6.  8,070 hours × $4,770 per hour = $38,493,900; the estimate for the cost of board time as a whole is derived from estimates made by the staff regarding typical board size and compensation that is based on information received from fund representatives and publicly available sources.

7.  $12,879,720 + $12,371,310 + $38,493,900 = $63,744,930.