Upon written request, copies available from: Securities and Exchange Commission, Office of Filings and Information Services, 450 5th Street, N.W., Washington, D.C. 20549.
Extension:
Rule 17a-7, SEC File No. 270-238, OMB Control No. 3235-0214
Rule 17a-8, SEC File No. 270-225, OMB Control No. 3235-0235
Rule 17e-1, SEC File No. 270-224, OMB Control No. 3235-0217
Rule 19a-1, SEC File No. 270-240, OMB Control No. 3235-0216
Rule 31a-1, SEC File No. 270-173, OMB Control No. 3235-0178
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”) requests for extension of previously approved collections of information described below.
Rule 17a-7 [17 CFR 270.17a-7] under the Investment Company Act of 1940 (the Act) is entitled “Exemption of certain purchase or sale transactions between an investment company and certain affiliated persons thereof.” It provides an exemption from section 17(a) of the Act for purchases and sales of securities between registered investment companies that are considered affiliates because of a common adviser, director, or officer. Rule 17a-7 requires investment companies to keep various records in connection with purchase or sale transactions affected by the rule. The rule requires the board of directors of an investment company to establish procedures reasonably designed to ensure that all conditions of the rule have been satisfied, and requires the investment company to maintain and preserve permanently a written copy of those procedures. In an investment company enters into a purchase or sale transaction with an affiliated person, the rule requires the investment company to maintain written records of the transaction for a period of not less than six years from the end of the fiscal year in which the transaction occurred. In addition, under the rule, the board is required to determine, at least on a quarterly basis, that all affiliated transactions made during the preceding quarter were made in compliance with these established procedures. The Commission's examination staff uses these records to evaluate transactions between affiliated investment companies for compliance with the rule.
The written records are required to set forth a description of the security purchased or sold, the identity of the person on the other side of the transaction, and the information or materials upon which the board of directors' determination that the transaction was in compliance with the procedures.
The Commission estimates that approximately 750 investment companies enter into transactions affected by rule 17a-7 each year. The average annual burden for rule 17a-7 is estimated to be approximately two burden hours per respondent, for an annual total of 1,500 burden hours for all respondents. The collection of information required by rule 17a-7 is necessary to obtain the benefits of the rule. Responses will not be kept confidential.
Based on the experience of the Commission's examination and inspections staff, the Commission staff estimates that most investment companies (3,000 of the estimated 3,560 registered investment companies) have adopted procedures for compliance with rule 17a-7. Of these 3,000 investment companies, the Commission staff assumes that each year approximately 25% (750) enter into transactions affected by rule 17a-7.
This estimate is based on conversations with attorneys familiar with the information collection requirements of rule 17a-7.
Rule 17a-8 [17 CFR 270.17a-8] under the Act is entitled “Mergers of certain affiliated investment companies.” Rule 17a-8 exempts certain mergers and similar business combinations (“mergers”) of affiliated registered investment companies (“funds”) from section 17(a)'s prohibitions on purchases and sales between a fund and its affiliates. The rule requires fund directors to consider certain issues and to record their findings in board minutes. The average annual burden of meeting the requirements of rule 17a-8 is estimated to be 1.5 hours for each fund. The Commission staff estimates that approximately 80 funds rely on the rule each year. The estimated total average annual burden for all respondents therefore is 120 hours.
The collection of information required by rule 17a-8 is required to obtain the benefits of the rule. Responses will not be kept confidential. Pursuant to rule 31a-2 under the Investment Company Act [17 CFR 270.31a-2], a fund is required to maintain permanently the minutes of its board meetings.
Rule 17e-1 [17 CFR 270.17e-1] under the Act is entitled “Brokerage Transactions on a Securities Exchange.” The rule governs the remuneration that a broker affiliated with an investment company may receive in connection with securities transactions by the investment company. The rule requires an investment company's board of directors to establish, and review as necessary, procedures reasonably designed to provide that the remuneration to an affiliated broker is a fair amount compared to that received by other brokers in connection with transactions in similar securities during a comparable period of time. Each quarter, the board must determine that all transactions effected with affiliated brokers in the preceding quarter complied with the procedures established under the rule. Rule 17e-1 also requires the investment company to (i) maintain permanently 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 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. The Commission's examination staff uses these records to evaluate transactions between investment companies and their affiliated brokers for compliance with the rule.
The Commission staff estimates that approximately 1,850 investment companies may rely on rule 17e-1 each year. The total average annual burden for rule 17e-1 per respondent is estimated to be approximately 10 burden hours, for an annual total of approximately 18,500 burden hours for all respondents.
Item 14 of Form N-SAR requires investment companies to list any affiliated brokers or dealers. Based on the Form N-SARs filed for the six-month period ended August 31, 1999, it is estimated that approximately 1,850 investment companies have affiliated broker dealers, and may be subject to rule 17e-1 each year.
This estimate is based on conversations with attorneys familiar with the information collection requirements of rule 17e-1.
Compliance with the collection of information required by rule 17e-1 is necessary to obtain the benefit of the rule. Responses will not be kept confidential.
Section 19(a) [15 U.S.C. 80a-19(a)] of the Act makes it unlawful for any registered investment company to pay any dividend or similar distribution from any source other than the company's net income, unless the payment is accompanied by a written statement to the company's shareholders which adequately discloses the sources of the payment. Section 19(a) authorizes the Commission to prescribe the form of the statement by rule.
Rule 19a-1 [17 CFR 270.19a-1] under the Act is entitled “Written Statement to Accompany Dividend Payments by Management Companies.” Rule 19a-1 sets forth specific requirements for the information that must be included in statements made under section 19(a) by registered investment companies. The rule requires that the statements indicate what portions of the payment are made from net income, net profits and paid-in capital. When any part of the payment is made from net profits, the rule requires that the statement disclose certain other information relating to the appreciation or depreciation of portfolio securities. If an estimated portion of the payment is subsequently determined to be significantly inaccurate, a correction must be made on a statement made under section 19(a) or in the first report to shareholders following the discovery of the inaccuracy. The purpose of rule 19a-1 is to afford fund shareholders adequate disclosure of the sources from which dividend payments are made.
Rule 19a-1 requires, among other things, that every written statement made under section 19 of the Act by or on behalf of a management company clearly indicate what portion of the payment per share is made from the following sources: net income for the current or preceding fiscal year, or accumulated net income, or both, not including in either case profits or losses from the sale of securities or other properties; accumulated undistributed net profits from the sale of securities or other properties; and paid-in surplus or other capital source.
The Commission staff estimates that approximately 6,700 portfolios of management companies may be subject to rule 19a-1 each year. The total average annual burden for rule 19a-1 per portfolio is estimated to be approximately 30 minutes. The total annual burden for all portfolios therefore is estimated to be approximately 3,350 burden hours.
The Commission staff estimates that there are approximately 3,000 registered investment companies that are “management companies” as defined by the Act, and each may have one or more separate portfolios that report dividends to shareholders. The Commission's records indicate that those 3,000 management companies have approximately 6,700 portfolios that report paying dividends, and so may be subject to rule 19a-1.
According to respondents, no more than approximately 15 minutes is needed to make the determinations required by the rule and include the required information in the shareholders' dividend statements. The Commission staff estimates that, on average, each portfolio mails two notices per year to meet the requirements of the rule, for an average total annual burden of approximately 30 minutes.
Compliance with the collection of information required by rule 19a-1 is mandatory for management companies that make written statements to shareholders pursuant to section 19(a) of the Act. Responses will not be kept confidential.
Rule 31a-1 [17 CFR 270.31a-1] under the Act is entitled “Records to be maintained by registered investment companies, certain majority-owned subsidiaries thereof, and other persons having transactions with registered investment companies.” “Rule 31a-1 requires registered investment companies (“funds”), and every underwriter, broker, dealer, or investment adviser that is a majority-owned subsidiary of a fund, to maintain and keep current account, books, and other documents which constitute the record forming the basis for financial statements required to be filed pursuant to section 30 of the Act [15 U.S.C. 80a-30] and of the auditor's certificates relating thereto. The rule lists specific records to be maintained by funds. The rule also requires certain underwriters, brokers, dealers, depositors, and investment advisers to maintain the records that they are required to maintain under federal securities laws. The Commission periodically inspects the operations of funds to insure their compliance with the provisions of the Act and the rules thereunder. The books and records required to be maintained by rule 31a-1 constitute a major focus of the Commission inspection program.
There are approximately 4,295 investment companies registered with the Commission, all of which are required to comply with rule 31a-1. For purposes of determining the burden imposed by rule 31a-1, the Commission staff estimates that each registered investment company is divided into approximately four series, on average, and that each series is required to comply with the recordkeeping requirements of rule 31a-1. Based on conversations with fund representatives, it is estimated that rule 31a-1 imposes an average burden of approximately 1,200 hours annually per series for a total of 4,800 annual hours per investment company. The estimated total annual burden for all 4,295 investment companies subject to the rule therefore is approximately 20,616,000 hours. Based on conversations with fund representatives, however, the Commission staff estimates that even absent the requirements of rule 31a-1, most of the records created pursuant to the rule are the type that generally would be created as a matter of normal business custom and to prepare financial statements.
The collection of information required by rule 31a-1 is mandatory. Responses will not be kept confidential. The records required by rule 31a-1 are required to be preserved pursuant to rule 31a-2 under the Investment Company Act [17 CFR 270.31a-2]. Rule 31a-2 requires that certain of these records be preserved permanently, and that others be preserved six years from the end of the fiscal year in which any transaction occurred. In both cases, the records should be kept in an easily accessible place for the first two years.
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.
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, Officer of Information and Regulatory Affairs, Office of Management and Budget, New Executive Office Building, Washington, D.C. 20503; and (ii) Michael E. Bartell, Associate Executive Director, Office of Information Technology, Securities and Exchange Commission, 450 5th Street, N.W., Washington, D.C. 20549. Comments must be submitted to OMB within 30 days of this notice.
Dated: February 16, 2000.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-4380 Filed 2-24-00; 8:45 am]
BILLING CODE 8010-01-M