11828 Federal Register / Vol. 76, No. 42 / Thursday, March 3, 2011 / Notices 

1 15 U.S.C. 80a–17(a). 

2 15 U.S.C. 80a–2(a)(3)(E). 

3 17 CFR 270.17a–10(a)(2). 

4 44 U.S.C. 3501. 

5We assume that funds formed after 2003 that 

intended to rely on rule 17a–10 would have 

included the required provision as a standard 

element in their initial subadvisory contracts. 

6Based on information in Commission filings, we 

estimate that 42.5 percent of funds are advised by 

subadvisers. 

7This estimate is based on the following 

calculation: 3 hours ÷ 4 rules = 0.75 hours. 

8These estimates are based on the following 

calculations: 0.75 hours × 252 portfolios = 189 

burden hours; $316 per hour × 189 hours = $59,724 

total cost. The Commission staff’s estimates 

concerning the wage rates for attorney time are 

based on salary information for the securities 

industry compiled by the Securities Industry and 

Financial Markets Association. The $316 per hour 

figure for an attorney is from the Securities Industry 

and Financial Markets Association’s Management & 

Professional Earnings in the Securities Industry 

2009, modified by Commission staff to account for 

an 1800-hour work-year and multiplied by 5.35 to 

account for bonuses, firm size, employee benefits, 

and overhead. 

(‘‘fund’’) from borrowing money or other 

property from, or selling or buying 

securities or other property to or from, 

the fund or any company that the fund 

controls.1 Section 2(a)(3) of the Act 

defines ‘‘affiliated person’’ of a fund to 

include its investment advisers.2 Rule 

17a–10 (17 CFR 270.17a–10) permits (i) 

a subadviser of a fund to enter into 

transactions with funds the subadviser 

does not advise but that are affiliated 

persons of a fund that it does advise 

(e.g., other funds in the fund complex), 

and (ii) a subadviser (and its affiliated 

persons) to enter into transactions and 

arrangements with funds the subadviser 

does advise, but only with respect to 

discrete portions of the subadvised fund 

for which the subadviser does not 

provide investment advice. 

To qualify for the exemptions in rule 

17a–10, the subadvisory relationship 

must be the sole reason why section 

17(a) prohibits the transaction. In 

addition, the advisory contracts of the 

subadviser entering into the transaction, 

and any subadviser that is advising the 

purchasing portion of the fund, must 

prohibit the subadvisers from consulting 

with each other concerning securities 

transactions of the fund, and limit their 

responsibility to providing advice with 

respect to discrete portions of the fund’s 

portfolio.3 Section 17(a) of the 

Investment Company Act of 1940 (the 

‘‘Act’’), generally prohibits affiliated 

persons of a registered investment 

company (‘‘fund’’) from borrowing 

money or other property from, or selling 

or buying securities or other property to 

or from, the fund or any company that 

the fund controls. Section 2(a)(3) of the 

Act defines ‘‘affiliated person’’ of a fund 

to include its investment advisers. Rule 

17a–10 permits (i) a subadviser of a 

fund to enter into transactions with 

funds the subadviser does not advise 

but that are affiliated persons of a fund 

that it does advise (e.g., other funds in 

the fund complex), and (ii) a subadviser 

(and its affiliated persons) to enter into 

transactions and arrangements with 

funds the subadviser does advise, but 

only with respect to discrete portions of 

the subadvised fund for which the 

subadviser does not provide investment 

advice. 

To qualify for the exemptions in rule 

17a–10, the subadvisory relationship 

must be the sole reason why section 

17(a) prohibits the transaction. In 

addition, the advisory contracts of the 

subadviser entering into the transaction, 

and any subadviser that is advising the 

purchasing portion of the fund, must 

prohibit the subadvisers from consulting 

with each other concerning securities 

transactions of the fund, and limit their 

responsibility to providing advice with 

respect to discrete portions of the fund’s 

portfolio. This requirement regarding 

the prohibitions and limitations in 

advisory contracts of subadvisors 

relying on the rule constitutes a 

collection of information under the 

Paperwork Reduction Act of 1995 

(‘‘PRA’’).4

The staff assumes that all funds 

existing in 2003 amended their advisory 

contracts following the amendments to 

rule 17a–10 that year that conditioned 

certain exemptions upon these 

contractual alterations, and therefore 

there is no continuing burden for those 

funds.5 Staff also assumes that funds 

that came into existence after 2003 

included the contractual requirements 

in rule 17a–10 in their subadvisory 

agreements and therefore there is no 

continuing burden for those funds. 

Based on an analysis of fund filings, 

the staff estimates that approximately 

252 fund portfolios enter into new 

subadvisory agreements each year.6

Based on discussions with industry 

representatives, the staff estimates that 

it will require approximately 3 attorney 

hours to draft and execute additional 

clauses in new subadvisory contracts in 

order for funds and subadvisers to be 

able to rely on the exemptions in rule 

17a–10. Because these additional 

clauses are identical to the clauses that 

a fund would need to insert in their 

subadvisory contracts to rely on rules 

10f–3, 12d3–1, and 17e–1, and because 

we believe that funds that use one such 

rule generally use all of these rules, we 

apportion this 3 hour time burden 

equally among all four rules. Therefore, 

we estimate that the burden allocated to 

rule 17a–10 for this contract change 

would be 0.75 hours.7 Assuming that all 

252 funds that enter into new 

subadvisory contracts each year include 

in their contract the provisions required 

by the rule, we estimate that the rule’s 

contract requirement will result in 189 

burden hours annually, with an 

associated cost of approximately 

$59,724.8

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. 

Complying with this collection of 

information requirement is necessary to 

obtain the benefit of relying on rule 

17a–10. Responses 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 control number. 

The public may view the background 

documentation for this information 

collection at the following Web site, 

http://www.reginfo.gov. Comments 

should be directed to: (i) Desk Officer 

for the Securities and Exchange 

Commission, Office of Information and 

Regulatory Affairs, Office of 

Management and Budget, Room 10102, 

New Executive Office Building, 

Washington, DC 20503, or by sending an 

e-mail to: 

Shagufta_Ahmed@omb.eop.gov; and (ii) 

Thomas Bayer, Chief Information 

Officer, Securities and Exchange 

Commission, c/o Remi Pavlik-Simon, 

6432 General Green Way, Alexandria, 

VA 22312 or send an e-mail to: 

PRA_Mailbox@sec.gov. Comments must 

be submitted to OMB within 30 days of 

this notice. 

Dated: February 25, 2011. 

Cathy H. Ahn, 

Deputy Secretary. 

[FR Doc. 2011–4730 Filed 3–2–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

Submission for OMB Review; 

Comment Request 

Upon Written Request, Copies Available 

From: Securities and Exchange 

Commission, Office of Investor 

Education and Advocacy, 

Washington, DC 20549–0213. 

Extension: 

Rule 12d3–1; SEC File No. 270–504; 

OMB Control No. 3235–0561. 

Notice is hereby given that, pursuant 

to the Paperwork Reduction Act of 1995 


srobinson on DSKHWCL6B1PROD with NOTICES
Federal Register / Vol. 76, No. 42 / Thursday, March 3, 2011 / Notices 11829 

1Based on information in Commission filings, we 

estimate that 42.5 percent of funds are advised by 

subadvisers. 

2This estimate is based on the following 

calculation (3 hours ÷ 4 rules = .75 hours). 

3This estimate is based on the following 

calculation: (0.75 hours × 252 portfolios = 189 

burden hours. 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

(44 U.S.C. 3501 et seq.), the Securities 

and Exchange Commission (the 

‘‘Commission’’) has submitted to the 

Office of Management and Budget 

(‘‘OMB’’) a request for extension of the 

previously approved collection of 

information discussed below. 

Section 12(d)(3) of the Investment 

Company Act of 1940 (15 U.S.C. 80a) 

generally prohibits registered 

investment companies (‘‘funds’’), and 

companies controlled by funds, from 

purchasing securities issued by a 

registered investment adviser, broker, 

dealer, or underwriter (‘‘securitiesrelated businesses’’). Rule 12d3–1 

(‘‘Exemption of acquisitions of securities 

issued by persons engaged in securities 

related businesses’’ (17 CFR 270.12d3– 

1)) permits a fund to invest up to five 

percent of its assets in securities of an 

issuer deriving more than fifteen 

percent of its gross revenues from 

securities-related businesses, but a fund 

may not rely on rule 12d3–1 to acquire 

securities of its own investment adviser 

or any affiliated person of its own 

investment adviser. 

A fund may, however, rely on an 

exemption in rule 12d3–1 to acquire 

securities issued by its subadvisers in 

circumstances in which the subadviser 

would have little ability to take 

advantage of the fund, because it is not 

in a position to direct the fund’s 

securities purchases. The exemption in 

rule 12d3–1 is available if (i) the 

subadviser is not, and is not an affiliated 

person of, an investment adviser that 

provides advice with respect to the 

portion of the fund that is acquiring the 

securities, and (ii) the advisory contracts 

of the subadviser, and any subadviser 

that is advising the purchasing portion 

of the fund, prohibit them from 

consulting with each other concerning 

securities transactions of the fund, and 

limit their responsibility in providing 

advice to providing advice with respect 

to discrete portions of the fund’s 

portfolio. 

Based on an analysis of fund filings, 

the staff estimates that approximately 

252 fund portfolios enter into 

subadvisory agreements each year.1

Based on discussions with industry 

representatives, the staff estimates that 

it will require approximately 3 attorney 

hours to draft and execute additional 

clauses in new subadvisory contracts in 

order for funds and subadvisers to be 

able to rely on the exemptions in rule 

12d3–1. Because these additional 

clauses are identical to the clauses that 

a fund would need to insert in their 

subadvisory contracts to rely on rules 

10f–3, 17a–10, and 17e–1 and because 

we believe that funds that use one such 

rule generally use all of these rules, we 

apportion this 3 hour time burden 

equally to all four rules. Therefore, we 

estimate that the burden allocated to 

rule 12d3–1 for this contract change 

would be 0.75 hours.2 Assuming that all 

252 funds that enter into new 

subadvisory contracts each year make 

the modification to their contract 

required by the rule, we estimate that 

the rule’s contract modification 

requirement will result in 189 burden 

hours annually.3

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. 

Complying with this collection of 

information requirement is necessary to 

obtain the benefit of relying on rule 

12d3–1. Responses 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 control number. 

The public may view the background 

documentation for this information 

collection at the following Web site, 

http://www.reginfo.gov. Comments 

should be directed to: (i) Desk Officer 

for the Securities and Exchange 

Commission, Office of Information and 

Regulatory Affairs, Office of 

Management and Budget, Room 10102, 

New Executive Office Building, 

Washington, DC 20503, or by sending an 

e-mail to: 

Shagufta_Ahmed@omb.eop.gov; and (ii) 

Thomas Bayer, Chief Information 

Officer, Securities and Exchange 

Commission, c/o Remi Pavlik-Simon, 

6432 General Green Way, Alexandria, 

VA 22312 or send an e-mail to: 

PRA_Mailbox@sec.gov. Comments must 

be submitted to OMB within 30 days of 

this notice. 

Dated: February 25, 2011. 

Cathy H. Ahn, 

Deputy Secretary. 

[FR Doc. 2011–4725 Filed 3–2–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63960; File No. SR–FINRA– 

2011–008] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing of a 

Proposed Rule Change To Require 

Public Disclosure of Any Access or 

Post-Transaction Fees for Executions 

Against a Public Quotation in an OTC 

Equity Security 

February 24, 2011. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Exchange Act’’) 1 and Rule 19b–4 

thereunder,2 notice is hereby given that 

on February 18, 2011, the Financial 

Industry Regulatory Authority, Inc. 

(‘‘FINRA’’) filed with the Securities and 

Exchange Commission (‘‘SEC’’ or 

‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been prepared 

by FINRA. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

FINRA is proposing to require 

members to disclose on the member’s 

Web site fees imposed against its 

published quotation in any OTC Equity 

Security consistent with FINRA Rule 

6450 (Restrictions on Access Fees). 

The text of the proposed rule change 

is available on FINRA’s Web site at 

http://www.finra.org, at the principal 

office of FINRA, and at the 

Commission’s Public Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

FINRA included statements concerning 

the purpose of and basis for the 

proposed rule change and discussed any 

comments it received on the proposed 

rule change. The text of these statements 

may be examined at the places specified 

in Item IV below. FINRA has prepared 

summaries, set forth in sections A, B, 

and C below, of the most significant 

aspects of such statements. 


srobinson on DSKHWCL6B1PROD with NOTICES