Federal Register / Vol. 76, No. 53 / Friday, March 18, 2011 / Notices 15005 

4Rule 19b–1(e) also requires that the application 

comply with rule 0–2 [17 CFR 270.02], which sets 

forth the general requirements for papers and 

applications filed with the Commission. 

5This understanding is based on conversations 

with representatives from the fund industry. 

6This estimate is based on the following 

calculation: 10 hours multiplied by $400 per hour 

equals $4,000. 

7This estimate is based on the following 

calculation: $4,000 multiplied by 6 (funds) equals 

$24,000. 

8The Investment Company Institute, Unit 

Investment Trust Data, (January 2011). 

9The number of times UITs rely on the rule to 

make capital gains distributions depends on a wide 

range of factors and, thus, can vary greatly across 

years. A number of UITs are organized as grantor 

trusts, and therefore do not generally make capital 

gains distributions under rule 19b–1(c), or may not 

rely on rule 19b–1(c) as they do not meet the rule’s 

requirements. Other UITs may distribute capital 

gains biannually, annually, quarterly, or at other 

intervals. 

10This estimate is based on the following 

calculation: 3,759 UITs multiplied by $50 equals 

$187,950. 

the Commission for permission to 

distribute long-term capital gains more 

than once a year if the fund did not 

foresee the circumstances that created 

the need for the distribution. The 

application must set forth the pertinent 

facts and explain the circumstances that 

justify the distribution.4 An application 

that meets those requirements is 

deemed to be granted unless the 

Commission denies the request within 

15 days after the Commission receives 

the application. 

Commission staff estimates that, on 

average, each year six funds file an 

application under rule 19b–1(e). The 

staff understands that funds that file an 

application generally use outside 

counsel to prepare the application. The 

cost burden of using outside counsel is 

discussed below. The staff estimates 

that, on average, the fund’s investment 

adviser spends a total of approximately 

4 hours to review an application, 

including 3.5 hours by an assistant 

general counsel, 0.5 hours by an 

administrative assistant, and the fund’s 

board of directors spends an additional 

1 hour, for a total of 5 hours. Thus, the 

Commission staff estimates that the 

annual hour burden of the collection of 

information imposed by rule 19b–1 is 

approximately five hours per fund, for 

a total burden of 30 hours. 

The Commission staff estimates that 

there is no hourly burden associated 

with complying with the collection of 

information component of rule 19b–1(c). 

As noted above, the Commission staff 

understands that funds that file an 

application under rule 19b–1(e) 

generally use outside counsel to prepare 

the application.5 The staff estimates 

that, on average, outside counsel spends 

10 hours preparing a rule 19b–1(e) 

application, including eight hours by an 

associate and two hours by a partner. 

Outside counsel billing arrangements 

and rates vary based on numerous 

factors, but the staff has estimated the 

average cost of outside counsel as $400 

per hour, based on information received 

from funds, intermediaries, and their 

counsel. The staff therefore estimates 

that the average cost of outside counsel 

preparation of the 19b–(e) exemptive 

application is $4,000.6 Thus, the staff 

estimates that the total annual cost 

burden imposed by the exemptive 

application requirements of rule 19b– 

1(e) is $24,000.7

The Commission staff estimates that 

there are approximately 3759 UITs 8 that 

may rely on rule 19b–1(c) to make 

capital gains distributions. The staff 

estimates that, on average, these UITs 

rely on rule 19b–1(c) once a year to 

make a capital gains distribution.9 In 

most cases, the trustee of the UIT is 

responsible for preparing and sending 

the notices that must accompany a 

capital gains distribution under rule 

19b–1(c)(2). These notices require 

limited preparation, the cost of which 

accounts for only a small, indiscrete 

portion of the comprehensive fee 

charged by the trustee for its services to 

the UIT. The staff believes that as a 

matter of good business practices, and 

for tax preparation reasons, UITs would 

collect and distribute the capital gains 

information required to be sent to 

unitholders under rule 19b–1(c) even in 

the absence of the rule. The staff 

estimates that the cost of preparing a 

notice for a capital gains distribution 

under rule 19b–1(c)(2) is approximately 

$50. There is no separate cost to mail 

the notices because they are mailed with 

the capital gains distribution. Thus, the 

staff estimates that the capital gains 

distribution notice requirement imposes 

an annual cost on UITs of 

approximately $187,950.10 The staff 

therefore estimates that the total cost 

imposed by rule 19b–1 is $211,950 

($187,950 plus $24,000 equals 

$211,950). 

Based on these calculations, the total 

number of respondents for rule 19b–1 is 

estimated to be 3,765 (3759 UIT 

portfolios + 6 funds filing an application 

under rule 19b–1(e)), the total annual 

hour burden is estimated to be 30 hours, 

and the total annual cost burden is 

estimated to be $211,950. These 

estimates of average annual burden 

hours and costs are made solely for 

purposes of the Paperwork Reduction 

Act. The collections of information 

required by 19b–1(c) and 19b–1(e) are 

necessary to obtain the benefits 

described above. 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. 

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 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. 

Dated: March 15, 2011. 

Cathy H. Ahn, 

Deputy Secretary. 

[FR Doc. 2011–6366 Filed 3–17–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

Proposed Collection; Comment 

Request 

Upon Written Request, Copies Available 

From: Securities and Exchange 

Commission, Office of Investor 

Education and Advocacy, 

Washington, DC 20549–0213. 

Extension: 

Rule 17f–5; SEC File No. 270–259; 

OMB Control No. 3235–0269. 

Notice is hereby given that, pursuant 

to the Paperwork Reduction Act of 1995 

(44 U.S.C. 3501–3520), the Securities 

and Exchange Commission 

(‘‘Commission’’) is soliciting comments 

on the collection of information 

summarized below. The Commission 

plans to submit the existing collection 

of information to the Office of 

Management and Budget for extension 

and approval. 

Rule 17f–5 under the Investment 

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

(‘‘Investment Company Act’’ or ‘‘Act’’) 


Emcdonald on DSK2BSOYB1PROD with NOTICES
15006 Federal Register / Vol. 76, No. 53 / Friday, March 18, 2011 / Notices 

1 17 CFR 270.17f–5. All references to rules 17f– 

5, 17f–7, 17d–1, or 19b–1 in this notice are to 17 

CFR 270.17f–5, 17 CFR 270.17f–7, 17 CFR 270.17d– 

1, and 17 CFR 270.19b–1, respectively. 2See section 17(f) of the Investment Company Act 

(15 U.S.C. 80a–17(f)). 

3This figure is an estimate of the number of new 

funds each year, based on data reported by funds 

in 2010 on Form N–1A and Form N–2. In practice, 

not all funds will use foreign custody managers, 

and the actual figure may be smaller. 

4This estimate is based on staff research. 

5The board hourly rate is based on fund industry 

representations. The $220/hour figure for a trust 

administrator is from SIFMA’s Management & 

Professional Earnings in the Securities Industry 

2010, modified to account for an 1,800-hour workyear and multiplied by 5.35 to account for bonuses, 

firm size, employee benefits and overhead. 

governs the custody of the assets of 

registered management investment 

companies (‘‘funds’’) with custodians 

outside the United States.1 Under Rule 

17f–5, the fund’s board of directors must 

find that it is reasonable to rely on each 

delegate it selects to act as the fund’s 

foreign custody manager. The delegate 

must agree to provide written reports 

that notify the board when the fund’s 

assets are placed with a foreign 

custodian and when any material 

change occurs in the fund’s custody 

arrangements. The delegate must agree 

to exercise reasonable care, prudence, 

and diligence, or to adhere to a higher 

standard of care. When the foreign 

custody manager selects an eligible 

foreign custodian, it must determine 

that the fund’s assets will be subject to 

reasonable care if maintained with that 

custodian, and that the written contract 

that governs each custody arrangement 

will provide reasonable care for fund 

assets. The contract must contain 

certain specified provisions or others 

that provide at least equivalent care. 

The foreign custody manager must 

establish a system to monitor the 

performance of the contract and the 

appropriateness of continuing to 

maintain assets with the eligible foreign 

custodian. 

The collection of information 

requirements in rule 17f–5 are intended 

to provide protection for fund assets 

maintained with a foreign bank 

custodian whose use is not authorized 

by statutory provisions that govern fund 

custody arrangements,2 and that is not 

subject to regulation and examination 

by U.S. regulators. The requirement that 

the fund board determine that it is 

reasonable to rely on each delegate is 

intended to ensure that the board 

carefully considers each delegate’s 

qualifications to perform its 

responsibilities. The requirement that 

the delegate provide written reports to 

the board is intended to ensure that the 

delegate notifies the board of important 

developments concerning custody 

arrangements so that the board may 

exercise effective oversight. The 

requirement that the delegate agree to 

exercise reasonable care is intended to 

provide assurances to the fund that the 

delegate will properly perform its 

duties. 

The requirements that the foreign 

custody manager determine that fund 

assets will be subject to reasonable care 

with the eligible foreign custodian and 

under the custody contract, and that 

each contract contain specified 

provisions or equivalent provisions, are 

intended to ensure that the delegate has 

evaluated the level of care provided by 

the custodian, that it weighs the 

adequacy of contractual provisions, and 

that fund assets are protected by 

minimal contractual safeguards. The 

requirement that the foreign custody 

manager establish a monitoring system 

is intended to ensure that the manager 

periodically reviews each custody 

arrangement and takes appropriate 

action if developing custody risks may 

threaten fund assets. 

Commission staff estimates that each 

year, approximately 135 registrants 3

could be required to make an average of 

one response per registrant under rule 

17f–5, requiring approximately 2.5 

hours of board of director time per 

response, to make the necessary 

findings concerning foreign custody 

managers. The total annual burden 

associated with these requirements of 

the rule is up to approximately 337.5 

hours (135 registrants × 2.5 hours per 

registrant). The staff further estimates 

that during each year, approximately 15 

global custodians 4 are required to make 

an average of 4 responses per custodian 

concerning the use of foreign custodians 

other than depositories. The staff 

estimates that each response will take 

approximately 270 hours, requiring 

approximately 1,080 total hours 

annually per custodian. The total 

annual burden associated with these 

requirements of the rule is 

approximately 16,200 hours (15 global 

custodians × 1,080 hours per custodian). 

Therefore, the total annual burden of all 

collection of information requirements 

of rule 17f–5 is estimated to be up to 

16,537.5 hours (337.5 + 16,200). The 

total annual cost of burden hours is 

estimated to be $4,914,000 (337.5 hours 

× $4,000/hour for board of director’s 

time, plus 16,200 hours × $220/hour for 

a trust administrator’s time).5

Compliance with the collection of 

information requirements of the rule is 

necessary to obtain the benefit of relying 

on the rule’s permission for funds to 

maintain their assets in foreign 

custodians. 

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 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 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. 

Dated: March 15, 2011. 

Cathy H. Ahn, 

Deputy Secretary. 

[FR Doc. 2011–6365 Filed 3–17–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

Proposed Collection; Comment 

Request 

Upon Written Request, Copies Available 

From: Securities and Exchange 

Commission, Office of Investor 

Education and Advocacy, 

Washington, DC 20549–0213. 

Extension: 

Rule 17f–7; SEC File No. 270–470; 

OMB Control No. 3235–0529. 

Notice is hereby given that, pursuant 

to the Paperwork Reduction Act of 1995 

(44 U.S.C. 3501–3520), the Securities 

and Exchange Commission 

(‘‘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 (‘‘OMB’’) for 

extension and approval. 

Rule 17f–7 (17 CFR 270.17f–7) 

permits funds to maintain their assets in 


Emcdonald on DSK2BSOYB1PROD with NOTICES