64382 Federal Register / Vol. 83, No. 240 / Friday, December 14, 2018 / Notices 

1The burdens imposed by the CFTC are included 

in this collection of information. 

approved collection of information 

provided for the following rules: Rules 

3a68–2 and 3a68–4(c) under the 

Securities Exchange Act of 1934 (15 

U.S.C. 78a et seq.). 

Rule 3a68–2 creates a process for 

interested persons to request a joint 

interpretation by the SEC and the 

Commodity Futures Trading 

Commission (‘‘CFTC’’) (together with 

the SEC, the ‘‘Commissions’’) regarding 

whether a particular instrument (or 

class of instruments) is a swap, a 

security-based swap, or both (i.e., a 

mixed swap). Under Rule 3a68–2, a 

person provides to the Commissions a 

copy of all material information 

regarding the terms of, and a statement 

of the economic characteristics and 

purpose of, each relevant agreement, 

contract, or transaction (or class 

thereof), along with that person’s 

determination as to whether each such 

agreement, contract, or transaction (or 

class thereof) should be characterized as 

a swap, security-based swap, or both 

(i.e., a mixed swap). The Commissions 

also may request the submitting person 

to provide additional information. 

The SEC expects 25 requests pursuant 

to Rule 3a68–2 per year. The SEC 

estimates the total paperwork burden 

associated with preparing and 

submitting each request would be 20 

hours to retrieve, review, and submit the 

information associated with the 

submission. This 20 hour burden is 

divided between the SEC and the CFTC, 

with 10 hours per response regarding 

reporting to the SEC and 10 hours of 

response regarding third party 

disclosure to the CFTC.1 The SEC 

estimates this would result in an 

aggregate annual burden of 500 hours 

(25 requests × 20 hours/request). 

The SEC estimates that the total costs 

resulting from a submission under Rule 

3a68–2 would be approximately $12,000 

for outside attorneys to retrieve, review, 

and submit the information associated 

with the submission. The SEC estimates 

this would result in aggregate costs each 

year of $300,000 (25 requests × 30 

hours/request × $400). 

Rule 3a68–4(c) establishes a process 

for persons to request that the 

Commissions issue a joint order 

permitting such persons (and any other 

person or persons that subsequently 

lists, trades, or clears that class of mixed 

swap) to comply, as to parallel 

provisions only, with specified parallel 

provisions of either the Commodity 

Exchange Act (‘‘CEA’’) or the Securities 

Exchange Act of 1934 (‘‘Exchange Act’’), 

and related rules and regulations 

(collectively ‘‘specified parallel 

provisions’’), instead of being required 

to comply with parallel provisions of 

both the CEA and the Exchange Act. 

The SEC expects ten requests 

pursuant to Rule 3a68–4(c) per year. 

The SEC estimates that nine of these 

requests will have also been made in a 

request for a joint interpretation 

pursuant to Rule 3a68–2, and one will 

not have been. The SEC estimates the 

total burden for the one request for 

which the joint interpretation pursuant 

to 3a68–2 was not requested would be 

30 hours, and the total burden 

associated with the other nine requests 

would be 20 hours per request because 

some of the information required to be 

submitted pursuant to Rule 3a68–4(c) 

would have already been submitted 

pursuant to Rule 3a68–2. The burden in 

both cases is evenly divided between 

the SEC and the CFTC. 

The SEC estimates that the total costs 

resulting from a submission under Rule 

3a68–4(c) would be approximately 

$20,000 for the services of outside 

attorneys to retrieve, review, and submit 

the information associated with the 

submission of the one request for which 

a request for a joint interpretation 

pursuant to Rule 3a68–2 was not 

previously made (1 request × 50 hours/ 

request × $400). For the nine requests 

for which a request for a joint 

interpretation pursuant to Rule 3a68–2 

was previously made, the SEC estimates 

the total costs associated with preparing 

and submitting a party’s request 

pursuant to Rule 3a68–4(c) would be 

$6,000 less per request because, as 

discussed above, some of the 

information required to be submitted 

pursuant to Rule 3a68–4(c) already 

would have been submitted pursuant to 

Rule 3a68–2. The SEC estimates this 

would result in an aggregate cost each 

year of $126,000 for the services of 

outside attorneys (9 requests × 35 hours/ 

request × $400). 

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. 

The public may view background 

documentation for this information 

collection at the following website: 

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 email to: 

Lindsay.M.Abate@omb.eop.gov; and (ii) 

Charles Riddle, Acting Director/Chief 

Information Officer, Securities and 

Exchange Commission, c/o Candace 

Kenner, 100 F Street NE, Washington, 

DC 20549, or by sending an email to: 

PRA_Mailbox@sec.gov. Comments must 

be submitted to OMB within 30 days of 

this notice. 

Dated: December 10, 2018. 

Eduardo A. Aleman, 

Deputy Secretary. 

[FR Doc. 2018–27089 Filed 12–13–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[SEC File No. 270–401, OMB Control No. 

3235–0459] 

Proposed Collection; Comment 

Request 

Upon Written Request, Copies Available 

From: Securities and Exchange 

Commission, Office of FOIA Services, 

100 F Street NE, Washington, DC 

20549–2736 

Extension: 

Rule 3a–4. 

Notice is hereby given that, pursuant 

to the Paperwork Reduction Act of 1995 

(44 U.S.C. 350l–3520), 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 for extension 

and approval. 

Rule 3a–4 (17 CFR 270.3a–4) under 

the Investment Company Act of 1940 

(15 U.S.C. 80a) (‘‘Investment Company 

Act’’ or ‘‘Act’’) provides a nonexclusive 

safe harbor from the definition of 

investment company under the Act for 

certain investment advisory programs. 

These programs, which include ‘‘wrap 

fee’’ programs, generally are designed to 

provide professional portfolio 

management services on a discretionary 

basis to clients who are investing less 

than the minimum investments for 

individual accounts usually required by 

the investment adviser but more than 

the minimum account size of most 

mutual funds. Under wrap fee and 

similar programs, a client’s account is 

typically managed on a discretionary 

basis according to pre-selected 

investment objectives. Clients with 

similar investment objectives often 

receive the same investment advice and 

may hold the same or substantially 

similar securities in their accounts. 

Because of this similarity of 

management, some of these investment 

advisory programs may meet the 


amozie on DSK3GDR082PROD with NOTICES1
Federal Register / Vol. 83, No. 240 / Friday, December 14, 2018 / Notices 64383 

1Status of Investment Advisory Programs Under 

the Investment Company Act of 1940, Investment 

Company Act Rel. No. 22579 (Mar. 24, 1997) [62 FR 

15098 (Mar. 31,1997)] (‘‘Adopting Release’’). In 

addition, there are no registration requirements 

under section 5 of the Securities Act of 1933 for 

programs that meet the requirements of rule 3a–4. 

See 17 CFR 270.3a–4, introductory note. 

2For purposes of rule 3a–4, the term ‘‘sponsor’’ 

refers to any person who receives compensation for 

sponsoring, organizing or administering the 

program, or for selecting, or providing advice to 

clients regarding the selection of, persons 

responsible for managing the client’s account in the 

program. 

3Clients specifically must be allowed to designate 

securities that should not be purchased for the 

account or that should be sold if held in the 

account. The rule does not require that a client be 

able to require particular securities be purchased for 

the account. 

4These estimates are based on an analysis of the 

number of individual clients from Form ADV Item 

5D(a)(1) and (b)(1) of advisers that report they 

provide portfolio management to wrap programs as 

indicated in Form ADV Item 5I(2)(b) and (c), and 

the number of individual clients of advisers that 

identify as internet advisers in Form ADV Item 

2A(11). From analysis comparing reported 

individual client assets in Form ADV Item 5D(a)(3) 

and 5D(b)(3) to reported wrap portfolio manager 

assets in Form ADV Item 5I(2)(b) and (c), we 

discount the estimated number of individual clients 

of non-internet advisers providing portfolio 

management to wrap programs by 10%. These 

estimates are based on the number of new clients 

expected due to average year-over-year growth in 

individual clients from Form ADV Item 5D(a)(1) 

and (b)(1) (about 8%) and an assumed rate of yearly 

client turnover of 10%. 

5These estimates are based on the number of new 

clients expected due to average year-over-year 

growth in individual clients from Form ADV Item 

5D(a)(1) and (b)(1) (about 8%) and an assumed rate 

of yearly client turnover of 10%. 

6These estimates are based upon consultation 

with investment advisers that operate investment 

advisory programs that rely on rule 3a–4. 

7The staff bases this estimate in part on the fact 

that, by business necessity, computer records 

already will be available that contain the 

information in the quarterly reports. 

8This estimate is based on the following 

calculation: (16,087,359 continuing clients × 1 

hour) + (3,531,372 new clients × 1.5 hours) + 

(19,618,731 total clients × (0.25 hours × 4 

statements)) = 41,003,148 hours. We note that the 

breakdown of burden hours between professional 

and staff time discussed below may not equal the 

estimate of total burden hours due to rounding. 

definition of investment company under 

the Act. 

In 1997, the Commission adopted rule 

3a–4, which clarifies that programs 

organized and operated in accordance 

with the rule are not required to register 

under the Investment Company Act or 

comply with the Act’s requirements.1

These programs differ from investment 

companies because, among other things, 

they provide individualized investment 

advice to the client. The rule’s 

provisions have the effect of ensuring 

that clients in a program relying on the 

rule receive advice tailored to the 

client’s needs. 

For a program to be eligible for the 

rule’s safe harbor, each client’s account 

must be managed on the basis of the 

client’s financial situation and 

investment objectives and in accordance 

with any reasonable restrictions the 

client imposes on managing the 

account. When an account is opened, 

the sponsor 2 (or its designee) must 

obtain information from each client 

regarding the client’s financial situation 

and investment objectives, and must 

allow the client an opportunity to 

impose reasonable restrictions on 

managing the account.3 In addition, the 

sponsor (or its designee) must contact 

the client annually to determine 

whether the client’s financial situation 

or investment objectives have changed 

and whether the client wishes to impose 

any reasonable restrictions on the 

management of the account or 

reasonably modify existing restrictions. 

The sponsor (or its designee) must also 

notify the client quarterly, in writing, to 

contact the sponsor (or its designee) 

regarding changes to the client’s 

financial situation, investment 

objectives, or restrictions on the 

account’s management. 

Additionally, the sponsor (or its 

designee) must provide each client with 

a quarterly statement describing all 

activity in the client’s account during 

the previous quarter. The sponsor and 

personnel of the client’s account 

manager who know about the client’s 

account and its management must be 

reasonably available to consult with the 

client. Each client also must retain 

certain indicia of ownership of all 

securities and funds in the account. 

The Commission staff estimates that 

19,618,731 clients participate each year 

in investment advisory programs relying 

on rule 3a–4.4 Of that number, the staff 

estimates that 3,531,372 are new clients 

and 16,087,359 are continuing clients.5

The staff estimates that each year the 

investment advisory program sponsors’ 

staff engage in 1.5 hours per new client 

and 1 hour per continuing client to 

prepare, conduct and/or review 

interviews regarding the client’s 

financial situation and investment 

objectives as required by the rule.6

Furthermore, the staff estimates that 

each year the investment advisory 

program sponsors’ staff spends 1 hour 

per client to prepare and mail quarterly 

client account statements, including 

notices to update information.7 Based 

on the estimates above, the Commission 

estimates that the total annual burden of 

the rule’s paperwork requirements is 

41,003,148 hours.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 and 

forms. 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 collections of information 

are 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 burdens of the collections of 

information; (c) ways to enhance the 

quality, utility, and clarity of the 

information collected; and (d) ways to 

minimize the burdens of the collections 

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 Charles Riddle, Acting Director/Chief 

Information Officer, Securities and 

Exchange Commission, C/O Candace 

Kenner, 100 F Street NE, Washington, 

DC 20549; or send an email to: PRA_

Mailbox@sec.gov. 

Dated: December 10, 2018. 

Eduardo A. Aleman, 

Deputy Secretary. 

[FR Doc. 2018–27094 Filed 12–13–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

SEC File No. 270–774, OMB Control No. 

3235–0726] 

Proposed Collection; Comment 

Request 

Upon Written Request, Copies Available 

From: Securities and Exchange 

Commission, Office of FOIA Services, 

100 F Street NE, Washington, DC 

20549–2736 

Extension: 

Rules 300–304 of Regulation 

Crowdfunding (Intermediaries). 

Notice is hereby given that pursuant 

to the Paperwork Reduction Act of 1995 

(‘‘PRA’’) (44 U.S.C. 3501 et seq.), the 

Securities and Exchange Commission 

(‘‘Commission’’) is soliciting comments 

on the collection of information 

provided for Rule 17Ab2–1 (17 CFR 

240.17Ab2–1) and Form CA–1: 

Registration of Clearing Agencies (17 

CFR 249b.200) under the Securities 

Exchange Act of 1934 (‘‘Exchange Act’’) 

(15 U.S.C. 78a et seq.). The Commission 

plans to submit this existing collection 


amozie on DSK3GDR082PROD with NOTICES1