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
64384 Federal Register / Vol. 83, No. 240 / Friday, December 14, 2018 / Notices 

1Currently, FINRA is the only registered national 

securities association. 

2 17 CFR 240.15c2–4. 

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

2 17 CFR 240.19b–4. 

3 15 U.S.C. 78s(b)(3)(A)(iii). 

4 17 CFR 240.19b–4(f)(6). 

of information to the Office of 

Management and Budget (‘‘OMB’’) for 

extension and approval. 

Rules 300–304 of Regulation 

Crowdfunding enumerate the 

requirements with which intermediaries 

must comply to participate in the offer 

and sale of securities in reliance on 

Section 4(a)(6) of the Securities Act of 

1933 (‘‘Section 4(a)(6)’’). Rule 300 

requires an intermediary to be registered 

with the Commission as a broker or as 

a funding portal and be a member of a 

registered national securities 

association.1

Rule 301 requires intermediaries to 

have a reasonable basis for believing 

that an issuer seeking to offer and sell 

securities in reliance on Section 4(a)(6) 

through the intermediary’s platform 

complies with the requirements in 

Section 4A(b) of the Securities Act and 

the related requirements in Regulation 

Crowdfunding. Rule 302 provides that 

no intermediary or associated person of 

an intermediary may accept an 

investment commitment in a transaction 

involving the offer or sale of securities 

made in reliance on Section 4(a)(6) until 

the investor has opened an account with 

the intermediary and the intermediary 

has obtained from the investor consent 

to electronic delivery of materials. Rule 

303 requires an intermediary to make 

publicly available on its platform the 

information that an issuer of 

crowdfunding securities is required to 

provide to potential investors, in a 

manner that reasonably permits a 

person accessing the platform to save, 

download or otherwise store the 

information, for a minimum of 21 days 

before any securities are sold in the 

offering, during which time the 

intermediary may accept investment 

commitments. Rule 303 also requires 

intermediaries to comply with the 

requirements related to the maintenance 

and transmission of funds. An 

intermediary that is a registered broker 

is required to comply with the 

requirements of Rule 15c2–4 of the 

Securities Exchange Act of 1934 

(‘‘Exchange Act’’) (Transmission or 

Maintenance of Payments Received in 

Connection with Underwritings).2 An 

intermediary that is a registered funding 

portal must direct investors to transmit 

the money or other consideration 

directly to a qualified third party that 

has agreed in writing to hold the funds 

for the benefit of, and to promptly 

transmit or return the funds to, the 

persons entitled thereto in accordance 

with Regulation Crowdfunding. 

The rules also require intermediaries 

to implement and maintain systems to 

comply with the information disclosure, 

communication channels, and investor 

notification requirements. These 

requirements include providing 

disclosure about compensation at 

account opening (Rule 302), obtaining 

investor acknowledgements to confirm 

investor qualifications and review of 

educational materials (Rule 303), 

providing investor questionnaires (Rule 

303), providing communication 

channels with third parties and among 

investors (Rule 303), notifying investors 

of investment commitments (Rule 303), 

confirming completed transactions 

(Rule 303) and confirming or 

reconfirming offering cancellations 

(Rule 304). 

The Commission staff estimates that 

there are 62 intermediaries engaged in 

crowdfunding activity and therefore 

subject to Rules 300–304. The 

Commission staff estimates that 

annualized industry burden would be 

15,621 hours to comply with Rules 300– 

304. This estimate is composed of a onetime burden for new intermediaries to 

comply with the rules and develop the 

platform and ongoing burdens 

associated with maintaining the 

platform. The Commission staff 

estimates that the costs associated with 

complying with Rules 300–304 are 

estimated to be approximately a total 

amount of $5,772,327. These costs are 

composed of a one-time burden for new 

intermediaries to comply with the rules 

and develop the platform and ongoing 

burdens associated with maintaining the 

platform. 

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 

estimates of the burden of the proposed 

collection of information; (c) ways to 

enhance the quality, utility, and clarity 

of the information to be 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. 

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: 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. 2018–27093 Filed 12–13–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–84778; File No. SR– 

CboeEDGX–2018–058] 

Self-Regulatory Organizations; Cboe 

EDGX Exchange, Inc.; Notice of Filing 

and Immediate Effectiveness of a 

Proposed Rule Change Relating To 

Amend Its Provision Related to Its Risk 

Monitor Mechanism 

December 10, 2018. 

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

Securities Exchange Act of 1934 (the 

‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on November 

30, 2018, Cboe EDGX Exchange, Inc. 

(the ‘‘Exchange’’ or ‘‘EDGX’’) filed with 

the Securities and Exchange 

Commission (the ‘‘Commission’’) the 

proposed rule change as described in 

Items I and II below, which Items have 

been prepared by the Exchange. The 

Exchange filed the proposal as a ‘‘noncontroversial’’ proposed rule change 

pursuant to Section 19(b)(3)(A)(iii) of 

the Act 3 and Rule 19b–4(f)(6) 

thereunder.4 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 

Cboe EDGX Exchange, Inc. (the 

‘‘Exchange’’ or ‘‘EDGX’’) proposes to 

amend its provision related to its Risk 

Monitor Mechanism. The text of the 

proposed rule change is provided in 

Exhibit 5. 

The text of the proposed rule change 

is also available on the Exchange’s 

website (http://www.cboe.com/ 

AboutCBOE/CBOELegal

RegulatoryHome.aspx), at the 

Exchange’s Office of the Secretary, and 

at the Commission’s Public Reference 

Room. 


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