7914 Federal Register / Vol. 86, No. 20 / Tuesday, February 2, 2021 / Notices 

1Financial Reporting Release No. 70. 

2The Financial Accounting Foundation’s Board 

of Trustees approved the FASB’s budget on 

November 17, 2020. The FAF submitted the 

approved budget to the Commission on November 

23, 2020. 

3See ‘‘OMB Report Pursuant to the Sequestration 

Transparency Act of 2012’’ (Pub. L. 112–155), page 

16 of 17 at: https://www.whitehouse.gov/wpcontent/uploads/2020/02/JC-sequestration_report_

FY21_2-10-20.pdf 

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

2 17 CFR 240.19b–4. 

3The Exchange initially filed the proposed fee 

changes January 4, 2021 (SR–CboeBYX–2021–001). 

On January 13, 2021, the Exchange withdrew that 

filing and submitted this proposal. 

Securities and Exchange Commission 

(the ‘‘Commission’’) may recognize, as 

generally accepted for purposes of the 

securities laws, any accounting 

principles established by a standardsetting body that meets certain criteria. 

Section 109 of SOX provides that all of 

the budget of such a standard-setting 

body shall be payable from an annual 

accounting support fee assessed and 

collected against each issuer, as may be 

necessary or appropriate to pay for the 

budget and provide for the expenses of 

the standard-setting body, and to 

provide for an independent, stable 

source of funding, subject to review by 

the Commission. Under Section 109(f) 

of the Act, the amount of fees collected 

for a fiscal year shall not exceed the 

‘‘recoverable budget expenses’’ of the 

standard-setting body. Section 109(h) of 

SOX amends Section 13(b)(2) of the 

Securities Exchange Act of 1934 to 

require issuers to pay the allocable share 

of a reasonable annual accounting 

support fee or fees, determined in 

accordance with Section 109 of the Act. 

On April 25, 2003, the Commission 

issued a policy statement concluding 

that the Financial Accounting Standards 

Board (‘‘FASB’’) and its parent 

organization, the Financial Accounting 

Foundation (‘‘FAF’’), satisfied the 

criteria for an accounting standardsetting body under the Act, and 

recognizing the FASB’s financial 

accounting and reporting standards as 

‘‘generally accepted’’ under Section 108 

of the Act.1 Accordingly, the 

Commission undertook a review of the 

FASB’s accounting support fee for 

calendar year 2021.2 In connection with 

its review, the Commission also 

reviewed the budget for the FAF and the 

FASB for calendar year 2021. 

Section 109 of SOX provides that, in 

addition to the accounting support fee, 

the standard-setting body can have 

additional sources of revenue for its 

activities, such as earnings from sales of 

publications, provided that each 

additional source of revenue shall not 

jeopardize, in the judgment of the 

Commission, the actual or perceived 

independence of the standard setter. In 

this regard, the Commission also 

considered the interrelation of the 

operating budgets of the FAF, the FASB, 

and the Governmental Accounting 

Standards Board (‘‘GASB’’), the FASB’s 

sister organization, which sets 

accounting standards used by state and 

local government entities. The 

Commission has been advised by the 

FAF that neither the FAF, the FASB, nor 

the GASB accept contributions from the 

accounting profession. 

The Commission understands that the 

Office of Management and Budget 

(‘‘OMB’’) has determined the FASB’s 

spending of the 2021 accounting 

support fee is sequestrable under the 

Budget Control Act of 2011.3 So long as 

sequestration is applicable, we 

anticipate that the FAF will work with 

the Commission and Commission staff 

as appropriate regarding its 

implementation of sequestration. 

After its review, the Commission 

determined that the 2021 annual 

accounting support fee for the FASB is 

consistent with Section 109 of the Act. 

Accordingly, 

It is ordered, pursuant to Section 109 

of SOX, that the FASB may act in 

accordance with this determination of 

the Commission. 

By the Commission. 

Vanessa A. Countryman, 

Secretary. 

[FR Doc. 2021–02171 Filed 2–1–21; 8:45 am] 

BILLING CODE P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–90999; File No. SR– 

CboeBYX–2021–003] 

Self-Regulatory Organizations; Cboe 

BYX Exchange, Inc.; Notice of Filing 

and Immediate Effectiveness of a 

Proposed Rule Change To Amend Its 

Fee Schedule To Eliminate Certain 

Routing Fee Codes 

January 27, 2021. 

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 January 

13, 2021, Cboe BYX Exchange, Inc. (the 

‘‘Exchange’’ or ‘‘BYX’’) 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 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 BYX Exchange, Inc. (the 

‘‘Exchange’’ or ‘‘BYX’’) is filing with the 

Securities and Exchange Commission 

(‘‘Commission’’) a proposed rule change 

to amend the fee schedule applicable to 

Members and non-Members of the 

Exchange pursuant to BYX Rules 15.1(a) 

and (c). Changes to the fee schedule 

pursuant to this proposal are effective 

upon filing. 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://markets.cboe.com/us/ 

equities/regulation/rule_filings/byx/), at 

the Exchange’s Office of the Secretary, 

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, the 

self-regulatory organization 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 those statements may be examined at 

the places specified in Item IV below. 

The Exchange has prepared summaries, 

set forth in sections A, B, and C below, 

of the most significant parts of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to amend its 

fee schedule by eliminating certain 

routing fee codes.3

The Exchange first notes that it 

operates in a highly competitive market 

in which market participants can 

readily direct order flow to competing 

venues if they deem fee levels at a 

particular venue to be excessive or 

incentives to be insufficient. More 

specifically, the Exchange is only one of 

16 registered equities exchanges, as well 

as a number of alternative trading 

systems and other off-exchange venues 

that do not have similar self-regulatory 

responsibilities under the Exchange Act, 

to which market participants may direct 

their order flow. Based on publicly 


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Federal Register / Vol. 86, No. 20 / Tuesday, February 2, 2021 / Notices 7915 

4See Cboe Global Markets, U.S. Equities Market 

Volume Summary, Month-to-Date (December 29, 

2020), available at https://markets.cboe.com/us/ 

equities/market_statistics/. 

5The SLIM routing strategy is a routing strategy 

in which an order checks the System for available 

shares if so instructed by the entering User and then 

is sent to destinations on the applicable System 

routing table. See Rule 11.13(b)(3)(G); see also Cboe 

Routing Strategies, FIX/BOE Routing Tags and 

Instructions, available at: https://cdn.cboe.com/ 

resources/features/Cboe_USE_

RoutingStrategies.pdf. 

6 15 U.S.C. 78f. 

7 15 U.S.C. 78f(b)(4). 

8 15 U.S.C. 78f.(b)(5). 

available information,4 no single 

registered equities exchange has more 

than 16% of the market share. Thus, in 

such a low-concentrated and highly 

competitive market, no single equities 

exchange possesses significant pricing 

power in the execution of order flow. 

The Exchange believes that the evershifting market share among the 

exchanges from month to month 

demonstrates that market participants 

can shift order flow or discontinue to 

reduce use of certain categories of 

products, in response to fee changes. 

Accordingly, competitive forces 

constrain the Exchange’s transaction 

fees, and market participants can readily 

trade on competing venues if they deem 

pricing levels at those other venues to 

be more favorable. 

The Exchange assesses fees in 

connection with orders routed away to 

various exchanges. As a result of 

minimal use in the last months, the 

Exchange proposes to eliminate the 

following routing fee codes currently 

under the Fee Codes and Associated 

Fees section of the Fee Schedule: 

• Fee code 8, which is appended to 

Members’ orders routed to NYSE 

American that adds liquidity and 

assesses a charge of $0.00020 per 

contract; and 

• Fee code MX, which is appended to 

Members’ orders routed to NYSE 

American using the SLIM 5 routing 

strategy and assesses a charge of 

$0.00020 per contract. 

The Exchange has observed a minimal 

amount of volume in recent months in 

orders yielding fee codes 8 or MX. In 

particular, over the last six months the 

Exchange observed that orders yielding 

fee code MX accounted for 

approximately only 0.12% of all routed 

order volume, and no orders yielding 

fee code 8 have been submitted since 

2014. The Exchange believes that, 

because so few Users elect to route their 

orders with specifications to which fee 

codes 8 or MX, the current demand does 

not warrant the infrastructure and 

ongoing Systems maintenance required 

to support these separate fee codes. 

Therefore, the Exchange now proposes 

to delete fee codes 8 and MX in the Fee 

Schedule. 

In light of the proposed fee code 

deletions, the Exchange also proposes to 

update the description to which fee 

code X is applicable. Currently, the 

description for orders yielding fee code 

X applies to Members’ orders routed to 

a displayed market to remove liquidity 

using Parallel D, Parallel 2D, ROUT, 

ROUX or Post to Away routing strategy. 

Fee code X assesses a charge of $0.0030 

per contract. Essentially, fee code X is 

designed to apply, and currently 

applies, to all other routed orders that 

are not otherwise specified under other 

fee codes in the Fee Schedule. However, 

as currently written, the description of 

orders that yield fee code X would not 

encompass those orders that currently 

yield fee codes 8 and MX. Therefore, the 

proposed rule change updates the 

description of orders that yield fee code 

X to ‘‘Routed.’’ The Exchange notes that 

the corresponding fee will remain 

unchanged and is the standard rate 

routing fee assessed pursuant to the 

Standard Rates section of the Fee 

Schedule. As a result of the proposed 

description, Members will continue to 

be able to choose to route their orders 

with the same specifications to which 

fee codes 8 and MX currently apply— 

such orders will simply be assessed the 

fee currently in place for orders yielding 

fee code X (i.e., routed orders not 

otherwise specified under other fee 

codes in the Fee Schedule). The 

Exchange notes that the proposed 

description for fee code X does not alter 

any of the routed orders to which fee 

code X currently applies. The Exchange 

also notes that the proposed description 

for fee code X is consistent with the 

description associated with 

corresponding fee code X on the 

Exchange’s affiliated equities exchanges, 

Cboe EDGX Exchange, Inc. (‘‘EDGX’’) 

and Cboe EDGA Exchange Inc. 

(‘‘EDGA’’). 

2. Statutory Basis 

The Exchange believes that the 

proposed rule change is consistent with 

the objectives of Section 6 of the Act,6

in general, and furthers the objectives of 

Section 6(b)(4),7 in particular, as it is 

designed to provide for the equitable 

allocation of reasonable dues, fees and 

other charges among its Members and 

issuers and other persons using its 

facilities. The Exchange also believes 

that the proposed rule change is 

consistent with the objectives of Section 

6(b)(5) 8 requirements that the rules of 

an exchange be designed to prevent 

fraudulent and manipulative acts and 

practices, to promote just and equitable 

principles of trade, to foster cooperation 

and coordination with persons engaged 

in regulating, clearing, settling, 

processing information with respect to, 

and facilitating transactions in 

securities, to remove impediments to 

and perfect the mechanism of a free and 

open market and a national market 

system, and, in general, to protect 

investors and the public interest, and, 

particularly, is not designed to permit 

unfair discrimination between 

customers, issuers, brokers, or dealers. 

The Exchange believes the proposed 

rule changes are reasonable, equitable 

and not unfairly discriminatory. The 

Exchange first notes that routing 

through the Exchange is optional. The 

Exchange believes the proposed rule 

change to remove fee codes 8 and MX 

is reasonable as the Exchange has 

observed a minimal amount of volume 

in orders yielding these fee codes and, 

therefore, the continuation of these fee 

codes does not warrant the 

infrastructure and ongoing Systems 

maintenance required to support 

separate fee codes for specific routed 

orders. As such, the Exchange also 

believes that is reasonable and equitable 

to assess routed orders which meet the 

specifications to which fee codes 8 and 

MX are currently applicable the slightly 

higher standard routing fee currently in 

place for all other routed orders that are 

not otherwise specified under other fee 

codes in the Fee Schedule—via fee code 

X, as amended. The Exchange believes 

it is reasonable to update the 

description for orders that yield fee code 

X in a manner that reflects the intent of 

fee code X, which is to apply to routed 

orders not otherwise specified under 

other fees codes in the Fee Schedule, 

and will thus apply to routed orders that 

currently yield fee codes 8 and MX. The 

Exchange believes that the proposed 

updated description is reasonable 

because it does not alter any of the 

routed orders to which fee code X 

currently applies and will allow 

Members to continue to be able to 

choose to route their orders with the 

same specifications to which fee codes 

8 and MX currently apply. The 

Exchange again notes that the proposed 

description for fee code X is consistent 

with the description associated with 

corresponding fee code X on the 

Exchange’s affiliated equities exchanges. 

The Exchange believes that the 

proposed rule change is equitable and 

not unfairly discriminatory because 

Members will continue to have the 

option to elect to route their orders in 

the same manner (i.e., routed to NYSE 

American that add liquidity and routed 

to NYSE American using the SLIM 


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7916 Federal Register / Vol. 86, No. 20 / Tuesday, February 2, 2021 / Notices 

9See supra note 4. 

10See Securities Exchange Act Release No. 51808 

(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005). 

11NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. 

Cir. 2010) (quoting Securities Exchange Act Release 

No. 59039 (December 2, 2008), 73 FR 74770, 74782– 

83 (December 9, 2008) (SR–NYSEArca–2006–21)). 

12 15 U.S.C. 78s(b)(3)(A). 

13 17 CFR 240.19b–4(f)(2). 

14 15 U.S.C. 78s(b)(2)(B). 

routing strategy), which will be 

automatically and uniformly be assessed 

the applicable standard rates in place 

for generally all other routed orders 

under fee code X. Further, if members 

do not favor the Exchange’s pricing for 

routed orders, they can send their 

routable orders directly to away markets 

instead of using routing functionality 

provided by the Exchange. Routing 

through the Exchange is optional, and 

the Exchange operates in a competitive 

environment where market participants 

can readily direct order flow to 

competing venues or providers of 

routing services if they deem fee levels 

to be excessive. The Exchange believes 

that the updated description for orders 

that yield fee code X is equitable and 

not unfairly discriminatory because it 

does not impact the routed orders that 

currently yield fee code X; the same 

orders will continue to yield fee code X 

and will continue to be automatically 

and uniformly assessed the 

corresponding fee. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. The 

Exchange does not believe the proposed 

rule change will impose any burden on 

intramarket competition because all 

Members orders that would yield 

current fee codes 8 or MX, will 

automatically and uniformly be assessed 

the fees already in place for all other 

routed orders generally under fee code 

X. Fee code X, as amended, will 

continue to apply to the same routed 

orders as it currently does, which will 

continue to be automatically and 

uniformly assessed the corresponding 

fee. Ultimately, all routed orders will 

generally be assessed the same fee. 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on intermarket competition 

that is not necessary or appropriate in 

furtherance of the purposes of the Act. 

The Exchange again notes that orders 

that meet the specifications to which fee 

codes 8 or MX would currently apply, 

will yield the same fee codes and be 

assessed the same corresponding rates 

that are already in place in the Fee 

Schedule for routed orders generally, as 

previously filed with the Commission. 

Also, as previously discussed, the 

Exchange operates in a highly 

competitive market. Members have 

numerous alternative venues that they 

may participate on and director their 

order flow, including 15 other options 

exchanges and off-exchange venues. 

Additionally, the Exchange represents a 

small percentage of the overall market. 

Based on publicly available information, 

no single options exchange has more 

than 16% of the market share.9

Therefore, no exchange possesses 

significant pricing power in the 

execution of option order flow. Indeed, 

participants can readily choose to send 

their orders to other exchange and offexchange venues if they deem fee levels 

at those other venues to be more 

favorable. Moreover, the Commission 

has repeatedly expressed its preference 

for competition over regulatory 

intervention in determining prices, 

products, and services in the securities 

markets. Specifically, in Regulation 

NMS, the Commission highlighted the 

importance of market forces in 

determining prices and SRO revenues 

and, also, recognized that current 

regulation of the market system ‘‘has 

been remarkably successful in 

promoting market competition in its 

broader forms that are most important to 

investors and listed companies.’’ 10 The 

fact that this market is competitive has 

also long been recognized by the courts. 

In NetCoalition v. Securities and 

Exchange Commission, the D.C. Circuit 

stated as follows: ‘‘[n]o one disputes 

that competition for order flow is 

‘fierce.’ . . . As the SEC explained, ‘[i]n 

the U.S. national market system, buyers 

and sellers of securities, and the brokerdealers that act as their order-routing 

agents, have a wide range of choices of 

where to route orders for execution’; 

[and] ‘no exchange can afford to take its 

market share percentages for granted’ 

because ‘no exchange possesses a 

monopoly, regulatory or otherwise, in 

the execution of order flow from broker 

dealers’. . . .’’.11 Accordingly, the 

Exchange does not believe its proposed 

fee change imposes any burden on 

competition that is not necessary or 

appropriate in furtherance of the 

purposes of the Act. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

The Exchange neither solicited nor 

received comments on the proposed 

rule change. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing rule change is effective 

upon filing pursuant to Section 

19(b)(3)(A) 12 of the Act and 

subparagraph (f)(2) of Rule 19b–4 13

thereunder, because it establishes a due, 

fee, or other charge imposed by the 

Exchange. 

At any time within 60 days of the 

filing of such proposed rule change, the 

Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is necessary or appropriate in the 

public interest, for the protection of 

investors, or otherwise in furtherance of 

the purposes of the Act. If the 

Commission takes such action, the 

Commission shall institute proceedings 

under Section 19(b)(2)(B) 14 of the Act to 

determine whether the proposed rule 

change should be approved or 

disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

CboeBYX–2021–003 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–CboeBYX–2021–003. This 

file number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

internet website (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 


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Federal Register / Vol. 86, No. 20 / Tuesday, February 2, 2021 / Notices 7917 

15 17 CFR 200.30–3(a)(12). 

1Section 4(3) of the Act (15 U.S.C. 80a–4(3)) 

defines ‘‘management company’’ as ‘‘any 

investment company other than a face amount 

certificate company or a unit investment trust.’’ 

2This estimate is based on statistics compiled by 

Commission staff as of September 21, 2020. The 

number of management investment company 

portfolios that make distributions for which 

compliance with rule 19a–1 is required depends on 

a wide range of factors and can vary greatly across 

years. Therefore, the calculation of estimated 

burden hours is based on the total number of 

management investment company portfolios, each 

of which may be subject to rule 19a–1. 

3A few portfolios make monthly distributions 

from sources other than net income, so the rule 

requires them to send out a statement 12 times a 

year. Other portfolios never make such 

distributions. 

4This estimate is based on the following 

calculation: 12,019 management investment 

company portfolios × 2 statements per year × 1 hour 

per statement = 24,038 burden hours. 

5Hourly rates are derived from the Securities 

Industry and Financial Markets Association 

(‘‘SIFMA’’), Management and Professional Earnings 

in the Securities Industry 2013, modified to account 

for an 1,800-hour work-year and inflation, and 

multiplied by 5.35 to account for bonuses, firm size, 

employee benefits, and overhead. 

6Hourly rates are derived from SIFMA’s Office 

Salaries in the Securities Industry 2013, modified 

to account for an 1,800-hour work-year and 

multiplied by 2.93 to account for bonuses, firm size, 

employee benefits and overhead. 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549, on official 

business days between the hours of 

10:00 a.m. and 3:00 p.m. Copies of the 

filing also will be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change. 

Persons submitting comments are 

cautioned that we do not redact or edit 

personal identifying information from 

comment submissions. You should 

submit only information that you wish 

to make available publicly. All 

submissions should refer to File 

Number SR–CboeBYX–2021–003, and 

should be submitted on or before 

February 23, 2021. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.15

J. Matthew DeLesDernier 

Assistant Secretary. 

[FR Doc. 2021–02117 Filed 2–1–21; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[SEC File No. 270–240, OMB Control No. 

3235–0216] 

Submission for OMB Review; 

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 19a–1 

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 a 

request for extension of the previously 

approved collection of information 

discussed below. 

Section 19(a) (15 U.S.C. 80a–19(a)) of 

the Investment Company Act of 1940 

(the ‘‘Act’’) (15 U.S.C. 80a) 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 

such statement by rule. 

Rule 19a–1 (17 CFR 270.19a–1) under 

the Act, entitled ‘‘Written Statement to 

Accompany Dividend Payments by 

Management Companies,’’ sets forth 

specific requirements for the 

information that must be included in 

statements made pursuant to section 

19(a) by or on behalf of management 

companies.1 The rule requires that the 

statement indicate what portions of 

distribution payments are made from 

net income, net profits from the sale of 

a security or other property (‘‘capital 

gains’’) and paid-in capital. When any 

part of the payment is made from capital 

gains, rule 19a–1 also requires that the 

statement disclose certain other 

information relating to the appreciation 

or depreciation of portfolio securities. If 

an estimated portion is subsequently 

determined to be significantly 

inaccurate, a correction must be made 

on a statement made pursuant to 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 distribution 

payments are made. The rule is 

intended to prevent shareholders from 

confusing income dividends with 

distributions made from capital sources. 

Absent rule 19a–1, shareholders might 

receive a false impression of fund gains. 

Based on a review of filings made 

with the Commission, the staff estimates 

that approximately 12,019 series of 

registered investment companies that 

are management companies may be 

subject to rule 19a–1 each year,2 and 

that each portfolio on average mails two 

statements per year to meet the 

requirements of the rule.3 The staff 

further estimates that the time needed to 

make the determinations required by the 

rule and to prepare the statement 

required under the rule is 

approximately 1 hour per statement. 

The total annual burden for all 

portfolios therefore is estimated to be 

approximately 24,038 burden hours.4

The staff estimates that approximately 

one-third of the total annual burden 

(8,013 hours) would be incurred by a 

paralegal with an average hourly wage 

rate of approximately $219 per hour,5

and approximately two-thirds of the 

annual burden (16,026 hours) would be 

incurred by a compliance clerk with an 

average hourly wage rate of $71 per 

hour.6 The staff therefore estimates that 

the aggregate annual cost of complying 

with the paperwork requirements of the 

rule is approximately $2,892,693 ((8,013 

hours × $219 = $1,754,847) + (16,026 

hours × $71 = $1,137,846)). 

To comply with state law, many 

investment companies already must 

distinguish the different sources from 

which a shareholder distribution is paid 

and disclose that information to 

shareholders. Thus, many investment 

companies would be required to 

distinguish the sources of shareholder 

dividends whether or not the 

Commission required them to do so 

under rule 19a–1. 

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. Compliance 

with the collection of information 

required by rule 19a–1 is mandatory for 

management companies that make 

statements to shareholders pursuant to 

section 19(a) of the Act. 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 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 


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