Federal Register / Vol. 75, No. 248 / Tuesday, December 28, 2010 / Notices 81681 

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. 

7 17 CFR 270.17a–10(a)(2). 

8This estimate is based on the following 

calculation: 3 hours ÷ 4 rules = 0.75 hours. 

9These 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. 

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 7 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.8 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 

$59,724.9

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. 

Written comments are invited on: (a) 

Whether the proposed collection of 

information is necessary for the proper 

performance of the functions of the 

agency, including whether the 

information will have practical utility; 

(b) the accuracy of the agency’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. 

December 20, 2010. 

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–32521 Filed 12–27–10; 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 17a–6, SEC File No. 270– 

506, OMB Control No. 3235–0564. 

Notice is hereby given that, pursuant 

to the Paperwork Reduction Act of 1995 

(44 U.S.C. 3501), the Securities and 

Exchange Commission (the 

‘‘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. 

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 


emcdonald on DSK2BSOYB1PROD with NOTICES
81682 Federal Register / Vol. 75, No. 248 / Tuesday, December 28, 2010 / Notices 

1 15 U.S.C. 80a–17(a). 

2 44 U.S.C. 3501. 

1The rule sets forth minimum reserve amounts 

and guidelines for the management and 

disbursement of the assets in the account. Rule 

27d–1(j) directs depositors and principal 

underwriters annually to make an accounting of 

their segregated trust accounts on Form N–27D–1, 

which is filed with the Commission. The form 

requires depositors and principal underwriters to 

report deposits to a segregated trust account, 

including those made pursuant to paragraphs (c) 

and (e) of the rule. Withdrawals pursuant to 

paragraph (f) of the rule also must be reported. In 

addition, the form solicits information regarding the 

minimum amount required to be maintained under 

paragraphs (d) and (e) of rule 27d–1. 

securities or other property to or from, 

the fund or any company that the fund 

controls.1 Rule 17a–6 (17 CFR 270.17a– 

6) permits a fund and a ‘‘portfolio 

affiliate’’ (a company that is an affiliated 

person of the fund because the fund 

controls the company, or holds five 

percent or more of the company’s 

outstanding voting securities) to engage 

in principal transactions that would 

otherwise be prohibited under section 

17(a) of the Act under certain 

conditions. A fund may not rely on the 

exemption in the rule to enter into a 

principal transaction with a portfolio 

affiliate if certain prohibited 

participants (e.g., directors, officers, 

employees, or investment advisers of 

the fund) have a financial interest in a 

party to the transaction. Rule 17a–6 

specifies certain interests that are not 

‘‘financial interests,’’ including any 

interest that the fund’s board of 

directors (including a majority of the 

directors who are not interested persons 

of the fund) finds to be not material. A 

board making this finding is required to 

record the basis for the finding in its 

meeting minutes. This recordkeeping 

requirement is a collection of 

information under the Paperwork 

Reduction Act of 1995 (‘‘PRA’’).2

The rule is designed to permit 

transactions between funds and their 

portfolio affiliates in circumstances in 

which it is unlikely that the affiliate 

would be in a position to take advantage 

of the fund. In determining whether a 

financial interest is ‘‘material,’’ the board 

of the fund should consider whether the 

nature and extent of the interest in the 

transaction is sufficiently small that a 

reasonable person would not believe 

that the interest affected the 

determination of whether to enter into 

the transaction or arrangement or the 

terms of the transaction or arrangement. 

The information collection requirements 

in rule 17a–6 are intended to ensure that 

Commission staff can review, in the 

course of its compliance and 

examination functions, the basis for a 

board of director’s finding that the 

financial interest of an otherwise 

prohibited participant in a party to a 

transaction with a portfolio affiliate is 

not material. 

Based on staff discussions with fund 

representatives, we estimate that funds 

currently do not rely on the exemption 

from the term ‘‘financial interest’’ with 

respect to any interest that the fund’s 

board of directors (including a majority 

of the directors who are not interested 

persons of the fund) finds to be not 

material. Accordingly, we estimate that 

annually there will be no principal 

transactions under rule 17a–6 that will 

result in a collection of information. 

The Commission requests 

authorization to maintain an inventory 

of one burden hour to ease future 

renewals of rule 17a–6’s collection of 

information analysis should funds rely 

on this exemption to the term ‘‘financial 

interest’’ as defined in rule 17a–6. 

The estimate of 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–6. 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 proposed collection of 

information is necessary for the proper 

performance of the functions of the 

agency, including whether the 

information will have practical utility; 

(b) the accuracy of the agency’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: December 20, 2010. 

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–32518 Filed 12–27–10; 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 27d–2; SEC File No. 270– 

500; OMB Control No. 3235–0566. 

Notice is hereby given that, pursuant 

to the Paperwork Reduction Act of 1995 

(44 U.S.C. 350l et seq.), the Securities 

and Exchange Commission (the 

‘‘Commission’’) is soliciting comments 

on the collections of information under 

the Investment Company Act of 1940 

(15 U.S.C. 80a) (‘‘Act’’) summarized 

below. The Commission plans to submit 

these collections of information to the 

Office of Management and Budget for 

approval. 

Rule 27d–2 (17 CFR 270.27d–2) is 

entitled ‘‘Insurance Company 

Undertaking in Lieu of Segregated Trust 

Account.’’ Rule 27d–1 (17 CFR 270.27d– 

1) under the Act requires the depositor 

or principal underwriter for an issuer of 

periodic payment plans to deposit funds 

into a segregated trust account to 

provide assurance of its ability to fulfill 

its refund obligations under sections 

27(d) and 27(f) of the Act.1 Rule 27d– 

2 provides an exemption from rule 27d– 

1 under the Act for depositors or 

principal underwriters for the issuers of 

periodic payments plans. In order to 

comply with the rule: (i) The depositor 

or principal underwriter must secure 

from an insurance company a written 

guarantee of the refund requirements; 

(ii) the insurance company must satisfy 

certain financial criteria; and (iii) the 

depositor or principal underwriter must 

file as an exhibit to the issuer’s 

registration statement, a copy of the 

written undertaking, an annual 

statement that the insurance company 

has met the requisite financial criteria 

on a monthly basis, and an annual 

audited balance sheet. 

Rule 27d–2, which was explicitly 

authorized by statute, provides 

assurance that depositors and principal 

underwriters of issuers have access to 

sufficient cash to meet the demands of 

certificate holders who reconsider their 

decisions to invest in a periodic 

payment plan. The information 

collection requirement in rule 27d–2 

enables the Commission to monitor 

compliance with insurance company 

undertaking requirements. 


emcdonald on DSK2BSOYB1PROD with NOTICES