Federal Register / Vol. 73, No. 89 / Wednesday, May 7, 2008 / Notices 25787 

1See 17 CFR 270.17a–10(a)(2). 

2Rules 12d3–1, 10f–3, 17a–10, and 17e–1 require 

virtually identical modifications to fund advisory 

contracts. The Commission staff assumes that funds 

would rely equally on the exemptions in these 

rules, and therefore the burden hours associated 

with the required contract modifications should be 

apportioned equally among the four rules. 

3We assume that funds formed after 2002 that 

intended to rely on rule 17a–10 would have 

included the required provision as a standard 

element in their initial subadvisory contracts. 

4The use of subadvisers has grown rapidly over 

the last several years, with approximately 600 

portfolios that use subadvisers registering between 

December 2005 and December 2006. Based on 

information in Commission filings, we estimate that 

31 percent of funds are advised by subadvisers. 

5The 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 Association. The $292 per 

hour figure for an attorney is from the SIA Report 

on Management & Professional Earnings in the 

Securities Industry 2006, modified to account for an 

1800-hour work-year and multiplied by 5.35 to 

account for bonuses, firm size, employee benefits 

and overhead. 

6This estimate is based on the following 

calculation (3 hours ÷ 4 rules = .75 hours). 

7These estimates are based on the following 

calculations: (0.75 hours × 600 portfolios = 450 

burden hours); ($292 per hour × 450 hours = 

$131,400 total cost). 

1 ‘‘Investment company’’ refers to both 

investment companies registered under the 

Investment Company Act of 1940, as amended, and 

business development companies. 

2 15 U.S.C. 77j(b). 

17(a) prohibits the transaction; and 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.1

The Commission staff estimates that 

3583 portfolios of approximately 649 

fund complexes use the services of one 

or more subadvisers. Based on 

discussions with industry 

representatives, the staff estimates that 

it requires approximately 6 hours to 

draft and execute revised subadvisory 

contracts allowing funds and 

subadvisers to rely on the exemptions in 

rule 17a–10.2 The staff assumes that all 

existing funds amended their advisory 

contracts following the adoption of rule 

17a–10 in 2003 that conditioned certain 

exemptions upon these contractual 

alterations, and therefore there is no 

continuing burden for those funds.3

Based on an analysis of fund filings, 

the staff estimates that approximately 

600 fund portfolios enter into new 

subadvisory agreements each year.4

Based on discussions with industry 

representatives, the staff estimates that 

it will require approximately 3 attorney 

hours 5 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 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.6 Assuming that all 

600 funds that enter into new 

subadvisory contracts each year make 

the modification to their contract 

required by the rule, we estimate that 

the rule’s contract modification 

requirement will result in 450 burden 

hours annually, with an associated cost 

of approximately $131,400.7

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. 

Please direct general comments 

regarding the above information to the 

following persons: (i) Desk Officer for 

the Securities and Exchange 

Commission, Office of Management and 

Budget, Room 10102, New Executive 

Office Building, Washington, DC 20503 

or e-mail to: 

Alexander_T._Hunt@omb.eop.gov; and 

(ii) R. Corey Booth, Director/Chief 

Information Officer, Securities and 

Exchange Commission, C/O Shirley 

Martinson, 6432 General Green Way, 

Alexandria, VA 22312; or send an 

e-mail to: PRA_Mailbox@sec.gov. 

Comments must be submitted to OMB 

within 30 days of this notice. 

Dated: April 30, 2008. 

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E8–10045 Filed 5–6–08; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

Submission for OMB Review; 

Comment Request 

Upon written request, copies available 

from: Securities and Exchange 

Commission, Office of Investor 

Education and Advocacy, 

Washington, DC 20549–0213. 

Extension: 

Rule 482; SEC File No. 270–508; OMB 

Control No. 3235–0565. 

Notice is hereby given that pursuant 

to the Paperwork Reduction Act of 1995 

(44 U.S.C. 3501 et seq.) the Securities 

and Exchange Commission 

(‘‘Commission’’) has submitted to the 

Office of Management and Budget a 

request for extension of the previously 

approved collection of information 

discussed below. 

Like most issuers of securities, when 

an investment company 1 (‘‘fund’’) offers 

its shares to the public, its promotional 

efforts become subject to the advertising 

restrictions of the Securities Act of 

1933, (15 U.S.C. 77) as amended (the 

‘‘Securities Act’’). In recognition of the 

particular problems faced by funds that 

continually offer securities and wish to 

advertise their securities, the 

Commission has previously adopted 

advertising safe harbor rules. The most 

important of these is Rule 482 (17 CFR 

230.482) under the Securities Act, 

which, under certain circumstances, 

permits funds to advertise investment 

performance data, as well as other 

information. Rule 482 advertisements 

are deemed to be ‘‘prospectuses’’ under 

section 10(b) of the Securities Act.2

Rule 482 contains certain 

requirements regarding the disclosure 

that funds are required to provide in 

qualifying advertisements. These 

requirements are intended to encourage 

the provision to investors of information 

that is balanced and informative, 

particularly in the area of investment 

performance. For example, a fund is 

required to include disclosure advising 

investors to consider the fund’s 

investment objectives, risks, charges and 

expenses, and other information 

described in the fund’s prospectus or 

accompanying profile (if applicable), 

and highlighting the availability of the 

fund’s prospectus. In addition, rule 482 

advertisements that include 

performance data of open-end funds or 

insurance company separate accounts 

offering variable annuity contracts are 

required to include certain standardized 

performance information, information 

about any sales loads or other 

nonrecurring fees, and a legend warning 

that past performance does not 

guarantee future results. Such funds 

including performance information in 

rule 482 advertisements are also 


sroberts on PROD1PC70 with NOTICES
25788 Federal Register / Vol. 73, No. 89 / Wednesday, May 7, 2008 / Notices 

3See Rule 24b–3 under the Investment Company 

Act (17 CFR 270.24b–3), which provides that any 

sales material, including rule 482 advertisements, 

shall be deemed filed with the Commission for 

purposes of Section 24(b) of the Investment 

Company Act upon filing with FINRA. 

1The information collection requirements for rule 

27d–1 and Form N–27D–1 are covered in a separate 

Federal Register notice under OMB Control No. 

3235–0560. 

2The 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. 

required to make available to investors 

month-end performance figures via Web 

site disclosure or by a toll-free 

telephone number, and to disclose the 

availability of the month-end 

performance data in the advertisement. 

The rule also sets forth requirements 

regarding the prominence of certain 

disclosures, requirements regarding 

advertisements that make tax 

representations, requirements regarding 

advertisements used prior to the 

effectiveness of the fund’s registration 

statement, requirements regarding the 

timeliness of performance data, and 

certain required disclosures by money 

market funds. 

Rule 482 advertisements must be filed 

with the Commission or, in the 

alternative, with Financial Industry 

Regulatory Authority (‘‘FINRA’’).3 This 

information collection differs from 

many other federal information 

collections that are primarily for the use 

and benefit of the collecting agency. 

As discussed above, rule 482 contains 

requirements that are intended to 

encourage the provision to investors of 

information that is balanced and 

informative, particularly in the area of 

investment performance. The 

Commission is concerned that in the 

absence of such provisions fund 

investors may be misled by deceptive 

rule 482 performance advertisements 

and may rely on less-than-adequate 

information when determining in which 

funds they should invest their money. 

As a result, the Commission believes it 

is beneficial for funds to provide 

investors with balanced information in 

fund advertisements in order to allow 

investors to make better-informed 

decisions. 

The Commission estimates that 

89,077 responses are filed annually 

pursuant to rule 482 by 4,106 

investment companies offering 37,265 

portfolios. Respondents consist of all 

the investment companies that take 

advantage of the safe harbor offered by 

the rule for their advertisements. The 

burden associated with rule 482 is 

presently estimated to be 5.16 hours per 

response. The hourly burden is 

therefore approximately 459,637 hours 

(89,077 responses × 5.16 hours per 

response). 

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 and forms. 

Cost burden is the cost of services 

purchased to comply with rule 482, 

such as for the services of computer 

programmers, outside counsel, financial 

printers, and advertising agencies. The 

Commission attributes no cost burden to 

rule 482. 

The provision of information under 

rule 482 is necessary to obtain the 

benefits of the safe harbor offered by the 

rule. The information provided is not 

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. 

Please direct general comments 

regarding the above information to the 

following persons: (i) Desk Officer for 

the Securities and Exchange 

Commission, Office of Management and 

Budget, Room 10102, New Executive 

Office Building, Washington, DC 20503 

or e-mail to: 

Alexander_T._Hunt@omb.eop.gov; and 

(ii) R. Corey Booth, Director/Chief 

Information Officer, Securities and 

Exchange Commission, C/O Shirley 

Martinson, 6432 General Green Way, 

Alexandria, VA 22312; or send an 

e-mail to: PRA_Mailbox@sec.gov. 

Comments must be submitted to OMB 

within 30 days of this notice. 

Dated: April 30, 2008. 

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E8–10046 Filed 5–6–08; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

Submission for OMB Review; 

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. 3501 et seq.), the Securities 

and Exchange Commission (the 

‘‘Commission’’) has submitted to the 

Office of Management and Budget 

(‘‘OMB’’) a request for approval of the 

collections of information under the 

Investment Company Act of 1940 (15 

U.S.C. 80a) (‘‘Act’’) summarized below. 

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) 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).2 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. 

Rules 27d–1 and 27d–2, which were 

explicitly authorized by statute, provide 

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 requirements in rules 27d–1 

and 27d–2 enable the Commission to 

monitor compliance with reserve rules. 

Rules 27d–1 and 27d–2, which were 

explicitly authorized by statute, provide 

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 requirements in rules 27d–1 

and 27d–2 enable the Commission to 

monitor compliance with reserve rules. 


sroberts on PROD1PC70 with NOTICES