[Federal Register Volume 62, Number 152 (Thursday, August 7, 1997)]
[Notices]
[Pages 42610-42611]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-20748]


=======================================================================
-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION


Submission for OMB Review; Comment Request

Upon Written Request, Copies Available From: Securities and Exchange 
Commission, Office of Filings and Information Services, 450 Fifth 
Street, NW, Washington, DC 20549.

Extensions:
    Rule 11a-3, SEC File No. 270-321, OMB Control No. 3235-0358
    Rule 17g-1, SEC File No. 270-208, OMB Control No. 3235-0213
    Rule 206(4)-3, SEC File No. 270-218, OMB Control No. 3235-0242
    Rule 206(4)-4, SEC File No. 270-304, OMB Control No. 3235-0345

    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 requests for extension of the previously approved 
collections of information discussed below.
    Rule 11a-3 under the Investment Company Act of 1940 is an exemptive 
rule that permits open-end investment companies (``funds''), other than 
insurance company separate accounts, and funds' principal underwriters, 
to make certain exchange offers to fund shareholders and shareholders 
of other funds in the same group of investment companies. The rule 
requires a fund, among other things, (i) to disclose in its prospectus 
and advertising literature the amount of any administrative or 
redemption fee imposed on an exchange transaction, (ii) if the fund 
imposes an administrative fee on exchange transactions, other than a 
nominal one, to maintain and preserve records with respect to the 
actual costs incurred in connection with exchanges for at least six 
years, and (iii) give the fund's shareholders a sixty day notice of a 
termination of an exchange offer or any material amendment to the terms 
of an exchange offer (unless the only material effect of an amendment 
is to reduce or eliminate an administrative fee, sales load or 
redemption fee payable at the time of an exchange).
    The rule's requirements are designed to protect investors against 
abuses associated with exchange offers, provide fund shareholders with 
information necessary to evaluate exchange offers and certain material 
changes in the terms of exchange offers, and enable the Commission 
staff to monitor funds' use of administrative fees charged in 
connection with exchange transactions.
    It is estimated that approximately 2,500 funds may choose to rely 
on the rule, and each fund may spend one hour annually complying with 
the recordkeeping requirement and another hour annually complying with 
the notice requirement. The total annual burden associated with the 
rule is estimated to be 5,000 hours. The burdens associated with the 
disclosure requirement of the rule are accounted for in the burdens 
associated with the Form N-1A registration statement for funds.
    Rule 17g-1 under the Investment Company Act of 1940 governs the 
fidelity bonding of officers and employees of registered management 
investment companies (``funds''). Rule 17g-1 requires, among other 
things, that:

    (i) Fidelity Bond Content Requirements. The fidelity bond must 
provide that it shall not be cancelled, terminated or modified 
except upon a 60-day written notice by the acting party to the 
affected party. In the case of a ``joint bond'' covering several 
funds or certain other parties, the notice also must be given to 
each fund and to the Commission. In addition, a joint bond must 
provide that a copy of the bond, any amendments to the bond, any 
formal filing of a claim on the bond, and notification of the terms 
of any settlement on such claim, will be furnished to each fund 
promptly after the execution.
    (ii) Independent Directors' Approval Requirements. At least 
annually, the independent directors of a fund must approve the form 
and amount of the fidelity bond. The amount of any premium paid for 
any joint bond also must be approved by the independent directors of 
a fund.
    (iii) Joint Bond Agreement Requirement. A fund that is insured 
by a joint bond must enter into an agreement with all other parties

[[Page 42611]]

insured by the joint bond regarding recovery under the joint bond.
    (iv) Required Filings with the Commission. Upon execution of a 
fidelity bond or any amendment thereto, a fund must file with the 
Commission a copy of: (i) The executed fidelity bond; (ii) the 
resolution of the fund's directors approving the fidelity bond; and 
(iii) a statement as to the period for which the fidelity bond 
premiums have been paid. In the case of a joint bond, a fund also 
must file a copy of: (i) A statement showing the amount of a single 
insured bond the fund would have maintained under the rule had it 
not been named under a joint bond; and (ii) each agreement between 
the fund and all other insured parties. A fund also must notify the 
Commission in writing within 5 days of any claim and settlement on a 
claim made under a fidelity bond.
    (v) Required Notices to Directors. A fund must notify by 
registered mail each member of its board of directors (i) of any 
cancellation, termination or modification of the fidelity bond at 
least 45 days prior to the effective date; and (ii) of the filing or 
settlement of any claim under the fidelity bond when the 
notification is filed with the Commission.

    The fidelity bond content requirements, the joint bond agreement 
requirement, the independent directors' annual review requirement and 
the required notices to directors are designed to ensure the safety of 
fund assets against losses due to the conduct of persons who may obtain 
access to those assets, and facilitate oversight of a fund's fidelity 
bond. The rule's required filings with the Commission are designed to 
assist the Commission in monitoring funds' compliance with the fidelity 
bond requirements.
    The Commission estimates that approximately 3,200 funds are subject 
to the requirements of rule 17g-1, and that on average a fund spends 
approximately one hour per year on complying with the rule's paperwork 
requirements. The total annual burden of the rule's paperwork 
requirements thus is estimated to be 3,200 hours.
    Rule 206(4)-3, entitled ``Cash Payments for Client Solicitations'' 
provides restrictions on cash payments for client solicitations. The 
rule imposes two sets of information collection requirements. Where 
only impersonal advisory services are to be provided or an affiliation 
between the solicitor and adviser exists, the rule requires that the 
fee be paid pursuant to a written agreement and that the prospective 
client be advised of any affiliation between the adviser and the 
solicitor. Where individualized services are to be provided, the 
solicitor must furnish the prospective client with a copy of the 
adviser's brochure and a disclosure document containing specified 
information. The information collection and disclosure requirements in 
rule 206(4)-3 permit the Commission's inspection staff to monitor the 
activities of investment advisers and protect investors. Rule 206(4)-3 
is applicable to all registered investment advisers.
    The Commission believes that approximately 4,577 of these advisers 
have cash referral fee arrangements. Under the recently enacted 
National Securities Markets Improvement Act of 1996 (the ``1996 Act''), 
however, only about 1,281 advisers are subject to the rule after the 
legislation became effective on July 8, 1997. The rule requires 
approximately 7.04 burden hours per year per adviser and would result 
in a total of approximately 9,018 total burden hours (7.04 x 1281) for 
all advisers.
    Rule 206(4)-4, entitled ``Financial and Disciplinary Information 
that Investment Advisers Must Disclose to Clients,'' requires advisers 
to disclose certain financial and disciplinary information to clients. 
The disclosure requirements in rule 206(4)-4 are designed so that a 
client will have information about an adviser's financial condition and 
disciplinary events that may be material to a client's evaluation of 
the adviser's integrity or ability to meet contractual commitments to 
clients. The Commission does not use the information disclosed to 
clients.
    It is estimated that approximately 3,222 advisers were subject to 
this rule, but that after the 1996 Act became effective only 902 
advisers are subject to the rule. The rule requires approximately 7.5 
burden hours per year per adviser and would amount to approximately 
6,765 total burden hours (7.5 x 902) for all advisers.
    Rule 206(4)-3 does not specify a retention period for its 
recordkeeping requirements. The disclosure and recordkeeping 
requirements of rule 206(4)-3 and the disclosure requirements of rule 
206(4)-4 are mandatory. Information subject to the recordkeeping and 
disclosure requirements of rules 206(4)-3 and -4 is not submitted to 
the Commission, so confidentiality is not an issue.
    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 regarding the above information should be directed 
to the following persons: (i) Desk Officer for the Securities and 
Exchange Commission, Office of Information and Regulatory Affairs, 
Office of Management and Budget, Room 3208, New Executive Office 
Building, Washington, DC 20503; and (ii) Michael E. Bartell, Associate 
Executive Director, Office of Information Technology, Securities and 
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549. 
Comments must be submitted to OMB within 30 days of this notice.

    Dated: July 28, 1997.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-20748 Filed 8-6-97; 8:45 am]
BILLING CODE 8010-01-M