53458 Federal Register / Vol. 73, No. 180 / Tuesday, September 16, 2008 / Notices 

2See section 17(f) of the Investment Company Act 

[15 U.S.C. 80a–17(f)]. 

3This figure is an estimate of the number of new 

funds each year, based on data reported by funds 

in 2007 on Form N–1A and Form N–2 [17 CFR 

274.101]. In practice, not all funds will use foreign 

custody managers, and the actual figure may be 

smaller. 

4This estimate is based on staff research. 

5The $164/hour figure for a trust administrator is 

from SIFMA’s Management & Professional Earnings 

in the Securities Industry 2007, modified to account 

for an 1800-hour work-year and multiplied by 5.35 

to account for bonuses, firm size, employee benefits 

and overhead. The $2000/hr board of director time 

is from industry sources. 

1Custody of Investment Company Assets Outside 

the United States, Investment Company Act Release 

No. IC–23815 (April 29, 1999) (64 FR 24489 (May 

6, 1999)). 

continuing to maintain assets with the 

eligible foreign custodian. 

The collection of information 

requirements in rule 17f–5 are intended 

to provide protection for fund assets 

maintained with a foreign bank 

custodian whose use is not authorized 

by statutory provisions that govern fund 

custody arrangements,2 and that is not 

subject to regulation and examination 

by U.S. regulators. The requirement that 

the fund board determine that it is 

reasonable to rely on each delegate is 

intended to ensure that the board 

carefully considers each delegate’s 

qualifications to perform its 

responsibilities. The requirement that 

the delegate provide written reports to 

the board is intended to ensure that the 

delegate notifies the board of important 

developments concerning custody 

arrangements so that the board may 

exercise effective oversight. The 

requirement that the delegate agree to 

exercise reasonable care is intended to 

provide assurances to the fund that the 

delegate will properly perform its 

duties. 

The requirements that the foreign 

custody manager determine that fund 

assets will be subject to reasonable care 

with the eligible foreign custodian and 

under the custody contract, and that 

each contract contain specified 

provisions or equivalent provisions, are 

intended to ensure that the delegate has 

evaluated the level of care provided by 

the custodian, that it weighs the 

adequacy of contractual provisions, and 

that fund assets are protected by 

minimal contractual safeguards. The 

requirement that the foreign custody 

manager establish a monitoring system 

is intended to ensure that the manager 

periodically reviews each custody 

arrangement and takes appropriate 

action if developing custody risks may 

threaten fund assets. 

The Commission’s staff estimates that 

each year, approximately 159 

registrants 3 could be required to make 

an average of one response per registrant 

under rule 17f–5, requiring 

approximately 2 hours of board of 

director time per response, to make the 

necessary findings concerning foreign 

custody managers. The total annual 

burden associated with these 

requirements of the rule would be up to 

approximately 318 hours (159 

registrants × 2 hours per registrant). The 

staff further estimates that during each 

year, approximately 15 global 

custodians 4 would be required to make 

an average of 4 responses per custodian 

concerning the use of foreign custodians 

other than depositories. The staff 

estimates that each response would take 

approximately 262 hours, requiring 

approximately 1048 total hours 

annually per custodian. The total 

annual burden associated with these 

requirements of the rule would be 

approximately 15,720 hours (15 global 

custodians x 1048 hours per custodian). 

Therefore, the total annual burden of all 

collection of information requirements 

of rule 17f–5 is estimated to be up to 

16,038 hours (318 + 15,720). The total 

annual cost of burden hours is estimated 

to be $3,214,080 (318 hours × $2000/ 

hour for board of director’s time, plus 

15,720 hours × $164/hour for a trust 

administrator’s time).5 Compliance with 

the collection of information 

requirements of the rule is necessary to 

obtain the benefit of relying on the 

rule’s permission for funds to maintain 

their assets in foreign custodians. 

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. Compliance with the collection 

of information requirements of the rule 

is necessary to obtain the benefit of 

relying on the rule’s permission for 

funds to maintain their assets in foreign 

custodians. 

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: 

Kimberly_P._Nelson@omb.eop.gov; and 

(ii) Lewis W. Walker, Acting Director/ 

Chief Information Officer, Securities 

and Exchange Commission, C/O Shirley 

Martinson, 6432 General Green Way, 

Alexandria, VA 22312; or send an email to: PRA_Mailbox@sec.gov. 

Comments must be submitted to OMB 

within 30 days of this notice. 

Dated: September 8, 2008. 

Florence E. Harmon, 

Acting Secretary. 

[FR Doc. E8–21533 Filed 9–15–08; 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 17f–7; SEC File No. 270–470; OMB 

Control No. 3235–0529. 

Notice is hereby given that, pursuant 

to the Paperwork Reduction Act of 1995 

(44 U.S.C. 3501–3520), the Securities 

and Exchange Commission 

(‘‘Commission’’) has submitted to the 

Office of Management and Budget 

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

previously approved collection of 

information discussed below. 

Rule 17f–7 (17 CFR 270.17f–7) 

permits funds to maintain their assets in 

foreign securities depositories based on 

conditions that reflect the operations 

and role of these depositories.1 Rule 

17f–7 contains some ‘‘collection of 

information’’ requirements. An eligible 

securities depository has to meet 

minimum standards for a depository. 

The fund or its investment adviser 

generally determines whether the 

depository complies with those 

requirements based on information 

provided by the fund’s primary 

custodian (a bank that acts as global 

custodian). The depository custody 

arrangement has to meet certain risk 

limiting requirements. The fund can 

obtain indemnification or insurance 

arrangements that adequately protect 

the fund against custody risks. The fund 

or its investment adviser generally 

determines whether indemnification or 

insurance provisions are adequate. If the 

fund does not rely on indemnification 

or insurance, the fund’s contract with its 

primary custodian is required to state 

that the custodian will provide to the 

fund or its investment adviser a custody 

risk analysis of each depository, monitor 

risks on a continuous basis, and 

promptly notify the fund or its adviser 

of material changes in risks. The 

primary custodian and other custodians 


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Federal Register / Vol. 73, No. 180 / Tuesday, September 16, 2008 / Notices 53459 

2At the start of 2008, there were more than 9,300 

open-end (including ETFs) portfolios and closedend funds. These entities were managed or 

sponsored by more than 828 investment advisers. 

3These estimates are based on conversations with 

representatives of the fund industry and global 

custodians. 

4The salaries for a portfolio manager and a trust 

administrator are from SIFMA’s Management & 

Professional Earnings in the Securities Industry 

2007, modified to account for an 1800-hour workyear and multiplied by 5.35 to account for bonuses, 

firm size, employee benefits and overhead. 

1 17 CFR 270.19b–1. 

2 17 CFR 270.19b–1(c)(1). 

3The notice requirement in rule 19b–1(c)(2) (17 

CFR 270.19b–1(c)(2)) supplements the notice 

requirement of section 19(a) [15 U.S.C. 80a–19(a)] 

and rule 19a–1 [17 CFR 270.19a–1], which requires 

any distribution in the nature of a dividend 

payment made by a fund to its investors to be 

accompanied by a notice disclosing the source of 

the distribution. 

4Rule 19b–1(e) also requires that the application 

comply with rule 0–2 [17 CFR 270.02], which sets 

forth the general requirements for papers and 

applications filed with the Commission. 

also are required to agree to exercise 

reasonable care. 

The collection of information 

requirements in rule 17f–7 are intended 

to provide workable standards that 

protect funds from the risks of using 

securities depositories while assigning 

appropriate responsibilities to the 

fund’s primary custodian and 

investment adviser based on their 

capabilities. The requirement that the 

depository meet specified minimum 

standards is intended to ensure that the 

depository is subject to basic safeguards 

deemed appropriate for all depositories. 

The requirement that the custody 

contract state that the fund’s primary 

custodian will provide an analysis of 

the custody risks of depository 

arrangements, monitor the risks, and 

report on material changes is intended 

to provide essential information about 

custody risks to the fund’s investment 

adviser as necessary for it to approve the 

continued use of the depository. The 

requirement that the primary custodian 

agree to exercise reasonable care is 

intended to provide assurances that its 

services and the information it provides 

will meet an appropriate standard of 

care. The alternative requirement that 

the funds obtain adequate 

indemnification or insurance against the 

custody risks of depository 

arrangements is intended to provide 

another, potentially less burdensome 

means to protect assets held in 

depository arrangements. 

The staff estimates that each of 

approximately 828 investment advisers 2

would make an average of 7 responses 

annually under the rule to address 

depository compliance with minimum 

requirements, any indemnification or 

insurance arrangements, and reviews of 

risk analyses or notifications. The staff 

estimates each response would take 5.5 

hours, requiring a total of approximately 

38.5 hours for each adviser. The total 

annual burden associated with these 

requirements of the rule would be 

approximately 31,878 hours (828 

advisers × 38.5 hours per adviser). The 

staff further estimates that during each 

year, each of approximately 15 global 

custodians would make an average of 4 

responses to analyze custody risks and 

provide notice of any material changes 

to custody risk under the rule. The staff 

estimates that each response would take 

250.25 hours, requiring approximately 

1001 hours annually per custodian.3

The total annual burden associated with 

these requirements of the new rule 

would be approximately 15,015 hours 

(15 custodians × 1001 hours). Therefore, 

the staff estimates that the total annual 

burden associated with all collection of 

information requirements of the rule 

would be 46,893 hours (31,878 + 

15,015). The total annual cost of burden 

hours is estimated to be $10,081,302 

(31,878 × $239 for a portfolio manager, 

plus 15,015 hours × $164/hour for a 

trust administrator’s time).4 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. Compliance with the collection 

of information requirements of the rule 

is necessary to obtain the benefit of 

relying on the rule’s permission for 

funds to maintain their assets in foreign 

custodians. 

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: 

Kimberly_P._Nelson@omb.eop.gov; and 

(ii) Lewis W. Walker, Acting Director/ 

CIO, 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: September 8, 2008. 

Florence E. Harmon, 

Acting Secretary. 

[FR Doc. E8–21534 Filed 9–15–08; 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 19b–1; SEC File No. 270–312; OMB 

Control No. 3235–0354. 

Notice is hereby given that, pursuant 

to the Paperwork Reduction Act of 1995 

(44 U.S.C. 3501–3520), the Securities 

and Exchange Commission 

(‘‘Commission’’) has submitted to the 

Office of Management and Budget 

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

previously approved collection of 

information discussed below. 

Section 19(b) of the Investment 

Company Act of 1940 (the ‘‘Act’’) (15 

U.S.C. 80a–19(b)) authorizes the 

Commission to regulate registered 

investment company (‘‘fund’’) 

distributions of long-term capital gains 

made more frequently than once every 

twelve months. Rule 19b–1 under the 

Act 1 prohibits funds from distributing 

long-term capital gains more than once 

every twelve months unless certain 

conditions are met. Rule 19b–1(c) (17 

CFR 270.19b–1(c)) permits unit 

investment trusts (‘‘UITs’’) engaged 

exclusively in the business of investing 

in certain eligible fixed-income 

securities to distribute long-term capital 

gains more than once every twelve 

months, if: (i) The capital gains 

distribution falls within one of several 

categories specified in the rule 2 and (ii) 

the distribution is accompanied by a 

report to the unitholder that clearly 

describes the distribution as a capital 

gains distribution (the ‘‘notice 

requirement’’).3 Rule 19b-1(e) (17 CFR 

270.19b–1(e)) permits a fund to apply to 

the Commission for permission to 

distribute long-term capital gains more 

than once a year if the fund did not 

foresee the circumstances that created 

the need for the distribution. The 

application must set forth the pertinent 

facts and explain the circumstances that 

justify the distribution.4 An application 

that meets those requirements is 

deemed to be granted unless the 

Commission denies the request within 

15 days after the Commission receives 

the application. 

Commission staff estimates that, on 

average, each year five funds file an 

application under rule 19b–1(e). The 

staff understands that funds that file an 

application generally use outside 

counsel to prepare the application. The 

cost burden of using outside counsel is 


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