Federal Register / Vol. 82, No. 173 / Friday, September 8, 2017 / Notices 42565 

3This estimate is based on statistics compiled by 

Commission staff as of April 30, 2017. 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. 

4A 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. 

5This estimate is based on the following 

calculation: 11,818 management investment 

company portfolios × 2 statements per year × 1 hour 

per statement = 23,636 burden hours. 

6Hourly 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. 

7Hourly 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. 

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 11,818 series of 

registered investment companies that 

are management companies may be 

subject to rule 19a–1 each year,3 and 

that each portfolio on average mails two 

statements per year to meet the 

requirements of the rule.4 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 23,636 burden hours.5

The staff estimates that approximately 

one-third of the total annual burden 

(7,879 hours) would be incurred by a 

paralegal with an average hourly wage 

rate of approximately $205 per hour,6

and approximately two-thirds of the 

annual burden (15,757 hours) would be 

incurred by a compliance clerk with an 

average hourly wage rate of $66 per 

hour.7 The staff therefore estimates that 

the aggregate annual cost of complying 

with the paperwork requirements of the 

rule is approximately $2,655,157 ((7,879 

hours × $205 = $1,615,195) + (15,757 

hours × $66 = $1,039,962)). 

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. 

Written comments are invited on: (a) 

Whether the collections of information 

are necessary for the proper 

performance of the functions of the 

Commission, including whether the 

information has practical utility; (b) the 

accuracy of the Commission’s estimate 

of the burdens of the collections of 

information; (c) ways to enhance the 

quality, utility, and clarity of the 

information collected; and (d) ways to 

minimize the burdens of the collections 

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 Pamela Dyson, Director/Chief 

Information Officer, Securities and 

Exchange Commission, C/O Remi 

Pavlik-Simon, 100 F Street NE., 

Washington, DC 20549; or send an email 

to: PRA_Mailbox@sec.gov. 

Dated: September 5, 2017. 

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2017–19070 Filed 9–7–17; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

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 17Ad–3(b), 

SEC File No. 270–424, OMB Control No. 

3235–0473. 

Notice is hereby given that pursuant 

to the Paperwork Reduction Act of 1995 

(‘‘PRA’’) (44 U.S.C. 3501 et seq.), the 

Securities and Exchange Commission 

(‘‘Commission’’) has submitted to the 

Office of Management and Budget 

(‘‘OMB’’) a request for approval of 

extension of the previously approved 

collection of information provided for in 

Rule 17Ad–3(b) (17 CFR 240.17Ad– 

3(b)), under the Securities Exchange Act 

of 1934 (15 U.S.C. 78a et seq.). 

Rule 17Ad–3(b) requires registered 

transfer agents to send a copy of the 

written notice required under Rules 

17Ad–2(c), (d), and (h) to the chief 

executive officer of each issuer for 

which the transfer agent acts when it 

has failed to turnaround at least 75% of 

all routine items in accordance with the 

requirements of Rule 17Ad–2(a), or to 

process at least 75% of all items in 

accordance with the requirements of 

Rule 17Ad–2(b), for two consecutive 

months. The issuer may use the 

information contained in the notices: (1) 

As an early warning of the transfer 

agent’s non-compliance with the 

Commission’s minimum performance 

standards regarding registered transfer 

agents; and (2) to become aware of 

certain problems and poor performances 

with respect to the transfer agents that 

are servicing the issuer’s issues. If the 

issuer does not receive notice of a 

registered transfer agent’s failure to 

comply with the Commission’s 

minimum performance standards then 

the issuer will be unable to take 

remedial action to correct the problem 

or to find another registered transfer 

agent. Pursuant to Rule 17Ad–3(b), a 

transfer agent that has already filed a 

Notice of Non-Compliance with the 

Commission pursuant to Rule 17Ad–2 

will only be required to send a copy of 

that notice to issuers for which it acts 

when that transfer agent fails to 

turnaround 75% of all routine items or 

to process 75% of all items. 

The Commission estimates that only 

one transfer agent will meet the 

requirements of Rule 17Ad–3(b) each 

year. If a transfer agent fails to meet 

those turnaround and processing 

performance requirements under 17Ad– 

3(b), it would simply send a copy of the 

notice to its issuer-clients that had 

already been produced for the 

Commission pursuant to Rule 17Ad– 

2(c) or (d). The Commission estimates 


sradovich on DSK3GMQ082PROD with NOTICES
42566 Federal Register / Vol. 82, No. 173 / Friday, September 8, 2017 / Notices 

1 15 U.S.C. 80a. 

2For example, fund directors must approve 

investment advisory and distribution contracts. See 

15 U.S.C. 80a–15(a), (b), and (c). 

3 Investment Company Act Release No. 4 (Oct. 29, 

1940) (5 FR 4316 (Oct. 31, 1940)). Note that rule 0– 

1 was originally adopted as rule N–1. 

4The relevant exemptive rules are: Rule 10f–3 (17 

CFR 270.10f–3), rule 12b–1 (17 CFR 270.12b–1), 

rule 15a–4(b)(2) (17 CFR 270.15a–4(b)(2)), rule 17a– 

7 (17 CFR 270.17a–7), rule 17a–8 (17 CFR 270.17a– 

8), rule 17d–1(d)(7) (17 CFR 270.17d–1(d)(7)), rule 

17e–1(c) (17 CFR 270.17e–1(c)), rule 17g–1 (17 CFR 

270.17g–1), rule 18f–3 (17 CFR 270.18f–3), and rule 

23c–3 (17 CFR 270.23c–3). 

5See Role of Independent Directors of Investment 

Companies, Investment Company Act Release No. 

24816 (Jan. 2, 2001) (66 FR 3735 (Jan. 16, 2001)). 

6A ‘‘control person’’ is any person—other than a 

fund—directly or indirectly controlling, controlled 

by, or under common control, with any of the 

fund’s management organizations. See 17 CFR 

270.01(a)(6)(iv)(B). 

7Based on statistics compiled by Commission 

staff, we estimate that there are approximately 3,453 

funds that could rely on one or more of the 

exemptive rules (this figure reflects the three-year 

average of open-end and closed-end funds (3,349) 

and business development companies (104)). Of 

those funds, we assume that approximately 90 

percent (3,108) actually rely on at least one 

exemptive rules annually. 

the requirement will take each 

respondent approximately four hours to 

complete. The Commission staff 

estimates that compliance staff work at 

registered transfer agents to comply 

with the third party disclosure 

requirement will result in an internal 

cost of compliance, at an estimated 

hourly wage of $283, of $1,128 per year 

per transfer agent (4 hours × $283 per 

hour = $1,128 per year). Therefore, the 

aggregate annual internal cost of 

compliance for the approximately one 

registered transfer agent each year to 

comply with Rule 17Ad–3(b) is also 

$1,128. There are no external labor costs 

associated with sending the notice to 

issuers. 

An agency may not conduct or 

sponsor, and a person is not required to 

respond to, a collection of information 

under the PRA unless it displays a 

currently valid OMB control number. 

The public may view background 

documentation for this information 

collection at the following Web site: 

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 

Office Building, Washington, DC 20503, 

or by sending an email to: Shagufta_

Ahmed@omb.eop.gov; and (ii) Pamela 

Dyson, Director/Chief Information 

Officer, Securities and Exchange 

Commission, c/o Remi Pavlik-Simon, 

100 F Street NE., Washington, DC 

20549, or by sending an email to: PRA_

Mailbox@sec.gov. Comments must be 

submitted to OMB within 30 days of 

this notice. 

Dated: September 5, 2017. 

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2017–19071 Filed 9–7–17; 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 FOIA Services, 

100 F Street NE., Washington, DC 

20549–2736. 

Extension: 

Rule 0–1, SEC File No. 270–472, OMB 

Control No. 3235–0531 

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 

(‘‘Commission’’) plans to submit to the 

Office of Management and Budget a 

request for extension of the previous 

approved collection of information 

discussed below. 

The Investment Company Act of 1940 

(the ‘‘Act’’) 1 establishes a 

comprehensive framework for regulating 

the organization and operation of 

investment companies (‘‘funds’’). A 

principal objective of the Act is to 

protect fund investors by addressing the 

conflicts of interest that exist between 

funds and their investment advisers and 

other affiliated persons. The Act places 

significant responsibility on the fund 

board of directors in overseeing the 

operations of the fund and policing the 

relevant conflicts of interest.2

In one of its first releases, the 

Commission exercised its rulemaking 

authority pursuant to sections 38(a) and 

40(b) of the Act by adopting rule 0–1 (17 

CFR 270.0–1).3 Rule 0–1, as 

subsequently amended on numerous 

occasions, provides definitions for the 

terms used by the Commission in the 

rules and regulations it has adopted 

pursuant to the Act. The rule also 

contains a number of rules of 

construction for terms that are defined 

either in the Act itself or elsewhere in 

the Commission’s rules and regulations. 

Finally, rule 0–1 defines terms that 

serve as conditions to the availability of 

certain of the Commission’s exemptive 

rules. More specifically, the term 

‘‘independent legal counsel,’’ as defined 

in rule 0–1, sets out conditions that 

funds must meet in order to rely on any 

of ten exemptive rules (‘‘exemptive 

rules’’) under the Act.4

The Commission amended rule 0–1 to 

include the definition of the term 

‘‘independent legal counsel’’ in 2001.5

This amendment was designed to 

enhance the effectiveness of fund boards 

of directors and to better enable 

investors to assess the independence of 

those directors. The Commission also 

amended the exemptive rules to require 

that any person who serves as legal 

counsel to the independent directors of 

any fund that relies on any of the 

exemptive rules must be an 

‘‘independent legal counsel.’’ This 

requirement was added because 

independent directors can better 

perform the responsibilities assigned to 

them under the Act and the rules if they 

have the assistance of truly independent 

legal counsel. 

If the board’s counsel has represented 

the fund’s investment adviser, principal 

underwriter, administrator (collectively, 

‘‘management organizations’’) or their 

‘‘control persons’’ 6 during the past two 

years, rule 0–1 requires that the board’s 

independent directors make a 

determination about the adequacy of the 

counsel’s independence. A majority of 

the board’s independent directors are 

required to reasonably determine, in the 

exercise of their judgment, that the 

counsel’s prior or current representation 

of the management organizations or 

their control persons was sufficiently 

limited to conclude that it is unlikely to 

adversely affect the counsel’s 

professional judgment and legal 

representation. Rule 0–1 also requires 

that a record for the basis of this 

determination is made in the minutes of 

the directors’ meeting. In addition, the 

independent directors must have 

obtained an undertaking from the 

counsel to provide them with the 

information necessary to make their 

determination and to update promptly 

that information when the person begins 

to represent a management organization 

or control person, or when he or she 

materially increases his or her 

representation. Generally, the 

independent directors must re-evaluate 

their determination no less frequently 

than annually. 

Any fund that relies on one of the 

exemptive rules must comply with the 

requirements in the definition of 

‘‘independent legal counsel’’ under rule 

0–1. We assume that approximately 

3,108 funds rely on at least one of the 

exemptive rules annually.7 We further 

assume that the independent directors 

of approximately one-third (1,036) of 

those funds would need to make the 

required determination in order for their 

counsel to meet the definition of 


sradovich on DSK3GMQ082PROD with NOTICES