Document ID: SEC-2020-0297-0001
Agency: sec
Document Type: Notice
Title: Agency Information Collection Activities; Proposals, Submissions, and Approvals
Posted Date: 2020-03-03T05:00Z

[Federal Register Volume 85, Number 42 (Tuesday, March 3, 2020)]
[Notices]
[Pages 12632-12633]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-04351]

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SECURITIES AND EXCHANGE COMMISSION

[SEC File No. 270-473, OMB Control No. 3235-0530]

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 32a-4

    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'') 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 32(a)(2) of the Investment Company Act of 1940 (15 U.S.C. 
80a 31(a)(2)) (``Act'') requires that the selection of a registered 
management investment company's or registered face-amount certificate 
company's (collectively, ``funds'') independent public accountant be 
submitted to shareholders for ratification or rejection. Rule 32a-4 
under the Investment Company Act (17 CFR 270.32a-4) exempts a fund from 
this requirement if, among other things, the fund has an audit 
committee consisting entirely of independent directors. The rule 
permits continuing oversight of a fund's accounting and auditing 
processes by an independent audit committee in place of a shareholder 
vote.
    Among other things, in order to rely on rule 32a-4, a fund's board 
of directors must adopt an audit committee charter and must preserve 
that charter, and any modifications to the charter, permanently in an 
easily accessible place. The purpose of these conditions is to ensure 
that Commission staff will be able to monitor the duties and 
responsibilities of an audit committee of a fund relying on the rule.
    Commission staff estimates that on average the board of directors 
takes 15 minutes to adopt the audit committee charter. Commission staff 
has estimated that with an average of 8 directors on

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the board,\1\ total director time to adopt the charter is 2 hours. 
Combined with an estimated \1/2\ hour of paralegal time to prepare the 
charter for board review, the staff estimates a total one-time 
collection of information burden of 2\1/2\ hours for each fund. Once a 
board adopts an audit committee charter, the charter is preserved as 
part of the fund's records. Commission staff estimates that there is no 
annual hourly burden associated with preserving the charter in 
accordance with this rule.\2\
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    \1\ This estimate is based on staff experience and on 
discussions with a representative of an entity that surveys funds 
and calculates fund board statistics based on responses to its 
surveys.
    \2\ This estimate is based on staff experience and discussions 
with funds regarding the hour burden related to maintenance of the 
charter.
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    Because virtually all existing funds have now adopted audit 
committee charters, the annual one-time collection of information 
burden associated with adopting audit committee charters is limited to 
the burden incurred by newly established funds. Commission staff 
estimates that fund sponsors establish approximately 90 new funds each 
year,\3\ and that all of these funds will adopt an audit committee 
charter in order to rely on rule 32a-4. Thus, Commission staff 
estimates that the annual one-time hour burden associated with adopting 
an audit committee charter under rule 32a-4 is approximately225 
hours.\4\
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    \3\ This estimate is based on the average number of 
notifications of registration on Form N-8A filed from2017 2019.
    \4\ This estimate is based on the following calculation: (2.5 
burden hours for establishing charter x 90 new funds = 225 burden 
hours).
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    When funds adopt an audit committee charter in order to rely on 
rule 32a-4, they also may incur one-time costs related to hiring 
outside counsel to prepare the charter. Commission staff estimates that 
those costs average approximately $1,500 per fund. \5\ As noted above, 
Commission staff estimates that approximately 90 new funds each year 
will adopt an audit committee charter in order to rely on rule 32a-4. 
Thus, Commission staff estimates that the ongoing annual cost burden 
associated with rule 32a-4 in the future will be approximately 
$135,000.\6\
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    \5\ Costs may vary based on the individual needs of each fund. 
However, based on the staff's experience and conversations with 
outside counsel that prepare these charters, legal fees related to 
the preparation and adoption of an audit committee charter usually 
average $1500 or less. The Commission also understands that model 
audit committee charters are available, which reduces the costs 
associated with drafting a charter.
    \6\ This estimate is based on the following calculations: ($1500 
cost of adopting charter x 90 newly established funds = $135,000).
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    These estimates of average costs are made solely for the purposes 
of the Paperwork Reduction Act. The estimates are not derived from a 
comprehensive or even a representative survey or study of the costs of 
Commission rules. The collections of information required by rule 32a-4 
are necessary to obtain the benefits of the rule. The Commission is 
seeking OMB approval, because 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 collection of 
information is 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 estimates 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 David Bottom, Director/Chief 
Information Officer, Securities and Exchange Commission, C/O Cynthia 
Roscoe, 100 F Street NE, Washington, DC 20549; or send an email to: 
PRA_Mailbox@sec.gov.

    Dated: February 27, 2020.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-04351 Filed 3-2-20; 8:45 am]
 BILLING CODE 8011-01-P