Document ID: SEC-2020-0696-0002
Agency: sec
Document Type: Notice
Title: Agency Information Collection Activities; Proposals, Submissions, and Approvals
Posted Date: 2023-04-25T04:00Z

[Federal Register Volume 88, Number 79 (Tuesday, April 25, 2023)]
[Notices]
[Pages 25041-25043]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-08648]

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SECURITIES AND EXCHANGE COMMISSION

[SEC File No. 270-508, OMB Control No. 3235-0565]

Proposed Collection; Comment Request; Extension: Rule 482

Upon Written Request, Copies Available From: Securities and Exchange 
Commission, Office of FOIA Services, 100 F Street NE, Washington, DC 
20549-2736

    Notice is hereby given that, pursuant to the Paperwork Reduction 
Act of 1995 (44 U.S.C. 3501 et seq.) (``Paperwork Reduction Act''), the 
Securities and Exchange Commission (the ``Commission'') is soliciting 
comments on the collection of information summarized below. The 
Commission plans to submit this existing collection of information to 
the Office of Management and Budget (``OMB'') for extension and 
approval.
    Like most issuers of securities, when an investment company 
(``fund'') \1\ 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) (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 (15 U.S.C. 77j(b)).
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    \1\ ``Investment company'' refers to both investment companies 
registered under the Investment Company Act of 1940 (``Investment 
Company Act'') (15 U.S.C. 80a-1 et seq.) and business development 
companies.
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    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, 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 
required to make available to investors month-end performance figures 
via website 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. In addition, rule 482(b) describes the information 
that is required to be included in an advertisement, including a 
cautionary statement under rule 482(b)(4) disclosing the particular 
risks associated with investing in a money market fund.
    On October 26, 2022, the Commission adopted rule and form 
amendments that modernize the requirements for annual and semi-annual 
shareholder reports provided by open-end management investment 
companies.\2\ The Commission also adopted amendments to the advertising 
rules for registered investment companies and business development 
companies to promote more transparent and balanced statements about 
investment costs. The advertising rule amendments require that 
investment company advertisements providing fee and expense figures 
include: (1) the maximum amount of any sales load or any other 
nonrecurring fee; and (2) the total annual expenses without any fee 
waiver or expense reimbursement arrangement. Under the amendments to 
rule 482, investment company fee and

[[Page 25042]]

expense presentations in advertisements must include timely and 
prominent information about a fund's maximum sales load (or any other 
nonrecurring fee) and gross total annual expenses, based on the methods 
of computation that the company's Investment Company Act or Securities 
Act registration statement form prescribes for a prospectus.
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    \2\ Tailored Shareholder Reports for Mutual Funds and Exchange-
Traded Funds; Fee Information in Investment Company Advertisements, 
Investment Company Act Release No. 34731 (Oct. 26, 2022), 87 FR 
72758 (Nov. 25, 2022) (the ``Adopting Release'').
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    Rule 482 advertisements must be filed with the Commission or, in 
the alternative, with the 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.
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    \3\ See note to rule 482(h) under the Securities Act, which 
states that ``these advertisements, unless filed with [FINRA], are 
required to be filed in accordance with the requirements of Sec.  
230.497.'' See also 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.
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    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 advertisements and may rely on less-than-
adequate information when determining in which funds they should invest 
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 table below summarizes our estimates associated with the 
amendments to rule 482 that the Adopting Release addresses:

                                                                 Rule 482 PRA Estimates
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                                           Internal
                                         initial hour      Internal annual  burden \1\            Wage rate \2\                Internal time costs
                                            burdens
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                                                              FINAL ESTIMATES FOR RULE 482
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New general requirements re: fee and           9 hours  6 hours \3\......................  $381 (blended rate for       $2,286
 expense figure disclosure.                                                                 compliance attorney and
                                                                                            senior programmer).
Number of responses to rule 482 that                    x 36,492 \4\ responses...........                               x 36,492 responses
 include fee/expense figure disclosure.
                                       -----------------------------------------------------------------------------------------------------------------
    Total burden of new requirements    ..............  218,952 hours....................  ...........................  $83,420,712
     for fee and expense disclosure.
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New requirements for disclosure of fee         6 hours  4 hours \5\......................  $381 (blended rate for       $1,524
 waivers/expense reimbursement                                                              compliance attorney and
 arrangements.                                                                              senior programmer).
Number of responses to rule 482 that                    x 36,492 responses...............                               x 36,492 responses
 disclose fee waivers/expense
 reimbursement arrangements.
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    Total burden of annual              ..............  145,968 hours....................  ...........................  $55,613,808
     requirements for disclosure of
     fee waivers/expense reimbursement
     arrangements.
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        Total annual burden...........  ..............  364,920 hours....................  ...........................  $139,034,520
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                                                   TOTAL FINAL ESTIMATED BURDENS INCLUDING AMENDMENTS
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Current burden estimates..............  ..............  212,927 hours....................  ...........................  $74,098,735
Revised burden estimate...............  ..............  577,847 hours....................  ...........................  $213,133,255
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Notes:
\1\ Includes initial burden estimates annualized over a 3-year period.
\2\ These PRA estimates assume that the same types of professionals would be involved in preparing advertisements (reflecting the proposed and final
  amendments to rule 482) that we believe otherwise would be involved in preparing a fund's advertisements. The Commission's estimates of the relevant
  wage rates are based on salary information for the securities industry compiled by the Securities Industry and Financial Markets Association's Office
  Salaries in the Securities Industry 2013. The estimated figures are modified by firm size, employee benefits, overhead, and adjusted to account for
  the effects of inflation. See Securities Industry and Financial Markets Association, Report on Management & Professional Earnings in the Securities
  Industry 2013.
\3\ This estimate assumed that, after the initial 9 hours that an entity would spend on the proposed fee and expense disclosure, which we annualize over
  a 3-year period, the entity would incur 3 additional burden hours associated with ongoing compliance with these requirements per year. The estimate of
  6 hours is based on the following calculation: ((9 initial hours/3) + 3 hours of additional ongoing burden hours) = 6 hours.
\4\ The Commission estimates that there was a total of 41,953 responses to rule 482 that either were filed with FINRA or with the Commission in 2021. Of
  those, the Commission estimates that 1,124 were responses from closed-end funds and BDCs, and that 2,816 were responses from variable insurance
  contracts. The number of responses filed with the SEC is based on the average number of responses filed with the Commission from 2019-2021. The
  Commission assumes that, moving forward, closed-end funds and BDCs will choose to use free writing prospectuses under rule 433, and also that variable
  insurance contracts will not be subject to the amendments to rule 482. Therefore, we exclude closed-end funds, BDCs, and variable insurance contracts
  from the total responses to rule 482 for purposes of this estimate. For purposes of estimating the burden of the final rules amendments, we estimate
  that 38,013 responses to rule 482 are filed annually. We estimate that approximately 96% of these rule 482 responses provide fee and expense figures
  in qualifying advertisements and would, therefore, be required to comply with the final rule amendments regarding such information (for example,
  ensuring that the fee and expense figures are presented in accordance with the prominence and timeliness requirements in the amendments to rule 482).

[[Page 25043]]

 
\5\ This estimate assumed that, after the initial 6 hours that an entity would spend on the proposed fee waiver and expense reimbursement requirements,
  which we annualized over a 3-year period, the entity would incur 2 additional burden hours associated with ongoing compliance with these requirements
  per year. The estimate of 4 hours is based on the following calculation ((6 initial hours/3) + 2 hours of additional ongoing burden hours) = 4 hours.

    The table above summarizes our PRA initial and ongoing annual 
burden estimates associated with rule 482, as amended. In the 
aggregate, we estimate the total annual burden to comply with amended 
rule 482 to be 577,847 hours, at an average time cost of $213,133,255.
    The information provided under rule 482 will not be kept 
confidential. The provision of information under rule 482 is necessary 
to obtain the benefits of the safe harbor offered by the rule.
    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. 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 OMB control number.
    Written comments are invited on: (a) whether the proposed 
collection of information is necessary for the proper performance of 
the functions of the Commission, including whether the information 
shall have practical utility; (b) the accuracy of the Commission's 
estimate of the burden of the collection of information; (c) ways to 
enhance the quality, utility, and clarity of the information collected; 
and (d) ways to minimize the burden of the collection 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 by June 26, 2023.
    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.
    Please direct your written comments to: David Bottom, Director/
Chief Information Officer, Securities and Exchange Commission, c/o John 
Pezzullo, 100 F Street NE, Washington, DC 20549 or send an email to: 
[email protected].

    Dated: April 19, 2023.
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-08648 Filed 4-24-23; 8:45 am]
BILLING CODE 8011-01-P