Document ID: SEC-2020-1879-0004
Agency: sec
Document Type: Notice
Title: Submission for OMB Review; Comment Request; Extension: Rule 19a–1
Posted Date: 2023-12-21T05:00Z

[Federal Register Volume 88, Number 244 (Thursday, December 21, 2023)]
[Notices]
[Pages 88428-88429]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-28118]

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SECURITIES AND EXCHANGE COMMISSION

[SEC File No. 270-240, OMB Control No. 3235-0216]

Submission for OMB Review; Comment Request; Extension: Rule 19a-1

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. 3501-3520), the Securities and Exchange 
Commission (the ``Commission'') has submitted to the Office of 
Management and Budget a request for extension of the previously 
approved collection of information discussed below.
    Section 19(a) (15 U.S.C. 80a-19(a)) of the Investment Company Act 
of 1940 (the ``Act'') (15 U.S.C. 80a) makes it unlawful for any 
registered investment company to pay any dividend or similar 
distribution from any source other than the company's net income, 
unless the payment is accompanied by a written statement to the 
company's shareholders which adequately discloses the sources of the 
payment. Section 19(a) authorizes the Commission to prescribe the form 
of such statement by rule.
    Rule 19a-1 (17 CFR 270. 19a-1) under the Act, entitled ``Written 
Statement to Accompany Dividend Payments by Management Companies,'' 
sets forth specific requirements for the information that must be 
included in statements made pursuant to section 19(a) by or on behalf 
of management companies.\1\ The rule requires that the statement 
indicate what portions of distribution payments are made from net 
income, net profits from the sale of a security or other property 
(``capital gains'') and paid-in capital. When any part of the payment 
is made from capital gains, rule 19a-1 also requires that the statement 
disclose certain other information relating to the appreciation or 
depreciation of portfolio securities. If an estimated portion is 
subsequently determined to be significantly inaccurate, a correction 
must be made on a statement made pursuant to section 19(a) or in the 
first report to shareholders following the discovery of the inaccuracy.
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    \1\ Section 4(3) of the Act (15 U.S. C. 80a-4(3)) defines 
``management company'' as ``any investment company other than a face 
amount certificate company or a unit investment trust.''
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    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 12,900 series of registered investment 
companies that are management companies may be subject to rule 19a-1 
each year,\2\ and that each portfolio on average mails two statements 
per year to meet the requirements of the rule.\3\ 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 25,800 burden 
hours.\4\
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    \2\ This estimate is as of December 2022 and is based on the 
Commission staff's review of EDGAR filings through July 31, 2023; 
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 below is 
based on the total number of management investment company 
portfolios, each of which may be subject to rule 19a-1.
    \3\ A 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.
    \4\ This estimate is based on the following calculation: 12,900 
management investment company portfolios x 2 statements per year x 1 
hour per statement = 25,800 burden hours.
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    The staff estimates that approximately one-third of the total 
annual burden (8,600 hours) would be incurred by a paralegal with an 
average hourly wage rate of approximately $253 per hour,\5\ and 
approximately two-thirds of the annual burden (17,200 hours) would be 
incurred by a compliance clerk with an average hourly wage rate of $82 
per

[[Page 88429]]

hour.\6\ The staff therefore estimates that the aggregate annual 
burden, in dollars, of the hours needed to comply with the paperwork 
requirements of the rule is approximately $3,586,200 ((8,600 hours x 
$253 = $2,175,800) + (17,200 hours x $82 = $1,410,400)). It is 
estimated that there is no cost burden of rule 19a-1 other than these 
estimates.
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    \5\ Hourly 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 1800-hour work-year and inflation, and multiplied by 
5.35 to account for bonuses, firm size, employee benefits, and 
overhead.
    \6\ Hourly rates are derived from SIFMA's Office Salaries in the 
Securities Industry 2013, modified to account for an 1800-hour work-
year and multiplied by 2.93 to account for bonuses, firm size, 
employee benefits and overhead.
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    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.
    These estimates are made solely for the purposes of the Paperwork 
Reduction Act, and are 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.
    The public may view background documentation for this information 
collection at the following website: www.reginfo.gov. Find this 
particular information collection by selecting ``Currently under 30-day 
Review--Open for Public Comments'' or by using the search function. 
Written comments and recommendations for the proposed information 
collection should be sent within 30 days of publication of this notice 
by January 22, 2024 to (i) [email protected] 
and (ii) David Bottom, Director/Chief Information Officer, Securities 
and Exchange Commission, c/o John Pezzullo, 100 F Street NE, 
Washington, DC 20549, or by sending an email to: [email protected].

    Dated: December 18, 2023.
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-28118 Filed 12-20-23; 8:45 am]
BILLING CODE 8011-01-P