Document ID: SEC-2018-0869-0002
Agency: sec
Document Type: Notice
Title: Agency Information Collection Activities; Proposals, Submissions, and Approvals
Posted Date: 2021-08-31T04:00Z

[Federal Register Volume 86, Number 166 (Tuesday, August 31, 2021)]
[Notices]
[Pages 48787-48788]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-18695]

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SECURITIES AND EXCHANGE COMMISSION

[SEC File No. 270-233, OMB Control No. 3235-0223]

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 17f-2

    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 (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 for extension and approval.
    Rule 17f-2 (17 CFR 270.17f-2), entitled ``Custody of Investments by

[[Page 48788]]

Registered Management Investment Company,'' establishes safeguards for 
arrangements in which a registered management investment company or 
business development company (``fund'') is deemed to maintain custody 
of its own assets, such as when the fund maintains its assets in a 
facility that provides safekeeping but not custodial services.\1\ The 
rule includes four distinct requirements that are an information 
collection under the Paperwork Reduction Act. First, fund's directors 
must prepare a resolution designating not more than five fund officers 
or responsible employees who may have access to the fund's assets. 
Secondly, the fund's board must vote to approve this resolution. Third, 
the designated access persons (two or more of whom must act jointly 
when handling fund assets) must prepare a written notation providing 
certain information about each deposit or withdrawal of fund assets, 
and must transmit the notation to another officer or director 
designated by the directors. Lastly, an independent public accountant 
must verify the fund's assets three times each year, and two of those 
examinations must be unscheduled.\2\
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    \1\ The rule generally requires all assets to be deposited in 
the safekeeping of a ``bank or other company whose functions and 
physical facilities are supervised by Federal or State authority.''
    \2\ The accountant must transmit to the Commission promptly 
after each examination a certificate describing the examination on 
Form N-17f-2. The preparation and filing of Form N-17f-2, which 
largely serves as a cover-sheet for the accountant's certification 
of their audit, is covered by a separate information collection. The 
third (scheduled) examination may coincide with the annual 
verification required for every fund by section 30(g) of the Act (15 
U.S.C. 80a-29(g)).
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    Rule 17f-2's requirements are designed to safeguard fund assets 
from loss by requiring certain specific controls when those assets are 
not placed and maintained in the custody of a bank or other custodian 
as permitted under section 17(f) of the Investment Company Act of 1940 
(15 U.S.C. 80a-17(f)) (``Act'') and the rules thereunder. Specifically, 
the requirement that directors designate access persons is intended to 
ensure that directors evaluate the trustworthiness of insiders who 
handle fund assets. The requirements that access persons act jointly in 
handling fund assets, prepare a written notation of each transaction, 
and transmit the notation to another designated person are intended to 
reduce the risk of misappropriation of fund assets by access persons, 
and to ensure that adequate records are prepared, reviewed by a 
responsible third person, and available for examination by the 
Commission. The requirement that auditors verify fund assets without 
notice twice each year is intended to provide an additional deterrent 
to the misappropriation of fund assets and to detect any 
irregularities. Less frequent examinations by a fund's accountants 
could impair the ability of the Commission's examination staff to 
ascertain the fund's compliance with the rule.
    The Commission staff estimates that each fund makes 974 responses 
and spends an average of 252 hours annually in complying with the 
rule's requirements.\3\ Commission staff estimates that on an annual 
basis it takes: (i) 0.5 hours of fund accounting personnel at a total 
cost of $111 and 1 hour of fund attorney personnel time at a cost of 
$425, for a total of 1.5 hours and a cost of $536 to draft director 
resolutions; \4\ (ii) 0.5 hours of the fund's board of directors at a 
total cost of $2,385 to adopt the resolution; \5\ (iii) 244 hours for 
the fund's accounting personnel at a total cost of $71,102 to prepare 
written notations of transactions; \6\ and (iv) 3 hours for the fund's 
controller or administrator at a total cost of $1,494 to assist the 
independent public accountants when they perform verifications of fund 
assets.\7\ The total of these four requirements would then be 249 hours 
at a cost of $75,517 per respondent. Commission staff estimates that 
approximately 183 funds file Form N-17f-2 each year.\8\ Thus, the total 
annual hour burden for rule 17f-2 is estimated to be 45,384 hours.\9\ 
Based on the total costs per fund listed above, the total cost of rule 
17f-2's collection of information requirements is estimated to be 
approximately $13,819,611.\10\
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    \3\ The 974 responses are: 1 (one) response to draft and adopt 
the resolution and 973 notations. Estimates of the number of hours 
are based on conversations with individuals in the fund industry. 
The actual number of hours may vary significantly depending on 
individual fund assets.
    \4\ The estimate relating to fund accounting personnel is based 
on the following calculation: 0.5 (burden hours per fund) x $221 
(senior accountant's hourly rate) = approximately $111. Unless 
otherwise indicated, the hourly wage figures used herein are from 
the Securities Industry and Financial Markets Association's 
Management & Professional Earnings in the Securities Industry 2013, 
modified by Commission staff 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.
    \5\ The staff has estimated the average cost of board of 
director time as $4,770 per hour for the board as a whole, based on 
information received from funds and their counsel.
    \6\ Respondents estimated that each fund makes 973 responses on 
an annual basis and spends a total of 0.25 hours per response. The 
fund personnel involved are Accounts Payable Manager ($208 hourly 
rate), Operations Manager ($373 hourly rate) and Accounting Manager 
($296 hourly rate). The average hourly rate of these personnel is 
approximately $292. The estimated cost of preparing notations is 
based on the following calculation: 974 x 0.25 x $292 = $71,102.
    \7\ This estimate is based on the following calculation: 3 x 
$498 (fund controller's hourly rate) = $1,494.
    \8\ On average, each year approximately 183 funds filed Form N-
17f-2 with the Commission during calendar years 2018-2020. As every 
fund subject to rule 17f-2 must file Form N-17f-2, we believe this 
is a good estimate for the number of respondents to the rule.
    \9\ This estimate is based on the following calculation: 183 
(funds) x 249 (total annual hourly burden per fund) = 45,384 hours 
for rule. The annual burden for rule 17f-2 does not include time 
spent preparing Form N-17f-2. The burden for Form N-17f-2 is 
included in a separate collection of information.
    \10\ This estimate is based on the following calculation: 
$75,517 (total annual cost per fund) x 183 funds = $13,819,611.
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    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. Complying with the collections of 
information required by rule 17f-2 is mandatory for those funds that 
maintain custody of their own assets. Responses will not be kept 
confidential. 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 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 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: August 25, 2021.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2021-18695 Filed 8-30-21; 8:45 am]
BILLING CODE 8011-01-P