Document ID: SEC-2018-1773-0001
Agency: sec
Document Type: Notice
Title: Agency Information Collection Activities; Proposals, Submissions, and Approvals
Posted Date: 2018-11-20T05:00Z

[Federal Register Volume 83, Number 224 (Tuesday, November 20, 2018)]
[Notices]
[Page 58663]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-25216]

[[Page 58663]]

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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 17e-1, SEC File No. 270-224, OMB Control No. 3235-0217

    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.
    Rule 17e-1 (17 CFR 270.17e-1) under the Investment Company Act of 
1940 (15 U.S.C. 80a-1 et seq.) (the ``Investment Company Act'') deems a 
remuneration as ``not exceeding the usual and customary broker's 
commission'' for purposes of Section 17(e)(2)(A) of the Investment 
Company Act (15 U.S.C. 80a-17(e)(2)(A)) if, among other things, a 
registered investment company's (``fund's'') board of directors has 
adopted procedures reasonably designed to provide that the remuneration 
to an affiliated broker is reasonable and fair compared to that 
received by other brokers in connection with comparable transactions 
involving similar securities being purchased or sold on a securities 
exchange during a comparable period of time and the board makes and 
approves such changes as it deems necessary. In addition, each quarter, 
the board must determine that all transactions effected under the rule 
during the preceding quarter complied with the established procedures. 
Rule 17e-1 also requires the fund to (i) maintain permanently a written 
copy of the procedures adopted by the board for complying with the 
requirements of the rule; and (ii) maintain for a period of six years, 
the first two in an easily accessible place, a written record of each 
transaction subject to the rule, setting forth the amount and source of 
the commission, fee, or other remuneration received; the identity of 
the broker; the terms of the transaction; and the materials used to 
determine that the transactions were effected in compliance with the 
procedures adopted by the board. The recordkeeping requirements under 
rule 17e-1 enable the Commission to ensure that affiliated brokers 
receive compensation that does not exceed the usual and customary 
broker's commission. Without the recordkeeping requirements, Commission 
inspectors would have difficulty ascertaining whether funds were 
complying with rule 17e-1.
    Based on an analysis of fund filings, the staff estimates that 
approximately 266 funds enter into subadvisory agreements each year.\1\ 
Based on discussions with industry representatives, the staff estimates 
that it will require approximately 3 attorney hours to draft and 
execute additional clauses in new subadvisory contracts in order for 
funds and subadvisers to be able to rely on the exemptions in rule 17e-
1. Because these additional clauses are identical to the clauses that a 
fund would need to insert in their subadvisory contracts to rely on 
rules 12d3-1, 10f-3, and 17a-10, and because we believe that funds that 
use one such rule generally use all of these rules, we apportion this 3 
hour time burden equally to all four rules. Therefore, we estimate that 
the burden allocated to rule 17e-1 for this contract change would be 
0.75 hours.\2\ Assuming that all 266 funds enter into new subadvisory 
contracts each year make the modification to their contract required by 
the rule, we estimate that the rule's contract modification requirement 
will result in 200 burden hours annually.\3\
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    \1\ Based on data from Morningstar, as of June 30, 2018, there 
are 12,393 registered funds (open-end funds, closed-end funds, and 
exchange-traded funds), 4,594 funds of which have subadvisory 
relationships (approximately 37%). Based on data from the 2018 ICI 
Factbook, 720 new funds were established in 2017 (705 open-end funds 
and exchange-traded funds + 15 closed-end funds (from the ICI 
Research Perspective, April 2018)). 720 new funds x 37% = 266 funds.
    \2\ 3 hours / 4 rules = 0.75 hours.
    \3\ This estimate is based on the following calculation: 0.75 
hours x 266 funds = 200 burden hours.
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    Based on an analysis of fund filings, we estimate that 
approximately 1,609 funds use at least one affiliated broker. Based on 
staff experience and conversations with fund representatives, the staff 
estimates approximately 40 percent of transactions (and thus, 40% of 
funds) that occur under the rule 17e-1 would be exempt from its 
recordkeeping and review requirements. This would leave approximately 
965 funds \4\ still subject to the rule's recordkeeping and review 
requirements. Based on staff experience and conversations with fund 
representatives, we estimate that the burden of compliance with rule 
17e-1 is approximately 50 hours per fund per year. This time is spent, 
for example, reviewing the applicable transactions and maintaining 
records. Accordingly, we calculate the total estimated annual internal 
burden of complying with the review and recordkeeping requirements of 
rule 17e-1 to be approximately 48,250 hours \5\ and the total annual 
burden of the rule's paperwork requirements is 48,450 hours.\6\
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    \4\ 1,609 funds x 0.6 = 965 funds.
    \5\ 965 funds x 50 hours per fund = 48,250 hours.
    \6\ 200 hours + 48,250 hours = 48,450 hours.
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    Estimates of average burden hours 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 and forms. The collection of information under rule 17e-1 is 
mandatory. The information provided under rule 17e-1 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 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 agency, including whether the information will 
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 in writing within 60 
days of this publication.
    Please direct your written comments to Charles Riddle, Acting 
Director/Chief Information Officer, Securities and Exchange Commission, 
C/O Candace Kenner, 100 F Street NE, Washington, DC 20549; or send an 
email to: [email protected].

    Dated: November 14, 2018.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-25216 Filed 11-19-18; 8:45 am]
BILLING CODE 8011-01-P