Document ID: SEC-2019-1734-0001
Agency: sec
Document Type: Notice
Title: Agency Information Collection Activities; Proposals, Submissions, and Approvals
Posted Date: 2019-11-20T05:00Z

[Federal Register Volume 84, Number 224 (Wednesday, November 20, 2019)]
[Notices]
[Pages 64128-64129]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-24971]

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SECURITIES AND EXCHANGE COMMISSION

Submission for OMB Review; Comment Request

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

New Collection:
    Rule 139b; OMB Control No. New Collection, SEC File No. 270-815

    Notice is hereby given that the Securities and Exchange Commission 
(the ``Commission'') has, in accordance with the Paperwork Reduction 
Act of 1995 (Pub. L. 104-13, 44 U.S.C. 3501 et seq.) (``PRA''), 
submitted a sponsored information collection request (``ICR'') to the 
Office of Management and Budget (``OMB'') for review and clearance for 
the collection of information associated with the new Rule 139b (17 CFR 
230.139b) under the Securities Act of 1933 (15 U.S.C. 77a et seq.) 
(``Securities Act'') that was adopted by the Commission on November 30, 
2018.\1\ The title for this collection of information is: ``Rule 139b 
Disclosure of Standardized Performance.''
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    \1\ See Release No. 33-10580 (Nov. 30, 2018) [83 FR 64180 (Dec. 
13, 2018)] (``Adopting Release''). New rule 139b will be effective 
on January 14, 2019.
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    As directed by the Fair Access to Investment Research Act of 2017 
(Pub. L. 115-66, 131 Stat. 1196 (2017) (the ``FAIR Act''), the 
Commission adopted new rule 139b under the Securities Act to extend the 
safe harbor under rule 139 to a ``covered investment fund research 
report.'' Specifically, new rule 139b provides a safe harbor to a 
broker-dealer who publishes or distributes in the regular course of its 
business research reports concerning one or more ``covered investment 
fund(s)'' while participating in the distribution of a covered 
investment fund's securities.
    In the Proposing Release, we solicited comment on whether rule 139b 
should include a standardized performance disclosure requirement.\2\ In 
response to comments received, we have decided to adopt such a 
requirement.\3\ We believe that standardized performance presentation 
is an appropriate requirement because investors tend to consider fund 
performance a significant factor in evaluating or comparing investment 
companies, and the requirement addresses potential investor confusion 
if a communication were not easily recognizable as research as opposed 
to an advertising prospectus or supplemental sales literature. Rule 
139b requires that research reports about open-end funds that include 
performance information must present it in accordance with paragraphs 
(d), (e), and (g) of rule 482. Rule 139b also requires that research 
reports about closed-end funds that include performance information 
must present it in accordance with instructions to item 4.1(g) of Form 
N-2. Performance measures calculated by broker-dealers are not required 
to be kept confidential and there is no mandatory retention period. We 
anticipate that compliance with these performance measures for each 
fund discussed in a research report, and for which the performance 
measures apply, would increase compliance costs for broker-dealers 
seeking to publish or distribute a covered investment fund research 
report.
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    \2\ See Covered Investment Fund Research Reports, Securities Act 
Release No. 10498 (May 23, 2018) [83 FR 26788 (June 8, 2018)] 
(``Proposing Release'') at 26803-04.
    \3\ See Adopting Release, supra note I, at Section II.C.
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    It is difficult to provide estimates of the burdens and costs for 
those broker-dealers that will include performance information in a 
rule 139b research report. As discussed above, this is difficult to 
estimate because current data collected does not reflect the affiliate 
exclusion, does not include the entire universe of covered investment 
funds, and it is uncertain what percentage of communications currently 
filed as rule 482 advertising prospectuses (or rule 34b-1 supplemental 
sales materials) will instead be published in reliance of rule 139b, as 
covered investment fund research reports.\4\ For purposes of the PRA, 
we estimate that 10% of the rule 482 and rule 34b-1 communications 
currently filed by broker-dealers with FINRA (approximately 65,000) 
could be considered as rule 139b covered investment fund research 
reports. We estimate that broker-dealers will publish annually 6,500 
(10% of 65,000) covered investment fund research reports. Moreover, we 
assume for purposes of the PRA that all estimated rule 139b research 
reports will include fund performance information. We further estimate 
that 1,417 broker-dealers would likely be respondents to the collection 
of information with a frequency of 4.6 responses per year.\5\ We 
further estimate that 50% of these broker-dealers will have experience 
in complying with standardized performance requirements under rule 482. 
For the 50% of this subset of broker-dealers that do not have 
experience with complying with rule 482, we estimate that there will be 
a one-time implementation cost for each broker-dealer of 5 internal 
burden hours. Additionally, we estimate that each research report will 
require 3 hours of ongoing internal burden hours by a broker-dealers' 
personnel to comply with the rule 139b collection of information 
requirements, which for each broker-dealer is estimated to be

[[Page 64129]]

13.8 internal burden hours.\6\ Accordingly, we estimate that the 
standardized performance presentation requirements will result in an 
average annual hour burden of about 16.3 hours per broker-dealer \7\ in 
the first year of compliance and about 13.8 hours per broker-dealer for 
each of the next two years. Amortized over three years, the average 
annual hour burden will be about 14.63 hours per broker-dealer.\8\
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    \4\ See Adopting Release, supra note 1, n. 413 and accompanying 
paragraph.
    \5\ See Adopting Release, supra note 1, n. 414 and accompanying 
text. 6,500 covered investment fund research reports/1,417 broker-
dealers = 4.6 annual responses per broker-dealer.
    \6\ 4.6 annual responses per broker-dealer x 3 internal burden 
hours = 13.8 annual internal burden hours per broker-dealer.
    \7\ (50% of * 13.8 hours ongoing compliance) + (50% * (13.8 
hours ongoing compliance + 5 hours of initial compliance hours)).
    \8\ ((16.3 internal burden hours in year 1) + (13.8 internal 
burden hours in year 2) + (13.8 internal burden hours in year 3)) / 
3.
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    In sum, we estimate that rule 139b's requirements will impose a 
total annual internal hour burden of 20,731 hours on broker-dealers.\9\ 
We do not think there is an external cost burden associated with this 
collection of information.
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    \9\ 14.63 annualized burden hours * 1,417 broker-dealers.
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    This information collection is subject to the PRA. If approved, 
responses to the new collection of information requirement would not be 
mandatory for broker-dealers seeking to rely upon rule 139b but would 
be necessary for those broker-dealers that would like to provide 
performance information in their covered investment fund research 
reports. Responses to the information collections 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. The public may view the background 
documentation for this information collection at the following website, 
www.reginfo.gov. Comments should be directed to: (i) Desk Officer for 
the Securities and Exchange Commission, Office of Information and 
Regulatory Affairs, Office of Management and Budget, Room 10102, New 
Executive Office Building, Washington, DC 20503, or by sending an email 
to: Lindsay.M.Abate@omb.eop.gov; and (ii) Charles Riddle, Acting 
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. Comments must be submitted to OMB within 
30 days of this notice.

    Dated: November 13, 2019.
 Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-24971 Filed 11-19-19; 8:45 am]
BILLING CODE 8011-01-M