Document ID: SEC-2010-1590-0001
Agency: sec
Document Type: Rule
Title: Forms N-CSR and N-SAR in Connection with 2010 Comprehensive Iran Sanctions, Accountability, and Divestment Act: Technical Amendments
Posted Date: 2010-10-19T04:00Z

[Federal Register: October 19, 2010 (Volume 75, Number 201)]
[Rules and Regulations]               
[Page 64120-64123]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr19oc10-2]                         

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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 249 and 274

[Release Nos. 34-63087; IC-29461]

 
Technical Amendments to Forms N-CSR and N-SAR in Connection With 
the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 
2010

AGENCY: Securities and Exchange Commission.

ACTION: Final rule; technical amendments.

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SUMMARY: The Securities and Exchange Commission is adopting technical 
amendments to Forms N-CSR and N-SAR under the Securities Exchange Act 
of 1934 and the Investment Company Act of 1940 in connection with 
amendments to Section 13(c) of the Investment Company Act that were 
included in the Comprehensive Iran Sanctions, Accountability, and 
Divestment Act of 2010.

DATES: Effective Date: October 19, 2010.

FOR FURTHER INFORMATION CONTACT: Kieran G. Brown, Senior Counsel, 
Office of Disclosure Regulation, Division of Investment Management, at 
(202) 551-6784, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-5720.

SUPPLEMENTARY INFORMATION: The Securities and Exchange Commission 
(``Commission'') is adopting technical amendments to Form N-CSR \1\ and 
Form N-SAR \2\ under the Securities Exchange Act of 1934 (``Exchange 
Act'') \3\ and the Investment Company Act of 1940 (``Investment Company 
Act'').\4\
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    \1\ 17 CFR 249.331 and 274.128.
    \2\ 17 CFR 249.330 and 274.101.
    \3\ 15 U.S.C. 78a et seq.
    \4\ 15 U.S.C. 80a-1 et seq.
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I. Discussion

    On July 1, 2010, the President signed the Comprehensive Iran 
Sanctions, Accountability, and Divestment Act of 2010 (``Iran 
Divestment Act'') into law.\5\ Among other things, the Iran

[[Page 64121]]

Divestment Act amended Section 13(c) of the Investment Company Act \6\ 
to provide that no person may bring any civil, criminal, or 
administrative action against any registered investment company, or any 
employee, officer, director, or investment adviser of the investment 
company, based solely upon the investment company divesting from, or 
avoiding investing in, securities issued by persons that the investment 
company determines, using credible information that is available to the 
public, engage in certain investment activities in Iran.\7\ Section 
13(c)(2)(B) of the Investment Company Act provides that this limitation 
on actions does not apply to a registered investment company, or any of 
its employees, officers, directors, or investment advisers, unless the 
investment company makes disclosures about the divestments in 
accordance with regulations prescribed by the Commission.\8\ To that 
end, the Iran Divestment Act requires that we issue, not later than 120 
days after enactment, any revisions we determine to be necessary to the 
regulations requiring disclosure by each registered investment company 
that divests itself of securities in accordance with Section 13(c) of 
the Investment Company Act to include divestments of securities in 
accordance with the amendments added by the Iran Divestment Act.\9\
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    \5\ Pub. L. 111-195, 124 Stat. 1312 (2010).
    \6\ 15 U.S.C. 80a-13(c).
    \7\ Section 203(a) of the Iran Divestment Act [to be codified at 
15 U.S.C. 80a-13(c)(1)(B)].
    \8\ 15 U.S.C. 80a-13(c)(2)(B).
    \9\ Section 203(b) of the Iran Divestment Act.
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    Under our current regulations, each registered investment company 
that divests itself of securities in accordance with Section 13(c) of 
the Investment Company Act is required to disclose the divestment on 
the next Form N-CSR or Form N-SAR that it files following the 
divestment. Management investment companies are required to provide the 
disclosure on Form N-CSR, pursuant to Item 6(b) of the form, and unit 
investment trusts are required to provide the disclosure on Form N-SAR, 
pursuant to Item 133 of the form.\10\ These form items were originally 
adopted to implement the Sudan Accountability and Divestment Act of 
2007 (``Sudan Divestment Act''), which limits civil, criminal, and 
administrative actions that may be brought against a registered 
investment company that divests from securities of issuers that conduct 
or have direct investments in certain business operations in Sudan, 
provided that the investment company makes disclosures in accordance 
with regulations prescribed by the Commission.\11\ As a result, each 
item contains a termination provision that is based on the termination 
of the relevant provisions of the Sudan Divestment Act. Moreover, the 
instructions to the items contain references to the Sudan Divestment 
Act. Specifically, Instruction 1 to Item 6(b) of Form N-CSR and the 
Instruction to Item 133 of Form N-SAR each include a statement that 
Section 13(c) of the Investment Company Act was added by the Sudan 
Divestment Act. In addition, the heading to the Instruction to Item 133 
of Form N-SAR includes a reference to the Sudan Divestment Act.
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    \10\ Item 6(b) of Form N-CSR; Item 133 of Form N-SAR. The 
regulations require disclosure of information that will identify the 
securities divested and the magnitude of the divestment, including 
the issuer's name; exchange ticker symbol; Committee on Uniform 
Securities Identification Procedures (``CUSIP'') number; total 
number of shares or, for debt securities, principal amount divested; 
and dates that the securities were divested. Item 6(b)(1)-(5) of 
Form N-CSR; Items 133.A-E of Form N-SAR. In addition, if the 
registered investment company continues to hold any securities of 
the divested issuer, it is required to disclose the exchange ticker 
symbol; CUSIP number; and total number of shares or, for debt 
securities, principal amount of such securities, held on the date of 
filing. Item 6(b)(6) of Form N-CSR; Item 133.F of Form N-SAR. While 
a registered investment company is not required to include 
disclosure under the relevant Item, the limitation on actions 
provided in Section 13(c) does not apply with respect to a 
divestment that is not disclosed. Instruction 1 to Item 6(b) of Form 
N-CSR; Instruction to Item 133 of Form N-SAR.
    \11\ Sudan Accountability and Divestment Act of 2007, Pub. L. 
110-174, 121 Stat. 2516 (2007); Investment Company Act Release No. 
28254 (Apr. 24, 2008) [73 FR 23328, 23328 (Apr. 30, 2008)] (adoption 
of Item 6(b) of Form N-CSR and Item 133 of Form N-SAR).
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    The requirements of Item 6(b) of Form N-CSR and Item 133 of Form N-
SAR apply to divestment of securities in accordance with Section 13(c) 
of the Investment Company Act. Therefore, we have determined that the 
items are broad enough to apply to disclosure of divestment of 
securities in accordance with the amendments to Section 13(c) added by 
the Iran Divestment Act without substantive revision. However, we have 
determined that it is appropriate to make technical revisions that 
remove the references to the Sudan Divestment Act from the forms and 
require disclosure of a Section 13(c) divestment to specify whether it 
is undertaken pursuant to the Sudan Divestment Act or the Iran 
Divestment Act.
    Specifically, in accordance with the Iran Divestment Act, we are 
amending our forms to delete the references to the Sudan Divestment Act 
from Instruction 1 to Item 6(b) of Form N-CSR, the Instruction to Item 
133 of Form N-SAR, and the heading to the Instruction to Item 133 of 
Form N-SAR. We are also amending the termination provisions in Item 
6(b) of Form N-CSR and Item 133 of Form N-SAR to eliminate the 
references to termination of the Sudan Divestment Act and to provide, 
more generically, that the disclosure requirements terminate one year 
after the first date on which all statutory provisions that underlie 
Section 13(c) of the Investment Company Act (i.e., the provisions of 
both the Sudan Divestment Act and the Iran Divestment Act) have 
terminated. Finally, we are amending Item 6(b) of Form N-CSR and Item 
133 of Form N-SAR to require that any registrant that divests itself of 
securities in accordance with Section 13(c) of the Investment Company 
Act must disclose the name of the statute that added the provision of 
Section 13(c) in accordance with which the securities were divested 
(i.e., the ``Sudan Accountability and Divestment Act'' or the 
``Comprehensive Iran Sanctions, Accountability, and Divestment 
Act'').\12\ We are adding this requirement so that it will be clear 
from the disclosure which provision of Section 13(c) is being relied 
upon in connection with the divestment.
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    \12\ Item 6(b)(7) of Form N-CSR; Item 133.G. of Form N-SAR.
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II. Procedural and Other Matters

    Under the Administrative Procedure Act (``APA''), notice and public 
comment procedures are not required when an agency, for good cause, 
finds ``that notice and public procedure thereon are impracticable, 
unnecessary, or contrary to the public interest.'' \13\ As discussed in 
this document, because no substantive revisions to our forms requiring 
Section 13(c) divestment disclosure are necessary to conform them to 
Section 203(b) of the Iran Divestment Act, the Commission believes that 
good cause exists to dispense with a public notice and comment period 
for these amendments. We have determined that only technical revisions 
to our forms are appropriate to make the existing forms consistent with 
the Iran Divestment Act. The technical amendments to Forms N-CSR and N-
SAR remove references to the Sudan Divestment Act from Item 6(b) of 
Form N-CSR and Item 133 of Form N-SAR. The technical amendments also 
require that any registrant that divests itself of securities in 
accordance with Section 13(c) of the Investment Company Act must 
disclose the name of the statute under which the securities were 
divested. Because these revisions merely revise Item 6(b) of Form N-CSR

[[Page 64122]]

and Item 133 of Form N-SAR to make them consistent with a newly enacted 
statute, Section 203 of the Iran Divestment Act, the Commission finds 
that the amendments are technical in nature and that publishing the 
amendments for comment is unnecessary.\14\
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    \13\ 5 U.S.C. 553(b)(B).
    \14\ This finding also satisfies the requirements of 5 U.S.C. 
808(2) (if a federal agency finds that notice and public comment are 
``impractical, unnecessary or contrary to the public interest,'' a 
rule ``shall take effect at such time as the federal agency 
promulgating the rule determines''), allowing the amendments to 
become effective notwithstanding the requirement of 5 U.S.C. 801.
    The amendments do not require analysis under the Regulatory 
Flexibility Act. See 5 U.S.C. 601(2) (for purposes of Regulatory 
Flexibility Act analysis, the term ``rule'' means any rule for which 
the agency publishes a general notice of proposed rulemaking).
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    Publication of a substantive rule not less than 30 days before its 
effective date is required by the APA except as otherwise provided by 
the agency for good cause.\15\ For the same reasons described above 
with respect to notice and opportunity for comment, the Commission 
finds that there is good cause for making the technical amendments to 
each of the forms effective on the date of publication in the Federal 
Register.
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    \15\ 5 U.S.C. 553(d).
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    The form amendments contain ``collection of information'' 
requirements within the meaning of the Paperwork Reduction Act of 1995 
(``PRA'').\16\ The titles for the collections of information are ``Form 
N-CSR under the Investment Company Act of 1940 and Securities Exchange 
Act of 1934, Certified Shareholder Report,'' and ``Form N-SAR under the 
Investment Company Act of 1940, Semi-Annual Report for Registered 
Investment Companies.'' Form N-CSR (OMB Control No. 3235-0570) under 
the Exchange Act and the Investment Company Act is used by registered 
management investment companies filing certified shareholder reports. 
Form N-SAR (OMB Control No. 3235-0330) under the Exchange Act and the 
Investment Company Act is used by registered investment companies to 
file periodic reports with the Commission. 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.
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    \16\ 44 U.S.C. 3501 et seq.
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    We do not believe that the technical amendments necessitate an 
increase in the current PRA burden estimates for Form N-CSR and Form N-
SAR. When the forms were originally amended to implement the Sudan 
Divestment Act, we estimated that approximately 15% of all registered 
investment companies had an objective of investing internationally.\17\ 
We also conservatively assumed that every investment company portfolio 
that had an international investment strategy would disclose a 
divestment in accordance with the Sudan Divestment Act on each semi-
annual filing, for a total of approximately 1,000 such filings per 
year.\18\ Since then, however, it appears that there have been less 
than ten total filings by investment companies disclosing a divestment 
in accordance with the Sudan Divestment Act.\19\ Based on this 
experience, we do not believe that it is appropriate to adjust our 
existing estimate upwards to reflect additional filings for divestments 
in accordance with the Iran Divestment Act.
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    \17\ Investment Company Act Release No. 28254, supra note 11, at 
23330.
    \18\ See id. (6,743 annual and semi-annual filings on Form N-CSR 
x 15% of filings on Form N-CSR) + (90 filings on Form N-SAR x 15% of 
filings on Form N-SAR) = 1,025 filings.
    \19\ Based on the Commission staff's review of filings made with 
the Commission.
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    We also do not believe that the technical amendments necessitate a 
decrease in the current PRA burden estimates for Form N-CSR and Form N-
SAR. Because we do not know the extent to which divestments in 
accordance with the Iran Divestment Act will occur, we believe that it 
is appropriate to maintain a conservative assumption that each Form N-
CSR and N-SAR filing by an international portfolio will have a 
disclosure either with respect to the Sudan Divestment Act or the Iran 
Divestment Act. In addition, any decrease in the estimates would be 
insignificant relative to the total current PRA burden estimates for 
Form N-CSR and Form N-SAR because the estimated current PRA burden for 
the Section 13(c) disclosure is itself insignificant relative to the 
total burden estimates for these forms, i.e., 510 hours (out of a total 
burden of 138,662.5 hours, or 0.37%) \20\ for Form N-CSR and 10 hours 
(out of a total burden of 107,213 hours, or 0.01%) \21\ for Form N-SAR.
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    \20\ Investment Company Act Release No. 28254, supra note 11, at 
23330.
    \21\ Id.
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    Section 23(a)(2) of the Exchange Act \22\ requires us, when 
adopting rules under the Exchange Act, to consider the impact that any 
new rule would have on competition. Section 23(a)(2) also prohibits us 
from adopting any rule that would impose a burden on competition not 
necessary or appropriate in furtherance of the purposes of the Exchange 
Act. In addition, Section 3(f) of the Exchange Act \23\ requires the 
Commission, when engaging in rulemaking that requires it to consider or 
determine whether an action is necessary or appropriate in the public 
interest, to consider, in addition to the protection of investors, 
whether the action will promote efficiency, competition, and capital 
formation. Section 2(c) of the Investment Company Act \24\ requires the 
Commission, when engaging in rulemaking that requires it to consider or 
determine whether an action is consistent with the public interest, to 
consider, in addition to the protection of investors, whether the 
action will promote efficiency, competition, and capital formation. 
Because the amendments are technical in nature, we do not anticipate 
that any competitive advantages or disadvantages would be created. We 
do not expect that the amendments, as technical amendments, will have 
an effect on efficiency, competition, or capital formation. Moreover, 
the Commission is taking this action to make Forms N-CSR and N-SAR 
consistent with the Iran Divestment Act. Thus, any costs and benefits 
and other economic effects resulting from these amendments are mandated 
under the Act.
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    \22\ 15 U.S.C. 78w(a)(2).
    \23\ 15 U.S.C. 78c(f).
    \24\ 15 U.S.C. 80a-2(c).
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III. Statutory Authority

    The Commission is adopting amendments to Form N-SAR and Form N-CSR 
pursuant to authority set forth in Section 203(b) of the Comprehensive 
Iran Sanctions, Accountability, and Divestment Act of 2010 and Sections 
10(b), 13, 15(d), 23(a), and 36 of the Exchange Act [15 U.S.C. 78j(b), 
78m, 78o(d), 78w(a), and 78mm], and Sections 8, 13(c), 24(a), 30, and 
38 of the Investment Company Act [15 U.S.C. 80a-8, 80a-13(c), 80a-
24(a), 80a-29, and 80a-37].

List of Subjects

17 CFR Part 249

    Reporting and recordkeeping requirements, Securities.

17 CFR Part 274

    Investment companies, Reporting and recordkeeping requirements, 
Securities.

Text of Form Amendments

0
For the reasons set out in the preamble, the Commission amends Title 
17, Chapter II, of the Code of Federal Regulations as follows.

[[Page 64123]]

PART 249--FORMS, SECURITIES EXCHANGE ACT OF 1934

0
1. The authority citation for part 249 continues to read in part as 
follows:

    Authority: 15 U.S.C. 78a et seq. and 7201 et seq.; and 18 U.S.C. 
1350, unless otherwise noted.
* * * * *

PART 274--FORMS PRESCRIBED UNDER THE INVESTMENT COMPANY ACT OF 1940

0
2. The authority citation for part 274 continues to read in part as 
follows:

    Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 78c(b), 78l, 78m, 
78n, 78o(d), 80a-8, 80a-24, 80a-26, and 80a-29, unless otherwise 
noted.
* * * * *

0
3. Form N-SAR (referenced in Sec. Sec.  249.330 and 274.101) is amended 
by:
0
a. In paragraph E. of Item 133, deleting the word ``and'';
0
b. In paragraph F. of Item 133, revising ``filing.'' to read ``filing; 
and'';
0
c. Adding new paragraph G. to Item 133;
0
d. Revising the sentence immediately following new paragraph G. to Item 
133;
0
e. In the heading to the Instruction to Item 133, deleting the phrase 
``in Accordance with the Sudan Accountability and Divestment Act of 
2007''; and
0
f. In the first sentence of the Instruction to Item 133, deleting the 
phrase ``, which was added by the Sudan Accountability and Divestment 
Act of 2007''. The addition and revision read as follows:

    Note: The text of Form N-SAR does not, and these amendments will 
not, appear in the Code of Federal Regulations.

Form N-SAR

* * * * *
133. * * *
    G. Name of the statute that added the provision of Section 13(c) in 
accordance with which the securities were divested.
    This item 133 shall terminate one year after the first date on 
which all statutory provisions that underlie Section 13(c) of the 
Investment Company Act of 1940 have terminated.
* * * * *

0
4. Form N-CSR (referenced in Sec. Sec.  249.331 and 274.128) is amended 
by:
0
a. In paragraph (b)(5) of Item 6, deleting the word ``and'';
0
b. In paragraph (b)(6) of Item 6, revising ``filing.'' to read 
``filing; and'';
0
c. Adding new paragraph (7) to Item 6(b);
0
d. Revising the sentence immediately following new paragraph (7) to 
Item 6(b); and
0
e. In Instruction 1 to paragraph (b) of Item 6, deleting the phrase ``, 
which was added by the Sudan Accountability and Divestment Act of 
2007''.
    The addition and revision read as follows:

    Note: The text of Form N-CSR does not, and these amendments will 
not, appear in the Code of Federal Regulations.

Form N-CSR

* * * * *

Item 6. Investments.

    (a) * * *
    (b) * * *
    (7) Name of the statute that added the provision of Section 13(c) 
in accordance with which the securities were divested.
    This Item 6(b) shall terminate one year after the first date on 
which all statutory provisions that underlie Section 13(c) of the 
Investment Company Act of 1940 have terminated.
* * * * *

    By the Commission.

    October 13, 2010.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2010-26206 Filed 10-18-10; 8:45 am]
BILLING CODE 8011-01-P