[Federal Register Volume 62, Number 2 (Friday, January 3, 1997)]
[Notices]
[Pages 430-432]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-21]


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SECURITIES AND EXCHANGE COMMISSION


Submission for OMB Review; Comment Request

Proposed New Rules

Rule 203A-2; SEC File No. 270-431; OMB Control No. 3235-new.
Rule 203A-5; SEC File No. 270-432; OMB Control No. 3235-new.

Proposed Amendments

Rule 203-1 and Form ADV: SEC File No. 270-39; OMB Control No. 3235-
0049.
Rule 204-1; SEC File No. 270-41; OMB Control No. 3235-0048.

Rule 204-2; SEC File No. 270-315; OMB Control No. 3235-0278.

    Upon Written Request, Copies Available From: Securities and 
Exchange Commission, Office of Filings and Information Services, 
Washington, D.C. 20549.
    Notice is hereby given that pursuant to the Paperwork Reduction Act 
of 1995 (44 U.S.C. 3501 et seq.), the Securities and Exchange 
Commission (``Commission'') has submitted to the Office of Management 
and Budget requests for approval of the following proposed rules and 
forms.
    On October 11, 1996 President Clinton signed into law the National 
Securities Markets Improvement Act of 1996 (``1996 Act''). Title III of 
the 1996 Act, the Investment Advisers Supervision Coordination Act 
(``Coordination Act''), amended the Investment Advisers Act of 1940 to, 
among other things, reallocate the responsibilities for regulating 
investment advisers between the Commission and the securities 
regulatory authorities of the states. The most significant of these 
amendments reallocates federal and state responsibilities for the 
regulation of the approximately 22,500 investment advisers currently 
registered with the Commission. These amendments will become effective 
on April 9, 1997. Based on information provided by advisers, the 
Commission estimates that approximately 72 percent of the advisers 
currently registered with the Commission will not be eligible for 
Commission registration after April 9, 1997.
    The Commission has published for comment new rules and rule 
amendments to implement Congressional intent to reallocate regulatory 
responsibilities for investment advisers between the Commission and 
state securities authorities. The Commission is also revising several 
of its rules that currently apply to all investment advisers to make 
such rules applicable only to advisers registered or required to be 
registered with the Commission. The proposed rules would establish the 
process by which certain advisers would withdraw from Commission 
registration, exempt certain advisers from the prohibition on 
Commission registration, and define certain terms. The proposed 
amendments to rules under the Advisers Act would reflect the changes 
made by the Coordination Act. Certain provisions of the proposed rules 
and rule amendments contain ``collection of information'' requirements 
within the meaning of the Paperwork Reduction Act of 1995 (44 U.S.C. 
3501 et seq,). Those provisions are summarized below.

Rule 203A-2(d)

    Proposed rule 203A-2(d) would exempt from the prohibition on 
Commission registration a newly formed adviser that has a reasonable 
expectation that it will be eligible for Commission registration within 
90 days, provided certain conditions are met. Proposed rule 203A-2(d) 
contains two related collection of information requirements. The 
collection of information would be necessary to determine the 
eligibility of certain investment advisers to rely on the proposed 
``reasonable expectation'' exemption from the prohibition on Commission 
registration, and to implement that exemption. It is anticipated that 
this collection of information would be found at 17 CFR 275.203A-2(d). 
An adviser relying on the exemption provided by proposed rule 203A-2(d) 
would be required to file a short written undertaking on Schedule E to 
Form ADV, indicating that the adviser will withdraw from registration 
if on the 90th day after registering with the Commission the adviser 
does not meet the eligibility requirements for registration under 
section 203A of the Advisers Act and rules thereunder. At the end of 
the 90-day period, the adviser also would be required to file an 
amended Schedule I to Form ADV. If the adviser indicates on the amended 
Schedule I that it has not become eligible to register with the 
Commission, the adviser would be required to file a Form ADV-W 
concurrently with the Schedule I, thereby withdrawing its registration 
with the Commission. The likely respondents to this information 
collection are newly formed investment advisers that are not currently 
registered with the Commission or with the states. The Commission 
estimates that there would be 100 such respondents per year, and that 
each respondent would respond one time per year. The weighted average 
total annual time burden for each respondent is estimated to be 57.5 
minutes. This figure is based upon the following estimates: (i) 45 
minutes for the approximately 90 advisers that advise registered 
investment companies, that do not need to calculate assets under 
management to complete Schedule I, or that need to calculate assets 
under management but do so as part of their normal business operations; 
(ii) 2 hours for the approximately 10 advisers that must calculate 
assets under management for the sole purpose of filing Schedule I; and 
(iii) 5 minutes for all respondents to prepare the undertaking required 
on Schedule E to Form ADV. The Commission estimates that the aggregate 
annual burden for all respondents would be 95.83 hours. Providing this 
information would be mandatory to qualify for the exemption under 
proposed rule 203A-2(d), and responses would not be kept confidential.

Rule 203A-5 and Form ADV-T

    Proposed rule 203A-5 and Form ADV-T contain collection of 
information requirements. This collection of information is necessary 
for the Commission to determine whether advisers meet the proposed 
eligibility criteria for Commission registration set forth in section 
203A of the Advisers Act and rules thereunder, and to provide for the 
orderly withdrawal from Commission

[[Page 431]]

registration for advisers that are no longer eligible. It is 
anticipated that this collection of information would be found at 17 
CFR 275.203A-5 and 17 CFR 279.3. Under proposed rule 203A-5 and 17 CFR 
279.3. Under proposed rule 203A-5, all advisers registered with the 
Commission on April 9, 1997 would be required to file a completed Form 
ADV-T no later than that date. Form ADV-T would require each adviser to 
declare whether it remains eligible for Commission registration. For an 
adviser that declares itself not eligible for Commission registration, 
Form ADV-T would serve as a request for withdrawal of the adviser's 
registration as of April 9, 1997. The likely respondents to this 
information collection are all investment advisers registered with the 
Commission on April 9, 1997. The Commission estimates that there would 
be 22,500 such respondents to this collection of information. Each 
respondent would respond once. The weighted average annual time burden 
for each respondent is estimated to be 53.33 minutes. This figure is 
based upon the following estimates: (i) 45 minutes for the 
approximately 20,000 advisers that advise registered investment 
companies, that do not need to calculate assets under management to 
complete Form ADV-T, or that need to calculate assets under management 
but do so as part of their normal business operations; (ii) 2 hours for 
the approximately 2,500 advisers that must calculate assets under 
management for the sole purpose of filing Form ADV-T. The aggregate 
annual burden for all 22,500 advisers is estimated to be 19,998 hours. 
Providing the information would be mandatory, and responses would not 
be kept confidential.

Rule 203-1 and Form ADV

    Rule 203-1 and Form ADV, including the proposed new Schedule I to 
Form ADV, contain information collection requirements. Form ADV is 
required by rule 201-1 to be filed by every applicant for registration 
with the Commission as an investment adviser, is mandatory, and 
responses are not kept confidential. This collection of information is 
found at 17 CFR 275.203-1 and 17 CFR 279.1. The Commission in the past 
received approximately 3,500 applications for registration on Form ADV 
in one year. The weighted average burden hours for completing Form ADV 
is currently 9.0063, and the total annual burden hours currently 
approved by OMB for this form is 31, 522 hours.
    The Commission is proposing to amend Form ADV to include a new 
Schedule I. The Commission is not proposing to amend rule 203-1. 
Schedule I would require an applicant to declare whether it is eligible 
for Commission registration. This new requirement is necessary for the 
Commission to determine whether advisers meet the eligibility criteria 
for Commission registration set forth in section 203A of the Advisers 
Act and rules thereunder. The likely respondents to this information 
collection would be all applicants for registration with the Commission 
after April 9, 1997. Based on the Commission's experience in processing 
adviser applications, and the percentage of applicants in the past 
without assets under management, the Commission estimates that after 
April 9, 1997 the number of applicants for registration will decrease 
from approximately 3,500 to between 500 and 1000 annually. The weighted 
average total annual time burden for each applicant to complete 
Schedule I on average is estimated to be 52.5 minutes. This figure is 
based upon the following estimates. Compliance with the requirement to 
complete Schedule I imposes a total burden per applicant of 
approximately 45 minutes for the approximately 90 percent of applicants 
that advise registered investment companies, that do not need to 
calculate assets under management to complete Schedule I, or that need 
to calculate assets under management but do so as a part of their 
normal business operations. For the approximately 10 percent of 
applicants that must calculate assets under management for Schedule I, 
however, this burden would be 2 hours. Providing this information would 
be mandatory. Amending Form ADV to include new Schedule I is estimated 
to increase the weighted average burden hours for applicants completing 
Form ADV to 9.8813 hours. As a result of the new Schedule I, together 
with the reduction of the number of investment advisers registered with 
the Commission, the annual aggregate burden for all respondents for 
completing amended Form ADV is estimated to be between 4,940.65 and 
9,881.3 hours.

Rule 204-1

    Rule 204-1, including the proposed amendment to the rule, includes 
collection of information requirements. Rule 204-1 sets forth the 
circumstances requiring the filing of an amendment to Form ADV, the 
form that must be filed with the Commission to register as an 
investment adviser. This collection of information is found at 17 CFR 
275.204-1, is mandatory, and responses are not kept confidential. The 
total annual burden currently approved by OMB for rule 204-1 is 
approximately 21,438 hours for the 20,088 advisers registered with the 
Commission in 1994.
    The proposed amendments to rule 204-1 would require an adviser to 
file an amended Schedule I to Form ADV annually within 90 days of the 
end of the adviser's fiscal year. Schedule I would require an adviser 
to declare whether it remains eligible for Commission registration. The 
new requirement is necessary for the Commission to determine whether 
advisers continue to meet the eligibility criteria for Commission 
registration set forth in section 203A of the Advisers Act and rules 
thereunder. The likely respondents to this information collection are 
all investment advisers registered with the Commission after April 9, 
1997. The Commission estimates that there would be 6,300 such 
respondents to this collection of information (28% of the approximately 
22,500 registered investment advisers as of April 9, 1997). Each 
respondent would respond one time per year. The total annual time 
burden for each respondent is estimated to be 52.14 minutes. This 
figure is based upon the following estimates. Compliance with the 
requirement to file an amended Schedule I would impose a total annual 
burden per adviser of approximately 45 minutes for the approximately 
5,700 advisers that advise registered investment companies, that do not 
need to calculate assets under management to complete Schedule I, or 
that need to calculate assets under management but do so as part of 
their normal business operations. For the approximately 600 advisers 
that must calculate assets under management for Schedule I, however, 
this burden would be 2 hours. Providing the information would be 
mandatory and responses would not be kept confidential. Based on the 
Commission's experience under rule 204-1, and taking into account the 
new requirement to annually amend Schedule I, the Commission 
anticipates that each adviser eligible for Commission registration 
after April 9, 1997 will respond to the information collection 
requirements of rule 204-1, as proposed to be amended, an average of 
1.5 times annually. The Commission estimates that the annual aggregate 
burden for all respondents under rule 204-1 will be 18,297.09 hours.

Rule 204-2

    Section 204 of the Advisers Act provides that investment advisers 
required to register with the Commission must make and keep for 
prescribed periods such records, and furnish such copies thereof, and 
make and disseminate such reports as the

[[Page 432]]

Commission, by rule, may prescribe as necessary or appropriate in the 
public interest or for the protection of investors. Rule 204-2 sets 
forth requirements for keeping, maintaining and preserving specified 
books and records by investment advisers. This collection of 
information is found at 17 CFR 275.204-2, is mandatory, is used by the 
Commission staff in its oversight program, and generally is kept 
confidential. See section 210(b) of the Advisers Act [15 U.S.C. 80b-
10(b)]. Currently, compliance with the rule requires approximately 
235.47 hours each year per Commission-registered investment adviser, 
for a total of 5,180,340 hours for all 22,000 advisers registered last 
year.
    The proposed amendments to rule 204-2 would clarify the application 
of the rule's recordkeeping requirements to advisers that register with 
the Commission after having been registered with the states. The 
proposed amendments are necessary (i) to make the books and 
recordkeeping requirements of that rule applicable only to advisers 
registered with the Commission, and (ii) to clarify the rule's 
application to investment advisers that transfer from state to 
Commission registration after April 9, 1997. The Commission is 
proposing to amend rule 204-2 to make the rule's books and 
recordkeeping requirements applicable only to advisers registered with 
the Commission after the Coordination Act's effective date. This 
amendment would relieve the approximately 16,200 of the 22,500 advisers 
currently registered that will not be eligible for Commission 
registration after April 9, 1997 from the recordkeeping burdens imposed 
by this rule.
    The Commission is also proposing to amend rule 204-2 to require an 
adviser that registers with the Commission after April 9, 1997 to 
preserve any books and records that the adviser was previously required 
to maintain under state law. These books and records would be required 
to be maintained in the manner and for the period of time as the other 
books and records required to be maintained under rule 204-2(a). This 
collection of information would be found at 17 CFR 275.204-2. The 
likely respondents to this information collection are all investment 
advisers registered with the Commission after April 9, 1997. The 
Commission estimates that there would be 6,300 such respondents to this 
collection of information. Each respondent would retain records on an 
ongoing basis. The total annual time burden for each respondent is 
estimated to be 235.47 hours. The proposed amendments would not change 
the burden last reported to the OMB. As a result of the reduction of 
the number of investment advisers registered with the Commission, the 
annual aggregate burden for all respondents to the recordkeeping 
requirements under rule 204-2 is estimated to be 1,483,461 hours.
    The estimated average burden hours are made solely for the purposes 
of the Paperwork Reduction Act, and are not derived from a 
comprehensive or even representative survey or study of the cost of SEC 
rules and forms.
    General comments regarding the estimated burden hours should be 
directed to the Desk Officer for the Securities and Exchange Commission 
at the address below. Any comments concerning the accuracy of the 
estimated average burden hours for compliance with Commission rules and 
forms should be directed to Michael E. Bartell, Associate Executive 
Director, Office of Information Technology, Securities and Exchange 
Commission, 450 Fifth Street NW., Washington, DC 20549 and Desk Officer 
for the Securities and Exchange Commission, Office of Information and 
Regulatory Affairs, Office of Management and Budget, Room 3208, New 
Executive Office Building, Washington, DC 20503.

    Dated: December 20, 1996.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-21 Filed 1-2-97; 8:45 am]
BILLING CODE 8010-01-M