[Federal Register Volume 62, Number 137 (Thursday, July 17, 1997)]
[Notices]
[Pages 38331-38332]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-18832]


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SECURITIES AND EXCHANGE COMMISSION


Proposed Collection; Comment Request

    Upon Written Request, Copies Available From: Securities and 
Exchange Commission, Office of Filings and Information Services, 
Washington, DC 20549.
    Extension:

Rule 206(4)-2--SEC File No. 270-217, OMB Control No. 3235-0241
Rule 02 and Forms 4-R, 5-R, 6-R, and 7-R--SEC File No. 270-214, OMB 
Control No. 3235-0240
Rule 203-2, and Form ADV-W--SEC File No. 270-40, OMB Control No. 3235-
0313.

    Notice is hereby given that, pursuant to the Paperwork Reduction 
Act of 1995 (44 U.S.C. 3501 et seq.), the Securities an Exchange 
Commission (``Commission'') is soliciting comments on the collections 
of information summarized below. The Commission plans to submit these 
existing collections of information to the Office of Management and 
Budget for extension and approval.
    Rule 206(4)-2 governs the custody or possession of funds or 
securities by Commission-registered investment advisers. Rule 206(4)-2 
makes it a fraudulent, deceptive or manipulative act, practice or 
course of business for any investment adviser who has custody or 
possession of funds or securities of its clients to do any act or take 
any action with respect to any such funds or securities unless (1) The 
securities are properly segregated and safely kept; (2) the funds are 
held in one or more specially designated client accounts with the 
adviser named as trustee; (3) the advisor promptly notifies the client 
as to the place and manner of safekeeping; (4) the adviser sends a 
detailed written statement to each client at least once every three 
months; and (5) at least once each year, on an unannounced basis, an 
independent public accountant verifies by actual examination the 
clients' funds and securities and files a certificate with the 
Commission describing the examination. The rule does not apply to an 
investment adviser that is also registered as a broker-dealer under the 
Securities Exchange Act of 1934 (``Exchange Act''), provided the 
adviser is in compliance with Rule 15c3-1 under the Exchange Act, or, 
if a member of an exchange, in compliance with exchange requirements 
with respect to financial responsibility and the segregation of funds 
or securities carried for the account of the customer.

[[Page 38332]]

    The information required by Rule 206(4)-2 is used by the Commission 
in connection with its investment adviser inspection program to ensure 
that advisers are in compliance with Rule 206(4)-2. The information 
required by paragraphs (3) and (4) of the rule is also used by clients. 
Without the information collected under the rule, the Commission would 
be less efficient and effective in its inspection program and clients 
would not have information valuable for monitoring the adviser's 
handling of their accounts.
    The Commission recently adopted amendments to the rule to restrict 
the application of the rule to those advisers registered with the 
Commission. The likely respondents to this information collection are 
those investment advisers that are registered with the Commission after 
July 8, 1997, are not also registered as broker-dealers, and have 
custody of clients' funds or securities. The Commission estimates that 
111 advisers would be subject to Rule 206(4)-2. The number of responses 
under Rule 206(4)-2 will vary considerably depending on the number of 
clients for which an adviser has custody or possession of funds or 
securities. It is estimated that an adviser subject to this rule would 
be required to provide an average of 250 responses annually at an 
average of .5 hours per response. The total annual burden for each 
respondent is estimated to be 125 hours. The total annual aggregate 
burden for all respondents is estimated to be 13,875 hours.
    Rule O-2 requires certain non-resident persons to furnish to the 
Commission a written irrevocable consent and power of attorney that 
designates the Commission as an agent for service of process, and that 
stipulates and agrees that any civil suit or action against such person 
may be commenced by service of process on the Commission. Regulation 
279.4, 279.5, 279.6, and 279.7 [17 CFR 279.4, 279.5, 279.6, and 279.7] 
designate Forms 4-R, 5-R, 6-R, and 7-R as the irrevocable appointments 
of agent for service of process, pleadings and other papers to be filed 
by an individual non-resident adviser or an unincorporated nonresident 
investment adviser, a partnership nonresident investment adviser, or a 
nonresident general partner of an investment adviser or a nonresident 
``managing agent'' of an unincorporated investment adviser, 
respectively, which is registered or applying for registration with the 
Commission as an investment adviser.
    It is necessary to obtain the appropriate consent to ensure that 
the Commission and other persons can institute injunctive actions 
against nonresident investment advisers and non-resident partners or 
managers of investment advisers in cases involving violation of the 
Investment Advisers Act of 1940 (``Advisers Act'') that may result in 
civil liabilities.
    The Commission estimates that there may be an increase in the 
number of non-resident registered investment advisers, which may be 
offset by those non-resident general partners or non-resident managing 
agents of investment advisers that would not register or be registered 
with the Commission after July 8, 1997 who would not be subject to the 
Rule 0-2 or the forms.\1\ Therefore, non-resident general partners or 
non-resident managing agents of investment advisers that would be 
registered with the states after the July 8, 1997 effective date would 
no longer be subject to Rule 0-2 or be required to file the forms.
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    \1\ 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.
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    The Commission estimates that there would be approximately 300 
registrants subject to Rule 0-2. An adviser subject to this rule would 
be required to file only once, and the Commission estimates that the 
preparation and filing of any of the forms designated for use pursuant 
to Rule 0-2 would require approximately one hour of the registrant's 
time. The total annual burden would be 300 hours.
    Rule 203-2 governs withdrawal from registration under the Advisers 
Act and Form ADV-W is the form for withdrawing registration under the 
Advisers Act.
    To enforce the registration provisions of the Advisers Act and to 
fulfill its responsibilities under Section 203(h), the Commission must 
obtain certain information from persons seeking to withdraw from 
registration. The information required by Form ADV-W enables the 
Commission to satisfy itself that the activities of person seeking to 
withdraw from registration do not require such person to be registered 
and to determine whether terms and conditions should be imposed upon a 
registrant's withdrawal. Such terms and conditions might include the 
making of appropriate arrangements with respect to the transfer to 
clients of client funds and securities in the custody and possession of 
the adviser or the return to clients of prepaid advisory fees.
    After July 8, 1997 (effective date of the Coordination Act), the 
Commission estimates that only 28 percent of investment advisers 
currently registered with the Commission will remain eligible for 
Commission registration. It is estimated that approximately 616 
advisers will be withdrawing their registration from the Commission by 
filing Form ADV-W. The total annual burden for each respondent is 
estimated to be one hour. The annual aggregate burden for all 
respondents is estimated to be 616 hours.
    The estimated average burden hours are made solely for the purposes 
of Paperwork Reduction Act and are not derived from a comprehensive or 
even representative survey or study of the cost of Commission rules and 
forms.
    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 agency'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 Michael E. Bartell, 
Associate Executive Director, Office of Information Technology, 
Securities and Exchange Commission, 450 5th Street, NW., Washington, DC 
20549.

    Dated: July 10, 1997.
Jonathan G. Katz,
Secretary.
[FR Doc. 97-18832 Filed 7-16-97; 8:45 am]
BILLING CODE 8010-01-M