[Federal Register Volume 62, Number 152 (Thursday, August 7, 1997)]
[Notices]
[Pages 42610-42611]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-20748]
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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 Filings and Information Services, 450 Fifth
Street, NW, Washington, DC 20549.
Extensions:
Rule 11a-3, SEC File No. 270-321, OMB Control No. 3235-0358
Rule 17g-1, SEC File No. 270-208, OMB Control No. 3235-0213
Rule 206(4)-3, SEC File No. 270-218, OMB Control No. 3235-0242
Rule 206(4)-4, SEC File No. 270-304, OMB Control No. 3235-0345
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 extension of the previously approved
collections of information discussed below.
Rule 11a-3 under the Investment Company Act of 1940 is an exemptive
rule that permits open-end investment companies (``funds''), other than
insurance company separate accounts, and funds' principal underwriters,
to make certain exchange offers to fund shareholders and shareholders
of other funds in the same group of investment companies. The rule
requires a fund, among other things, (i) to disclose in its prospectus
and advertising literature the amount of any administrative or
redemption fee imposed on an exchange transaction, (ii) if the fund
imposes an administrative fee on exchange transactions, other than a
nominal one, to maintain and preserve records with respect to the
actual costs incurred in connection with exchanges for at least six
years, and (iii) give the fund's shareholders a sixty day notice of a
termination of an exchange offer or any material amendment to the terms
of an exchange offer (unless the only material effect of an amendment
is to reduce or eliminate an administrative fee, sales load or
redemption fee payable at the time of an exchange).
The rule's requirements are designed to protect investors against
abuses associated with exchange offers, provide fund shareholders with
information necessary to evaluate exchange offers and certain material
changes in the terms of exchange offers, and enable the Commission
staff to monitor funds' use of administrative fees charged in
connection with exchange transactions.
It is estimated that approximately 2,500 funds may choose to rely
on the rule, and each fund may spend one hour annually complying with
the recordkeeping requirement and another hour annually complying with
the notice requirement. The total annual burden associated with the
rule is estimated to be 5,000 hours. The burdens associated with the
disclosure requirement of the rule are accounted for in the burdens
associated with the Form N-1A registration statement for funds.
Rule 17g-1 under the Investment Company Act of 1940 governs the
fidelity bonding of officers and employees of registered management
investment companies (``funds''). Rule 17g-1 requires, among other
things, that:
(i) Fidelity Bond Content Requirements. The fidelity bond must
provide that it shall not be cancelled, terminated or modified
except upon a 60-day written notice by the acting party to the
affected party. In the case of a ``joint bond'' covering several
funds or certain other parties, the notice also must be given to
each fund and to the Commission. In addition, a joint bond must
provide that a copy of the bond, any amendments to the bond, any
formal filing of a claim on the bond, and notification of the terms
of any settlement on such claim, will be furnished to each fund
promptly after the execution.
(ii) Independent Directors' Approval Requirements. At least
annually, the independent directors of a fund must approve the form
and amount of the fidelity bond. The amount of any premium paid for
any joint bond also must be approved by the independent directors of
a fund.
(iii) Joint Bond Agreement Requirement. A fund that is insured
by a joint bond must enter into an agreement with all other parties
[[Page 42611]]
insured by the joint bond regarding recovery under the joint bond.
(iv) Required Filings with the Commission. Upon execution of a
fidelity bond or any amendment thereto, a fund must file with the
Commission a copy of: (i) The executed fidelity bond; (ii) the
resolution of the fund's directors approving the fidelity bond; and
(iii) a statement as to the period for which the fidelity bond
premiums have been paid. In the case of a joint bond, a fund also
must file a copy of: (i) A statement showing the amount of a single
insured bond the fund would have maintained under the rule had it
not been named under a joint bond; and (ii) each agreement between
the fund and all other insured parties. A fund also must notify the
Commission in writing within 5 days of any claim and settlement on a
claim made under a fidelity bond.
(v) Required Notices to Directors. A fund must notify by
registered mail each member of its board of directors (i) of any
cancellation, termination or modification of the fidelity bond at
least 45 days prior to the effective date; and (ii) of the filing or
settlement of any claim under the fidelity bond when the
notification is filed with the Commission.
The fidelity bond content requirements, the joint bond agreement
requirement, the independent directors' annual review requirement and
the required notices to directors are designed to ensure the safety of
fund assets against losses due to the conduct of persons who may obtain
access to those assets, and facilitate oversight of a fund's fidelity
bond. The rule's required filings with the Commission are designed to
assist the Commission in monitoring funds' compliance with the fidelity
bond requirements.
The Commission estimates that approximately 3,200 funds are subject
to the requirements of rule 17g-1, and that on average a fund spends
approximately one hour per year on complying with the rule's paperwork
requirements. The total annual burden of the rule's paperwork
requirements thus is estimated to be 3,200 hours.
Rule 206(4)-3, entitled ``Cash Payments for Client Solicitations''
provides restrictions on cash payments for client solicitations. The
rule imposes two sets of information collection requirements. Where
only impersonal advisory services are to be provided or an affiliation
between the solicitor and adviser exists, the rule requires that the
fee be paid pursuant to a written agreement and that the prospective
client be advised of any affiliation between the adviser and the
solicitor. Where individualized services are to be provided, the
solicitor must furnish the prospective client with a copy of the
adviser's brochure and a disclosure document containing specified
information. The information collection and disclosure requirements in
rule 206(4)-3 permit the Commission's inspection staff to monitor the
activities of investment advisers and protect investors. Rule 206(4)-3
is applicable to all registered investment advisers.
The Commission believes that approximately 4,577 of these advisers
have cash referral fee arrangements. Under the recently enacted
National Securities Markets Improvement Act of 1996 (the ``1996 Act''),
however, only about 1,281 advisers are subject to the rule after the
legislation became effective on July 8, 1997. The rule requires
approximately 7.04 burden hours per year per adviser and would result
in a total of approximately 9,018 total burden hours (7.04 x 1281) for
all advisers.
Rule 206(4)-4, entitled ``Financial and Disciplinary Information
that Investment Advisers Must Disclose to Clients,'' requires advisers
to disclose certain financial and disciplinary information to clients.
The disclosure requirements in rule 206(4)-4 are designed so that a
client will have information about an adviser's financial condition and
disciplinary events that may be material to a client's evaluation of
the adviser's integrity or ability to meet contractual commitments to
clients. The Commission does not use the information disclosed to
clients.
It is estimated that approximately 3,222 advisers were subject to
this rule, but that after the 1996 Act became effective only 902
advisers are subject to the rule. The rule requires approximately 7.5
burden hours per year per adviser and would amount to approximately
6,765 total burden hours (7.5 x 902) for all advisers.
Rule 206(4)-3 does not specify a retention period for its
recordkeeping requirements. The disclosure and recordkeeping
requirements of rule 206(4)-3 and the disclosure requirements of rule
206(4)-4 are mandatory. Information subject to the recordkeeping and
disclosure requirements of rules 206(4)-3 and -4 is not submitted to
the Commission, so confidentiality is not an issue.
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 control number.
Written comments regarding the above information should be directed
to the following persons: (i) 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; and (ii) Michael E. Bartell, Associate
Executive Director, Office of Information Technology, Securities and
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549.
Comments must be submitted to OMB within 30 days of this notice.
Dated: July 28, 1997.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-20748 Filed 8-6-97; 8:45 am]
BILLING CODE 8010-01-M