[Federal Register Volume 64, Number 242 (Friday, December 17, 1999)]
[Notices]
[Pages 70750-70752]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-32711]


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SECURITIES AND EXCHANGE COMMISSION


Existing Collection; Comment Request

Upon written request, copies available from: Securities and Exchange 
Commission, Office of Filings and Information Services, 450 5th Street, 
NW, Washington, DC 20549.

Extension:
    Rule 17a-7, SEC File No. 270-238, OMB Control No. 3235-0214
    Rule 17a-8, SEC File No. 270-225, OMB Control No. 3235-0235
    Rule 17e-1, SEC File No. 270-224, OMB Control No. 3235-0217
    Rule 19a-1, SEC File No. 270-240, OMB Control No. 3235-0216
    Rule 31a-1, SEC File No. 270-173, OMB Control No. 3235-0178

    Notice is hereby given that, pursuant to the Paperwork Reduction 
Act of 1995 (44 U.S.C. 3501-3520), the Securities and Exchange 
Commission (the ``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 (``OMB'') for extension and approval.
    Rule 17a-7 (17 CFR 270.17a-7) under the Investment Company Act of 
1940 (the ``Act'') is entitled ``Exemption of certain purchase or sale 
transactions between an investment company and certain affiliated 
persons thereof.'' It provides an exemption from section 17(a) of the 
Act for purchases and sales of securities between registered investment 
companies that are considered affiliates because of a common adviser, 
director, or officer. Rule 17a-7 requires investment companies to keep 
various records in connection with purchase or sale transactions 
affected by the rule. The rule requires the board of directors of an 
investment company to establish procedures reasonably designed to 
ensure that all conditions of the rule have been satisfied, and 
requires the investment company to maintain and preserve permanently a 
written copy of those procedures. If an investment company enters into 
a purchase or sale transaction with an affiliated person, the rule 
requires the investment company to maintain written records of the 
transaction for a period of not less than six years from the end of the 
fiscal year in which the transaction occurred.\1\ In addition, under 
the rule, the board is required to determine, at least on a quarterly 
basis, that all affiliated transactions made during the preceding 
quarter were made in compliance with these established procedures. The 
Commission's examination staff uses these records to evaluate 
transactions between affiliated investment companies for compliance 
with the rule.
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    \1\ The written records are required to set forth a description 
of the security purchased or sold, the identity of the person on the 
other side of the transaction, and the information or materials upon 
which the board of directors' determination that the transaction was 
in compliance with the procedures.
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    The Commission estimates that approximately 750 investment 
companies enter into transactions affected by rule 17a-7 each year.\2\ 
The average annual burden for rule 17a-7 is estimated to be 
approximately two burden hours per respondents,\3\ for an annual total 
of 1,500 burden hours for all respondents. The collection of 
information required by rule 17a-7 is necessary to obtain the benefits 
of the

[[Page 70751]]

rule. Responses will not be kept confidential.
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    \2\ Based on the experience of the Commission's examination and 
inspections staff, the Commission staff estimates that most 
investment companies (3,000 of the estimated 3,560 registered 
investment companies) have adopted procedures for compliance with 
rule 17a-7. Of these 3,000 investment companies, the Commission 
staff assumes that each year approximately 25% (750) enter into 
transactions affected by rule 17a-7.
    \3\ This estimate is based on conversations with attorneys 
familiar with the information collection requirements of rule 17a-7
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    Rule 17a-8 (17 CFR 270.17a-8) under the Act is entitled ``Mergers 
of certain affiliated investment companies.'' Rule 17a-8 exempts 
certain mergers and similar business combinations (``mergers'') of 
affiliated registered investment companies (``funds'') from section 
17(a)'s prohibitions on purchases and sales between a fund and its 
affiliates. The rule requires fund directors to consider certain issues 
and to record their findings in board minutes. The average annual 
burden of meeting the requirements of rule 17a-8 is estimated to be 1.5 
hours for each fund. The Commission staff estimates that approximately 
80 funds rely each year on the rule. The estimated total average annual 
burden for all respondents therefore is 120 hours.
    Rule 17e-1 (17 CFR 270.17e-1) under the Act is entitled ``Brokerage 
Transactions on a Securities Exchange.'' The rule governs the 
remuneration that a broker affiliated with an investment company may 
receive in connection with securities transactions by the investment 
company. The rule requires an investment company's board of directors 
to establish, and review as necessary, procedures reasonably designed 
to provide that the remuneration to an affiliated broker is a fair 
amount compared to that received by other brokers in connection with 
transactions in similar securities during a comparable period of time. 
Each quarter, the board must determine that all transactions with 
affiliated brokers during the preceding quarter complied with the 
procedures established under the rule. Rule 17e-1 also requires the 
investment company to: (i) Maintain permanently a written copy of the 
procedures adopted by the board for complying with the requirements of 
the rule; and (ii) maintain for a period of six years a written record 
of each transaction subject to the rule setting forth: the amount and 
source of the commission, fee or other remuneration received; the 
identity of the broker; the terms of the transaction; and the materials 
used to determine that the transactions were effected in compliance 
with the procedures adopted by the board. The Commission's examination 
staff uses these records to evaluate transactions between investment 
companies and their affiliated brokers for compliance with the rule.
    The Commission staff estimates that approximately 1,850 investment 
companies may rely on rule 17e-1 each year.\4\ The total average annual 
burden for rule 17e-1 per respondent is estimated to be approximately 
10 burden hours,\5\ for an annual total of approximately 18,500 burden 
hours for all respondents.
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    \4\ Item 14 of Form N-SAR requires investment companies to list 
any affiliated brokers or dealers. Based on the Form N-SARs filed 
for the six-month period ended August 31, 1999, it is estimated that 
approximately 1,850 investment companies have affiliated broker 
dealers, and may be subject to rule 17e-1 each year.
    \5\ This estimate is based on conversions with attorneys 
familiar with the information collection requirements of rule 17e-1.
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    Section 19(a) (15 U.S.C. 80a-19(a)) of the Act makes it unlawful 
for any registered investment company to pay any dividend or similar 
distribution from any source other than the company's net income, 
unless the payment is accompanied by a written statement to the 
company's shareholders which adequately discloses the sources of the 
payment. Section 19(a) authorizes the Commission to prescribe the form 
of the statement by rule.
    Rule 19a-1 (17 CFR 270.19a-1) under the Act is entitled ``Written 
Statement to Accompany Dividend Payments by Management Companies.'' 
Rule 19a-1 sets forth specific requirements for the information that 
must be included in statements made under section 19(a) by registered 
investment companies. The rule requires that the statement indicate 
what portions of the payment are made from net income, net profits and 
paid-in capital.\6\ When any part of the payment is made from net 
profits, the rule requires that the statement disclose certain other 
information relating to the appreciation or depreciation of portfolio 
securities. If an estimated portion is subsequently determined to be 
significantly inaccurate, a correction must be made on a statement made 
under section 19(a) or in the first report to shareholders following 
the discovery of the inaccuracy. The proposed of rule 19a-1 is to 
afford fund shareholders adequate disclosure of the sources from which 
dividend payments are made.
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    \6\ Rule 19a-1 requires, among other things, that every written 
statement made under section 19 of the Act by or on behalf of a 
management company clearly indicate what portion of the payment per 
share is made from the following sources: net income for the current 
or preceding fiscal year, or accumulated undistributed net income, 
or both, not including in either case profits or losses from the 
sale of securities or other properties; accumulated undistributed 
not profits from the sale of securities or other properties; and 
paid-in surplus or other capital source.
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    The Commission staff estimates that approximately 6,700 portfolios 
of management companies may be subject to rule 19a-1 each year.\7\ The 
total average annual burden for rule 19a-1 per portfolio is estimated 
to be approximately 30 minutes.\8\ The total annual burden for all 
portfolios is therefore estimated to be approximately 3,350 burden 
hours. Compliance with the collection of information required by rule 
19a-1 is mandatory for management companies that make statements to 
shareholders pursuant to section 19(a) of the Act. Responses will not 
be kept confidential.
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    \7\ The Commission staff estimates that there are approximately 
3,000 registered investment companies that are ``management 
companies'' as defined by the Act, and each may have one or more 
separate portfolios that report dividends to shareholders. The 
Commission's records indicate that those 3,000 management companies 
have approximately 6,700 portfolios that report paying dividends, 
and so may be subject to rule 19a-1.
    \8\ According to respondents, no more than approximately 15 
minutes is needed to make the determinations required by the rule 
and include the required information in the shareholders' dividend 
statements. The Commission staff estimates that, on average, each 
portfolio mails two notices per year to meet the requirements of the 
rule, for an average total annual burden of approximately 30 
minutes.
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    Rule 31a-1 (17 CFR 270.31a-1) under the Act is entitled ``Records 
to be maintained by registered investment companies, certain majority-
owned subsidiaries thereof, and other persons having transactions with 
registered investment companies.'' Rule 31a-1 requires registered 
investment companies (``funds''), and every underwriter, broker, 
dealer, or investment adviser that is a majority-owned subsidiary of a 
fund, to maintain and keep current accounts, books, and other documents 
which constitute the record forming the basis for financial statements 
required to be filed pursuant to sect8ion 30 of the Act (15 U.S.C. 80a-
29) and of the auditor's certificates relating thereto. The rule lists 
specific records to be maintained by funds. The rule also requires 
certain underwriters, brokers, dealers, depositors, and investment 
advisers to maintain the records that they are required to maintain 
under federal securities laws.
    There are approximately 4,295 investment companies registered with 
the Commission, all of which are required to comply with rule 31a-1. 
For purposes of determining the burden imposed by rule 31a-1, the 
Commission staff estimates that each registered investment company is 
divided into approximately four series, on average, and that each 
series is required to comply with recordkeeping requirements of rule 
31a-1. Based on conversations with fund representatives, it is 
estimated that rule 31a-1 imposes an average burden of approximately 
1,200 hours annually per series for a

[[Page 70752]]

total of 4,800 annual hours per investment company. The estimated total 
annual burden for all 4,295 investment companies subject to the rule 
therefore is approximately 20,616,000 hours. Based on conversations 
with fund representatives, however, the Commission staff estimates that 
even absent the requirements of rule 31a-1, most of the records created 
pursuant to the rule are the type that generally would be created as a 
matter of normal business custom and to prepare financial statements.
    The estimates of burden hours are made solely for the purposes of 
the Paperwork Reduction Act, and are not derived from a comprehensive 
or even a representative survey or study of the costs of Commission 
rules. 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.
    Written comments are invited on: (a) Whether the collections of 
information are necessary for the proper performance of the functions 
of the Commission, including whether the information has practical 
utility; (b) the accuracy of the Commission's estimate of the burdens 
of the collections of information; (c) ways to enhance the quality, 
utility, and clarity of the information collected; and (d) ways to 
minimize the burdens of the collections 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: December 9, 1999.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-32711 Filed 12-16-99; 8:45 am]
BILLING CODE 8010-01-M