[Federal Register Volume 65, Number 38 (Friday, February 25, 2000)]
[Notices]
[Pages 10123-10125]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-4380]


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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 
5th Street, N.W., Washington, D.C. 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'') has submitted to the Office of 
Management and Budget (``OMB'') requests for extension of previously 
approved collections of information described below.
    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. In 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 respondent,\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 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 on the rule each year. The estimated total average annual 
burden for all respondents therefore is 120 hours.
    The collection of information required by rule 17a-8 is required to 
obtain the benefits of the rule. Responses will not be kept 
confidential. Pursuant to rule 31a-2 under the Investment Company Act 
[17 CFR 270.31a-2], a fund is required to maintain permanently the 
minutes of its board meetings.
    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 effected 
with affiliated brokers in 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

[[Page 10124]]

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 conversations with attorneys 
familiar with the information collection requirements of rule 17e-1.
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    Compliance with the collection of information required by rule 17e-
1 is necessary to obtain the benefit of the rule. Responses will not be 
kept confidential.
    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 statements 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 of the payment 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 purpose 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 net income, or both, not 
including in either case profits or losses from the sale of 
securities or other properties; accumulated undistributed net 
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 therefore is estimated to be approximately 3,350 burden 
hours.
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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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    Compliance with the collection of information required by rule 19a-
1 is mandatory for management companies that make written statements to 
shareholders pursuant to section 19(a) of the Act. Responses will not 
be kept confidential.
    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 account, books, and other documents 
which constitute the record forming the basis for financial statements 
required to be filed pursuant to section 30 of the Act [15 U.S.C. 80a-
30] 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. The Commission periodically inspects the 
operations of funds to insure their compliance with the provisions of 
the Act and the rules thereunder. The books and records required to be 
maintained by rule 31a-1 constitute a major focus of the Commission 
inspection program.
    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 the 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 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 collection of information required by rule 31a-1 is mandatory. 
Responses will not be kept confidential. The records required by rule 
31a-1 are required to be preserved pursuant to rule 31a-2 under the 
Investment Company Act [17 CFR 270.31a-2]. Rule 31a-2 requires that 
certain of these records be preserved permanently, and that others be 
preserved six years from the end of the fiscal year in which any 
transaction occurred. In both cases, the records should be kept in an 
easily accessible place for the first two years.
    The estimate of average burden hours is made solely for the 
purposes of the Paperwork Reduction Act, and is 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 control number.

[[Page 10125]]

    Please direct general comments regarding the above information to 
the following persons: (i) Desk Officer for the Securities and Exchange 
Commission, Officer of Information and Regulatory Affairs, Office of 
Management and Budget, New Executive Office Building, Washington, D.C. 
20503; and (ii) Michael E. Bartell, Associate Executive Director, 
Office of Information Technology, Securities and Exchange Commission, 
450 5th Street, N.W., Washington, D.C. 20549. Comments must be 
submitted to OMB within 30 days of this notice.

    Dated: February 16, 2000.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-4380 Filed 2-24-00; 8:45 am]
BILLING CODE 8010-01-M