[Federal Register Volume 65, Number 113 (Monday, June 12, 2000)]
[Notices]
[Pages 36847-36848]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-14716]


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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, Washington, 
DC 20549.
Extension:
    Rule 17f-1, SEC File No. 270-236, OMB Control No. 3235-0222
    Form N-17f-1, SEC File No. 270-316, OMB Control No. 3235-0359
    Rule 17f-2, SEC File No. 270-233, OMB Control No. 3235-0223
    Form N-17f-2, SEC File No. 270-317, OMB Control No. 3235-0360

    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 17f-1 under the Investment Company Act of 1940 (the ``Act'') 
is entitled: ``Custody of Securities with Members of National 
Securities Exchanges.'' Rule 17f-1 provides that any registered 
management investment company (``fund'') that wishes to place its 
assets in the custody of a national securities exchange member may do 
so only under a written contract that must be ratified initially and 
approved annually by a majority of the fund's board of directors. The 
written contract also must contain certain specified provisions. In 
addition, the rule requires an independent public accountant to examine 
the fund's assets in the custody of the exchange member at least three 
times during the fund's fiscal year. The rule requires the written 
contract and the certificate of each examination to be transmitted to 
the Commission. The purpose of the rule is to ensure the safekeeping of 
fund assets.
    Commission staff estimates that approximately five funds maintain 
their assets with a national securities exchange member.\1\ The annual 
burden of the rule's requirements is estimated to be approximately 4.5 
hours for each of these funds.\2\ Commission staff estimates the total 
annual burden for all funds is 22.5 hours.
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    \1\ The Commission's records show that five funds filed Form N-
17f-1 during calendar year 1999.
    \2\ The Commission staff estimates, based upon the experience of 
staff familiar with the information collection requirements of the 
rule, that each fund spends approximately 4.5 hours annually in 
complying with the rule's requirements: 4 hours of clerical time (1 
hour to prepare the custodial contract for board review and to 
transmit the contract, and 1 hour to transmit of the accountant's 
certificates three times yearly), and 0.5 hours for the board of 
directors to ratify the custodial contract.
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    Compliance with the collection of information required by rule 17f-
1 is mandatory for funds that place their assets in the custody of a 
national securities exchange. Responses will not be kept confidential. 
Form N-17f-1 is entitled: ``Certificate of Accounting of Securities and 
Similar Investments of a Management Investment Company in the Custody 
of Members of National Securities Exchanges.'' Form N-17f-1 is the 
cover sheet for accountant examination certificates filed under rule 
17f-1 of the Act. Rule 17f-1 requires the accountant's certificate of 
each examination be attached to Form N-17f-1 and transmitted to the 
Commission promptly after each examination. The form facilities the 
filing of the accountant's certificate, and increases the accessibility 
of the certificate to both Commission's staff and interested investors.
    Commission staff estimates that approximately five funds maintain 
their assets with a national securities exchange member. The annual 
burden of the rule's requirements is estimated to be approximately 27 
minutes for each of these funds.\3\ The total annual burden for all 
funds is therefore estimated to be 2.25 burden hours.
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    \3\ Commission staff estimates that it takes approximately 9 
minutes of clerical time to prepare each Form N-17f-1. This 
estimated is based on Commission staff members filling out the Form 
N-17f-1. Each fund is required to file Form N-17f-1 three times 
annually, for an average hour burden per dund of 27 minutes.
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    Compliance with the collection of information required by Form N-
17f-1 is mandatory for funds that place their assets in the custody of 
a national securities exchange member.
    Rule 17f-2 under the Act is entitled: ``Custody of Investments by 
Registered Management Investment Company.'' Rule 17f-2 establishes 
safeguards for arrangements in which a registered management investment 
company is deemed to maintain custody of its own assets, such as when 
the fund maintains its assets in a facility that provides safekeeping 
but not custodial services. The rule includes several recordkeeping or 
reporting requirements. The fund's directors must prepare a resolution 
designating not more than five fund officers or responsible employees 
who may have access to the fund's assets. The designated access persons 
(two or more of whom must act jointly when handling fund assets) must 
prepare a written notation providing certain information about each 
deposit or withdrawal of fund assets, and must transmit the notation to 
another officer or director designated by the directors. Independent 
public accounts must verify the fund's assets at least three times a 
year, and two of the examinations must be unscheduled.
    The requirement that directors designate access persons is intended 
to ensure that directors evaluate the trustworthiness of insiders who 
handle fund assets. The requirements that access persons act jointly in 
handling fund assets, prepare a written notation of each transaction, 
and transmit the notation to another designated person

[[Page 36848]]

are intended to reduce the risk of misappropriation of fund assets by 
access persons, and to ensure that adequate records are prepared, 
reviewed by a responsible third person, and available for examination 
by the Commission. The requirement that auditors verify fund assets 
without notice twice each year is intended to provide an additional 
deterrent to the misappropiation of fund assets and to detect any 
irregulatirites.
    Commission staff estimates that approximately 204 funds rely upon 
the rule (and that each fund offers an average of two separate series 
or portfolios subject to the rule) \4\ Commission staff estimates that 
each fund spends approximately 2 hours annually in drafting resolutions 
by directors, 24 hours annually in preparing transaction notations, and 
100 hours annually assisting independent public accountants perform 
unscheduled verifications of assets.\5\ The total annual burden of the 
rule's paperwork requirements thus is estimated to be 25,704 hours. 
This represents an increase of 10,844 hours from a prior estimate of 
13,860 hours, based on an increase in the number of funds relying on 
the rule from 110 to 204 funds.
    Form N-17f-2 is entitled ``Certificate of Accounting of Securities 
and Similar Investments in the Custody of Management Investment 
Companies.'' Form N-17f-2 is the cover sheet for the accountant 
examination certificates filed under rule 17f-2 of the Act by 
registered management investment companies maintaining custody of 
securities or other investments. Form N-17f-2 facilitates the filing of 
the accountant's examination certificates. The use of the form allows 
the certificates to be filed electronically, and increases the 
accessibility of the examination certificates to both the Commission's 
examination staff and interested investors by ensuring that the 
certificates are filed under the proper SEC file number and the correct 
name of a fund.
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    \4\ A fund relying upon rules 17f-2 is required to file Form N-
17f-2 with the Commission three times yearly. The Commission's 
records indicate that approximately 204 funds filed Form N-17f-2 
with the Commission during calendar year 1999.
    \5\ Each of these hour burden estimates is based upon 
conversations with attorneys and accountants familiar with the 
information collection requirements of the rule.
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    Commission staff estimates that approximately 204 funds rely on 
rule 17f-2, and therefore, file Form N-17f-2 with the Commission. A 
fund relying on rule 17f-2 must file the form with the Commission at 
least three times a year. Commission staff estimates that each fund 
spends approximately nine minutes (0.15 hours) preparing each response 
on Form N-17f-2 \6\ Therefore, the total annual burden of Form N-17f-
2's annual paperwork requirements is estimated to be approximately 92 
hours,\7\ an increase of 72 hours from the prior estimate of 20 hours. 
The increase in the annual hour burden is primarily attributable to the 
increase in the number of respondents from 130 funds to 204 funds.\8\
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    \6\ This estimate is based on the experience of members of the 
Commission staff in completing Form N-17f-2.
    \7\ This estimate is based on the following calculation: 204 
(respondents)  x  3 (responses per fund per year)  x  .015 (hours 
per response) = 91.8 burden hours.
    \8\ The estimate of the hour burden per fund per response 
remains 9 minutes for each Form N-17f-2 filed with the Commission. 
The prior annual hour burden estimate was based on a calculation of 
.05 hours (which equals 3 minutes) instead of .015 hours (9 
minutes). The annual hour burden for Form N-17f-2 has, therefore, 
increased by only 42.3 burden hours if the prior annual hour burden 
is recalculated: 110 (respondents) x 3 (responses per respondent per 
year) x .015 (hours per response) = 49.5 burden hours.
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    Complying with the collection of information requirements of the 
rule is mandatory for those funds that maintain custody of their own 
assets. The information provided to the Commission by the fund's 
independent public accounts about each verification of the fund's 
assets will not be kept confidential.
    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.
    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 10102, 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: June 5, 2000.
Jonathan G. Katz,
Secretary.
[FR Doc. 00-14716 Filed 6-9-00; 8:45 am]
BILLING CODE 8010-01-M