[Federal Register Volume 67, Number 168 (Thursday, August 29, 2002)]
[Notices]
[Page 55440]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-22085]



[[Page 55440]]

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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 20549-0004.

Extension

Rule 32a-4; OMB Control No. 3235-0530; SEC File No. 270-473.

    Notice is hereby given that, pursuant to the Paperwork Reduction 
Act of 1995 (44 U.S.C. 350l et seq.), the Securities and Exchange 
Commission (the ``Commission'') is soliciting comments on the 
collection of information under the Investment Company Act of 1940 
(``Act'') summarized below. The Commission plans to submit this 
collection of information to the Office of Management and Budget for 
approval.
    Rule 32a-4 [17 CFR 270.32a-4] is entitled ``Independent Audit 
Committees.'' The rule exempts a registered management investment 
company or registered face-amount certificate company (``fund'') fund 
from the requirements of section 32(a)(2) of the Investment Company Act 
that shareholders ratify or reject the selection of the fund's 
independent public accountant if the fund has an audit committee 
composed wholly of independent directors.
    Instead of relying on rule 32a-4, a fund could seek ratification or 
rejection by shareholders of the selection of its independent public 
accountant at each annual meeting. Under the rule, a fund is exempt 
from having to seek shareholder approval of its independent public 
accountant, if (i) the fund's board of directors establishes an audit 
committee composed solely of independent directors with responsibility 
for overseeing the fund's accounting and auditing processes,\1\ (ii) 
the fund's board of directors adopts an audit committee charter setting 
forth the committee's structure, duties, powers and methods of 
operation, or sets out similar provisions in the fund's charter or 
bylaws,\2\ and (iii) the fund maintains a copy of such an audit 
committee charter permanently in an easily accessible place.\3\
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    \1\ Rule 32a-4(a).
    \2\ Rule 32a-4(b).
    \3\ Rule 32a-4(c).
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    As conditions of relying on rule 32a-4, a fund's board of directors 
must adopt an audit committee charter and must preserve that charter, 
and any modifications to the charter, permanently in an easily 
accessible place. The information collection requirement in rule 32a-4 
enables the Commission to monitor the duties and responsibilities of an 
independent audit committee formed by a fund relying on the rule. 
Commission staff estimates that there are approximately 3,700 
management investment companies and face-amount certificate companies 
that could rely on the rule. We believe that approximately 9.7 percent 
(360) of those funds have taken advantage of the exemption since 
adoption of the rule, and approximately 2.7% (100) of the funds that 
have not already done so choose to rely on the rule each year. For each 
of those funds choosing for the first time to rely on the rule, we 
estimate that the adoption of the audit committee charter requires, on 
average, 1 hour of directors' time, 2.5 hours of professional time and 
1 hour of support staff time, for a total one-time burden of burden of 
4.5 hours, and an estimated total one-time cost of $555.40, resulting 
in an annual aggregate time burden of 450 hours and an annual aggregate 
cost of $55,540.\4\
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    \4\ To calculate this cost, the Commission staff used an average 
hourly wage rate of $300 per hour for directors, an average hourly 
wage rate of $96.16 per hour for professionals, and an average 
hourly wage rate of $15 per hour for support staff ((100 x 1 x $300/
hour) + (100 x 2.5 x $96.16/hour) + (100 x 1 x $15/hour) = $94,000). 
See Securities Industry Association, Report on Management & 
Professional Earnings in the Securities Industry 2001 (Oct. 2001).
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    In addition to the hour burden described above, rule 32a-4 imposes 
certain costs on those funds that choose to rely on the exemption. 
These costs are minimal and are justified by the relief provided by the 
exemption. We estimate that each of the approximately 360 funds 
currently relying on the rule is required to spend approximately .5 
hours annually to comply with the requirement that it preserve 
permanently its audit committee charters, for an additional annual hour 
burden of 180 hours, and an additional annual cost for all funds of 
$12,439.20.\5\
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    \5\ In calculating this annual cost, the Commission staff 
estimated that one-third of the annual hour burden (60 hours) would 
be incurred by support staff with an average hourly wage rate of $15 
per hour, and two-thirds of the annual burden (120 hours) would be 
incurred by professionals with an average hourly wage rate of $96.16 
per hour ((60 x $15/hour) + (120 x $96.16/hour) = $12,439.20).
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    The estimates of average burden hours and costs 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 and forms.\6\
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    \6\ These estimates are based on telephone interviews between 
Commission staff and fund representatives.
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    The collections of information required by rule 32a-4 are necessary 
to obtain the benefits of the rule. The Commission is seeking OMB 
approval, because 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 are invited on: (a) Whether the collection of 
information is 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 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: August 20, 2002.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-22085 Filed 8-28-02; 8:45 am]
BILLING CODE 8010-01-U