[Federal Register Volume 68, Number 24 (Wednesday, February 5, 2003)]
[Notices]
[Pages 5939-5940]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-2645]


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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 31a-1, SEC File No. 270-173, OMB Control No. 3235-0178;
    rule 18f-3, SEC File No. 270-385, OMB Control No. 3235-0441;
    rule 498, SEC File No. 270-435, OMB Control No. 3235-0488;
    rule 34b-1, SEC File No. 270-305, OMB Control No. 3235-0346.
    Notice is hereby given that pursuant to the Paperwork Reduction Act 
of 1995 (44 U.S.C. 3501-3520), the Securities and Exchange Commission 
(``Commission'') has submitted to the Office of Management and Budget 
(``OMB'') a request for extension on the previously approved 
collections of information discussed below.
    Rule 31a-1 (17 CFR 270.31a-1) under the Investment Company Act of 
1940 (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 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's inspection 
program.
    There are approximately 4,500 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 
1,400 hours annually per series for a total of 5,600 annual hours per 
investment company. The estimated total annual burden for all 4,500 
investment companies subject to the rule therefore is approximately 
25,200,000 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.
    Section 18(f)(1) \1\ of the Act \2\ prohibits registered open-end 
management investment companies from issuing any senior security. Rule 
18f-3 under the Act \3\ exempts from section 18(f)(1) a fund that 
issues multiple classes of shares representing interests in the same 
portfolio of securities (a ``multiple class fund'') if the fund 
satisfies the conditions of the rule. In general, each class must 
differ in its arrangement for shareholder services or distribution or 
both, and must pay the related expenses of that different arrangement.
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    \1\ 15 U.S.C. 80a-18(f)(1).
    \2\ 15 U.S.C. 80a.
    \3\ 17 CFR 270.18f-3.
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    The rule includes one requirement for the collection of 
information. A multiple class fund must prepare and fund directors must 
approve a written plan setting forth the separate arrangement and 
expense allocation of each class, and any related conversion features 
or exchange privileges (``rule 18f-3 plan'').\4\ Approval of the plan 
must occur before the fund issues any shares of multiple classes, and 
whenever the fund materially amends the plan. In approving the plan, a 
majority of the fund board, including a majority of the fund's 
independent directors, must determine that the plan is in the best 
interests of each class and the fund as a whole.
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    \4\ Rule 18f-3(d).
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    The requirement that the fund prepare and directors approve a 
written rule 18f-3 plan is intended to ensure that the fund compiles 
information relevant to the fairness of the separate arrangement and 
expense allocation for each class, and that directors review and 
approve the information. Without a blueprint that highlights material 
differences among classes, directors might not perceive potential 
conflicts of interests when they determine whether the plan is in the 
best interests of each class and

[[Page 5940]]

the fund. In addition, the plan may be useful to Commission staff in 
reviewing the fund's compliance with the rule.
    There are approximately 516 multiple class funds.\5\ Based on a 
review of typical rule 18f-3 plans, the Commission's staff estimates 
that the 516 funds together make an average of 258 responses each year 
to prepare and approve a written rule 18f-3 plan, requiring 
approximately 18.5 hours per response, and a total of 4,773 burden 
hours per year in the aggregate.\6\ Preparation of the rule 18f-3 plan 
may require 11 hours of the services of an attorney or accountant, at a 
cost of approximately $130 per hour for professional time, and approval 
of the plan may require 1.5 hours of the attention of each of 5 
directors, at a cost of approximately $500 per hour per director. The 
staff therefore estimates that the aggregate annual cost of complying 
with the paperwork requirements of the rule is approximately $1,336,440 
((11 hours x 1 professional x 258 responses x $130) + (1.5 hours x 5 
directors x 258 responses x $500)).
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    \5\ This estimate is based on data from form N-SAR, the semi-
annual report that funds file with the Commission.
    \6\ The estimate reflects the assumption that each multiple 
class fund prepares and approves a rule 18f-3 plan every two years 
when issuing a new class or amending a plan (or that 258 of all 516 
funds prepare and approve a plan each year). The estimate assumes 
that the time required to prepare a plan is 11 hours per plan (or 
2,838 hours for 258 funds annually), and the time required to 
approve a plan is an additional 1.5 hours per director per plan (or 
1,935 hours for 258 funds annually (assuming five directors per 
fund)).
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    The estimated annual burden of 4,773 hours represents an increase 
of 3,260.5 hours over the prior estimate of 1,512.5 hours. The increase 
in burden hours is attributable to more accurate estimates of the 
burden hours that reflect additional time spent by professionals and 
time spent by directors. The estimated number of multiple class funds 
has decreased, however, from 550 to 516.
    Complying with this collection of information requirement is 
necessary to obtain the benefit of relying on rule 18f-3. Responses 
will not be kept confidential.
    Rule 498 of the Securities Act of 1933 (17 CFR 230.498) permits 
open-end management investment companies (or a series of an investment 
company organized as a series company, which offers one or more series 
of shares representing interests in separate investment portfolios) 
(``funds'') to provide investors with a ``profile'' that contains a 
summary of key information about a fund, including the fund's 
investment objectives, strategies, risks and performance, and fees, in 
a standardized format. The profile provides investors the option of 
buying fund shares based on the information in the profile or reviewing 
the fund's prospectus before making an investment decision. Investors 
purchasing shares based on a profile receive the fund's prospectus 
prior to or with confirmation of their investment in the fund.
    Consistent with the filing requirement of a fund's prospectus, a 
profile must be filed with the Commission 30 days before first use. 
Such a filing allows the Commission to review the profile for 
compliance with rule 498. Compliance with the rule's standardized 
format assists investors in evaluating and comparing funds.
    It is estimated that approximately 16 initial profiles and 316 
updated profiles are filed with the Commission annually. The Commission 
estimates that each profile contains on average 1.25 portfolios, 
resulting in 20 portfolios filed annually on initial profiles and 395 
portfolios filed annually on updated profiles. The number of burden 
hours for preparing and filing an initial profile per portfolio is 25. 
The number of burden hours for preparing and filing an updated profile 
per portfolio is 10. The total burden hours for preparing and filing 
initial and updated profiles under rule 498 is 4,450, representing a 
decrease of 2,660 hours from the prior estimate of 7,110. The reduction 
in burden hours is attributable to the lower number of profiles 
actually prepared and filed as compared to the previous estimates.
    The collection of information under rule 498 is voluntary. The 
information provided by rule 498 is not kept confidential.
    Rule 34b-1 under the Investment Company Act (17 CFR 270.34b-1) 
governs sales material that accompanies or follows the delivery of a 
statutory prospectus (``sales literature''). Rule 34b-1 deems to be 
materially misleading any investment company sales literature, required 
to be filed with the Commission by section 24(b) of the Investment 
Company Act (15 U.S.C. 80a-24(b)),\7\ that includes performance data 
unless it also includes the appropriate uniformly computed data and the 
legend disclosure required in advertisements by rule 482 under the 
Securities Act of 1933 (17 CFR 230.482). Requiring the inclusion of 
such standardized performance data in sales literature is designed to 
prevent misleading performance claims by funds and to enable investors 
to make meaningful comparisons among fund performance claims.
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    \7\ Sales literature addressed to or intended for distribution 
to prospective investors shall be deemed filed with the Commission 
for purposes of section 24(b) of the Investment Company Act upon 
filing with a national securities association registered under 
section 15A of the Securities Exchange Act of 1934 that has adopted 
rules providing standards for the investment company advertising 
practices of its members and has established and implemented 
procedures to review that advertising. See rule 24b-3 under the 
Investment Company Act (17 CFR 270.24b-3).
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    The Commission estimates that respondents file approximately 37,000 
responses with the Commission, which include the information required 
by rule 34b-1. The burden from rule 34b-1 requires slightly more than 
2.4 hours per response resulting from creating the information required 
under rule 34b-1.\8\ The total burden hours for rule 34b-1 is 89,143 
per year in the aggregate (37,000 responses x 2.4092702 hours per 
response).
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    \8\ The estimated burden per response is 2.9 hours for 686 
responses and 2.4 hours for the remaining, giving a more exact 
weighted average burden per response of approximately 2.4092702.
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    The collection of information under rule 34b-1 is mandatory. The 
information provided under rule 34b-1 is not kept confidential.
    The estimates of average burden hours are made solely for the 
purposes of the Act and are not derived from a comprehensive or even 
representative survey or study of the cost of Commission rules and 
forms. 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.
    Please direct general comments regarding the above information 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 10202, New Executive Office Building, 
Washington, DC 20503; and (ii) Kenneth A. Fogash, Acting Associate 
Executive Director/CIO, Office of Information Technology, Securities 
and Exchange Commission, 450 5th Street, NW., Washington, DC 20549. 
Comments must be submitted to OMB within 30 days of this notice.

    Dated: January 28, 2003.
J. Lynn Taylor,
Assistant Secretary.
[FR Doc. 03-2645 Filed 2-4-03; 8:45 am]
BILLING CODE 8010-01-P