[Federal Register Volume 68, Number 63 (Wednesday, April 2, 2003)]
[Notices]
[Pages 16108-16109]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-7843]


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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, 450 
Fifth Street, NW, Washington, DC 20549.
    Extension: Rule 17f-2 [17 CFR 270.17f-2]. SEC File No. 270-233. 
OMB Control No. 3235-0223.

    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 summarized below. The Commission plans to 
submit this existing collection of information to the Office of 
Management and Budget for extension and approval.
    Rule 17f-2 under the Investment Company Act of 1940 (17 CFR 
270.17f-2) is entitled: ``Custody of Investments by Registered 
Management Investment Company.'' Rule 17f-2 establishes safeguards for 
arrangements in which a registered management investment company 
(``fund'') 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 accountants 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 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 misappropriation of fund assets and to detect any 
irregularities.
    The Commission staff estimates that approximately 135 funds rely 
upon rule 17f-2.\1\ The Commission staff estimates that each fund 
offers an average of 3.7 separate series or portfolios subject to rule 
17f-2. Each fund makes an average of 97.4 responses each year under the 
rule, including 1 response (requiring .2 burden hours) per fund to 
draft director resolutions, 89 responses per fund to

[[Page 16109]]

prepare notations of transactions \2\ (requiring one hour each), and 
7.4 responses \3\ per fund for fund personnel to assist the independent 
public accountants when they perform unscheduled verifications 
(requiring 10 burden hours each). Thus, the total hour burden per fund 
is estimated to 163.2 hours \4\ Commission staff estimates that each 
fund therefore spends approximately .2 burden hours of professional 
time at $60 per hour annually in drafting resolutions by directors (.2 
x $60 = $12), 89 hours \5\ of professional time at $60 per hour 
annually in preparing transaction notations (89 x $60 = $5,340), and 74 
hours \6\ of clerical time at $16 per hour annually in assisting 
independent public accounts perform unscheduled verifications of assets 
(74 x $16 = $1,184).\7\ The total annual burden of rule 17f-2's 
paperwork requirements thus is estimated to be approximately 22,032 
hours \8\ at an annual cost of $882,360.\9\
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    \1\ The Commission's records indicate that approximately 135 
funds filed Form N-17f-2 with the Commission during calendar year 
2002.
    \2\ This number results from 24 responses per portfolio 
multiplied by 3.7 portfolios in the average fund (24 x 3.7 = 88.8).
    \3\ This number results from 2 unscheduled verifications per 
portfolio multiplied by 3.7 portfolios in the average fund (2 x 3.7 
= 7.4 responses per fund).
    \4\ (1 response x .2 burden hours) + (89 responses x 1 burden 
hour) + (7.4 responses x 10 burden hours) = 163.2 burden hours.
    \5\ 89 transaction notations per fund x 1 hour = 89 hours.
    \6\ 7.4 verifications per fund x 10 hours = 74 hours.
    \7\ Each of these hour burden estimates is based upon 
conversations with attorneys and accountants familiar with the 
information collection requirements of the rule. Commission staff 
relied upon the Securities Industry Association, Report on 
Management and Professional Earnings in the Securities Industry 
(2002) to determine the hourly wage rates used in the calculation of 
this estimate. Professional time is based on the estimated average 
wage for associate and general counsel in the securities industry.
    \8\ 163.2 hours per fund x 135 funds = 22,032 total annual 
burden.
    \9\ ($12 (for drafting resolutions) + $5,340 (for transaction 
notations) + $1,184 (for unscheduled verifications)) x 135 funds = 
$882,360.The annual burden for rule 17f-2 does not include time 
spent preparing Form N-17f-2. The burden for Form N-17f-2 is 
included in a separate collection of information.
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    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 and forms. 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 accountants about each 
verification of the fund's assets will not be kept confidential. 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 Kenneth A. Fogash, Acting 
Associate Executive Director/CIO, Office of Information Technology, 
Securities and Exchange Commission, 450 5th Street, NW., Washington, DC 
20549.

    Dated: March 25, 2003.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-7843 Filed 4-1-03; 8:45 am]
BILLING CODE 8010-01-P