[Federal Register Volume 68, Number 109 (Friday, June 6, 2003)]
[Notices]
[Pages 34016-34017]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-14294]


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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 Fifth 
Street, NW., Washington, DC 20549.
Extension:
    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 (the ``Commission'') has submitted to the Office of 
Management and Budget a request for extension of the previously 
approved collection of information discussed below.
    Rule 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's examination staff. 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 prepare notations 
of transactions \2\

[[Page 34017]]

(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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    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 Investment 
Company Act of 1940 by registered management investment companies 
(``funds'') 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.
    Under rule 17f-2, each fund is required to file Form N-17f-2 at 
least three times a year with the Commission. Commission staff 
estimates that it takes approximately 1 hour per response to prepare 
and file a Form N-17f-2 with the Commission. Thus, the total annual 
burden of Form N-17f-2's paperwork requirement is estimated to be 
approximately 405 burden hours.\10\ The entire hour burden will be 
borne by clerical staff at $16 per hour, for a total cost of 
approximately $6,480 (405 burden hours x $16 = $6,480). The increase in 
burden hours from 92 to 405 is attributable to updated estimates of the 
burden hours that reflect additional time spent by professionals and 
clerical staff in their compliance efforts.
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    \10\ The Commission staff estimates that there are 135 funds 
that file Form N-17f-2 each year. Each fund is required to make 
three responses per year, and each response requires 1 hour to 
prepare. The hour burden is calculated as follows: 135 (respondents) 
x 3 (responses per fund per year) x 1 (hours per response) = 405 
hours.
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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.
    Please direct written 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 10102, 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: May 30, 2003.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-14294 Filed 6-5-03; 8:45 am]
BILLING CODE 8010-01-P