[Federal Register Volume 69, Number 85 (Monday, May 3, 2004)]
[Notices]
[Pages 24198-24199]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-9975]


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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.

Extension: Rule 17j-1; SEC File No. 270-239; OMB Control No. 3235-
0224.

    Notice is hereby given that, pursuant to the Paperwork Reduction 
Act of 1995 (44 U.S.C. 3501-3520), 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 (``OMB'') for extension and approval.
    Rule 17j-1 under the Investment Company Act of 1940 (15 U.S.C. 80a) 
(the ``Investment Company Act''), which the Commission adopted in 1980 
\1\ and amended in 1999,\2\ implements section 17(j) of the Act. 
Section 17(j) makes it unlawful for persons affiliated with a 
registered investment company or with the investment company's 
investment adviser or principal underwriter (each, a ``17j-1 
organization''), in connection with the purchase or sale of securities 
held or to be acquired by the investment company, to engage in any 
fraudulent, deceptive, or manipulative act or practice in contravention 
of the Commission's rules and regulations. Section 17(j) authorizes the 
Commission to promulgate rules requiring the adoption of code of 
ethics.
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    \1\ Prevention of Certain Unlawful Activities With Respect to 
Registered Investment Companies, Investment Company Act Release No. 
11421 (Oct. 31, 1980) (45 FR 73915 (Nov. 7, 1980)).
    \2\ Personal Investment Activities of Investment Company 
Personnel, Investment Company Act Release No. 23958 (Aug. 20, 1999) 
(64 FR 46821-01 (Aug. 27, 1999)).
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    In order to implement section 17(j), rule 17j-1 imposes certain 
requirements on 17j-1 organizations and ``Access Persons'' \3\ of those 
organizations. The rule prohibits fraudulent, deceptive or manipulative 
acts by persons affiliated with a rule 17j-1 organization in connection 
with their personal securities transactions in securities held or to be 
acquired by the fund. The rule requires each 17j-1 organization \4\ to: 
(i) Adopt a written code of ethics, (ii) submit the code and any 
material changes to the code, along with a certification that it has 
adopted procedures reasonably necessary to prevent Access Persons from 
violating the code of ethics, to the fund board for approval, (iii) use 
reasonable diligence and institute procedures reasonably necessary to 
prevent violations of the code, (iv) submit a written report at least 
annually to the fund describing any issues arising under the code and 
procedures and certifying that the 17j-1 entity has adopted procedures 
reasonably necessary to prevent Access Persons from violating the code, 
(v) identify Access Persons and notify them of their reporting 
obligations, and (vi) maintain and make available to the Commission for 
review certain records related to the code of ethics and transaction 
reporting by Access Persons.
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    \3\ Rule 17j-1(a)(1) defines an ``access person'' as ``any 
director, officer, general partner, or advisory person of a fund or 
of a fund's investment adviser'' and as ``any director, officer, or 
general partner of a principal underwriter who, in the ordinary 
course of business, makes, participates in or obtains information 
regarding, the purchase or sale of Covered Securities by the Fund 
for which the principal underwriter acts, or whose functions or 
duties in the ordinary course of business relate to the making of 
any recommendation to the Fund regarding the purchase or sale of 
Covered Securities.''
    \4\ Money market funds and funds that do not invest in ``Covered 
Securities,'' as defined in paragraph (a)(4) of the rule, are 
excepted.

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[[Page 24199]]

    The rule requires each Access Person of a fund (other than a money 
market fund or a fund that does not invest in Covered Securities) and 
of an investment adviser or principal underwriter of the fund, who is 
not subject to an exception,\5\ to file: (i) Within 10 days of becoming 
an Access Person, a dated initial holdings report that sets forth 
certain information with respect to the access person's securities and 
accounts, (ii) within 10 days of the end of each calendar quarter, a 
dated quarterly transaction report providing certain information with 
respect to any securities transactions during the quarter and any 
account established by the Access Person in which any securities were 
held during the quarter, and (iii) dated annual holding reports 
providing information with respect to each covered security the Access 
Person beneficially owns and accounts in which securities are held for 
his or her benefit. In addition, rule 17j-1 requires investment 
personnel of a fund or its investment adviser, before acquiring 
beneficial ownership in securities through an initial public offering 
(IPO) or in a private placement, to obtain approval from the fund or 
the fund's investment adviser.
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    \5\ Rule 17j-1(d)(2) exempts Access Persons from reporting in 
five instances in which reporting would be duplicative or would not 
serve the purposes of the rule.
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    The requirements that the management of a rule 17j-1 organization 
provide the fund's board with new and amended codes of ethics and an 
annual issues and certification report are intended to enhance board 
oversight of personal investment policies applicable to the fund and 
the personal investment activities of Access Persons. The requirements 
that Access Persons provide initial holdings reports, quarterly 
transaction reports, and annual holdings reports and request approval 
for purchases of securities through IPOs and private placements are 
intended to help fund compliance personnel and the Commission's 
examinations staff monitor potential conflicts of interest and detect 
potentially abusive activities. The requirement that each rule 17j-1 
organization maintain certain records is intended to assist the 
organization and the Commission's examinations staff in determining if 
there have been violations of rule 17j-1.
    The Commission estimates that each year a total of 73,976 Access 
Persons and 17j-1 organizations are subject to the rule's reporting 
requirements. Respondents provide approximately 102,230 responses each 
year. The total annual burden of the rule's paperwork requirements is 
estimated to be approximately 243,884 hours. Of the total, 38,722 hours 
are associated with reporting requirements for access persons, and the 
remaining 205,162 hours are associated with the requirements applicable 
to rule 17j-1 entities.
    These burden hour estimates are based upon the Commission staff's 
experience and discussions with the fund industry. The estimates of 
average burden hours are made solely for the purposes of the Paperwork 
Reduction Act. These estimates are not derived from a comprehensive or 
even a representative survey or study of the costs of Commission rules.
    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 will have practical 
utility; (b) the accuracy of the Commission's estimate of the burden of 
the collections of information; (c) ways to enhance the quality, 
utility, and clarity of the information collected; and (d) ways to 
minimize the burdens 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 R. Corey Booth, Director/
Chief Information Officer, Office of Information Technology, Securities 
and Exchange Commission, 450 5th Street, NW., Washington, DC 20549.

    Dated: April 26, 2004.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 04-9975 Filed 4-30-04; 8:45 am]
BILLING CODE 8010-01-P