[Federal Register Volume 69, Number 132 (Monday, July 12, 2004)]
[Notices]
[Pages 41861-41862]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-15682]


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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 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'') has submitted to the Office of 
Management and Budget (``OMB'') a request for extension and approval of 
the collection of information discussed below.
    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 codes 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 codes 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 form 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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    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 ten 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 ten 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

[[Page 41862]]

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.
    Compliance with the collection of information requirements of the 
rule is mandatory and is necessary to comply with the requirements of 
the rule in general. 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. Rule 17j-1 requires that 
records be maintained for at least five years in an easily accessible 
place.\6\
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    \6\ If information collected pursuant to the rule is reviewed by 
the Commission's examination staff, it will be accorded the same 
level of confidentiality accorded to other responses provided to the 
Commission in the context of its examination and oversight program. 
See section 31(c) of the Investment Company Act [15 U.S.C. 80a-
30(c)].
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    General comments regarding the above information should be directed 
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, or email to: [email protected]; and (ii) R. Corey Booth, Director/Chief 
Information Officer, 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: July 2, 2004.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-15682 Filed 7-9-04; 8:45 am]
BILLING CODE 8010-01-P