[Federal Register Volume 70, Number 116 (Friday, June 17, 2005)]
[Notices]
[Pages 35313-35314]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-3105]


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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 17e-1, SEC File No. 270-224, OMB Control No. 3235-0217.

    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 of the 
previously approved collection of information described below.
    Rule 17e-1 [17 CFR 270.17e-1] under the Investment Company Act of 
1940 (the ``Act'') is entitled ``Brokerage Transactions on a Securities 
Exchange.'' The rule governs the remuneration that a broker affiliated 
with a registered investment company (``fund'') may receive in 
connection with securities transactions by the fund. The rule requires 
a fund's board of directors to establish, and review as necessary, 
procedures reasonably designed to provide that the remuneration to an 
affiliated broker is a fair amount compared to that received by other 
brokers in connection with transactions in similar securities during a 
comparable period of time. Each quarter, the board must determine that 
all transactions with affiliated brokers during the preceding quarter 
complied with the procedures established under the rule. Rule 17e-1 
also requires the fund to (i) maintain permanently a written copy of 
the procedures adopted by the board for complying with the requirements 
of the rule; and (ii) maintain for a period of six years a written 
record of each transaction subject to the rule, setting forth: the 
amount and source of the commission, fee or other remuneration 
received; the identity of the broker; the terms of the transaction; and 
the materials used to determine that the transactions were effected in 
compliance with the procedures adopted by the board. The Commission's 
examination staff uses these records to evaluate transactions between 
funds and their affiliated brokers for compliance with the rule.
    The Commission staff estimates that 3,028 portfolios of 
approximately 2,126 funds use the services of one or more subadvisers. 
Based on discussions with industry representatives, the staff estimates 
that it will require approximately 6 hours to draft and execute revised 
subadvisory contracts (5 staff attorney hours, 1 supervisory attorney 
hour), in order for funds and subadvisers to be able to rely on the 
exemptions in rule 17e-1. The staff assumes that all of these funds 
amended their advisory contracts when rule 17e-1 was amended in 2002 by 
conditioning certain exemptions upon such contractual alterations.\1\
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    \1\ Rules 12d3-1, 10f-3, 17a-10, and 17e-1 require virtually 
identical modifications to fund advisory contracts. The Commission 
staff assumes that funds would rely equally on the exemptions in 
these rules, and therefore the burden hours associated with the 
required contract modifications should be apportioned equally among 
the four rules.
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    Based on an analysis of fund filings, the staff estimates that 
approximately 200 new funds are registered annually. Assuming that the 
number of these funds that will use the services of subadvisers is 
proportionate to the number of funds that currently use the services of 
subadvisers, then approximately 46 new funds will enter into 
subadvisory agreements each year.\2\ The Commission staff further 
estimates, based on analysis of fund filings, that 10 extant funds will 
employ the services of subadvisers for the first time each year. Thus, 
the staff estimates that a total of 56 funds, with a total of 78 
portfolios,\3\ will enter into subadvisory agreements each year. 
Assuming that each of these funds enters into a contract that permits 
it to rely on the exemptions in rule 17e-1, we estimate that the rule's 
contract modification requirement will result in 117 burden hours 
annually.\4\
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    \2\ Based on information in Commission filings, we estimate that 
23 percent of funds are advised by subadvisers.
    \3\ Based on existing statistics, we assume that each fund has 
1.4 portfolios advised by a subadviser.
    \4\ This estimate is based on the following calculations: (78 
portfolios x 6 hours = 468 burden hours for rules 12d3-1, 10f-3, 
17a-10, and 17e-1; 468 total burden hours for all of the rules / 
four rules = 117 annual burden hours per rule.)
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    Based on an analysis of fund filings, the staff estimates that 
approximately 300 funds use at least one affiliated broker. Based on 
conversations with fund representatives, the staff estimates that rule 
17e-1's exemption would free approximately 40 percent of transactions 
that occur under rule 17e-1 from the rule's recordkeeping and review 
requirements. This would leave approximately 180 funds (300 funds x .6 
= 180) still subject to the rule's recordkeeping and review 
requirements. The staff estimates that each of these funds spends 57 
hours per year hours at a cost of approximately $3,780 per year 
complying with rule 17e-1's requirements that (i) the fund retain 
records of transactions entered into pursuant to the rule, and (ii) the 
fund's directors review those transactions quarterly.\5\ We estimate, 
therefore, that all funds relying on this exemption incur yearly hourly 
burdens of 10,260 burden.\6\ Therefore, the annual aggregate burden 
hour associated with rule 17e-1 is 10,377.\7\
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    \5\ In calculating the total annual cost of complying with 
amended rule 17e-1, the Commission staff assumes that the entire 
burden would be attributable to professionals with an average hourly 
wage rate of $66.31 per hour. Unless stated otherwise, all hourly 
rates in this Supporting Statement are derived from the average 
annual salaries reported for employees outside of New York City in 
Securities Industry Association, Management and Professional 
Earnings in the Securities Industry (2003) and Securities Industry 
Association, Office Salaries in the Securities Industry (2003).
    \6\ This estimate is based on the following calculation: (180 
funds x 57 hours = 10,260).
    \7\ This estimate is based on the following calculation: (117 
hours + 10,260 hours = 10,377).
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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. 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.
    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 e-mail 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.


[[Page 35314]]


    Dated: June 6, 2005.
J. Lynn Taylor,
Assistant Secretary.
[FR Doc. E5-3105 Filed 6-16-05; 8:45 am]
BILLING CODE 8010-01-P