[Federal Register Volume 72, Number 225 (Friday, November 23, 2007)]
[Notices]
[Pages 65771-65772]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-22843]


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SECURITIES AND EXCHANGE COMMISSION


Proposed Collection; Comment Request

Upon Written Request, Copies Available From: Securities and Exchange 
Commission, Office of Investor Education and Advocacy, Washington, DC 
20549-0213.

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'') is soliciting comments on the 
collections of information summarized below. The Commission plans to 
submit these existing collections of information to the Office of 
Management and Budget (``OMB'') for extension and approval.
    Rule 17e-1 (17 CFR 270.17e-1) under the Investment Company Act of 
1940 (15 U.S.C. 80a-1) (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 3583 portfolios of 
approximately 649 fund complexes 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 in order for funds and 
subadvisers to be able to rely on the exemptions in rule 17e-1.\1\ The 
staff assumes that all existing funds amended their advisory contracts 
following amendments to rule 17e-1 in 2002 that conditioned certain 
exemptions upon these contractual alterations, and therefore there is 
no continuing burden for those funds.\2\
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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.
    \2\ We assume that funds formed after 2002 that intended to rely 
on rule 17e-1 would have included the contract provision in their 
initial subadvisory contracts.
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    Based on an analysis of fund filings, the staff estimates that 
approximately 600 fund portfolios enter into subadvisory agreements 
each year.\3\ Based on discussions with industry representatives, the 
staff estimates that it will require approximately 3 attorney hours \4\ 
to draft and execute additional clauses in new subadvisory contracts in 
order for funds and subadvisers to be able to rely on the exemptions in 
rule 17e-1. Because these additional clauses are identical to the 
clauses that a fund would need to insert in their subadvisory contracts 
to rely on rules 12d3-1, 10f-3, 17a-10, and because we believe that 
funds that use one such rule generally use all of these rules, we 
apportion this 3-hour time burden equally to all four rules. Therefore, 
we

[[Page 65772]]

estimate that the burden allocated to rule 17e-1 for this contract 
change would be 0.75 hours.\5\ Assuming that all 600 funds that enter 
into new subadvisory contracts each year make the modification to their 
contract required by the rule, we estimate that the rule's contract 
modification requirement will result in 450 burden hours annually, with 
an associated cost of approximately $131,400.\6\
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    \3\ The use of subadvisers has grown rapidly over the last 
several years, with approximately 600 portfolios that use 
subadvisers registering between December 2005 and December 2006. 
Based on information in Commission filings, we estimate that 31 
percent of funds are advised by subadvisers.
    \4\ The Commission staff's estimates concerning the wage rates 
for attorney time are based on salary information for the securities 
industry compiled by the Securities Industry Association. The $292 
per hour figure for an attorney is from the SIA Report on Management 
& Professional Earnings in the Securities Industry 2006, modified to 
account for an 1800-hour work-year and multiplied by 5.35 to account 
for bonuses, firm size, employee benefits and overhead.
    \5\ This estimate is based on the following calculation (3 hours 
/ 4 rules = .75 hours).
    \6\ These estimates are based on the following calculations: 
(0.75 hours x 600 portfolios = 450 burden hours); ($292 per hour x 
450 hours = $131,400 total cost).
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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 
approximately 60 hours per year (40 hours by accounting staff, 15 hours 
by an attorney, and 5 director hours) \7\ at a cost of approximately 
$10,495 per year to comply 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.\8\ 
We estimate, therefore, that the total yearly hourly burden for all 
funds relying on this exemption is 10,800 hours,\9\ with yearly costs 
of approximately $1,889,100.\10\ Therefore, the annual aggregate burden 
hour associated with rule 17e-1 is 11,250,\11\ and the annual aggregate 
cost associated with it is $2,020,500.\12\
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    \7\ The Commission staff's estimates concerning the wage rate 
for professional time are based on salary information for the 
securities industry compiled by the Securities Industry Association. 
The $292 per hour estimate for an attorney, $116 per hour estimate 
for accountant time, and $295 per hour estimate for directors (based 
on comparable position) is from the SIA Report on Management & 
Professional Earnings in the Securities Industry 2006, modified to 
account for an 1800-hour work-year and multiplied by 5.35 to account 
for bonuses, firm size, employee benefits and overhead.
    \8\ This estimate is based on the following calculations: (40 
hours accounting staff x $116 per hour = $4640) (15 hours by an 
attorney x $292 per hour = $4380); (5 hours by directors x $295 = 
$1475) ($4640 + $4380 + $1475 = $10,495 total cost).
    \9\ This estimate is based on the following calculation: (180 
funds x 60 hours = 10,800).
    \10\ This estimate is based on the following calculation: 
($10,495 x 180 funds = $1,889,100).
    \11\ This estimate is based on the following calculation: (450 
hours + 10,800 hours = 11,250 total hours).
    \12\ This estimate is based on the following calculation: 
($131,400 + $1,889,100 = $2,020,500).
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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.
    Written comments are invited on: (a) Whether the collections of 
information are 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 burdens 
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 collections 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, Securities and Exchange Commission, c/o 
Shirley Martinson, 6432 General Green Way, Alexandria, VA 22312; or 
send an e-mail to: [email protected].

    Dated: November 15, 2007.
Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-22843 Filed 11-21-07; 8:45 am]
BILLING CODE 8011-01-P