[Federal Register Volume 73, Number 32 (Friday, February 15, 2008)]
[Notices]
[Pages 8911-8912]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-2873]


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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 12d3-1; SEC File No. 270-504; OMB Control No. 3235-0561.

    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'') 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 for extension and approval.
    Section 12(d)(3) of the Investment Company Act of 1940 (15 U.S.C. 
80a) generally prohibits registered investment companies (``funds''), 
and companies controlled by funds, from purchasing securities issued by 
a registered investment adviser, broker, dealer, or underwriter 
(``securities-related businesses''). Rule 12d3-1 ``Exemption of 
acquisitions of securities issued by persons engaged in securities 
related businesses'' (17 CFR 270.12d3-1) permits a fund to invest up to 
five percent of its assets in securities of an issuer deriving more 
than fifteen percent of its gross revenues from securities-related 
businesses, but a fund may not rely on rule 12d3-1 to acquire 
securities of its own investment adviser or any affiliated person of 
its own investment adviser.
    A fund may, however, rely on an exemption in rule 12d3-1 to acquire 
securities issued by its subadvisers in circumstances in which the 
subadviser would have little ability to take advantage of the fund, 
because it is not in a position to direct the fund's securities 
purchases. The exemption in rule 12d3-1(c)(3) is available if (i) the 
subadviser is not, and is not an affiliated person of, an investment 
adviser that provides advice with respect to the portion of the fund 
that is acquiring the securities, and (ii) the advisory contracts of 
the subadviser, and any subadviser that is advising the purchasing 
portion of the fund, prohibit them from consulting with each other 
concerning securities transactions of the fund, and limit their 
responsibility in providing advice with respect to discrete portions of 
the fund's portfolio.
    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 requires approximately 6 hours to draft and 
execute revised subadvisory contracts allowing funds and subadvisers to 
rely on the exemptions in rule 17a-10.\1\ The staff assumes that all 
existing funds amended their advisory contracts following the adoption 
of rule 17a-10 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 17a-10 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

[[Page 8912]]

clauses in new subadvisory contracts in order for funds and subadvisers 
to be able to rely on the exemptions in rule 17a-10. Because these 
additional clauses are identical to the clauses that a fund would need 
to insert in their subadvisory contracts to rely on rules 10f-3, 12d3-
1, and 17e-1, 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 estimate that the burden 
allocated to rule 17a-10 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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    Written comments are invited on: (a) Whether the proposed 
collection of information is necessary for the proper performance of 
the functions of the agency, including whether the information will 
have practical utility; (b) the accuracy of the agency's estimate of 
the burden of the collection of information; (c) ways to enhance the 
quality, utility, and clarity of the information collected; and (d) 
ways to minimize the burden 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, Securities and Exchange Commission, C/O 
Shirley Martinson, 6432 General Green Way, Alexandria, VA 22312; or 
send an e-mail to: [email protected].

    Dated: February 7, 2008.
Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E8-2873 Filed 2-14-08; 8:45 am]
BILLING CODE 8011-01-P