[Federal Register Volume 73, Number 80 (Thursday, April 24, 2008)]
[Notices]
[Pages 22183-22184]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-8927]


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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 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 
(``Commission'') has submitted to the Office of Management and Budget a 
request for extension of the previously approved collection of 
information discussed below.
    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 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 3,583 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 12d3-1.\1\ The staff assumes that all 
existing funds amended their advisory contracts following amendments to 
rule 12d3-1 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 12d3-1would 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

[[Page 22184]]

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 12d3-1. 
Because these additional clauses are identical to the clauses that a 
fund would need to insert in their subadvisory contracts to rely on 
rules 10f-3, 17a-10, 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 12d3-1 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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    The estimate of average burden hours is made solely for the 
purposes of the Paperwork Reduction Act. The estimate is not derived 
from a comprehensive or even a representative survey or study of the 
costs of Commission rules. Complying with this collection of 
information requirement is necessary to obtain the benefit of relying 
on rule 12d3-1. Responses will not be kept confidential. 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.
    Please direct general comments regarding the above information to 
the following persons: (i) Desk Officer for the Securities and Exchange 
Commission, 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, Securities and Exchange Commission, C/O Shirley Martinson, 
6432 General Green Way, Alexandria, VA 22312; or send an e-mail to: 
[email protected]. Comments must be submitted to OMB within 30 days 
of this notice.

    Dated: April 18, 2008.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8-8927 Filed 4-23-08; 8:45 am]
BILLING CODE 8010-01-P