[Federal Register Volume 73, Number 180 (Tuesday, September 16, 2008)]
[Notices]
[Pages 53459-53460]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-21535]


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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 19b-1; SEC File No. 270-312; OMB Control No. 3235-0354.

    Notice is hereby given that, pursuant to the Paperwork Reduction 
Act of 1995 (44 U.S.C. 3501-3520), the Securities and Exchange 
Commission (``Commission'') has submitted to the Office of Management 
and Budget (``OMB'') a request for extension of the previously approved 
collection of information discussed below.
    Section 19(b) of the Investment Company Act of 1940 (the ``Act'') 
(15 U.S.C. 80a-19(b)) authorizes the Commission to regulate registered 
investment company (``fund'') distributions of long-term capital gains 
made more frequently than once every twelve months. Rule 19b-1 under 
the Act \1\ prohibits funds from distributing long-term capital gains 
more than once every twelve months unless certain conditions are met. 
Rule 19b-1(c) (17 CFR 270.19b-1(c)) permits unit investment trusts 
(``UITs'') engaged exclusively in the business of investing in certain 
eligible fixed-income securities to distribute long-term capital gains 
more than once every twelve months, if: (i) The capital gains 
distribution falls within one of several categories specified in the 
rule \2\ and (ii) the distribution is accompanied by a report to the 
unitholder that clearly describes the distribution as a capital gains 
distribution (the ``notice requirement'').\3\ Rule 19b-1(e) (17 CFR 
270.19b-1(e)) permits a fund to apply to the Commission for permission 
to distribute long-term capital gains more than once a year if the fund 
did not foresee the circumstances that created the need for the 
distribution. The application must set forth the pertinent facts and 
explain the circumstances that justify the distribution.\4\ An 
application that meets those requirements is deemed to be granted 
unless the Commission denies the request within 15 days after the 
Commission receives the application.
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    \1\ 17 CFR 270.19b-1.
    \2\ 17 CFR 270.19b-1(c)(1).
    \3\ The notice requirement in rule 19b-1(c)(2) (17 CFR 270.19b-
1(c)(2)) supplements the notice requirement of section 19(a) [15 
U.S.C. 80a-19(a)] and rule 19a-1 [17 CFR 270.19a-1], which requires 
any distribution in the nature of a dividend payment made by a fund 
to its investors to be accompanied by a notice disclosing the source 
of the distribution.
    \4\ Rule 19b-1(e) also requires that the application comply with 
rule 0-2 [17 CFR 270.02], which sets forth the general requirements 
for papers and applications filed with the Commission.
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    Commission staff estimates that, on average, each year five funds 
file an application under rule 19b-1(e). The staff understands that 
funds that file an application generally use outside counsel to prepare 
the application. The cost burden of using outside counsel is

[[Page 53460]]

discussed below. The staff estimates that, on average, the fund's 
investment adviser spends approximately four hours to review an 
application, including 3.5 hours by an assistant general counsel, at a 
cost of $371 per hour, and 0.5 hours by an administrative assistant, at 
a cost of $65 per hour.\5\ Thus, the Commission staff estimates that 
the annual hour burden of the collection of information imposed by rule 
19b-1 is approximately four hours per fund, at a cost of $1331, for a 
total burden of 20 hours at a cost of $6655.\6\
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    \5\ These hourly rate estimates are derived from annual salaries 
reported in: Securities Industry and Financial Markets Association, 
Management and Professional Earnings in the Securities Industry 
(2007) and Securities Industry and Financial Markets Association, 
Office Salaries in the Securities Industry (2007).
    \6\ This estimate is based on the following calculations: 
$1298.50 (3.5 hours x $371 = $1298.5) plus $32.50 (0.5 hours x $65 = 
$32.50) equals $1331.00 (cost of one application); $1331 x 5 
applications = $6655 total cost.
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    The Commission staff estimates that there is no hour burden 
associated with complying with the collection of information component 
of rule 19b-1(c).
    As noted above, the Commission staff understands that funds that 
file an application under rule 19b-1(e) generally use outside counsel 
to prepare the application.\7\ The staff estimates that, on average, 
outside counsel spends 10 hours preparing a rule 19b-1(e) application, 
including eight hours by an associate and two hours by a partner. 
Outside counsel billing arrangements and rates vary based on numerous 
factors. Based on conversations with outside counsel and average 
billing rates of outside counsel the staff estimates that the average 
cost of outside counsel preparation of the 19b-(e) exemptive 
application is $5,000. Thus, the staff estimates that the total annual 
cost burden imposed by the exemptive application requirements of rule 
19b-1(e) is $25,000.\8\
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    \7\ This understanding is based on conversations with 
representatives from the fund industry.
    \8\ This estimate is based on the following calculation: $5,000 
multiplied by 5 (funds) equals $25,000.
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    The Commission staff estimates that there are approximately 6030 
UITs,\9\ which may rely on rule 19b-1(c) to make capital gains 
distributions. The staff estimates that, on average, these UITs rely on 
rule 19b-1(c) once a year to make a capital gains distribution.\10\ In 
most cases, the trustee of the UIT is responsible for preparing and 
sending the notices that must accompany a capital gains distribution 
under rule 19b-1(c)(2). These notices require limited preparation, the 
cost of which accounts for only a small, indiscrete portion of the 
comprehensive fee charged by the trustee for its services to the UIT. 
The staff believes that as a matter of good business practices, and for 
tax preparation reasons, UITs would collect and distribute the capital 
gains information required to be sent to unitholders under rule 19b-
1(c) even in the absence of the rule. The staff estimates that the cost 
of preparing a notice for a capital gains distribution under rule 19b-
1(c)(2) is approximately $50. There is no separate cost to mail the 
notices because they are mailed with the capital gains distribution. 
Thus, the staff estimates that the capital gains distribution notice 
requirement imposes an annual cost on UITs of approximately 
$301,500.\11\ The staff therefore estimates that the total cost imposed 
by rule 19b-1 is $326,500 ($301,500 plus $25,000 equals $326,500).
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    \9\ The Investment Company Institute, Unit Investment Trust 
Data, (April, 2008).
    \10\ The number of times UITs rely on the rule to make capital 
gains distributions depends on a wide range of factors and, thus, 
can vary greatly across years. A number of UITs are organized as 
grantor trusts, and therefore do not generally make capital gains 
distributions under rule 19b-1(c), or may not rely on rule 19b-1(c) 
as they do not meet the rule's requirements. Other UITs may 
distribute capital gains biannually, annually, quarterly, or at 
other intervals.
    \11\ This estimate is based on the following calculation: 6030 
UITs multiplied by $50 equals $301,500.
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    Based on these calculations, the total number of respondents for 
rule 19b-1 is estimated to be 6035 (6030 UIT portfolios + 5 funds 
filing an application under rule 19b-1(e)), the total annual hour 
burden is estimated to be 20 hours, and the total annual cost burden is 
estimated to be $326,500. These estimates of average annual burden 
hours and costs are made solely for purposes of the Paperwork Reduction 
Act. The collections of information required by 19b-1(c) and 19b-1(e) 
are necessary to obtain the benefits described above. 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 email to: [email protected] ; and (ii) Lewis W. Walker, Acting Director/Chief 
Information Officer, Securities and Exchange Commission, C/O Shirley 
Martinson, 6432 General Green Way, Alexandria, VA 22312; or send an 
email to: [email protected]. Comments must be submitted to OMB 
within 30 days of this notice.

    Dated: September 8, 2008.
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-21535 Filed 9-15-08; 8:45 am]
BILLING CODE 8010-01-P