[Federal Register Volume 76, Number 53 (Friday, March 18, 2011)]
[Notices]
[Pages 15004-15005]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-6366]


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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 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. 350l-3520), the Securities and Exchange 
Commission (``Commission'') is soliciting comments on the collection of 
information summarized below. The Commission plans to submit this 
existing collection of information to the Office of Management and 
Budget (``OMB'') for extension and approval.
    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 
unit holder 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

[[Page 15005]]

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 six 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 discussed 
below. The staff estimates that, on average, the fund's investment 
adviser spends a total of approximately 4 hours to review an 
application, including 3.5 hours by an assistant general counsel, 0.5 
hours by an administrative assistant, and the fund's board of directors 
spends an additional 1 hour, for a total of 5 hours. Thus, the 
Commission staff estimates that the annual hour burden of the 
collection of information imposed by rule 19b-1 is approximately five 
hours per fund, for a total burden of 30 hours.
    The Commission staff estimates that there is no hourly 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.\5\ 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, but the staff has estimated the average cost of outside 
counsel as $400 per hour, based on information received from funds, 
intermediaries, and their counsel. The staff therefore estimates that 
the average cost of outside counsel preparation of the 19b-(e) 
exemptive application is $4,000.\6\ Thus, the staff estimates that the 
total annual cost burden imposed by the exemptive application 
requirements of rule 19b-1(e) is $24,000.\7\
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    \5\ This understanding is based on conversations with 
representatives from the fund industry.
    \6\ This estimate is based on the following calculation: 10 
hours multiplied by $400 per hour equals $4,000.
    \7\ This estimate is based on the following calculation: $4,000 
multiplied by 6 (funds) equals $24,000.
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    The Commission staff estimates that there are approximately 3759 
UITs \8\ that 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.\9\ 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 
$187,950.\10\ The staff therefore estimates that the total cost imposed 
by rule 19b-1 is $211,950 ($187,950 plus $24,000 equals $211,950).
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    \8\ The Investment Company Institute, Unit Investment Trust 
Data, (January 2011).
    \9\ 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.
    \10\ This estimate is based on the following calculation: 3,759 
UITs multiplied by $50 equals $187,950.
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    Based on these calculations, the total number of respondents for 
rule 19b-1 is estimated to be 3,765 (3759 UIT portfolios + 6 funds 
filing an application under rule 19b-1(e)), the total annual hour 
burden is estimated to be 30 hours, and the total annual cost burden is 
estimated to be $211,950. 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.
    Written comments are invited on: (a) Whether the collection of 
information is 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 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 Thomas Bayer, Chief 
Information Officer, Securities and Exchange Commission, c/o Remi 
Pavlik-Simon, 6432 General Green Way, Alexandria, VA 22312; or send an 
e-mail to: [email protected].

    Dated: March 15, 2011.
Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-6366 Filed 3-17-11; 8:45 am]
BILLING CODE 8011-01-P