[Federal Register Volume 76, Number 96 (Wednesday, May 18, 2011)]
[Notices]
[Pages 28824-28825]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-12203]


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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 17f-5; SEC File No. 270-259; OMB Control No. 3235-0269.

    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'') requests for extension of the previously approved 
collections of information discussed below.
    Rule 17f-5 under the Investment Company Act of 1940 (15 U.S.C. 80a) 
(``Investment Company Act'' or ``Act'') governs the custody of the 
assets of registered management investment companies (``funds'') with 
custodians outside the United States.\1\ Under rule 17f-5, the fund's 
board of directors must find that it is reasonable to rely on each 
delegate it selects to act as the fund's foreign custody manager. The 
delegate must agree to provide written reports that notify the board 
when the fund's assets are placed with a foreign custodian and when any 
material change occurs in the fund's custody arrangements. The delegate 
must agree to exercise reasonable care, prudence, and diligence, or to 
adhere to a higher standard of care. When the foreign custody manager 
selects an eligible foreign custodian, it must determine that the 
fund's assets will be subject to reasonable care if maintained with 
that custodian, and that the written contract that governs each custody 
arrangement will provide reasonable care for fund assets. The contract 
must contain certain specified provisions or others that provide at 
least equivalent care. The foreign custody manager must establish a 
system to monitor the performance of the contract and the 
appropriateness of continuing to maintain assets with the eligible 
foreign custodian.
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    \1\ 17 CFR 270.17f-5. All references to rules 17f-5, 17f-7, 17d-
1, or 19b-1 in this notice are to 17 CFR 270.17f-5, 17 CFR 270.17f-
7, 17 CFR 270.17d-1, and 17 CFR 270.19b-1, respectively.
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    The collection of information requirements in rule 17f-5 are 
intended to provide protection for fund assets maintained with a 
foreign bank custodian whose use is not authorized by statutory 
provisions that govern fund custody arrangements,\2\ and that is not 
subject to regulation and examination by U.S. regulators. The 
requirement that the fund board determine that it is reasonable to rely 
on each delegate is intended to ensure that the board carefully 
considers each delegate's qualifications to perform its 
responsibilities. The requirement that the delegate provide written 
reports to the board is intended to ensure that the delegate notifies 
the board of important developments concerning custody arrangements so 
that the board may exercise effective oversight. The requirement that 
the delegate agree to exercise reasonable care is intended to provide 
assurances to the fund that the delegate will properly perform its 
duties.
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    \2\ See section 17(f) of the Investment Company Act [15 U.S.C. 
80a-17(f)].
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    The requirements that the foreign custody manager determine that 
fund assets will be subject to reasonable care with the eligible 
foreign custodian and under the custody contract, and that each 
contract contain specified provisions or equivalent provisions, are 
intended to ensure that the delegate has evaluated the level of care 
provided by the custodian, that it weighs the adequacy of contractual 
provisions, and that fund assets are protected by minimal contractual 
safeguards. The requirement that the foreign custody manager establish 
a monitoring system is intended to ensure that the manager periodically 
reviews each custody arrangement and takes appropriate action if 
developing custody risks may threaten fund assets.
    Commission staff estimates that each year, approximately 135 
registrants \3\ could be required to make an average of one response 
per registrant under rule 17f-5, requiring approximately 2.5 hours of 
board of director time per response, to make the necessary findings 
concerning foreign custody managers. The total annual burden

[[Page 28825]]

associated with these requirements of the rule is up to approximately 
337.5 hours (135 registrants x 2.5 hours per registrant). The staff 
further estimates that during each year, approximately 15 global 
custodians \4\ are required to make an average of 4 responses per 
custodian concerning the use of foreign custodians other than 
depositories. The staff estimates that each response will take 
approximately 270 hours, requiring approximately 1,080 total hours 
annually per custodian. The total annual burden associated with these 
requirements of the rule is approximately 16,200 hours (15 global 
custodians x 1,080 hours per custodian). Therefore, the total annual 
time burden of all collection of information requirements of rule 17f-5 
is estimated to be up to 16,537.5 hours (337.5 + 16,200). The total 
annual internal cost of the burden is estimated to be $4,914,000 (337.5 
hours x $4,000/hour for board of director's time, plus 16,200 hours x 
$220/hour for a trust administrator's time).\5\ Compliance with the 
collection of information requirements of the rule is necessary to 
obtain the benefit of relying on the rule's permission for funds to 
maintain their assets in foreign custodians.
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    \3\ This figure is an estimate of the number of new funds each 
year, based on data reported by funds in 2010 on Form N-1A and Form 
N-2. In practice, not all funds will use foreign custody managers, 
and the actual figure may be smaller.
    \4\ This estimate is based on staff research.
    \5\ The board hourly rate is based on fund industry 
representations. The $220/hour figure for a trust administrator is 
from SIFMA's Management & Professional Earnings in the Securities 
Industry 2010, modified to account for an 1,800-hour work-year and 
multiplied by 5.35 to account for bonuses, firm size, employee 
benefits and overhead.
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    The estimate of average time burden 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 and forms. Rule 17f-5 does not impose any paperwork 
related cost burden.
    The public may view the background documentation for this 
information collection at the following Web site, http://www.reginfo.gov. Comments should be directed to: (i) Desk Officer for 
the Securities and Exchange Commission, Office of Information and 
Regulatory Affairs, Office of Management and Budget, Room 10102, New 
Executive Office Building, Washington, DC 20503, or by sending an e-
mail to: [email protected]; and (ii) Thomas Bayer, Director/
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]. Comments must be submitted to OMB 
within 30 days of this notice.

    Dated: May 13, 2011.
Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-12203 Filed 5-17-11; 8:45 am]
BILLING CODE 8011-01-P