[Federal Register Volume 76, Number 171 (Friday, September 2, 2011)]
[Notices]
[Pages 54820-54821]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-22573]


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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 18f-3, SEC File No. 270-385, OMB Control No. 3235-0441.

    Notice is hereby given that, pursuant to the Paperwork Reduction 
Act of 1995 (44 U.S.C. 3501-3520), the Securities and Exchange 
Commission (the ``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 for extension and approval.
    Section 18(f)(1) \1\ of the Investment Company Act of 1940 \2\ (the 
``Investment Company Act'' or ``Act'') prohibits registered open-end 
management investment companies (``funds'') from issuing any senior 
security. Rule 18f-3 under the Act \3\ exempts from section 18(f)(1) a 
fund that issues multiple classes of shares representing interests in 
the same portfolio of securities (a ``multiple class fund'') if the 
fund satisfies the conditions of the rule. In general, each class must 
differ in its arrangement for shareholder services or distribution or 
both, and must pay the related expenses of that different arrangement.
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    \1\ 15 U.S.C. 80a-18(f)(1).
    \2\ 15 U.S.C. 80a.
    \3\ 17 CFR 270.18f-3.
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    The rule includes one requirement for the collection of 
information. A multiple class fund must prepare, and fund directors 
must approve, a written plan setting forth the separate arrangement and 
expense allocation of each class, and any related conversion features 
or exchange privileges (``rule 18f-3 plan'').\4\ Approval of the plan 
must occur before the fund issues any shares of multiple classes and 
whenever the fund materially amends the plan. In approving the plan, a 
majority of the fund board, including a majority of the fund's 
independent directors, must determine that the plan is in the best 
interests of each class and the fund as a whole.
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    \4\ Rule 18f-3(d).
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    The requirement that the fund prepare and directors approve a 
written rule 18f-3 plan is intended to ensure that the fund compiles 
information relevant to the fairness of the separate arrangement and 
expense allocation for each class, and that directors review and 
approve the information. Without a blueprint that highlights material 
differences among classes, directors might not perceive potential 
conflicts of interests when they determine whether the plan is in the 
best interests of each class and the fund. In addition, the plan may be 
useful to Commission staff in reviewing the fund's compliance with the 
rule.
    There are approximately 5655 multiple class funds offered by 1020 
registrants.\5\ Based on a review of typical rule 18f-3 plans, the 
Commission's staff estimates that the 1020 registrants together make an 
average of 510 responses each year to prepare and approve a written 
rule 18f-3 plan, requiring approximately 8 hours per response and a 
total of 4080 burden hours per year in the aggregate.\6\ The staff 
estimates that preparation of the rule 18f-3 plan may require 5 hours 
of the services of an attorney employed by the fund, at a cost of 
approximately $354 per hour for professional time,\7\ and approval of 
the plan may require 3 hours of the services of the board of directors, 
at a cost of approximately $4000 per hour.\8\ The staff therefore 
estimates that the aggregate annual cost of complying with the 
paperwork requirements of the rule is approximately $7,022,700 ((5 
hours x

[[Page 54821]]

510 responses x $354 = $902,700) + (3 hours x 510 responses x $4000 = 
$6,120,000)).
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    \5\ This estimate is based on data from Form N-SAR, the semi-
annual report that funds file with the Commission. In previous 
years, the staff estimated that each multiple class fund prepared 
and approved a rule 18f-3 plan. However, the staff has revised this 
estimate to reflect its belief that most registrants prepare and 
approve a single rule 18f-3 plan for all series funds offered by the 
registrants.
    \6\ The estimate reflects the assumption that each registrant 
prepares and approves a rule 18f-3 plan every two years when issuing 
a new fund or new class or amending a plan (or that 510 of all 1020 
registrants prepare and approve a plan each year). The estimate 
assumes that the time required to prepare a plan is 5 hours per plan 
(or 2550 hours for 510 registrants annually), and the time required 
to approve a plan is an additional 3 hours per plan (or 1530 hours 
for 510 registrants annually).
    \7\ This hourly rate estimate is derived from annual salaries 
reported in: Securities Industry and Financial Markets Association, 
Management and Professional Earnings in the Securities Industry 
(2010), modified by Commission staff to account for an 1800-hour 
work year and multiplied by 5.35 to account for bonuses, firm size, 
employee benefits and overhead.
    \8\ This hourly rate estimate is derived from fund 
representatives.
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    The estimated annual burden of 4080 hours represents a decrease of 
1520 hours from the prior estimate of 5600 hours. The decrease in 
burden hours is attributable to changes in the estimates of the average 
hour burden per response and the number of responses that are submitted 
pursuant to the rule.
    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 mandatory. 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 collections of 
information are 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 burdens 
of the collections of information; (c) ways to enhance the quality, 
utility, and clarity of the information collected; and (d) ways to 
minimize the burdens of the collections 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, 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].

    Dated: August 29, 2011.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-22573 Filed 9-1-11; 8:45 am]
BILLING CODE 8011-01-P