[Federal Register Volume 78, Number 9 (Monday, January 14, 2013)]
[Notices]
[Pages 2696-2698]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-00517]


=======================================================================
-----------------------------------------------------------------------

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 2a-7, OMB Control No. 3235-0268, SEC File No. 270-258.

    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 (the ``Commission'') has submitted to the Office of 
Management and Budget a request for extension of the previously 
approved collection of information discussed below.
    Rule 2a-7 (17 CFR 270.2a-7) under the Investment Company Act of 
1940 (15 U.S.C. 80a) (the ``Act'') governs money market funds. Money 
market funds are open-end management investment companies that differ 
from other open-end management investment companies in that they seek 
to maintain a stable price per share, usually $1.00. The rule exempts 
money market funds from the valuation requirements of the Act, and, 
subject to certain risk-limiting conditions, permits money market funds 
to use the ``amortized cost method'' of asset valuation or the ``penny-
rounding method'' of share pricing.
    Rule 2a-7 also imposes certain recordkeeping and reporting 
obligations

[[Page 2697]]

on money market funds. The board of directors of a money market fund, 
in supervising the fund's operations, must establish written procedures 
designed to stabilize the fund's net asset value (``NAV''). The board 
must also adopt guidelines and procedures relating to certain 
responsibilities it delegates to the fund's investment adviser. These 
procedures and guidelines typically address various aspects of the 
fund's operations. The fund must maintain and preserve for six years a 
written copy of both these procedures and guidelines. The fund also 
must maintain and preserve for six years a written record of the 
board's considerations and actions taken in connection with the 
discharge of its responsibilities, to be included in the board's 
minutes. In addition, the fund must maintain and preserve for three 
years written records of certain credit risk analyses, evaluations with 
respect to securities subject to demand features or guarantees, and 
determinations with respect to adjustable rate securities and asset 
backed securities. If the board takes action with respect to defaulted 
securities, events of insolvency, or deviations in share price, the 
fund must file with the Commission an exhibit to Form N-SAR describing 
the nature and circumstances of the action. If any portfolio security 
fails to meet certain eligibility standards under the rule, the fund 
also must identify those securities in an exhibit to Form N-SAR. After 
certain events of default or insolvency relating to a portfolio 
security, the fund must notify the Commission of the event and the 
actions the fund intends to take in response to the situation.
    The 2010 amendments to rule 2a-7 also added new collection of 
information requirements. First, money market fund boards must adopt 
written procedures that provide for periodic testing (and reporting to 
the board) of the fund's ability to maintain a stable NAV per share 
based on certain hypothetical events. Second, funds must post monthly 
portfolio information on their Web sites. Third, funds must maintain 
records of creditworthiness evaluations on counterparties to repurchase 
agreements that the fund intends to ``look through'' for purposes of 
rule 2a-7's diversification limitations. Finally, money market funds 
must promptly notify the Commission of the purchase of any money market 
fund's portfolio security by an affiliated person in reliance on rule 
17a-9 under the Act and explain the reasons for such purchase.
    The recordkeeping requirements in rule 2a-7 are designed to enable 
Commission staff in its examinations of money market funds to determine 
compliance with the rule, as well as to ensure that money market funds 
have established procedures for collecting the information necessary to 
make adequate credit reviews of securities in their portfolios. The 
reporting requirements of rule 2a-7 are intended to assist Commission 
staff in overseeing money market funds and reduce the likelihood that a 
fund is unable to maintain a stable NAV.
    Commission staff estimates that there are 664 money market funds 
(136 fund complexes), all of which are subject to rule 2a-7. Commission 
staff further estimates that there will be approximately 10 new money 
market funds established each year. Commission staff estimates that 
rule 2a-7 contains the following collection of information 
requirements:
     Record of credit risk analyses, and determinations 
regarding adjustable rate securities, asset backed securities, 
securities subject to a demand feature or guarantee, and counterparties 
to repurchase agreements. Commission staff estimates a total annual 
hour burden for 664 funds to be 451,520 hours.
     Establishment of written procedures designed to stabilize 
NAV and guidelines and procedures for board delegation of authority. 
Commission staff estimates a total annual hour burden for 10 new money 
market funds to be 155 hours.
     Board review of procedures and guidelines of any 
investment adviser or officers to whom the fund's board has delegated 
responsibility under rule 2a-7 and amendment of such procedures and 
guidelines. Commission staff estimates a total annual hour burden for 
166 funds to be 830 hours.
     Written record of board determinations and actions related 
to failure of a security to meet certain eligibility standards or an 
event of default or insolvency and notice to the Commission of an event 
of default or insolvency. Commission staff estimates a total annual 
hour burden for 20 funds to be 30 hours.
     Establishment of written procedures to test periodically 
the ability of the fund to maintain a stable NAV per share based on 
certain hypothetical events (``stress testing''). Commission staff 
estimates a total annual hour burden for 10 new money market funds to 
be 220 hours.
     Review, revise, and approve written procedures to stress 
test a fund's portfolio. Commission staff estimates a total annual hour 
burden for 136 fund complexes to be 1,632 hours.
     Reports to fund boards on the results of stress testing. 
Commission staff estimates a total annual hour burden for 136 fund 
complexes to be 6,800 hours.
     Monthly posting of money market fund portfolio information 
on a fund's Web site. Commission staff estimates a total annual hour 
burden for 664 funds and 10 new money market funds to be 56,016 hours.
     Notice to the Commission of the purchase of a money market 
fund's portfolio security by certain affiliated persons in reliance on 
rule 17a-9. Commission staff estimates a total annual hour burden for 
25 fund complexes to be 25 hours.
    Thus, the Commission estimates the total annual burden of the 
rule's information collection requirements is 517,228 hours.\1\
---------------------------------------------------------------------------

    \1\ This estimate is based on the following calculation: 451,520 
hours + 155 hours + 830 hours + 30 hours + 220 hours + 1,632 hours + 
6,800 hours + 56,016 hours + 25 hours = 517,228 hours.
---------------------------------------------------------------------------

    The estimated total annual burden is being increased from 395,779 
hours to 517,228 hours. This net increase is attributable to a 
combination of factors, including a decrease in the number of money 
market funds and fund complexes, and updated information from money 
market funds regarding hourly burdens, including revised staff 
estimates of the burden hours required to comply with rule 2a-7 as a 
result of new information received from surveyed fund representatives.
    These estimates of burden hours are made solely for the purposes of 
the Paperwork Reduction Act. The estimates are not derived from a 
comprehensive or even a representative survey or study of Commission 
rules.
    Commission staff estimates that in addition to the costs described 
above, money market funds will incur costs to preserve records, as 
required under rule 2a-7. These costs will vary significantly for 
individual funds, depending on the amount of assets under fund 
management and whether the fund preserves its records in a storage 
facility in hard copy or has developed and maintains a computer system 
to create and preserve compliance records. Commission staff estimates 
that the amount an individual fund may spend ranges from $100 per year 
to $300,000. Based on a cost of $0.0051295 per dollar of assets under 
management for small funds, $0.0005041 per dollar assets under 
management for medium funds, and $0.0000009 per dollar of assets under 
management for large funds, the staff estimates compliance with the 
record storage requirements of rule 2a-

[[Page 2698]]

7 costs the fund industry approximately $57.3 million per year. Based 
on responses from individuals in the money market fund industry, the 
staff estimates that some of the largest fund complexes have created 
computer programs for maintaining and preserving compliance records for 
rule 2a-7. Based on a cost of $0.0000132 per dollar of assets under 
management for large funds, the staff estimates that total annualized 
capital/startup costs range from $0 for small funds to $35.6 million 
for all large funds. Commission staff further estimates that, even 
absent the requirements of rule 2a-7, money market funds would spend at 
least half of the amount for capital costs ($17.8 million) and for 
record preservation ($28.65 million) to establish and maintain these 
records and the systems for preserving them as a part of sound business 
practices to ensure diversification and minimal credit risk in a 
portfolio for a fund that seeks to maintain a stable price per share.
    The collection of information under Rule 2a-7 is mandatory. The 
information provided by the rule is not 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 send an email to Shagufta 
Ahmed at [email protected]; and (ii) Thomas Bayer, Director/
CIO, Securities and Exchange Commission, c/o Remi Pavlik-Simon, 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: January 8, 2013.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-00517 Filed 1-11-13; 8:45 am]
BILLING CODE 8011-01-P