[Federal Register Volume 79, Number 41 (Monday, March 3, 2014)]
[Notices]
[Pages 11835-11836]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-04558]


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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;

Extension:
    Rule 32a-4; OMB Control No. 3235-0530, SEC File No. 270-473.

    Notice is hereby given that, pursuant to the Paperwork Reduction 
Act of 1995 (44 U.S.C. 350l et seq.), the Securities and Exchange 
Commission (``Commission'') is soliciting comments on the collections 
of information summarized below. The Commission plans to submit these 
existing collections of information to the Office of Management and 
Budget (``OMB'') for extension and approval.
    Section 32(a)(2) of the Investment Company Act (15 U.S.C. 80a-
31(a)(2)) requires that shareholders of a registered investment 
management or face-amount certificate company (collectively, ``funds'') 
ratify or reject the selection of the fund's independent public 
accountant. Rule 32a-4 (17 CFR 270.32a-4) exempts funds from this 
requirement if (i) the fund's board of directors establishes an audit 
committee composed solely of independent directors with responsibility 
for overseeing the fund's accounting and auditing processes,\1\ (ii) 
the fund's board of directors adopts an audit committee charter setting 
forth the committee's structure, duties, powers and methods of 
operation, or sets forth such provisions in the fund's charter or

[[Page 11836]]

bylaws,\2\ and (iii) the fund maintains and preserves permanently in an 
easily accessible place a copy of the audit committee charter, and any 
modifications to the charter.\3\
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    \1\ Rule 32a-4(a).
    \2\ Rule 32a-4(b).
    \3\ Rule 32a-4(c).
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    Each fund that chooses to rely on rule 32a-4 incurs two collection 
of information burdens. The first, related to the board of directors' 
adoption of the audit committee charter, occurs once, when the 
committee is established. The second, related to the fund's maintenance 
and preservation of a copy of the charter in an easily accessible 
place, is an ongoing annual burden. The information collection 
requirement in rule 32a-4 enables the Commission to monitor the duties 
and responsibilities of an independent audit committee formed by a fund 
relying on the rule. Commission staff estimates that, on average, the 
board of directors takes 15 minutes to adopt the audit committee 
charter. Commission staff has estimated that with an average of 8 
directors on the board,\4\ total director time to adopt the charter is 
2 hours. Combined with an estimated 1 hour of paralegal time to prepare 
the charter for board review, the staff estimates a total one-time 
collection of information burden of 3 hours for each fund. Once a board 
adopts an audit committee charter, the charter is preserved as part of 
the fund's records. Commission staff estimates that there is no annual 
hourly burden associated with preserving the charter in accordance with 
the rule.\5\
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    \4\ This estimate is based on staff discussions with a 
representative of an entity that surveys funds and calculates fund 
board statistics based on responses to its surveys.
    \5\ No hour burden related to such maintenance of the charter 
was identified by the funds the Commission staff surveyed.
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    Because virtually all existing funds have now adopted audit 
committee charters, the annual one-time collection of information 
burden associated with adopting audit committee charters is limited to 
the burden incurred by newly established funds. Commission staff 
estimates that fund sponsors establish approximately 139 new funds each 
year,\6\ and that all of these funds will adopt an audit committee 
charter in order to rely on rule 32a-4. Thus, Commission staff 
estimates that the annual one-time hour burden associated with adopting 
an audit committee charter under rule 32a-4 going forward will be 
approximately 417 hours.\7\
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    \6\ This estimate is based on the average number of 
notifications of registration on Form N-8A filed from January 2011 
through December 2013.
    \7\ This estimate is based on the following calculation: (3.0 
burden hours for establishing charter x 139 new funds = 417 burden 
hours).
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    As noted above, all funds that rely on rule 32a-4 are subject to 
the ongoing collection of information requirement to preserve a copy of 
the charter in an easily accessible place. This ongoing requirement, 
which Commission staff estimated has no hourly burden, applies to new 
funds that adopt an audit committee charter each year and to all of the 
funds that have previously adopted the charter and continue to maintain 
it.
    Funds incur internal costs associated with the one-time collection 
of information burden related to adopting an audit committee charter. 
As noted above, Commission staff estimates that it takes approximately 
2 hours of aggregate directors' time at $4000 per hour, and 1 hour of 
paralegal time at $175 per hour,\8\ to adopt an audit committee 
charter. Thus, Commission staff estimates a total internal cost of 
$8175 per fund to adopt the charter \9\ and a total annual cost of 
$1,136,325.\10\
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    \8\ The $175/hour figure for a paralegal is from SIFMA's 
Management & Professional Earnings in the Securities Industry 2012, 
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.
    \9\ This estimate is based on the following calculations: ($4000 
per hour for directors' time x 2 hours = $8000); ($8000 + $175 = 
$8175).
    \10\ This estimate is based on the following calculations: 
($8175 cost of hour burden per fund x 139 new funds = $1,136,325).
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    When funds adopt an audit committee charter in order to rely on 
rule 32a-4, they also may incur one-time costs related to hiring 
outside counsel to prepare the charter. Commission staff estimates that 
those costs average approximately $1500 per fund.\11\ Commission staff 
understands that virtually all funds now rely on rule 32a-4 and have 
adopted audit committee charters, and thus estimates that the annual 
cost burden related to hiring outside legal counsel is limited to newly 
established funds.
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    \11\ Costs may vary based on the individual needs of each fund. 
However, based on the staff's conversations with outside counsel 
that prepare these charters, legal fees related to the preparation 
and adoption of an audit committee charter usually average $1500 or 
less. The Commission also understands that the ICI has prepared a 
model audit committee charter, which most legal professionals use 
when establishing audit committees, thereby reducing the costs 
associated with drafting a charter.
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    As noted above, Commission staff estimates that approximately 139 
new funds each year will adopt an audit committee charter in order to 
rely on rule 32a-4. Thus, Commission staff estimates that the ongoing 
annual cost burden associated with rule 32a-4 in the future will be 
approximately $208,500.\12\
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    \12\ This estimate is based on the following calculations: 
($1500 cost of adopting charter x 139 newly established funds = 
$208,500).
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    These estimates of average costs 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 the costs of 
Commission rules.
    The collections of information required by rule 32a-4 are necessary 
to obtain the benefits of the rule. The Commission is seeking OMB 
approval, because 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 OMB 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 estimates 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, Chief 
Information Officer, Securities and Exchange Commission, C/O Remi 
Pavlik-Simon, 100 F Street NE., Washington, DC 20549; or send an email 
to: [email protected].

    Dated: February 25, 2014.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-04558 Filed 2-28-14; 8:45 am]
BILLING CODE 8011-01-P