[Federal Register Volume 79, Number 48 (Wednesday, March 12, 2014)]
[Notices]
[Pages 14091-14092]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-05316]


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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; OMB Control No. 3235-0269, SEC File No. 270-259.

    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 (17 CFR 270.17f-5) under the Investment Company Act of 
1940 [15 U.S.C. 80a] (the ``Act'') governs the custody of the assets of 
registered management investment companies (``funds'') with custodians 
outside the United States. Under rule 17f-5, a fund or its foreign 
custody manager (as delegated by the fund's board) may maintain the 
fund's foreign assets in the care of an eligible fund custodian under 
certain conditions. If the fund's board delegates to a foreign custody 
manager authority to place foreign assets, the fund's board must find 
that it is reasonable to rely on each delegate the board 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.
    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,\1\ 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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    \1\ See section 17(f) of the 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.\2\
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    \2\ The staff believes that subcustodian monitoring does not 
involve ``collection of information'' within the meaning of the 
Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) (``Paperwork 
Reduction Act'').
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    Commission staff estimates that each year, approximately 130 
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 associated 
with these requirements of the rule is up to approximately 325 hours 
(130 registrants x 2.5 hours per registrant). The staff further 
estimates that during each year, approximately 15

[[Page 14092]]

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 
burden of all collection of information requirements of rule 17f-5 is 
estimated to be up to 16,525 hours (325 + 16,200). The total annual 
cost of burden hours is estimated to be $5,609,200 (325 hours x $4,000/
hour for board of directors' time, plus 16,200 hours x $266/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 2012 on Forms N-1A, N-2, N-
4, N-6, and S-6. 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 $266/hour figure for a trust administrator 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.
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    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 and forms.
    The public may view the background documentation for this 
information collection at the following Web site, 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 email to: [email protected]; and (ii) 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]. 
Comments must be submitted to OMB within 30 days of this notice.

    Dated: March 6, 2014.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-05316 Filed 3-11-14; 8:45 am]
BILLING CODE 8011-01-P