[Federal Register Volume 82, Number 34 (Wednesday, February 22, 2017)]
[Notices]
[Pages 11386-11388]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-03423]


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SECURITIES AND EXCHANGE COMMISSION


Proposed Collection; Comment Request

Upon Written Request, Copies Available From: Securities and Exchange 
Commission, Office of FOIA Services, 100 F Street NE., Washington, DC 
20549-2736.

Extension:
    Rule 19b-1, SEC File No. 270-312, OMB Control No. 3235-0354.

    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'') 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 19(b) of the Investment Company Act of 1940 (the ``Act'') 
(15 U.S.C. 80a-19(b)) authorizes the Commission to regulate registered

[[Page 11387]]

investment company (``fund'') distributions of long-term capital gains 
made more frequently than once every twelve months. Accordingly, rule 
19b-1 under the Act (17 CFR 270.19b-1) regulates the frequency of fund 
distributions of capital gains. Rule 19b-1(c) states that the rule does 
not apply to a unit investment trust (``UIT'') if it is engaged 
exclusively in the business of investing in certain eligible securities 
(generally, fixed-income securities), provided that: (i) The capital 
gains distribution falls within one of five categories specified in the 
rule \1\ and (ii) the distribution is accompanied by a report to the 
unitholder that clearly describes the distribution as a capital gains 
distribution (the ``notice requirement'').\2\ Rule 19b-1(e) permits a 
fund to apply to the Commission for permission to distribute long-term 
capital gains that would otherwise be prohibited by the rule if the 
fund did not foresee the circumstances that created the need for the 
distribution. The application must set forth the pertinent facts and 
explain the circumstances that justify the distribution.\3\ An 
application that meets those requirements is deemed to be granted 
unless the Commission denies the request within 15 days after the 
Commission receives the application.
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    \1\ 17 CFR 270.19b-1(c)(1).
    \2\ The notice requirement in rule 19b-1(c)(2) supplements the 
notice requirement of section 19(a) [15 U.S.C. 80a-19(a)], which 
requires any distribution in the nature of a dividend payment to be 
accompanied by a notice disclosing the source of the distribution.
    \3\ Rule 19b-1(e) also requires that the application comply with 
rule 0-2 [17 CFR 270.02] under the Act, which sets forth the general 
requirements for papers and applications filed with the Commission 
pursuant to the Act and rules thereunder.
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    Commission staff estimates that five funds will file an application 
under rule 19b-1(e) each year.\4\ The staff understands that if a fund 
files an application it generally uses outside counsel to prepare the 
application. The cost burden of using outside counsel is discussed 
below. The staff estimates that, on average, a fund's investment 
adviser would spend approximately 4 hours to review an application, 
including 3.5 hours by an assistant general counsel at a cost of $433 
per hour and 0.5 hours by an administrative assistant at a cost of $74 
per hour, and the fund's board of directors would spend an additional 1 
hour at a cost of $4,465 per hour, for a total of 5 hours.\5\ Thus, the 
staff estimates that the annual hour burden of the collection of 
information imposed by rule 19b-1(e) would be approximately five hours 
per fund, at a cost of $6017.50.\6\ Because the staff estimates that, 
each year, five funds will file an application pursuant to rule 19b-
1(e), the total burden for the information collection is 40 hours at a 
cost of $30,087.50.\7\
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    \4\ This estimate is based on the average number of applications 
filed with the Commission pursuant to rule 19b-1(e) in the prior 
three-year period.
    \5\ The estimate for assistant general counsels is from SIFMA's 
Management & Professional Earnings in the Securities Industry 2013, 
modified by Commission staff to account for an 1800-hour work-year 
and inflation (as of January 2016) and multiplied by 5.35 to account 
for bonuses, firm size, employee benefits and overhead. The estimate 
for administrative assistants is from SIFMA's Office Salaries in the 
Securities Industry 2013, modified by Commission staff to account 
for an 1800-hour work-year and inflation (as of January 2016) and 
multiplied by 2.93 to account for bonuses, firm size, employee 
benefits and overhead. The staff previously estimated in 2009 that 
the average cost of board of director time was $4,000 per hour for 
the board as a whole, based on information received from funds and 
their counsel. Adjusting for inflation, the staff estimates that the 
current average cost of board of director time is approximately 
$4,465.
    \6\ This estimate is based on the following calculations: 
$1515.50 (3.5 hours x $433 = $1515.50) plus $37 (0.5 hours x $74 = 
$37) plus $4465 equals $6017.50 (cost of one application).
    \7\ This estimate is based on the following calculation: 
$6017.50 (cost of one application) multiplied by 5 applications = 
$30,087.50 total cost.
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    Commission staff estimates that there is no hour burden associated 
with complying with the collection of information component of rule 
19b-1(c).
    As noted above, Commission staff understands that funds that file 
an application under rule 19b-1(e) generally use outside counsel to 
prepare the application.\8\ The staff estimates that, on average, 
outside counsel spends 10 hours preparing a rule 19b-1(e) application, 
including eight hours by an associate and two hours by a partner. 
Outside counsel billing arrangements and rates vary based on numerous 
factors, but the staff has estimated the average cost of outside 
counsel as $400 per hour, based on information received from funds, 
intermediaries, and their counsel. The staff therefore estimates that 
the average cost of outside counsel preparation of the rule 19b-1(e) 
exemptive application is $4,000.\9\ Because the staff estimates that, 
each year, five funds will file an application pursuant to rule 19b-
1(e), the total annual cost burden imposed by the exemptive application 
requirements of rule 19b-1(e) is estimated to be $20,000.\10\
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    \8\ This understanding is based on conversations with 
representatives from the fund industry.
    \9\ This estimate is based on the following calculation: 10 
hours multiplied by $400 per hour equals $4,000.
    \10\ This estimate is based on the following calculation: $4,000 
multiplied by five (funds) equals $20,000.
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    The Commission staff estimates that there are approximately 2,579 
UITs \11\ that may rely on rule 19b-1(c) to make capital gains 
distributions. The staff estimates that, on average, these UITs rely on 
rule 19b-1(c) once a year to make a capital gains distribution.\12\ In 
most cases, the trustee of the UIT is responsible for preparing and 
sending the notices that must accompany a capital gains distribution 
under rule 19b-1(c)(2). These notices require limited preparation, the 
cost of which accounts for only a small, indiscrete portion of the 
comprehensive fee charged by the trustee for its services to the UIT. 
The staff believes that as a matter of good business practice, and for 
tax preparation reasons, UITs would collect and distribute the capital 
gains information required to be sent to unitholders under rule 19b-
1(c) even in the absence of the rule. The staff estimates that the cost 
of preparing a notice for a capital gains distribution under rule 19b-
1(c)(2) is approximately $50. There is no separate cost to mail the 
notices because they are mailed with the capital gains distribution. 
Thus, the staff estimates that the capital gains distribution notice 
requirement imposes an annual cost on UITs of approximately 
$128,950.\13\ The staff therefore estimates that the total cost imposed 
by rule 19b-1 is $160,950 ($128,950 plus $20,000 (total cost associated 
with rule 19b-1(e)) equals $148,950).
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    \11\ See 2016 Investment Company Fact Book, Investment Company 
Institute, available at https://www.ici.org/pdf/2016_factbook.pdf.
    \12\ The number of times UITs rely on the rule to make capital 
gains distributions depends on a wide range of factors and, thus, 
can vary greatly across years and UITs. UITs may distribute capital 
gains biannually, annually, quarterly, or at other intervals. 
Additionally, a number of UITs are organized as grantor trusts, and 
therefore do not generally make capital gains distributions under 
rule 19b-1(c), or may not rely on rule 19b-1(c) as they do not meet 
the rule's requirements.
    \13\ This estimate is based on the following calculation: 2,579 
UITs multiplied by $50 equals $128,950.
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    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 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 estimate of the burden of 
the collection of information; (c) ways to enhance the quality, 
utility, and clarity of the information collected; and (d) ways to 
minimize the burden of the collection of information on

[[Page 11388]]

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 Pamela Dyson, Director/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 15, 2017.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-03423 Filed 2-21-17; 8:45 am]
 BILLING CODE 8011-01-P