[Federal Register Volume 84, Number 189 (Monday, September 30, 2019)]
[Notices]
[Page 51654]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-21084]


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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 FOIA Services, 100 F Street NE, Washington, DC 
20549-2736.

Extension:
    Rule 12d3-1, SEC File No. 270-504, OMB Control No. 3235-0561.

    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 (``OMB'') a request for extension of the 
previously approved collection of information discussed below.
    Section 12(d)(3) of the Investment Company Act of 1940 (15 U.S.C. 
80a) generally prohibits registered investment companies (``funds''), 
and companies controlled by funds, from purchasing securities issued by 
a registered investment adviser, broker, dealer, or underwriter 
(``securities-related businesses''). Rule 12d3-1 (``Exemption of 
acquisitions of securities issued by persons engaged in securities 
related businesses'' (17 CFR 270.12d3-1)) permits a fund to invest up 
to five percent of its assets in securities of an issuer deriving more 
than fifteen percent of its gross revenues from securities-related 
businesses, but a fund may not rely on rule 12d3-1 to acquire 
securities of its own investment adviser or any affiliated person of 
its own investment adviser.
    A fund may, however, rely on an exemption in rule 12d3-1 to acquire 
securities issued by its subadvisers in circumstances in which the 
subadviser would have little ability to take advantage of the fund, 
because it is not in a position to direct the fund's securities 
purchases. The exemption in rule 12d3-1 is available if (i) the 
subadviser is not, and is not an affiliated person of, an investment 
adviser that provides advice with respect to the portion of the fund 
that is acquiring the securities, and (ii) the advisory contracts of 
the subadviser, and any subadviser that is advising the purchasing 
portion of the fund, prohibit them from consulting with each other 
concerning securities transactions of the fund, and limit their 
responsibility in providing advice to providing advice with respect to 
discrete portions of the fund's portfolio.
    Based on an analysis of fund filings, the staff estimates that 
approximately 216 fund portfolios enter into subadvisory agreements 
each year.\1\ Based on discussions with industry representatives, the 
staff estimates that it will require approximately 3 attorney hours to 
draft and execute additional clauses in new subadvisory contracts in 
order for funds and subadvisers to be able to rely on the exemptions in 
rule 12d3-1. Because these additional clauses are identical to the 
clauses that a fund would need to insert in their subadvisory contracts 
to rely on rules 10f-3, 17a-10, and 17e-1 and because we believe that 
funds that use one such rule generally use all of these rules, we 
apportion this 3 hour time burden equally to all four rules. Therefore, 
we estimate that the burden allocated to rule 12d3-1 for this contract 
change would be 0.75 hours.\2\ Assuming that all 216 funds that enter 
into new subadvisory contracts each year make the modification to their 
contract required by the rule, we estimate that the rule's contract 
modification requirement will result in 182 burden hours annually.\3\
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    \1\ Based on data from Morningstar Direct, as of December 31, 
2018, there are 12,459 registered funds (open-end funds, closed-end 
funds, and exchange-traded funds), 4,615 of which have subadvisory 
relationships (approximately 37%). 583 new funds were established in 
2018. 583 new funds x 37% = 216 funds.
    \2\ This estimate is based on the following calculation (3 hours 
/ 4 rules = .75 hours).
    \3\ This estimate is based on the following calculation: (0.75 
hours x 216 portfolios = 182 burden hours).
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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. Complying with this collection of 
information requirement is necessary to obtain the benefit of relying 
on rule 12d3-1. 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.
    The public may view the background documentation for this 
information collection at the following website, 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) Charles Riddle, Acting Director/
Chief Information Officer, Securities and Exchange Commission, c/o 
Candace Kenner, 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: September 24, 2019.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-21084 Filed 9-27-19; 8:45 am]
BILLING CODE 8011-01-P