[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