[Federal Register Volume 85, Number 29 (Wednesday, February 12, 2020)]
[Notices]
[Pages 8085-8086]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-02733]
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SECURITIES AND EXCHANGE COMMISSION
[SEC File No. 270-794, OMB Control No. 3235-0737]
Proposed Collection; Comment Request; 30 Day Notice--Submission
for OMB Review; Comment Request; Extension: Rule 22e-4 (30 Day Notice
2019)
Upon Written Request, Copies Available From: Securities and Exchange
Commission, Office of FOIA Services, 100 F Street NE, Washington, DC
20549-2736
30 day notice--Submission for OMB Review; Comment Request
Extension:
Rule 22e-4 (30 Day Notice 2019)
Notice is hereby given that, under the Paperwork Reduction Act of
1995 (44 U.S.C. 3501-3520), the Securities and Exchange Commission (the
``Commission'') is soliciting comments on the collections of
information summarized below. The Commission plans to submit \1\ this
existing collection of information to the Office of Management and
Budget for extension and approval.
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\1\ This 30-day notice supersedes the notice originally
published in the Federal Register on February 5, 2020 (85 FR 6588,
Feb. 5, 2020). That notice incorrectly contained the heading
``Proposed Collection''.
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Section 22(e) of the Investment Company Act of 1940 (``Investment
Company Act'') provides that no registered investment company shall
suspend the right of redemption or postpone the date of payment of
redemption proceeds for more than seven days after tender of the
security absent specified unusual circumstances. The provision was
designed to prevent funds and their investment advisers from
interfering with the redemption rights of shareholders for improper
purposes, such as the preservation of management fees. Although section
22(e) permits funds to postpone the date of payment or satisfaction
upon redemption for up to seven days, it does not permit funds to
suspend the right of redemption for any amount of time, absent certain
specified circumstances or a Commission order.
Rule 22e-4 under the Act [17 CFR 270.22e-4] requires an open-end
fund and an exchange-traded fund that redeems in kind (``In-Kind ETF'')
to establish a written liquidity risk management program that is
reasonably designed to assess and manage the fund's or In-Kind ETF's
liquidity risk. The rule also requires board approval and oversight of
a fund's or In-Kind ETF's liquidity risk management program and
recordkeeping. Rule 22e-4 also requires a limited liquidity review,
under which a UIT's principal underwriter or depositor determines, on
or before the date of the initial deposit of portfolio securities into
the UIT, that the portion of the illiquid investments that the UIT
holds or will hold at the date of deposit that are assets is consistent
with the redeemable nature of the securities it issues and retains a
record of such determination for the life of the UIT and for five years
thereafter.
The following estimates of average burden hours and costs are made
solely for purposes of the Paperwork Reduction Act and are not derived
from a comprehensive or even representative survey or study of the cost
of Commission rules and forms.
Commission staff estimates that funds within 846 fund complexes are
subject to rule 22e-4. Compliance with rule 22e-4 is mandatory for all
such funds and In-Kind ETFs, with certain program elements applicable
to certain funds within a fund complex based upon whether the fund is
an In-Kind ETF or does not primarily hold assets that are highly liquid
investments. The
[[Page 8086]]
Commission estimates that a fund complex will incur a one time average
burden of 40 hours associated with documenting the liquidity risk
management programs adopted by each fund within a fund complex, in
addition to a one time burden of 10 hours per fund complex associated
with fund boards' review and approval of the funds' liquidity risk
management programs and preparation of board materials. We estimate
that the total burden for initial documentation and review of funds'
written liquidity risk management program will be 42,300 hours.
Rule 22e-4 requires any fund that does not primarily hold assets
that are highly liquid investments to determine a highly liquid
investment minimum for the fund, which must be reviewed at least
annually, and may not be changed during any period of time that a
fund's assets that are highly liquid investments are below the
determined minimum without approval from the fund's board of directors.
We estimate that fund complexes will have at least one fund that will
be subject to the highly liquid investment minimum requirement. Thus,
we estimate that 846 fund complexes will be subject to this requirement
under rule 22e-4 and that the total burden for preparation of the board
report associated will be 11,844 hours.
Rule 22e-4 requires a fund or In-Kind ETF to maintain a written
copy of the policies and procedures adopted pursuant to its liquidity
risk management program for five years in an easily accessible place.
The rule also requires a fund to maintain copies of materials provided
to the board in connection with its initial approval of the liquidity
risk management program and any written reports provided to the board,
for at least five years, the first two years in an easily accessible
place. If applicable, a fund must also maintain a written record of how
its highly liquid investment minimum and any adjustments to the minimum
were determined, as well as any reports to the board regarding a
shortfall in the fund's highly liquid investment minimum, for five
years, the first two years in an easily accessible place. We estimate
that the total burden for recordkeeping related to the liquidity risk
management program requirement of rule 22e-4 will be 3,384 hours.
We estimate that the hour burdens and time costs associated with
rule 22e-4 for open-end funds, including the burden associated with (1)
funds' initial documentation and review of the required written
liquidity risk management program, (2) reporting to a fund's board
regarding the fund's highly liquid investment minimum, and (3)
recordkeeping requirements will result in an average aggregate annual
burden of 25,380 hours,
UITs may in some circumstances be subject to liquidity risk
(particularly where the UIT is not a pass-through vehicle and the
sponsor does not maintain an active secondary market for UIT shares).
On or before the date of initial deposit of portfolio securities into a
registered UIT, the UIT's principal underwriter or depositor is
required to determine that the portion of the illiquid investments that
the UIT holds or will hold at the date of deposit that are assets is
consistent with the redeemable nature of the securities it issues, and
maintain a record of that determination for the life of the UIT and for
five years thereafter. We estimate that 1,385 newly registered UITs
will be subject to the UIT liquidity determination requirement under
rule 22e-4 each year. We estimate that the total burden for the initial
documentation and review of UIT funds' written liquidity risk
management program would be 13,850 hours. We estimate that the total
burden for recordkeeping related to UIT liquidity risk management
programs will be 2,770 hours.
Compliance with the collection of information requirements of the
rule is necessary to obtain the benefit of relying on the rule. ``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) David Bottom, Director/Chief
Information Officer, Securities and Exchange Commission, c/o Cynthia
Roscoe, 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: February 6, 2020.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-02733 Filed 2-11-20; 8:45 am]
BILLING CODE 8011-01-P