[Federal Register Volume 85, Number 227 (Tuesday, November 24, 2020)]
[Notices]
[Pages 75084-75085]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-25896]


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SECURITIES AND EXCHANGE COMMISSION

[SEC File No. 270-240, OMB Control No. 3235-0216]


Proposed Collection; Comment Request

Extension:
    Rule 19a-1

    Notice is hereby given that, pursuant to the Paperwork Reduction 
Act of 1995 (44 U.S.C. 3501-3520), the Securities and Exchange 
Commission (the ``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

[[Page 75085]]

Management and Budget for extension and approval.
    Section 19(a) (15 U.S.C. 80a-19(a)) of the Investment Company Act 
of 1940 (the ``Act'') (15 U.S.C. 80a) makes it unlawful for any 
registered investment company to pay any dividend or similar 
distribution from any source other than the company's net income, 
unless the payment is accompanied by a written statement to the 
company's shareholders which adequately discloses the sources of the 
payment. Section 19(a) authorizes the Commission to prescribe the form 
of such statement by rule.
    Rule 19a-1 (17 CFR 270.19a-1) under the Act, entitled ``Written 
Statement to Accompany Dividend Payments by Management Companies,'' 
sets forth specific requirements for the information that must be 
included in statements made pursuant to section 19(a) by or on behalf 
of management companies.\1\ The rule requires that the statement 
indicate what portions of distribution payments are made from net 
income, net profits from the sale of a security or other property 
(``capital gains'') and paid-in capital. When any part of the payment 
is made from capital gains, rule 19a-1 also requires that the statement 
disclose certain other information relating to the appreciation or 
depreciation of portfolio securities. If an estimated portion is 
subsequently determined to be significantly inaccurate, a correction 
must be made on a statement made pursuant to section 19(a) or in the 
first report to shareholders following the discovery of the inaccuracy.
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    \1\ Section 4(3) of the Act (15 U.S.C. 80a-4(3)) defines 
``management company'' as ``any investment company other than a face 
amount certificate company or a unit investment trust.''
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    The purpose of rule 19a-1 is to afford fund shareholders adequate 
disclosure of the sources from which distribution payments are made. 
The rule is intended to prevent shareholders from confusing income 
dividends with distributions made from capital sources. Absent rule 
19a-1, shareholders might receive a false impression of fund gains.
    Based on a review of filings made with the Commission, the staff 
estimates that approximately 12,019 series of registered investment 
companies that are management companies may be subject to rule 19a-1 
each year,\2\ and that each portfolio on average mails two statements 
per year to meet the requirements of the rule.\3\ The staff further 
estimates that the time needed to make the determinations required by 
the rule and to prepare the statement required under the rule is 
approximately 1 hour per statement. The total annual burden for all 
portfolios therefore is estimated to be approximately 24,038 burden 
hours.\4\
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    \2\ This estimate is based on statistics compiled by Commission 
staff as of September 21, 2020. The number of management investment 
company portfolios that make distributions for which compliance with 
rule 19a-1 is required depends on a wide range of factors and can 
vary greatly across years. Therefore, the calculation of estimated 
burden hours is based on the total number of management investment 
company portfolios, each of which may be subject to rule 19a-1.
    \3\ A few portfolios make monthly distributions from sources 
other than net income, so the rule requires them to send out a 
statement 12 times a year. Other portfolios never make such 
distributions.
    \4\ This estimate is based on the following calculation: 12,019 
management investment company portfolios x 2 statements per year x 1 
hour per statement = burden hours.
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    The staff estimates that approximately one-third of the total 
annual burden (8,013 hours) would be incurred by a paralegal with an 
average hourly wage rate of approximately $219 per hour,\5\ and 
approximately two-thirds of the annual burden (16,026 hours) would be 
incurred by a compliance clerk with an average hourly wage rate of $71 
per hour.\6\ The staff therefore estimates that the aggregate annual 
cost of complying with the paperwork requirements of the rule is 
approximately $2,892,693 ((8,013 hours x $219 = $1,754,847) + (16,026 
hours x $71 = $1,137,846)).
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    \5\ Hourly rates are derived from the Securities Industry and 
Financial Markets Association (``SIFMA''), Management and 
Professional Earnings in the Securities Industry 2013, modified to 
account for an 1,800-hour work-year and inflation, and multiplied by 
5.35 to account for bonuses, firm size, employee benefits, and 
overhead.
    \6\ Hourly rates are derived from SIFMA's Office Salaries in the 
Securities Industry 2013, modified to account for an 1,800-hour 
work-year and multiplied by 2.93 to account for bonuses, firm size, 
employee benefits and overhead.
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    To comply with state law, many investment companies already must 
distinguish the different sources from which a shareholder distribution 
is paid and disclose that information to shareholders. Thus, many 
investment companies would be required to distinguish the sources of 
shareholder dividends whether or not the Commission required them to do 
so under rule 19a-1.
    The estimate of average burden hours is made solely for the 
purposes of the Paperwork Reduction Act, and is not derived from a 
comprehensive or even a representative survey or study of the costs of 
Commission rules. Compliance with the collection of information 
required by rule 19a-1 is mandatory for management companies that make 
statements to shareholders pursuant to section 19(a) of the Act. 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 collections of 
information are 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 burdens 
of the collections of information; (c) ways to enhance the quality, 
utility, and clarity of the information collected; and (d) ways to 
minimize the burdens of the collections of information on 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 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].

    Dated: November 18, 2020.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-25896 Filed 11-23-20; 8:45 am]
BILLING CODE 8011-01-P