[Federal Register Volume 85, Number 237 (Wednesday, December 9, 2020)]
[Notices]
[Pages 79251-79252]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-27027]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[SEC File No. 270-238, OMB Control No. 3235-0214]


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 
20549-02736

Extension:
    Rule 17a-7

    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'') has submitted to the Office of Management 
and Budget a request for extension of the previously approved 
collection of information described below.
    Rule 17a-7 (17 CFR 270.17a-7) (the ``rule'') under the Investment 
Company Act of 1940 (15 U.S.C. 80a-1 et seq.) (the ``Act'') is entitled 
``Exemption of certain purchase or sale transactions between an 
investment company and certain affiliated persons thereof.'' It 
provides an exemption from section 17(a) of the Act for purchases and 
sales of securities between registered investment companies 
(``funds''), that are affiliated persons (``first-tier affiliates'') or 
affiliated persons of affiliated persons (``second-tier affiliates''), 
or between a fund and a first- or second-tier affiliate other than 
another fund, when the affiliation arises

[[Page 79252]]

solely because of a common investment adviser, director, or officer. 
Rule 17a-7 requires funds to keep various records in connection with 
purchase or sale transactions effected in reliance on the rule. The 
rule requires the fund's board of directors to establish procedures 
reasonably designed to ensure that the rule's conditions have been 
satisfied. The board is also required to determine, at least on a 
quarterly basis, that all affiliated transactions effected during the 
preceding quarter in reliance on the rule were made in compliance with 
these established procedures. If a fund enters into a purchase or sale 
transaction with an affiliated person, the rule requires the fund to 
compile and maintain written records of the transaction.\1\ The 
Commission's examination staff uses these records to evaluate for 
compliance with the rule.
---------------------------------------------------------------------------

    \1\ The written records are required to set forth a description 
of the security purchased or sold, the identity of the person on the 
other side of the transaction, and the information or materials upon 
which the board of directors' determination that the transaction was 
in compliance with the procedures was made.
---------------------------------------------------------------------------

    While most funds do not commonly engage in transactions covered by 
rule 17a-7, the Commission staff estimates that nearly all funds have 
adopted procedures for complying with the rule.\2\ Of the approximately 
2,915 currently active funds, the staff estimates that virtually all 
have already adopted procedures for compliance with rule 17a-7. This is 
a one-time burden, and the staff therefore does not estimate an ongoing 
burden related to the policies and procedures requirement of the rule 
for funds.\3\ The staff estimates that there are approximately 90 new 
funds that register each year, and that each of these funds adopts the 
relevant policies and procedures. The staff estimates that it takes 
approximately 4 hours to develop and adopt these policies and 
procedures. Therefore, the total annual burden related to developing 
and adopting these policies and procedures would be approximately 360 
hours.\4\
---------------------------------------------------------------------------

    \2\ Unless stated otherwise, these estimates are based on 
conversations with the examination and inspections staff of the 
Commission and fund representatives.
    \3\ Based on our reviews and conversations with fund 
representatives, we understand that funds rarely, if ever, need to 
make changes to these policies and procedures once adopted, and 
therefore we do not estimate a paperwork burden for such updates.
    \4\ This estimate is based on the following calculations: (4 
hours x 90 new funds = 360 hours).
---------------------------------------------------------------------------

    Of the 2,915 existing funds, the staff assumes that approximately 
25%, (or 729) enter into transactions affected by rule 17a-7 each year 
(either by the fund directly or through one of the fund's series), and 
that the same percentage (25%, or 23 funds) of the estimated 90 funds 
that newly register each year will also enter into these transactions, 
for a total of 752 \5\ companies that are affected by the recordkeeping 
requirements of rule 17a-7. These funds must keep records of each of 
these transactions, and the board of directors must quarterly determine 
that all relevant transactions were made in compliance with the 
company's policies and procedures. The rule generally imposes a minimal 
burden of collecting and storing records already generated for other 
purposes.\6\ The staff estimates that the burden related to making 
these records and for the board to review all transactions would be 3 
hours annually for each respondent, (2 hours spent by compliance 
attorneys and 1 hour spent by the board of directors) \7\ or 2,256 
total hours each year.\8\
---------------------------------------------------------------------------

    \5\ This estimate is based on the following calculation: (729 + 
23 = 752).
    \6\ Commission staff believes that rule 17a-7 does not impose 
any costs associated with record preservation in addition to the 
costs that funds already incur to comply with the record 
preservation requirements of rule 31a-2 under the Act. Rule 31a-2 
requires companies to preserve certain records for specified periods 
of time.
    \7\ The staff estimates that funds that rely on rule 17a-7 
annually enter into an average of 8 rule 17a-7 transactions each 
year. The staff estimates that the compliance attorneys of the 
companies spend approximately 15 minutes per transaction on this 
recordkeeping, and the board of directors spends a total of 1 hour 
annually in determining that all transactions made that year were 
done in compliance with the company's policies and procedures.
    \8\ This estimate is based on the following calculation: (3 
hours x 752 companies = 2,256 hours).
---------------------------------------------------------------------------

    Based on these estimates, the staff estimates the combined total 
annual burden hours associated with rule 17a-7 is 2,616 hours.\9\ The 
staff also estimates that there are approximately 752 respondents and 
6,016 total responses.\10\
---------------------------------------------------------------------------

    \9\ This estimate is based on the following calculation: (360 
hours + 2,256 hours = 2,616 total hours).
    \10\ This estimate is based on the following calculations: 752 
funds that engage in rule 17a-7 transactions x 8 transactions per 
year = 6,016.
---------------------------------------------------------------------------

    The estimates of burden hours are made solely for the purposes of 
the Paperwork Reduction Act, and are not derived from a comprehensive 
or even a representative survey or study of the costs of Commission 
rules. The collection of information required by rule 17a-7 is 
necessary to obtain the benefits of the rule. 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 background documentation for this information 
collection at the following website: www.reginfo.gov. Find this 
particular information collection by selecting ``Currently under 30-day 
Review--Open for Public Comments'' or by using the search function. 
Written comments and recommendations for the proposed information 
collection should be sent within 30 days of publication of this notice 
to (i) www.reginfo.gov/public/do/PRAMain and (ii) David Bottom, 
Director/Chief Information Officer, Securities and Exchange Commission, 
c/o Cynthia Roscoe, 100 F Street NE, Washington, DC 20549, or by 
sending an email to: [email protected].

    Dated: December 4, 2020.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-27027 Filed 12-8-20; 8:45 am]
BILLING CODE 8011-01-P