[Federal Register Volume 86, Number 61 (Thursday, April 1, 2021)]
[Notices]
[Pages 17257-17259]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-06731]


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SECURITIES AND EXCHANGE COMMISSION

[SEC File No. 270-321, OMB Control No. 3235-0358]


Proposed Collection; 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 11a-3

    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

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Management and Budget for extension and approval.
    Section 11(a) of the Investment Company Act of 1940 (``Act'') (15 
U.S.C. 80a-11(a)) provides that it is unlawful for a registered open-
end investment company (``fund'') or its underwriter to make an offer 
to the fund's shareholders or the shareholders of any other fund to 
exchange the fund's securities for securities of the same or another 
fund on any basis other than the relative net asset values (``NAVs'') 
of the respective securities to be exchanged, ``unless the terms of the 
offer have first been submitted to and approved by the Commission or 
are in accordance with such rules and regulations as the Commission may 
have prescribed in respect of such offers.'' Section 11(a) was designed 
to prevent ``switching,'' the practice of inducing shareholders of one 
fund to exchange their shares for the shares of another fund for the 
purpose of exacting additional sales charges.
    Rule 11a-3 (17 CFR 270.11a-3) under the Act is an exemptive rule 
that permits open-end investment companies (``funds''), other than 
insurance company separate accounts, and funds' principal underwriters, 
to make certain exchange offers to fund shareholders and shareholders 
of other funds in the same group of investment companies. The rule 
requires a fund, among other things, (i) to disclose in its prospectus 
and advertising literature the amount of any administrative or 
redemption fee imposed on an exchange transaction, (ii) if the fund 
imposes an administrative fee on exchange transactions, other than a 
nominal one, to maintain and preserve records with respect to the 
actual costs incurred in connection with exchanges for at least six 
years, and (iii) give the fund's shareholders a sixty day notice of a 
termination of an exchange offer or any material amendment to the terms 
of an exchange offer (unless the only material effect of an amendment 
is to reduce or eliminate an administrative fee, sales load or 
redemption fee payable at the time of an exchange).
    The rule's requirements are designed to protect investors against 
abuses associated with exchange offers, provide fund shareholders with 
information necessary to evaluate exchange offers and certain material 
changes in the terms of exchange offers, and enable the Commission 
staff to monitor funds' use of administrative fees charged in 
connection with exchange transactions.
    The staff estimates that there are approximately 1,397 active open-
end investment companies registered with the Commission as of October 
2020. The staff estimates that 25 percent of these funds (349 funds) 
impose a non-nominal administrative fee on exchange transactions. The 
staff estimates that the recordkeeping requirement of the rule requires 
approximately 1 hour annually of clerical time (at an estimated $63 per 
hour) \1\ per fund, for a total of 349 hours for all funds (at a total 
annual cost of $21,987).\2\
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    \1\ This estimate of $63 per hour for clerical work and the 
other estimated wage rates below are derived from the Securities 
Industry and Financial Markets Association's (``SIFMA'') Office 
Salaries in the Securities Industry 2013, modified to account for an 
1800-hour work-year and multiplied by 5.35 to account for bonuses, 
firm size, employee benefits and overhead (updated for inflation).
    \2\ This estimate is based on the following calculations: (1,397 
funds x 25% = 349 funds); (349 x 1 (clerical hour) = 349 clerical 
hours); (349 x $63 = $21,987 total annual cost for recordkeeping 
requirement).
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    The staff estimates that 5 percent of these 1,397 funds (or 70 
funds) terminate an exchange offer or make a material change to the 
terms of their exchange offer each year, requiring the fund to comply 
with the notice requirement of the rule. The staff estimates that 
complying with the notice requirement of the rule requires 
approximately 1 hour of attorney time (at an estimated $419 per hour) 
\3\ and 2 hours of clerical time (at an estimated $63 per hour) per 
fund, for a total of approximately 210 hours for all funds to comply 
with the notice requirement (at a total annual cost of $38,150).\4\ The 
staff estimates that such notices will be enclosed with other written 
materials sent to shareholders, such as annual shareholder reports or 
account statements, and therefore any burdens associated with mailing 
required notices are accounted for in the burdens associated with Form 
N-1A registration statements for funds.
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    \3\ The estimate of $419 per hour for an Attorney is derived 
from SIFMA's Management & Professional Earnings in the Securities 
Industry 2013, modified to account for an 1800-hour work-year and 
multiplied by 5.35 to account for bonuses, firm size, employee 
benefits and overhead (adjusted for inflation).
    \4\ This estimate is based on the following calculations: (1,397 
(funds) x 5% = 70 funds); (70 x 1 (attorney hour) = 70 total 
attorney hours); (70 (funds) x 2 (clerical hours) = 140 total 
clerical hours); (70 (attorney hours) + 140 (clerical hours) = 210 
total hours); (70 (attorney hours) x $419 = $29,330 total attorney 
cost); (140 (clerical hours) x $63 = $8,820 clerical cost); ($29,330 
+ $8,820 = $38,150 total annual cost).
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    The recordkeeping and notice requirements together impose an 
estimated total burden of 559 hours on all funds (at a total annual 
cost of $60,137).\5\ The total number of respondents is 419, each 
responding once a year.\6\ The burdens associated with the disclosure 
requirement of the rule are accounted for in the burdens associated 
with the Form N-1A registration statement for funds.
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    \5\ This estimate is based on the following calculations: (210 
(notice hours) + 349 (recordkeeping hours) = 559 total hours); 
($38,150 (notice costs) + $21,987 (recordkeeping costs) = $60,137 
total annual costs).
    \6\ This estimate is based on the following calculation: (349 
funds responding to recordkeeping requirement + 70 funds responding 
to notice requirement = 419 total respondents).
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    Table 1 below summarizes the currently-approved and updated burdens 
associated with rule 11a-3.

                               Table 1--Summary of Burden Estimates for Rule 11a-3
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                                           Internal burden             Wage rate         Cost of internal burden
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                                       CURRENTLY-APPROVED BURDEN ESTIMATES
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Recordkeeping Requirement............  1 hour.................  $59/hr. (clerk)........  $59.
Respondents..........................  402 funds..............  .......................  402 funds.
Total................................  402 hours..............  .......................  $23,718.
Notice Requirement...................  1 hour.................  $392/hr. (attorney)....  $392.
                                       2 hours................  $59/hr. (clerk)........  $118.
Respondents..........................  80 funds...............  .......................  80 funds.
Total................................  240 hours..............  .......................  $40,800.
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    Total Responses..................  482....................                           .......................
    (Recordkeeping + Notice).........
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    Total Burden.....................  642 hours..............  .......................  $64,518.
    (Recordkeeping + Notice).........
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                                            UPDATED BURDEN ESTIMATES
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Recordkeeping Requirement............  1 hour.................  $63/hr. (clerk)........  $63.
Respondents..........................  349 funds..............  .......................  349 funds.
Total................................  349 hours..............  .......................  $21,987.
Notice Requirement...................  1 hour.................  $419/hr. (attorney)....  $419.
                                       2 hours................  $63/hr. (clerk)........  $126.
Respondents..........................  70 funds...............  .......................  70 funds.
Total................................  210 hours..............  .......................  $38,150.
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    Total Responses..................  419                                               .......................
    (Recordkeeping + Notice).........
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    Total Burden.....................  559 hours..............  .......................  $60,137
    (Recordkeeping + Notice).........
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    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 and forms. 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 requested on: (a) Whether the collection of 
information is 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 burden(s) 
of the collection of information; (c) ways to enhance the quality, 
utility, and clarity of the information collected; and (d) ways to 
minimize the burden of the collection 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: March 29, 2021.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-06731 Filed 3-31-21; 8:45 am]
BILLING CODE 8011-01-P