[Federal Register Volume 88, Number 43 (Monday, March 6, 2023)]
[Notices]
[Pages 13861-13863]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-04525]


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SECURITIES AND EXCHANGE COMMISSION

[SEC File No. 270-312, OMB Control No. 3235-0354]


Submission for OMB Review; Comment Request; Extension: Rule 19b-1

Upon Written Request, Copies Available From: Securities and Exchange 
Commission, Office of FOIA Services, 100 F Street NE,
    Washington, DC 20549-2736.

    Notice is hereby given that, pursuant to the Paperwork Reduction 
Act of 1995 (44 U.S.C. 350l-3520), the Securities and Exchange 
Commission (``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 19(b) of the Investment Company Act of 1940 (the ``Act'') 
(15 U.S.C. 80a-19(b)) authorizes the Commission to regulate registered 
investment company (``fund'') distributions of long-term capital gains 
made more frequently than once every twelve months. Accordingly, rule 
19b-1 under the Act (17 CFR 270.19b-1) regulates the frequency of fund 
distributions of capital gains. Rule 19b-1(c) states that the rule does 
not apply to a unit investment trust (``UIT'') if it is engaged 
exclusively in the business of investing in certain eligible securities 
(generally, fixed-income securities), provided that: (i) the capital 
gains distribution falls within one of five categories specified in the 
rule \1\ and (ii)

[[Page 13862]]

the distribution is accompanied by a report to the unitholder that 
clearly describes the distribution as a capital gains distribution (the 
``notice requirement'').\2\ Rule 19b-1(e) permits a fund to apply to 
the Commission for permission to distribute long-term capital gains 
that would otherwise be prohibited by the rule if the fund did not 
foresee the circumstances that created the need for the distribution. 
The application must set forth the pertinent facts and explain the 
circumstances that justify the distribution.\3\ An application that 
meets those requirements is deemed to be granted unless the Commission 
denies the request within 15 days after the Commission receives the 
application.
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    \1\ 17 CFR 270.19b-1(c)(1).
    \2\ The notice requirement in rule 19b-1(c)(2) supplements the 
notice requirement of section 19(a) [15 U.S.C. 80a-19(a)], which 
requires any distribution in the nature of a dividend payment to be 
accompanied by a notice disclosing the source of the distribution.
    \3\ Rule 19b-1(e) also requires that the application comply with 
rule 0-2 [17 CFR 270.02] under the Act, which sets forth the general 
requirements for papers and applications filed with the Commission 
pursuant to the Act and rules thereunder.
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    Commission staff estimates that one fund will file an application 
under rule 19b-1(e) each year.\4\ The staff understands that if a fund 
files an application it generally uses outside counsel to prepare the 
application. The cost burden of using outside counsel is discussed in 
Item 13 below. The staff estimates that, on average, a fund's 
investment adviser would spend approximately 4 hours to review an 
application, including 3.5 hours by an assistant general counsel at a 
cost of $510 per hour and 0.5 hours by an administrative assistant at a 
cost of $89 per hour, and the fund's board of directors would spend an 
additional 1 hour at a cost of $4,770 per hour, for a total of 5 
hours.\5\ Thus, the staff estimates that the annual hour burden of the 
collection of information imposed by rule 19b-1(e) would be 
approximately five hours per fund, at a cost of $6,599.50.\6\ Because 
the staff estimates that, each year, one fund will file an application 
pursuant to rule 19b-1(e), the total burden for the information 
collection is 5 hours at a cost of $6,599.50.
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    \4\ This estimate is based on the average number of applications 
filed with the Commission pursuant to rule 19b-1(e) in the prior 
three-year period.
    \5\ The estimate for assistant general counsels is from SIFMA's 
Management & Professional Earnings in the Securities Industry 2013, 
modified by Commission staff to account for an 1800-hour work-year 
and inflation and multiplied by 5.35 to account for bonuses, firm 
size, employee benefits and overhead. The estimate for 
administrative assistants is from SIFMA's Office Salaries in the 
Securities Industry 2013, modified by Commission staff to account 
for an 1800-hour work-year and inflation and multiplied by 2.93 to 
account for bonuses, firm size, employee benefits and overhead. The 
staff previously estimated in 2009 that the average cost of board of 
director time was $4,000 per hour for the board as a whole, based on 
information received from funds and their counsel. Adjusting for 
inflation, the staff estimates that the current average cost of 
board of director time is approximately $4,770.
    \6\ This estimate is based on the following calculations: $1,785 
(3.5 hours x $510 = $1,785) plus $44.5 (0.5 hours x $89 = $44.5) 
plus $4,770 equals $6,599.50 (cost of one application).
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    Commission staff estimates that there is no hour burden associated 
with complying with the collection of information component of rule 
19b-1(c). This estimate assumes that UITs using rule 19b-1(c) do not 
have their own employees or staff and that the mechanics of the notice 
requirement would be handled by a UIT sponsor or trustee as an 
accommodation for the UIT. As such, the costs related to this aspect of 
the collection of information are captured in the external cost 
estimates below.
    As noted above, Commission staff understands that funds that file 
an application under rule 19b-1(e) generally use outside counsel to 
prepare the application.\7\ The staff estimates that, on average, 
outside counsel spends 10 hours preparing a rule 19b-1(e) application, 
including eight hours by an associate and two hours by a partner. 
Outside counsel billing arrangements and rates vary based on numerous 
factors, but the staff has estimated the average cost of outside 
counsel as $531per hour, based on information received from funds, 
intermediaries, and their counsel. The staff therefore estimates that 
the average cost of outside counsel preparation of the rule 19b-1(e) 
exemptive application is $5,310.\8\ Because the staff estimates that, 
each year, one fund will file an application pursuant to rule 19b-1(e), 
the total annual cost burden imposed by the exemptive application 
requirements of rule 19b-1(e) is estimated to be $5,130.
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    \7\ This understanding is based on conversations with 
representatives from the fund industry.
    \8\ This estimate is based on the following calculation: 10 
hours multiplied by $531 per hour equals $5,310.
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    The Commission staff estimates that there are approximately 1,779 
UITs that may rely on rule 19b-1(c) to make capital gains 
distributions.\9\ The staff estimates that, on average, these UITs rely 
on rule 19b-1(c) once a year to make a capital gains distribution.\10\ 
In most cases, the trustee of the UIT is responsible for preparing and 
sending the notices that must accompany a capital gains distribution 
under rule 19b-1(c)(2). These notices require limited preparation, the 
cost of which accounts for only a small, indiscrete portion of the 
comprehensive fee charged by the trustee for its services to the UIT. 
The staff believes that as a matter of good business practice, and for 
tax preparation reasons, UITs would collect and distribute the capital 
gains information required to be sent to unitholders under rule 19b-
1(c) even in the absence of the rule. The staff estimates that the cost 
of preparing and distributing a notice for a capital gains distribution 
under rule 19b-1(c)(2) is approximately $50.\11\ Thus, the staff 
estimates that the capital gains distribution notice requirement 
imposes an annual cost on UITs of approximately $88,950.\12\ The staff 
therefore estimates that the total cost imposed by rule 19b-1 is 
$94,260.\13\
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    \9\ See 2022 Investment Company Fact Book, Investment Company 
Institute, available at https://www.icifactbook.org/pdf/2022_factbook.pdf (totaling the number of taxable debt and tax-free 
debt UITs presented in Table 14).
    \10\ The number of times UITs rely on the rule to make capital 
gains distributions depends on a wide range of factors and, thus, 
can vary greatly across years and UITs. UITs may distribute capital 
gains biannually, annually, quarterly, or at other intervals. 
Additionally, a number of UITs are organized as grantor trusts, and 
therefore do not generally make capital gains distributions under 
rule 19b-1(c), or may not rely on rule 19b-1(c) as they do not meet 
the rule's requirements.
    \11\ Although the $50 estimate is consistent with prior renewals 
it is possible that the actual costs have decreased over time as a 
result of electronic automation or other efficiencies. In an 
abundance of a caution, and for purposes of this Paperwork Reduction 
Act renewal, we are assuming on a conservative basis that this cost 
has not changed.
    \12\ This estimate is based on the following calculation: 1,779 
UITs multiplied by $50 equals $88,950.
    \13\ This estimate is based on the following calculation: 
$88,950. (total cost associated with rule 19b-1(c)) + $5,310 (total 
cost associated with rule 19b-1(e)) = $94,260.
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    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 
by April 5, 2023 to (i) [email protected] and 
(ii) David Bottom, Director/Chief Information Officer, Securities and 
Exchange Commission, c/o John Pezzullo, 100 F Street NE, Washington, DC 
20549, or by sending an email to: [email protected].


[[Page 13863]]


    Dated: March 1, 2023.
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-04525 Filed 3-3-23; 8:45 am]
BILLING CODE 8011-01-P