[Federal Register Volume 88, Number 217 (Monday, November 13, 2023)]
[Notices]
[Pages 77652-77653]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-24954]


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

SECURITIES AND EXCHANGE COMMISSION

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


Submission for OMB Review; Comment Request; Extension: Rule 17a-7

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. 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 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

[[Page 77653]]

examination staff uses these records to evaluate for compliance with 
the rule.
---------------------------------------------------------------------------

    \1\ Rule 17a-7(g) requires the written record of the affiliated 
transaction to include the following information: a description of 
the security purchased or sold, the identity of the person on the 
other side of the transaction, the terms of the purchase or sale 
transaction, and the information or materials upon which the board 
determined that the purchase or sale complied with the procedures 
set by the board.
---------------------------------------------------------------------------

    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 
2,768 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 110new 
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 x110 new funds = 440 hours); ($6,045 x 110 = $664,950.
---------------------------------------------------------------------------

    Of the 2,768 existing funds, the staff assumes that approximately 
21%, (or 582) 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 (21%, or 23 funds) of the estimated 110 funds 
that newly register each year will also enter into these transactions, 
for a total of 605 \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 1,815 
total hours each year at cost of $3,400,100.\8\
---------------------------------------------------------------------------

    \5\ These estimates are based on the following calculations: 
(21% = 582 / 2,768); (605 = 582 + 23).
    \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. This 
estimate is based on the following calculations: (2 hours x $425 = 
$850); ($850 + $4,770 = $5,620).
    \8\ This estimate is based on the following calculation: (3 
hours x 605 companies = 1,815 hours); ($5,620 x 605 companies = 
$3,400,100).
---------------------------------------------------------------------------

    Based on these estimates, the staff estimates the combined total 
annual burden hours associated with rule 17a-7 is 2,225 hours at a cost 
of $4,065,050.\9\ The staff also estimates that there are approximately 
605 respondents and 4,840 total responses.\10\
---------------------------------------------------------------------------

    \9\ This estimate is based on the following calculation: (440 
hours + 1,815 hours = 2,255 total hours); ($664,950 + $3,400,100 = 
$4,065,050).
    \10\ This estimate is based on the following calculations: 605 
funds that engage in rule 17a-7 transactions x 8 transactions per 
year = 4,840.
---------------------------------------------------------------------------

    The estimate of average burden hours is 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 
by December 13, 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].

    Dated: November 7, 2023.
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-24954 Filed 11-9-23; 8:45 am]
BILLING CODE 8011-01-P