[Federal Register Volume 89, Number 25 (Tuesday, February 6, 2024)]
[Notices]
[Pages 8259-8260]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-02358]


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SECURITIES AND EXCHANGE COMMISSION

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


Proposed Collection; Comment Request; Extension: Rule 11a-3

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 
(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 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 1,379 active open-
end investment companies registered with the Commission as of December 
2022 (using filings made through July 2023). The staff estimates that 
25 percent of these funds (345 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 $73 per hour) \1\ per fund, 
for a total of 345 hours for all funds (at a total annual cost of 
$25,185).\2\
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    \1\ This estimate of $73 per hour for clerical work and the 
other estimated wage rates below are based on salary information for 
the securities industry compiled by the Securities Industry and 
Financial Markets Association's Office Salaries in the Securities 
Industry 2013; the estimated wage figures are modified by Commission 
staff to account for an 1,800-hour work-year and adjusted to account 
for bonuses, firm size, employee benefits, overhead, and adjusted to 
account for the effects of inflation.
    \2\ This estimate is based on the following calculations: (1,379 
funds x 25% = 345 funds); (345 x 1 (clerical hour) = 345 clerical 
hours); (345 x $73 = $25,185 total annual cost for recordkeeping 
requirement).
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    The staff estimates that 5 percent of these 1,379 funds (or 69 
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 $484 per hour) 
and 2 hours of clerical time (at an estimated $73 per hour) per fund, 
for a total of approximately 207 hours for all funds to comply with the 
notice requirement (at a total annual cost of $43,470).\3\ 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\ This estimate is based on the following calculations: 1,379 
funds x 5% = 69 funds; 69 x ((1 attorney hour x $484 per hour) + (2 
clerical hours x $73 per hour)) = $43,470 total annual cost.
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    The recordkeeping and notice requirements together impose an 
estimated total burden of 552 hours on all funds (at a total annual 
cost of $68,655).\4\ The total number of respondents is 414, each 
responding once a year.\5\ 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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    \4\ This estimate is based on the following calculations: (207 
(notice hours) + 345 (recordkeeping hours) = 552 total hours); 
($43,470 (notice costs) + $25,185 (recordkeeping costs) = $68,655 
total annual costs).
    \5\ This estimate is based on the following calculation: (345 
funds responding to recordkeeping requirement + 69 funds responding 
to notice requirement = 414 total respondents).
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    Table 1 below summarizes the currently approved and updated burdens 
associated with rule 11a-3.

[[Page 8260]]



                               Table 1--Summary of Burden Estimates for Rule 11a-3
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                                                                                                Cost of internal
                                              Internal burden               Wage rate                burden
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                                       CURRENTLY-APPROVED 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
                                        ------------------------------------------------------------------------
        Total Responses (Recordkeeping   419......................  .........................  .................
         + Notice).
                                        ------------------------------------------------------------------------
        Total Burden (Recordkeeping +    559 hours................  .........................            $60,137
         Notice).
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                                            UPDATED BURDEN ESTIMATES
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Recordkeeping Requirement..............  1 hour...................  $73/hr. (clerk)..........                $73
Respondents............................  345 funds................  .........................          345 funds
                                        ------------------------------------------------------------------------
    Total..............................  345 funds................  .........................            $25,185
Notice Requirement.....................  1 hour...................  $484/hr. (attorney)......               $484
                                         2 hours..................  $73/hr. (clerk)..........               $146
Respondents............................  69 funds.................  .........................           69 funds
                                        ------------------------------------------------------------------------
    Total..............................  207 hours................  .........................            $43,470
                                        ------------------------------------------------------------------------
        Total Responses (Recordkeeping   414......................  .........................  .................
         + Notice).
        Total Burden (Recordkeeping +    552 hours................  .........................            $68,655
         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.
    Written comments are invited on: (a) whether the proposed 
collection of information is necessary for the proper performance of 
the functions of the Commission, including whether the information 
shall have practical utility; (b) the accuracy of the Commission's 
estimate of the burden 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 by April 8, 2024.
    An agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information under the PRA unless it 
displays a currently valid OMB control number.
    Please direct your written comments to: David Bottom, Chief 
Information Officer, Securities and Exchange Commission, c/o John 
Pezzullo, 100 F Street NE, Washington, DC 20549 or send an email to: 
[email protected].

    Dated: February 1, 2024.
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-02358 Filed 2-5-24; 8:45 am]
BILLING CODE 8011-01-P