

[Federal Register: February 1, 2006 (Volume 71, Number 21)]
[Notices]               
[Page 5385-5386]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr01fe06-156]                         

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SECURITIES AND EXCHANGE COMMISSION

 
Submission for OMB Review; Comment Request

Upon Written Request, Copies Available From: Securities and Exchange 
Commission, Office of Filings and Information Services, Washington, DC 
20549.

    Extension: Rule 3a-8; SEC File No. 270-516; OMB Control No. 
3235-0574.

    Notice is hereby given that pursuant to the Paperwork Reduction Act 
of 1995 (44 U.S.C. 3501 et seq.), 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.
    Rule 3a-8 of the Investment Company Act of 1940 (the ``Act''), 
serves as a nonexclusive safe harbor from investment company status for 
certain research and development companies (``R&D companies''). The 
rule requires

[[Page 5386]]

that the board of directors of an R&D company seeking to rely on the 
safe harbor adopt an appropriate resolution evidencing that the company 
is primarily engaged in a non-investment business and record that 
resolution contemporaneously in its minute books or comparable 
documents.\1\ An R&D company seeking to rely on the safe harbor must 
retain these records only as long as such records must be maintained in 
accordance with state law.
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    \1\ Rule 3a-8(a)(6). This requirement is modeled on the 
requirement in rule 3a-2 under the Act that provides a temporary 
exemption from the Act for transient investment companies. 17 CFR 
270.3a-2.
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    Rule 3a-8 contains an additional requirement that is also a 
collection of information within the meaning of the PRA. The board of 
directors of a company that relies on the safe harbor under rule 3a-8 
must adopt a written policy with respect to the company's capital 
preservation investments. We expect that the board of directors will 
base its decision to adopt the resolution discussed above, in part, on 
investment guidelines that the company will follow to ensure its 
investment portfolio is in compliance with the rule's requirements.
    The collection of information imposed by rule 3a-8 is voluntary 
because the rule is an exemptive safe harbor, and therefore, R&D 
companies may choose whether or not to rely on it. The purposes of the 
information collection requirements in rule 3a-8 are to ensure that: 
(i) The board of directors of an R&D company is involved in determining 
whether the company should be considered an investment company and 
subject to regulation under the Act, and (ii) adequate records are 
available for Commission review, if necessary. Rule 3a-8 would not 
require the reporting of any information or the filing of any documents 
with the Commission.
    Commission staff estimates that there is no annual recordkeeping 
burden associated with the rule's requirements. Nevertheless, the 
Commission requests authorization to maintain an inventory of one 
burden hour for administrative purposes.
    There are approximately 33,000 R&D companies in the Unites 
States.\2\ Rule 3a-8 impacts non-manufacturing R&D companies that would 
fall within the definition of investment company pursuant to section 
3(a)(1)(C) of the Act [15 U.S.C. 80a-3(a)(1)(C)].\3\ Of the 16,170 non-
manufacturing R&D Companies, the Commission believes that companies in 
scientific R&D services are more likely to use the exemption provided 
by rule 3a-8.\4\ This field comprises companies that specialize in 
conducting R&D for other organizations, such as many biotechnology 
companies.\5\ It accounts for 18%, or approximately 2910 companies.\6\ 
Given that the board resolutions and investment guidelines will 
generally need to be adopted only once (unless relevant circumstances 
change),\7\ the Commission believes that all the companies that seek to 
rely on rule 3a-8 would have adopted their board resolutions and 
established written investment guidelines in 2003 when the rule was 
adopted. We expect that newly formed R&D companies would adopt the 
board resolution and investment guidelines simultaneously with their 
formation documents in the ordinary course of business.\8\ Therefore, 
we estimate that rule 3a-8 will not create additional time burdens.
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    \2\ See National Science Board, Science and Engineering 
Indicators 2004 (``NSB Indicators'') (available at http://www.nsf.gov/statistics/seind04/
).

    \3\ The Act provides certain exclusions from the definition of 
investment company for a company that is primarily engaged in a non-
investment business. 15 U.S.C. 80a-3(b)(1). For purposes of this PRA 
analysis, we assume that all manufacturing R&D companies are 
primarily engaged in the manufacturing industry and, therefore, may 
rely on the exclusion for companies primarily engaged in a non-
investment business. For example, the top two manufacturing R&D 
companies in terms of dollars spent are Ford Motor Company and 
General Motors, which are primarily engaged in motor vehicle 
manufacturing. See NSB Indicators, supra note 2.
    \4\ We believe that R&D Companies in this field are most likely 
to rely on the rule because they often raise and invest large 
amounts of capital to fund their research and product development 
and may make strategic investments in other R&D companies to develop 
products jointly. These activities may cause the R&D companies to 
fall within the definition of investment company and fail to qualify 
for statutory exclusions under the Act when using the Commission's 
traditional analysis. See Certain Research and Development 
Companies, Release No. 26077 (Jun. 16, 2003) [68 FR 37045 (Jun. 20, 
2003)], at n. 12 and accompanying text (``Rule 3a-8 Release'').
    \5\ See NSB Indicators, supra note 2.
    \6\ Id.
    \7\ In the event of changed circumstances, the Commission 
believes that the board resolution and investment guidelines will be 
amended and recorded in the ordinary course of business and would 
not create additional time burdens.
    \8\ In order for these companies to raise sufficient capital to 
fund their product development stage, we believe they will need to 
present potential investors with investment guidelines. Investors 
would want to be assured that the company's funds are invested 
consistent with the goals of capital preservation and liquidity.
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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.
    General comments regarding the above information should be directed 
to the following persons: (i) Desk Officer for the Securities and 
Exchange Commission, Office of Information and Regulatory Affairs, 
Office of Management and Budget, Room 10102, New Executive Office 
Building, Washington, DC 20503 or e-mail to: 
David_Rostker@omb.eop.gov; and (ii) R. Corey Booth, Director/Chief 

Information Officer, Office of Information Technology, Securities and 
Exchange Commission, 100 F Street, NE., Washington, DC 20549. Comments 
must be submitted to OMB within 30 days of this notice.

    Dated: January 25, 2006.
Nancy M. Morris,
Secretary.
[FR Doc. E6-1314 Filed 1-31-06; 8:45 am]

BILLING CODE 8010-01-P
