

[Federal Register: June 1, 2006 (Volume 71, Number 105)]
[Notices]               
[Page 31228-31230]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr01jn06-110]                         

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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

[[Page 31229]]

Information Services, Washington, DC 20549.

Extension:
    Rule 17f-2; SEC File No. 270-233; OMB Control No. 3235-0223.
    Form N-17f-2; SEC File No. 270-317; OMB Control No. 3235-0360.

    Notice is hereby given that, pursuant to the Paperwork Reduction 
Act of 1995 (44 U.S.C. 350l et seq.), the Securities and Exchange 
Commission (the ``Commission'') has submitted to the Office of 
Management and Budget requests for extension of the previously approved 
collections of information discussed below.
    Rule 17f-2 (17 CFR 270.17f-2) under the Investment Company Act of 
1940 (the ``Act'') (15 U.S.C. 80a-1) is entitled: ``Custody of 
Investments by Registered Management Investment Company.'' Rule 17f-2 
establishes safeguards for arrangements in which a registered 
management investment company (``fund'') is deemed to maintain custody 
of its own assets, such as when the fund maintains its assets in a 
facility that provides safekeeping but not custodial services. The rule 
includes several recordkeeping or reporting requirements. The fund's 
directors must prepare a resolution designating not more than five fund 
officers or responsible employees who may have access to the fund's 
assets. The designated access persons (two or more of whom must act 
jointly when handling fund assets) must prepare a written notation 
providing certain information about each deposit or withdrawal of fund 
assets, and must transmit the notation to another officer or director 
designated by the directors. Independent public accountants must verify 
the fund's assets at least three times a year and two of the 
examinations must be unscheduled.
    The requirement that directors designate access persons is intended 
to ensure that directors evaluate the trustworthiness of insiders who 
handle fund assets. The requirements that access persons act jointly in 
handling fund assets, prepare a written notation of each transaction, 
and transmit the notation to another designated person are intended to 
reduce the risk of misappropriation of fund assets by access persons, 
and to ensure that adequate records are prepared, reviewed by a 
responsible third person, and available for examination by the 
Commission's examination staff. The requirement that auditors verify 
fund assets without notice twice each year is intended to provide an 
additional deterrent to the misappropriation of fund assets and to 
detect any irregularities.
    The Commission staff estimates that each fund makes 270.5 responses 
and spends an average of 95 hours annually in complying with the rule's 
requirements.\1\ Commission staff estimates that on an annual basis it 
takes: (i) 0.17 hours of fund accounting personnel at a total cost of 
$10 to draft director resolutions;\2\ (ii) 0.6 hours of the fund's 
board of directors at a total cost of $1200 to adopt the resolution; 
(iii) 75 hours for the fund's accounting personnel at a total cost of 
$5228 to prepare written notations of transactions;\3\ and (iv) 18.9 
hours for the fund's accounting personnel at a total cost of $1087 to 
assist the independent public accountants when they perform 
verifications of fund assets.\4\ Approximately 140 funds rely upon Rule 
17f-2 annually.\5\ Thus, the total annual hour burden for Rule 17f-2 is 
estimated to be 13,300 hours.\6\ Based on the total costs per fund 
listed above, the total cost of the Rule 17f-2's collection of 
information requirements is estimated to be $1 million.\7\
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    \1\ The 270.5 responses are: 1.5 responses to draft and adopt 
the resolution and 269 notations. Estimates of the number of hours 
are based on conversations with individuals in the mutual fund 
industry. In preparing this submission, Commission staff randomly 
selected 9 funds from the pool of Form N-17f-2 filers. The actual 
number of hours may vary significantly depending on individual fund 
assets.
    \2\ This estimate is based on the following calculation: 0.17 
(burden hours per fund) x $57.52 (fund senior accountant's hourly 
rate) = $9.78. The estimated costs for fund personnel were based on 
the average annual salaries reported for employees in New York City 
in Securities Industry Association, Management and Professional 
Earnings in the Securities Industry (2003) and Securities Industry 
Association, Office Salaries in the Securities Industry (2003), 
which were adjusted to include overhead costs and employee benefits.
    \3\ Respondents estimated that each fund makes 269 responses on 
an annual basis and spent a total of 0.28 hours per response. The 
fund personnel involved are Fund Payable Manager ($47.03 hourly 
rate), Fund Operations Manager ($64.25 hourly rate) and Fund 
Accounting Manager ($96.95 hourly rate). The weighted hourly rate of 
these personnel is $69.41. The estimated cost of preparing notations 
is based on the following calculation: 269 x 0.28 x $69.41 = 
$5227.96.
    \4\ This estimate is based on the following calculation: 18.9 x 
$57.52 (fund senior accountant hourly rate) = $1087.13.
    \5\ Based on a review of Form N-17f-2 filings in 2004, the 
Commission staff estimates that 140 funds relied on Rule 17f-2 in 
2005.
    \6\ This estimate is based on the following calculation: 140 
(funds) x 95 (total annual hourly burden per fund) = 13,300 hours 
for rule. The annual burden for Rule 17f-2 does not include time 
spent preparing Form N-17f-2. The burden for Form N-17f-2 is 
included in a separate collection of information.
    \7\ This estimate is based on the following calculation: $7525 
(total annual cost per fund) x 140 funds = $1,053,500.
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    Form N-17f-2 (17 CFR 274.220) under the Act is entitled 
``Certificate of Accounting of Securities and Similar Investments in 
the Custody of Management Investment Companies.'' Form N-17f-2 is the 
cover sheet for the accountant examination certificates filed under 
Rule 17f-2 by registered management investment companies (funds'') 
maintaining custody of securities or other investments. Form N-17f-2 
facilitates the filing of the accountant's examination certificates. 
The use of the form allows the certificates to be filed electronically, 
and increases the accessibility of the examination certificates to both 
the Commission's examination staff and interested investors by ensuring 
that the certificates are filed under the proper Commission file number 
and the correct name of a fund.
    Commission staff estimates that on an annual basis it takes: (i) On 
average 3.25 hours of fund accounting personnel at a total cost of $187 
to prepare the Form N-17f-2;\8\ and (ii) 3.15 hours of clerical time at 
a total cost of $187 to file the Form N-17f-2 with the Commission.\9\ 
As noted above, approximately 140 funds currently file Form N-17f-2 
with the Commission, and each fund is required to make three filings 
annually for a total annual hourly burden per fund of approximately 6.4 
hours at a total cost of $274. The total annual hour burden for Form N-
17f-2 is therefore estimated to be approximately 896 hours. Based on 
the total annual costs per fund listed above, the total cost of Form N-
17f-2's collection of information requirements is estimated to be 
approximately $38,360.\10\
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    \8\ This estimate is based on the following calculation: 3.25 x 
$57.52 (fund senior accountant's hourly rate) = $186.94.
    \9\ This estimate is based on the following calculation: 3.15 x 
$27.6 (secretary hourly rate) = $86.94.
    \10\ This estimate is based on the following calculation: 140 
funds x $274 (total annual cost per fund) = $38,360.
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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. Complying with the collections of 
information required by Rule 17f-2 and Form N-17f-1 is mandatory for 
those funds that maintain custody of their own assets. 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.
    General comments regarding the above information should be directed 
to the following persons: (i) Desk Officer

[[Page 31230]]

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, Securities and Exchange Commission, C/O Shirley 
Martinson, 6432 General Green Way, Alexandria, Virginia 22312 or send 
an e-mail to: PRA_Mailbox@sec.gov. Comments must be submitted to OMB 
within 30 days of this notice.

    Dated: May 22, 2006.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. E6-8494 Filed 5-31-06; 8:45 am]

BILLING CODE 8010-01-P
