

[Federal Register: January 31, 2007 (Volume 72, Number 20)]
[Notices]               
[Page 4545]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr31ja07-106]                         


[[Page 4545]]

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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 12b-1; SEC File No. 270-188; OMB Control No. 3235-
0212.

    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 12b-1 (17 CFR 270.12b-1) permits a registered open-end 
investment company (``mutual fund'') to distribute its own shares and 
pay the expenses of distribution out of the mutual fund's assets 
provided, among other things, that the mutual fund adopts a written 
plan (``Rule 12b-1 plan'') and has in writing any agreements relating 
to the implementation of the Rule 12b-1 plan. The rule in part requires 
that (i) the adoption or material amendment of a Rule 12b-1 plan be 
approved by the mutual fund's directors and shareholders; (ii) the 
board review quarterly reports of amounts spent under the Rule 12b-1 
plan; and (iii) the board consider continuation of the Rule 12b-1 plan 
at least annually. Rule 12b-1 also requires funds relying on the rule 
to preserve for six years, the first two years in an easily accessible 
place, copies of the Rule 12b-1 plan, related agreements and reports, 
as well as minutes of board meetings that describe the factors 
considered and the basis for adopting or continuing a Rule 12b-1 plan.
    The board and shareholder approval requirements of Rule 12b-1 are 
designed to ensure that fund shareholders and directors receive 
adequate information to evaluate and approve a Rule 12b-1 plan. The 
requirement of quarterly reporting to the board is designed to ensure 
that the Rule 12b-1 plan continues to benefit the fund and its 
shareholders. The recordkeeping requirements of the rule are necessary 
to enable Commission staff to oversee compliance with the rule.
    The number of hours required to comply with Rule 12b-1 will vary 
considerably depending on several factors, including the complexity of 
the plan and the number of classes of fund shares covered by the plan, 
and is expected to be higher in the first year following adoption of 
the proposed amendments than in subsequent years. Based on information 
filed with the Commission by funds, Commission staff estimates that 
there are approximately 6,536 mutual fund portfolios with Rule 12b-1 
plans.
    Rule 12b-1 requires the board of each fund with a Rule 12b-1 plan 
to (i) review quarterly reports of amounts spent under the plan, and 
(ii) annually consider the plan's continuation (which generally is 
combined with the fourth quarterly review); (iii) have each fund 
document the policies and procedures it has implemented to enable it to 
effect portfolio securities transactions through an executing broker 
that also distributes the fund's shares, and (iv) approve those 
policies and procedures.
    The number of annual responses per fund portfolio will be four per 
year. Thus, there will be an estimated 26,144 industry responses (6,536 
fund portfolios x 4 responses per fund portfolio = 26,144 responses) in 
the first year and in each subsequent year. Thus, we estimate that 
there will be an average of 26,144 industry responses per year over the 
three year period for which we are requesting approval of the 
information collection burden.
    Based on conversations with fund industry representatives, 
Commission staff estimates that for each of the 6,536 mutual fund 
portfolios that currently have a Rule 12b-1 plan, the average annual 
burden of complying with the rule is 100 hours to maintain the plan. 
This estimate takes into account the time needed to prepare quarterly 
reports to the board of directors, the board's consideration of those 
reports, and the board's annual consideration of the plan's 
continuation. The total burden hours per year for all fund portfolios 
to comply with current information collection requirements under Rule 
12b-1, is therefore estimated to be 653,600 hours (6,536 fund 
portfolios x 100 hours per fund portfolio = 653,600 hours). The annual 
cost of the hourly burden per fund under the rule is estimated to be 
$11,135.00. Thus, we estimate that the total annual cost to all funds 
of the Rule 12b-1 hour burden is $72,778,360.00 (6,536 fund portfolios 
with Rule 12b-1 plans x $11,135.00 per fund portfolio = 
$72,778,360.00).
    If a currently operating fund seeks to (i) adopt a new Rule 12b-1 
plan or (ii) materially increase the amount it spends for distribution 
under its Rule 12b-1 plan, Rule 12b-1 requires that the fund obtain 
shareholder approval. As a consequence, the fund will incur the cost of 
a proxy. Based on conversations with fund industry representatives, 
Commission staff estimates that approximately three funds per year 
prepare a proxy in connection with the adoption or material amendment 
of a Rule 12b-1 plan. The staff further estimates that the cost of each 
fund's proxy is $30,000. Thus the total annual cost burden of Rule 12b-
1 to the fund industry is $90,000 (3 funds requiring a proxy x $30,000 
per proxy).
    The collections of information required by Rule 12b-1 are necessary 
to obtain the benefits of the rule. Notices to the Commission 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 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, VA 22312, or send an e-
mail to: PRA_Mailbox@sec.gov. Comments must be submitted to OMB within 
30 days of this notice.

    Dated: January 22, 2007.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-1520 Filed 1-30-07; 8:45 am]

BILLING CODE 8011-01-P
