
[Federal Register: February 27, 2008 (Volume 73, Number 39)]
[Notices]               
[Page 10498-10499]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27fe08-84]                         

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

SECURITIES AND EXCHANGE COMMISSION

 
Proposed Collection; Comment Request

Upon Written Request, Copies Available From: Securities and Exchange 
Commission, Office of Investor Education and Advocacy, Washington, DC 
20549-0213.

Extension:
    Rule 17a-10; SEC File No. 270-507; OMB Control No. 3235-0563.

    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 (the ``Commission'') is soliciting comments on the 
collections of information summarized below. The Commission plans to 
submit these existing collections of information to the Office of 
Management and Budget (``OMB'') for extension and approval.
    Section 17(a) of the Investment Company Act of 1940 (15 U.S.C. 80a) 
(the ``Act''), prohibits affiliated persons of a registered investment 
company (``fund'') from borrowing money or other

[[Page 10499]]

property from, or selling or buying securities or other property to or 
from the fund, or any company that the fund controls. Section 2(a)(3) 
of the Act (15 U.S.C. 80a-2(a)(3)(E)) defines ``affiliated person'' of 
a fund to include its investment advisers. Rule 17a-10 (17 CFR 270.17a-
10) permits (i) a subadviser of a fund to enter into transactions with 
funds the subadviser does not advise but which are affiliated persons 
of a fund that it does advise (e.g., other funds in the fund complex), 
and (ii) a subadviser (and its affiliated persons) to enter into 
transactions and arrangements with funds the subadviser does advise, 
but only with respect to discrete portions of the subadvised fund for 
which the subadviser does not provide investment advice.
    To qualify for the exemptions in rule 17a-10, the subadvisory 
relationship must be the sole reason why section 17(a) prohibits the 
transaction; and the advisory contracts of the subadviser entering into 
the transaction, and any subadviser that is advising the purchasing 
portion of the fund, must prohibit the subadvisers from consulting with 
each other concerning securities transactions of the fund, and limit 
their responsibility to providing advice with respect to discrete 
portions of the fund's portfolio.\1\
---------------------------------------------------------------------------

    \1\ See 17 CFR 270.17a-10(a)(2).
---------------------------------------------------------------------------

    The Commission staff estimates that 3583 portfolios of 
approximately 649 fund complexes use the services of one or more 
subadvisers. Based on discussions with industry representatives, the 
staff estimates that it requires approximately 6 hours to draft and 
execute revised subadvisory contracts allowing funds and subadvisers to 
rely on the exemptions in rule 17a-10.\2\ The staff assumes that all 
existing funds amended their advisory contracts following the adoption 
of rule 17a-10 in 2003 that conditioned certain exemptions upon these 
contractual alterations, and therefore there is no continuing burden 
for those funds.\3\
---------------------------------------------------------------------------

    \2\ Rules 12d3-1, 10f-3, 17a-10, and 17e-1 require virtually 
identical modifications to fund advisory contracts. The Commission 
staff assumes that funds would rely equally on the exemptions in 
these rules, and therefore the burden hours associated with the 
required contract modifications should be apportioned equally among 
the four rules.
    \3\ We assume that funds formed after 2002 that intended to rely 
on rule 17a-10 would have included the required provision as a 
standard element in their initial subadvisory contracts.
---------------------------------------------------------------------------

    Based on an analysis of fund filings, the staff estimates that 
approximately 600 fund portfolios enter into new subadvisory agreements 
each year.\4\ Based on discussions with industry representatives, the 
staff estimates that it will require approximately 3 attorney hours \5\ 
to draft and execute additional clauses in new subadvisory contracts in 
order for funds and subadvisers to be able to rely on the exemptions in 
rule 17a-10. Because these additional clauses are identical to the 
clauses that a fund would need to insert in their subadvisory contracts 
to rely on rules 10f-3, 12d3-1, and 17e-1, and because we believe that 
funds that use one such rule generally use all of these rules, we 
apportion this 3 hour time burden equally among all four rules. 
Therefore, we estimate that the burden allocated to rule 17a-10 for 
this contract change would be 0.75 hours.\6\ Assuming that all 600 
funds that enter into new subadvisory contracts each year make the 
modification to their contract required by the rule, we estimate that 
the rule's contract modification requirement will result in 450 burden 
hours annually, with an associated cost of approximately $131,400.\7\
---------------------------------------------------------------------------

    \4\ The use of subadvisers has grown rapidly over the last 
several years, with approximately 600 portfolios that use 
subadvisers registering between December 2005 and December 2006. 
Based on information in Commission filings, we estimate that 31 
percent of funds are advised by subadvisers.
    \5\ The Commission staff's estimates concerning the wage rates 
for attorney time are based on salary information for the securities 
industry compiled by the Securities Industry Association. The $292 
per hour figure for an attorney is from the SIA Report on Management 
& Professional Earnings in the Securities Industry 2006, modified to 
account for an 1800-hour work-year and multiplied by 5.35 to account 
for bonuses, firm size, employee benefits and overhead.
    \6\ This estimate is based on the following calculation (3 hours 
/ 4 rules = .75 hours).
    \7\ These estimates are based on the following calculations: 
(0.75 hours x 600 portfolios = 450 burden hours); ($292 per hour x 
450 hours = $131,400 total cost).
---------------------------------------------------------------------------

    Written comments are invited on: (a) Whether the proposed 
collection of information is necessary for the proper performance of 
the functions of the agency, including whether the information will 
have practical utility; (b) the accuracy of the agency'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 in writing within 60 
days of this publication.
    Please direct your written comments to 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.

    Dated: February 19, 2008.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8-3622 Filed 2-26-08; 8:45 am]

BILLING CODE 8011-01-P
