
[Federal Register: March 5, 2008 (Volume 73, Number 44)]
[Notices]               
[Page 11958-11959]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr05mr08-107]                         

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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 17d-1; SEC File No. 270-505; OMB Control No. 3235-0562.

    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 for extension and approval.
    Section 17(d) (15 U.S.C. 80a-17(d)) of the Investment Company Act 
of 1940 (15 U.S.C. 80a et seq.) (the ``Act'') prohibits first- and 
second-tier affiliates of a fund, the fund's principal underwriters, 
and affiliated persons of the fund's principal underwriters, acting as 
principal, to effect any transaction in which the fund or a company 
controlled by the fund is a joint or a joint and several participant in 
contravention of the Commission's rules. Rule 17d-1 (17 CFR 270.17d-1) 
prohibits an affiliated person of or principal underwriter for any fund 
(a ``first-tier affiliate''), or any affiliated person of such person 
or underwriter (a ``second-tier affiliate''), acting as principal, from 
participating in or effecting any transaction in connection with a 
joint enterprise or other joint arrangement in which the fund is a 
participant, unless prior to entering into the enterprise or 
arrangement ``an application regarding (the transaction) has been filed 
with the Commission and has been granted by an order.'' In reviewing 
the proposed affiliated transaction, the rule provides that the 
Commission will consider whether the proposal is (i) consistent with 
the provisions, policies, and purposes of the Act, and (ii) on a basis 
different from or less advantageous than that of other participants in 
determining whether to grant an exemptive application for a proposed 
joint enterprise, joint arrangement, or profit-sharing plan.
    Rule 17d-1 also contains a number of exceptions to the requirement 
that a fund must obtain Commission approval prior to entering into 
joint transactions or arrangements with affiliates. For example, funds 
do not have to obtain Commission approval for certain employee 
compensation plans, certain tax-deferred employee benefit plans, 
certain transactions involving small business investment companies, the 
receipt of securities or cash by certain affiliates pursuant to a plan 
of reorganization, and arrangements regarding liability insurance 
policies. The Commission amended rule 17d-1 most recently in 2003 to 
expand the current exemptions from the Commission approval process to 
permit funds to engage in transactions with ``portfolio affiliates''--
companies that are affiliated with the fund solely as a result of the 
fund (or an affiliated fund) controlling them or owning more than five 
percent of their voting securities. This amendment was designed to 
permit funds' transactions with portfolio affiliates without seeking 
Commission approval, as long as certain other affiliated persons of the 
fund (e.g., the fund's adviser, persons controlling the fund, and 
persons under common control with the fund) (``prohibited 
participants'') are not parties to the transaction and do not have a 
``financial interest'' in a party to the transaction. The rule excludes 
from the definition of ``financial interest'' any interest that the 
fund's board of directors (including a majority of the directors who 
are not interested persons of the fund) finds to be not material, as 
long as the board records the basis for its finding in their meeting 
minutes.
    Thus, the rule contains two filing and recordkeeping requirements 
that constitute collections of information. First, rule 17d-1 requires 
funds that wish to engage in a joint transaction or arrangement with 
affiliates to meet the procedural requirements for obtaining exemptive 
relief from the rule's prohibition on joint transactions or 
arrangements involving first- or second-tier affiliates. Second, rule 
17d-1 permits a portfolio affiliate to enter into a joint transaction 
or arrangement with the fund if a prohibited participant has a 
financial interest that the fund's board determines is not material and 
records the basis for this finding in their meeting minutes. These 
requirements of rule 17d-1 are designed to prevent fund insiders from 
managing funds for their own benefit, rather than for the benefit of 
the funds' shareholders.
    Based on an analysis of past filings, Commission staff estimates 
that 4 funds file applications under section 17(d) and rule 17d-1 per 
year. Based on a limited survey of persons in the mutual fund industry, 
the Commission staff estimates that each applicant will spend an 
average of 154 hours to comply with the Commission's applications 
process. The Commission staff therefore estimates the annual burden 
hours per year for all funds under rule 17d-1's application process to 
be 616 hours.
    Based on analysis of past filings, the Commission's staff estimates 
that 148 funds are affiliated persons of 668 issuers as a result of the 
fund's ownership or control of the issuer's voting securities, and that 
there are approximately 1,000 such affiliate relationships. Staff 
discussions with mutual fund representatives have suggested that no 
funds are currently relying on rule 17d-1 exemptions. We do not know 
definitively the reasons for this transactional behavior, but differing 
market conditions from year to year may offer some explanation for the 
current lack of fund interest in the exemptions under rule 17d-1. 
Accordingly, we estimate that annually there will be no joint 
transactions under rule 17d-1 that will result in a collection of 
information. The Commission, therefore, requests authorization to 
maintain an inventory of total burden hours per year for all funds 
under rule 17d-1 of 616 hours.
    The estimate of average burden hours is made solely for the 
purposes of the Paperwork Reduction Act. The estimate is not derived 
from a comprehensive or even a representative survey or study of the 
costs of Commission rules. Complying with these collections of 
information requirement is necessary to obtain the benefit of relying 
on rule 17d-1. 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.
    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

[[Page 11959]]

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 27, 2008.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8-4206 Filed 3-4-08; 8:45 am]

BILLING CODE 8011-01-P
