
[Federal Register: September 16, 2008 (Volume 73, Number 180)]
[Notices]               
[Page 53458-53459]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr16se08-90]                         

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

SECURITIES AND EXCHANGE COMMISSION

 
Submission for OMB Review; Comment Request

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

Extension:
    Rule 17f-7; SEC File No. 270-470; OMB Control No. 3235-0529.

    Notice is hereby given that, pursuant to the Paperwork Reduction 
Act of 1995 (44 U.S.C. 3501-3520), 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 17f-7 (17 CFR 270.17f-7) permits funds to maintain their 
assets in foreign securities depositories based on conditions that 
reflect the operations and role of these depositories.\1\ Rule 17f-7 
contains some ``collection of information'' requirements. An eligible 
securities depository has to meet minimum standards for a depository. 
The fund or its investment adviser generally determines whether the 
depository complies with those requirements based on information 
provided by the fund's primary custodian (a bank that acts as global 
custodian). The depository custody arrangement has to meet certain risk 
limiting requirements. The fund can obtain indemnification or insurance 
arrangements that adequately protect the fund against custody risks. 
The fund or its investment adviser generally determines whether 
indemnification or insurance provisions are adequate. If the fund does 
not rely on indemnification or insurance, the fund's contract with its 
primary custodian is required to state that the custodian will provide 
to the fund or its investment adviser a custody risk analysis of each 
depository, monitor risks on a continuous basis, and promptly notify 
the fund or its adviser of material changes in risks. The primary 
custodian and other custodians

[[Page 53459]]

also are required to agree to exercise reasonable care.
---------------------------------------------------------------------------

    \1\ Custody of Investment Company Assets Outside the United 
States, Investment Company Act Release No. IC-23815 (April 29, 1999) 
(64 FR 24489 (May 6, 1999)).
---------------------------------------------------------------------------

    The collection of information requirements in rule 17f-7 are 
intended to provide workable standards that protect funds from the 
risks of using securities depositories while assigning appropriate 
responsibilities to the fund's primary custodian and investment adviser 
based on their capabilities. The requirement that the depository meet 
specified minimum standards is intended to ensure that the depository 
is subject to basic safeguards deemed appropriate for all depositories. 
The requirement that the custody contract state that the fund's primary 
custodian will provide an analysis of the custody risks of depository 
arrangements, monitor the risks, and report on material changes is 
intended to provide essential information about custody risks to the 
fund's investment adviser as necessary for it to approve the continued 
use of the depository. The requirement that the primary custodian agree 
to exercise reasonable care is intended to provide assurances that its 
services and the information it provides will meet an appropriate 
standard of care. The alternative requirement that the funds obtain 
adequate indemnification or insurance against the custody risks of 
depository arrangements is intended to provide another, potentially 
less burdensome means to protect assets held in depository 
arrangements.
    The staff estimates that each of approximately 828 investment 
advisers \2\ would make an average of 7 responses annually under the 
rule to address depository compliance with minimum requirements, any 
indemnification or insurance arrangements, and reviews of risk analyses 
or notifications. The staff estimates each response would take 5.5 
hours, requiring a total of approximately 38.5 hours for each adviser. 
The total annual burden associated with these requirements of the rule 
would be approximately 31,878 hours (828 advisers x 38.5 hours per 
adviser). The staff further estimates that during each year, each of 
approximately 15 global custodians would make an average of 4 responses 
to analyze custody risks and provide notice of any material changes to 
custody risk under the rule. The staff estimates that each response 
would take 250.25 hours, requiring approximately 1001 hours annually 
per custodian.\3\ The total annual burden associated with these 
requirements of the new rule would be approximately 15,015 hours (15 
custodians x 1001 hours). Therefore, the staff estimates that the total 
annual burden associated with all collection of information 
requirements of the rule would be 46,893 hours (31,878 + 15,015). The 
total annual cost of burden hours is estimated to be $10,081,302 
(31,878 x $239 for a portfolio manager, plus 15,015 hours x $164/hour 
for a trust administrator's time).\4\ 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 and 
forms. Compliance with the collection of information requirements of 
the rule is necessary to obtain the benefit of relying on the rule's 
permission for funds to maintain their assets in foreign custodians.
---------------------------------------------------------------------------

    \2\ At the start of 2008, there were more than 9,300 open-end 
(including ETFs) portfolios and closed-end funds. These entities 
were managed or sponsored by more than 828 investment advisers.
    \3\ These estimates are based on conversations with 
representatives of the fund industry and global custodians.
    \4\ The salaries for a portfolio manager and a trust 
administrator are from SIFMA's Management & Professional Earnings in 
the Securities Industry 2007, modified to account for an 1800-hour 
work-year and multiplied by 5.35 to account for bonuses, firm size, 
employee benefits and overhead.
---------------------------------------------------------------------------

    Please direct general comments regarding the above information to 
the following persons: (i) Desk Officer for the Securities and Exchange 
Commission, Office of Management and Budget, Room 10102, New Executive 
Office Building, Washington, DC 20503 or e-mail to: Kimberly_P._
Nelson@omb.eop.gov; and (ii) Lewis W. Walker, Acting Director/CIO, 
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: September 8, 2008.
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-21534 Filed 9-15-08; 8:45 am]

BILLING CODE 8010-01-P
