
[Federal Register: October 23, 2009 (Volume 74, Number 204)]
[
Notices]               
[Page 54862-54864]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr23oc09-87]                         

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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 31a-2; SEC File No. 270-174; OMB Control No. 3235-0179.





[[Page 54863]]





    Notice is hereby given that, pursuant to the Paperwork Reduction 

Act of 1995 (44 U.S.C. 3501-3520), the Securities and Exchange 

Commission (the ``Commission'') is soliciting comments on the 

collection of information summarized below. The Commission plans to 

submit this existing collection of information to the Office of 

Management and Budget for extension and approval.

    Section 31(a)(1) of the Investment Company Act of 1940 (the 

``Act'') \1\ requires registered investment companies (``funds'') and 

certain principal underwriters, broker-dealers, investment advisers and 

depositors of funds to maintain and preserve records as prescribed by 

Commission rules. Rule 31a-1 \2\ specifies the books and records that 

each of these entities must maintain. Rule 31a-2,\3\ which was adopted 

on April 17, 1944, specifies the time periods that entities must retain 

books and records required to be maintained under rule 31a-1.

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    \1\ 15 U.S.C. 80a-30(a)(1).

    \2\ 17 CFR 270.31a-1.

    \3\ 17 CFR 270.31a-2.

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    Rule 31a-2 requires the following:

    1. Every fund must preserve permanently, and in an easily 

accessible place for the first two years, all books and records 

required under rule 31a-1(b)(1)-(4).\4\

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    \4\ 17 CFR 270.31a-1(b)(1)-(4). These include, among other 

records, journals detailing daily purchases and sales of securities 

or contracts to purchase and sell securities, general and auxiliary 

ledgers reflecting all asset, liability, reserve, capital, income 

and expense accounts, separate ledgers reflecting, separately for 

each portfolio security as of the trade date all ``long'' and 

``short'' positions carried by the fund for its own account, and 

corporate charters, certificates of incorporation and by-laws.

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    2. Every fund must preserve for at least six years, and in an 

easily accessible place for the first two years:

    a. All books and records required under rule 31a-1(b)(5)-(12); \5\

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    \5\ 17 CFR 270.31a-1(b)(5)-(12). These include, among other 

records, records of each brokerage order given in connection with 

purchases and sales of securities by the fund, all other portfolio 

purchases, records of all puts, calls, spreads, straddles or other 

options in which the fund has an interest, has granted, or has 

guaranteed, records of proof of money balances in all ledger 

accounts, files of all advisory material received from the 

investment adviser, and memoranda identifying persons, committees or 

groups authorizing the purchase or sale of securities for the fund.

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    b. All vouchers, memoranda, correspondence, checkbooks, bank 

statements, canceled checks, cash reconciliations, canceled stock 

certificates and all schedules that support each computation of net 

asset value of fund shares;

    c. Any advertisement, pamphlet, circular, form letter or other 

sales literature addressed or intended for distribution to prospective 

investors;

    d. Any record of the initial determination that a director is not 

an interested person of the fund, and each subsequent determination 

that the director is not an interested person of the fund, including 

any questionnaire and any other document used to determine that a 

director is not an interested person of the company;

    e. Any materials used by the disinterested directors of a fund to 

determine that a person who is acting as legal counsel to those 

directors is an independent legal counsel; and

    f. Any documents or other written information considered by the 

directors of the fund pursuant to section 15(c) of the Act in approving 

the terms or renewal of a contract or agreement between the company and 

an investment advisor.

    3. Every underwriter, broker or dealer that is a majority-owned 

subsidiary of a fund must preserve records required to be preserved by 

brokers and dealers under rules adopted under section 17 of the 

Securities Exchange Act of 1934 \6\ (``section 17'') for the periods 

established in those rules.

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    \6\ 15 U.S.C. 78q.

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    4. Every depositor of any fund, and every principal underwriter of 

any fund other than a closed-end fund, must preserve for at least six 

years records required to be preserved by brokers and dealers under 

rules adopted under section 17 to the extent the records are necessary 

or appropriate to record the entity's transactions with the fund.

    5. Every investment adviser that is a majority-owned subsidiary of 

a fund must preserve the records required to be maintained by 

investment advisers under rules adopted under section 204 of the 

Investment Advisers Act of 1940 \7\ (``section 204'') for the periods 

specified in those rules.

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    \7\ 15 U.S.C. 80b-4.

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    6. Every investment adviser that is not a majority-owned subsidiary 

of a fund must preserve for at least six years records required to be 

maintained by registered investment advisers under rules adopted under 

section 204 to the extent the records are necessary or appropriate to 

reflect the adviser's transactions with the fund.

    The records required to be maintained and preserved under this part 

may be maintained and preserved for the required time by, or on behalf 

of, a fund on (i) micrographic media, including microfilm, microfiche, 

or any similar medium, or (ii) electronic storage media, including any 

digital storage medium or system that meets the terms of this section. 

The fund, or person that maintains and preserves records on its behalf, 

must arrange and index the records in a way that permits easy location, 

access, and retrieval of any particular record.\8\

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    \8\ In addition, the fund, or whoever maintains the documents 

for the fund must provide promptly any of the following that the 

Commission (by its examiners or other representatives) or the 

directors of the fund may request: (A) A legible, true, and complete 

copy of the record in the medium and format in which it is stored; 

(B) a legible, true, and complete printout of the record; and (C) 

means to access, view, and print the records; and separately store, 

for the time required for preservation of the original record, a 

duplicate copy of the record on any medium allowed by this section. 

In the case of records retained on electronic storage media, the 

fund, or person that maintains and preserves records on its behalf, 

must establish and maintain procedures: (i) To maintain and preserve 

the records, so as to reasonably safeguard them from loss, 

alteration, or destruction; (ii) to limit access to the records to 

properly authorized personnel, the directors of the fund, and the 

Commission (including its examiners and other representatives); and 

(iii) to reasonably ensure that any reproduction of a non-electronic 

original record on electronic storage media is complete, true, and 

legible when retrieved.

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    The Commission periodically inspects the operations of all funds to 

ensure their compliance with the provisions of the Act and the rules 

under the Act. The Commission staff spends a significant portion of 

their time in these inspections reviewing the information contained in 

the books and records required to be kept by rule 31a-1 and to be 

preserved by rule 31a-2.

    There are approximately 4,522 registered investment companies 

(``funds'') as of September 30, 2009, all of which are required to 

comply with rule 31a-2. Based on conversations with representatives of 

the fund industry and past estimates, our staff estimates that each 

fund currently spends 220 hours per year complying with rule 31a-2. 

Based on these estimates, our staff estimates that the total annual 

burden for a fund to comply with rule 31a-2, is 220 hours, with a total 

annual burden for all funds of 994,840 hours.\9\

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    \9\ This estimate is based on the following calculation: 4,522 

registered investment companies x 220 hours = 994,840 total hours.

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    The hour burden estimates for retaining records under rule 31a-2 

are based on our experience with registrants and our experience with 

similar requirements under the Act and the rules under the Act. The 

number of burden hours may vary depending on, among other things, the 

complexity of the fund, the issues faced by the fund, and the number of 

series and classes of the fund. The estimated average burden hours are 

made solely for purposes of the Paperwork Reduction Act and are not 

derived from quantitative, comprehensive, or even representative



[[Page 54864]]



survey or study of the burdens associated with our rules and forms.

    The Commission staff estimates the average cost of preserving books 

and records required by rule 31a-2, to be approximately $70,000 

annually per fund. As discussed previously, there are approximately 

4,522 funds currently operating, for a total cost of preserving records 

as required by rule 31a-2 of $316,540,000 per year.\10\ Our staff 

understands, however, based on conversations with representatives of 

the fund industry, that funds would already spend approximately half of 

this amount ($158,270,000) to preserve these same books and records, as 

they are also necessary to prepare financial statements, meet various 

state reporting requirements, and prepare their annual federal and 

state income tax returns. Therefore, we estimate that the total annual 

cost burden for funds as a result of compliance with rule 31a-2 is 

$158,270,000 per year.

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    \10\ This estimate is based on the following calculation: 4,522 

funds x $70,000 = $316,540,000.

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    These estimates of average costs are 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. 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 OMB control number.

    Written comments are invited on: (a) Whether the collections of 

information are necessary for the proper performance of the functions 

of the Commission, including whether the information has practical 

utility; (b) the accuracy of the Commission's estimate of the burdens 

of the collections of information; (c) ways to enhance the quality, 

utility, and clarity of the information collected; and (d) ways to 

minimize the burdens of the collections 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 Charles Boucher, 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.



    Dated: October 19, 2009.

Florence E. Harmon,

Deputy Secretary.

[FR Doc. E9-25487 Filed 10-22-09; 8:45 am]

BILLING CODE 8011-01-P
