
[Federal Register Volume 75, Number 4 (Thursday, January 7, 2010)]
[Notices]
[Pages 1005-1007]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: X10-340107]


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SECURITIES AND EXCHANGE COMMISSION


Submission of OMB Review; Comment Request

Upon Written Request, Copies Available From: Securities and Exchange 
Commission, Office of Investor

[[Page 1006]]

Education and Advocacy, Washington, DC 20549-0213.

Extension: Rule 31a-2, SEC File No. 270-174, OMB Control No. 3235-
0179.

    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'') has submitted to the Office of 
Management and Budget a request for extension of the previously 
approved collection of information discussed below.
    Section 31(a)(1) of the Investment Company Act of 1940 \1\ (the 
``Act'') 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

[[Page 1007]]

not derived from quantitative, comprehensive, or even representative 
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.
    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 send an e-mail to Shagufta 
Ahmed at Shagufta_Ahmed@omb.eop.gov; and (ii) 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. Comments must be submitted to OMB within 
30 days of this notice.

    Dated: December 30, 2009.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-6 Filed 1-6-10; 8:45 am]
BILLING CODE 8011-01-P


