
[Federal Register Volume 76, Number 42 (Thursday, March 3, 2011)]
[Notices]
[Pages 11827-11828]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-4730]


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

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 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 
(``Commission'') has submitted to the Office of Management and Budget 
(``OMB'') a request for extension of the previously approved collection 
of information discussed below.
    Section 17(a) of the Investment Company Act of 1940 (the ``Act''), 
generally prohibits affiliated persons of a registered investment 
company

[[Page 11828]]

(``fund'') from borrowing money or other property from, or selling or 
buying securities or other property to or from, the fund or any company 
that the fund controls.\1\ Section 2(a)(3) of the Act defines 
``affiliated person'' of a fund to include its investment advisers.\2\ 
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 
that 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 80a-17(a).
    \2\ 15 U.S.C. 80a-2(a)(3)(E).
---------------------------------------------------------------------------

    To qualify for the exemptions in rule 17a-10, the subadvisory 
relationship must be the sole reason why section 17(a) prohibits the 
transaction. In addition, 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.\3\ Section 17(a) of the 
Investment Company Act of 1940 (the ``Act''), generally prohibits 
affiliated persons of a registered investment company (``fund'') from 
borrowing money or other 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 defines ``affiliated person'' of a 
fund to include its investment advisers. Rule 17a-10 permits (i) a 
subadviser of a fund to enter into transactions with funds the 
subadviser does not advise but that 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.
---------------------------------------------------------------------------

    \3\ 17 CFR 270.17a-10(a)(2).
---------------------------------------------------------------------------

    To qualify for the exemptions in rule 17a-10, the subadvisory 
relationship must be the sole reason why section 17(a) prohibits the 
transaction. In addition, 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. This requirement 
regarding the prohibitions and limitations in advisory contracts of 
subadvisors relying on the rule constitutes a collection of information 
under the Paperwork Reduction Act of 1995 (``PRA'').\4\
---------------------------------------------------------------------------

    \4\ 44 U.S.C. 3501.
---------------------------------------------------------------------------

    The staff assumes that all funds existing in 2003 amended their 
advisory contracts following the amendments to rule 17a-10 that year 
that conditioned certain exemptions upon these contractual alterations, 
and therefore there is no continuing burden for those funds.\5\ Staff 
also assumes that funds that came into existence after 2003 included 
the contractual requirements in rule 17a-10 in their subadvisory 
agreements and therefore there is no continuing burden for those funds.
---------------------------------------------------------------------------

    \5\ We assume that funds formed after 2003 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 252 fund portfolios enter into new subadvisory agreements 
each year.\6\ Based on discussions with industry representatives, the 
staff estimates that it will require approximately 3 attorney hours 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.\7\ Assuming that all 252 
funds that enter into new subadvisory contracts each year include in 
their contract the provisions required by the rule, we estimate that 
the rule's contract requirement will result in 189 burden hours 
annually, with an associated cost of approximately $59,724.\8\
---------------------------------------------------------------------------

    \6\ Based on information in Commission filings, we estimate that 
42.5 percent of funds are advised by subadvisers.
    \7\ This estimate is based on the following calculation: 3 hours 
/ 4 rules = 0.75 hours.
    \8\ These estimates are based on the following calculations: 
0.75 hours x 252 portfolios = 189 burden hours; $316 per hour x 189 
hours = $59,724 total cost. 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 and Financial Markets Association. The $316 per hour figure 
for an attorney is from the Securities Industry and Financial 
Markets Association's Management & Professional Earnings in the 
Securities Industry 2009, modified by Commission staff to account 
for an 1800-hour work-year and multiplied by 5.35 to account for 
bonuses, firm size, employee benefits, and overhead.
---------------------------------------------------------------------------

    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 this collection of 
information requirement is necessary to obtain the benefit of relying 
on rule 17a-10. Responses will not be kept confidential. 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.
    The public may view the background documentation for this 
information collection at the following Web site, http://www.reginfo.gov. Comments should be directed to: (i) Desk Officer for 
the Securities and Exchange Commission, Office of Information and 
Regulatory Affairs, Office of Management and Budget, Room 10102, New 
Executive Office Building, Washington, DC 20503, or by sending an e-
mail to: Shagufta_Ahmed@omb.eop.gov; and (ii) Thomas Bayer, Chief 
Information Officer, Securities and Exchange Commission, c/o Remi 
Pavlik-Simon, 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: February 25, 2011.
Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-4730 Filed 3-2-11; 8:45 am]
BILLING CODE 8011-01-P


