
[Federal Register Volume 78, Number 251 (Tuesday, December 31, 2013)]
[Notices]
[Pages 79712-79714]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-31239]


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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 19b-1, OMB Control No. 3235-0354, SEC File No. 270-312.

    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'') 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 19(b) of the Investment Company Act of 1940 (the ``Act'') 
(15 U.S.C. 80a-19(b)) authorizes the Commission to regulate registered 
investment company (``fund'') distributions of long-term capital gains 
made more frequently than once every twelve months. Accordingly, rule 
19b-1 under the Act (17 CFR 270.19b-1) regulates the frequency of fund

[[Page 79713]]

distributions of capital gains. Rule 19b-1(c) states that the rule does 
not apply to a unit investment trust (``UIT'') if it is engaged 
exclusively in the business of investing in certain eligible securities 
(generally, fixed-income securities), provided that: (i) The capital 
gains distribution falls within one of five categories specified in the 
rule \1\ and (ii) the distribution is accompanied by a report to the 
unitholder that clearly describes the distribution as a capital gains 
distribution (the ``notice requirement'').\2\ Rule 19b-1(e) permits a 
fund to apply to the Commission for permission to distribute long-term 
capital gains that would otherwise be prohibited by the rule if the 
fund did not foresee the circumstances that created the need for the 
distribution. The application must set forth the pertinent facts and 
explain the circumstances that justify the distribution.\3\ An 
application that meets those requirements is deemed to be granted 
unless the Commission denies the request within 15 days after the 
Commission receives the application.
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    \1\ 17 CFR 270.19b-1(c)(1).
    \2\ The notice requirement in rule 19b-1(c)(2) supplements the 
notice requirement of section 19(a) [15 U.S.C. 80a-19(a)], which 
requires any distribution in the nature of a dividend payment to be 
accompanied by a notice disclosing the source of the distribution.
    \3\ Rule 19b-1(e) also requires that the application comply with 
rule 0-2 [17 CFR 270.02] under the Act, which sets forth the general 
requirements for papers and applications filed with the Commission 
pursuant to the Act and rules thereunder.
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    Commission staff estimates that zero funds will file an application 
under rule 19b-1(e) each year. The staff understands that if a fund 
files an application it generally uses outside counsel to prepare the 
application. The cost burden of using outside counsel is discussed 
below. The staff estimates that, on average, a fund's investment 
adviser would spend approximately 4 hours to review an application, 
including 3.5 hours by an assistant general counsel at a cost of $467 
per hour and 0.5 hours by an administrative assistant at a cost of $72 
per hour, and the fund's board of directors would spend an additional 1 
hour at a cost of $4,500 per hour, for a total of 5 hours.\4\ Thus, the 
staff estimates that the annual hour burden of the collection of 
information imposed by rule 19b-1(e) would be approximately five hours 
per fund, at a cost of $6173.50.\5\ Because the staff estimates that, 
each year, zero funds will file an application pursuant to rule 19b-
1(e), the total burden for the information collection is 0 hours at a 
cost of $0.\6\
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    \4\ The estimate for assistant general counsels is from SIFMA's 
Management & Professional Earnings in the Securities Industry 2012, 
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 for administrative assistants is 
from SIFMA's Office Salaries in the Securities Industry 2012, 
modified by Commission staff to account for an 1800-hour work-year 
and multiplied by 2.93 to account for bonuses, firm size, employee 
benefits and overhead. The estimate for the board of directors as a 
whole is derived from estimates made by the staff regarding typical 
board size and compensation that is based on information received 
from fund representatives and publicly available sources.
    \5\ This estimate is based on the following calculations: 
$1634.50 (3.5 hours x $467 = $1634.50) plus $36 (0.5 hours x $72 = 
$36) plus $4500 equals $6173.50 (cost of one application).
    \6\ This estimate is based on the following calculation: 
$6173.50 (cost of one application) multiplied by 0 applications = $0 
total cost.
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    Commission staff estimates that there is no hour burden associated 
with complying with the collection of information component of rule 
19b-1(c). Although Commission staff estimates that there is no hour 
burden associated with rule 19b-1, the staff is requesting an hour 
burden of one hour for administrative purposes.
    As noted above, Commission staff understands that funds that file 
an application under rule 19b-1(e) generally use outside counsel to 
prepare the application.\7\ The staff estimates that, on average, 
outside counsel spends 10 hours preparing a rule 19b-1(e) application, 
including eight hours by an associate and two hours by a partner. 
Outside counsel billing arrangements and rates vary based on numerous 
factors, but the staff has estimated the average cost of outside 
counsel as $450 per hour, based on information received from funds, 
intermediaries, and their counsel. The staff therefore estimates that 
the average cost of outside counsel preparation of the rule 19b-1(e) 
exemptive application is $4,500.\8\ Because the staff estimates that, 
each year, zero funds will file an application pursuant to rule 19b-
1(e), the total annual cost burden imposed by the exemptive application 
requirements of rule 19b-1(e) is estimated to be $0.\9\
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    \7\ This understanding is based on conversations with 
representatives from the fund industry.
    \8\ This estimate is based on the following calculation: 10 
hours multiplied by $450 per hour equals $4,500.
    \9\ This estimate is based on the following calculation: $4,500 
multiplied by 0 (funds) equals $0.
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    The Commission staff estimates that there are approximately 3,361 
UITs \10\ that may rely on rule 19b-1(c) to make capital gains 
distributions. The staff estimates that, on average, these UITs rely on 
rule 19b-1(c) once a year to make a capital gains distribution.\11\ In 
most cases, the trustee of the UIT is responsible for preparing and 
sending the notices that must accompany a capital gains distribution 
under rule 19b-1(c)(2). These notices require limited preparation, the 
cost of which accounts for only a small, indiscrete portion of the 
comprehensive fee charged by the trustee for its services to the UIT. 
The staff believes that as a matter of good business practice, and for 
tax preparation reasons, UITs would collect and distribute the capital 
gains information required to be sent to unitholders under rule 19b-
1(c) even in the absence of the rule. The staff estimates that the cost 
of preparing a notice for a capital gains distribution under rule 19b-
1(c)(2) is approximately $50. There is no separate cost to mail the 
notices because they are mailed with the capital gains distribution. 
Thus, the staff estimates that the capital gains distribution notice 
requirement imposes an annual cost on UITs of approximately 
$168,050.\12\ The staff therefore estimates that the total cost imposed 
by rule 19b-1 is $168,050 ($168,050 plus $0 (total cost associated with 
rule 19b-1(e)) equals $168,050).
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    \10\ See 2013 Investment Company Fact Book, Investment Company 
Institute, available at http://www.ici.org/pdf/2013_factbook.pdf.
    \11\ The number of times UITs rely on the rule to make capital 
gains distributions depends on a wide range of factors and, thus, 
can vary greatly across years and UITs. UITs may distribute capital 
gains biannually, annually, quarterly, or at other intervals. 
Additionally, a number of UITs are organized as grantor trusts, and 
therefore do not generally make capital gains distributions under 
rule 19b-1(c), or may not rely on rule 19b-1(c) as they do not meet 
the rule's requirements.
    \12\ This estimate is based on the following calculation: 3361 
UITs multiplied by $50 equals $168,050.
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    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 collection of 
information is 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 burden of 
the collection of information; (c) ways to enhance the quality, 
utility, and clarity of the 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 Thomas Bayer, Chief 
Information

[[Page 79714]]

Officer, Securities and Exchange Commission, C/O Remi Pavlik-Simon, 100 
F Street NE., Washington, DC 20549; or send an email to: PRA_Mailbox@sec.gov.

    Dated: December 24, 2013.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2013-31239 Filed 12-30-13; 8:45 am]
BILLING CODE 8011-01-P


