
[Federal Register Volume 81, Number 20 (Monday, February 1, 2016)]
[Notices]
[Pages 5148-5149]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-01717]


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SECURITIES AND EXCHANGE COMMISSION


Proposed Collection; Comment Request

Upon Written Request, Copies Available From: Securities and Exchange 
Commission, Office of FOIA Services, 100 F Street NE., Washington, DC 
20549-2736.

Extension:
     Rule 17e-1; SEC File No. 270-224, OMB Control No. 3235-0217.

    Notice is hereby given that, pursuant to the Paperwork Reduction 
Act of 1995 (44 U.S.C. 3501 et seq.) (``Paperwork Reduction Act''), 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

[[Page 5149]]

Management and Budget (``OMB'') for extension and approval.
    Rule 17e-1 (17 CFR 270.17e-1) under the Investment Company Act of 
1940 (15 U.S.C. 80a-1 et seq.) (the ``Investment Company Act'') deems a 
remuneration as ``not exceeding the usual and customary broker's 
commission'' for purposes of Section 17(e)(2)(A) if, among other 
things, a registered investment company's (``fund's'') board of 
directors has adopted procedures reasonably designed to provide that 
the remuneration to an affiliated broker is a reasonable and fair 
amount compared to that received by other brokers in connection with 
comparable transactions involving similar securities being purchased or 
sold on a securities exchange during a comparable period of time and 
the board makes and approves such changes as it deems necessary. In 
addition, each quarter, the board must determine that all transactions 
effected under the rule during the preceding quarter complied with the 
established procedures. Rule 17e-1 also requires the fund to (i) 
maintain permanently a written copy of the procedures adopted by the 
board for complying with the requirements of the rule; and (ii) 
maintain for a period of six years, the first two in an easily 
accessible place, a written record of each transaction subject to the 
rule, setting forth the amount and source of the commission, fee, or 
other remuneration received; the identity of the broker; the terms of 
the transaction; and the materials used to determine that the 
transactions were effected in compliance with the procedures adopted by 
the board. The recordkeeping requirements under rule 17e-1 enable the 
Commission to ensure that affiliated brokers receive compensation that 
does not exceed the usual and customary broker's commission. Without 
the recordkeeping requirements, Commission inspectors would have 
difficulty ascertaining whether funds were complying with rule 17e-1.
    Based on an analysis of fund filings, the staff estimates that 
approximately 320 funds enter into subadvisory agreements each year.\1\ 
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 17e-
1. Because these additional clauses are identical to the clauses that a 
fund would need to insert in their subadvisory contracts to rely on 
rules 12d3-1, 10f-3, and 17a-10, 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 to all four rules. Therefore, we estimate that 
the burden allocated to rule 17e-1 for this contract change would be 
0.75 hours.\2\ Assuming that all 320 funds enter into new subadvisory 
contracts each year make the modification to their contract required by 
the rule, we estimate that the rule's contract modification requirement 
will result in 240 burden hours annually.\3\
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    \1\ Based on data from Morningstar, as of September, 2015, there 
are 12,426 registered funds (open-end funds, closed-end funds, and 
exchange-traded funds), 4,683 funds of which have subadvisory 
relationships (approximately 38%). Based on data from the 2015 ICI 
Factbook, 843 new funds were established in 2014 (654 open-end funds 
+ 176 exchange-traded funds + 13 closed-end funds (from the ICI 
Research Perspective, April 2015)). 843 new funds x 38% = 320 funds.
    \2\ 3 hours / 4 rules = 0.75 hours.
    \3\ This estimate is based on the following calculation: 0.75 
hours x 320 funds = 240 burden hours.
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    Based on an analysis of fund filings, we estimate that 
approximately 1,696 funds use at least one affiliated broker. Based on 
staff experience and conversations with fund representatives, the staff 
estimates approximately 40 percent of transactions (and thus, 40% of 
funds) that occur under the rule 17e-1 would be exempt from its 
recordkeeping and review requirements. This would leave approximately 
1,018 funds \4\ still subject to the rule's recordkeeping and review 
requirements. Based on staff experience and conversations with fund 
representatives, we estimate that the burden of compliance with rule 
17e-1 is approximately 50 hours per fund per year. This time is spent, 
for example, reviewing the applicable transactions and maintaining 
records. Accordingly, we calculate the total estimated annual internal 
burden of complying with the review and recordkeeping requirements of 
rule 17e-1 to be approximately 50,900 hours \5\ and the total annual 
burden of the rule's paperwork requirements is 51,140 hours.\6\
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    \4\ 1,696 funds x 0.6 = 1,018 funds.
    \5\ 1,018 funds x 50 hours per fund = 50,900 hours.
    \6\ 240 hours + 50,900 hours = 51,140 hours.
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    Estimates of average burden hours are made solely for the purposes 
of the Paperwork Reduction Act and are not derived from a comprehensive 
or even a representative survey or study of the costs of Commission 
rules and forms. The collection of information under rule 17e-1 is 
mandatory. The information provided under rule 17e-1 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 OMB control number.
    Written comments are invited on: (a) Whether the proposed 
collection of information is necessary for the proper performance of 
the functions of the agency, including whether the information will 
have 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 Pamela Dyson, Director/Chief 
Information 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: January 25, 2016.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-01717 Filed 1-29-16; 8:45 am]
 BILLING CODE 8011-01-P


