[Federal Register Volume 87, Number 124 (Wednesday, June 29, 2022)]
[Notices]
[Pages 38792-38794]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-13808]


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SECURITIES AND EXCHANGE COMMISSION

[SEC File No. 270-176, OMB Control No. 3235-0311]


Proposed Collection; Comment Request; Extension: Rule 7d-1

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

    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 
collections of information summarized below. The Commission plans to 
submit these existing collection of information to the Office of 
Management and Budget for extension and approval.
    Section 7(d) of the Investment Company Act of 1940 (15 U.S.C. 80a-
7(d)) (the ``Act'' or ``Investment Company Act'') requires an 
investment company (``fund'') organized outside the United States 
(``foreign fund'') to obtain an order from the Commission allowing the 
fund to register under the Act before making a public offering of its 
securities through the United States mail or any means of interstate 
commerce. The Commission may issue an order only if it finds that it is 
both legally and practically feasible effectively to enforce the 
provisions of the Act against the foreign fund, and that the 
registration of the fund is consistent with the public interest and 
protection of investors.
    Rule 7d-1 (17 CFR 270.7d-1) under the Act, which was adopted in 
1954, specifies the conditions under which a Canadian management 
investment company (``Canadian fund'') may request an order from the 
Commission permitting it to register under the Act. Although rule 7d-1 
by its terms applies only to Canadian funds, other foreign funds 
generally have agreed to comply with the requirements of rule 7d-1 as a 
prerequisite to receiving an order permitting those foreign funds' 
registration under the Act.
    The rule requires a Canadian fund that wishes to register to file 
an application with the Commission that contains various undertakings 
and agreements by the fund. The requirement of the Canadian fund to 
file an application is a collection of information under the Paperwork 
Reduction Act. Certain of the undertakings and agreements, in turn, 
impose the following additional information collection requirements:

    (1) the fund must file with the Commission agreements between 
the fund and its directors, officers, and service providers 
requiring them to comply with the fund's charter and bylaws, the 
Act, and certain other obligations relating to the undertakings and 
agreements in the application;
    (2) the fund and each of its directors, officers, and investment 
advisers that is not a U.S. resident, must file with the Commission 
an irrevocable designation of the fund's custodian in the United 
States as agent for service of process;
    (3) the fund's charter and bylaws must provide that (a) the fund 
will comply with certain provisions of the Act applicable to all 
funds, (b) the fund will maintain originals or copies of its books 
and records in the United States, and (c) the fund's contracts with 
its custodian, investment adviser, and principal underwriter, will 
contain certain terms, including a requirement that the adviser 
maintain originals or copies of pertinent records in the United 
States;
    (4) the fund's contracts with service providers will require 
that the provider perform the contract in accordance with the Act, 
the Securities Act of 1933 (15 U.S.C. 77a), and the Securities 
Exchange Act of 1934 (15 U.S.C. 78a), as applicable; and
    (5) the fund must file, and periodically revise, a list of 
persons affiliated with the fund or its adviser or underwriter.

    As noted above, under section 7(d) of the Act the Commission may 
issue an

[[Page 38793]]

order permitting a foreign fund's registration only if the Commission 
finds that ``by reason of special circumstances or arrangements, it is 
both legally and practically feasible effectively to enforce the 
provisions of the (Act).'' The information collection requirements are 
necessary to ensure that the substantive provisions of the Act may be 
enforced as a matter of contract right in the United States or Canada 
by the fund's shareholders or by the Commission.
    Rule 7d-1 also contains certain information collection requirements 
that are associated with other provisions of the Act. These 
requirements are applicable to all registered funds and are outside the 
scope of this request.
    The Commission believes that one foreign fund is registered under 
rule 7d-1 and currently active. Apart from requirements under the Act 
applicable to all registered funds, rule 7d-1 imposes ongoing burdens 
to maintain records in the United States, and to update, as necessary, 
certain fund agreements, designations of the fund's custodian as 
service agent, and the fund's list of affiliated persons. The 
Commission staff estimates that each year under the rule, the active 
registrant and its directors, officers, and service providers engage in 
the following collections of information and associated burden hours:
    For the fund and its investment adviser to maintain records in the 
United States: \1\
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    \1\ The rule requires an applicant and its investment adviser to 
maintain records in the United States (which, without the 
requirement, might be maintained in Canada or another foreign 
jurisdiction), which facilitates routine inspections and any special 
investigations of the fund by Commission staff. The registrant and 
its investment adviser, however, already maintain the registrant's 
records in the United States and in no other jurisdiction. 
Therefore, maintenance of the registrant's records in the United 
States does not impose an additional burden beyond that imposed by 
other provisions of the Act. Those provisions are applicable to all 
registered funds and the compliance burden of those provisions is 
outside the scope of this request.
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    0 hours: 0 minutes of compliance clerk time.
     For the fund to update its list of affiliated persons:
    2 hours: 2 hours of support staff time.
     For new officers, directors, and service providers to 
enter into and file agreements requiring them to comply with the fund's 
charter and bylaws, the Act, and certain other obligations:
    0.5 hours: 7.5 minutes of director time; 2.5 minutes of officer 
time; 20 minutes of support staff time.
     For new officers, directors, and investment advisers who 
are not residents of the United States to file irrevocable designation 
of the fund's custodian as agent for process of service:
    0.25 hours: 5 minutes of director time; 10 minutes of support staff 
time.
    Based on the estimates above, the Commission estimates that the 
total annual burden of the rule's paperwork requirements is 2.75 
hours.\2\ If a fund were to file an application under rule 7d-1 to 
register under the Act, the Commission estimates that the rule would 
impose initial information collection burdens (for filing an 
application, preparing the specified charter, bylaw, and contract 
provisions, designations of agents for service of process, and an 
initial list of affiliated persons, and establishing a means of keeping 
records in the United States) of approximately 90 hours for the fund 
and its associated persons. The Commission is not including these hours 
in its calculation of the annual burden because no fund has applied to 
register under the Act pursuant to rule 7d-1 in the last three years.
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    \2\ This estimate is based on the following calculation: (0 + 2 
+ 0.5 + 0.25) = 2.75 hours.
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    As noted above, after registration, a Canadian fund may file a 
supplemental application seeking special relief designed for the fund's 
particular circumstances. Rule 7d-1 does not mandate these 
applications. For purposes of this PRA we are assuming one registrant 
has filed a substantive supplemental application within the past three 
years. The Commission staff estimates that the rule would impose an 
additional information collection burden of 5 hours on a fund to comply 
with the Commission's application process. The staff understands that 
funds also obtain assistance from outside counsel to comply with the 
Commission's application process and the cost burden of using outside 
counsel is discussed below.
    Therefore, the Commission staff estimates the aggregate annual 
burden hours of the collection of information associated with rule 7d-1 
is 13.25 hours.\3\ Amortized over three years we estimate an hourly 
annual burden of 4.42 hours.\4\ These estimates of average burden hours 
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 Commission rules.
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    \3\ This estimate is based on the following calculation: 2.75 
hours year 1 + 5 hours year 1 + 2.75 hours year 2 + 2.75 hours year 
3 = 13.25 hours.
    \4\ The estimates are based on the following calculations: 4.42 
hours = 13.25 cumulative burden hours/3 years.
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    If a Canadian or other foreign fund in the future applied to 
register under the Act under rule 7d-1, the fund initially might have 
capital and start-up costs (not including hourly burdens) of an 
estimated $20,000 to comply with the rule's initial information 
collection requirements. These costs include legal and processing-
related fees for preparing the required documentation (such as the 
application, charter, bylaw, and contract provisions, designations for 
service of process, and the list of affiliated persons). Other related 
costs would include fees for establishing arrangements with a custodian 
or other agent for maintaining records in the United States, copying 
and transportation costs for records, and the costs of purchasing or 
leasing computer equipment, software, or other record storage equipment 
for records maintained in electronic or photographic form.
    The Commission expects that a fund and its sponsors would incur 
these costs immediately, and that the annualized cost of the 
expenditures would be $20,000 in the first year. Some expenditures 
might involve capital improvements, such as computer equipment, having 
expected useful lives for which annualized figures beyond the first 
year would be meaningful.
    These annualized figures are not provided, however, because, in 
most cases, the expenses would be incurred immediately rather than on 
an annual basis. The Commission is not including these costs in its 
calculation of the annualized capital/start-up costs because no fund 
has applied under rule 7d-1 to register under the Act pursuant to rule 
7d-1 in the last three years.
    As indicated above, a Canadian or fund may file a supplemental 
application seeking special relief designed for the fund's particular 
circumstances. Rule 7d-1 does not mandate these applications. The 
active registrant filed a substantive supplemental application in the 
past three years. As noted above, the staff understands that funds 
generally use outside counsel to prepare the application. The staff 
estimates that outside counsel spends 10 hours preparing a supplemental 
application, including 8 hours by an associate and 2 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 $531 per hour, based on information received from 
funds, intermediaries and their counsel. The Commission staff therefore 
estimates that the fund would obtain assistance

[[Page 38794]]

from outside counsel at a cost of $5,130.\5\
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    \5\ This estimate is based on the following calculation: 10 
hours x $531 per hour = $5,130.
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    The estimates of average burden hours and average cost burdens 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. Compliance with the collection of information requirements of 
the rule is necessary to obtain the benefit of relying on the rule. 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 proposed 
collection of information is necessary for the proper performance of 
the functions of the Commission, including whether the information 
shall 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 by August 29, 2022.
    An agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information under the PRA unless it 
displays a currently valid OMB control number.
    Please direct your written comments to: David Bottom, Acting 
Director/Chief Information Officer, Securities and Exchange Commission, 
c/o John Pezzullo, 100 F Street NE, Washington, DC 20549 or send an 
email to: [email protected].

    Dated: June 23, 2022.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-13808 Filed 6-28-22; 8:45 am]
BILLING CODE 8011-01-P


