[Federal Register Volume 84, Number 189 (Monday, September 30, 2019)]
[Notices]
[Pages 51690-51692]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-21079]


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

SECURITIES AND EXCHANGE COMMISSION


Submission for OMB Review; 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 7d-1, OMB Control No. 3235-0311, SEC File No. 270-176

    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 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 the foreign fund's 
registration under the Act.
    The rule requires a Canadian fund proposing to register under the 
Act to file an application with the Commission that contains various 
undertakings and agreements of the fund. The requirement for 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 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 assure 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\ 0 hours: 0 minutes of compliance 
clerk time.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

     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

[[Page 51691]]

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\ We estimate that directors perform 0.21 hours of these burden 
hours at a total cost of $930.20,\3\ officers perform 0.04 of these 
burden hours at a total cost of $22.08,\4\ and support staff perform 
2.5 of these burden hours at a total cost of $175.\5\ Thus, the 
Commission estimates the aggregate annual cost of these burden hours 
associated with rule 7d-1 is $1,127.28.\6\
---------------------------------------------------------------------------

    \2\ This estimate is based on the following calculation: (0 + 2 
+ 0.5 + 0.25) = 2.75 hours.
    \3\ The director estimates are based on the following 
calculations: (7.5 minutes + 5 minutes)/60 minutes per hour = 0.2083 
hours; and 0.2083 hours x $4465 per hour = $930.20. The per hour 
cost estimate is based on estimated hourly compensation for each 
board member of $558.125 and an average board size of 8 members. The 
$4465 per hour estimate for a fund board of directors includes a CPI 
inflation adjustment from the 2009 estimate.
    \4\ The officer estimates are based on the following 
calculations: 2.5 minutes/60 minutes per hour = 0.0416 hours; 0.0416 
hours x $530 per hour = $22.08. The per hour cost estimate, as well 
as other internal time cost estimates for management and 
professional earnings, is based on the figure for chief compliance 
officers found in SIFMA's Management & Professional Earnings in the 
Securities Industry 2013, 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.
    \5\ The support staff estimates are based on the following 
calculations: 2 hours + 20 minutes + 10 minutes = 2.5 hours; and 2.5 
hours x $70 per hour = $175. The per hour cost estimate, as well as 
other internal time cost estimates for office salaries, is based on 
the figure for compliance clerks found in SIFMA's Office Salaries in 
the Securities Industry 2013, 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.
    \6\ This estimate is based on the following calculation: 
$1,127.28 = $930.20 + $22.08 + $175.
---------------------------------------------------------------------------

    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.
    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 at a cost of $6,136.50.\7\ 
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 in Item 13 below.
---------------------------------------------------------------------------

    \7\ The staff estimates that, on average, the fund's investment 
adviser spends approximately 4 hours to review an application, 
including 3.5 hours by an assistant general counsel at a cost of 
$466 per hour, 0.5 hours by an administrative assistant, at a cost 
of $81 per hour, and the fund's board of directors spends an 
additional 1 hour at a cost of $4,465 per hour for a total of 5 
hours, at a total cost of $6,136.50. This estimate is based on the 
following calculation: (3.5 hours x $466 per hour) + (0.5 hours x 
$81 per hour) + (1 hour x $4465 per hour) = $6,136.50.
---------------------------------------------------------------------------

    Therefore, the Commission staff estimates the aggregate annual 
burden hours of the collection of information associated with rule 7d-1 
is 13.25 hours, at a cost of $9,518.34.\8\ Amortized over three years 
we estimate an annual cost burden of $3,172.78 based on an hourly 
annual burden of 4.42 hours.\9\ 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.
---------------------------------------------------------------------------

    \8\ These estimates are based on the following calculations: 
2.75 hours year 1 + 5 hours year 1 + 2.75 hours year 2 + 2.75 hours 
year 3 = 13.25 hours; $1,127.28 year 1+ $6,136.50 year 1 + $1,127.28 
year 2 + $1,127.28 year 3 = $9,518.34. As discussed above, the 
ongoing compliance burdens for an active fund require updates each 
year, whereas we estimate to receive one supplemental application 
each three year period.
    \9\ The estimates are based on the following calculations: 4.42 
hours = 13.25 cumulative burden hours/3 years. Likewise, the 
amortized cost burden is based on the following calculations: 
$9,518.34 cumulative 3-year cost burden/3 years = $3,172.78 average 
annual cost burden.
---------------------------------------------------------------------------

    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 foreign 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 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 application in the past three 
years. The staff understands that funds generally use outside counsel 
to prepare the application. The staff estimates that outside counsel 
spends 10 hours preparing the application, including 8 hours by an 
associate and 2 hours by a partner. Outside counsel billing 
arrangements vary based on numerous factors, but the staff has 
estimated the average cost of outside counsel at $400 per hour, based 
on information received from funds, intermediaries and their counsel. 
The Commission therefore estimates that the fund would obtain 
assistance from outside counsel at a cost of $4,000.\10\
---------------------------------------------------------------------------

    \10\ This estimate is based on the following calculation: 10 
hours x $400 per hour = $4,000.
---------------------------------------------------------------------------

    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

[[Page 51692]]

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.
    The public may view the background documentation for this 
information collection at the following website, 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 email to: 
Shagufta_Ahmed@omb.eop.gov; and (ii) Charles Riddle, Acting Director/
Chief Information Officer, Securities and Exchange Commission, c/o 
Candace Kenner, 100 F Street NE, Washington, DC 20549 or send an email 
to: PRA_Mailbox@sec.gov. Comments must be submitted to OMB within 30 
days of this notice.

    Dated: September 24, 2019.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-21079 Filed 9-27-19; 8:45 am]
BILLING CODE 8011-01-P


