[Federal Register Volume 88, Number 40 (Wednesday, March 1, 2023)]
[Notices]
[Page 12998]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-04209]


=======================================================================
-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[SEC File No. 270-473, OMB Control No. 3235-0530]


Submission for OMB Review; Comment Request; Extension: Rule 32a-4

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. 350l et seq.), the Securities and Exchange 
Commission (``Commission'') has submitted to the Office of Management 
and Budget requests for extension of the previously approved 
collections of information discussed below.
    Section 32(a)(2) of the Investment Company Act of 1940 (15 U.S.C. 
80a 31(a)(2)) (``Act'') requires that the selection of a registered 
management investment company's or registered face-amount certificate 
company's (collectively, ``funds'') independent public accountant be 
submitted to shareholders for ratification or rejection. Rule 32a-4 
under the Investment Company Act (17 CFR 270.32a-4) exempts a fund from 
this requirement if, among other things, the fund has an audit 
committee consisting entirely of independent directors. The rule 
permits continuing oversight of a fund's accounting and auditing 
processes by an independent audit committee in place of a shareholder 
vote.
    Among other things, in order to rely on rule 32a-4, a fund's board 
of directors must adopt an audit committee charter and must preserve 
that charter, and any modifications to the charter, permanently in an 
easily accessible place. The purpose of these conditions is to ensure 
that Commission staff will be able to monitor the duties and 
responsibilities of an audit committee of a fund relying on the rule.
    Commission staff estimates that on average the board of directors 
takes 15 minutes to adopt the audit committee charter. Commission staff 
has estimated that with an average of 9 directors on the board,\1\ 
total director time to adopt the charter is 2.25 hours. Combined with 
an estimated \1/2\ hour of paralegal time to prepare the charter for 
board review, the staff estimates a total one-time collection of 
information burden of 2.75 hours for each fund. Once a board adopts an 
audit committee charter, the charter is preserved as part of the fund's 
records. Commission staff estimates that there is no annual hourly 
burden associated with preserving the charter in accordance with this 
rule.\2\
---------------------------------------------------------------------------

    \1\ This estimate is based on staff experience and on 
discussions with a representative of an entity that surveys funds 
and calculates fund board statistics based on responses to its 
surveys.
    \2\ This estimate is based on staff experience and discussions 
with funds regarding the hour burden related to maintenance of the 
charter.
---------------------------------------------------------------------------

    Because virtually all existing funds have now adopted audit 
committee charters, the annual one-time collection of information 
burden associated with adopting audit committee charters is limited to 
the burden incurred by newly established funds. Commission staff 
estimates that fund sponsors establish approximately 120 new funds each 
year,\3\ and that all of these funds will adopt an audit committee 
charter in order to rely on rule 32a-4. Thus, Commission staff 
estimates that the annual one-time hour burden associated with adopting 
an audit committee charter under rule 32a-4 is approximately 330 
hours.\4\
---------------------------------------------------------------------------

    \3\ This estimate is based on the average annual number of 
notifications of registration on Form N-8A filed from 2019 to 2021.
    \4\ This estimate is based on the following calculation: (2.75 
burden hours for establishing charter x 120 new funds = 330 burden 
hours).
---------------------------------------------------------------------------

    When funds adopt an audit committee charter in order to rely on 
rule 32a-4, they also may incur one-time costs related to hiring 
outside counsel to prepare the charter. Commission staff estimates that 
those costs average approximately $1500 per fund.\5\ As noted above, 
Commission staff estimates that approximately 120 new funds each year 
will adopt an audit committee charter in order to rely on rule 32a-4. 
Thus, Commission staff estimates that the ongoing annual cost burden 
associated with rule 32a-4 in the future will be approximately 
$180,000.\6\
---------------------------------------------------------------------------

    \5\ Costs may vary based on the individual needs of each fund. 
However, based on the staff's experience and conversations with 
outside counsel that prepare these charters, legal fees related to 
the preparation and adoption of an audit committee charter usually 
average $1500 or less. The Commission also understands that model 
audit committee charters are available, which reduces the costs 
associated with drafting a charter.
    \6\ This estimate is based on the following calculations: ($1500 
cost of adopting charter x 120 newly established funds = $180,000).
---------------------------------------------------------------------------

    The estimates of average burden hours and costs 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 collections of information required by 
rule 32a-4 are necessary to obtain the benefits of the rule. The 
Commission is seeking OMB approval, because 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 background documentation for this information 
collection at the following website: www.reginfo.gov. Find this 
particular information collection by selecting ``Currently under 30-day 
Review--Open for Public Comments'' or by using the search function. 
Written comments and recommendations for the proposed information 
collection should be sent within 30 days of publication of this notice 
by March 31, 2023 to (i) [email protected] and 
(ii) David Bottom, Director/Chief Information Officer, Securities and 
Exchange Commission, c/o John Pezzullo, 100 F Street NE, Washington, DC 
20549, or by sending an email to: [email protected].

    Dated: February 23, 2023.
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-04209 Filed 2-28-23; 8:45 am]
BILLING CODE 8011-01-P


