[Federal Register Volume 88, Number 8 (Thursday, January 12, 2023)]
[Notices]
[Pages 2142-2144]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-00427]


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SECURITIES AND EXCHANGE COMMISSION

[SEC File No. 270-505, OMB Control No. 3235-0562]


Proposed Collection; Comment Request; Extension: Rule 17d-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 et seq.), the Securities and Exchange 
Commission (``Commission'') is soliciting comments on the collections 
of information

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summarized below. The Commission plans to submit these existing 
collections of information to the Office of Management and Budget for 
extension and approval.
    Section 17(d) (15 U.S.C. 80a-17(d)) of the Investment Company Act 
of 1940 (15 U.S.C. 80a et seq.) (the ``Act'') prohibits first- and 
second-tier affiliates of a fund, the fund's principal underwriters, 
and affiliated persons of the fund's principal underwriters, acting as 
principal, to effect any transaction in which the fund or a company 
controlled by the fund is a joint or a joint and several participant in 
contravention of the Commission's rules. Rule 17d-1 (17 CFR 270.17d-1) 
prohibits an affiliated person of or principal underwriter for any fund 
(a ``first-tier affiliate''), or any affiliated person of such person 
or underwriter (a ``second-tier affiliate''), acting as principal, from 
participating in or effecting any transaction in connection with a 
joint enterprise or other joint arrangement in which the fund is a 
participant, unless prior to entering into the enterprise or 
arrangement ``an application regarding [the transaction] has been filed 
with the Commission and has been granted by an order.'' In reviewing 
the proposed affiliated transaction, the rule provides that the 
Commission will consider whether the proposal is (i) consistent with 
the provisions, policies, and purposes of the Act, and (ii) on a basis 
different from or less advantageous than that of other participants in 
determining whether to grant an exemptive application for a proposed 
joint enterprise, joint arrangement, or profit-sharing plan.
    Rule 17d-1 also contains a number of exceptions to the requirement 
that a fund must obtain Commission approval prior to entering into 
joint transactions or arrangements with affiliates. For example, funds 
do not have to obtain Commission approval for certain employee 
compensation plans, certain tax-deferred employee benefit plans, 
certain transactions involving small business investment companies, the 
receipt of securities or cash by certain affiliates pursuant to a plan 
of reorganization, certain arrangements regarding liability insurance 
policies and transactions with ``portfolio affiliates'' (companies that 
are affiliated with the fund solely as a result of the fund (or an 
affiliated fund) controlling them or owning more than five percent of 
their voting securities) so long as certain other affiliated persons of 
the fund (e.g., the fund's adviser, persons controlling the fund, and 
persons under common control with the fund) are not parties to the 
transaction and do not have a ``financial interest'' in a party to the 
transaction. The rule excludes from the definition of ``financial 
interest'' any interest that the fund's board of directors (including a 
majority of the directors who are not interested persons of the fund) 
finds to be not material, as long as the board records the basis for 
its finding in their meeting minutes.
    Thus, the rule contains two filing and recordkeeping requirements 
that constitute collections of information. First, rule 17d-1 requires 
funds that wish to engage in a joint transaction or arrangement with 
affiliates to meet the procedural requirements for obtaining exemptive 
relief from the rule's prohibition on joint transactions or 
arrangements involving first- or second-tier affiliates. Second, rule 
17d-1 permits a portfolio affiliate to enter into a joint transaction 
or arrangement with the fund if a prohibited participant has a 
financial interest that the fund's board determines is not material and 
records the basis for this finding in their meeting minutes. These 
requirements of rule 17d-1 are designed to prevent fund insiders from 
managing funds for their own benefit, rather than for the benefit of 
the funds' shareholders.
    Based on an analysis of past filings, Commission staff estimates 
that 43 funds file applications under section 17(d) and rule 17d-1 per 
year. The staff understands that funds that file an application 
generally obtain assistance from outside counsel to prepare the 
application. The cost burden of using outside counsel is discussed 
below. The Commission staff estimates that each applicant will spend an 
average of 75 hours to comply with the Commission's applications 
process. The Commission staff therefore estimates the annual burden 
hours per year for all funds under rule 17d-1's application process to 
be 3,225 hours at a cost of $1,428,675.\1\ The Commission, therefore, 
requests authorization to reduce the inventory of total burden hours 
per year for all funds under rule 17d-1 from the current authorized 
burden of 3,542 hours to 3,225 hours. The reduction is due to a 
decrease in the Commission's estimate of the number of internal annual 
burden hours per application for exemptions under rule 17d-1.
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    \1\ This estimate is based on the following calculation: 75 
hours per applicant x $433 wage rate = $33,225. $33,225 x 43 
exemption requests per year = $1,428,675. This blended rate is based 
on the following: $580 (hourly rate for a chief compliance officer); 
$510 (hourly rate for an assistant general counsel); and $238 
(hourly rate for a paralegal). The Commission's estimates of the 
relevant wage rates are based on the salary information for the 
securities industry compiled by Securities Industry and Financial 
Markets Association's Office Salaries in the Securities Industry 
2013, as modified by Commission staff (``SIFMA Wage Report''). The 
estimated figures are modified by firm size, employee benefits, 
overhead, and adjusted to account for the effects of inflation.
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    As noted above, the Commission staff understands that funds that 
file an application under rule 17d-1 generally use outside counsel to 
assist in preparing the application. The staff estimates that, on 
average, funds spend an additional $53,100 for outside legal services 
in connection with seeking Commission approval of affiliated joint 
transactions. Thus, the staff estimates that the total annual cost 
burden imposed by the exemptive application requirements of rule 17d-1 
is $2,283,300.\2\
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    \2\ This estimated burden is based on the estimated wage rate of 
$531/hour, for 100 hours, for outside legal services. The 
Commission's estimates of the relevant wage rates for external time 
costs, such as outside legal services, take into account staff 
experience, a variety of sources including general information 
websites, and adjustments for inflation. The estimate is based on 
the following calculation: $53,100 x 43 exemption requests per year 
= $2,283,300.
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    We estimate that funds currently do not rely on the exemption from 
the term ``financial interest'' with respect to any interest that the 
fund's board of directors (including a majority of the directors who 
are not interested persons of the fund) finds to be not material. 
Accordingly, we estimate that annually there will be no transactions 
under rule 17d-1 that will result in this aspect of the collection of 
information.
    Based on these calculations, the total annual hour burden is 
estimated to be 3,225 hours and the total annual cost burden is 
estimated to be $2,283,300.
    The estimate of average burden hours is 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 the 
costs of Commission rules. Complying with these collections of 
information requirement is necessary to obtain the benefit of relying 
on rule 17d-1. Responses 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 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

[[Page 2144]]

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 
March 13, 2023.
    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, 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: January 6, 2023.
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-00427 Filed 1-11-23; 8:45 am]
BILLING CODE 8011-01-P


