
[Federal Register Volume 88, Number 196 (Thursday, October 12, 2023)]
[Notices]
[Pages 70690-70691]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-22580]


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SECURITIES AND EXCHANGE COMMISSION

[SEC File No. 270-472, OMB Control No. 3235-0531]


Proposed Collection; Comment Request; Extension: Rule 0-1

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. 350l et seq.), the Securities and Exchange 
Commission (``Commission'') plans to submit to the Office of Management 
and Budget a request for extension of the previous approved collection 
of information discussed below.
    The Investment Company Act of 1940 (the ``Act'') \1\ establishes a 
comprehensive framework for regulating the organization and operation 
of investment companies (``funds''). A principal objective of the Act 
is to protect fund investors by addressing the conflicts of interest 
that exist between funds and their investment advisers and other 
affiliated persons. The Act places significant responsibility on the 
fund board of directors in overseeing the operations of the fund and 
policing the relevant conflicts of interest.\2\ Rule 0-1 (17 CFR 270.0-
1), as amended, provides definitions for the terms used by the 
Commission in the rules and regulations it has adopted pursuant to the 
Act. The rule also contains a number of rules of construction for terms 
that are defined either in the Act itself or elsewhere in the 
Commission's rules and regulations. Finally, rule 0-1 defines terms 
that serve as conditions to the availability of certain of the 
Commission's exemptive rules. More specifically, the term ``independent 
legal counsel,'' as defined in rule 0-1, sets out conditions that funds 
must meet in order to rely on any of ten exemptive rules (``exemptive 
rules'') under the Act.\3\
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    \1\ 15 U.S.C. 80a.
    \2\ For example, fund directors must approve investment advisory 
and distribution contracts. See 15 U.S.C. 80a-15(a), (b), and (c).
    \3\ The relevant exemptive rules are: rule 10f-3 (17 CFR 
270.10f-3), rule 12b-1 (17 CFR 270.12b-1), rule 15a-4(b)(2) (17 CFR 
270.15a-4(b)(2)), rule 17a-7 (17 CFR 270.17a-7), rule 17a-8 (17 CFR 
270.17a-8), rule 17d-1(d)(7) (17 CFR 270.17d-1(d)(7)), rule 17e-1(c) 
(17 CFR 270.17e-1(c)), rule 17g-1 (17 CFR 270.17g-1), rule 18f-3 (17 
CFR 270.18f-3), and rule 23c-3 (17 CFR 270.23c-3).
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    If the board's counsel has represented the fund's investment 
adviser, principal underwriter, administrator (collectively, 
``management organizations'') or their ``control persons'' \4\ during 
the past two years, rule 0-1 requires that the board's independent 
directors make a determination about the adequacy of the counsel's 
independence. A majority of the board's independent directors are 
required to reasonably determine, in the exercise of their judgment, 
that the counsel's prior or current representation of the management 
organizations or their control persons was sufficiently limited to 
conclude that it is unlikely to adversely affect the counsel's 
professional judgment and legal representation. Rule 0-1 also requires 
that a record for the basis of this determination is made in the 
minutes of the directors' meeting. In addition, the independent 
directors must have obtained an undertaking from the counsel to provide 
them with the information necessary to make their determination and to 
update promptly that information when the person begins to represent a 
management organization or control person, or when he or she materially 
increases his or her representation. Generally, the independent 
directors must re-evaluate their determination no less frequently than 
annually.
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    \4\ A ``control person'' is any person--other than a fund--
directly or indirectly controlling, controlled by, or under common 
control, with any of the fund's management organizations. See 17 CFR 
270.01(a)(6)(iv)(B).
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    Any fund that relies on one of the exemptive rules must comply with 
the requirements in the definition of ``independent legal counsel'' 
under rule 0-1. We assume that approximately 2,909 funds rely on at 
least one of the exemptive rules annually.\5\ We further assume that 
the independent directors of approximately one-third (970) of those 
funds would need to make the required determination in order for their 
counsel to meet the definition of independent legal counsel.\6\ We 
estimate that each of these 970 funds would be required to spend, on 
average, 0.75 hours annually to comply with the recordkeeping 
requirement associated with this determination, for a total annual 
burden of approximately 727.5 hours. Based on this estimate, the total 
annual cost for all funds' compliance

[[Page 70691]]

with this rule is approximately $194,485. To calculate this total 
annual cost, the Commission staff assumed that approximately two-thirds 
of the total annual hour burden (485 hours) would be incurred by a 
compliance manager with an average hourly wage rate of $360 per 
hour,\7\ and one-third of the annual hour burden (242.5 hours) would be 
incurred by compliance clerk with an average hourly wage rate of $82 
per hour.\8\
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    \5\ Based on statistics compiled by Commission staff, we 
estimate that there are approximately 3,232 funds that could rely on 
one or more of the exemptive rules. Of those funds, we assume that 
approximately 90 percent (2,909) actually rely on at least one 
exemptive rules annually.
    \6\ We assume that the independent directors of the remaining 
two-thirds of those funds will choose not to have counsel, or will 
rely on counsel who has not recently represented the fund's 
management organizations or control persons. In both circumstances, 
it would not be necessary for the fund's independent directors to 
make a determination about their counsel's independence.
    \7\ The estimated hourly wages used in this PRA analysis were 
derived from the Securities Industry and Financial Markets 
Association's Reports on Management and Professional Earnings in the 
Securities Industry (2013) (modified to account for an 1,800-hour 
work year and multiplied by 5.35 to account for bonuses, firm size, 
employee benefits and overhead) (adjusted for inflation), and Office 
Salaries in the Securities Industry (2013) (modified to account for 
an 1,800-hour work year and multiplied by 2.93 to account for 
bonuses, firm size, employee benefits and overhead) (adjusted for 
inflation).
    \8\ (485 x $360/hour) + (242.5 x $82/hour) = $194,485.
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    The estimates of average burden hours are made solely for the 
purposes of the Paperwork Reduction Act. These estimates are not 
derived from a comprehensive or even a representative survey or study 
of the costs of Commission rules.
    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 December 11, 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, 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: October 6, 2023.
J. Lynn Taylor,
Assistant Secretary.
[FR Doc. 2023-22580 Filed 10-11-23; 8:45 am]
BILLING CODE 8011-01-P


