Notice2021-18695
Proposed Collection; Comment Request
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
August 31, 2021
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 86 Issue 166 (Tuesday, August 31, 2021)</title>
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[Federal Register Volume 86, Number 166 (Tuesday, August 31, 2021)]
[Notices]
[Pages 48787-48788]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-18695]
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SECURITIES AND EXCHANGE COMMISSION
[SEC File No. 270-233, OMB Control No. 3235-0223]
Proposed Collection; 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 17f-2
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 (the ``Commission'') is soliciting comments on the
collection of information summarized below. The Commission plans to
submit this existing collection of information to the Office of
Management and Budget for extension and approval.
Rule 17f-2 (17 CFR 270.17f-2), entitled ``Custody of Investments by
[[Page 48788]]
Registered Management Investment Company,'' establishes safeguards for
arrangements in which a registered management investment company or
business development company (``fund'') is deemed to maintain custody
of its own assets, such as when the fund maintains its assets in a
facility that provides safekeeping but not custodial services.\1\ The
rule includes four distinct requirements that are an information
collection under the Paperwork Reduction Act. First, fund's directors
must prepare a resolution designating not more than five fund officers
or responsible employees who may have access to the fund's assets.
Secondly, the fund's board must vote to approve this resolution. Third,
the designated access persons (two or more of whom must act jointly
when handling fund assets) must prepare a written notation providing
certain information about each deposit or withdrawal of fund assets,
and must transmit the notation to another officer or director
designated by the directors. Lastly, an independent public accountant
must verify the fund's assets three times each year, and two of those
examinations must be unscheduled.\2\
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\1\ The rule generally requires all assets to be deposited in
the safekeeping of a ``bank or other company whose functions and
physical facilities are supervised by Federal or State authority.''
\2\ The accountant must transmit to the Commission promptly
after each examination a certificate describing the examination on
Form N-17f-2. The preparation and filing of Form N-17f-2, which
largely serves as a cover-sheet for the accountant's certification
of their audit, is covered by a separate information collection. The
third (scheduled) examination may coincide with the annual
verification required for every fund by section 30(g) of the Act (15
U.S.C. 80a-29(g)).
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Rule 17f-2's requirements are designed to safeguard fund assets
from loss by requiring certain specific controls when those assets are
not placed and maintained in the custody of a bank or other custodian
as permitted under section 17(f) of the Investment Company Act of 1940
(15 U.S.C. 80a-17(f)) (``Act'') and the rules thereunder. Specifically,
the requirement that directors designate access persons is intended to
ensure that directors evaluate the trustworthiness of insiders who
handle fund assets. The requirements that access persons act jointly in
handling fund assets, prepare a written notation of each transaction,
and transmit the notation to another designated person are intended to
reduce the risk of misappropriation of fund assets by access persons,
and to ensure that adequate records are prepared, reviewed by a
responsible third person, and available for examination by the
Commission. The requirement that auditors verify fund assets without
notice twice each year is intended to provide an additional deterrent
to the misappropriation of fund assets and to detect any
irregularities. Less frequent examinations by a fund's accountants
could impair the ability of the Commission's examination staff to
ascertain the fund's compliance with the rule.
The Commission staff estimates that each fund makes 974 responses
and spends an average of 252 hours annually in complying with the
rule's requirements.\3\ Commission staff estimates that on an annual
basis it takes: (i) 0.5 hours of fund accounting personnel at a total
cost of $111 and 1 hour of fund attorney personnel time at a cost of
$425, for a total of 1.5 hours and a cost of $536 to draft director
resolutions; \4\ (ii) 0.5 hours of the fund's board of directors at a
total cost of $2,385 to adopt the resolution; \5\ (iii) 244 hours for
the fund's accounting personnel at a total cost of $71,102 to prepare
written notations of transactions; \6\ and (iv) 3 hours for the fund's
controller or administrator at a total cost of $1,494 to assist the
independent public accountants when they perform verifications of fund
assets.\7\ The total of these four requirements would then be 249 hours
at a cost of $75,517 per respondent. Commission staff estimates that
approximately 183 funds file Form N-17f-2 each year.\8\ Thus, the total
annual hour burden for rule 17f-2 is estimated to be 45,384 hours.\9\
Based on the total costs per fund listed above, the total cost of rule
17f-2's collection of information requirements is estimated to be
approximately $13,819,611.\10\
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\3\ The 974 responses are: 1 (one) response to draft and adopt
the resolution and 973 notations. Estimates of the number of hours
are based on conversations with individuals in the fund industry.
The actual number of hours may vary significantly depending on
individual fund assets.
\4\ The estimate relating to fund accounting personnel is based
on the following calculation: 0.5 (burden hours per fund) x $221
(senior accountant's hourly rate) = approximately $111. Unless
otherwise indicated, the hourly wage figures used herein are from
the Securities Industry and Financial Markets Association's
Management & Professional Earnings in the Securities Industry 2013,
modified by Commission staff to account for an 1,800-hour work-year
and inflation, and multiplied by 5.35 to account for bonuses, firm
size, employee benefits and overhead.
\5\ The staff has estimated the average cost of board of
director time as $4,770 per hour for the board as a whole, based on
information received from funds and their counsel.
\6\ Respondents estimated that each fund makes 973 responses on
an annual basis and spends a total of 0.25 hours per response. The
fund personnel involved are Accounts Payable Manager ($208 hourly
rate), Operations Manager ($373 hourly rate) and Accounting Manager
($296 hourly rate). The average hourly rate of these personnel is
approximately $292. The estimated cost of preparing notations is
based on the following calculation: 974 x 0.25 x $292 = $71,102.
\7\ This estimate is based on the following calculation: 3 x
$498 (fund controller's hourly rate) = $1,494.
\8\ On average, each year approximately 183 funds filed Form N-
17f-2 with the Commission during calendar years 2018-2020. As every
fund subject to rule 17f-2 must file Form N-17f-2, we believe this
is a good estimate for the number of respondents to the rule.
\9\ This estimate is based on the following calculation: 183
(funds) x 249 (total annual hourly burden per fund) = 45,384 hours
for rule. The annual burden for rule 17f-2 does not include time
spent preparing Form N-17f-2. The burden for Form N-17f-2 is
included in a separate collection of information.
\10\ This estimate is based on the following calculation:
$75,517 (total annual cost per fund) x 183 funds = $13,819,611.
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The estimate of average burden hours is made solely for the
purposes of the Paperwork Reduction Act, and is not derived from a
comprehensive or even a representative survey or study of the costs of
Commission rules and forms. Complying with the collections of
information required by rule 17f-2 is mandatory for those funds that
maintain custody of their own assets. 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 collection of
information is necessary for the proper performance of the functions of
the Commission, including whether the information has 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 in writing within 60 days of this
publication.
Please direct your written comments to David Bottom, Director/Chief
Information Officer, Securities and Exchange Commission, C/O Cynthia
Roscoe, 100 F Street NE, Washington, DC 20549; or send an email to:
<a href="/cdn-cgi/l/email-protection#9bcbc9dac4d6faf2f7f9f4e3dbe8fef8b5fcf4ed"><span class="__cf_email__" data-cfemail="603032213f2d01090c020f18201305034e070f16">[email protected]</span></a>.
Dated: August 25, 2021.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2021-18695 Filed 8-30-21; 8:45 am]
BILLING CODE 8011-01-P
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