Notice2022-10299
Submission for OMB Review; 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
May 13, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 93 (Friday, May 13, 2022)</title>
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[Federal Register Volume 87, Number 93 (Friday, May 13, 2022)]
[Notices]
[Pages 29408-29410]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-10299]
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SECURITIES AND EXCHANGE COMMISSION
[SEC File No. 270-258, OMB Control No. 3235-0268]
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 2a-7
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 (the ``Commission'') has submitted to the Office of
Management and Budget a request for extension of the previously
approved collection of information discussed below.
Rule 2a-7 (17 CFR 270.2a-7) under the Investment Company Act of
1940 (15 U.S.C. 80a) (the ``Act'') governs money market funds. Money
market funds are open-end management investment companies that differ
from other open-end management investment companies in that they seek
to maintain a stable price per share, usually $1.00. The rule exempts
money market funds from the valuation requirements of the Act, and,
subject to certain risk-limiting conditions, permits money market funds
to use the ``amortized cost method'' of asset valuation or the ``penny-
rounding method'' of share pricing.
Rule 2a-7 also imposes certain recordkeeping and reporting
obligations on money market funds. The board of directors of a money
market fund, in supervising the fund's operations, must establish
written procedures designed to stabilize the fund's net asset value
(``NAV''); establish written procedures to test periodically the
ability of the fund to maintain a stable NAV based on certain
hypothetical events (``stress testing''); review, revise, and approve
written procedures to stress test a fund's portfolio; and create a
report to the fund board documenting the results of stress
[[Page 29409]]
testing. The board must also adopt guidelines and procedures relating
to certain responsibilities it delegates to the fund's investment
adviser. These procedures and guidelines typically address various
aspects of the fund's operations. The fund must maintain and preserve
for six years a written copy of both these procedures and guidelines.
The fund also must maintain and preserve for six years a written record
of the board's considerations and actions taken in connection with the
discharge of its responsibilities, to be included in the board's
minutes, including determinations to impose any liquidity fees or
temporary suspension of redemptions. In addition, the fund must
maintain and preserve for three years written records of certain credit
risk analyses, evaluations with respect to securities subject to demand
features or guarantees, evaluations with respect to asset-backed
securities not subject to guarantees, and determinations with respect
to adjustable rate securities and asset-backed securities. If the board
takes action with respect to defaulted securities, events of
insolvency, or deviations in share price, the fund must file with the
Commission an exhibit to Form N-CR describing the nature and
circumstances of the action. If any portfolio security fails to meet
certain eligibility standards under the rule, the fund also must
identify those securities in an exhibit to Form N-CR. After certain
events of default or insolvency relating to a portfolio security, the
fund must notify the Commission of the event and the actions the fund
intends to take in response to the situation.
A fund must also post certain periodic information on the its
website including disclosure of portfolio holdings, disclosure of daily
and weekly liquid assets and net shareholder flow, disclosure of daily
current NAV, and disclosures of financial support received by the fund,
the imposition and removal of liquidity fees, and the suspension and
resumption of fund redemptions. Lastly, for funds that elect to be
retail funds, they must create written policies and procedures
reasonably designed to limit all beneficial owners of the fund to
natural persons.
The recordkeeping requirements in rule 2a-7 are designed to enable
Commission staff in its examinations of money market funds to determine
compliance with the rule, as well as to ensure that money market funds
have established procedures for collecting the information necessary to
make adequate credit reviews of securities in their portfolios. The
reporting requirements of rule 2a-7 are intended to assist Commission
staff in overseeing money market funds and reduce the likelihood that a
fund is unable to maintain a stable NAV.
Commission staff estimates that there are 320 money market funds
(80 fund complexes), all of which are subject to rule 2a-7. Commission
staff further estimates that there will be approximately 10 new money
market funds established each year. Commission staff estimates that
rule 2a-7 contains the following collection of information
requirements:
<bullet> Record of credit risk analyses, and determinations
regarding adjustable rate securities, asset-backed securities, asset-
backed securities not subject to guarantees, securities subject to a
demand feature or guarantee, and counterparties to repurchase
agreements. Commission staff estimates a total annual hour burden for
320 funds to be 260,440 hours.
<bullet> Establishment of written procedures designed to stabilize
NAV and guidelines and procedures for board delegation of authority.
Commission staff estimates a total annual hour burden for 10 new money
market funds to be 155 hours.
<bullet> Board review of procedures and guidelines of any
investment adviser or officers to whom the fund's board has delegated
responsibility under rule 2a-7 and amendment of such procedures and
guidelines. Commission staff estimates a total annual hour burden for
80 funds to be 400 hours.
<bullet> Records of the board's determination for imposing any
liquidity fees or temporary suspension of redemptions. Commission staff
estimates a total annual hour burden for 2 funds to be 14 hours.
<bullet> Records of the board's determinations and actions related
to failure of a security to meet certain eligibility standards or an
event of default or insolvency. Commission staff estimates a total
annual hour burden for 20 funds to be 50 hours.
<bullet> Establishment of written procedures to test periodically
the ability of the fund to maintain a stable NAV per share based on
certain hypothetical events (``stress testing''). Commission staff
estimates a total annual hour burden for 10 new money market funds to
be 220 hours.
<bullet> Review, revise, and approve written procedures to stress
test a fund's portfolio. Commission staff estimates a total annual hour
burden for 80 fund complexes to be 960 hours.
<bullet> Reports to fund boards on the results of stress testing.
Commission staff estimates a total annual hour burden for 80 fund
complexes to be 4,000 hours.
<bullet> Website disclosures of portfolio holdings, of daily and
weekly liquid assets and net shareholder flow, of daily current NAV,
and disclosures of financial support received by the fund, the
imposition and removal of liquidity fees and the suspension and
resumption of fund redemptions. Commission staff estimates a total
annual hour burden for 320 funds to be 27,251 hours.
<bullet> For funds electing retail fund status, written policies
and procedures limiting all beneficial owners of the fund to natural
persons. Commission staff estimates a total annual hour burden for 2
funds to be 26 hours.
Thus, the Commission estimates the total annual burden of the
rule's information collection requirements is 293,516 hours.
The estimated total annual burden is being decreased from 337,328
hours to 293,516 hours. This net decrease of 43,812 hours is
attributable to a combination of factors, including a decrease in the
number of money market funds and fund complexes, and updated
information from money market funds regarding hourly burdens, including
revised staff estimates of the burden hours required to comply with
rule 2a-7.
Commission staff estimates that in addition to the costs described
in section 12, money market funds will incur costs to preserve records,
as required under rule 2a-7.\1\ These costs will vary significantly for
individual funds, depending on the amount of assets under fund
management and whether the fund preserves its records in a storage
facility in hard copy or has developed and maintains a computer system
to create and preserve compliance records.\2\ Commission staff
estimates that the amount an individual fund may spend ranges from $100
per year to $300,000. Based on a cost of $0.0051295 per dollar of
assets under management for small funds, $0.0005041 per dollar assets
under
[[Page 29410]]
management for medium funds, and $0.0000009 per dollar of assets under
management for large funds, the staff estimates compliance with the
record storage requirements of rule 2a-7 costs the fund industry
approximately $33.0 million per year.\3\
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\1\ A significant portion of the recordkeeping burden involves
organizing information that the funds already collect when initially
purchasing securities. In addition, when a money market fund
analyzes a security, the analysis need not be presented in any
particular format. Money market funds therefore have a choice of
methods for maintaining these records that vary in technical
sophistication and formality. Accordingly, the cost of preparing
these documents may vary significantly among individual funds. The
burden hours associated with filing reports to the Commission as an
exhibit to Form N-CR are included in the PRA burden estimate for
that form.
\2\ The amount assets under management in individual money
market funds ranges widely, varying from below $50 million to well
over $150 billion. We further note that the assets under management
figures were calculated based on net assets at the fund level and
not the sum of the market values of the underlying funds.
\3\ The staff estimated the annual cost of preserving the
required books and records by identifying the annual costs incurred
by several funds and then relating this total cost to the average
net assets of these funds during the year. With a total of $328.5
million under management in small funds, $52.4 billion under
management in medium funds and $5.4 trillion under management in
large funds, the costs of preservation were estimated as follows:
((0.0051295 x $328.5 million) + (0.0005041 x $52.4 billion) +
(0.0000009 x $5.4 trillion) = $33.0 million. For purposes of this
PRA submission, Commission staff used the following categories for
fund sizes: (i) small-money market funds with $50 million or less in
assets under management; (ii) medium-money market funds with more
than $50 million up to and including $1 billion in assets under
management; and (iii) large-money market funds with more than $1
billion in assets under management.
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Based on responses from individuals in the money market fund
industry, the staff estimates that some of the largest fund complexes
have created computer programs for maintaining and preserving
compliance records for rule 2a-7. Based on a cost of $0.0000132 per
dollar of assets under management for large funds, the staff estimates
that total annualized capital/startup costs range from $0 for small
funds to $71.6 million for all large funds.\4\ Commission staff further
estimates that, even absent the requirements of rule 2a-7, money market
funds would spend at least half of the amount for capital costs ($35.8
million) \5\ and for record preservation ($16.5 million) \6\ to
establish and maintain these records and the systems for preserving
them as a part of sound business practices to ensure diversification
and minimal credit risk in a portfolio for a fund that seeks to
maintain a stable price per share.
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\4\ This estimate is based on the following calculation:
$0.0000132 x $5.4 trillion in assets under management for large
funds = $71.6 million.
\5\ This estimate is based on the following calculation: $71.6
million in capital costs/2 = $35.8 million.
\6\ This estimate is based on the following calculation: $33.0
million in record preservation costs/2 = $16.5 million.
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These estimates of burden hours and costs are made solely for the
purposes of the Paperwork Reduction Act. The estimates are not derived
from a comprehensive or even a representative survey or study of
Commission rules.
The collection of information under Rule 2a-7 is mandatory. The
information provided by the rule is not 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.
The public may view background documentation for this information
collection at the following website: <a href="http://www.reginfo.gov">www.reginfo.gov</a>. 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 June 13, 2022 to (i) <a href="/cdn-cgi/l/email-protection#5d101f057312101f7312140f1c730e181e0239382e3602323b3b343e382f1d32303f7338322d733a322b"><span class="__cf_email__" data-cfemail="460b041e68090b0468090f140768150305192223352d192920202f25233406292b246823293668212930">[email protected]</span></a> 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: <a href="/cdn-cgi/l/email-protection#c6969487998ba7afaaa4a9be86b5a3a5e8a1a9b0"><span class="__cf_email__" data-cfemail="441416051b09252d28262b3c043721276a232b32">[email protected]</span></a>.
Dated: May 9, 2022.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-10299 Filed 5-12-22; 8:45 am]
BILLING CODE 8011-01-P
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