Notice2022-13808
Proposed Collection; Comment Request; Extension: Rule 7d-1
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
June 29, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 124 (Wednesday, June 29, 2022)</title>
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[Federal Register Volume 87, Number 124 (Wednesday, June 29, 2022)]
[Notices]
[Pages 38792-38794]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-13808]
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SECURITIES AND EXCHANGE COMMISSION
[SEC File No. 270-176, OMB Control No. 3235-0311]
Proposed Collection; Comment Request; Extension: Rule 7d-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. 3501-3520), the Securities and Exchange
Commission (the ``Commission'') is soliciting comments on the
collections of information summarized below. The Commission plans to
submit these existing collection of information to the Office of
Management and Budget for extension and approval.
Section 7(d) of the Investment Company Act of 1940 (15 U.S.C. 80a-
7(d)) (the ``Act'' or ``Investment Company Act'') requires an
investment company (``fund'') organized outside the United States
(``foreign fund'') to obtain an order from the Commission allowing the
fund to register under the Act before making a public offering of its
securities through the United States mail or any means of interstate
commerce. The Commission may issue an order only if it finds that it is
both legally and practically feasible effectively to enforce the
provisions of the Act against the foreign fund, and that the
registration of the fund is consistent with the public interest and
protection of investors.
Rule 7d-1 (17 CFR 270.7d-1) under the Act, which was adopted in
1954, specifies the conditions under which a Canadian management
investment company (``Canadian fund'') may request an order from the
Commission permitting it to register under the Act. Although rule 7d-1
by its terms applies only to Canadian funds, other foreign funds
generally have agreed to comply with the requirements of rule 7d-1 as a
prerequisite to receiving an order permitting those foreign funds'
registration under the Act.
The rule requires a Canadian fund that wishes to register to file
an application with the Commission that contains various undertakings
and agreements by the fund. The requirement of the Canadian fund to
file an application is a collection of information under the Paperwork
Reduction Act. Certain of the undertakings and agreements, in turn,
impose the following additional information collection requirements:
(1) the fund must file with the Commission agreements between
the fund and its directors, officers, and service providers
requiring them to comply with the fund's charter and bylaws, the
Act, and certain other obligations relating to the undertakings and
agreements in the application;
(2) the fund and each of its directors, officers, and investment
advisers that is not a U.S. resident, must file with the Commission
an irrevocable designation of the fund's custodian in the United
States as agent for service of process;
(3) the fund's charter and bylaws must provide that (a) the fund
will comply with certain provisions of the Act applicable to all
funds, (b) the fund will maintain originals or copies of its books
and records in the United States, and (c) the fund's contracts with
its custodian, investment adviser, and principal underwriter, will
contain certain terms, including a requirement that the adviser
maintain originals or copies of pertinent records in the United
States;
(4) the fund's contracts with service providers will require
that the provider perform the contract in accordance with the Act,
the Securities Act of 1933 (15 U.S.C. 77a), and the Securities
Exchange Act of 1934 (15 U.S.C. 78a), as applicable; and
(5) the fund must file, and periodically revise, a list of
persons affiliated with the fund or its adviser or underwriter.
As noted above, under section 7(d) of the Act the Commission may
issue an
[[Page 38793]]
order permitting a foreign fund's registration only if the Commission
finds that ``by reason of special circumstances or arrangements, it is
both legally and practically feasible effectively to enforce the
provisions of the (Act).'' The information collection requirements are
necessary to ensure that the substantive provisions of the Act may be
enforced as a matter of contract right in the United States or Canada
by the fund's shareholders or by the Commission.
Rule 7d-1 also contains certain information collection requirements
that are associated with other provisions of the Act. These
requirements are applicable to all registered funds and are outside the
scope of this request.
The Commission believes that one foreign fund is registered under
rule 7d-1 and currently active. Apart from requirements under the Act
applicable to all registered funds, rule 7d-1 imposes ongoing burdens
to maintain records in the United States, and to update, as necessary,
certain fund agreements, designations of the fund's custodian as
service agent, and the fund's list of affiliated persons. The
Commission staff estimates that each year under the rule, the active
registrant and its directors, officers, and service providers engage in
the following collections of information and associated burden hours:
For the fund and its investment adviser to maintain records in the
United States: \1\
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\1\ The rule requires an applicant and its investment adviser to
maintain records in the United States (which, without the
requirement, might be maintained in Canada or another foreign
jurisdiction), which facilitates routine inspections and any special
investigations of the fund by Commission staff. The registrant and
its investment adviser, however, already maintain the registrant's
records in the United States and in no other jurisdiction.
Therefore, maintenance of the registrant's records in the United
States does not impose an additional burden beyond that imposed by
other provisions of the Act. Those provisions are applicable to all
registered funds and the compliance burden of those provisions is
outside the scope of this request.
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0 hours: 0 minutes of compliance clerk time.
<bullet> For the fund to update its list of affiliated persons:
2 hours: 2 hours of support staff time.
<bullet> For new officers, directors, and service providers to
enter into and file agreements requiring them to comply with the fund's
charter and bylaws, the Act, and certain other obligations:
0.5 hours: 7.5 minutes of director time; 2.5 minutes of officer
time; 20 minutes of support staff time.
<bullet> For new officers, directors, and investment advisers who
are not residents of the United States to file irrevocable designation
of the fund's custodian as agent for process of service:
0.25 hours: 5 minutes of director time; 10 minutes of support staff
time.
Based on the estimates above, the Commission estimates that the
total annual burden of the rule's paperwork requirements is 2.75
hours.\2\ If a fund were to file an application under rule 7d-1 to
register under the Act, the Commission estimates that the rule would
impose initial information collection burdens (for filing an
application, preparing the specified charter, bylaw, and contract
provisions, designations of agents for service of process, and an
initial list of affiliated persons, and establishing a means of keeping
records in the United States) of approximately 90 hours for the fund
and its associated persons. The Commission is not including these hours
in its calculation of the annual burden because no fund has applied to
register under the Act pursuant to rule 7d-1 in the last three years.
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\2\ This estimate is based on the following calculation: (0 + 2
+ 0.5 + 0.25) = 2.75 hours.
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As noted above, after registration, a Canadian fund may file a
supplemental application seeking special relief designed for the fund's
particular circumstances. Rule 7d-1 does not mandate these
applications. For purposes of this PRA we are assuming one registrant
has filed a substantive supplemental application within the past three
years. The Commission staff estimates that the rule would impose an
additional information collection burden of 5 hours on a fund to comply
with the Commission's application process. The staff understands that
funds also obtain assistance from outside counsel to comply with the
Commission's application process and the cost burden of using outside
counsel is discussed below.
Therefore, the Commission staff estimates the aggregate annual
burden hours of the collection of information associated with rule 7d-1
is 13.25 hours.\3\ Amortized over three years we estimate an hourly
annual burden of 4.42 hours.\4\ These estimates of average burden hours
are 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 Commission rules.
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\3\ This estimate is based on the following calculation: 2.75
hours year 1 + 5 hours year 1 + 2.75 hours year 2 + 2.75 hours year
3 = 13.25 hours.
\4\ The estimates are based on the following calculations: 4.42
hours = 13.25 cumulative burden hours/3 years.
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If a Canadian or other foreign fund in the future applied to
register under the Act under rule 7d-1, the fund initially might have
capital and start-up costs (not including hourly burdens) of an
estimated $20,000 to comply with the rule's initial information
collection requirements. These costs include legal and processing-
related fees for preparing the required documentation (such as the
application, charter, bylaw, and contract provisions, designations for
service of process, and the list of affiliated persons). Other related
costs would include fees for establishing arrangements with a custodian
or other agent for maintaining records in the United States, copying
and transportation costs for records, and the costs of purchasing or
leasing computer equipment, software, or other record storage equipment
for records maintained in electronic or photographic form.
The Commission expects that a fund and its sponsors would incur
these costs immediately, and that the annualized cost of the
expenditures would be $20,000 in the first year. Some expenditures
might involve capital improvements, such as computer equipment, having
expected useful lives for which annualized figures beyond the first
year would be meaningful.
These annualized figures are not provided, however, because, in
most cases, the expenses would be incurred immediately rather than on
an annual basis. The Commission is not including these costs in its
calculation of the annualized capital/start-up costs because no fund
has applied under rule 7d-1 to register under the Act pursuant to rule
7d-1 in the last three years.
As indicated above, a Canadian or fund may file a supplemental
application seeking special relief designed for the fund's particular
circumstances. Rule 7d-1 does not mandate these applications. The
active registrant filed a substantive supplemental application in the
past three years. As noted above, the staff understands that funds
generally use outside counsel to prepare the application. The staff
estimates that outside counsel spends 10 hours preparing a supplemental
application, including 8 hours by an associate and 2 hours by a
partner. Outside counsel billing arrangements and rates vary based on
numerous factors, but the staff has estimated the average cost of
outside counsel as $531 per hour, based on information received from
funds, intermediaries and their counsel. The Commission staff therefore
estimates that the fund would obtain assistance
[[Page 38794]]
from outside counsel at a cost of $5,130.\5\
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\5\ This estimate is based on the following calculation: 10
hours x $531 per hour = $5,130.
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The estimates of average burden hours and average cost burdens 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. Compliance with the collection of information requirements of
the rule is necessary to obtain the benefit of relying on the rule. 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 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 August 29, 2022.
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: <a href="/cdn-cgi/l/email-protection#035351425c4e626a6f616c7b437066602d646c75"><span class="__cf_email__" data-cfemail="e6b6b4a7b9ab878f8a84899ea6958385c8818990">[email protected]</span></a>.
Dated: June 23, 2022.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-13808 Filed 6-28-22; 8:45 am]
BILLING CODE 8011-01-P
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