Notice2023-22818
Proposed Collection; Comment Request; Extension: Rule 19a-1
Primary source
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Published
October 17, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 88 Issue 199 (Tuesday, October 17, 2023)</title>
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[Federal Register Volume 88, Number 199 (Tuesday, October 17, 2023)]
[Notices]
[Pages 71614-71615]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-22818]
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SECURITIES AND EXCHANGE COMMISSION
[SEC File No. 270-240, OMB Control No. 3235-0216]
Proposed Collection; Comment Request; Extension: Rule 19a-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
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.
Section 19(a) (15 U.S.C. 80a-19(a)) of the Investment Company Act
of 1940 (the ``Act'') (15 U.S.C. 80a) makes it unlawful for any
registered investment company to pay any dividend or similar
distribution from any source other than the company's net income,
unless the payment is accompanied by a written statement to the
company's shareholders which adequately discloses the sources of the
payment. Section 19(a) authorizes the Commission to prescribe the form
of such statement by rule.
Rule 19a-1 (17 CFR 270.19a-1) under the Act, entitled ``Written
Statement to Accompany Dividend Payments by Management Companies,''
sets forth specific requirements for the information that must be
included in statements made pursuant to section 19(a) by or on behalf
of management companies.\1\ The rule requires that the statement
indicate what portions of distribution payments are made from net
income, net profits from the sale of a security or other property
(``capital gains'') and paid-in capital. When any part of the payment
is made from capital gains, rule 19a-1 also requires that the statement
disclose certain other information relating to the appreciation or
depreciation of portfolio securities. If an estimated portion is
subsequently determined to be significantly inaccurate, a correction
must be made on a statement made pursuant to section 19(a) or in the
first report to shareholders following the discovery of the inaccuracy.
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\1\ Section 4(3) of the Act (15 U.S.C. 80a-4(3)) defines
``management company'' as ``any investment company other than a face
amount certificate company or a unit investment trust.''
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The purpose of rule 19a-1 is to afford fund shareholders adequate
disclosure of the sources from which distribution payments are made.
The rule is intended to prevent shareholders from confusing income
dividends with distributions made from capital sources. Absent rule
19a-1, shareholders might receive a false impression of fund gains.
Based on a review of filings made with the Commission, the staff
estimates that approximately 12,900 series of registered investment
companies that are management companies may be subject to rule 19a-1
each year,\2\ and that each portfolio on average mails two statements
per year to meet the requirements of the rule.\3\ The staff further
estimates that the time needed to make the determinations required by
the rule and to prepare the statement required under the rule is
approximately 1 hour per statement. The total annual burden for all
portfolios therefore is estimated to be approximately 25,800 burden
hours.\4\
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\2\ This estimate is as of December 2022 and is based on the
Commission staff's review of EDGAR filings through July 31, 2023.
The number of management investment company portfolios that make
distributions for which compliance with rule 19a-1 is required
depends on a wide range of factors and can vary greatly across
years. Therefore, the calculation of estimated burden hours below is
based on the total number of management investment company
portfolios, each of which may be subject to rule 19a-1.
\3\ A few portfolios make monthly distributions from sources
other than net income, so the rule requires them to send out a
statement 12 times a year. Other portfolios never make such
distributions.
\4\ This estimate is based on the following calculation: 12,900
management investment company portfolios x 2 statements per year x 1
hour per statement = 25,800 burden hours.
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The staff estimates that approximately one-third of the total
annual burden (8,600 hours) would be incurred by a paralegal with an
average hourly wage rate of approximately $253 per hour,\5\ and
approximately two-thirds of the annual burden (17,200 hours) would be
incurred by a compliance clerk with an average hourly wage rate of $82
per hour.\6\ The staff therefore estimates that the aggregate annual
burden, in dollars, of the hours needed to comply with the paperwork
requirements of the rule is approximately $3,586,200 ((8,600 hours x
$253 = $2,175,800) + (17,200 hours x $82 = $1,410,400)). It is
estimated that there is no cost burden of rule 19a-1 other than these
estimates.
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\5\ Hourly rates are derived from the Securities Industry and
Financial Markets Association (``SIFMA''), Management and
Professional Earnings in the Securities Industry 2013, modified 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.
\6\ Hourly rates are derived from SIFMA's 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.
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To comply with state law, many investment companies already must
distinguish the different sources from which a shareholder distribution
is paid and disclose that information to shareholders. Thus, many
investment companies would be required to distinguish the sources of
shareholder dividends whether or not the Commission required them to do
so under rule 19a-1.
These estimates 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 of the costs of Commission rules.
Compliance with the collection of information required by rule 19a-1 is
mandatory for management companies that make statements to shareholders
pursuant to section 19(a) of the Act. 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 December 18, 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
[[Page 71615]]
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#46161407190b272f2a24293e0635232568212930"><span class="__cf_email__" data-cfemail="421210031d0f232b2e202d3a023127216c252d34">[email protected]</span></a>.
Dated: October 11, 2023.
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-22818 Filed 10-16-23; 8:45 am]
BILLING CODE 8011-01-P
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