Notice2023-22970
Proposed Collection; Comment Request; Extension: Rule 2a-5
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
October 18, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 88 Issue 200 (Wednesday, October 18, 2023)</title>
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[Federal Register Volume 88, Number 200 (Wednesday, October 18, 2023)]
[Notices]
[Pages 71903-71904]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-22970]
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SECURITIES AND EXCHANGE COMMISSION
[SEC File No. 270-XXX, OMB Control No. 3235-0779]
Proposed Collection; Comment Request; Extension: Rule 2a-5
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 (``Commission'') is soliciting comments on the collections
of information summarized below. The Commission plans to submit the
existing collection of information to the Office of Management and
Budget for extension and approval.
Section 2(a)(41) of the Investment Company Act of 1940
(``Investment Company Act'') \1\ requires funds to value their
portfolio investments using the market value of their portfolio
securities when market quotations for those securities are ``readily
available,'' and, when a market quotation for a portfolio security is
not readily available, by using the fair value of that security, as
determined in good faith by the fund's board.\2\ The aggregate value of
a fund's investments is the primary determinant of the fund's net asset
value (``NAV''), which for many funds determines the price at which
their shares are offered and redeemed (or repurchased).\3\
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\1\ 15 U.S.C. 80a-1 et seq.
\2\ 15 U.S.C. 80a-2(a)(41). See also 17 CFR 270.2a-4.
\3\ See 15 U.S.C. 80a-22(c) and 23(c). See also 17 CFR 270.22c-
1(a).
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Rule 2a-5 provides requirements for determining in good faith the
fair value of the investments of a registered investment company or
companies that have elected to be treated as business development
companies under the Investment Company Act (``BDCs'' and, collectively,
``funds'') for purposes of section 2(a)(41) of the Investment Company
Act and rule 2a-4
[[Page 71904]]
thereunder.\4\ Under the rule, fair value as determined in good faith
requires assessing and managing material risks associated with fair
value determinations; selecting, applying, and testing fair value
methodologies; and overseeing and evaluating any pricing services used.
The rule also permits a fund's board to designate a ``valuation
designee'' to perform fair value determinations. The valuation designee
can be the adviser of the fund or an officer of an internally managed
fund.\5\ When a board designates the performance of determinations of
fair value to a valuation designee for some or all of the fund's
investments under the rule, the rule requires the board to oversee the
valuation designee's performance of fair value determinations.
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\4\ See Good Faith Determinations of Fair Value, Investment
Company Act Release No. 34128 (Dec. 7, 2020) (``Adopting Release'').
\5\ Rule 2a-5(e)(4).
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To facilitate the board's oversight, the rule also includes certain
reporting and other requirements in the case of designation to a
valuation designee.\6\ As relevant here, the rule requires, if the
board designates performance of fair value determinations to a
valuation designee, that the valuation designee report to the board in
both periodic and as needed reports on a per-fund basis.
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\6\ Rule 2a-5(b).
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Specifically, on a periodic basis, the valuation designee must
provide to the board:
<bullet> Quarterly Reports. At least quarterly, in writing, (1) any
reports or materials requested by the board related to the fair value
of designated investments or the valuation designee's process for fair
valuing fund investments and (2) a summary or description of material
fair value matters that occurred in the prior quarter. This summary or
description must include (1) any material changes in the assessment and
management of valuation risks, including any material changes in
conflicts of interest of the valuation designee (and any other service
provider), (2) any material changes to, or material deviations from,
the fair value methodologies, and (3) any material changes to the
valuation designee's process for selecting and overseeing pricing
services, as well as any material events related to the valuation
designee's oversight of pricing services.
<bullet> Annual Reports. At least annually, in writing, an
assessment of the adequacy and effectiveness of the valuation
designee's process for determining the fair value of the designated
portfolio of investments. At a minimum, this annual report must include
a summary of the results of the testing of fair value methodologies
required under the rule and an assessment of the adequacy of resources
allocated to the process for determining the fair value of designated
investments, including any material changes to the roles or functions
of the persons responsible for determining fair value.
Further, the rule requires the valuation designee to provide a
written notification to the board of the occurrence of matters that
materially affect the fair value of the designated portfolio of
investments (defined as ``material matters'') within a time period
determined by the board, but in no event later than five business days
after the valuation designee becomes aware of the material matter.
Material matters in this instance include, as examples, a significant
deficiency or material weakness in the design or effectiveness of the
valuation designee's fair value determination process or of material
errors in the calculation of net asset value. The valuation designee
must also provide such timely follow-on reports as the board may
reasonably determine are appropriate.\7\
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\7\ Rule 2a-5(b).
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The Commission staff estimates that 9,800 funds are subject to rule
2a-5. The internal annual burden estimate is 34 hours for a fund. Based
on these estimates, the total annual burden hours associated with the
rule is estimated to be 333,200 hours. The estimated burden hours
associated with rule 2a-5 have increased by 15,810 hours from the
current allocation of 317,390 hours. The external cost associated with
this collection of information is approximately $3,674 per fund, and
the total annual external cost burden is $36,005,200. The estimated
external cost has increased by $6,319,900 from the current estimate of
$29,685,300. These increases are due to an increase in the estimated
number of affected entities, as well as in the estimated hourly burden
and the external cost associated with the information collection
requirements.
The estimate of average burden hours is made solely for purposes of
the Paperwork Reduction Act and is not derived from a comprehensive or
even a representative survey or study of the cost of Commission rules.
The collection of information required by rule 2a-5 is necessary to
obtain the benefits of the rule. Other information provided to the
Commission in connection with staff examinations or investigations is
kept confidential subject to the provisions of applicable law. If
information collected pursuant to rule 2a-5 is reviewed by the
Commission's examination staff, it is accorded the same level of
confidentiality accorded to other responses provided to the Commission
in the context of its examination and oversight program.
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, 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#feaeacbfa1b39f97929c9186be8d9b9dd0999188"><span class="__cf_email__" data-cfemail="a0f0f2e1ffedc1c9ccc2cfd8e0d3c5c38ec7cfd6">[email protected]</span></a>.
Dated: October 13, 2023.
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-22970 Filed 10-17-23; 8:45 am]
BILLING CODE 8011-01-P
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