Notice2023-28115
Submission for OMB Review; 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
December 21, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 88 Issue 244 (Thursday, December 21, 2023)</title>
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[Federal Register Volume 88, Number 244 (Thursday, December 21, 2023)]
[Notices]
[Pages 88432-88433]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-28115]
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SECURITIES AND EXCHANGE COMMISSION
[SEC File No. 270-xxx, OMB Control No. 3235-0779]
Submission for OMB Review; 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'') has submitted to the Office of Management
and Budget a request for extension of the previously approved
collection of information described below.
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 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
[[Page 88433]]
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. 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 January 22, 2024 to (i) <a href="/cdn-cgi/l/email-protection#db969983f5949699f59492899af5889e9884bfbea8b084b4bdbdb2b8bea99bb4b6b9f5beb4abf5bcb4ad"><span class="__cf_email__" data-cfemail="9fd2ddc7b1d0d2ddb1d0d6cddeb1ccdadcc0fbfaecf4c0f0f9f9f6fcfaeddff0f2fdb1faf0efb1f8f0e9">[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#09595b4856446860656b6671497a6c6a276e667f"><span class="__cf_email__" data-cfemail="c29290839d8fa3abaea0adba82b1a7a1eca5adb4">[email protected]</span></a>.
Dated: December 18, 2023.
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-28115 Filed 12-20-23; 8:45 am]
BILLING CODE 8011-01-P
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