Notice2024-13702
Proposed Collection; Comment Request; Extension: Rule 17f-2
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 24, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
<html>
<head>
<title>Federal Register, Volume 89 Issue 121 (Monday, June 24, 2024)</title>
</head>
<body><pre>
[Federal Register Volume 89, Number 121 (Monday, June 24, 2024)]
[Notices]
[Pages 52524-52525]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-13702]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[SEC File No. 270-233, OMB Control No. 3235-0223]
Proposed Collection; Comment Request; Extension: Rule 17f-2
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. 350l et seq.), 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.
Rule 17f-2 (17 CFR 270.17f-2), entitled ``Custody of Investments by
Registered Management Investment Company,'' establishes safeguards for
arrangements in which a registered management investment company or
business development company (``fund'') is deemed to maintain custody
of its own assets, such as when the fund maintains its assets in a
facility that provides safekeeping but not custodial services.\1\ The
rule includes four distinct requirements that are an information
collection under the Paperwork Reduction Act. First, fund's directors
must prepare a resolution designating not more than five fund officers
or responsible employees who may have access to the fund's assets.
Secondly, the fund's board must vote to approve this resolution. Third,
the designated access persons (two or more of whom must act jointly
when handling fund assets) must prepare a written notation providing
certain information about each deposit or withdrawal of fund assets and
must transmit the notation to another officer or director designated by
the directors. Lastly, an independent public accountant must verify the
fund's assets three times each year, and two of those examinations must
be unscheduled.\2\
---------------------------------------------------------------------------
\1\ The rule generally requires all assets to be deposited in
the safekeeping of a ``bank or other company whose functions and
physical facilities are supervised by Federal or State authority.''
\2\ The accountant must transmit to the Commission promptly
after each examination a certificate describing the examination on
Form N-17f-2; the preparation and filing of Form N-17f-2, which
largely serves as a cover-sheet for the accountant's certification
of their audit, is covered by a separate information collection; the
third (scheduled) examination may coincide with the annual
verification required for every fund by section 30(g) of the Act (15
U.S.C. 80a-29(g)).
---------------------------------------------------------------------------
Rule 17f-2's requirements are designed to safeguard fund assets
from loss by requiring certain specific controls when those assets are
not placed and maintained in the custody of a bank or other custodian
as permitted under section 17(f) of the Investment Company Act of 1940
(15 U.S.C. 80a-17(f)) (``Act'') and the rules thereunder. Specifically,
the requirement that directors designate access persons is intended to
ensure that directors evaluate the trustworthiness of insiders who
handle fund assets. The requirements that access persons act jointly in
handling fund assets, prepare a written notation of each transaction,
and transmit the notation to another designated person are intended to
reduce the risk of misappropriation of fund assets by access persons,
and to ensure that adequate records are prepared, reviewed by a
responsible third person, and available for examination by the
Commission. The requirement that auditors verify fund assets without
notice twice each year is intended to provide an additional deterrent
to the misappropriation of fund assets and to detect any
irregularities. Less frequent examinations by a fund's accountants
could impair the ability of the Commission's examination staff to
ascertain the fund's compliance with the rule.
The Commission staff estimates that each fund makes 974 responses
and spends an average of 252 hours annually in complying with the
rule's requirements.\3\ Commission staff estimates that on an annual
basis it takes: (i) 0.5 hours of fund accounting personnel at a total
cost of $126 and 1 hour of fund attorney personnel time at a cost of
$484, for a total of 1.5 hours and a cost of $610 to draft director
resolutions; \4\ (ii) 0.5 hours of the fund's board of directors at a
total cost of $2,385 to adopt the resolution; \5\ (iii) 244 hours for
the fund's accounting personnel at a total cost of $81,086 to prepare
written notations of transactions; \6\ and (iv) 3 hours for the fund's
controller or administrator at a total cost of $1,704 to assist the
independent public accountants when they perform verifications of fund
assets.\7\ The total of these four requirements would then be 249 hours
at a cost of $84,081 per respondent.\8\ Commission staff estimates that
approximately 165 funds file Form N-17f-2 each year.\9\ Thus, the total
annual
[[Page 52525]]
hour burden for rule 17f-2 is estimated to be 41,085 hours.\10\ Based
on the total costs per fund listed above, the total cost of rule 17f-
2's collection of information requirements is estimated to be
approximately $13,873.\11\
---------------------------------------------------------------------------
\3\ The 974 responses are: 1 (one) response to draft and adopt
the resolution and 973 notations; estimates of the number of hours
are based on conversations with individuals in the fund industry;
the actual number of hours may vary significantly depending on
individual fund assets.
\4\ The estimate relating to fund accounting personnel is based
on the following calculation: 0.5 (burden hours per fund) x $252
(senior accountant's hourly rate) = approximately $126; unless
otherwise indicated, the hourly wage figures used herein are from
the Securities Industry and Financial Markets Association's
Management & Professional Earnings in the Securities Industry 2013,
modified by Commission staff to account for an 1800-hour work-year
and inflation, and multiplied by 5.35 to account for bonuses, firm
size, employee benefits and overhead.
\5\ The staff has estimated the average cost of board of
director time as $4,770 per hour, which was last adjusted for
inflation through 2019; this is a combined cost for the entire board
and assumes as average of 9 board members per board..
\6\ Respondents estimated that each fund makes 973 responses on
an annual basis and spends a total of 0.25 hours per response; the
staff assumes that the fund personnel involved are Accounts Payable
Manager ($237 hourly rate), Senior Operations Manager ($425 hourly
rate) and General Accounting Manager ($337 hourly rate); the blended
average hourly rate of these personnel is $333 ($333 = (237 + 425 +
337)/3); the total estimated cost of preparing notations is based on
the following calculation: 974 x 0.25 x $333 = $81,086.
\7\ This estimate is based on the following calculation: 3 x
$568 (fund controller's hourly rate) = $1704.
\8\ 249 = 0.5 + 1 + 0.5 + 3 + 244; $84,081 = 126 + 484 + $2,385
+ 81,086 + 1,704.
\9\ On average, each year approximately 165 funds filed Form N-
17f-2 with the Commission during calendar years 2020-2022; as every
fund subject to rule 17f-2 must file Form N-17f-2, we believe this
is a good estimate for the number of respondents to the rule.
\10\ This estimate is based on the following calculation: 165
(funds) x 249 (total annual hourly burden per fund) = 41,085 hours
for rule; the annual burden for rule 17f-2 does not include time
spent preparing Form N-17f-2; the burden for Form N-17f-2 is
included in a separate collection of information.
\11\ This estimate is based on the following calculation:
$84,081 (total annual cost per fund) x 165 funds = $13,873,365.
---------------------------------------------------------------------------
The estimate of average burden hours is made solely for the
purposes of the Paperwork Reduction Act and is not derived from a
comprehensive or even a representative survey or study of the costs of
Commission rules and forms. Complying with the collections of
information required by rule 17f-2 is mandatory for those funds that
maintain custody of their own assets. Responses will not be 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.
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 23, 2024.
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, 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#93c3c1d2ccdef2fafff1fcebd3e0f6f0bdf4fce5"><span class="__cf_email__" data-cfemail="421210031d0f232b2e202d3a023127216c252d34">[email protected]</span></a>.
Dated: June 17, 2024.
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-13702 Filed 6-21-24; 8:45 am]
BILLING CODE 8011-01-P
</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>Indexed from Federal Register on June 24, 2024.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.