Notice2025-09481
Proposed Collection; Comment Request; Extension: Rule 17a-10
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
May 28, 2025
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 90 Issue 101 (Wednesday, May 28, 2025)</title>
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[Federal Register Volume 90, Number 101 (Wednesday, May 28, 2025)]
[Notices]
[Pages 22524-22525]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-09481]
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SECURITIES AND EXCHANGE COMMISSION
[OMB Control No. 3235-0563]
Proposed Collection; Comment Request; Extension: Rule 17a-10
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 et seq.) (``PRA'') the Securities and Exchange
Commission (the ``Commission'') is soliciting comments on the
collections of information summarized below. The Commission plans to
submit these existing collections of information to the Office of
Management and Budget (``OMB'') for extension and approval.
Section 17(a) of the Investment Company Act of 1940 (15 U.S.C. 80a-
1 et seq.) (the ``Act''), generally prohibits affiliated persons of a
registered investment company (``fund'') from borrowing money or other
property from, or selling or buying securities or other property to or
from, the fund or any company that the fund controls.\1\ Section
2(a)(3) of the Act defines ``affiliated person'' of a fund to include
its investment advisers.\2\ Rule 17a-10 (17 CFR 270.17a-10) permits (i)
a subadviser \3\ of a fund to enter into transactions with funds the
subadviser does not advise but that are affiliated persons of a fund
that it does advise (e.g., other funds in the fund complex), and (ii) a
subadviser (and its affiliated persons) to enter into transactions and
arrangements with funds the subadviser does advise, but only with
respect to discrete portions of the subadvised fund for which the
subadviser does not provide investment advice.
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\1\ 15 U.S.C. 80a-17(a).
\2\ 15 U.S.C. 80a-2(a)(3)(E).
\3\ As defined in rule 17a-10(b)(2). 17 CFR 270.17a-10(b)(2).
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To qualify for the exemptions in rule 17a-10, the subadvisory
relationship must be the sole reason why section 17(a) prohibits the
transaction. In addition, the advisory contracts of the subadviser
entering into the transaction, and any subadviser that is advising the
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purchasing portion of the fund, must prohibit the subadvisers from
consulting with each other concerning securities transactions of the
fund, and limit their responsibility to providing advice with respect
to discrete portions of the fund's portfolio.\4\ This requirement
regarding the prohibitions and limitations in advisory contracts of
subadvisers relying on the rule constitutes a collection of information
under the PRA.\5\
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\4\ 17 CFR 270.17a-10(a)(2).
\5\ 44 U.S.C. 3501.
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The staff assumes that all existing funds with subadvisory
contracts amended those contracts to comply with the adoption of rule
17a-10 in 2003, which conditioned certain exemptions upon these
contractual alterations, and therefore there is no continuing burden
for those funds.\6\ However, the staff assumes that all newly formed
subadvised funds, and funds that enter into new contracts with
subadvisers, will incur the one-time burden by amending their contracts
to add the terms required by the rule.
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\6\ Transactions of Investment Companies With Portfolio and
Subadviser Affiliates, Investment Company Act Release No. 25888
(Jan. 14, 2003) [68 FR 3153, (Jan. 22, 2003)]; we assume that funds
formed after 2003 that intended to rely on rule 17a-10 would have
included the required provision as a standard element in their
initial subadvisory contracts.
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Based on an analysis of fund filings, the staff estimates that
approximately 49 funds enter into new subadvisory agreements each
year.\7\ Based on discussions with industry representatives, the staff
estimates that it will require approximately 3 attorney hours to draft
and execute additional clauses in new subadvisory contracts in order
for funds and subadvisers to be able to rely on the exemptions in rule
17a-10. Because these additional clauses are identical to the clauses
that a fund would need to insert in their subadvisory contracts to rely
on rules 10f-3 (17 CFR 270.10f-3), 12d3-1 (17 CFR 270.12d3-1), and 17e-
1 (17 CFR 270.17e-1), and because we believe that funds that use one
such rule generally use all of these rules, we apportion this 3 hour
time burden equally among all four rules. Therefore, we estimate that
the burden allocated to rule 17a-10 for this contract change would be
0.75 hours.\8\ Assuming that all 49 funds that enter into new
subadvisory contracts each year make the modification to their contract
required by the rule, we estimate that the rule's contract modification
requirement will result in 37 burden hours annually, with an associated
cost of approximately $18,907.\9\
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\7\ Based on filings by registrants on Form N-1A and Form N-2 on
Form N-CEN through March 14, 2025, there are 12,928 registered funds
(open-end funds, closed-end funds, and exchange-traded funds), 5,272
funds of which have subadvisory relationships (approximately 41%);
49 new funds registered on Form N-1A or Form N-2 were established in
2024 by registrants with subadvisory relationships.
\8\ This estimate is based on the following calculation: (3
hours / 4 rules = 0.75 hours).
\9\ These estimates are based on the following calculations:
(0.75 hours x 49 funds = 37 burden hours); ($511 per hour x 37 hours
= $18,907 total cost); the Commission's estimates concerning the
wage rates for attorney time are based on salary information for the
securities industry compiled by the Securities Industry and
Financial Markets Association; the estimated wage figure is based on
published rates for in-house attorneys, modified to account for a
1,800-hour work-year and inflation, and adjusted to account for
bonuses, firm size, employee benefits, and overhead, yielding an
effective hourly rate of $511; see Securities Industry and Financial
Markets Association, Report on Management & Professional Earnings in
the Securities Industry 2013.
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The estimate of average burden hours is made solely for the
purposes of the PRA. The estimate is not derived from a comprehensive
or even a representative survey or study of the costs of Commission
rules. Complying with this collection of information requirement is
necessary to obtain the benefit of relying on rule 17a-10. 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 OMB Control Number.
Written comments are invited on: (a) whether this collection of
information is necessary for the proper performance of the functions of
the agency, including whether the information will have practical
utility; (b) the accuracy of the agency's estimate of the burden
imposed by 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.
Please direct your written comments to Austin Gerig, Director/Chief
Data Officer, Securities and Exchange Commission, c/o Tanya Ruttenberg,
100 F Street NE, Washington, DC 20549 and send it by email to
<a href="/cdn-cgi/l/email-protection#5c0c3d2c392e2b332e370e3938293f283533321d3f281c2f393f723b332a"><span class="__cf_email__" data-cfemail="f4a495849186839b869fa691908197809d9b9ab59780b4879197da939b82">[email protected]</span></a> by July 28, 2025.
Dated: May 21, 2025.
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-09481 Filed 5-27-25; 8:45 am]
BILLING CODE 8011-01-P
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