[Federal Register: June 6, 2003 (Volume 68, Number 109)]
[Notices]
[Page 34016-34017]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr06jn03-114]
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SECURITIES AND EXCHANGE COMMISSION
Submission for OMB Review; Comment Request
Upon Written Request, Copies Available From: Securities and Exchange
Commission, Office of Filings and Information Services, 450 Fifth
Street, NW., Washington, DC 20549.
Extension:
Rule 17f-2 SEC File No. 270-233 OMB Control No. 3235-0223.
Form N-17f-2 SEC File No. 270-317 OMB Control No. 3235-0360.
Notice is hereby given that, pursuant to the Paperwork Reduction
Act of 1995 (44 U.S.C. 3501 et seq.), the Securities and Exchange
Commission (the ``Commission'') has submitted to the Office of
Management and Budget a request for extension of the previously
approved collection of information discussed below.
Rule 17f-2 is entitled: ``Custody of Investments by Registered
Management Investment Company.'' Rule 17f-2 establishes safeguards for
arrangements in which a registered management investment 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. The rule includes several
recordkeeping or reporting requirements. The 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. 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. Independent public accountants must verify the fund's assets
at least three times a year, and two of the examinations must be
unscheduled.
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's examination staff. 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.
The Commission staff estimates that approximately 135 funds rely
upon rule 17f-2.\1\ The Commission staff estimates that each fund
offers an average of 3.7 separate series or portfolios subject to rule
17f-2. Each fund makes an average of 97.4 responses each year under the
rule, including 1 response (requiring .2 burden hours) per fund to
draft director resolutions, 89 responses per fund to prepare notations
of transactions \2\
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(requiring one hour each), and 7.4 responses \3\ per fund for fund
personnel to assist the independent public accountants when they
perform unscheduled verifications (requiring 10 burden hours each).
Thus, the total hour burden per fund is estimated to 163.2 hours \4\
Commission staff estimates that each fund therefore spends
approximately .2 burden hours of professional time at $60 per hour
annually in drafting resolutions by directors (.2 x $60 = $12), 89
hours \5\ of professional time at $60 per hour annually in preparing
transaction notations (89 x $60 = $5,340), and 74 hours \6\ of clerical
time at $16 per hour annually in assisting independent public accounts
perform unscheduled verifications of assets (74 x $16 = $1,184).\7\ The
total annual burden of rule 17f-2's paperwork requirements thus is
estimated to be approximately 22,032 hours \8\ at an annual cost of
$882,360.\9\
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\1\ The Commission's records indicate that approximately 135
funds filed Form N-17f-2 with the Commission during calendar year
2002.
\2\ This number results from 24 responses per portfolio
multiplied by 3.7 portfolios in the average fund (24 x 3.7 = 88.8).
\3\ This number results from 2 unscheduled verifications per
portfolio multiplied by 3.7 portfolios in the average fund (2 x 3.7
= 7.4 responses per fund).
\4\ (1 response x .2 burden hours) + (89 responses x 1 burden
hour) + (7.4 responses x 10 burden hours) = 163.2 burden hours.
\5\ 89 transaction notations per fund x 1 hour = 89 hours.
\6\ 7.4 verifications per fund x 10 hours = 74 hours.
\7\ Each of these hour burden estimates is based upon
conversations with attorneys and accountants familiar with the
information collection requirements of the rule. Commission staff
relied upon the Securities Industry Association, Report on
Management and Professional Earnings in the Securities Industry
(2002) to determine the hourly wage rates used in the calculation of
this estimate. Professional time is based on the estimated average
wage for associate and general counsel in the securities industry.
\8\ 163.2 hours per fund x 135 funds = 22,032 total annual
burden.
\9\ ($12 (for drafting resolutions) + $5,340 (for transaction
notations) + $1,184 (for unscheduled verifications)) x 135 funds =
$882,360. 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.
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Form N-17f-2 is entitled ``Certificate of Accounting of Securities
and Similar Investments in the Custody of Management Investment
Companies.'' Form N-17f-2 is the cover sheet for the accountant
examination certificates filed under rule 17f-2 of the Investment
Company Act of 1940 by registered management investment companies
(``funds'') maintaining custody of securities or other investments.
Form N-17f-2 facilitates the filing of the accountant's examination
certificates. The use of the form allows the certificates to be filed
electronically, and increases the accessibility of the examination
certificates to both the Commission's examination staff and interested
investors by ensuring that the certificates are filed under the proper
SEC file number and the correct name of a fund.
Under rule 17f-2, each fund is required to file Form N-17f-2 at
least three times a year with the Commission. Commission staff
estimates that it takes approximately 1 hour per response to prepare
and file a Form N-17f-2 with the Commission. Thus, the total annual
burden of Form N-17f-2's paperwork requirement is estimated to be
approximately 405 burden hours.\10\ The entire hour burden will be
borne by clerical staff at $16 per hour, for a total cost of
approximately $6,480 (405 burden hours x $16 = $6,480). The increase in
burden hours from 92 to 405 is attributable to updated estimates of the
burden hours that reflect additional time spent by professionals and
clerical staff in their compliance efforts.
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\10\ The Commission staff estimates that there are 135 funds
that file Form N-17f-2 each year. Each fund is required to make
three responses per year, and each response requires 1 hour to
prepare. The hour burden is calculated as follows: 135 (respondents)
x 3 (responses per fund per year) x 1 (hours per response) = 405
hours.
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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 collection of
information requirements of the rule is mandatory for those funds that
maintain custody of their own assets. The information provided to the
Commission by the fund's independent public accountants about each
verification of the fund's assets 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.
Please direct written comments regarding the above information to
the following persons: (i) Desk Officer for the Securities and Exchange
Commission, Office of Information and Regulatory Affairs, Office of
Management and Budget, Room 10102, New Executive Office Building,
Washington, DC 20503; and (ii) Kenneth A. Fogash, Acting Associate
Executive Director/CIO, Office of Information Technology, Securities
and Exchange Commission, 450 5th Street, NW., Washington, DC 20549.
Comments must be submitted to OMB within 30 days of this notice.
Dated: May 30, 2003.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-14294 Filed 6-5-03; 8:45 am]
BILLING CODE 8010-01-P