[Federal Register: December 7, 2005 (Volume 70, Number 234)]
[Notices]
[Page 72864-72865]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07de05-129]
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SECURITIES AND EXCHANGE COMMISSION
Proposed Collection; Comment Request
Upon Written Request, Copies Available From: Securities and Exchange
Commission, Office of Filings and Information Services, Washington, DC
20549.
Extension: Rule 18f-3; SEC File No. 270-385; OMB Control No. 3235-
0441
Notice is hereby given that, pursuant to the Paperwork Reduction
Act of 1995 (44 U.S.C. 3501-3520), 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 18(f)(1) \1\ of the Investment Company Act of 1940 \2\ (the
``Investment Company Act'') prohibits registered open-end management
investment companies (``funds'') from issuing any senior security. Rule
18f-3 under the Act \3\ exempts from section 18(f)(1) a fund that
issues multiple classes of shares representing interests in the same
portfolio of securities (a ``multiple class fund'') if the fund
satisfies the conditions of the rule. In general, each class must
differ in its arrangement for shareholder services or distribution or
both, and must pay the related expenses of that different arrangement.
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\1\ 15 U.S.C. 80a-18(f)(1).
\2\ 15 U.S.C. 80a.
\3\ 17 CFR 270.18f-3.
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The rule includes one requirement for the collection of
information. A multiple class fund must prepare, and fund directors
must approve, a written plan setting forth the separate arrangement and
expense allocation of each class, and any related conversion features
or exchange privileges (``rule 18f-3 plan'').\4\ Approval of the plan
must occur before the fund issues any shares of multiple classes and
whenever the fund materially amends the plan. In approving the plan, a
majority of the fund board, including a majority of the fund's
independent directors, must determine that the plan is in the best
interests of each class and the fund as a whole.
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\4\ Rule 18f-3(d).
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The requirement that the fund prepare and directors approve a
written rule 18f-3 plan is intended to ensure that the fund compiles
information relevant to the fairness of the separate arrangement and
expense allocation for each class, and that directors review and
approve the information. Without a blueprint that highlights material
differences among classes, directors might not perceive potential
conflicts of interests when they determine whether the plan is in the
best interests of each class and the fund. In addition, the plan may be
useful to Commission staff in reviewing the fund's compliance with the
rule.
There are approximately 1,142 multiple class funds.\5\ Based on a
review of typical rule 18f-3 plans, the Commission's staff estimates
that the 1,142 funds together make an average of 571 responses each
year to prepare and approve a written rule 18f-3 plan, requiring
approximately 10 hours per response and a total of 5,710 burden hours
per year in the aggregate.\6\ The
[[Page 72865]]
staff estimates that preparation of the rule 18f-3 plan may require 4
hours of the services of an attorney or accountant employed by the
firm, at a cost of approximately $140 per hour for professional
time,\7\ and approval of the plan may require 1 hour of the attention
of each of 6 directors, at a cost of approximately $635 per hour per
director.\8\ The staff therefore estimates that the aggregate annual
cost of complying with the paperwork requirements of the rule is
approximately $2,495,270 ((4 hours x 1 professional x 571 responses x
$140) + (1 hour x 6 directors x 571 responses x $635)).
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\5\ This estimate is based on data from Form N-SAR, the semi-
annual report that funds file with the Commission.
\6\ The estimate reflects the assumption that each multiple
class fund prepares and approves a rule 18f-3 plan every two years
when issuing a new class or amending a plan (or that 571 of all
1,142 funds prepare and approve a plan each year). The estimate
assumes that the time required to prepare a plan is 4 hours per plan
(or 2,284 hours for 571 funds annually), and the time required to
approve a plan is an additional 1 hour per director per plan (or
3,426 hours for 571 funds annually (assuming 6 directors per fund)).
\7\ Hourly rates are derived from salary information compiled by
the Securities Industry Association. We used the annual salary
listed for the Deputy General Counsel position, adjusted upward by
35% to reflect possible overhead costs and employee benefits, to
make our estimate. See Securities Industry Association, Report on
Management and Professional Earnings in the Securities Industry
(2004) (available in part at http://www.careerjournal.com/salaryhiring
(last visited Nov. 17, 2005)).
\8\ Hourly rates are based on previous estimates, adjusted to
reflect a 27% reported increase in compensation during the 2003-2004
period. See Management Practice Inc. Bulletin: More Meetings Means
More Pay for Fund Directors (April 2005) (available at http://www.mfgovern.com
).
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The estimated annual burden of 5,710 hours represents an increase
of 937 hours over the prior estimate of 4,773 hours. The increase in
burden hours is attributable to a change in estimates of the number of
multiple class funds that are subject to the rule based on recent
Commission filings. For the most part, however, most funds require less
time to prepare the rule 18f-3 plans because they only need to amend
existing plans.
The estimate of average burden hours is made solely for the
purposes of the Paperwork Reduction Act. 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 mandatory. 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 collections of
information are necessary for the proper performance of the functions
of the Commission, including whether the information has practical
utility; (b) the accuracy of the Commission's estimate of the burdens
of the collections of information; (c) ways to enhance the quality,
utility, and clarity of the information collected; and (d) ways to
minimize the burdens of the collections 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 in writing within 60 days of this
publication.
Please direct your written comments to R. Corey Booth, Director/
Chief Information Officer, Office of Information Technology, Securities
and Exchange Commission, 100 F Street, NE., Washington, DC 20549.
Dated: November 29, 2005.
Jonathan G. Katz,
Secretary.
[FR Doc. E5-6980 Filed 12-6-05; 8:45 am]
BILLING CODE 8010-01-P