[Federal Register: July 8, 2008 (Volume 73, Number 131)]
[Notices]
[Page 39062-39063]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr08jy08-116]
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SECURITIES AND EXCHANGE COMMISSION
Proposed Collection; Comment Request
Upon Written Request, Copies Available From: Securities and Exchange
Commission, Office of Investor Education and Advocacy, Washington, DC
20549-0213.
Extension:
Rule 19b-1, SEC File No. 270-312, OMB Control No. 3235-0354.
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'') is soliciting comments on the collection of
information summarized below. The Commission plans to submit the
existing collection of information to the Office of Management and
Budget (``OMB'') for extension and approval.
Section 19(b) of the Investment Company Act of 1940 (the ``Act'')
(15 U.S.C. 80a-19(b)) authorizes the Commission to regulate registered
investment company (``fund'') distributions of long-term capital gains
made more frequently than once every twelve months. Rule 19b-1 under
the Act \1\ prohibits funds from distributing long-term capital gains
more than once every twelve months unless certain conditions are met.
Rule 19b-1(c) (17 CFR 270.19b-1(c)) permits unit investment trusts
(``UITs'') engaged exclusively in the business of investing in certain
eligible fixed-income securities to distribute long-term capital gains
more than once every twelve months, if: (i) The capital gains
distribution falls within one of several categories specified in the
rule \2\ and (ii) the distribution is accompanied by a report to the
unit holder that clearly describes the distribution as a capital gains
distribution (the ``notice requirement'').\3\ Rule 19b-1(e) (17 CFR
270.19b-1(e)) permits a fund to apply to the Commission for permission
to distribute long-term capital gains more than once a year if the fund
did not foresee the circumstances that created the need for the
distribution. The application must set forth the pertinent facts and
explain the circumstances that justify the distribution.\4\ An
application that meets those requirements is deemed to be granted
unless the Commission denies the request within 15 days after the
Commission receives the application.
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\1\ 17 CFR 270.19b-1.
\2\ 17 CFR 270.19b-1(c)(1).
\3\ The notice requirement in rule 19b-1(c)(2) (17 CFR 270.19b-
1(c)(2)) supplements the notice requirement of section 19(a) [15
U.S.C. 80a-19(a)] and rule 19a-1 [17 CFR 270.19a-1], which requires
any distribution in the nature of a dividend payment made by a fund
to its investors to be accompanied by a notice disclosing the source
of the distribution.
\4\ Rule 19b-1(e) also requires that the application comply with
rule 0-2 [17 CFR 270.02], which sets forth the general requirements
for papers and applications filed with the Commission.
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Commission staff estimates that, on average, each year five funds
file an application under rule 19b-1(e). The staff understands that
funds that file an application generally use outside counsel to prepare
the application. The cost burden of using outside counsel is discussed
below. The staff estimates that, on average, the fund's investment
adviser spends approximately four hours to review an application,
including 3.5 hours by an assistant general counsel, at a cost of $371
per hour, and 0.5 hours by an administrative assistant, at a cost of
$65 per hour.\5\ Thus, the Commission staff estimates that the annual
hour burden of the collection of information imposed by rule 19b-1 is
approximately four hours per fund, at a cost of $1331, for a total
burden of 20 hours at a cost of $6655.\6\
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\5\ These hourly rate estimates are derived from annual salaries
reported in: Securities Industry and Financial Markets Association,
Management and Professional Earnings in the Securities Industry
(2007) and Securities Industry and Financial Markets Association,
Office Salaries in the Securities Industry (2007).
\6\ This estimate is based on the following calculations:
$1298.50 (3.5 hours x $371 = $1298.5) plus $32.50 (0.5 hours x $65 =
$32.50) equals $1331.00 (cost of one application); $1331 x 5
applications = $6655 total cost.
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The Commission staff estimates that there is no hour burden
associated with complying with the collection of information component
of rule 19b-1(c).
As noted above, the Commission staff understands that funds that
file an application under rule 19b-1(e) generally use outside counsel
to prepare the application.\7\ The staff estimates that, on average,
outside counsel spends 10 hours preparing a rule 19b-1(e) application,
including eight hours by an associate and two hours by a partner.
Outside counsel billing arrangements and rates vary based on numerous
factors. Based on conversations with outside counsel and average
billing rates of outside counsel the staff estimates that the average
cost of outside counsel preparation of the 19b-(e) exemptive
application is $5,000. Thus, the staff estimates that the total annual
cost burden imposed by the exemptive application requirements of rule
19b-1(e) is $25,000.\8\
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\7\ This understanding is based on conversations with
representatives from the fund industry.
\8\ This estimate is based on the following calculation: $5,000
multiplied by 5 (funds) equals $25,000.
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The Commission staff estimates that there are approximately 6030
UITs,\9\ which may rely on rule 19b-1(c) to make capital gains
distributions. The staff estimates that, on average, these UITs rely on
rule 19b-1(c) once a year to make a capital gains distribution.\10\ In
most cases, the trustee of the UIT is responsible for preparing and
sending the notices that must accompany a capital gains distribution
under rule 19b-1(c)(2). These notices require limited preparation, the
cost of which accounts for only a small, indiscrete portion of the
comprehensive fee charged by the trustee for its services to the UIT.
The staff believes that as a matter of good business practices, and for
tax preparation reasons, UITs would collect and distribute the capital
gains information required to be sent to unit holders under rule 19b-
1(c) even in the absence of the rule. The staff estimates that the cost
of preparing a notice for a capital gains distribution under rule 19b-
1(c)(2) is approximately $50. There is no separate cost to mail the
notices because they are mailed with the capital gains distribution.
Thus, the staff estimates that the capital gains distribution notice
requirement imposes an annual cost on UITs of approximately
$301,500.\11\ The staff therefore estimates that the total cost
[[Page 39063]]
imposed by rule 19b-1 is $326,500 ($301,500 plus $25,000 equals
$326,500).
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\9\ The Investment Company Institute, Unit Investment Trust Data
(April, 2008).
\10\ The number of times UITs rely on the rule to make capital
gains distributions depends on a wide range of factors and, thus,
can vary greatly across years. A number of UITs are organized as
grantor trusts, and therefore do not generally make capital gains
distributions under rule 19b-1(c), or may not rely on rule 19b-1(c)
as they do not meet the rule's requirements. Other UITs may
distribute capital gains biannually, annually, quarterly, or at
other intervals.
\11\ This estimate is based on the following calculation: 6030
UITs multiplied by $50 equals $301,500.
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Based on these calculations, the total number of respondents for
rule 19b-1 is estimated to be 6035 (6030 UIT portfolios + 5 funds
filing an application under rule 19b-1(e)), the total annual hour
burden is estimated to be 20 hours, and the total annual cost burden is
estimated to be $326,500. These estimates of average annual burden
hours and costs are made solely for purposes of the Paperwork Reduction
Act. The collections of information required by 19b-1(c) and 19b-1(e)
are necessary to obtain the benefits described above. 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 collection of
information is 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 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 in writing within 60 days of this
publication.
Please direct your written comments to R. Corey Booth, Director/
Chief Information Officer, Securities and Exchange Commission, C/O
Shirley Martinson, 6432 General Green Way, Alexandria, VA 22312; or
send an e-mail to: PRA_Mailbox@sec.gov.
Dated: June 30, 2008.
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-15356 Filed 7-7-08; 8:45 am]
BILLING CODE 8010-01-P