[Federal Register Volume 84, Number 224 (Wednesday, November 20, 2019)]
[Notices]
[Pages 64128-64129]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-24971]
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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 FOIA Services, 100 F Street NE,
Washington, DC 20549-2736
New Collection:
Rule 139b; OMB Control No. New Collection, SEC File No. 270-815
Notice is hereby given that the Securities and Exchange Commission
(the ``Commission'') has, in accordance with the Paperwork Reduction
Act of 1995 (Pub. L. 104-13, 44 U.S.C. 3501 et seq.) (``PRA''),
submitted a sponsored information collection request (``ICR'') to the
Office of Management and Budget (``OMB'') for review and clearance for
the collection of information associated with the new Rule 139b (17 CFR
230.139b) under the Securities Act of 1933 (15 U.S.C. 77a et seq.)
(``Securities Act'') that was adopted by the Commission on November 30,
2018.\1\ The title for this collection of information is: ``Rule 139b
Disclosure of Standardized Performance.''
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\1\ See Release No. 33-10580 (Nov. 30, 2018) [83 FR 64180 (Dec.
13, 2018)] (``Adopting Release''). New rule 139b will be effective
on January 14, 2019.
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As directed by the Fair Access to Investment Research Act of 2017
(Pub. L. 115-66, 131 Stat. 1196 (2017) (the ``FAIR Act''), the
Commission adopted new rule 139b under the Securities Act to extend the
safe harbor under rule 139 to a ``covered investment fund research
report.'' Specifically, new rule 139b provides a safe harbor to a
broker-dealer who publishes or distributes in the regular course of its
business research reports concerning one or more ``covered investment
fund(s)'' while participating in the distribution of a covered
investment fund's securities.
In the Proposing Release, we solicited comment on whether rule 139b
should include a standardized performance disclosure requirement.\2\ In
response to comments received, we have decided to adopt such a
requirement.\3\ We believe that standardized performance presentation
is an appropriate requirement because investors tend to consider fund
performance a significant factor in evaluating or comparing investment
companies, and the requirement addresses potential investor confusion
if a communication were not easily recognizable as research as opposed
to an advertising prospectus or supplemental sales literature. Rule
139b requires that research reports about open-end funds that include
performance information must present it in accordance with paragraphs
(d), (e), and (g) of rule 482. Rule 139b also requires that research
reports about closed-end funds that include performance information
must present it in accordance with instructions to item 4.1(g) of Form
N-2. Performance measures calculated by broker-dealers are not required
to be kept confidential and there is no mandatory retention period. We
anticipate that compliance with these performance measures for each
fund discussed in a research report, and for which the performance
measures apply, would increase compliance costs for broker-dealers
seeking to publish or distribute a covered investment fund research
report.
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\2\ See Covered Investment Fund Research Reports, Securities Act
Release No. 10498 (May 23, 2018) [83 FR 26788 (June 8, 2018)]
(``Proposing Release'') at 26803-04.
\3\ See Adopting Release, supra note I, at Section II.C.
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It is difficult to provide estimates of the burdens and costs for
those broker-dealers that will include performance information in a
rule 139b research report. As discussed above, this is difficult to
estimate because current data collected does not reflect the affiliate
exclusion, does not include the entire universe of covered investment
funds, and it is uncertain what percentage of communications currently
filed as rule 482 advertising prospectuses (or rule 34b-1 supplemental
sales materials) will instead be published in reliance of rule 139b, as
covered investment fund research reports.\4\ For purposes of the PRA,
we estimate that 10% of the rule 482 and rule 34b-1 communications
currently filed by broker-dealers with FINRA (approximately 65,000)
could be considered as rule 139b covered investment fund research
reports. We estimate that broker-dealers will publish annually 6,500
(10% of 65,000) covered investment fund research reports. Moreover, we
assume for purposes of the PRA that all estimated rule 139b research
reports will include fund performance information. We further estimate
that 1,417 broker-dealers would likely be respondents to the collection
of information with a frequency of 4.6 responses per year.\5\ We
further estimate that 50% of these broker-dealers will have experience
in complying with standardized performance requirements under rule 482.
For the 50% of this subset of broker-dealers that do not have
experience with complying with rule 482, we estimate that there will be
a one-time implementation cost for each broker-dealer of 5 internal
burden hours. Additionally, we estimate that each research report will
require 3 hours of ongoing internal burden hours by a broker-dealers'
personnel to comply with the rule 139b collection of information
requirements, which for each broker-dealer is estimated to be
[[Page 64129]]
13.8 internal burden hours.\6\ Accordingly, we estimate that the
standardized performance presentation requirements will result in an
average annual hour burden of about 16.3 hours per broker-dealer \7\ in
the first year of compliance and about 13.8 hours per broker-dealer for
each of the next two years. Amortized over three years, the average
annual hour burden will be about 14.63 hours per broker-dealer.\8\
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\4\ See Adopting Release, supra note 1, n. 413 and accompanying
paragraph.
\5\ See Adopting Release, supra note 1, n. 414 and accompanying
text. 6,500 covered investment fund research reports/1,417 broker-
dealers = 4.6 annual responses per broker-dealer.
\6\ 4.6 annual responses per broker-dealer x 3 internal burden
hours = 13.8 annual internal burden hours per broker-dealer.
\7\ (50% of * 13.8 hours ongoing compliance) + (50% * (13.8
hours ongoing compliance + 5 hours of initial compliance hours)).
\8\ ((16.3 internal burden hours in year 1) + (13.8 internal
burden hours in year 2) + (13.8 internal burden hours in year 3)) /
3.
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In sum, we estimate that rule 139b's requirements will impose a
total annual internal hour burden of 20,731 hours on broker-dealers.\9\
We do not think there is an external cost burden associated with this
collection of information.
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\9\ 14.63 annualized burden hours * 1,417 broker-dealers.
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This information collection is subject to the PRA. If approved,
responses to the new collection of information requirement would not be
mandatory for broker-dealers seeking to rely upon rule 139b but would
be necessary for those broker-dealers that would like to provide
performance information in their covered investment fund research
reports. Responses to the information collections 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. The public may view the background
documentation for this information collection at the following website,
www.reginfo.gov. Comments should be directed to: (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, or by sending an email
to: [email protected]; and (ii) Charles Riddle, Acting
Director/Chief Information Officer, Securities and Exchange Commission,
c/o Cynthia Roscoe, 100 F Street NE, Washington, DC 20549 or send an
email to: [email protected]. Comments must be submitted to OMB within
30 days of this notice.
Dated: November 13, 2019.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-24971 Filed 11-19-19; 8:45 am]
BILLING CODE 8011-01-M