[Federal Register Volume 85, Number 42 (Tuesday, March 3, 2020)]
[Notices]
[Pages 12632-12633]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-04351]
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SECURITIES AND EXCHANGE COMMISSION
[SEC File No. 270-473, OMB Control No. 3235-0530]
Proposed Collection; Comment Request
Upon Written Request, Copies Available From: Securities and Exchange
Commission, Office of FOIA Services, 100 F Street NE, Washington, DC
20549-2736
Extension:
Rule 32a-4
Notice is hereby given that, pursuant to the Paperwork Reduction
Act of 1995 (44 U.S.C. 350l et seq.), the Securities and Exchange
Commission (``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 32(a)(2) of the Investment Company Act of 1940 (15 U.S.C.
80a 31(a)(2)) (``Act'') requires that the selection of a registered
management investment company's or registered face-amount certificate
company's (collectively, ``funds'') independent public accountant be
submitted to shareholders for ratification or rejection. Rule 32a-4
under the Investment Company Act (17 CFR 270.32a-4) exempts a fund from
this requirement if, among other things, the fund has an audit
committee consisting entirely of independent directors. The rule
permits continuing oversight of a fund's accounting and auditing
processes by an independent audit committee in place of a shareholder
vote.
Among other things, in order to rely on rule 32a-4, a fund's board
of directors must adopt an audit committee charter and must preserve
that charter, and any modifications to the charter, permanently in an
easily accessible place. The purpose of these conditions is to ensure
that Commission staff will be able to monitor the duties and
responsibilities of an audit committee of a fund relying on the rule.
Commission staff estimates that on average the board of directors
takes 15 minutes to adopt the audit committee charter. Commission staff
has estimated that with an average of 8 directors on
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the board,\1\ total director time to adopt the charter is 2 hours.
Combined with an estimated \1/2\ hour of paralegal time to prepare the
charter for board review, the staff estimates a total one-time
collection of information burden of 2\1/2\ hours for each fund. Once a
board adopts an audit committee charter, the charter is preserved as
part of the fund's records. Commission staff estimates that there is no
annual hourly burden associated with preserving the charter in
accordance with this rule.\2\
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\1\ This estimate is based on staff experience and on
discussions with a representative of an entity that surveys funds
and calculates fund board statistics based on responses to its
surveys.
\2\ This estimate is based on staff experience and discussions
with funds regarding the hour burden related to maintenance of the
charter.
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Because virtually all existing funds have now adopted audit
committee charters, the annual one-time collection of information
burden associated with adopting audit committee charters is limited to
the burden incurred by newly established funds. Commission staff
estimates that fund sponsors establish approximately 90 new funds each
year,\3\ and that all of these funds will adopt an audit committee
charter in order to rely on rule 32a-4. Thus, Commission staff
estimates that the annual one-time hour burden associated with adopting
an audit committee charter under rule 32a-4 is approximately225
hours.\4\
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\3\ This estimate is based on the average number of
notifications of registration on Form N-8A filed from2017 2019.
\4\ This estimate is based on the following calculation: (2.5
burden hours for establishing charter x 90 new funds = 225 burden
hours).
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When funds adopt an audit committee charter in order to rely on
rule 32a-4, they also may incur one-time costs related to hiring
outside counsel to prepare the charter. Commission staff estimates that
those costs average approximately $1,500 per fund. \5\ As noted above,
Commission staff estimates that approximately 90 new funds each year
will adopt an audit committee charter in order to rely on rule 32a-4.
Thus, Commission staff estimates that the ongoing annual cost burden
associated with rule 32a-4 in the future will be approximately
$135,000.\6\
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\5\ Costs may vary based on the individual needs of each fund.
However, based on the staff's experience and conversations with
outside counsel that prepare these charters, legal fees related to
the preparation and adoption of an audit committee charter usually
average $1500 or less. The Commission also understands that model
audit committee charters are available, which reduces the costs
associated with drafting a charter.
\6\ This estimate is based on the following calculations: ($1500
cost of adopting charter x 90 newly established funds = $135,000).
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These estimates of average costs are made solely for the purposes
of the Paperwork Reduction Act. The estimates are not derived from a
comprehensive or even a representative survey or study of the costs of
Commission rules. The collections of information required by rule 32a-4
are necessary to obtain the benefits of the rule. The Commission is
seeking OMB approval, because 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 estimates 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 David Bottom, 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].
Dated: February 27, 2020.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-04351 Filed 3-2-20; 8:45 am]
BILLING CODE 8011-01-P