[Federal Register Volume 85, Number 98 (Wednesday, May 20, 2020)]
[Notices]
[Pages 30760-30761]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-10881]
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SECURITIES AND EXCHANGE COMMISSION
[SEC File No. 270-473, OMB Control No. 3235-0530]
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
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'') has submitted to the Office of Management
and Budget requests for extension of the previously approved
collections of information discussed below.
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 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 approximately 225
hours.\4\
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\3\ This estimate is based on the average number of
notifications of registration on Form N-8A filed from 2017 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 $1500 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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The estimates of average burden hours and costs are made solely for
the purposes of the Paperwork Reduction Act, and are not derived from a
comprehensive or even a representative survey or study of the costs of
Commission rules and forms. 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.
The public may view background documentation for this information
collection at the following website: www.reginfo.gov. Find this
particular information collection by selecting ``Currently under 30-day
Review--Open for Public Comments'' or by using the search function.
Written comments and recommendations for the proposed information
collection should be sent within 30 days of publication of this notice
to (i) www.reginfo.gov/public/do/PRAMain and (ii) David Bottom,
Director/Chief Information Officer, Securities and Exchange Commission,
c/o Cynthia Roscoe, 100 F Street NE,
[[Page 30761]]
Washington, DC 20549, or by sending an email to: [email protected].
Dated: May 15, 2020.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-10881 Filed 5-19-20; 8:45 am]
BILLING CODE 8011-01-P