Skip to Content


Proposed Collection; Comment Request

Document Details

Information about this document as published in the Federal Register.

Published Document

This document has been published in the Federal Register. Use the PDF linked in the document sidebar for the official electronic format.

Start Preamble

Upon Written Request, Copies Available From: Securities and Exchange Commission, Office of Filings and Information Services, 450 Fifth Street, NW, Washington, DC 20549.

Extension: Rule 17f-2 [17 CFR 270.17f-2]. SEC File No. 270-233. OMB Control No. 3235-0223.

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 (the “Commission”) is soliciting comments on the collection of information summarized below. The Commission plans to submit this existing collection of information to the Office of Management and Budget for extension and approval.

Rule 17f-2 under the Investment Company Act of 1940 (17 CFR 270.17f-2) is entitled: “Custody of Investments by Registered Management Investment Company.” Rule 17f-2 establishes safeguards for arrangements in which a registered management investment company (“fund”) is deemed to maintain custody of its own assets, such as when the fund maintains its assets in a facility that provides safekeeping but not custodial services. The rule includes several recordkeeping or reporting requirements. The fund's directors must prepare a resolution designating not more than five fund officers or responsible employees who may have access to the fund's assets. The designated access persons (two or more of whom must act jointly when handling fund assets) must prepare a written notation providing certain information about each deposit or withdrawal of fund assets, and must transmit the notation to another officer or director designated by the directors. Independent public accountants must verify the fund's assets at least three times a year, and two of the examinations must be unscheduled.

The requirement that directors designate access persons is intended to ensure that directors evaluate the trustworthiness of insiders who handle fund assets. The requirements that access persons act jointly in handling fund assets, prepare a written notation of each transaction, and transmit the notation to another designated person are intended to reduce the risk of misappropriation of fund assets by access persons, and to ensure that adequate records are prepared, reviewed by a responsible third person, and available for examination by the Commission. The requirement that auditors verify fund assets without notice twice each year is intended to provide an additional deterrent to the misappropriation of fund assets and to detect any irregularities.

The Commission staff estimates that approximately 135 funds rely upon rule 17f-2.[1] The Commission staff estimates that each fund offers an average of 3.7 separate series or portfolios subject to rule 17f-2. Each fund makes an average of 97.4 responses each year under the rule, including 1 response (requiring .2 burden hours) per fund to draft director resolutions, 89 responses per fund to Start Printed Page 16109prepare notations of transactions [2] (requiring one hour each), and 7.4 responses [3] per fund for fund personnel to assist the independent public accountants when they perform unscheduled verifications (requiring 10 burden hours each). Thus, the total hour burden per fund is estimated to 163.2 hours [4] Commission staff estimates that each fund therefore spends approximately .2 burden hours of professional time at $60 per hour annually in drafting resolutions by directors (.2 x $60 = $12), 89 hours [5] of professional time at $60 per hour annually in preparing transaction notations (89 x $60 = $5,340), and 74 hours [6] of clerical time at $16 per hour annually in assisting independent public accounts perform unscheduled verifications of assets (74 × $16 = $1,184).[7] The total annual burden of rule 17f-2's paperwork requirements thus is estimated to be approximately 22,032 hours [8] at an annual cost of $882,360.[9]

The estimate of average burden hours is made solely for the purposes of the Paperwork Reduction Act, and is not derived from a comprehensive or even a representative survey or study of the costs of Commission rules and forms. Complying with the collection of information requirements of the rule is mandatory for those funds that maintain custody of their own assets. The information provided to the Commission by the fund's independent public accountants about each verification of the fund's assets 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 Kenneth A. Fogash, Acting Associate Executive Director/CIO, Office of Information Technology, Securities and Exchange Commission, 450 5th Street, NW., Washington, DC 20549.

Start Signature

Dated: March 25, 2003.

Margaret H. McFarland,

Deputy Secretary.

End Signature End Preamble


1.  The Commission's records indicate that approximately 135 funds filed Form N-17f-2 with the Commission during calendar year 2002.

Back to Citation

2.  This number results from 24 responses per portfolio multiplied by 3.7 portfolios in the average fund (24 × 3.7 = 88.8).

Back to Citation

3.  This number results from 2 unscheduled verifications per portfolio multiplied by 3.7 portfolios in the average fund (2 × 3.7 = 7.4 responses per fund).

Back to Citation

4.  (1 response × .2 burden hours) + (89 responses × 1 burden hour) + (7.4 responses × 10 burden hours) = 163.2 burden hours.

Back to Citation

5.  89 transaction notations per fund × 1 hour = 89 hours.

Back to Citation

6.  7.4 verifications per fund × 10 hours = 74 hours.

Back to Citation

7.  Each of these hour burden estimates is based upon conversations with attorneys and accountants familiar with the information collection requirements of the rule. Commission staff relied upon the Securities Industry Association, Report on Management and Professional Earnings in the Securities Industry (2002) to determine the hourly wage rates used in the calculation of this estimate. Professional time is based on the estimated average wage for associate and general counsel in the securities industry.

Back to Citation

8.  163.2 hours per fund × 135 funds = 22,032 total annual burden.

Back to Citation

9.  ($12 (for drafting resolutions) + $5,340 (for transaction notations) + $1,184 (for unscheduled verifications)) × 135 funds = $882,360.The annual burden for rule 17f-2 does not include time spent preparing Form N-17f-2. The burden for Form N-17f-2 is included in a separate collection of information.

Back to Citation

[FR Doc. 03-7843 Filed 4-1-03; 8:45 am]