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Upon Written Request Copies Available From: U.S. Securities and Exchange Commission, Office of FOIA Services, 100 F Street NE., Washington, DC 20549-2736.


Rule 17f-2; OMB Control No. 3235-0223, SEC File No. 270-233.

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”) has submitted to the Office of Management and Budget a request for extension of the previously approved collection of information discussed below.

Rule 17f-2 (17 CFR 270.17f-2), entitled “Custody of Investments by Registered Management Investment Company,” was adopted in 1940 under section 17(f) of the Investment Company Act of 1940 (15 U.S.C. 80a-17(f)) (the “Act”), and was last amended materially in 1947. 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.[1] 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. An independent public accountant must verify the fund's assets three times each year, and two of those examinations must be unscheduled.[2]

Rule 17f-2's 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 Start Printed Page 33320fund assets and to detect any irregularities.

The Commission staff estimates that each fund makes 974 responses and spends an average of 252 hours annually in complying with the rule's requirements.[3] Commission staff estimates that on an annual basis it takes: (i) 0.5 hours of fund accounting personnel at a total cost of $99 to draft director resolutions; [4] (ii) 0.5 hours of the fund's board of directors at a total cost of $2200 to adopt the resolution; [5] (iii) 244 hours for the fund's accounting personnel at a total cost of $63,797 to prepare written notations of transactions; [6] and (iv) 7 hours for the fund's accounting personnel at a total cost of $1386 to assist the independent public accountants when they perform verifications of fund assets.[7] Commission staff estimates that approximately 188 funds file Form N-17f-2 each year.[8] Thus, the total annual hour burden for rule 17f-2 is estimated to be 47,376 hours.[9] Based on the total costs per fund listed above, the total cost of rule 17f-2's collection of information requirements is estimated to be approximately $12.7 million.[10]

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 collections of information required by rule 17f-2 is mandatory for those funds that maintain custody of their own assets. 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.

The public may view the background documentation for this information collection at the following Web site, 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:; and (ii) Pamela Dyson, Director/Chief Information Officer, Securities and Exchange Commission, c/o Remi Pavlik-Simon, 100 F Street NE., Washington, DC 20549 or send an email to: Comments must be submitted to OMB within 30 days of this notice.

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Dated: June 5, 2015.

Robert W. Errett,

Deputy Secretary.

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1.  The rule generally requires all assets to be deposited in the safekeeping of a “bank or other company whose functions and physical facilities are supervised by Federal or State authority.” The fund's securities must be physically segregated at all times from the securities of any other person.

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2.  The accountant must transmit to the Commission promptly after each examination a certificate describing the examination on FormN-17f-2. The third (scheduled) examination may coincide with the annual verification required for every fund by section 30(g) of the Act (15 U.S.C. 80a-29(g)).

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3.  The 974 responses are: 1 (one) response to draft and adopt the resolution and 973 notations. Estimates of the number of hours are based on conversations with individuals in the fund industry. The actual number of hours may vary significantly depending on individual fund assets.

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4.  This estimate is based on the following calculation: 0.5 (burden hours per fund) × $198 (senior accountant's hourly rate) = $99. Unless otherwise indicated, the hourly wage figures used herein are from the Securities Industry and Financial Markets Association's Management & Professional Earnings in the Securities Industry 2013, modified by Commission staff to account for an 1800-hour work-year and multiplied by 5.35 to account for bonuses, firm size, employee benefits and overhead.

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5.  The estimate for the cost of board time as a whole is derived from estimates made by the staff regarding typical board size and compensation that is based on information received from fund representatives and publicly available sources.

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6.  Respondents estimated that each fund makes 974 responses on an annual basis and spends a total of 0.25 hours per response. The fund personnel involved are Accounts Payable Manager ($186 hourly rate), Operations Manager ($334 hourly rate) and Accounting Manager ($265 hourly rate). The average hourly rate of these personnel is $262. The estimated cost of preparing notations is based on the following calculation: 974 × 0.25 × $262 = $63,797.

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7.  This estimate is based on the following calculation: 7 × $198 (senior accountant's hourly rate) = $1386.

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8.  On average, each year approximately 188 funds filed Form N-17f-2 with the Commission during calendar years 2011-2013.

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9.  This estimate is based on the following calculation: 188 (funds) × 252 (total annual hourly burden per fund) = 47,376 hours for rule. 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.

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10.  This estimate is based on the following calculation: $67,482 (total annual cost per fund) × 188 funds = $12,686,616.

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[FR Doc. 2015-14244 Filed 6-10-15; 8:45 am]