Form N-17f-1 Supporting Statement (2014)

SUPPORTING STATEMENT
For the Paperwork Reduction Act Information Collection Submission for
Form N-17F-1

A.

JUSTIFICATION
1.

Necessity for the Information Collection

Section 17(f) of the Investment Company Act of 1940 ("Act") (15 U.S.C. 80a-17(f))
provides in part that a registered management investment company ("fund") may maintain its
securities and similar investments in the custody of a “company which is a member of a national
securities exchange as defined in the Securities Exchange Act of 1934, subject to such rules and
regulations as the Commission may from time to time prescribe for the protection of investors.”
Form N-17f-1 (17 CFR 274.219) is entitled “Certificate of Accounting of Securities and
Similar Investments of a Management Investment Company in the Custody of Members of
National Securities Exchanges.” The form serves as a cover sheet to the accountant’s certificate
that is required to be filed periodically with the Commission pursuant to rule 17f-1 (17 CFR
270.17f-1) under the Act, entitled “Custody of Securities with Members of National Securities
Exchanges,” which sets forth the conditions under which a fund may place its assets in the
custody of a member of a national securities exchange. Rule 17f-1 requires, among other things,
that an independent public accountant verify the fund's assets at the end of every annual and
semi-annual fiscal period, and at least one other time during the fiscal year as chosen by the
independent accountant. Requiring an independent accountant to examine the fund's assets in the
custody of a member of a national securities exchange assists Commission staff in its inspection
program and helps to ensure that the fund assets are subject to proper auditing procedures. The
accountant's certificate stating that it has made an examination, and describing the nature and the

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extent of the examination, must be attached to Form N-17f-1 and filed with the Commission
promptly after each examination. The form facilitates the filing of the accountant’s certificates,
and increases the accessibility of the certificates to both Commission staff and interested
investors.
2.

Purpose of the Information Collection

Form N-17f-1 is designed to assist Commission staff in monitoring funds' compliance
with federal securities laws. Although Commission inspections staff conducts periodic reviews
of all funds, due to staffing constraints, funds are not inspected annually. Thus, the periodic
examinations by accountants required by filing of the accountant’s certificate attached to Form
N-17f-1 help to ensure that the fund’s assets are continuously subject to proper auditing
procedures. Form N-17f-1 facilitates filing the accountant’s certificate, and increases the
accessibility of the certificate to both Commission staff and interested investors. If Form
N-17f-1 were not used to transmit the accountant’s certificate, the certificates might not contain
the proper SEC file number or the correct fund name, and the accountant’s certificate might be
difficult to handle properly when received by the Commission.
3.

Consideration Given to Information Technology

The Commission’s Electronic Data Gathering, Analysis and Retrieval System
(“EDGAR”) provides for the automated filing, processing, and dissemination of full disclosure
filings. The automation provides for speed, accuracy and public availability of information,
generating benefits to investors and financial markets. Currently, the accountant's certificates are
required to be filed electronically with Form N-17f-1 through EDGAR.
4.

Duplication

Form N-17f-1 does not impose any duplicative requirements, and the information

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collected under the rule is not available elsewhere.
5.

Effect on Small Entities

The requirements of Form N-17f-1 apply to all funds, including funds that are small
entities, that maintain their assets in the custody of a member of a national securities exchange.
If a fund chooses to maintain its assets in the custody of a national securities exchange member,
then regardless of its size, it must file Form N-17f-1 three times each year, as required by
rule 17f-1.
6.

Consequences of Not Conducting Collection

The requirements of Form N-17f-1 are designed to ensure the safekeeping of fund assets
and assist Commission staff in monitoring fund custodial arrangements. The frequency of filing
Form N-17f-1 is determined by the frequency of filing the attached accountants certificate. Less
frequent collection of the accountants certificate and the form required by the rule would inhibit
the dissemination of timely information that enables Commission staff to ensure the safekeeping
of client funds and investment company securities.
7.

Inconsistencies with Guidelines in 5 CFR 1320.5(d)(2)

Not applicable.
8.

Consultation Outside the Agency

The Commission requested public comment on the collection of information
requirements of Form N-17f-1 before it submitted this request for extension and approval to the
Office of Management and Budget. The Commission received no comments in response to these
requests. The Commission and the staff of the Division of Investment Management participate
in an ongoing dialogue with representatives of the fund industry through public conferences,
meetings and informal exchanges. These various forums provide the Commission and the staff
with a means of ascertaining and acting upon paperwork burdens confronting the industry.

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9.

Payment or Gift

Not applicable.
10.

Assurance of Confidentiality

Not applicable.
11.

Sensitive Questions

No information of a sensitive nature will be required under these collections of
information. These information collections collect basic Personally Identifiable Information (PII)
that may include name, business address, and residential address (for sole proprietor only),
telephone/cellular/facsimile numbers, and email address. The information collection is covered
under the following System of Records Notices (SORN).
http://www.sec.gov/about/privacy/sorn/secsorn6.pdf
12.

Estimate of Hour Burden

Commission staff estimates that it takes: (i) 1 hour of clerical time, at a cost of $57 per
hour, to prepare and file Form N-17f-1 1; and (ii) 0.5 hour for the fund’s chief compliance officer,
at a cost of $485 per hour (or $243 for half an hour), 2 to review Form N-17f-1 prior to filing with
the Commission, for a total of 1.5 hours at a total cost of $300. 3 Each fund is required to make 3

1

This estimate of $57 per hour for a general clerk is derived from the Securities Industry and
Financial Markets Association’s (“SIFMA”) Office Salaries in the Securities Industry 2013,
modified by Commission staff to account for an 1800-hour work-year and multiplied by 2.93 to
account for bonuses, firm size, employee benefits and overhead.

2

This estimate of $485 per hour for a chief compliance officer is derived from SIFMA’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.

3

This estimate is based on the following calculation: ($57 + $243 = $300).

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filings annually, for a total annual burden per fund of approximately 4.5 hours at a cost of $900. 4
Commission staff estimates that an average of 4 funds currently file Form N-17f-1 with the
Commission 3 times each year, for a total of 12 responses annually. 5 The staff therefore
estimates that the total annual hour burden for Form N-17f-1 is 18 hours at a total cost of
$3,600. 6
13.

Estimate of Total Annual Cost Burden

Form N-17f-1 does not impose any paperwork related cost burden not discussed in item
12 above.
14.

Estimate of Cost to the Federal Government

The federal government does not incur any direct costs in connection with the
requirements of Form N-17f-1. Because Form N-17f-1 facilitates the electronic filing of the
attached certificate, the amount of staff time required to process the EDGAR filing of the form
and the related costs to the federal government are de minimis.
15.

Explanation of Changes in Burden

The estimated total annual burden has decreased from 22.5 hours to 18 hours. Based on a
review of filings, the number of funds making Form N-17f-1 filings has decreased and the time
to prepare the filings has not changed.
16.

Information Collection Planned for Statistical Purposes

Not applicable.

4

This estimate is based on the following calculations: (1.5 hours × 3 responses annually = 4.5
hours); ($300 per response × 3 responses annually = $900).

5

This estimate is based on a review of Form N-17f-1 filings made with the Commission over the
last three years.

6

This estimate is based on the following calculations: (4.5 hours × 4 funds = 18 total hours);

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17.

Approval to Omit OMB Expiration Date

We request authorization to omit the expiration date on the electronic version of the form.
Including the expiration date on the electronic version of the form will result in increased costs,
because the need to make changes to the form may not follow the application’s scheduled version
release dates. The OMB control number will be displayed.
18.

Exceptions to Certification Statement

Not applicable.
B.

COLLECTIONS OF INFORMATION EMPLOYING STATISTICAL METHODS
Not applicable.

($900 × 4 funds = $3,600).