Supporting Statement N-17F-2

SUPPORTING STATEMENT
For the Paperwork Reduction Act Information Collection Submission for
Form N-17f-2

A.

JUSTIFICATION
1.

Necessity of Information Collection

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. Independent public accountants must verify the fund's assets
three times each year, and two of those examinations must be unscheduled. 2
Form N-17f-2 (17 CFR 274.220) is entitled “Certificate of Accounting of Securities and
Similar Investments in the Custody of Management Investment Companies.” Form N-17f-2 is
the cover sheet for the accountant examination certificates prepared under rule 17f-2. Form
N-17f-2 facilitates the filing process for accountant examination certificates. The form has a
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.

2

The accountant must transmit to the Commission promptly after each examination a certificate
describing the examination on Form N-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)).

2
purely administrative purpose and does not require any additional information (beyond that
required by rule 17f-2) to be collected.
2.

Purpose of the Information Collection

Form N-17f-2 facilitates the filing of the accountant’s examination certificates prepared
under rule 17f-2. Form N-17f-2 increases the accessibility of the examination certificates to both
Commission staff and interested investors by ensuring that the certificates are filed under the
proper SEC file number and correct name of a fund.
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 on Form N-17f-2.
4.

Duplication

The Commission evaluates reporting requirements for duplication periodically, and
whenever a rule or a change in a rule is proposed. There is no duplication of the information
required by Form N-17f-2.
5.

Effect on Small Entities

Form N-17f-2 does not significantly increase the regulatory burden on any funds,
including small entities.
6.

Consequences of Less Frequent Collection

Less frequent collection on Form N-17f-2 could inhibit the dissemination of timely
information to the public and could impair the ability of the Commission’s examination staff to
ascertain compliance with the rule.
7.
None.

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

3
8.

Consultation Outside the Agency

The Commission requested public comment on the collection of information
requirements for Form N-17f-2 before it submitted this request for extension and approval to the
Office of Management and Budget. The Commission received no comments in response to its
request.
The Commission and 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 forums provide the Commission and the staff means of
ascertaining and acting upon paperwork burdens confronting the industry.
9.

Payment or Gift

Not applicable.
10.

Confidentiality

Not applicable.
11.

Sensitive Questions

No personally identifiable information (PII) collected/not applicable.
12.

Burden of Information Collection

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. Under rule 17f-2, each fund is required to file Form
N-17f-2 at least three times a year with the Commission. Commission staff estimates that 188
funds file Form N-17f-2 each year, 3 and that it takes approximately 2 hours per response to
prepare and file Form N-17f-2 with the Commission. Commission staff further estimates that on
average each fund files Form N-17f-2 approximately four times a year for a total annual hourly

3

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

4
burden per fund of approximately 8 hours. 4 Thus, the total annual burden for preparing and filing
Form N-17f-2 is approximately 1504 hours. 5 Commission staff estimates that it takes on average
1.25 hours of fund accounting personnel at a total cost of $247.5 to prepare each Form N-17f-2
and .75 hours of clerical time at a total cost of $55.50 6 to file the form with the Commission for a
total annual cost per fund of approximately $1,212. 7 The total cost of Form N-17f-2’s collection
of information requirements is estimated to be approximately $227,856. 8
13.

Costs to Respondents

Form N-17f-2 does not impose any paperwork related cost burden not discussed in item
12 above.
14.

Costs to Federal Government

Because the form facilitates the electronic filing of the attached certificate, the amount of
staff time required to process the EDGAR filing of the Form N-17F-2 and the related costs to the
federal government are de minimis.

4

In the aggregate, funds filed 814 Form N-17f-2s on average each year from 2011-2013. (814
filings per year / 188 funds filing each year = 4.33 filings per year).

5

This estimate is based on the following calculation: 188 respondents (funds that file Form
N-17f-2 each year) x 4 (responses per fund per year) x 2 (hours per response) = 1504 hours.
Estimates of the number of hours are based on conversations with individuals in the mutual fund
industry. The actual number of hours may vary significantly depending on individual fund
assets.

6

The hourly wage figure for an administrative assistant (clerical) is from the Securities Industry
and Financial Markets Association’s 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.

7

This estimate is based on the following calculation 5 hours (1.25 hours per form x 4 forms
annually) x $198 (fund senior accountant hourly rate) + 3 hours (.75 hours per form x 4 forms
annually) x $74 (administrative assistant (clerical) hourly rate) = $1,212.

8

This estimate is based on the following calculation: 188 funds x $1,212 (total annual cost per
fund) = $227,856.

5
15.

Changes in Burden

The estimated total annual burden has decreased from 1944 hours to 1504 hours. Based
on a review of filings, the number of funds filing Form N-17f-2 has decreased and the time to
prepare the form has not changed.
16.

Information Collection Planned for Statistical Purposes

Not applicable.
17.

Approval to Omit OMB Expiration Date

The Commission is not seeking approval to omit the expiration date.
18.

Exceptions to Certification Statement

Not applicable.
B.

COLLECTION OF INFORMATION EMPLOYING STATISTICAL METHODS
Not applicable.