Rule 12d1-1 Supporting Statement

SUPPORTING STATEMENT
For the Paperwork Reduction Act Information Collection Submission for
Rule 12d1-1
A.

JUSTIFICATION
1.

Necessity for the Information Collection

An investment company (“fund”) is generally limited in the amount of securities the fund
(“acquiring fund”) can acquire from another fund (“acquired fund”). Section 12(d) of the
Investment Company Act of 1940 (the “Investment Company Act” or “Act”) 1 provides that a
registered fund (and companies it controls) cannot:
•

acquire more than three percent of another fund’s securities;

•

invest more than five percent of its own assets in another fund; or

•

invest more than ten percent of its own assets in other funds in the aggregate. 2

In addition, a registered open-end fund, its principal underwriter, and any registered
broker or dealer cannot sell that fund’s shares to another fund if, as a result:
•

the acquiring fund (and any companies it controls) owns more than three percent
of the acquired fund’s stock; or

•

all acquiring funds (and companies they control) in the aggregate own more than
ten percent of the acquired fund’s stock. 3

Rule 12d1-1 under the Act provides an exemption from these limitations for “cash
sweep” arrangements in which a fund invests all or a portion of its available cash in a money
market fund rather than directly in short-term instruments. 4 An acquiring fund relying on the

1

See 15 U.S.C. 80a.

2

See 15 U.S.C. 80a-12(d)(1)(A). If an acquiring fund is not registered, these limitations apply only
with respect to the acquiring fund’s acquisition of registered funds.

3

See 15 U.S.C. 80a-12(d)(1)(B).

4

See 17 CFR 270.12d1-1.

exemption may not pay a sales load, distribution fee, or service fee on acquired fund shares, or if
it does, the acquiring fund’s investment adviser must waive a sufficient amount of its advisory
fee to offset the cost of the loads or distribution fees. 5 The acquired fund may be a fund in the
same fund complex or in a different fund complex. In addition to providing an exemption from
section 12(d)(1) of the Act, the rule provides exemptions from section 17(a) of the Act and rule
17d-1 thereunder, which restrict a fund’s ability to enter into transactions and joint arrangements
with affiliated persons. 6 These provisions would otherwise prohibit an acquiring fund from
investing in a money market fund in the same fund complex, 7 and prohibit a fund that acquires
five percent or more of the securities of a money market fund in another fund complex from
making any additional investments in the money market fund. 8
The rule also permits a registered fund to rely on the exemption to invest in an
unregistered money market fund that limits its investments to those in which a registered money
market fund may invest under rule 2a-7 under the Act, and undertakes to comply with all the

5

See rule 12d1-1(b)(1).

6

See 15 U.S.C. 80a-17(a), 15 U.S.C. 80a-17(d); 17 CFR 270.17d-1.

7

An affiliated person of a fund includes any person directly or indirectly controlling, controlled by,
or under common control with such other person. See 15 U.S.C. 80a-2(a)(3) (definition of
“affiliated person”). Most funds today are organized by an investment adviser that advises or
provides administrative services to other funds in the same complex. Funds in a fund complex
are generally under common control of an investment adviser or other person exercising a
controlling influence over the management or policies of the funds. See 15 U.S.C. 80a-2(a)(9)
(definition of “control”). Not all advisers control funds they advise. The determination of
whether a fund is under the control of its adviser, officers, or directors depends on all the relevant
facts and circumstances. See Investment Company Mergers, Investment Company Act Release
No. 25259 (Nov. 8, 2001) [66 FR 57602 (Nov. 15, 2001)], at n.11. To the extent that an
acquiring fund in a fund complex is under common control with a money market fund in the same
complex, the funds would rely on the rule’s exemptions from section 17(a) and rule 17d-1.

8

See 15 U.S.C. 80a-2(a)(3)(A), (B).

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other provisions of rule 2a-7. 9 In addition, the acquiring fund must reasonably believe that the
unregistered money market fund (i) operates in compliance with rule 2a-7, (ii) complies with
sections 17(a), (d), (e), 18, and 22(e) of the Act 10 as if it were a registered open-end fund, (iii) has
adopted procedures designed to ensure that it complies with these statutory provisions,
(iv) maintains the records required by rules 31a-1(b)(1), 31a-1(b)(2)(ii), 31a-1(b)(2)(iv), and
31a-1(b)(9); 11 and (v) preserves permanently, the first two years in an easily accessible place, all
books and records required to be made under these rules.
2.

Purpose of the Information Collection

Rule 2a-7 contains certain collection of information requirements. An unregistered
money market fund that complies with rule 2a-7 would be subject to these collection of
information requirements. In addition, the recordkeeping requirements under rule 31a-1 with
which the acquiring fund reasonably believes the unregistered money market fund complies are
collections of information for the unregistered money market fund. The adoption of procedures
by unregistered money market funds to ensure that they comply with sections 17(a), (d), (e), 18,
and 22(e) of the Act also constitute collections of information. By allowing funds to invest in
registered and unregistered money market funds, rule 12d1-1 is intended to provide funds greater
options for cash management. In order for a registered fund to rely on the exemption to invest in
an unregistered money market fund, the unregistered money market fund must comply with
certain collection of information requirements for registered money market funds. These
9

See 17 CFR 270.2a-7.

10

See 15 U.S.C. 80a-17(a), 15 U.S.C. 80a-17(d), 15 U.S.C. 80a-17(e), 15 U.S.C. 80a-18, 15 U.S.C.
80a-22(e).

11

See 17 CFR 270.31a-1(b)(1), 17 CFR 270.31a-1(b)(2)(ii), 17 CFR 270.31a-1(b)(2)(iv), 17 CFR
270.31a-1(b)(9).

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requirements are intended to ensure that the unregistered money market fund has established
procedures for collecting the information necessary to make adequate credit reviews of securities
in its portfolio, as well as other recordkeeping requirements that will assist the acquiring fund in
overseeing the unregistered money market fund (and Commission staff in its examination of the
unregistered money market fund’s adviser).
3.

Consideration Given to Information Technology

Rule 31a-2(f) under the Act permits funds to maintain many types of records on
micrographic and electronic storage media.
4.

Duplication

The Commission periodically evaluates rule-based reporting and recordkeeping
requirements for duplication, and reevaluates them whenever it proposes a rule or a change in a
rule. The conditions in rule 12d1-1 are not duplicated elsewhere.
5.

Effect on Small Entities

Rule 12d1-1 does not distinguish between small entities and other unregistered funds.
The rule does not apply directly to unregistered money market funds, which are not regulated by
the Commission. The Commission does not believe that to the extent an unregistered money
market fund complies with the rule’s requirements in order to sell its shares to a registered fund
relying on the rule, the collection of information is unduly burdensome.
We review all Commission rules periodically, as required by the Regulatory Flexibility
Act, to identify methods to minimize recordkeeping or reporting requirements affecting small
entities.

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6.

Consequences of Less Frequent Collection

Rule 2a-7, as amended in July 2014, requires for retail and government money market
funds, that a fund’s board adopt written procedures designed to stabilize the fund’s net asset
value and also adopt guidelines regarding the delegation of certain responsibilities. None of
these is a recurring obligation. The rule also requires money market funds to perform periodic
analyses of portfolio securities and reviews of the credit risks associated with those securities.
The frequency of these reviews is within the fund’s discretion. The reviews are necessary to
ensure that securities that remain in a fund’s portfolio continue to present minimal credit risks.
7.

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

Unregistered money market funds that sell their shares to registered funds that rely on
rule 12d1-1 are required to keep certain records for more than three years. The Commission
believes that the long-term retention of records is necessary to carry out its examination and
enforcement responsibilities, and its mandate to ensure that the Act's provisions are legally
enforceable. Under the rule, registered funds may invest in unregistered funds that meet certain
conditions, including having an adviser that is registered with the Commission. Commission
staff periodically inspects the operations of registered funds and registered investment advisers to
ensure compliance with the rules and regulations under the Act and the Investment Advisers Act.
For those advisers who also advise an unregistered money market fund that sells shares to
registered funds in reliance on rule 12d1-1, Commission staff also inspects for compliance with
the conditions in the rule. Nevertheless, each fund or adviser may be inspected only at intervals
of several years due to limits on the Commission’s resources. For this reason, the Commission
often needs information relating to events or transactions that occurred years ago. Computerized
record storage has made long-term retention of records less burdensome.
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8.

Consultation Outside the Agency

Before adopting rule 12d1-1, the Commission received and evaluated public comments
on the proposed rule and its collection of information requirements. The Commission received
five comments on its proposal, including comments from a fund management company, a fund
trade association, and an adviser to funds of hedge funds. In, addition, 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. The Commission requested public comment on the collection of information
requirements in rule 12d1-1 before it submitted this request for extension and approval to the
Office of Management and Budget. The Commission received no comments in response to its
request.
9.

Payment or Gift to Respondents

Not applicable.
10.

Assurance of Confidentiality

Not applicable.
11.

Sensitive Questions

No PII collected / Not applicable.
12.

Estimate of Hour Burden

The number of unregistered money market funds that are affected by rule 12d1-1 is an
estimate based on the number of private liquidity funds reported on Form PF as of

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May 7, 2014. 12 The hour burden estimates for the condition that an unregistered money market
fund comply with rule 2a-7 are based on the burden hours included in the Commission’s 2013
PRA submission regarding rule 2a-7. 13 The estimated average burden hours in this collection of
information are made solely for purposes of the Paperwork Reduction Act and are not derived
from a quantitative, comprehensive or even representative survey or study of the burdens
associated with Commission rules and forms.
In the most recent rule 2a-7 submission, Commission staff made the following estimates
with respect to aggregate annual hour and cost burdens for collections of information for each
existing registered money market fund:

12

See U.S. Securities and Exchange Commission Annual Staff Report Relating to the Use of Data
Collected from Private Fund Systemic Risk Reports, Appendix A, Census PF Data as of May 7,
2014, available at http://www.sec.gov/reportspubs/special-studies/im-private-fund-annual-report081514.pdf. In the past, the staff has estimated the number of affected unregistered money
market funds based on the latest number of exemptive applications received by the Commission
that sought relief for registered funds to purchase shares in an unregistered money market fund in
excess of the section 12(d)(1) limits. The staff’s prior estimate of 30 affected unregistered money
market funds was based on 40 exemptive applications received by the Commission in 2005 (the
last full year in which the Commission received applications seeking an exemption to invest in
unregistered money market funds in excess of the statutory limits) and adjusted by the percentage
change in registered money market funds from 2005 to November 2011 (870 funds to 641 funds,
according to the Investment Company Institute). The staff noted that this estimate may be
understated because applicants generally did not identify the name or number of unregistered
money market funds in which registered funds intended to invest, and each application also
applies to unregistered money market funds to be organized in the future.

13

See Securities and Exchange Commission, Request for OMB Approval of Extension for
Approved Collection for Rule 2a-7 under the Investment Company Act of 1940 (OMB Control
No. 3235-0268) (approved Aug. 28, 2013). In connection with amendments to rule 2a-7 adopted
in July 2014, the Commission also submitted a Revision of a Currently Approved Collection for
Rule 2a-7, which is not yet approved. See Money Market Fund Reform, Investment Company
Act Release No. 31166 (July 23, 2014) [79 FR 47736 (Aug. 14, 2014)], available at
http://www.sec.gov/rules/final/2014/33-9616.pdf; Securities and Exchange Commission,
Revision of a Currently Approved Collection (OMB Control No. 3235-0268) (pending, submitted
September 4, 2014).

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Record of credit risk analyses, and determinations regarding adjustable rate securities,
asset backed securities, securities subject to a demand feature or guarantee, and
counterparties to repurchase agreements:
85 responses
680 hours of professional time
Cost: $178,160 14

Public website posting of monthly portfolio information:
12 responses
7 hours of professional time
Cost: $17,30415
Review of procedures and guidelines of any investment adviser to whom the fund’s board
has delegated responsibility under rule 2a-7 and amendment of such procedures:
1 response
5 hours of professional and director time
Cost: $5,960 16
Based on new census data available on Form PF, the staff now believes that the number
of private liquidity funds reported on Form PF (69) is a more current and accurate estimate the
number of unregistered money market funds affected by rule 12d1-1. 17 Each of these

14

This estimate is based on the following calculation: (680 burden hours x $262 per hour for
professional time) = $178,160 per fund.

15

This estimate is based on the following calculation: (12 x 7 burden hours x $206 per hour for a
webmaster) = $17,304 per fund.

16

This estimate is based on the following calculation: (1 hour x $4,500 per hour for board time)
+ (4 hours x $365 per hour for professional time) = $5,960 per fund.

17

See supra note 12. The staff notes, however, that this estimate may be overstated to the extent
that a private liquidity fund reported on Form PF does not follow all of rule 2a-7’s requirements
(that include collections of information) or because no registered investment companies invest in
such a fund. The staff also notes, however, that this estimate may be understated to the extent
that there are additional unregistered money market funds that are not required to be reported on
Form PF (because Form PF is filed only by certain investments advisers to private funds that have
$150 million in private fund assets under management).

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unregistered money market funds engages in the collections of information described above.
Accordingly, the staff estimates that unregistered money market funds complying with the
collections of information described above engage in a total of 6,762 annual responses under rule
12d1-1, 18 the aggregate annual burden hours associated with these responses is 47,748, 19 and the
aggregate annual cost to funds is $13,898,256. 20
In the rule 2a-7 submissions, Commission staff further estimated the aggregate annual
hour and cost burdens for collections of information for fund complexes with registered money
market funds as follows:
Review, revise, and approve procedures concerning stress testing:
1 response
12 burden hours of professional and director time
Cost: $8,021 21
Report to fund boards on the results of stress testing:
5 responses
10 burden hours of professional and support staff time
Cost: $15,490 22
18

The estimate is based on the following calculations: (69 funds x 85 responses for documentation
of credit analyses and other determinations) = 5,865 responses. (69 funds x 12 responses for
public website posting) = 828 responses. (69 funds x 1 response for policies and procedures
related to delegation to an investment adviser) = 69 responses. 5,865 responses + 828 responses
+ 69 responses = 6,762 responses.

19

This estimate is based on the following calculations: (69 funds x 680 hours for documentation of
credit analyses and other determinations) = 46,920 hours. (69 funds x 7 hours for public website
posting) = 483 hours. (69 funds x 5 hours for policies and procedures related to delegation to an
investment adviser) = 345 hours. 46,920 hours + 483 hours + 345 hours = 47,748 hours.

20

This estimate is based on the following calculations: (69 funds x $178,160) = $12,293,040. (69
funds x $17,304) = $1,193,976. (69 funds x $5,960) = $411,240. $12,293,040 + $1,193,976 +
$411,240 = $13,898,256.

21

This estimate is based on the following calculation: (1 hour x $4,500 per hour for board time) +
(5 hours x $322 per hour for a portfolio manager) + (3 hours x $259 per hour for a risk
management specialist) + (3 hours x $378 per hour for an attorney) = $8,021 per response.

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Reporting of rule 17a-9 transactions: 23
1 response
1 burden hour of legal time
Cost: $378 24
Based on the number of large liquidity fund advisers reported on Form PF, the staff
estimates that there are 25 fund complexes with unregistered money market funds invested in by
mutual funds in excess of the statutory limits under rule 12d1-1. 25 Each of these fund complexes
engages in the collections of information described above. Accordingly, the staff estimates that
these fund complexes complying with the collections of information described above engage in a
total of 175 annual responses under rule 12d1-1, 26 the aggregate annual burden hours associated
with these responses is 575, 27 and the aggregate annual cost to funds is $597,225. 28

22

This estimate is based on the following calculation: (5 responses x 5 hours x $322 per hour for a
portfolio manager) + (5 responses x 2 hours x $279 per hour for a compliance manager) + (5
responses x 2 hours x $378 per hour for an attorney) + (5 responses x 1 hour x $174 per hour for
support staff) = $15,490 per fund complex.

23

See 17 CFR 270.17a-9.

24

The estimate is based on the following calculations: (1 response x $378 per hour for an attorney)
= $378 per response.

25

See supra note 12.

26

The estimate is based on the following calculations: (25 fund complexes x 1 response for
revision of procedures concerning stress testing) = 25 responses. (25 fund complexes x 5
responses to provide stress testing reports) = 125 responses. (25 fund complexes x 1 response for
reporting of rule 17a-9 transactions) = 25 responses. 25 responses + 125 responses + 25
responses = 175 responses.

27

This estimate is based on the following calculations: (25 fund complexes x 12 hours for revision
of procedures concerning stress testing) = 300 hours. (25 fund complexes x 10 hours to provide
stress testing reports) = 250 hours. (25 fund complexes x 1 hour for reporting of rule 17a-9
transactions) = 25 hours. 300 hours + 250 hours + 25 hours = 575 hours.

28

This estimate is based on the following calculations: (25 fund complexes x $8,021 for revision of
procedures concerning stress testing) = $200,525. (25 fund complexes x $15,490 to provide
stress testing reports) = $387,250. (25 fund complexes x $378 for reporting of rule 17a-9
transactions) = $9,450. $200,525 + $387,250 + $9,450 = $597,225.

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In the rule 2a-7 submissions, Commission staff further estimated the aggregate annual
burdens for registered money market funds that experience an event of default or insolvency as
follows:
Written record of board determinations and actions related to failure of a security to meet
certain eligibility standards or an event of default of default or insolvency:
2 responses
1 burden hour of legal time
Cost: $378
Notice to Commission of an event of default or insolvency:
1 response
0.5 burden hours of legal time
Cost: $189
Consistent with the estimate in the rule 2a-7 submissions, Commission staff estimates
that approximately 2 percent, or 1, unregistered money market fund experiences an event of
default or insolvency each year. Accordingly, the staff estimates that one unregistered money
market fund will comply with these collection of information requirements and engage in 3
annual responses under rule 12d1-1, 29 the aggregate annual burden hours associated with these
responses is 1.5, 30 and the aggregate annual cost to funds is $567. 31
In the rule 2a-7 submissions, Commission staff further estimated the aggregate annual
burdens for newly registered money market funds as follows:
Establish written procedures and guidelines designed to stabilize the fund’s net asset
value and establish procedures for board delegation of authority:
29

The estimate is based on the following calculations: (1 fund x 2 responses) + (1 fund x 1
response) = 3 responses.

30

This estimate is based on the following calculations: (1 fund x 1 hour) + (1 fund x 0.5 hours) =
1.5 hours.

31

This estimate is based on the following calculations: (1 fund x $378) + (1 fund x $189) = $567.

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1 response
15.5 hours of director, legal, and support staff time
Cost: $6,328 32

Adopt procedures concerning stress testing:
1 response per fund complex
22 burden hours of professional and director time per fund complex
Cost: $19,373 per fund complex 33
Commission staff estimates that the proportion of unregistered money market funds that
intend to newly undertake the collection of information burdens of rule 2a-7 will be similar to the
proportion of money market funds that are newly registered. Based on a projection of 10 new
money market funds per year (in the most recent rule 2a-7 submission), the staff estimates that,
similarly, there will be 10 new unregistered money market funds that undertake the above burden
to establish written procedures and guidelines designed to stabilize the fund’s net asset value and
establish procedures for board delegation of authority. 34 Accordingly, the staff estimates that 10
unregistered money market funds will comply with this collection of information requirement
32

This estimate is based on the following calculation: (0.5 hours x $4,500 per hour for board time)
+ (7.2 hours x $378 per hour for an attorney) + (7.8 hours x $174 per hour for support staff) =
$6,328 per response.

33

This estimate is based on the following calculation: (3 hours x $4,500 per hour for board time) +
(8 hours x $378 per hour for an attorney) + (11 hours x $259 per hour for a risk management
specialist) = $19,373 per response. See also infra note 34.

34

The staff’s estimate is based on historical data provided in Lipper Inc.’s LANA database and
projections about the growth of the money market mutual fund industry going forward. The
actual number of new money market funds launched may vary significantly from our estimates
depending upon developments in market interest rates and reactions to recent amendments
adopted to money market funds in July 2014. The staff does not estimate any new fund
complexes being launched in the next year.

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and engage in 10 annual responses under rule 12d1-1, 35 the aggregate annual burden hours
associated with these responses is 155, 36 and the aggregate annual cost to funds is $62,380. 37
Accordingly, the estimated total number of annual responses under rule 12d1-1 for the
collections of information described in the rule 2a-7 submissions is 6,950, the aggregate annual
burden hours associated with these responses is 48,479.5, and the aggregate cost to funds is
$14,558,428. 38
Rules 31a-1(b)(1), 31a-1(b)(2)(ii), 31a-1(b)(2)(iv), and 31a-1(b)(9) require registered
funds to keep certain records, which include journals and general and auxiliary ledgers, including
ledgers for each portfolio security and each shareholder of record of the fund. Most of the
records required to be maintained by the rule are the type that generally would be maintained as
a matter of good business practice and to prepare the unregistered money market fund’s financial
statements. Accordingly, Commission staff estimates that the requirements under rules
31a-1(b)(1), 31a-1(b)(2)(ii), 31a-1(b)(2)(iv), and 31a-1(b)(9) would not impose any additional
burden because the costs of maintaining these records would be incurred by unregistered money
market funds in any case to keep books and records that are necessary to prepare financial
statements for shareholders, to prepare the fund’s annual income tax returns, and as a normal
business custom.

35

The estimate is based on the following calculations: (10 funds x 1 response) = 10 responses.

36

This estimate is based on the following calculations: (10 funds x 15.5 hours) = 155 hours.

37

This estimate is based on the following calculations: (10 funds x $6,238) = $62,380.

38

These estimates are based upon the following calculations: (6,762 + 175 + 3+ 10) = 6,950 annual
responses; (47,748 + 575 + 1.5 + 155) = 48,479.5 burden hours; and ($13,898,256 + $597,225 +
$567 + $62,380) = $14,558,428.

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Rule 12d1-1 also requires unregistered money market funds in which registered funds
invest to adopt procedures designed to ensure that the unregistered money market funds comply
with sections 17(a), (d), (e), and 22(e) of the Act. This is a one-time collection of information
requirement that applies to unregistered money market funds that intend to comply with the
requirements of rule 12d1-1. As discussed above, based on a projection of 10 new money
market funds per year, the staff estimates that, similarly, there will be 10 new unregistered
money market funds that undertake the above burden to establish written procedures and
guidelines designed to ensure that the unregistered money market funds comply with sections
17(a), (d), (e), and 22(e) of the Act. The staff estimates the burden as follows:
Establish written procedures and guidelines designed to ensure that the unregistered
money market funds comply with sections 17(a), (d), (e), and 22(e) of the Act:
1 response
15.5 hours of director, legal, and support staff time
Cost: $6,32839
Accordingly, the staff estimates that 10 unregistered money market funds will comply
with this collection of information requirement and engage in 10 annual responses under rule
12d1-1, 40 the aggregate annual burden hours associated with these responses is 155, 41 and the
aggregate annual cost to funds is $62,380. 42

39

This estimate is based on the following calculation: (0.5 hours x $4,500 per hour for board time)
+ (7.2 hours x $378 per hour for an attorney) + (7.8 hours x $174 per hour for support staff) =
$6,328 per response.

40

The estimate is based on the following calculations: (10 funds x 1 response) = 10 responses.

41

This estimate is based on the following calculations: (10 funds x 15.5 hours) = 155 hours.

42

This estimate is based on the following calculations: (10 funds x $6,238) = $62,380.

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13.

Estimate of Total Annual Cost Burden

Commission staff estimates that in addition to the costs described in section 12,
unregistered money market funds will incur costs to preserve records, as required under rule
2a-7. These costs will vary significantly for individual funds, depending on the amount of assets
under fund management and whether the fund preserves its records in a storage facility in hard
copy or has developed and maintains a computer system to create and preserve compliance
records. In the rule 2a-7 submissions, Commission staff estimated that the amount an individual
money market fund may spend ranges from $100 per year to $300,000. We have no reason to
believe the range is different for unregistered money market funds. Based on Form PF data as of
May 7, 2014, private liquidity funds have $257 billion in regulatory assets under management. 43
The Commission does not have specific information about the proportion of assets held in small,
medium-sized, or large unregistered money market funds. Because private liquidity funds are
often used as cash management vehicles, the staff estimates that each private liquidity fund is a
“large” fund (i.e., more than $1 billion in assets under management). Based on a cost of
$0.0000009 per dollar of assets under management (for large funds), 44 the staff estimates
compliance with rule 2-7 for these unregistered money market funds totals $231,300 annually. 45
Consistent with estimates made in the rule 2a-7 submissions, Commission staff estimates
that unregistered money market funds also incur capital costs to create computer programs for

43

See supra note 12.

44

The recordkeeping cost estimates are $0.0051295 per dollar of assets under management for
small funds, and $0.0005041 per dollar of assets under management for medium-sized funds.
The cost estimates are the same as those used in the most recently approved rule 2a-7 submission.

45

This estimate is based on the following calculation: ($257 billion x $0.0000009) = $231,300
billion for small funds.

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maintaining and preserving compliance records for rule 2a-7 of $0.0000132 per dollar of assets
under management. Based on the assets under management figures described above, staff
estimates annual capital costs for all unregistered money market funds of $3.39 million. 46
Commission staff further estimates that, even absent the requirements of rule 2a-7,
money market funds would spend at least half of the amounts described above for record
preservation ($115,650) and for capital costs ($1.7 million). Commission staff concludes that the
aggregate annual costs of compliance with the rule are $115,650 for record preservation and $1.7
million for capital costs.
14.

Estimate of Cost to the Federal Government

There are no costs to the Federal Government associated with rule 12d1-1.
15.

Explanation of Changes in Burden

The estimated total annual burden is increased from 13,570 to 48,479.50 hours. The
increase in hours is attributable to increases in the number of unregistered money market funds
in which other funds invest.
The estimated total annual cost is decreased from $2.99 million to $1.82 million annually.
The decrease in cost is attributable to changes in the estimates and methodology used to calculate
compliance with rule 12d1-1. The prior submission estimated that unregistered money market
funds may be small, medium-sized, or large funds that incur capital costs and that, on average,
have greater amounts of assets under management and therefore greater record preservation costs
when measured as a cost per amount of assets under management. In contrast, the current
submission uses assets under management for private liquidity funds as reported on Form PF and
46

This estimate is based on the following calculation: ($257 billion x 0.0000132) = $3.39 million.

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estimates that, given the nature and use of these funds, that the unregistered money market funds
are “large” funds for purposes of estimating the annual cost.
16.

Information Collection Planned for Statistical Purposes

Not applicable.
17.

Approval to Omit Expiration Date

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

Exceptions to Certification Statement

Not applicable.
B.

COLLECTIONS OF INFORMATION EMPLOYING STATISTICAL METHODS
Not applicable.

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