60 day notice

SECURITIES AND EXCHANGE COMMISSION
Submission for OMB Review; Comment Request
Upon Written Request, Copies Available From
Securities and Exchange Commission
Office of FOIA Services
100 F Street, NE
Washington, DC 20549-2736

Extension: Rule 17j-1
SEC File No. 270-239, OMB Control No. 3235-0224
Notice is hereby given that, pursuant to the Paperwork Reduction Act of 1995
(44 U.S.C. 350l-3520), 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.
Conflicts of interest between investment company personnel (such as portfolio managers)
and their funds can arise when these persons buy and sell securities for their own accounts
(“personal investment activities”). These conflicts arise because fund personnel have the
opportunity to profit from information about fund transactions, often to the detriment of fund
investors. Beginning in the early 1960s, Congress and the Securities and Exchange Commission
(“Commission”) sought to devise a regulatory scheme to effectively address these potential
conflicts. These efforts culminated in the addition of section 17(j) to the Investment Company
Act of 1940 (the “Investment Company Act”) (15 U.S.C. 80a-17(j)) in 1970 and the adoption by
the Commission of rule 17j-1 (17 CFR 270.17j-1) in 1980.1 The Commission proposed
amendments to rule 17j-1 in 1995 in response to recommendations made in the first detailed
study of fund policies concerning personal investment activities by the Commission’s Division of
Investment Management since rule 17j-1 was adopted. Amendments to rule 17j-1, which were

1

Prevention of Certain Unlawful Activities with Respect to Registered Investment Companies, Investment
Company Act Release No. 11421 (Oct. 31, 1980) (45 FR 73915 (Nov. 7, 1980)).

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adopted in 1999, enhanced fund oversight of personal investment activities and the board’s role
in carrying out that oversight.2 Additional amendments to rule 17j-1 were made in 2004,
conforming rule 17j-1 to rule 204A-1 under the Investment Advisers Act of 1940 (15 U.S.C.
80b), avoiding duplicative reporting, and modifying certain definitions and time restrictions.3
Section 17(j) makes it unlawful for persons affiliated with a registered investment
company (“fund”) or with the fund’s investment adviser or principal underwriter (each a “17j-1
organization”), in connection with the purchase or sale of securities held or to be acquired by the
investment company, to engage in any fraudulent, deceptive, or manipulative act or practice in
contravention of the Commission’s rules and regulations. Section 17(j) also authorizes the
Commission to promulgate rules requiring 17j-1 organizations to adopt codes of ethics.
In order to implement section 17(j), rule 17j-1 imposes certain requirements on 17j-1
organizations and “Access Persons”4 of those organizations. The rule prohibits fraudulent,
deceptive or manipulative acts by persons affiliated with a 17j-1 organization in connection with
their personal securities transactions in securities held or to be acquired by the fund. The rule
requires each 17j-1 organization, unless it is a money market fund or a fund that does not invest
in Covered Securities,5 to: (i) adopt a written codes of ethics, (ii) submit the code and any
2

Personal Investment Activities of Investment Company Personnel, Investment Company Act Release No.
23958 (Aug. 20, 1999) (64 FR 46821 (Aug. 27, 1999)).

3

Investment Adviser Codes of Ethics, Investment Advisers Act Release No. 2256 (Jul. 2, 2004) (69 FR
41696 (Jul. 9, 2004)).

4

Rule 17j-1(a)(1) defines an “access person” as “Any Advisory Person of a Fund or of a Fund's investment
adviser. If an investment adviser's primary business is advising Funds or other advisory clients, all of the
investment adviser's directors, officers, and general partners are presumed to be Access Persons of any Fund
advised by the investment adviser. All of a Fund's directors, officers, and general partners are presumed to
be Access Persons of the Fund.” The definition of Access Person also includes “Any director, officer or
general partner of a principal underwriter who, in the ordinary course of business, makes, participates in or
obtains information regarding, the purchase or sale of Covered Securities by the Fund for which the
principal underwriter acts, or whose functions or duties in the ordinary course of business relate to the
making of any recommendation to the Fund regarding the purchase or sale of Covered Securities.” Rule
17j-1(a)(1).

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A “Covered Security” is any security that falls within the definition in section 2(a)(36) of the Act, except for
direct obligations of the U.S. Government, bankers’ acceptances, bank certificates of deposit, commercial
paper and high quality short-term debt instruments, including repurchase agreements, and shares issued by

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material changes to the code, along with a certification that it has adopted procedures reasonably
necessary to prevent Access Persons from violating the code of ethics, to the fund board for
approval, (iii) use reasonable diligence and institute procedures reasonably necessary to prevent
violations of the code, (iv) submit a written report to the fund describing any issues arising under
the code and procedures and certifying that the 17j-1 entity has adopted procedures reasonably
necessary to prevent Access Persons form violating the code, (v) identify Access Persons and
notify them of their reporting obligations, and (vi) maintain and make available to the
Commission for review certain records related to the code of ethics and transaction reporting by
Access Persons.
The rule requires each Access Person of a fund (other than a money market fund or a fund
that does not invest in Covered Securities) and of an investment adviser or principal underwriter
of the fund, who is not subject to an exception,6 to file: (i) within 10 days of becoming an Access
Person, a dated initial holdings report that sets forth certain information with respect to the
Access Person’s securities and accounts; (ii) dated quarterly transaction reports within 30 days of
the end of each calendar quarter providing certain information with respect to any securities

open-end funds. Rule 17j-1(a)(4).
6

Rule 17j-1(d)(2) contains the following exceptions: (i) an Access Person need not file a report for
transactions effected for, and securities held in, any account over which the Access Person does not have
control; (ii) an independent director of the fund, who would otherwise be required to report solely by reason
of being a fund director and who does not have information with respect to the fund’s transactions in a
particular security, does not have to file an initial holdings report or a quarterly transaction report; (iii) an
Access Person of a principal underwriter of the fund does not have to file reports if the principal
underwriter is not affiliated with the fund (unless the fund is a unit investment trust) or any investment
adviser of the fund and the principal underwriter of the fund does not have any officer, director, or general
partner who serves in one of those capacities for the fund or any investment adviser of the fund; (iv) an
Access Person to an investment adviser need not make quarterly reports if the report would duplicate
information provided under the reporting provisions of the Investment Adviser’s Act of 1940; (v) an Access
Person need not make quarterly transaction reports if the information provided in the report would duplicate
information received by the 17j-1 organization in the form of broker trade confirmations or account
statements or information otherwise in the records of the 17j-1 organization; and (vi) an Access Person
need not make quarterly transaction reports with respect to transactions effected pursuant to an Automatic
Investment Plan.

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transactions during the quarter and any account established by the Access Person in which any
securities were held during the quarter; and (iii) dated annual holding reports providing
information with respect to each Covered Security the Access Person beneficially owns and
accounts in which securities are held for his or her benefit. In addition, rule 17j-1 requires
investment personnel of a fund or its investment adviser, before acquiring beneficial ownership
in securities through an initial public offering (IPO) or in a private placement, to obtain approval
from the fund or the fund’s investment adviser.
The requirements that the management of a rule 17j-1 organization provide the fund’s
board with new and amended codes of ethics and an annual issues and certification report are
intended to enhance board oversight of personal investment policies applicable to the fund and
the personal investment activities of Access Persons. The requirements that Access Persons
provide initial holdings reports, quarterly transaction reports, and annual holdings reports and
request approval for purchases of securities through IPOs and private placements are intended to
help fund compliance personnel and the Commission’s examinations staff monitor potential
conflicts of interest and detect potentially abusive activities. The requirement that each rule
17j-1 organization maintain certain records is intended to assist the organization and the
Commission’s examinations staff in determining if there have been violations of rule 17j-1.
We estimate that annually there are approximately 75,316 respondents under rule 17j-1,
of which 5,316 are rule 17j-1 organizations and 70,000 are Access Persons. In the aggregate,
these respondents make approximately 107,038 responses annually. We estimate that the total
annual burden of complying with the information collection requirements in rule 17j-1 is
approximately 368,094 hours. This hour burden represents time spent by Access Persons that
must file initial and annual holdings reports and quarterly transaction reports, investment
personnel that must obtain approval before acquiring beneficial ownership in any securities
through an IPO or private placement, and the responsibilities of Rule 17j-1 organizations arising
from information collection requirements under rule 17j-1. These include notifying Access

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Persons of their reporting obligations, preparing an annual rule 17j-1 report and certification for
the board, documenting their approval or rejection of IPO and private placement requests,
maintaining annual rule 17j-1 records, maintaining electronic reporting and recordkeeping
systems, amending their codes of ethics as necessary, and, for new fund complexes, adopting a
code of ethics.
We estimate that there is an annual cost burden of approximately $5,000 per fund
complex, for a total of $3,915,000, associated with complying with the information collection
requirements in rule 17j-1. This represents the costs of purchasing and maintaining computers
and software to assist funds in carrying out rule 17j-1 recordkeeping.
These burden hour and cost estimates are based upon the Commission staff’s experience
and discussions with the fund industry. The estimates of average burden hours and costs are
made solely for the purposes of the Paperwork Reduction Act. These estimates are not derived
from a comprehensive or even a representative survey or study of the costs of Commission rules.
Compliance with the collection of information requirements of the rule is mandatory and
is necessary to comply with the requirements of the rule in general. 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. Rule 17j-1 requires that records be maintained for at
least five years in an easily accessible place.7
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 will have practical utility; (b) the accuracy of the Commission’s estimate of the
burden of the collections of information; (c) ways to enhance the quality, utility, and clarity of the
information collected; and (d) ways to minimize the burdens of the collection of information on

7

If information collected pursuant to the rule is reviewed by the Commission’s examination staff, it will be
accorded the same level of confidentiality accorded to other responses provided to the Commission in the
context of its examination and oversight program. See section 31(c) of the Investment Company Act (15
U.S.C. 80a-30(c)).

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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 Charles Riddle, Acting Director/Chief Information
Officer, Securities and Exchange Commission, C/O Candace Kenner, 100 F Street, NE,
Washington, DC 20549; or send an email to: [email protected].

Eduardo A. Aleman
Deputy Secretary
February 11, 2019