Rule 12d1-1 Supporting Statement

OMB CONTROL NUMBER: 3235-0584

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
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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market fund may invest under rule 2a-7 under the Act, and undertakes to comply with all the
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 and Use 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
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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certain collection of information requirements for registered money market funds. These
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 Not Conducting 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
of 1940, as amended. 12 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,
12

15 U.S.C. §80b-1.

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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.
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. 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

Not applicable.
10.

Confidentiality

Not applicable.
11.

Sensitive Questions

No information of a sensitive nature, including social security numbers, will be required
under this collection of information. The information collection does not collect personally
identifiable information (PII). The agency has determined that a system of records notice
(SORN) and privacy impact assessment (PIA) are not required in connection with the collection
of information.

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12.

Burden of Information Collection

The following estimates of average burden hours and costs are made solely for purposes
of the Paperwork Reduction Act of 1995 (“PRA”) 13 and are not derived from a comprehensive or
even representative survey or study of the cost of Commission rules and forms.
The number of unregistered money market funds that are affected by rule 12d1-1 is an
estimate based on the number of liquidity funds reported on Form PF as of the fourth calendar
quarter 2019. 14 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 2019
PRA extension regarding rule 2a-7. 15 However, we have updated the estimated costs associated
using the following methodology:
• For professional personnel: SIFMA’s Management & Professional Earnings in
the Securities Industry 2013, modified for 2020 by Commission staff to account
for an 1800-hour work-year and inflation, and multiplied by 5.35 to account for
bonuses, firm size, employee benefits, and overhead;

13

44 U.S.C. 3501 et seq.

14

See the U.S. Securities and Exchange Commission’s Division of Investment Management
– Analytics Office Private Funds Statistics, Fourth Calendar Quarter (Oct. 2, 2020)
available at https://www.sec.gov/divisions/investment/private-funds-statistics/privatefunds-statistics-2019-q4.pdf.

15

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 May 28, 2019) (the “2019 rule 2a-7 PRA extension”).
The 2019 rule 2a-7 PRA extension was the most recent rule 2a-7 submission that includes
certain estimates with respect to aggregate annual hour and cost burdens for collections
of information for registered money market funds.

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• For a fund board of directors: SIFMA data does not include a board of directors.
For board time, Commission staff currently uses a cost of $4770 per hour, which
was last adjusted for inflation in 2019. This estimate assumes an average of nine
board members per year; and
•

For clerical personnel: SIFMA’s Office Salaries in the Securities Industry 2013,
modified for 2020 by Commission staff to account for an 1800-hour work-year
and inflation, and multiplied by 2.93 to account for bonuses, firm size, employee
benefits, and overhead.

The estimated burden of information collection for rule 2a-7 is set forth in Table 1 below.
We use these estimated burdens for registered money market funds to extrapolate the
information collection burdens for unregistered money market funds under rule 12d1-1 in Table
2 below.

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Table 1: Rule 2a-7 burden of information collection for registered money market funds 16
Estimated Responses

Estimated Burden
Hours

Record of credit risk
analyses, and
determination regarding
adjustable rate
securities, asset backed
securities, securities
subject to a demand
feature or guarantee,
and counterparties to
repurchase agreements
85 responses annually for
each of 433 funds 17

680 burden hours of
professional (business
analyst or portfolio
manager) time per fund
x 433

Estimated Cost Burden

$232 per hour
(intermediate business
analyst)
+
$332 per hour (senior
portfolio manager)
$564
2

16

The estimated responses and hour burdens shown in this chart were included in the 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 May 28, 2019) (the “2019 rule 2a-7 PRA extension”). The 2019 rule 2a-7 PRA
extension was the most recent rule 2a-7 submission that includes certain estimates with respect to
aggregate annual hour and cost burdens for collections of information for registered money
market funds.
However, the cost burdens shown in this chart have been updated. The cost burdens for
professional personnel are based on SIFMA’s Management & Professional Earnings in the
Securities Industry 2013, modified for 2020 by the Commission staff to account for an 1800hour work –year and inflation, and multiplied by 5.35 to account for bonuses, firm size,
employee benefits and overhead and the cost burdens for clerical personnel are based on
SIFMA's Office Salaries in the Securities Industry 2013, modified for 2020 by Commission staff
to account for an 1800-hour work-year and inflation, and multiplied by 2.93 to account for
bonuses, firm size, employee benefits and overhead. However, SIFMA data does not include a
board of directors. For board time, Commission staff currently uses a cost of $4770 per hour,
which was last adjusted for inflation in 2019. This estimate assumes an average of nine board
members per year.
The number of funds based on Form N-MFP filings for the month ended September 30, 2018 and used
in the 2019 rule 2a-7 PRA extension.

17

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Estimated Responses

Estimated Burden
Hours

Estimated Cost Burden
=
$282 median weighted
average per hour of
professional time

Total

36,805 estimated
responses annually

294,440 estimated
burden hours

Disclosure of Portfolio
Information
12 months x 433 funds =
5,196 responses per year

Disclosure of Portfolio
Information
12 hours (webmaster)
annually x 433 funds =
5,196 hours per year +

$282 x 294,440 (hours) =
$83,032,080 estimated
cost burden

Fund’s website
disclosures including
portfolio holding
information, daily and
weekly liquid assets, net
flow, daily current NAV,
financial support
received by the fund, the
imposition and removal
of liquidity fees, and the
suspension and
resumption of fund
redemptions

24 hours (webmaster)
initial burden for each
new fund x 10 new funds
= 240 one-time hours
=
5,436 annual aggregate
one-time and recurring
burdens for the disclosure
of portfolio holdings
information
Disclosure of Daily and
Weekly Liquid Assets and
Net Shareholder Flow
252 business days x 433
funds = 109,116
responses per year

Disclosure of Daily and
Weekly Liquid Assets and
Net Shareholder Flow
31.5 hours (senior
systems analyst/senior
programmer) + 4.5 hours
(compliance
manager/compliance

- 10 -

Disclosure of Portfolio
Information
5,196 hours for 433 funds
x $250 (per hour for a
webmaster) =$1,299,000
(for recurring internal
burden labor costs) +
240 hours for 10 new
funds x $250 (per hour for
a webmaster) = $60,000
=
$1,359,000 aggregate
annual one-time and
recurring labor burdens
for disclosure of portfolio
information
Disclosure of Daily and
Weekly Liquid Assets and
Net Shareholder Flow
31.5 hours x $311
(blended rate for a senior
systems analyst ($287)
and senior programmer
($334) = $9,797 (per

Estimated Responses

Estimated Burden
Hours
attorney) = 36 hours x
433 funds = 15,588 hours
per year +

70 hours (blended time
for a compliance manager
and a compliance
attorney) x 10 new funds
= 700 one-time hours
=

16,288 aggregate annual
one-time and recurring
burden hours for
disclosure of daily and
weekly liquid assets and
shareholder flow

Estimated Cost Burden
fund)
+
4.5 hours x $340
(blended rate for a
compliance manager
($312) and a compliance
attorney ($368)) = $1,530
= $11,327 (per fund to
update the depiction of
daily and weekly liquid
assets and the fund’s net
inflow or outflow on the
fund’s website each
business day during that
year) x
433 funds =$4,904,591 +
700 hours (aggregate total
one-time burden for 10
new funds) x
[20 hours x $340 (blended
rate for a compliance
manager ($312) and a
compliance attorney
($368))= $6,800 +
50 hours x $311 (blended
rate for a senior systems
analyst ($287) and senior
programmer ($334)
=$15,550
= $22,350 (internal labor
cost burden for each new
funds]= $223,500
$5,128,091 aggregate
annual one-time and
recurring burdens for
disclosure of daily and
weekly liquid assets and
shareholder flow

Disclosure of Daily
Current NAV
252 business days x 433
funds = 109,116
responses per year

Disclosure of Daily
Current NAV
32 hours (senior systems
analyst/senior
programmer) x 433 funds
= 13,856 hours per year +
70 hours x 10 new funds
= 700 one-time hours

- 11 -

Disclosure of Daily
Current NAV
32 hours x $311 (blended
rate for a senior systems
analyst ($287) and senior
programmer ($334) =
$9,952 (annual ongoing
internal labor cost burden
per fund) x 433 funds =

Estimated Responses

Estimated Burden
Hours

=
14,556 aggregate annual
one-time and recurring
burden hours for the
disclosure of daily current
NAV

Estimated Cost Burden
$4,309,216 (ongoing
annual burden) +
700 hours (aggregate total
one-time burden for 10
new funds) x
[20 hours x $340 (blended
rate for compliance
manager ($312) and a
compliance attorney
($368))=$6,800 +
50 hours x $311 (blended
rate for a senior systems
analyst ($287) and senior
programmer ($334) =
$15,550 $22,350 per fund
x 10 new funds =
$223,500 (total one-time
cost burden)] =
$4,532,716 aggregate
annual one-time and
recurring labor burdens
for disclosure of daily and
current NAV

Disclosure of Financial
Support Received by the
Fund, the Imposition and
Removal of Liquidity
Fees, and the Suspension
and Resumption of Fund
Redemptions
11 responses per year

Disclosure of Financial
Support Received by the
Fund, the Imposition and
Removal of Liquidity
Fees, and the Suspension
and Resumption of Fund
Redemptions
1 additional burden hour
each time a fund updates
its website to include new
disclosure about the
provision of financial
support to fund x 10
reports per year =

Disclosure of Financial
Support Received by the
Fund, the Imposition and
Removal of Liquidity
Fees, and the Suspension
and Resumption of Fund
Redemptions
10 reports per fund x 1
hour per website update x
$250 per hour for a
webmaster (internal cost
burden per fund to include
new disclosure) =

10 hours per year
+
1 burden hour for website
updates x 1 estimated
instance of a fund
updating its website
regarding the imposition
and removal of liquidity
fees, and suspension and
resumption of fund

$2,500 (aggregate internal
labor cost burden for
disclosure of financial
support provided to
funds)
+
1 hour (annual aggregate
burden) x $250 per hour
for a webmaster =
$250 (aggregate internal

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Estimated Responses

TOTAL
Board review of
procedures and
guidelines of any
investment adviser or
officers to whom the
fund’s board has
delegated responsibility
under rule 2a-7 and
amendment of such
procedures and
guidelines

Estimated Burden
Hours
redemptions = 1 hour per
year
=
11 aggregate annual onetime and recurring burden
for the disclosure of
financial support received
by the fund, the
imposition and removal of
liquidity fees, and the
suspension and
resumption of fund
redemptions

Estimated Cost Burden
labor cost burden)
=
$2,750 aggregate annual
one-time and recurring
burden for the disclosure
of financial support
received by the fund, the
imposition and removal of
liquidity fees, and the
suspension and
resumption of fund
redemptions

Total Estimated
Responses Relating to
Website Disclosure

Total Estimated Burden
Hours Relating to Website
Disclosure

Total Estimated Cost
Burden Relating to
Website Disclosure

5,196 +109,116 +
109,116 +11 =

5,436 + 16,288 + 14,556
+ 11 =

$1,359,000 + $5,128,091
+ $4,532,716 +
$2,750 =

223,439 estimated
responses annually

36,291 estimated burden
hours

$11,022,557 estimated
cost burden

1 response annually for
each of 108 funds 18

1 hour (board time)

1 hour x $4770 (board
time) = $4,770

+ 4 hours (compliance
and professional legal

18

For purposes of the 2019 rule 2a-7 PRA extension, we assumed that on average 25% (433
funds x .25 = 108 funds) of money market funds would review and update their procedures on
annual basis).
- 13 -

Estimated Responses

Estimated Burden
Hours
time) =
5 hours per fund

Estimated Cost Burden
4 x $340 (blended rate for
compliance manager
($312) and a compliance
attorney ($368)) = $1,360
$4,770+ $1,360 = $6,130
(cost per fund)

Total
Review, revise, and
approve written
procedures to stress test
a fund’s portfolio

108 estimated responses
annually

1 response annually 19 for
each of 91 fund
complexes 20

5 hours x 108 estimated
responses =
540 estimated burden
hours

$6,130 x 108 estimated
responses =
$662,040 estimated cost
burden

1 hour of board time
5 hours of senior portfolio
manager time
3 hours of risk
management specialist
time
+ 3 hours of professional
legal time

1 hour x $4,770 (board
time) = $4,770

=
12 burden hours per fund
complex

5 x $332 (Sr. portfolio
manager) = $1,660
3 x $201 (risk
management specialist) =
$603
3 x $401 (attorney) =
$1,203
$4,770 + $1,660+ $603+
$1,203 =
$8,236 per fund complex

Total

91 estimated responses
annually

12 hours x 91estimated
responses =
1,092 estimated burden
hours

$8,236 x 91 estimated
responses =
$749,476 estimated cost
burden

19

We have not amortized the one-time hour and cost burdens figures associated with new funds,
because we estimated there would be 10 new funds each year. Therefore, the burden would
occur each year instead of occurring over a three-year period. We have done this throughout this
PRA.
20

Commission staff estimates that there are 91 fund complexes subject to rule 2a-7. This
estimate is based on Form N-MEP filings with the Commission for the month ended September
30, 2018.
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Estimated Responses
Reports to fund boards
on the results of stress
testing

5 responses annually for
each of 91 fund
complexes

Estimated Burden
Hours

5 hours senior portfolio
manager time
2 hours compliance
manager time
2 hours professional legal
time
+ 1 hour paralegal time
= 10 hours per response

Estimated Cost Burden

5 x $332 (sr. portfolio
manager) = $1,660
2 x $312 (compliance
manager) = $624
2 x $419 (attorney) =
$838
1 x $219 (paralegal) =
$219
$1,660 + $624 + $838 +
$219 = $3,341 per
response

Total
Retail Funds Policies
and Procedures

455 estimated responses
annually

2 21

10 hours x 455 responses
=
4,550 estimated burden
hours

$3,341 x 455 estimated
responses =
$1,520,155 estimated
cost burden

12 hours (attorney time)+
+1 hour (board time) =
13 hours per fund

12 x $419 (attorney) =
$5,028
1 hour x $4,770 ( board
time) = $4,770
$5,028 + $4,770 =$9,798

21

We estimated that approximately two new money market funds would seek to qualify as retail
money market funds under rule 2a-7 and therefore be required to adopt written policies and
procedures reasonably designed to limit beneficial owners to natural persons.
For purposes of the 2019 rule 2a-7 PRA extension, Form N-MFP data reflects that of the 30 new
money market funds created between April of 2015 through September 2018, only six new
money market funds elected to be retail funds – or approximately two per year ((6 funds/42
months) x 12 months). Based on these figures, we estimated that two new money market fund
per year would elect to be a retail fund.

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Estimated Responses

Total
Establishment of written
procedures to test
periodically the ability
of the fund to maintain a
stable NAV per share
based on certain
hypothetical events
(“stress testing”)

2 estimated responses
annually

1 response annually for
10 new money market
funds

Estimated Burden
Hours

Estimated Cost Burden
(per fund)

13 hours x 2 estimated
responses =
26 estimated burden
hours

$9,798 x 2 estimated
responses =
$19,596 estimated cost
burden

3 hours board time
8 hours professional legal
time
7 hours risk management
specialist time
+ 4 hours senior risk
management time
=
22 hours

3 hours x $4,770 ( board
time) = $14,310
8 hours x $419 (attorney)
= $3,352
7 hours x $201 (risk
management specialist) =
$1,407
4 hours x $361 (sr. risk
management specialist) =
$1,444
$14,310 + $3,352 +
$1,407 + $1,444 =
$20,513 (per response)

Total
Establishment of written
procedures designed to
stabilize NAV and
guidelines and
procedures for board
delegation of authority

10 estimated responses
annually

1 response annually for
10 new funds

22 hours x 10 estimated
responses =
220 estimated burden
hours

$20,513 x 10 estimated
responses =
$205,130 estimated cost
burden

.5 hours of board time
7.2 hours professional
legal time
+ 7.7 hours paralegal time
= 15.5 hour per response

.5 x hours x $4,770 (
board time) =$2,385

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7.2 hours x $419
(attorney) = $3,016.80

Estimated Responses

Estimated Burden
Hours

Estimated Cost Burden
7.7 hours x $219
(paralegal) = $1,686.30
$2,385 + $3,016.80 +
$1,686.30 = $7,088.10 per
response

Total
Board determination –
Fees and Gates

10 estimated responses
annually

2 funds per year

15.5 hours x10 estimated
responses =
155 estimated burden
hours

$7,088.10 x 10 estimated
responses =
$70,881 estimated cost
burden

4 hours attorney
2 hours of board time
+ 1 hour of fund’s
compliance attorney =
7 hours per fund

4 hours x $419 (attorney)
= $1,676
2 hours x $4,770 ( board
time) = $9,540
1 x $368 (compliance
attorney) = $368

2 estimated responses
annually

14 estimated burden
hours

$1,676+$9,540+$368 =
$11,584 estimated cost
burden per fund x 2 funds
$23,168 estimated cost
burden

2 responses annually for
20 funds

.5 hours (professional
legal time)

.5 hour x $419 (attorney)
= $209.50 per response

Total

40 estimated responses
annually

.5 hours x 40 estimated
responses =
20 estimated burden
hours

$209.50 x 40 estimated
responses =
$8,380 estimated cost
burden

TOTAL ESTIMATED
ANNUAL BURDEN OF
INFORMATION
COLLECTION FOR
RULE 2a-7

260,962 estimated
responses annually

337,348 estimated
burden hours annually

$97,313,463 estimated
cost burden annually

7 hours x 2 funds =
Total
Written record of board
determinations and
actions related to failure
of a security to meet
certain eligibility
standards or an event of
default or insolvency

- 17 -

Based on the estimated burden of information collection for rule 2a-7 and Form PF filings, the
estimated burden of information collection for rule 12d1-1 is set forth in Table 2 below.
Table 2: Rule 12d1-1 burden of information collection burden estimates for unregistered
money market funds

Record of credit risk
analyses, and
determination
regarding adjustable
rate securities, asset
backed securities,
securities subject to a
demand feature or
guarantee, and
counterparties to
repurchase agreements

Estimated Responses

Estimated Burden Hours

Estimated Cost
Burden 22

85 responses annually per
41 liquidity funds 23

680 burden hours of
professional (business

$232 per hour
(intermediate business

22

The cost burdens shown in this chart for professional personnel are based on SIFMA’s
Management & Professional Earnings in the Securities Industry 2013, modified for 2020 by the
Commission staff to account for an 1800-hour work –year and inflation, and multiplied by 5.35
to account for bonuses, firm size, employee benefits and overhead and the cost burdens for
clerical personnel are based on SIFMA's Office Salaries in the Securities Industry 2013,
modified for 2020 by Commission staff to account for an 1800-hour work-year and inflation, and
multiplied by 2.93 to account for bonuses, firm size, employee benefits and overhead. However,
SIFMA data does not include a board of directors. For board time, Commission staff currently
uses a cost of $4770 per hour, which was last adjusted for inflation in 2019. This estimate
assumes an average of nine board members per year.
We use these estimated burdens for registered money market funds to extrapolate the
information collection burdens for unregistered money market funds under rule 12d1-1 in this
Table 2.
23

The number of liquidity funds is based on the following: 65 x the percentage of liquidity
funds that are at least partially in compliance with the risk–limiting provisions of rule 2a-7 and
used in the most recent supporting statement for rule 2a-7 100 – 37.2) = 62.8%. The result
(rounded up to a whole number) is 41 liquidity funds. The number of liquidity funds is based on
the U.S. Securities and Exchange Commission’s Division of Investment Management –
Analytics Office Private Funds Statistics, Fourth Calendar Quarter (Oct. 2, 2020) available at
- 18 -

Estimated Responses

Estimated Burden Hours
analyst or portfolio
manager) time per liquidity
fund
x 41 liquidity funds

Estimated Cost
Burden 22
analyst)
+
$332 per hour (senior
portfolio manager)
$564
2
= $282 median weighted
average per hour
x

Total

Fund’s website
disclosures including
portfolio holding
information, daily and
weekly liquid assets, net
shareholder flow, daily
current NAV, financial
support received by the
fund, the imposition and
removal of liquidity
fees, and the suspension
and resumption of fund
redemptions

3,485 estimated
responses per liquidity
fund annually

27,880 estimated burden
hours

Disclosure of Portfolio
Holdings Information
12 months x 41 liquidity
funds = 492 responses
per year

Disclosure of Portfolio
Holdings Information
12 hours (one hour per
monthly filing) to update
the website to include the
disclosure of portfolio
holdings information x 41
liquidity funds = 492 hours
per year +

27,880 hours =
$7,862,160 estimated
cost burden

Disclosure of Portfolio
Holdings Information
492 hours for 41 liquidity
funds x $250 (per hour
for a webmaster)
=$123,000 (for recurring
internal burden labor
costs) +

24 hours of webmaster

https://www.sec.gov/divisions/investment/private-funds-statistics/private-funds-statistics-2019q4.pdf.
- 19 -

Estimated Responses

Estimated Burden Hours
time for an estimated 1
new liquidity fund 24 each
year to initially develop a
webpage and provide
monthly disclosure for the
initial year = 24 one-time
burden hours
516 aggregate annual onetime and recurring burden
hours for the disclosure of
portfolio holdings

Disclosure of Daily and
Weekly Liquid Assets and
Net Shareholder Flow
252 business days x 41
liquidity funds = 10,332
per year

Disclosure of Daily and
Weekly Liquid Assets and
Net Shareholder Flow
36 hours ongoing annual
burden x 41 liquidity funds
= 1,476 hours per year
+
70 hours for each new
liquidity fund x 1 new fund
= 70 one-time hours
1,476 annual burden hours
+ 70 one-time burden
hours = 1,546 aggregate
annual recurring and onetime burden hours for
disclosure of daily and
weekly liquid assets and
shareholder flow

Estimated Cost
Burden 22
24 hours for 1 new
liquidity fund x $250 (per
hour for a webmaster) =
$6,000
=
$129,000 total aggregate
annual one-time and
recurring labor burdens
for disclosure of portfolio
holdings
Disclosure of Daily and
Weekly Liquid Assets and
Net Shareholder Flow
31.5 hours x $311
(blended rate for a senior
systems analyst ($287)
and senior programmer
($334) = $9,797 (per
liquidity fund)
+
4.5 hours x $340
(blended rate for
compliance manager
($312) and a compliance
attorney ($368)) = $1,530
= $11,327 (per fund to
update the depiction of
daily and weekly liquid
assets and the liquidity
fund’s net inflow or
outflow on the liquidity
fund’s website each
business day during that
year)
x

24

The number of new unregistered money market funds is estimated from 2018-2019 historical
Form PF filings by liquidity fund advisers. See Securities and Exchange Commission’s Division
of Investment Management – Analytics Office Private Funds Statistics, Fourth Calendar Quarter
(Oct. 2, 2020) available at https://www.sec.gov/divisions/investment/private-fundsstatistics/private-funds-statistics-2019-q4.pdf.

- 20 -

Estimated Responses

Estimated Burden Hours

Estimated Cost
Burden 22
41 liquidity funds
= $464,407 recurring
aggregate annual cost
burdens for the disclosure
of daily and weekly liquid
assets and weekly liquid
assets and the fund’s net
inflow or outflow on the
liquidity fund’s website
each business day during
the year
+
70 hours aggregate total
one-time burden for 1
new fund) x [20 hours x
$340 (blended rate for
compliance manager
($312) and a compliance
attorney ($368))= $6,800
+ 50 hours x $311
(blended rate for a senior
systems analyst ($287)
and senior programmer
($334) =$15,550
= $22,350 (internal labor
cost burden for each new
fund)]= $1,564,500
= $2,028,907 aggregate
annual recurring and onetime cost burdens for
disclosure of daily and
weekly liquid assets and
shareholder flow

Disclosure of Daily
Current NAV
252 business days x 41
liquidity funds = 10,332
per year

Disclosure of Daily
Current NAV
32 hours x 41 liquidity
funds = 1,312 hours per
year
+
70 one-time burden hours
for each new liquidity fund
x 1 new liquidity fund = 70
one-time burden hours
1,312 annual burden hours
+ 70 one-time burden
hours = 1,382 aggregate
annual recurring and onetime burden hours for

- 21 -

Disclosure of Daily
Current NAV
32 hours x $311 (blended
rate for a senior systems
analyst ($287) and senior
programmer ($334) =
$9,952 (annual ongoing
internal labor cost burden
per fund) x 41 funds
= $408,932 ongoing
annual cost burdens
+
70 hours (aggregate total
one-time burden for 1
new liquidity fund) x
[20 hours x $340

Estimated Responses

Estimated Burden Hours
disclosure of daily current
NAV

Estimated Cost
Burden 22
(blended rate for
compliance manager
($312) and a compliance
attorney ($368))= $6,800
+
50 hours x $311 (blended
rate for a senior systems
analyst ($287) and senior
programmer ($334) =
$15,550 = $22,350
(internal labor cost
burden for each new
fund)] = $1,564,500
$408,932 (recurring
internal cost burden) +
$1,564,500 (one-time
internal labor cost
burden) = $1,973,432
aggregate annual
recurring and one-time
cost burdens

Disclosure of Financial
Support Received by the
Fund, and Imposition and
Removal of Liquidity
Fees, and the Suspension
and Resumption of Fund
Redemptions
Not applicable

TOTAL

Disclosure of Financial
Support Received by the
Fund, and Imposition and
Removal of Liquidity Fees,
and the Suspension and
Resumption of Fund
Redemptions
Not applicable

Total Estimated Burden
Hours Relating to
Website Disclosure

Total Estimated Burden
Hours Relating to Website
Disclosure

492+10,332+10,332 =
21,156 estimated
responses

516 + 1,546 + 1,382 =
3,444 estimated burden
hours

Board review of
procedures and
guidelines of any
investment adviser or
officers to whom the
fund’s board has
delegated responsibility
under rule 2a-7 and
amendment of such

- 22 -

Disclosure of Financial
Support Received by the
Fund, and Imposition and
Removal of Liquidity
Fees, and the Suspension
and Resumption of Fund
Redemptions
Not applicable
Total Estimated Burden
Hours Relating to
Website Disclosure
$129,000 + $2,028,907+
$1,973,432 =
$4,131,339 estimated
cost burden

procedures and
guidelines 25

Estimated Responses

Estimated Burden Hours

Estimated Cost
Burden 22

1 response annually for
each of 10 funds 26

1 hour (board time)

1 hour x $4770 ( board
time) = $4,770

+ 4 hours (compliance and
professional legal time) =
5 hours

4 x $340 (blended rate for
compliance manager
($312) and a compliance
attorney ($368)) = $1,360
$4,770+ $1,360 = $6,130
(cost per fund)

5 hours x 10 responses =
TOTAL
Review, revise, and
approve written
procedures to stress test
a fund’s portfolio

10 estimated responses

50 estimated burden
hours

1 response annually for
each of 36 fund
complexes 27

1 hour of board time
5 hours of senior portfolio
manager time
3 hours of risk
management specialist
time
+ 3 hours of professional
legal time
=
12 hours

$6,130 x 10 estimated
responses =
$61,300 estimated cost
burden

1 hour x $4,770 ( board
time) = $4,770
5 x $332 (Sr. portfolio
manager) = $1,660
3 x $201 (risk
management specialist) =
$603
3 x $401 (attorney) =
$1,203

25

We recognize that in many cases the adviser to an unregistered money market fund typically
performs the function of the fund’s board. Money Market Fund Reform; Amendments to Form
PF Investment Company Act Rel. No. 31166 (Jul. 23, 2014), 79 FR 47735, 47809 (Aug. 14,
2014).
26

For purposes of this PRA extension, we assumed that on average 25% (41 funds x .25 =
approximately 10 funds) of liquidity funds would review and update their procedures on annual
basis.
27

This number has been derived from the number of advisers to liquidity funds. See U.S
Securities and Exchange Commission, Division of Investment Management, Analytics Office,
Private Fund Statistics, Fourth Quarter 2019 (Oct. 2, 2020), Table 2.
- 23 -

Estimated Responses

Estimated Burden Hours

Estimated Cost
Burden 22
$4,770 + $1,660+ $603+
$1,203 = $8,236 per
liquidity fund complex

TOTAL
Reports to fund boards
on the results of stress
testing 28

36 estimated responses

432 estimated burden
hours

5 responses annually for
each of 36 fund
complexes

5 hours senior portfolio
manager time
2 hours compliance
manager time
2 hours professional legal
time
+1 hour paralegal time
= 10 hours per response

$8,236 x 36 estimated
responses =
$ 296,496 estimated cost
burden

5 x $332 (sr. portfolio
manager) = $1,660
2 x $312 (compliance
manager) = $624
2 x $419 (attorney) =
$838
1 x $219 (paralegal) =
$219
$1,660 + $624 + $838 +
$219 = $3,341 per
response

TOTAL

180 estimated responses

1800 estimated burden
hours

$3,341 x 180 estimated
responses =
$601,380 estimated cost
burden

Retail Funds Policies
and Procedures 29
TOTAL

Not applicable

Establishment of
written procedures to
test periodically the
ability of the fund to
maintain a stable NAV
per share based on
28

See supra note 25.

29

There are no liquidity funds of this type; liquidity funds only are offered to qualified investors.
- 24 -

certain hypothetical
events (“stress testing”)

Estimated Responses

Estimated Burden Hours

Estimated Cost
Burden 22

1 response annually for 1
new liquidity fund

3 hours board time
8 hours professional legal
time
7 hours risk management
specialist time
+4 hours senior risk
management time
=
22 hours

3 hours x $4,770 (board
time) = $14,310
8 hours x $419 (attorney)
= $3,352
7 hours x $201 (risk
management specialist) =
$1,407
4 hours x $361 (sr. risk
management specialist) =
$1,444
$14,310 + $3,352 +
$1,407 + $1,444 =
$20,513 (per response)

TOTAL
Establishment of
written procedures
designed to stabilize
NAV and guidelines and
procedures for board
delegation of authority 30

1 estimated response

22 estimated burden
hours

1 response annually for 1
new liquidity fund

.5 hours board time
7.2 hours professional
legal time
+7.8 hours paralegal time
=
15.5 hours

$20,513(cost) x 1
estimated response =
$20,513 estimated cost
burden

.5 hours x $4,770 (board
time) = $2,385
7.2 hours x $419
(attorney) = $3,016.80
7.8 hours x $219
(paralegal) = $1,708.20
$2,385 + $3,016.80+
$1,708.20 = $7,110 (per
response)

TOTAL
30

1 estimated response

15.5 estimated burden

See supra note 25.
- 25 -

$7,110 x 1 estimated
response =
$7,110 estimated cost

Estimated Responses

Estimated Burden Hours
hours

Board determination –
Fees and Gates 31

2 liquidity funds per year

4 hours attorney
2 hours of board time
+1 hours of fund’s
compliance attorney
7 hours per liquidity fund

Estimated Cost
Burden 22
burden

4 hours x $419 (attorney)
= $1,676
2 hours x $4,770 ( board
time) = $9,540
1 x $368 (compliance
attorney) = $368
$1,676+$9,540+$368 =
$11,584 per liquidity fund

2 estimated responses

14 estimated hours
burden

$11,584 x 2 estimated
responses =
$23,168 estimated costs
burden

2 estimated responses
annually for 2 liquidity
funds 33

.5 hours (professional legal
time)

.5 hour x $419 (attorney)
= $209.50

x 4 estimated responses

Total

4 estimated responses

2 estimated burden hours

$209.50 x 4 estimated
responses =
$838 estimated cost
burden

TOTAL ESTIMATED

24,875 estimated

33,660 estimated burden

TOTAL
Written record of board
determinations and
actions related to failure
of a security to meet
certain eligibility
standards or an event of
default or insolvency 32

31

Id.

32

Id.

33

$13,004,304 estimated

In the context of registered money market funds, we have previously estimated an average of
approximately 2 occurrences for 20 funds each year; however, this number may vary
significantly in any particular year. For purposes of this PRA extension, we assumed there would
be same proportion of unregistered money market funds experiencing events of default or
solvency each year. (20/433 registered money market funds = approximately 5%. 5% x 41
liquidity funds = approximately 2 liquidity funds.)
- 26 -

BURDEN OF
INFORMATION
COLLECTION FOR
RULE 12d1-1

13.

Estimated Responses

Estimated Burden Hours

responses annually

hours annually

Estimated Cost
Burden 22
cost burden annually

Cost to Respondents

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 2019 rule 2a-7 PRA extension, 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 the fourth calendar quarter 2019, liquidity funds have $294 billion in gross asset
value. 34 The Commission does not have specific information about the proportion of assets held
in small, medium-sized, or large unregistered money market funds. Because 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), 35 the staff estimates
compliance with rule 2a-7 for these unregistered money market funds totals $264,600 annually. 36

See U.S Securities and Exchange Commission, Division of Investment Management,
Analytics Office, Private Fund Statistics, Fourth Quarter 2019 (Oct. 2, 2020), Table 3.
34

35

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.
- 27 -

Consistent with estimates made in the rule 2a-7 submission, Commission staff estimates
that unregistered money market funds also incur capital costs to create computer programs for
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 $3.88 million. 37
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 ($132,300) and for capital costs ($1.94 million). Commission staff concludes that
the aggregate annual costs of compliance with the rule are $132,300 for record preservation and
$1.94 million for capital costs.
14.

Cost to the Federal Government

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

Change in Burden

The estimated total annual burden decreased from 48,801.5 to 33,660 hours. The
decrease in hours is attributable to a decrease in our estimate of the number of fund complexes
with liquidity funds invested in by mutual funds in excess of the statutory limits under rule
12d1-1.

The cost estimates are the same as those used in the most recently approved rule 2a-7
submission.
36

This estimate is based on the following calculation: ($294 billion x $0.0000009) = $264,600
for large funds.
37

This estimate is based on the following calculation: ($294 billion x 0.0000132) = $3.88
million.38 This estimate is based on $13,004,304 estimated cost burdens - $2,072,300 ($132,300
for record preservation + $1.94 million for capital costs a fund would incur absent the
requirements of rule 2a-7) = $10,932,004.
- 28 -

The estimated total annual cost is increased from $2.07 million annually to $10.93
million annually. 38 The increase in cost is attributable additional regulatory requirements under
rule 2a-7 as well as to an increase in the gross asset value of private liquidity funds as reported
on Form PF data.
16.

Information Collection Planned for Statistical Purposes

Not applicable.
17.

Approval to Omit OMB Expiration Date

Not applicable.
18.

Exceptions to Certification Statement for Paperwork Reduction Act
Submission

Not applicable.
B.

COLLECTIONS OF INFORMATION EMPLOYING STATISTICAL METHODS
Not applicable.

38

This estimate is based on $13,004,304 estimated cost burdens - $2,072,300 ($132,300 for
record preservation + $1.94 million for capital costs a fund would incur absent the requirements
of rule 2a-7) = $10,932,004.
- 29 -