60 Day Notice

Federal Register / Vol. 87, No. 112 / Friday, June 10, 2022 / Notices
Rule 9561(b)(3).30 Accordingly, for
consistency and clarity, FINRA
proposes to modify the second sentence
of Rule 9561(b)(3) to use the phrase
‘‘suspension or cancellation of
membership.’’
Other Technical, Non-Substantive
Changes
FINRA also proposes to amend
various provisions in Rule 4111 to
remove the capitalization of the term
‘‘Associated Persons.’’ 31 This would be
consistent with how, throughout the
FINRA Rulebook, the term ‘‘associated
person’’ is generally not capitalized.32
FINRA has filed the proposed rule
change for immediate effectiveness and
has requested that the SEC waive the
requirement that the proposed rule
change not become operative for 30 days
after the date of the filing, so FINRA can
implement the proposed rule change
immediately.33
2. Statutory Basis

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FINRA believes that the proposed rule
change is consistent with the provisions
of Section 15A(b)(6) of the Act,34 which
requires, among other things, that
FINRA rules must be designed to
prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, and, in
general, to protect investors and the
public interest. The proposed rule
change will make non-substantive,
technical amendments that FINRA
30 See Rule 9561(b)(1), (3), (4) and (6); see also
Rule 9559(n)(6).
31 The capitalized term ‘‘Associated Persons’’ is in
Rule 4111(f)(3) (concerning requests by Previously
Designated Restricted Firms for withdrawals from a
Restricted Deposit Requirement), (i)(2) (defining
‘‘Covered Pending Arbitration Claim’’), and (i)(15)
(defining ‘‘Restricted Deposit Requirement’’).
32 The definition of ‘‘Covered Pending Arbitration
Claim’’ in Rule 4111(i)(2) was modeled on the
definition of the same term in Rule 1011(c), which
is in the Rule 1000 Series (Member Application and
Associated Person Registration). See Securities
Exchange Act Release No. 90527 (November 27,
2020), 85 FR 78540, 78541–42 n.10 (December 4,
2020) (Notice of Filing of SR–FINRA–2020–041). In
Rule 1011(c), as well as in some other provisions
in the Rule 1000 Series, the term ‘‘Associated
Person’’ is capitalized. The Rule 1000 Series,
however, has a specific definition of the term
‘‘Associated Person’’ that applies specifically to the
Rule 1000 Series. See Rule 1011(b).
33 FINRA notes that the proposed rule change
would impact all members, including members that
have elected to be treated as capital acquisition
brokers (‘‘CABs’’), given that the CAB rule set
incorporates the impacted FINRA rules by
reference. The proposed rule change would not
impact, however, member firms that are funding
portals, because the Funding Portal rule set neither
incorporates the impacted FINRA rules by reference
nor contains parallel rule provisions. See Funding
Portal Rule 900(a) (excepting FINRA Rule 9561
from the application of the FINRA Rule 9000 Series
to funding portals).
34 15 U.S.C. 78o–3(b)(6).

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believes will provide greater clarity and
consistency to its rules.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
FINRA does not believe that the
proposed rule change will result in any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
proposed rule change brings clarity and
consistency to FINRA rules without
adding any burden on firms.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Written comments were neither
solicited nor received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (i) significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act 35 and Rule 19b–
4(f)(6) thereunder.36
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (http://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
FINRA–2022–014 on the subject line.
35 15
36 17

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U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6).

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35585

Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–FINRA–2022–014. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (http://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such
filing also will be available for
inspection and copying at the principal
office of FINRA. All comments received
will be posted without change. Persons
submitting comments are cautioned that
we do not redact or edit personal
identifying information from comment
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–FINRA–
2022–014 and should be submitted on
or before July 1, 2022.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.37
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022–12483 Filed 6–9–22; 8:45 am]
BILLING CODE 8011–01–P

SECURITIES AND EXCHANGE
COMMISSION
[SEC File No. 270–507, OMB Control No.
3235–0563]

Proposed Collection; Comment
Request; Extension: Rule 17a–10
Upon Written Request, Copies Available
From: Securities and Exchange
Commission, Office of FOIA Services,
37 17

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CFR 200.30–3(a)(12).

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35586

Federal Register / Vol. 87, No. 112 / Friday, June 10, 2022 / Notices

100 F Street NE, Washington, DC
20549–2736
Notice is hereby given that pursuant
to the Paperwork Reduction Act of 1995
(44 U.S.C. 3501 et seq.) (‘‘PRA’’) the
Securities and Exchange Commission
(the ‘‘Commission’’) is soliciting
comments on the collections of
information summarized below. The
Commission plans to submit these
existing collections of information to the
Office of Management and Budget
(‘‘OMB’’) for extension and approval.
Section 17(a) of the Investment
Company Act of 1940 (15 U.S.C. 80a–1
et seq.) (the ‘‘Act’’), generally prohibits
affiliated persons of a registered
investment company (‘‘fund’’) from
borrowing money or other property
from, or selling or buying securities or
other property to or from, the fund or
any company that the fund controls.1
Section 2(a)(3) of the Act defines
‘‘affiliated person’’ of a fund to include
its investment advisers.2 Rule 17a–10
(17 CFR 270.17a–10) permits (i) a
subadviser 3 of a fund to enter into
transactions with funds the subadviser
does not advise but that are affiliated
persons of a fund that it does advise
(e.g., other funds in the fund complex),
and (ii) a subadviser (and its affiliated
persons) to enter into transactions and
arrangements with funds the subadviser
does advise, but only with respect to
discrete portions of the subadvised fund
for which the subadviser does not
provide investment advice.
To qualify for the exemptions in rule
17a–10, the subadvisory relationship
must be the sole reason why section
17(a) prohibits the transaction. In
addition, the advisory contracts of the
subadviser entering into the transaction,
and any subadviser that is advising the
purchasing portion of the fund, must
prohibit the subadvisers from consulting
with each other concerning securities
transactions of the fund, and limit their
responsibility to providing advice with
respect to discrete portions of the fund’s
portfolio.4 This requirement regarding
the prohibitions and limitations in
advisory contracts of subadvisers
relying on the rule constitutes a
collection of information under the
PRA.5
The staff assumes that all existing
funds with subadvisory contracts
amended those contracts to comply with
the adoption of rule 17a–10 in 2003,
which conditioned certain exemptions
1 15

U.S.C. 80a–17(a).
U.S.C. 80a–2(a)(3)(E).
3 As defined in rule 17a–10(b)(2). 17 CFR
270.17a–10(b)(2).
4 17 CFR 270.17a–10(a)(2).
5 44 U.S.C. 3501.
2 15

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upon these contractual alterations, and
therefore there is no continuing burden
for those funds.6 However, the staff
assumes that all newly formed
subadvised funds, and funds that enter
into new contracts with subadvisers,
will incur the one-time burden by
amending their contracts to add the
terms required by the rule.
Based on an analysis of fund filings,
the staff estimates that approximately
314 funds enter into new subadvisory
agreements each year.7 Based on
discussions with industry
representatives, the staff estimates that
it will require approximately 3 attorney
hours to draft and execute additional
clauses in new subadvisory contracts in
order for funds and subadvisers to be
able to rely on the exemptions in rule
17a–10. Because these additional
clauses are identical to the clauses that
a fund would need to insert in their
subadvisory contracts to rely on rules
10f–3 (17 CFR 270.10f–3), 12d3–1 (17
CFR 270.12d3–1), and 17e–1 (17 CFR
270.17e–1), and because we believe that
funds that use one such rule generally
use all of these rules, we apportion this
3 hour time burden equally among all
four rules. Therefore, we estimate that
the burden allocated to rule 17a–10 for
this contract change would be 0.75
hours.8 Assuming that all 314 funds that
enter into new subadvisory contracts
each year make the modification to their
contract required by the rule, we
estimate that the rule’s contract
modification requirement will result in
236 burden hours annually, with an
associated cost of approximately
$107,380.9
6 Transactions of Investment Companies With
Portfolio and Subadviser Affiliates, Investment
Company Act Release No. 25888 (Jan. 14, 2003) [68
FR 3153, (Jan. 22, 2003)]. We assume that funds
formed after 2003 that intended to rely on rule 17a–
10 would have included the required provision as
a standard element in their initial subadvisory
contracts.
7 Based on data from form N–CEN filings, as of
March 2022, there are 12,468 registered funds
(open-end funds, closed-end funds, and exchangetraded funds), 4,870 funds of which have
subadvisory relationships (approximately 39%).
Based on Form N–1A and Form N–2 filings, there
were 806 new registered funds in 2020. 806 new
funds × 39% = 314 funds.
8 This estimate is based on the following
calculation: 3 hours ÷ 4 rules = 0.75 hours.
9 These estimates are based on the following
calculations: (0.75 hours × 314 portfolios = 236
burden hours); ($455 per hour × 236 hours =
$107,380 total cost). The Commission’s estimates
concerning the wage rates for attorney time are
based on salary information for the securities
industry compiled by the Securities Industry and
Financial Markets Association. The estimated wage
figure is based on published rates for in-house
attorneys, modified to account for a 1,800-hour
work-year and inflation, and multiplied by 5.35 to
account for bonuses, firm size, employee benefits,
and overhead, yielding an effective hourly rate of

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The estimate of average burden hours
is made solely for the purposes of the
PRA. The estimate is not derived from
a comprehensive or even a
representative survey or study of the
costs of Commission rules. Complying
with this collection of information
requirement is necessary to obtain the
benefit of relying on rule 17a–10.
Responses will not be kept confidential.
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.
Written comments are invited on: (a)
whether the proposed collection of
information is necessary for the proper
performance of the functions of the
Commission, including whether the
information shall have practical utility;
(b) the accuracy of the Commission’s
estimate of the burden of the collection
of information; (c) ways to enhance the
quality, utility, and clarity of the
information collected; and (d) ways to
minimize the burden of the collection of
information on respondents, including
through the use of automated collection
techniques or other forms of information
technology. Consideration will be given
to comments and suggestions submitted
by August 9, 2022.
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
under the PRA unless it displays a
currently valid OMB control number.
Please direct your written comments
to: David Bottom, Acting Director/Chief
Information Officer, Securities and
Exchange Commission, c/o John
Pezzullo, 100 F Street NE, Washington,
DC 20549 or send an email to: PRA_
[email protected].
Dated: June 6, 2022.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022–12495 Filed 6–9–22; 8:45 am]
BILLING CODE 8011–01–P

SECURITIES AND EXCHANGE
COMMISSION
[SEC File No. 270–482, OMB Control No.
3235–0540]

Proposed Collection; Comment
Request; Extension: Rule 17a–25
Upon Written Request, Copies Available
From: Securities and Exchange
Commission, Office of FOIA Services,
100 F Street NE, Washington, DC
20549–2736
$455. See Securities Industry and Financial Markets
Association, Report on Management & Professional
Earnings in the Securities Industry 2013.

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