Supporting Statement A

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PAPERWORK REDUCTION ACT SUPPORTING STATEMENT

for the Extension of
Rule 17f-1 Custody of securities with members of national securities exchanges
OMB Control Number 3235-0222
The U.S. Securities and Exchange Commission (“Commission” or “SEC”) submits this
information collection request (“ICR”) pursuant to the Paperwork Reduction Act of 1995 (“PRA”), 44
U.S.C. Section 3501 et seq., with the following justification.

1.

Necessity of Information Collection
Section 17(f)(1)(B) of the Investment Company Act of 1940 ("Act") (15 U.S.C. 80a-17(f)(1)(B))

provides in part that a registered management investment company ("fund") may maintain its securities
and similar investments in the custody of a "company which is a member of a national securities
exchange as defined in the Securities Exchange Act of 1934, subject to such rules and regulations as the
Commission may from time to time prescribe for the protection of investors."
Rule 17f-1 (17 CFR 270.17f-1) under the Act, entitled “Custody of securities with members of
national securities exchanges,” sets forth the conditions under which a fund may place its assets in the
custody of a member of a national securities exchange. Rule 17f-1 permits a fund to place its assets in
the custody of a member of a national securities exchange only under a written contract approved by a
majority of the fund's board of directors. The rule requires the contract to contain certain provisions,
and requires the fund’s board to ratify the contract at least once a year thereafter. In addition, the fund
must submit a copy of the custodial contract to the Commission. This requirement assures that
Commission staff can review the contract for compliance with the Act.
Rule 17f-1 also requires, among other things, that an independent public accountant verify the
fund's assets at the end of every annual and semi-annual fiscal period, and at least one other time during
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the fiscal year as chosen by the independent accountant. Requiring an independent accountant to
examine the fund's assets in the custody of a member of a national securities exchange assists
Commission staff in its inspection program and helps to ensure that the fund assets are subject to proper
auditing procedures. The accountant's certificate stating that it has made an examination, and describing
the nature and the extent of the examination, must be attached to Form N-17f-1 and filed with the
Commission promptly after each examination. 1

2.

Purpose and Use of Information Collection
The requirements of rule 17f-1 are designed to ensure safekeeping of fund assets and to assist

Commission staff in monitoring funds' compliance with federal securities laws. Requiring a copy of the
custodial contract to be submitted to the Commission assures that Commission staff can review the
contract for compliance with the Act. Although Commission inspections staff conducts periodic reviews
of all funds, due to staffing constraints, funds are not inspected annually. Thus, the periodic
examination by the accountants required by rule 17f-1 helps to ensure that the fund’s assets are
continuously subject to proper auditing procedures. Less frequent periodic examinations by a fund’s
accountants could impair the ability of the Commission’s examination staff to ascertain a fund’s
compliance with the rule.

3.

Use and Consideration of Information Technology
The Commission’s Electronic Data Gathering, Analysis and Retrieval System (“EDGAR”)

provides for the automated filing, processing, and dissemination of full disclosure filings. The
automation provides for speed, accuracy and public availability of information, generating benefits to
investors and financial markets. Currently, the accountant's certificates are required to be filed
electronically. Rule 17f-1 requires the custody agreement to be filed as an exhibit to a fund’s

1

Form N-17f-1 is entitled “Certificate of Accounting of Securities and Similar Investments of a
Management Investment Company in the Custody of Members of National Securities Exchanges.” The
form serves as a cover sheet to the accountant’s certificate and does not require any additional information
to be gathered or filed with the Commission.

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registration statement under the Act, and each form of registration statement must be filed electronically
through EDGAR.

4.

Identifying and Minimizing Duplication
Rule 17f-1 does not impose any duplicative requirements, and the information collected under

the rule is not available elsewhere.

5.

Effect on Small Entities
The requirements of rule 17f-1 apply to all funds, including funds that are small entities, that

maintain their assets in the custody of a member of a national securities exchange. Rule 17f-1 is not
mandatory, and funds may choose alternative custody arrangements. If a fund chooses to maintain its
assets in the custody of a national securities exchange member, then regardless of its size, it must
comply with rule 17f-1.

6.

Consequences of Not Conducting Collection and Obstacles to Reducing
Burden
The requirements of rule 17f-1 are designed to ensure the safekeeping of fund assets and assist

Commission staff in monitoring fund custodial arrangements. Less frequent collection of the
information required by the rule would inhibit the dissemination of timely information that enables
Commission staff to ensure the safekeeping of client funds and investment company securities.

7.

Inconsistencies with Guidelines in 5 CFR 1320.5(d)(2)
Not applicable.

8.

Public Comment and Consultations Outside the Agency
The SEC did not receive public comment during the 60-day notice and comment period.

9.

Payment or Gift to Respondents
Not Applicable.

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10.

Assurance of Confidentiality and Privacy
The assurance of information collected pursuant to Form ADV is through filings with the

Commission. These disclosures are not kept confidential. 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.

11.

Collection Questions of a Sensitive Nature
Not applicable.

12.

Estimated Time Burden and its Cost Equivalent
The estimate of average burden hours is made solely for the purposes of the Paperwork

Reduction Act and is not derived from a comprehensive or even representative survey or study of the
cost of Commission rules and forms.
Within the current approved ICR for rule 17f-1, Commission staff estimated that each fund
makes 1 response and spends an average of 3.5 hours annually in complying with the rule’s
requirements, 2 and that 8 funds rely on the rule annually, with a total of 8 responses. The Commission
staff further estimated that on an annual basis it takes (i) 0.5 hours for the board of directors at a total
cost of $2,385 3 to review and ratify the custodial contracts; and (ii) 3 hours for the fund’s controller or
administrator at a total cost of $1,704 to assist the fund’s independent public auditors in verifying the
funds assets, for a total of 3.5 hours at a cost of $4,089. The total annual hour burden estimate is 28
hours, and the total cost estimate is $32,712.
Commission staff continue to estimate that each fund makes 1 response and spends an average of
3.5 hours annually in complying with the rule’s requirements. Commission staff estimates that on an

2
3

The 1 response is the board’s approval of the contract.
Commission staff estimated the average cost of a board of director time as $4,770 per hour for the board as
a whole, based on information received from funds and their counsel.

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annual basis it takes: (i) 0.5 hours for the board of directors4 at a total cost of approximately $6,093 5 to
review and ratify the custodial contracts; and (ii) 3 hours for the fund’s financial manager 6 at a total cost
of approximately $2,190 7 to assist the fund’s independent public auditors in verifying the fund’s assets,
for a total of 3.5 hours at a cost of $8,283. 8 Commission staff estimate that approximately 4 funds rely
on the rule annually, with a total of 4 responses. 9 Commission staff estimates that the total annual

4

5

6

7
8
9

Estimates of the number of hours are based on conversations with representatives of mutual funds that
comply with the rule. The actual number of hours may vary significantly depending on individual fund
assets. The hour burden for rule 17f-1 does not include preparing the custody contract because that would
be part of customary and usual business practice.
The prior staff estimate was based on information received from funds and their counsel. The Commission
has updated its methodology for estimating certain PRA burdens. To calculate the occupational hourly rates
used in this release, the Commission uses occupational mean hourly wage data from the Occupational
Employment and Wage Statistics (“OEWS”) program of the Bureau of Labor Statistics (“BLS”) for
“Securities, Commodity Contracts, and Other Financial Investments and Related Activities” (“NAICS
523”). See Occupational Employment and Wage Statistics, U.S. BUREAU OF LABOR STATISTICS,
https://www.bls.gov/oes/; see also Standard Occupational Classification, U.S. BUREAU OF LABOR
STATISTICS, https://www.bls.gov/soc/ (describing occupational classification system used by BLS);
EXEC. OFF. OF THE PRESIDENT, OFF. OF MGMT. & BUDGET, NORTH AMERICAN INDUSTRY
CLASSIFICATION SYSTEM (2022), available at
https://www.census.gov/naics/reference_files_tools/2022_NAICS_Manual.pdf (describing the industry
classification system used by BLS and other agencies). The mean hourly wage for each occupation is
adjusted for changes in the seasonally adjusted employment cost index for private wages and salaries
between the data reference period and when the data are released by BLS. See Employment Cost Index,
U.S. BUREAU OF LABOR STATISTICS, https://www.bls.gov/eci/. The adjusted mean hourly wage is
then multiplied by a factor that accounts for nonwage costs borne by employers, such as bonuses, benefits,
and overhead. This factor is calculated as an average over the 10 most recently available years of data of
the ratio of the Bureau of Economic Analysis’s annual gross output data for NAICS 523 to total annual
wages across all occupations for NAICS 523 in the OEWS data. See Gross Output by Industry, U.S.
BUREAU OF ECONOMIC ANALYSIS, https://www.bea.gov/data/industries/gross-output-by-industry;
Occupational Employment and Wage Statistics, U.S. BUREAU OF LABOR STATISTICS,
https://www.bls.gov/oes/. The final product is the occupational hourly rate. See generally UPDATED
METHODOLOGY FOR CALCULATING OCCUPATIONAL HOURLY RATES (Dec. 19, 2025),
available at https://www.sec.gov/files/method-occupational-hourly-rates.pdf. ($12,186 per hour for a fund
board of directors x 0.50 hours) = $6,093.
The names used to describe the professional and clerical staff performing certain functions will change in
order to align with the names of the professions used within the BLS data sources. Although the names of
the professions being described will change, the underlying functions being performed will not. We are
changing the title of the job function described here to financial manager from controller or administrator.
3 hours x $730 per hour cost for a financial manager = $2,190.
($6,093 + $2,190) = $8,283.
This estimate is based on a review of Form N—17f-1 EDGAR filings over the last three years. In 2023
there were six unique filers, in 2024 there were three unique filers, and in 2025 there were four unique
filers. (6 + 3 + 4) / 3 = 4.33 filers, rounded down to an estimated 4 filers. 4 filers x 1 response per filer = 4
responses.

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internal hour burden to comply with rule 17f-1 is 14 hours.10 Based on the total internal costs per fund,
Commission staff estimates that the total annual internal cost to comply with rule 17f-1 is $33,132. 11
Table 1: Summary of Revised Annual Responses, Internal Burden Hours, and Internal
Burden Hour Costs Estimates for Each Information Collection
IC

IC1

IC2

IC Title

Annual No. of Responses

Board
Review of
Custodial
Contract
Verification
of Fund
Assets

Total for all ICs

13.

Annual Internal Time Burden
(Hrs.)
Previously Requested
Change
approved

Annual Internal Cost Burden ($)
Previously
approved

Requested

Change

Previously
approved

Requested

Change

8

4

-4.0

4

2

-2

$19,080

$24,372 12

+$5,652

8

4

-4.0

24

12

-12

$13,632

$8,760 13

-$4,872

16

8

-8.0

28

14

-14

$32,712

$33,132

+$420

Estimated Additional Cost Burden
Funds that rely on rule 17f-1 generally use a lawyer to prepare the custodial contract for the

board’s review and to transmit the contract to the Commission. Commission staff estimate that it would
take a lawyer 2 hours to prepare the contract at a cost of $774 per hour. 14 Thus, Commission staff
estimates the total cost per fund of a lawyer to perform this task is $1,548. 15 Funds also must have an
independent public accountant verify the fund’s assets three times each year and prepare the certificate
of examination. Commission staff estimates that this would require approximately 35 hours for an
accountant to complete at a cost of approximately $330 per hour. Commission staff estimates the total
annual cost per fund for an independent public accountant to perform this service is $11,550. 16

10

11
12
13
14
15
16

4 respondents x 3.5 hours = 14 hours. The annual burden for rule 17f-1 does not include time spent
preparing Form N-17f-1. The burden for Form N-17f-1 is included in a separate information collection
request.
4 funds x $8,283 = $33,132.
$12,186 per hour for board of directors x 0.5 hours x 4 funds = $24,372.
$730 per hour for a financial manager x 3 hours x 4 funds = $8,760.
See supra footnote 5.
2 hours of lawyer services x $774 per hour = $1,548.
35 hours x $330 per hour for an accountant = $11,550.

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Therefore, the total annual external cost burden for a fund that relies on rule 17f-1 would be
approximately $13,098. 17 As noted above, the staff estimates that 4 funds rely on rule 17f-1 each year,
for an estimated total annualized external cost burden of $52,392. 18
Table 2: Summary of Revised Annual External Burden Hours, and External Burden Hour
Costs Estimates
IC Title

Lawyer Annual Time Burden

Accountant Annual Time Burden Annual External Cost Burden

(Hours)

(Hours)

Previously

Requested

Change

approved

2 hours

Total

Previously

($)
Requested

Change

approved

2 hours

-0

N/A 19

Previously

Requested

Change

$52,392

-$39,994

approved

35 hours

+35 hours $92,336

Annualized
Burden

14.

Annual Cost to the Federal Government
Not applicable.

15.

Reasons for Changes in Burden Estimates
The estimated total annual internal burden has decreased 14 hours, from 28 hours to 14 hours.

Based on a review of filings, the number of funds relying on rule 17f-1 has decreased from 8 to 4 funds.
The total annual internal cost burden has increased $420, from $32,712 to $33,132. The increase in total
annual internal cost burden is due to the change in the Commission’s methodology for estimating

17
18
19

$1,548 + $11,550 = $13,098.
4 funds x $13,098 = $52,392.
Prior rule 17f-1 ICR requests estimated a total cost for an independent public accountant. The change to
include an hourly burden and hourly rate for an accountant is a result of the change in the occupational
hourly rate methodology. See supra footnote 5.

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occupational hourly rates. Further, the total annual external cost burden has decreased $39,994, from
$92,336 to $52,392. This change is attributable to a decrease in the number of funds that rely on rule
17f-1. The changes in the Commission’s methodology for estimating occupational hourly rates have
resulted in an increase in the external cost per fund of $1,556, from $11,542 to $13,098. This change is
attributable to an increase in the cost of (i) a lawyer to prepare the custodial contract for board review
and its transmission to the Commission; and (ii) an accountant to verify the funds assets three times each
year and to prepare the certificate of examination.

16.

Plans for Publishing Results
The results of any information collection will not be published.

17.

Approval to Omit Display of OMB Expiration Date
Not applicable.

18.

Exceptions to the Certification for Paperwork Reduction Act Submissions
Not Applicable.

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