FR 2024-29579

The document from the Federal Register announces a request by the Securities and Exchange Commission (SEC) to extend existing rules regarding information collection under the Paperwork Reduction Act of 1995. Specifically, the SEC is focusing on Rule 22e-3, which allows money market funds to temporarily halt redemptions if such action is necessary for an orderly liquidation of the fund. This rule requires funds to notify the SEC in such cases. The document outlines an estimated minimal effort needed for compliance, involving approximately one hour of a lawyer's time annually.

General Summary

The primary aim of this notice is to outline the SEC's intention to maintain continuity in the collection of information regarding Rule 22e-3 under the Investment Company Act of 1940. This rule permits money market funds to suspend shareholder redemptions temporarily during liquidation, provided they notify the SEC of such decisions. The notice seeks public comments on the necessity and burden of this information collection, inviting responses until February 14, 2025.

Significant Issues or Concerns

The document leaves several points unclear. Firstly, it mentions an increase in "external costs" from $0 to $584 without detailing what these costs entail, which could lead to confusion among stakeholders. Additionally, the document's estimate of one respondent per year seems inadequately grounded, given that there are no historical instances where funds have invoked Rule 22e-3. This suggests the need for a more robust empirical basis for such estimates. Furthermore, the referenced cost of $511 for an in-house attorney's time does not include an explanation of how this figure was derived, potentially making it seem arbitrary. The complex legal and financial terminology might also present challenges for readers unfamiliar with such jargon. Lastly, the document references specific statutory and regulatory citations without offering clarifications, which may be bewildering for those not versed in legal frameworks.

Impact on the Public

Broadly, the document is unlikely to have a direct impact on the general public, as it pertains primarily to procedures and regulatory compliance for financial entities such as money market funds. However, it indirectly assures the public that protections surrounding the suspension of fund redemptions are being monitored by the SEC, which might offer some reassurance to investors concerned about their rights in fund liquidations.

Impact on Specific Stakeholders

Money Market Funds and Investment Companies: The document's request for information collection extension potentially imposes a minor regulatory burden on money market funds and related investment companies. The estimated compliance effort seems minimal, possibly limiting any adverse impact; however, the potential financial and administrative costs, like the undefined external costs, may be a concern.

Legal and Financial Advisors: For legal counsel and financial advisors, the outlined compliance requirements may mean minimal additional workload. Yet, there's a need for clarity in the delineation of costs and time, which might affect how legal services are billed or managed.

Regulatory Bodies and Policymakers: For the SEC and policymakers, this document underscores ongoing regulatory oversight and the importance of maintaining frameworks that ensure investor protection and market stability.

In conclusion, while the document presents necessary regulatory procedures aiming to safeguard investor rights during fund liquidation, clearer communication about costs and assumptions would enhance understanding and compliance. Stakeholders, particularly those directly affected, are encouraged to provide feedback to ensure that the SEC's rules align with current industry practices and realities.

The document discusses certain financial implications associated with Rule 22e-3 under the Investment Company Act of 1940, particularly in relation to money market funds. It focuses on the costs involved in complying with notification requirements when a fund decides to suspend redemptions and liquidate.

Summary of Financial Implications

The document highlights two main financial aspects:

1. The total annual burden for funds complying with the notification requirement of Rule 22e-3 is estimated to be approximately one hour of an in-house attorney's time, valued at $511.

2. It notes an increase in "external costs" associated with these requirements from $0 to $584.

Analysis Related to Identified Issues

1. Unclear External Costs: The document mentions an increase in external costs from $0 to $584, yet does not provide a breakdown or explanation of what these external costs encompass. This lack of clarity could potentially cause confusion, as it is not outlined how or why these costs have changed. A more detailed explanation could help stakeholders better understand the expenses involved.

2. Arbitrary Cost Estimation for Attorney’s Time: The stated cost of $511 for an in-house attorney's time is presented without detailed context or justification. Readers might wonder how this figure was computed and whether it accurately reflects typical legal fees. Without disclosing the basis for this calculation, such as average attorney fees or comparison to industry standards, the number seems arbitrary.

3. Lack of Empirical Data: The estimate of one respondent per year is based purely on assumptions since the Commission has not yet received any notices invoking Rule 22e-3. This implies a speculative basis for the financial calculations, as empirical data supporting this assumption is absent. Reliable data could provide a more concrete foundation for estimating costs and assessing financial implications.

Conclusion

Overall, the document attempts to outline the monetary obligations involved in complying with Rule 22e-3's notification requirements but falls short in offering a comprehensive breakdown of the costs and assumptions involved. Clarifying these figures and providing a stronger empirical foundation would benefit stakeholders in accurately assessing the financial impacts of compliance.