Agency Information Collection Activities; Proposals, Submissions, and Approvals

Agency Information Collection Activities; Submission for OMB Review; Comment Request; Extension: Rule 31a-2

Upon Written Request, Copies Available From: Securities and Exchange Commission, Office of FOIA Services, 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. ), the Securities and Exchange Commission (SEC or "Commission") is submitting to the Office of Management and Budget (OMB) this request for extension of the proposed collection of information described below.

Section 31(a)(1) of the Investment Company Act of 1940 (the "Act")  ⁽¹⁾ requires registered investment companies ("funds") and certain underwriters, broker-dealers, investment advisers, and depositors to maintain and preserve records as prescribed by Commission rules. ⁽²⁾ Rule 31a-1 under the Act specifies the books and records that each of these entities must maintain. ⁽³⁾ Rule 31a-2 under the Act specifies the time periods that entities must retain certain books and records, including those required to be maintained under rule 31a-1. ⁽⁴⁾

Retention of records, as required by the rule, is necessary to ensure access to material business and financial information about funds and certain related entities. Commission staff periodically inspect the operations of funds to ensure they are in compliance with the Act and regulations under the Act. Due to the limits on the Commission's resources, however, each fund may only be inspected at intervals of several years. In addition, the prosecution of persons who have engaged in certain violations of the federal securities laws may not be limited by timing restrictions. For these reasons, Commission staff often need information relating to events or transactions that occurred years ago. Without the requirement to preserve books, records, and other documents, Commission staff would have difficulty determining whether the fund was in compliance with the law in such areas as valuation of its portfolio securities, computation of the prices investors paid, and, when purchasing and selling fund shares, types and amounts of expenses the fund incurred, kinds of investments the fund purchased, actions of affiliated persons, or whether the fund had engaged in any illegal or fraudulent activities.

Rule 31a-2 requires every fund to preserve permanently, and in an easily accessible place for the first two years, all books and records required under rule 31a-1(b)(1)-(4). ⁽⁵⁾ Every fund must preserve for at least six years, and in an easily accessible place for the first two years: all books and records required under rule 31a-1(b)(5)-(12);  ⁽⁶⁾ all vouchers, memoranda, correspondence, checkbooks, bank statements, canceled checks, cash reconciliations, canceled stock certificates, and all schedules evidencing and supporting each computation of net asset value of fund shares, including schedules evidencing and supporting each computation of an adjustment to net asset value based on swing pricing policies and procedures; all schedules evidencing and supporting each computation of a liquidity fee by a money market fund pursuant to rule 2a-7(c)(2);  ⁽⁷⁾ other documents required to be maintained by rule 31a-1(a) and not enumerated in rule 31a-1(b); any advertisement, pamphlet, circular, form letter, or other sales literature addressed or intended for distribution to prospective investors;  ⁽⁸⁾ any record of the initial determination that a director is not an interested person of the fund, and each subsequent determination that the director is not an interested person of the fund;  ⁽⁹⁾ any materials used by the disinterested directors of a fund to determine that a person who is acting as legal counsel to those directors is an independent legal counsel;  ⁽¹⁰⁾ and any documents or other written information considered by the directors of the fund pursuant to section 15(c) of the Act in approving the terms or renewal of a contract or agreement between the fund and an investment advisor. ⁽¹¹⁾ Every underwriter, broker, or dealer that is a majority-owned subsidiary of a fund must preserve records required to be preserved by brokers and dealers under rules adopted under section 17 of the Securities Exchange Act of 1934 (the "Exchange Act")  ⁽¹²⁾ for the periods established in those rules. ⁽¹³⁾ Every depositor of a fund and every principal underwriter of a fund (other than a closed-end fund) must preserve for at least six years records required to be maintained by brokers and dealers under rules adopted under section 17 of the Exchange Act to the extent the records are necessary or appropriate to record the entity's transactions with the fund. ⁽¹⁴⁾ Every investment adviser that is a majority-owned subsidiary of a fund must preserve the records required to be preserved by investment advisers under rules adopted under section 204 of the Investment Advisers Act of 1940 (the "Investment Advisers Act")  ⁽¹⁵⁾ for the periods specified in those rules. ⁽¹⁶⁾ Every investment adviser that is not a majority-owned subsidiary of a fund must preserve for at least six years records required to be maintained by registered investment advisers under rules adopted under section 204 of the Investment Advisers Act to the extent the records are necessary or appropriate to reflect the adviser's transactions with the fund. ⁽¹⁷⁾ Compliance with rule 31a-2 is mandatory.

We estimate that approximately 2,741 funds are required to comply with rule 31a-2 annually. Each fund is estimated to spend 221 hours per year preserving the required books and records, at a monetized cost burden of $49,283 per fund. The total annual burden is approximately 605,761 burden hours and total annual time costs of approximately $135,084,703. The Commission estimates that funds incur about $40,602 in external cost burden each year, resulting in an aggregate external cost burden of approximately $111,290,082.

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 OMB Control Number.

The public may view and comment on this information collection request at: https://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=202607-3235-005 or email comment to [email protected] within 30 days of the day after publication of this notice, by October 26, 2026.

⁽¹⁾  15 U.S.C. 80a1 et seq.

⁽²⁾  15 U.S.C. 80a30(a)(1).

⁽³⁾  17 CFR 270.31a1.

⁽⁴⁾  17 CFR 270.31a2.

⁽⁵⁾  17 CFR 270.31a2(a)(1). These include, among other records, journals detailing daily purchases and sales of securities; general and auxiliary ledgers reflecting all assets, liability, reserve, capital, income, and expense accounts; separate ledgers reflecting for each portfolio security as of the trade date all "long" and "short" positions carried by the fund for its own account; and corporate charters, certificates of incorporation, by-laws, and minute books. 17 CFR 270.31a-1(b)(1)-(4).

⁽⁶⁾  17 CFR 270.31a2(a)(2). These include, among other records, records of each brokerage order given in connection with purchases and sales of securities by the fund; records of all other portfolio purchases or sales; records of all puts, calls, spreads, straddles, and other options in which the fund has an interest, which it has granted, or which it has guaranteed; records of proof of money balances in all ledger accounts; files of all advisory material received from the investment adviser; and memoranda identifying persons, committees, or groups authorizing the purchase or sale of securities for the fund. 17 CFR 270.31a1(b)(5)-(12).

⁽⁷⁾ Id. See also 17 CFR 270.2a-7(c)(2).

⁽⁸⁾  17 CFR 270.31a2(a)(3).

⁽⁹⁾  17 CFR 270.31a2(a)(4).

⁽¹⁰⁾  17 CFR 270.31a2(a)(5).

⁽¹¹⁾  17 CFR 270.31a2(a)(6). Section 15 of the Act requires that fund directors, including a majority of independent directors, annually approve the fund's advisory contract and that the directors first obtain from the adviser the information reasonably necessary to evaluate the contract. The information request requirement in section 15 provides fund directors, including independent directors, a tool for obtaining the information they need to represent shareholder interests. 15 U.S.C. 80a-15(c).

⁽¹²⁾  15 U.S.C. 78q.

⁽¹³⁾  17 CFR 270.31a2(b).

⁽¹⁴⁾  17 CFR 270.31a2(c).

⁽¹⁵⁾  15 U.S.C. 80b4.

⁽¹⁶⁾  17 CFR 270.31a2(d).

⁽¹⁷⁾  17 CFR 270.31a2(e).