Agency Information Collection Activities; Proposed Collection; Comment Request; Extension: Rule 17a-7 - Exemption of Certain Purchase or Sale Transactions Between an Investment Company and Certain Affiliated Persons Thereof
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The SEC is seeking public comments on the extension of the information collection requirements under Rule 17a-7. This rule provides an exemption from the Investment Company Act's section 17(a) prohibitions on affiliated transactions. It allows registered investment companies (funds) and their first- or second-tier affiliates to engage in securities purchases and sales when the affiliation stems solely from a shared investment adviser, director, or officer. The exemption helps funds avoid brokerage commissions through cross-trading while imposing conditions to prevent overreaching and unfair pricing. Funds must maintain specific board-approved procedures, conduct quarterly compliance reviews, and keep detailed records of each transaction and board determination for at least six years. The SEC estimates 446 funds use the rule annually, resulting in a total annual internal burden of 2,230 hours and external costs of $1,659,120.
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Key Changes
- Extension of OMB Control No. 3235-0214 for Rule 17a-7 information collection
- Requires board of directors to adopt, approve and periodically review procedures for affiliated transactions
- Quarterly board determination that all 17a-7 transactions complied with established procedures
+ 3 more changes with Pro
Obligations
What this law requires
Board of directors must make, adopt, and approve written procedures reasonably designed to ensure compliance with Rule 17a-7 conditions for affiliated transactions, and maintain a permanent written copy of these procedures.
Board of directors must determine at least quarterly that all affiliated transactions effected during the preceding quarter in reliance on Rule 17a-7 were made in compliance with established procedures.
Funds must maintain written records of each Rule 17a-7 transaction for a minimum of six years, including: description of security purchased or sold, identity of counterparty, transaction terms, and information/materials upon which the board determined compliance.
Funds must maintain written records of the board's quarterly compliance determination for a period of not less than six years.
Affiliated transactions between funds and first-tier or second-tier affiliates are prohibited unless the affiliation arises solely from a common investment adviser, director, or officer, and all Rule 17a-7 conditions are satisfied.