SECURITIES AND EXCHANGE COMMISSION
17 CFR Parts 232, 270 and 274
[Release No. IC-23786; File No. S7-31-98]
RIN 3235-AG29
Deregistration of Certain Registered Investment Companies
AGENCY: Securities and Exchange Commission
ACTION: Final rule
SUMMARY: The Commission is adopting amendments to the rule and
form under the Investment Company Act of 1940 that govern the
deregistration of registered investment companies. The
Commission also is adopting amendments that require investment
companies to file the form electronically through the
Commission’s Electronic Data Gathering, Analysis, and Retrieval
("EDGAR") system. The amendments are designed to expedite the
process for deregistering investment companies.
EFFECTIVE DATE: The rule amendments will become effective June
1, 1999.
FOR FURTHER INFORMATION CONTACT: Robin Gross Lehv, Staff
Attorney, or Penelope Saltzman, Senior Counsel, at (202) 942-
0690, Office of Regulatory Policy, Division of Investment
Management, Securities and Exchange Commission, 450 5th Street,
N.W., Washington, D.C. 20549-0506. For additional information,
including questions about filing Form N-8F, contact the Office of
Investment Company Regulation, Division of Investment Management,
at (202) 942-0564, Securities and Exchange Commission, 450 5th
Street, N.W., Washington, D.C. 20549-0506.
SUPPLEMENTARY INFORMATION: The Commission is adopting amendments
to rule 8f-1 [17 CFR 270.8f-1] and Form N-8F [17 CFR 274.218]
under the Investment Company Act of 1940 [15 U.S.C. 80a] (the
"Investment Company Act" or "Act"), and to rule 101 of the
Commission’s Regulation S-T [17 CFR 232.101].
I. DISCUSSION
Under section 8(f) of the Investment Company Act, the
Commission may deregister a registered investment company
("fund") if it determines the fund is no longer an "investment
company."[1] In order to expedite the deregistration process and
assist funds in preparing their applications, in 1978 the
Commission adopted rule 8f-1 and Form N-8F.[2] Rule 8f-1
describes the circumstances in which funds may use Form N-8F to
apply for a deregistration order, and Form N-8F specifies the
information that a fund must provide.
In December 1998, the Commission proposed to revise Form N-
8F to simplify the form, eliminate unnecessary items, and refocus
the questions to better elicit the information we need to make
the finding under section 8(f) to deregister a fund.[3] We also
proposed to amend rule 8f-1 to expand the types of circumstances
in which a fund may use Form N-8F to apply for a deregistration
order.[4] Finally, we proposed to require that Form N-8F, like
most other documents filed by funds, be submitted electronically
through the Commission’s EDGAR system.
The Commission received one comment letter, which supported
the proposed amendments and urged their prompt adoption.[5] The
commenter agreed that the amendments would facilitate completion
of the form and expedite the deregistration process. We are
adopting the amendments substantially as proposed, with minor
technical modifications[6] in response to issues raised by the
commenter.[7]
II. COST-BENEFIT ANALYSIS
The Commission is sensitive to the costs and benefits that
result from its rules. The rule and form amendments are designed
to decrease the regulatory burdens for funds that apply for a
deregistration order. The amendments (i) revise the content and
format of Form N-8F, making it easier to understand and complete,
(ii) expand the circumstances under which funds may use the form
to apply to deregister, and (iii) require the form to be filed
electronically.
As explained in greater detail in the cost-benefit analysis
of the Proposing Release, the Commission believes these changes
will result in cost and time savings for registered investment
companies. Specifically, we estimated that the amendments will
reduce the average time that it takes to complete the form by
about 50 percent, and will similarly reduce the number of
applications that require the applicant to provide additional or
clarifying information.[8] The one comment letter we received
agreed that the proposed amendments would expedite the
registration process, but did not provide specific estimates of
any costs or benefits of the amendments.
III. PAPERWORK REDUCTION ACT
Certain provisions of the amendments to rule 8f-1 and Form
N-8F constitute a "collection of information" requirement within
the meaning of the Paperwork Reduction Act of 1995 [44 U.S.C.
3501-3520]. The Commission solicited, but did not receive,
comments on the collection of information requirements in the
Proposing Release. The Commission submitted the proposed
amendments to the Office of Management and Budget ("OMB")
pursuant to 44 U.S.C. 3507(d) and received approval of the
amendments' collection of information requirements (OMB control
number 3235-0157).[9] 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.
The collection of information is not mandatory but is
recommended for all funds that seek to deregister under the
circumstances described in rule 8f-1. The amended rule does not
require that the collection of information be made public or kept
confidential by the parties.
IV. SUMMARY OF FINAL REGULATORY FLEXIBILITY ANALYSIS
A Final Regulatory Flexibility Analysis ("FRFA") concerning
rule 8f-1 and Form
N-8F has been prepared in accordance with 5 U.S.C. 604. An
Initial Regulatory Flexibility Analysis ("IRFA") was prepared in
accordance with 5 U.S.C. 603, and a summary of the IRFA was
included in the Proposing Release. The Commission received no
comments on the IRFA.
The FRFA notes that the amendments are intended to improve
the quality of information provided on the form and to reduce the
time and effort required to complete the form. The amendments do
not impose new burdens on respondents other than the requirement
that the form be filed through the EDGAR system. The amendments
will not impose any new reporting or recordkeeping requirements.
As discussed more fully in the FRFA, the amendments will
affect small businesses or small organizations (collectively,
"small entities"), as defined by the Commission’s rules, in the
same manner as all other entities who use Form N-8F to
deregister. The Commission believes the amendments will decrease
burdens on all funds by facilitating and expediting the
deregistration process, saving them time and money.
The FRFA states that for purposes of the Investment Company
Act and the Regulatory Flexibility Act, a small entity is a fund
that, together with other funds in the same group of related
funds, has net assets of $50 million or less as of the end of its
most recent fiscal year.[10] Of approximately 3900 active funds
(including business development companies), 339 funds are small
entities. Any of these 339 funds that applies to deregister
under circumstances described in amended rule 8f-1 could use Form
N-8F.
Finally, the FRFA notes that the Commission considered
various alternatives that might minimize the economic impact of
the amendments on small entities. These include: (i) the
establishment of differing compliance requirements that take into
account the resources available to small entities; (ii) the
clarification, consolidation, or simplification of compliance
requirements under the rule for small entities; (iii) the use of
performance rather than design standards; and (iv) an exemption
from coverage of the rule, or any part thereof, for small
entities. The FRFA concludes that alternative requirements or
simplification or consolidation of the requirements is
unnecessary because the amendments are designed to reduce the
compliance burdens for all funds, including small entities. In
addition, an exemption from any of the requirements for small
entities would increase their regulatory burden rather than
decrease it.
A copy of the FRFA may be obtained by contacting Robin
Gross Lehv, Division of Investment Management, Securities and
Exchange Commission, 450 5th Street, N.W., Washington, D.C.
20549-0506.
V. STATUTORY AUTHORITY
The Commission is amending rule 8f-1 and Form N-8F pursuant
to the authority set forth in section 38(a) [15 U.S.C. 80a-37(a)]
of the Investment Company Act.
List of Subjects in 17 CFR Part 232
Reporting and recordkeeping requirements.
List of Subjects in 17 CFR Part 270
Investment companies, Securities.
List of Subjects in 17 CFR Part 274
Investment companies, Reporting and recordkeeping
requirements.
TEXT OF RULE AND FORM AMENDMENTS
For the reasons set out in the preamble, Title 17, Chapter
II of the Code of Federal Regulations is amended as follows:
PART 232 - REGULATION S-T -- GENERAL RULES AND REGULATIONS FOR
ELECTRONIC FILINGS
1. The authority citation for Part 232 continues to read
as follows:
Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s(a), 77sss(a),
78c(b), 78l, 78m, 78n, 78o(d), 78w(a), 78ll(d), 79t(a), 80a-8,
80a-29, 80-30 and 80a-37.
2. Section 232.101 is amended in paragraph (a)(1)(iv) by
removing the phrase ", 8(f)" and by removing the phrase ", 80a-
8(f)".
3. Section 232.101 is amended in paragraph (c)(11) by
removing the phrase "8(f)," and by removing the phrase "80a-
8(f),".
PART 270 - RULES AND REGULATIONS, INVESTMENT COMPANY ACT OF 1940
4. The authority citation for Part 270 continues to read,
in part, as follows:
Authority: 15 U.S.C. 80a-1 et seq., 80a-34(d), 80a-37, 80a-
39 unless otherwise noted;
* * * * *
5. Section 270.8f-1 is revised to read as follows:
§ 270.8f-1 Deregistration of certain registered investment
companies.
A registered investment company that seeks a Commission
order declaring that it is no longer an investment company may
file an application with the Commission on Form N-8F (17 CFR
274.218) if the investment company:
(a) Has sold substantially all of its assets to another
registered investment company or merged into or consolidated with
another registered investment company;
(b) Has distributed substantially all of its assets to its
shareholders and has completed, or is in the process of, winding
up its affairs;
(c) Qualifies for an exclusion from the definition of
"investment company" under section 3(c)(1) (15 U.S.C. 80a-
3(c)(1)) or section 3(c)(7) (15 U.S.C. 80a-3(c)(7)) of the Act;
or
(d) Has become a business development company.
Note to § 270.8f-1: Applicants who are not eligible to use
Form N-8F to file an application to deregister may follow the
general guidance for filing applications under rule 0-2 (17 CFR
270.0-2) of this chapter.
PART 274 -- FORMS PRESCRIBED UNDER THE INVESTMENT COMPANY ACT OF
1940
6. The authority citation for Part 274 continues to read
as follows:
Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 78c(b), 78l,
78m, 78n, 78o(d), 80a-8, 80a-24, and 80a-29, unless otherwise
noted.
7. Section 274.218 and Form N-8F are revised to read as
follows:
§ 274.218 Form N-8F, application for deregistration of certain
registered investment companies.
This form must be used as the application for an order of
the Commission in cases in which the applicant is a registered
investment company that:
(a) Has sold substantially all of its assets to another
registered investment company or merged into or consolidated with
another registered investment company;
(b) Has distributed substantially all of its assets to its
shareholders and has completed, or is in the process of, winding
up its affairs;
(c) Qualifies for an exclusion from the definition of
"investment company" under section 3(c)(1) (15 U.S.C. 80a-
3(c)(1)) or section 3(c)(7) (15 U.S.C. 80a-3(c)(7)) of the Act;
or
(d) Has become a business development company.
Note to § 274.218: Form N-8F does not, and the amendments
will not, appear in the Code of Federal Regulations. A copy of
Form N-8F is attached as an Appendix to this document.
By the Commission.
Jonathan G. Katz
Secretary
April 15, 1999
**FOOTNOTES**
[1]: 15 U.S.C. 80a-8(f).
[2]: See Deregistration of Certain Investment Companies and
Quarterly Reports of Management Investment Companies,
Investment Company Act Release No. 10237 (May 11, 1978) [43
FR 21664 (May 19, 1978)].
[3]: See Deregistration of Certain Registered Investment
Companies, Investment Company Act Release No. 23588 (Dec. 4,
1998) [63 FR 69236 (Dec. 16, 1998)] ("Proposing Release").
[4]: Under the proposed amendments, a fund could use the form if
it (i) has sold substantially all of its assets to another
fund or merged into or consolidated with another fund, (ii)
has distributed substantially all of its assets to its
shareholders and completed, or is in the process of, winding
up its affairs, (iii) qualifies for an exclusion from the
definition of investment company under section 3(c)(1) or
section 3(c)(7) of the Act, or (iv) has decided to become a
business development company.
[5]: See Letter from Investment Company Institute (Feb. 5, 1999)
(placed in File No. S7-31-98).
[6]: Among other technical changes, we deleted the question
requesting the date that the fund filed a notice of
registration, because that information is not necessary to
our determination under section 8(f) if the fund provides
its registration number, as requested by the form. See
Proposed Form N-8F, item 10; Amended Form N-8F, item 3.
[7]: Form N-8F contains a reminder, but not a requirement, that a
deregistering fund must file a final Form N-SAR [17 CFR
274.101] in accordance with other rules under the Act. See
Amended Form N-8F, instruction 6. The commenter suggested
that the Commission eliminate the obligation to file a final
Form N-SAR in certain circumstances. We are considering
amendments to Form N-SAR, and will consider the commenter’s
suggestion in the context of that rulemaking.
[8]: The Commission believes the form typically is completed by
support staff. Based on an estimated cost of $15 per hour
for a clerical worker to complete Form N-8F and an estimate
of 130 applications filed each year, the Commission
estimates the current total annual cost of filing the form
is $11,700 (130 x $15 x 6 hrs.), while the total annual cost
of filing the amended form would be $5,850 (130 x $15 x 3
hrs.).
[9]: As stated in the Proposing Release, the Commission estimates that
the amendments will reduce the reporting and recordkeeping burden
of the rule and form to 3 hours per respondent. Based on past
experience, we estimate that each year approximately 130 funds
will apply to deregister, and that each applicant will apply only
once. Therefore, we estimate that the annual reporting and
recordkeeping burden for the amended form will be 3 hours per
applicant, and 390 hours total for all applicants.
[10]: Rule 0-10 under the Investment Company Act [17 CFR 270.0-10].