proposed rule and other recent Commission rules, as well as practical
realities such as implementation timelines.\595\ As discussed above,
the Commission acknowledges that overlapping compliance periods may in
some cases increase costs.\596\ This may be particularly true for
smaller entities with more limited compliance resources. This effect
can negatively impact competition because these entities may be less
able to absorb or pass on these additional costs, making it more
difficult for them to remain in business or compete. However, in
addition to mitigating the overall costs of the final rules relative to
the proposal,\597\ we believe we have mitigated the potential for
heightened costs by adopting longer compliance periods for all entities
relative to the proposal, and even longer compliance periods for
smaller entities. The compliance periods for the rules mentioned by
commenters, the Shareholder Reports Final Rule and the Money Market
Funds Final Rule,\598\ culminate in approximately July-October 2024
while the compliance dates for the final rule are [FILL IN date 24
months following amendments' effective date] for larger entities, and
[FILL IN date 30 months following amendments' effective date] for
smaller entities. We therefore do not expect the risk of negative
competitive effects from increased compliance costs from simultaneous
compliance periods to be significant.
---------------------------------------------------------------------------

    \595\ See supra section IV.D.
    \596\ See supra section IV.D.2.
    \597\ See supra footnote 594 and accompanying text.
    \598\ See supra section IV.D.2; see also, e.g., ICI Comment
Letter III.
---------------------------------------------------------------------------

    Finally, to the extent that the final amendments disincentivize
some funds from investing in assets with characteristics that do not
readily lend themselves to popular investment focuses that fund names
suggest and incentivizes investment in assets that do, the final
amendments could affect capital formation. For example, it may be
relatively more difficult for funds to conclude that certain issuers--
for example, firms that are newer, smaller, or whose strategies and
performance objectives are not as well publicized or as clearly
articulated--should appropriately be included in a fund's 80% basket,
and therefore funds that are within the scope of the 80% investment
policy requirement may invest relatively less in these issuers. These
issuers could consequently face increased costs of capital. Conversely,
assets whose appropriate inclusion in a fund's 80% basket is relatively
easier for a fund to determine (for example, because they exhibit
quantifiable criteria that assist in this determination) may receive
more fund attention and consequently face reduced costs of capital.

E. Reasonable Alternatives Considered

1. Disclosure-Based Framework
    The final rule expands the scope of names that require an 80%
investment policy. For certain categories of names, we considered
whether a disclosure-based framework would be more appropriate.
Specifically, we considered whether a fund whose name suggests a
particular investment focus should be required to have additional
disclosure in that fund's prospectus describing the investment strategy
in lieu of the requirement to maintain an 80% investment policy.\599\
Such a requirement could have been accompanied either by no scope
expansion at all for the 80% investment policy requirement or by a
less-encompassing scope expansion. The additional disclosure could have
included definitions of the terms in the name of the fund, criteria for
investment selection, or other information that would clarify for
investors how a fund's name relates to the investment strategy pursued
by the fund.
---------------------------------------------------------------------------

    \599\ This approach was suggested by many commenters (see, e.g.,
ICI Comment Letter, Dechert Comment Letter; Cato Institute Comment
Letter) and offered by Commissioner Peirce (see statement, available
at https://www.sec.gov/news/statement/peirce-fund-names-statement-052522).
---------------------------------------------------------------------------

    We are cognizant of the differential cost and benefits of this
alternative relative to the adopted expansion of the 80% investment
policy requirement. In particular, funds whose names include terms that
are defined at least partially using managerial judgment are likely to
face higher costs and lower benefits from an 80% test relative to funds
with names that include more objective terms.\600\
---------------------------------------------------------------------------

    \600\ For a fuller discussion, see supra section IV.D.2.
---------------------------------------------------------------------------

    However, we also considered the costs associated with excluding
certain terms or types of terms from the requirement. Excluding certain
types of funds names, or terms used in fund names, from the requirement
would incentivize funds to follow strategies associated with these
exclusions and thus limit the investment options available to
investors. This, however, may be balanced by the effect of investors
seeking funds covered by the amended rule. In addition, to the extent
that investor behavior is affected by the name of the fund itself,
additional prospectus disclosure on its own would not provide
additional investor protection. There is significant evidence from
academic literature that a fund's name does affect investor behavior
above and beyond what can be explained by any observable aspect of the
fund's actual investment strategy.\601\
---------------------------------------------------------------------------

    \601\ See supra section IV.C.
---------------------------------------------------------------------------

2. Alternatives to 90-Day Temporary Departure Limit
    The final amendments require a fund to invest consistent with its
80% investment policy under normal circumstances. In the event that a
fund identifies that its portfolio is no longer invested consistent
with its 80% investment policy, a fund must return to compliance as
soon as is reasonably practicable and in no more than 90 consecutive
days. Separately, if the fund decides to invest in a manner not
consistent with the 80% investment policy under other-than-normal
circumstances, the fund is not required to come back into compliance as
soon as reasonably practicable but must come back into compliance
within 90 consecutive days. As an alternative, we considered whether to
require instead that, if a temporary departure persists past 30 days,
the fund's board must approve, or be informed in writing about, the
temporary departure. We also considered whether to adopt a limit
greater than 90 days. In the context of requiring board approval, we
also considered requiring a majority of the independent directors to
approve the departure. In the context of requiring board notification,
we considered requiring a written report or notification that includes
a recommendation from the fund's adviser to be provided to the board
immediately or at the next regularly scheduled board meeting.
    Collectively, these alternatives may provide more flexibility for
funds to address the conditions that necessitate temporary departures
than the final amendments. Either they would not limit the duration for
which a fund could engage in a temporary departure, provided that the
board either approves or is notified of the departure, or they would
increase the allowable length of time that a fund could depart from its

80% investment policy. These approaches could provide funds with more
flexibility to reduce loss during market crises and manage liquidity
risk, which could, in turn, reduce any adverse effects that a fund's
trading activity may have on the markets for the investments in its
portfolio.
    Conversely, these alternatives may have been less effective than
the final amendments at addressing the concerns highlighted above
regarding portfolio ``drift'' or extended-length intentional
departures. That is, fund managers and boards may not fully internalize
investors' preferences for certain elements of a portfolio, such as
risk and diversification benefits, that a fund name suggests, and so
could be willing to extend departures for longer than would be optimal
for investors. For example, a fund board could determine to engage in a
departure for longer than 90 days to address a market disruption, but
this action might frustrate the expectation of investors who may expect
the fund to invest consistent with its named investment focus even
during market disruptions, and therefore may choose to rebalance
investments on their own rather than relying upon the fund to do so. We
also believe that the alternative that includes board notification or
approval would increase burdens on fund boards, particularly if we were
to require the approval or notification be immediate. Further, in
determining not to use a longer time frame for this requirement, we
considered the fact that in practice funds may be out of compliance for
more than 90 days, since funds will be required to reassess their
portfolio assets' inclusion in the fund's 80% basket no less than
quarterly and funds may unknowingly be out of compliance between
assessments.
3. Permit But Not Require the Use of Derivatives' Notional Values for
Purposes of Names Rule Compliance
    As an alternative, we considered permitting, but not requiring,
funds to value derivatives using notional values for purposes of
assessing names rule compliance. As discussed in section II.A.3 above,
an approach where a fund uses notional values for these purposes could
allow a fund to use a name that effectively communicates its
investments where it would not be able to do so under the current rule.
However, allowing a fund to use derivatives instruments' market values
for purposes of assessing names rule compliance could result in a fund
being in compliance with the fund's 80% investment policy despite the
fund having significant exposure to investments that are not suggested
by the fund's name. Because we believe the use of notional values
better reflects the investment exposure of derivatives investments than
market values for purposes of assessing names rule compliance in most
cases, we are requiring, rather than permitting, the use of notional
values.
4. Exclude Unit Investment Trusts From Requirements for Tagging
Prospectus Disclosure
    Under the final amendments, the new prospectus disclosure of term
definitions and investment selection criteria submitted by UITs on Form
N-8B-2 and Form S-6 will be tagged in Inline XBRL. Alternatively, we
could have changed the scope of the tagging requirement for the new
prospectus disclosures by excepting UITs from this requirement. Such an
exception was suggested by one commenter, who noted that UITs are not
currently required to tag any filings in Inline XBRL.\602\ Under this
alternative, UITs would submit their prospectus disclosures in
unstructured HTML or ASCII, and forgo the initial Inline XBRL
implementation costs (such as the cost of training in-house staff to
prepare filings in Inline XBRL, and the cost to license Inline XBRL
filing preparation software from vendors) and ongoing Inline XBRL
compliance burdens that would result from the tagging requirement.\603\
However, narrowing the scope of tagging requirements to exclude UITs
would diminish the extent of informational benefits that would accrue
as a result of the disclosure requirements by making UITs' disclosures
comparatively costlier to process and analyze.\604\ As such, we are not
excluding UITs from Inline XBRL tagging requirements.
---------------------------------------------------------------------------

    \602\ See supra footnote 433.
    \603\ See infra section V.E. Funds file registration statements
and amendments using the Commission's EDGAR electronic filing
system, which generally requires filers to use ASCII or HTML for
their document submissions, subject to certain exceptions. EDGAR
Filer Manual (Volume II) version 66 (June 2023), at 5-1; see 17 CFR
232.301 (incorporating EDGAR Filer Manual into Regulation S-T). To
the extent UITs are part of the same fund family as other types of
funds that are subject to Inline XBRL requirements, they may be able
to leverage those other funds' existing Inline XBRL tagging
experience and software, which would mitigate the initial Inline
XBRL implementation costs that UITs will incur under the final
amendments.
    \604\ In addition, one commenter noted that UITs can avail
themselves of the same applications and processes used by other fund
types that report information using Inline XBRL. See supra footnote
433.
---------------------------------------------------------------------------

V. Paperwork Reduction Act Analysis

A. Introduction

    Certain provisions of the final rules and form amendments contain
``collection of information'' requirements within the meaning of the
Paperwork Reduction Act of 1995 (``PRA'').\605\ We are submitting the
final collections of information to the Office of Management and Budget
(``OMB'') for review in accordance with the PRA.\606\ The titles for
the collections of information are: (1) ``Rule 35d-1 under the
Investment Company Act of 1940, Investment Company Names'' (OMB Control
No. 3235-0548); (2) ``Form N-1A under the Investment Company Act of
1940 and Securities Act of 1933, registration statement of Open-End
Management Investment Companies'' (OMB Control No. 3235-0307); (3)
``Form N-2 under the Investment Company Act of 1940 and Securities Act
of 1933, Registration Statement of Closed-End Management Companies''
(OMB Control No. 3235-0026); (4) ``Form N-8B-2, Registration Statement
of Unit Investment Trusts Which Are Currently Issuing Securities'' (OMB
Control No. 3235-0186); (5) ``Form S-6, Registration Under the
Securities Act of 1933 of Unit Investment Trusts Registered on Form N-
8B-2'' (OMB Control No. 3235-0184); (6) ``Form N-PORT under the
Investment Company Act of 1940'' (OMB Control No. 3235-730); and (7)
``Investment Company Interactive Data'' (OMB Control No. 3235-0642). 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.
---------------------------------------------------------------------------

    \605\ 44 U.S.C. 3501 et seq.
    \606\ 44 U.S.C. 3507(d); 5 CFR 1320.11.
---------------------------------------------------------------------------

    The Commission published notice soliciting comments on the
collection of information requirements in the Proposing Release and
submitted the proposed collections of information to OMB for review in
accordance with 44 U.S.C. 3507(d) and 5 CFR 1320.11. The Commission
received some comments that specifically addressed the estimated PRA
burdens and costs in the Proposing Release, as well as some comments
that discussed the overall burdens of implementing aspects of the
proposal associated with collections of information. We discuss these
comments below along with discussing updated estimates of the
collection of information burdens associated with the final amendments
to rule 35d-1, Form N-1A, Form N-2, Form N-8B-2, Form S-6, Form N-PORT;
and the interactive data requirements under the final

amendments. A description of the final amendments, including the need
for the information and its use, as well as a description of the likely
respondents, may be found in sections I and II above, and a discussion
of the economic effects of the final amendments may be found in section
IV above.

B. Rule 35d-1

    Rule 35d-1 is designed to address certain broad categories of
investment company names that, in the Commission's view, are likely to
mislead an investor about a company's investments and risks. The final
amendments will expand the scope of funds covered by the 80% investment
policy requirement of rule 35d-1. In addition to those fund names
currently subject to the rule, the final amendments specify that any
fund with a name suggesting that the fund focuses its investments in
investments that have, or whose issuers have, particular
characteristics will have to adopt an 80% investment policy.
    We are also adopting amendments to the names rule's notice
requirement. These amendments are designed to specify further the
content and delivery of the notice, and address more directly the needs
of investors who elect electronic delivery. The final amendments will
require notices not only to describe a change in the fund's 80%
investment policy, but also a change to the fund's name that
accompanies the investment policy change.
    The final amendments also include certain new recordkeeping
requirements. These amendments will newly require a fund that is
required to adopt an 80% investment policy to maintain a written record
documenting its compliance with the rule, including among other things
the fund's record of which assets are invested in the fund's 80%
basket, the basis for including each such asset in the fund's 80%
basket, and certain information regarding departures from the fund's
80% investment policy. A fund also will be required to keep records of
any notice sent to the fund's shareholders pursuant to the rule. In a
modification to the proposal, the final amendments will not require
funds that do not adopt an 80% policy to maintain a record of the
fund's analysis that such policy is not required under the names
rule.\607\
---------------------------------------------------------------------------

    \607\ See supra section II.F.
---------------------------------------------------------------------------

    Rule 35d-1, including the final amendments to the rule, contains
collection of information requirements. These collection of information
requirements include, as detailed in the chart below, the notice
requirement and recordkeeping requirements for funds that are required
to adopt an 80% investment policy. Compliance with these requirements
is mandatory. Responses to these requirements will not be kept
confidential.
    The Commission received only one comment that specifically
addressed the PRA analysis for the proposed amendments to rule 35d-1,
stating that the Commission had ``significantly underestimated'' the
costs related to preparing and providing notices to shareholders.\608\
The Commission received other comments that did not specifically
address the PRA analysis but suggested that the Commission had
generally underestimated the compliance costs associated with the
proposed notice and recordkeeping requirements.\609\ Some commenters
stated that the costs of providing notices would likely increase in
light of the rule's increase in scope.\610\ With respect to the
proposed recordkeeping requirements, commenters stated that funds would
face significant compliance costs related to the requirement to
document each investment included in the 80% basket.\611\ Some
commenters also stated that the proposed recordkeeping requirements may
not be easily automated, including the requirement to include a basis
for including each investment in the 80% basket, and the reasons for
departure from the fund's 80% investment policy.\612\
---------------------------------------------------------------------------

    \608\ ICI Comment Letter.
    \609\ ICI Comment Letter; T. Rowe Comment Letter; SIFMA AMG
Comment Letter; Seward & Kissel Comment Letter.
    \610\ ICI Comment Letter; SIFMA AMG Comment Letter; T. Rowe
Comment Letter; Dechert Comment Letter.
    \611\ ICI Comment Letter; T. Rowe Comment Letter; SIFMA Comment
Letter; Seward & Kissel Comment Letter.
    \612\ Invesco Comment Letter; Seward & Kissel Comment Letter.
---------------------------------------------------------------------------

    We have adjusted the proposal's estimated annual burden hours and
total time costs to reflect these comments and to reflect changes from
the proposal. Specifically, we are increasing the estimated annual
burden associated with the recordkeeping requirement to reflect that
certain records may not easily lend themselves to automation. The final
estimate also reflects that funds will be required under the final
amendments to reassess the characteristics of investments in the fund's
80% basket on a quarterly basis, in contrast to the proposed rule,
which would have required funds to engage in continual compliance
testing to reassess the characteristics of investments in the fund's
80% basket.\613\ Because we are not adopting the proposed recordkeeping
requirement for funds that are not required to adopt 80% investment
policies, the burdens associated with that requirement are omitted from
the final estimates below. We have also adjusted the proposal's
estimated annual burden hours and total time costs to reflect updated
wage rates. Because funds already have in place systems required to
provide notice to shareholders, we do not believe that per-fund costs
of providing notice to shareholders will materially increase as result
of the rule's increased scope under the final amendments. We also do
not believe that per-fund costs of providing notice will increase as a
direct result of exception under the final amendments related to
unlisted registered closed-end funds and BDCs because we believe that
the costs associated with providing notice under this exception are
comparable to the costs that a fund not relying on this exception would
incur by providing notices associated with the shareholder vote that
would otherwise be required for a change to the fund's investment
policy. The proposed estimate of funds that would provide notices under
the names rule over-estimated the number of unlisted registered closed-
end funds and BDCs that would provide notices, as it did not subtract
unlisted registered closed-end funds and BDCs from the overall estimate
of registered closed-end funds and BDCs (even though the proposal did
not anticipate that unlisted registered closed-end funds and BDCs would
provide notices under the names rule, as they would have to conduct a
shareholder vote in connection with a change in an 80% investment
policy). We are therefore not changing our analysis in our estimates of
the final rules' PRA burdens to increase the proposed estimate, even
though the final amendments (unlike the proposal) would permit unlisted
registered closed-end funds and BDCs to send notices to shareholders in
connection with a change in an 80% investment policy instead of holding
a shareholder vote.
---------------------------------------------------------------------------

    \613\ See supra section II.A.2.
---------------------------------------------------------------------------

    The table below summarizes our PRA initial and ongoing annual
burden estimates associated with the final notice and recordkeeping
amendments to rule 35d-1.

                                                    Table 1--PRA Estimates for Rule 35d-1 Amendments
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Annual
                                       Initial          Annual hours \1\              Wage rate \2\             Internal time costs       external  cost
                                        hours                                                                                burden
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Currently Aproved Burdens
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notice Requirement...................        0  20 hours \3\...................  $425 (estimate of wage   $8,500........................  ..............
Number of Funds......................  .......  x 38 funds \4\.................   rate in most recently   x 38 funds....................
                                                                                approved supporting
                                                                                statement).
Current Burden Estimates.............  .......  760 hours......................  .......................  $323,000......................              $0
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               Proposed Estimated Burdens
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notice Requirement...................        0  20 hours \5\...................  $425 (blended rate for   $8,500........................         \7\ 496
Number of Funds......................  .......  x 34 funds \6\.................   attorneys).             x 34 funds....................
Total New Burden for Notice            .......  680 hours......................  .......................  $289,000......................          16,864
 Requirement (I).
Recordkeeping for Funds with an 80%      \9\ 9  50 hours.......................  $356 (1:1 blend for      $17,800.......................             496
 Policy \8\.                           .......  x 10,394 funds.................   compliance attorney     x 10,394 funds................
Number of Funds......................                                             and senior programmer).
Total New Burden for Recordkeeping     .......  519,700 hours..................  .......................  $185,013,200..................       5,155,424
 For Funds Required to Adopt 80%
 Policy (II).
Recordkeeping For Funds Not Required         0  1 hour.........................  $425 (blended rate for   $425..........................             496
 to Adopt 80% Policy.                           x 3,465 funds \10\.............   attorneys).             x 3,465 funds.................
Total New Burden for Recordkeeping     .......  3,465 hours....................  .......................  $1,472,625....................       1,718,640
 For Funds Not Required to Adopt 80%
 Policy (III).
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                  Total Proposed Estimated Burdens Including Amendments
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total New Annual Burden (I + II +      .......  523,845 hours..................  .......................  $186,774,825..................       6,890,910
 III).
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 Final Estimated Burdens
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notice Requirement...................        0  20 hours \5\...................  $425 (blended rate for   $8,500........................        \11\ 565
Number of Funds......................  .......  x 34 funds \6\.................   attorneys).             x 34 funds....................
Total New Burden for Notice            .......  680 hours......................  .......................  $289,000......................          19,210
 Requirement (I).
Recordkeeping for Funds with an 80%      \9\ 9  75 hours \12\..................  $406 (1:1 blend for      $30,450.......................             565
 Policy \8\.                           .......  x 10,291 funds.................   compliance attorney     x 10,291 funds................
Number of Funds......................                                             and senior programmer).
Total New Burden for Recordkeeping     .......  771,825 hours..................  .......................  $313,360,950..................       5,814,415
 (II).
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                   Total Final Estimated Burdens Including Amendments
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total New Annual Burden (I + II).....  .......  772,505 hours..................  .......................  $313,649,950..................       5,833,625
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes:
\1\ Includes initial burden estimates annualized over a 3-year period.
\2\ The estimated wage figures are based on published rates for the professionals described in this chart, modified to account for an 1800-hour work-
  year and inflation. The estimated figures for the proposed and final burdens were multiplied by 5.35 to account for bonuses, firm size, employee
  benefits, and overhead. See Securities Industry and Financial Markets Association's Report on Management & Professional Earnings in the Securities
  Industry 2013.
\3\ This estimate assumed that these notices are typically short, one-page documents that are sent to shareholders with other written materials. The
  Commission anticipated that each respondent would only incur these burden hours once.
\4\ The currently-approved burden takes into account the Commission's previous estimate, across approximately 13,182 open-end funds and 676 closed-end
  funds then registered with the Commission, that there are approximately 11,502 funds that have names covered by the rule or 83% of funds covered by
  the rule (13,858 funds x 83% = 11,502). The Commission estimated that 1% of these funds, or 115 funds, would, within the next three years, provide a
  notice to shareholders pursuant to rule 35d-1. Therefore, over the course of 3 years, the Commission estimated that, on average approximately 38 funds
  per year would provide a notice to shareholders under rule 35d-1.
\5\ The final amendments would make some changes to the current notice requirement, including requiring funds to provide additional specificity about
  the content and delivery of notice. Because funds already have in place systems required to provide notice to shareholders, the Commission continues
  to believe, as in the proposal, that these proposed alterations would not increase the burden hours needed to prepare the notice. Although the final
  rules, unlike the proposed rules, would permit unlisted registered closed-end funds and BDCs to make changes to their 80% investment policies without
  a shareholder vote under certain circumstances, including that a fund provide certain notice to shareholders, we have not increased our estimates as a
  result of this provision. The costs associated with providing notice under this exception are comparable to the costs that a fund would incur by
  providing notices associated with the shareholder vote that would otherwise be required for a CEF/BDC to change its 80% investment policy under the
  final rule.
\6\ The currently-approved PRA burden for rule 35d-1 was based on the Commission's estimate that 83% of funds were covered by rule 35d-1. The Commission
  at proposal estimated that 75% of funds would have names subject to the 80% investment policy. The prior PRA burden was based on an estimate using a
  different analytical approach than the Commission employed at proposal, based on its updated economic analysis. Based on that analysis, the Commission
  estimated that 62% of funds were subject to rule 35d-1 at the time of proposal and that the proposed rule amendments would increase this estimate to
  75% of funds. The Commission estimated, across approximately 14,532 open-end and closed-end funds registered with the Commission, that there were
  approximately 10,394 funds that have names that would be covered by the proposed rule amendments, or 75% of funds covered by the rule amendments. The
  Commission estimated that 1% of these 10,394 funds, or 103 funds, would within the next three years provide a notice to shareholders pursuant to the
  proposed rule amendments. Therefore, over the course of 3 years, the Commission estimated that, on average approximately 34 funds per year would
  provide a notice to shareholders under the proposed rule amendments. The Commission now estimates, pursuant to its current economic analysis, that 60%
  of funds are currently subject to the 80% investment policy requirement, and that 76% of funds would be subject to this requirement under the final
  amendments. The Commission estimates, across approximately 13,541 open-end and closed-end funds registered with the Commission, that there are
  approximately 10,291 funds that have names that would be covered by the final rule amendments, or 76% of funds covered by the rule amendments (9,533
  mutual funds (other than money market funds) + 2,735 non-UIT ETFs + 355 money market funds = 12,975 open end funds + 748 registered closed-end funds +
  125 BDCs + 45 UITs = 13,541 funds x 76% = 10,291 funds). The Commission estimates that 1% of these 10,291 funds, or 103 funds, would within the next
  three years provide a notice to shareholders pursuant to the final rule amendments. Therefore, over the course of 3 years, the Commission estimates
  that on average approximately 34 funds per year would provide a notice to shareholders under the final rule amendments.
\7\ This estimate was based on the estimated wage rate of $496, for 1 hour of outside legal services. The Commission's estimate of the relevant wage
  rates for external time costs, such as outside legal services, took into account staff experience, a variety of sources including general information
  websites, and adjustments for inflation.
\8\ For funds that adopt an 80% investment policy under the proposed rule, the recordkeeping requirements under proposed rule 35d-1(b)(3) would require
  records documenting the fund's compliance under paragraphs (a) and (b) of proposed rule 35d-1. Written records documenting the fund's compliance
  include: the fund's record of which assets are invested in the 80% basket and the basis for including each such asset in the fund's 80% basket; the
  percentage of the value of the fund's assets that are invested in the 80% basket; the reasons for any departures from the fund's 80% investment policy
  (including why the fund determined that circumstances are other-than-normal); the dates of any departures from the 80% investment policy; and any
  notice sent to the fund's shareholders pursuant to proposed rule 35d-1(e). The Commission based its proposed estimate on its understanding that these
  records would generally need to be made daily, but that the vast majority of records would be automated. The Commission stated that it understood,
  however, that some records, specifically, records documenting the reasons for any departures from the 80% investment policy, may not be automated and
  may require a fund to spend more time to make. The proposed PRA estimates took these considerations into account. The recordkeeping requirements under
  the final rule are substantially similar to the proposed requirements, but do not include the proposed requirement for funds that do not adopt an 80%
  investment policy to maintain a record of their analysis that such a policy is not required.

\9\ This estimate initial burden for the proposed recordkeeping requirement accounts for the time the Commission estimates that fund will need to
  establish recordkeeping procedures for the records that must be kept.
\10\ The Commission at proposal estimated that, across approximately 14,532 open-end and closed-end funds registered with the Commission, there were
  approximately 3,465 funds that have names that would be not covered by the proposed rule amendments, or 25% of funds covered by the rule amendments.
\11\ This estimate is based on the estimated wage rate of $565, for 1 hour of outside legal services. The Commission's estimate of the relevant wage
  rates for external time costs, such as outside legal services, takes into account staff experience, a variety of sources including general information
  websites, and adjustments for inflation.
\12\ The Commission's estimates of the internal annual time burdens associated with the recordkeeping requirement under the final rules have been
  increased by 50% from the proposal to account for records that may not be easily automatable. This estimate reflects that funds will be required under
  the final amendments to reassess the characteristics of investments in the fund's 80% basket on a quarterly--as opposed to continual--basis.
  Therefore, while we recognize that some records may not be able to be automated, as commenters discussed, we are not increasing the proposed estimates
  to the degree that commenters suggested would be appropriate in light of the final rule's comparatively less-burdensome approach to reassessing
  investments in the fund's 80% basket.

C. Prospectus Disclosure

    We are adopting amendments to funds' registration forms--
specifically, Form N-1A, Form N-2, Form N-8B-2, and Form S-6--that will
require each fund that is required to adopt and implement an 80%
investment policy to include disclosure in its prospectus that defines
the terms used in its name, including the specific criteria the fund
uses to select the investments that the term describes, if any. These
amendments are designed to help investors better understand how a
fund's investment strategy corresponds with the investment focus that
the fund's name suggests as well as to provide additional information
about how the fund's management seeks to achieve the fund's objective.
While this is not currently required in a fund's prospectus, we
understand that including similar disclosure is currently common
industry practice, and believe that that the impact that the final
amendments will have on funds subject to the names rule will generally
be minor. Therefore, the PRA estimates for the final prospectus
disclosure amendments likely overestimate the costs for those funds
whose disclosure is currently in line with the disclosure the
amendments would require.
    The final amendments to Form N-1A, Form N-2, Form N-8B-2, and Form
S-6 all contain collection of information requirements. Compliance with
the disclosure requirements of each form is mandatory. Responses to
these disclosure requirements will not be kept confidential.
    The Commission received one comment stating that the costs of
prospectus disclosure were underestimated.\614\ We have adjusted the
proposal's estimated annual burden hours and total time costs to
reflect updated wage rates, and in light of developments in our
analysis with respect to estimating the burdens associated with initial
disclosure-related burdens.
---------------------------------------------------------------------------

    \614\ See supra footnote 565.
---------------------------------------------------------------------------

    The table below summarizes our PRA initial and ongoing annual
burden estimates associated with the amendments to Form N-1A, Form N-2,
Form N-8B-2, and Form S-6.
1. Form N-1A

                                                            Table 2--Form N-1A PRA Estimates
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                    Initial                                                                                Annual external  cost
                                      hours        Annual hours \1\           Wage rate \2\         Internal time costs                 burden
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Currently Aproved Burdens
--------------------------------------------------------------------------------------------------------------------------------------------------------
Preparing and Filing Reports on     .......  278........................  $284 (estimate of     $78,952....................  $21,849.
 Form N-1A Generally.                                                      wage rate in most
                                                                           recently approved
                                                                           supporting
                                                                           statement).
Number of Responses...............  .......  6,002 \3\..................  ....................  6,002......................  6,002.
Current Burden Requirement........  .......  1,672,077 hours............  ....................  $474,392,078...............  $132,940,008.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                  Propoproposed Burdens
--------------------------------------------------------------------------------------------------------------------------------------------------------
Proposed New Names Rule Disclosure        7  10 hours...................  $356 (1:1 blend of    $3,560.....................  $992.\6\
Number of funds...................  .......  x 9,731 funds \4\..........   attorney and senior  x 9,731 funds..............  x 9,731 funds.
                                                                           programmer).
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                  Total Proposed Estimated Burdens Including Amendments
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total New Annual Burden...........  .......  97,310 hours...............  ....................  $34,643,250................  $9,653,152.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 Final Estimated Burdens
--------------------------------------------------------------------------------------------------------------------------------------------------------
New Names Rule Disclosure.........   \5\ 15  12 hours...................  $406 (1:1 blend of    $4,872.....................  $1,130.\6\
Number of funds...................           x 9,593 funds \7\..........   attorney and senior  x 9,593 funds..............  x 9,593 funds.
                                                                           programmer).
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                   Total Final Estimated Burdens Including Amendments
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total New Annual Burden...........  .......  115,116 hours..............  ....................  $46,737,096................  $10,840,090.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes:
\1\ Includes initial burden estimates annualized over a 3-year period.
\2\ The estimated wage figures are based on published rates for the professionals described in this chart, modified to account for an 1800-hour work-
  year and inflation. The estimates for the proposed and final burdens were multiplied by 5.35 to account for bonuses, firm size, employee benefits, and
  overhead. See Securities Industry and Financial Markets Association's Report on Management & Professional Earnings in the Securities Industry 2013.
\3\ The currently-approved burden was based on the Commission's estimate that included all open-end funds, including ETFs, then registered on Form N-1A.
\4\ The currently-approved PRA burden for rule 35d-1 was based on the Commission's estimate that 83% of funds were covered by rule 35d-1. This estimate
  assumed that 75% of funds would be covered by our proposed rule amendments. The prior PRA burden was based on an estimate using a different analytical
  approach than we are now employing. The Commission estimated at proposal that 62% of funds were currently subject to rule 35d-1, and that the proposed
  rule amendments would increase this estimate to 75% of funds. The Commission estimated, across approximately 12,975 open-end funds including ETFs
  registered with the Commission, that there are approximately 9,731 open-end funds that have names that would have been covered by the proposed rule
  amendments, or 75% of open-end funds covered by the rule amendments (10,223 mutual funds (other than money market funds) + 2,320 non-UIT ETFs + 432
  money market funds = 12,975 open end funds x 75% = 9,731 open-end funds).

\5\ The estimated initial burden has been increased based on developments in our analysis with respect to estimating the burdens associated with initial
  disclosure-related burdens. This burden has been increased to reflect internal review processes that we understand are conventional when updating
  prospectus disclosures to reflect a new disclosure requirement, as well as the time that we understand, based on staff experience with the disclosure
  review process, drafting disclosure in response to new disclosure requirements typically takes.
\6\ The estimated burdens at proposal were based on the estimated wage rate of $496/hour, and at adoption are based on the estimated wage rate of $565/
  hour, for 2 hours, for outside legal services. The Commission's estimates of the relevant wage rate for external time costs, such as outside legal
  services, take into account staff experience, a variety of sources including general information websites, and adjustments for inflation.
\7\ Based on our current analysis, we estimate that 60% of funds are currently subject to rule 35d-1, and that the final amendments will increase this
  estimate to 76% of funds. The Commission estimates, across approximately 12,623 open-end funds including ETFs registered with the Commission, that
  there are approximately 9,467 open-end funds that have names that will be covered by the final amendments (9,533 mutual funds (other than money market
  funds) + 2,735 non-UIT ETFs + 355 money market funds = 12,623 x 76% = 9,593 open-end funds).

2. Form N-2

                                                             Table 3--Form N-2 PRA Estimates
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                    Initial                                                                                Annual external cost
                                      hours        Annual hours \1\            Wage rate \2\           Internal time costs               burden
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Currently Aproved Burdens
--------------------------------------------------------------------------------------------------------------------------------------------------------
Preparing and Filing Reports on     .......  2,426.......................  $400 (estimate of      $970,533....................  $160,523.
 Form N-2 Generally.                                                        wage rate in most
                                                                            recently approved
                                                                            supporting
                                                                            statement).
Number of Responses...............  .......  298.........................  .....................  298.........................  298.
Current Burden Requirement........  .......  722,948 hours...............  .....................  $289,218,834................  $47,835,854.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                    Proposed Burdens
--------------------------------------------------------------------------------------------------------------------------------------------------------
Proposed New Names Rule Disclosure        7  10 hours....................  $356 (1:1 blend of     $3,560......................  $992.\5\
Number of Funds...................  .......  x 626 funds \3\.............   attorney and senior   x 626 funds.................  x 626.
                                                                            programmer).
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                  Total Proposed Estimated Burdens Including Amendments
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total New Annual Burden...........  .......  6,260 hours.................  .....................  $2,228,560..................  $620,992.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 Final Estimated Burdens
--------------------------------------------------------------------------------------------------------------------------------------------------------
New Names Rule Disclosure.........   \4\ 15  12 hours....................  $406 (1:1 blend of     $4,872......................  $1,130.\5\
Number of Funds...................  .......  x 663 funds \6\.............   attorney and senior   x 663 funds.................  x 663.
                                                                            programmer).
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                   Total Final Estimated Burdens Including Amendments
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total New Annual Burden...........  .......  7,956 hours.................  .....................  $3,230,136..................  $749,190.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes:
\1\ Includes initial burden estimates annualized over a 3-year period.
\2\ The estimated wage figures are based on published rates for the professionals described in this chart, modified to account for an 1800-hour work-
  year and inflation. The estimates for the proposed and final burdens were multiplied by 5.35 to account for bonuses, firm size, employee benefits, and
  overhead. See Securities Industry and Financial Markets Association's Report on Management & Professional Earnings in the Securities Industry 2013.
\3\ The currently-approved PRA burden for rule 35d-1 was based on the Commission's estimate that 83% of funds were covered by rule 35d-1. We now
  estimate that 75% of funds would be covered by our proposed rule amendments. The prior PRA burden was based on an estimate using a different
  analytical approach than we are now employing. The Commission estimated that 62% of funds were currently subject to rule 35d-1, and that the proposed
  rule amendments would increase this estimate to 75% of funds. The Commission estimated, across approximately 835 closed-end funds registered with the
  Commission, that there were approximately 626 closed-end funds that had names that would be covered by the proposed rule amendments, or 75% of closed-
  end funds covered by the rule amendments (736 registered closed-end funds +99 BDCs = 835 Form N-2 registrants x 75% = 626 Form N-2 registrants).
\4\ The estimated initial burden has been increased based on developments in our analysis with respect to estimating the burdens associated with initial
  disclosure-related burdens. This burden has been increased to reflect internal review processes that we understand are conventional when updating
  prospectus disclosures to reflect a new disclosure requirement, as well as the time that we understand, based on staff experience with the disclosure
  review process, drafting disclosure in response to new disclosure requirements typically takes.
\5\ The estimated burdens at proposal were based on the estimated wage rate of $496/hour, and at adoption are based on the estimated wage rate of $565/
  hour, for 2 hours, for outside legal services. The Commission's estimates of the relevant wage rate for external time costs, such as outside legal
  services, take into account staff experience, a variety of sources including general information websites, and adjustments for inflation.
\6\ Based on our current analysis, we estimate that 60% of funds are currently subject to rule 35d-1, and that the final amendments will increase this
  estimate to 76% of funds. The Commission estimates, across approximately 873 closed-end funds registered with the Commission, that approximately 663
  closed-end funds have names that will be covered by the final rule, or 76% of closed-end funds (748 registered closed-end funds + 125 BDCs = 873 Form
  N-2 registrants x 76% = 663 Form N-2 registrants).

3. Form N-8B-2

                                                           Table 4--Form N-8B-2 PRA Estimates
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Cost of internal     Annual cost burden per
                                                                Annual hours \1\        Wage rate \2\      burden per portfolio          portfolio
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Currently Aproved Burdens
--------------------------------------------------------------------------------------------------------------------------------------------------------
Preparing and Filing Reports on    UITs...................  10 hours...............  $351 (estimate of    $3,510................  $10,000.
 Form N-8B-2 Generally.                                                               wage rate in most
                                                                                recently approved
                                                                                supporting
                                                                                statement).
                                   UIT ETFs...............  18 hours...............  $351 (estimate of    $6,318................  $0.
                                                                                wage rate in most
                                                                                recently approved
                                                                                supporting
                                                                                statement).
Number of Responses..............  .......................  1 \3\..................  ...................  1.....................  1.
Current Burden Requirement.......  .......................  28 hours...............  ...................  $9,828................  $10,000.
--------------------------------------------------------------------------------------------------------------------------------------------------------

                                                                    Proposed Burdens
--------------------------------------------------------------------------------------------------------------------------------------------------------
Proposed New Names Rule            7......................  10 hours...............  $356 (1:1 blend of   $3,560................  $992.\6\
 Disclosure.                       .......................  x 1 UIT \4\............   compliance          x 1 UIT...............  x 1 UIT.
Number of Responses..............                                                     attorney and
                                                                                senior programmer).
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                      Total Estimated Burdens Including Amendments
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total New Annual Burden..........  .......................  10 hours...............  ...................  $3,560................  $992.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 Final Estimated Burdens
--------------------------------------------------------------------------------------------------------------------------------------------------------
New Names Rule Disclosure........  15 \5\.................  12 hours...............  $406 (1:1 blend of   $4,872................  $1,130.\6\
Number of Responses..............  .......................  x 1 UIT \4\............   compliance          x 1 UIT...............  x 1 UIT.
                                                                                attorney and
                                                                                senior programmer).
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                   Total Final Estimated Burdens Including Amendments
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total New Annual Burden..........  .......................  12 hours...............  ...................  $4,872................  $1,130.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes:
\1\ Includes initial burden estimates annualized over a 3-year period.
\2\ The estimated wage figures are based on published rates for the professionals described in this chart, modified to account for an 1800-hour work-
  year and inflation. The estimates for the proposed and final burdens were multiplied by 5.35 to account for bonuses, firm size, employee benefits, and
  overhead. See Securities Industry and Financial Markets Association's Report on Management & Professional Earnings in the Securities Industry 2013.
\3\ Based on Commission records, in 2016, 2017, 2018, and 2019, during that four-year period, the Commission received 1 filing, submitted in 2019, on
  Form N-8B-2. The cumulative 4-year average is, therefore, 0.25 filings per year.
\4\ The Commission's proposed estimate was 1 annual filing and we continue to assume 1 filing annually.
\5\ The estimated initial burden has been increased based on developments in our analysis with respect to estimating the burdens associated with initial
  disclosure-related burdens. This burden has been increased to reflect internal review processes that we understand are conventional when updating
  prospectus disclosures to reflect a new disclosure requirement, as well as the time that we understand, based on staff experience with the disclosure
  review process, drafting disclosure in response to new disclosure requirements typically takes.
\6\ The estimated burdens at proposal were based on the estimated wage rate of $496/hour, and at adoption are based on the estimated wage rate of $565/
  hour, for 2 hours, for outside legal services. The Commission's estimates of the relevant wage rate for external time costs, such as outside legal
  services, take into account staff experience, a variety of sources including general information websites, and adjustments for inflation.

4. Form S-6

                                                             Table 5--Form S-6 PRA Estimates
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                    Initial
                                      hours        Annual hours \1\           Wage rate \2\            Internal costs           Annual external costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Currently Aproved Burdens
--------------------------------------------------------------------------------------------------------------------------------------------------------
Draft and Update Disclosures on          24  18 hours...................  $356 (1:1 blend of    $6,408.....................  $27,265.
 Form S-6 \3\.                                                             compliance attorney
                                                                           and senior
                                                                           programmer).
Number of Responses...............  .......  2,498......................  ....................  2,498......................  2,498.
Current Burden Requirement........  .......  107,359....................  ....................  $16,007,184................  $68,107,970.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                    Proposed Burdens
--------------------------------------------------------------------------------------------------------------------------------------------------------
Proposed New Names Rule Disclosure        7  10 hours...................  $356 (1:1 blend of    $3,560.....................  $992.\6\
                                                                           compliance attorney
                                                                           and senior
                                                                           programmer).
Number of Responses...............  .......  785 filings................  ....................  x 785 filings \4\..........  x 785 filings
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                  Total Proposed Estimated Burdens Including Amendments
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total New Annual Burden...........  .......  7,850 hours................  ....................  $2,794,600.................  $778,720.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 Final Estimated Burdens
--------------------------------------------------------------------------------------------------------------------------------------------------------
New Names Rule Disclosure.........   \5\ 15  12 hours...................  $406 (1:1 blend of    $4,872.....................  $1,130.\6\
                                                                           compliance attorney
                                                                           and senior
                                                                           programmer).
Number of Responses...............  .......  x 764 filings \7\..........  ....................  x 764 filings..............  764 filings.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                   Total Final Estimated Burdens Including Amendments
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total New Annual Burden...........  .......  9,168 hours................  ....................  $3,722,208.................  $863,320.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes:
\1\ Includes initial burden estimates annualized over a 3-year period.
\2\ The estimated wage figures are based on published rates for the professionals described in this chart, modified to account for an 1800-hour work-
  year and inflation. The estimates for the proposed and final burdens were multiplied by 5.35 to account for bonuses, firm size, employee benefits, and
  overhead. See Securities Industry and Financial Markets Association's Report on Management & Professional Earnings in the Securities Industry 2013.
\3\ Form S-6 incorporates the disclosure requirements of Form N-8B-2 for UITs on an ongoing basis. Because Form S-6 incorporates the requirements of
  Form N-8B-2, the amendments would indirectly affect these entities. UITs that have made their initial deposit of securities prior to the effective
  date of any final rule would be required to update their disclosure on Form S-6 to comply with the amended requirements of Form N-8B-2. As discussed
  above, UITs formed after the adoption of any final rules would be required to comply with the proposed disclosure requirements upon formation when
  those UITs file Form N-8B-2 with the Commission.

\4\ The currently-approved PRA burden for rule 35d-1 was based on the Commission's estimate that 83% of funds were covered by rule 35d-1. The Commission
  estimated that 75% of funds would be covered by our proposed rule amendments, based on this proposal's economic analysis above. The prior PRA burden
  was based on an estimate using a different analytical approach than we are now employing. The Commission estimated that 62% of funds are currently
  subject to rule 35d-1 and that our proposed rule amendments would increase this estimate to 75% of funds. The Commission estimated 49 non-separate
  account and non-ETF UITs registered with the Commission. However, the Commission based its estimate on the belief that using the number of filings
  instead of registrants would form a more accurate estimate of annual disclosure burdens. The Commission estimated 1,047 filings based on the average
  number of filings made on Form S-6 from 2018 to 2020. The Commission therefore estimated that there would be approximately 785 filings for funds that
  have names that would be covered by the proposed rule amendments, or 75% of the filings for UITs covered by the rule amendments (1,047 filings x 75% =
  785 filings).
\5\ The estimated initial burden has been increased based on developments in our analysis with respect to estimating the burdens associated with initial
  disclosure-related burdens. This burden has been increased to reflect internal review processes that we understand are conventional when updating
  prospectus disclosures to reflect a new disclosure requirement, as well as the time that we understand, based on staff experience with the disclosure
  review process, drafting disclosure in response to new disclosure requirements typically takes.
\6\ The estimated burdens at proposal were based on the estimated wage rate of $496/hour, and at adoption are based on the estimated wage rate of $565/
  hour, for 2 hours, for outside legal services. The Commission's estimates of the relevant wage rate for external time costs, such as outside legal
  services, take into account staff experience, a variety of sources including general information websites, and adjustments for inflation.
\7\ Based on our current analysis, we estimate that 60% of funds are currently subject to rule 35d-1, and that the final amendments will increase this
  estimate to 76% of funds. The Commission estimates 45 non-separate account and non-ETF UITs registered with the Commission. However, consistent with
  the Commission's methodology at proposal, we believe that using the number of filings instead of the number of registrants will form a more accurate
  estimate of annual disclosure burdens. The Commission estimates 1,005 filings based on the average number of filings made on Form S-6 from 2020 to
  2022. The Commission therefore estimates that there will be approximately 764 filings for funds that have names that will be covered by the final
  amendments, or 76% of the filings for UITs covered by the rule amendments (1,005 filings x 76% = 764 filings).

D. Form N-PORT Reporting Requirements

    We are adopting amendments to Form N-PORT to include new reporting
items for N-PORT funds regarding the 80% investment policy that such a
fund adopts in compliance with the names rule. As proposed, the final
amendments require N-PORT funds that are required to adopt an 80%
investment policy to report on Form N-PORT: (1) whether each investment
in the fund's portfolio is in the fund's 80% basket; and (2) the value
of the fund's 80% basket, as a percentage of the value of the fund's
assets.
    The final amendments contain some modifications from the
proposal.\615\ First, the final Form N-PORT amendments modify the
proposed reporting approach by requiring reported information for the
third month of each calendar quarter, instead of for every month. This
modified reporting frame corresponds with the period for review that
will otherwise be mandated by the final amendments. Secondly, the final
amendments add a new reporting item, in which funds will be required to
report the definitions of terms used in a fund's name. Lastly, we are
not adopting the proposed requirement that funds report the number of
days that that the value of the fund's 80% basket fell below 80% of the
value of the fund's total assets during the reporting period.
---------------------------------------------------------------------------

    \615\ See supra section II.E.
---------------------------------------------------------------------------

    Form N-PORT, including the final amendments, contains collection of
information requirements. Compliance with the requirements of the form
is mandatory. Responses to these reporting requirements will be kept
confidential, subject to the provisions of applicable law, for reports
filed with respect to the first two months of each quarter. Responses
to the new Form N-PORT reporting requirements for the third month of
the quarter will not be kept confidential, but made public sixty days
after the quarter end.
    The Commission did not receive public comment regarding the PRA
estimates for the amendments to Form N-PORT in the proposing release,
but it did receive comments on the overall costs and burdens associated
with this aspect of the proposal. Some commenters stated that the costs
and operational burdens of the proposed requirement for N-PORT funds
subject to the 80% investment policy requirement to indicate whether
each of its portfolio investments is included in the fund's 80% basket
would be significant.\616\ Commenters specifically expressed concern
about the costs and burden of reporting this information for each
investment on a monthly basis.\617\ Some commenters also stated that
the proposed new reporting item would require the build-out of new
systems, for daily testing and validation of names rule compliance
information, and for mapping this information over for reporting on
Form N-PORT.\618\ Commenters also stated that funds may need to hire
third-party vendors for supplemental and specially-tailored data on
their portfolio investments, in order to comply with the proposed new
reporting requirements.\619\ With respect to the proposed requirement
that a fund report the number of days that the value of the fund's 80%
basket fell below 80% of the value of the fund's total assets during
the reporting period, commenters stated that monitoring individual
securities on a daily basis for name rule compliance would be
operationally onerous.\620\
---------------------------------------------------------------------------

    \616\ See, e.g., MFS Comment Letter; J.P. Morgan Asset
Management Comment Letter; T. Rowe Comment Letter.
    \617\ See MFS Comment Letter.
    \618\ See, e.g., T. Rowe Comment Letter; Invesco Comment Letter;
Seward & Kissel Comment Letter.
    \619\ See, e.g., ICI Comment Letter; SIFMA AMG Comment Letter.
    \620\ See, e.g., J.P. Morgan Asset Management Comment Letter.
---------------------------------------------------------------------------

    We have adjusted the proposal's estimated annual burden hours and
total time costs to reflect these comments as well as the changes from
the proposed requirements. We recognize that complying with the new
reporting requirements will entail compliance activities, and
potentially systems and operational modifications as well as the use of
third-party service providers, and that reporting will be required for
each of a fund's portfolio holdings. As a result, we have adjusted the
estimated initial and annual hours associated with the requirement for
funds to report whether each of its investments is part of its 80%
basket. On the other hand, we expect that the modified reporting time
frame will reduce the burdens associated with the final amendments'
collection of information requirements. The burdens associated with the
proposal will also be reduced because we are not adopting the proposed
requirement to report the number of days that the value of the 80%
basket fell below 80% of the value of the fund's total assets. We do
not anticipate the new reporting item under the final amendments
requiring funds to include definitions of terms used in a fund's name
will entail significant costs because this reporting requirement
leverages the same disclosure that funds will also, under the final
amendments, be required to include in their prospectuses. Moreover, any
costs associated with this requirement should be recurring costs only
to the extent a fund determines to change its name or its definition of
the terms used in its name.
    The table below summarizes the estimates for internal burdens
associated with the new requirements under the final amendments to Form
N-PORT.

                                                           Table 6--Form N-PORT PRA Estimates
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                    Initial
                                      hours        Annual hours \1\           Wage rate \2\         Internal time costs      Annual external cost burden
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Currently Aproved Burdens
--------------------------------------------------------------------------------------------------------------------------------------------------------
Preparing and Filing Reports on     .......  44,500.....................  $344.19 (estimate of  $15,316,455................  $4,684,296.
 Form N-PORT Generally.                                                    wage rate in most
                                                                           recently approved
                                                                           supporting
                                                                           statement).
Number of Responses...............  .......  2,696......................  ....................  2,696......................  2,696.
Current Burden Requirement........  .......  1,839,903 hours............  ....................  $654,658, 288..............  $113,858,133.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                    Proposed Burdens
--------------------------------------------------------------------------------------------------------------------------------------------------------
New Reporting About 80% Investment        4  9 hours....................  $356 (blend of        $3,204.....................  $992.\4\
 Policy \3\.                                                               compliance attorney
                                                                           and senior
                                                                           programmer).
Number of Funds...................  .......  x 9,996 funds \3\..........  ....................  x 9,996 funds..............  x 9,996 funds.
Total New Burden for New Reporting  .......  89,964 hours...............  ....................  $32,027,184................  $9,916,032.
 About 80% Investment Policy (I).
Investments to be Included in a           4  10 hours...................  $356 (rate for        $3,560.....................  $992.\6\
 Fund's 80% Basket \4\.             .......  x 9,996 funds \4\..........   compliance attorney  x 9,996 funds..............  x 9,996 funds.
Number of Funds...................                                         and senior
                                                                           programmer).
Total New Burden for Investments    .......  99,960 hours...............  ....................  $35,585,760................  $9,916,032.
 to be Included in a Fund's 80%
 Basket (II).
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                  Total Proposed Estimated Burdens Including Amendments
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total New Annual Burden (I + II)..  .......  189,924 hours..............  ....................  $67,612,944................  $19,832,064.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 Final Estimated Burdens
--------------------------------------------------------------------------------------------------------------------------------------------------------
New Reporting About 80% Investment        4  2 hours....................  $406 (blend of        $812.......................  $1,130.\4\
 Policy \3\.                                                               compliance attorney
                                                                           and senior
                                                                           programmer).
Number of Funds...................  .......  x 9,926 funds \3\..........  ....................  x 9,926 funds..............  x 9,926 funds.
Total New Burden for New Reporting  .......  19,852 hours...............  ....................  $8,059,912.................  $11,216,380.
 About 80% Investment Policy (I).
Investments to be Included in a          15  14 hours...................  $406 (rate for        $5,684.....................  $1,130.\6\
 Fund's 80% Basket\4\.                                                     compliance attorney
                                                                           and senior
                                                                           programmer).
Number of Funds...................  .......  x 9,926 funds \6\..........  x 9,926 funds.......  x 9,926 funds..............
Total New Burden for Investments    .......  138,964 hours..............  ....................  $56,419,384................  $11,216,380.
 to be Included in a Fund's 80%
 Basket (II).
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                   Total Final Estimated Burdens Including Amendments
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total New Annual Burden (I + II)..  .......  158,816 hours..............  ....................  $64,479,296................  $22,432,760.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes:
\1\ Includes initial burden estimates annualized over a 3-year period.
\2\ The estimated wage figures are based on published rates for the professionals described in this chart, modified to account for an 1800-hour work-
  year and inflation. The estimates for the proposed and final burdens were multiplied by 5.35 to account for bonuses, firm size, employee benefits, and
  overhead. See Securities Industry and Financial Markets Association's Report on Management & Professional Earnings in the Securities Industry 2013.
\3\ This burden corresponds to the requirement for a fund to report the value of its 80% basket as a percentage of the value of its assets. The proposed
  estimate also reflects the burden associated with the requirement for funds to report the number of days that the value of the 80% basket fell below
  80% of the value of the fund's total assets. Because we are not adopting this requirement under the final rule, the final annual hours burden estimate
  has been reduced by 33% compared to the proposed estimate. The final annual hours estimate has also been reduced by a factor of 3 to reflect the
  modified reporting timeframe under the final amendments (i.e., quarterly as opposed to monthly). Accordingly, the adjustment from proposed annual
  hours burden estimate to the final estimate reflects the following calculation: 9 hours x (\2/3\) = 6 hours/3 = 2 hours.
\4\ This burden corresponds to the requirement for funds that are required to adopt 80% policies to indicate, with respect to each portfolio investment,
  whether the investment is included in the fund's calculation of assets in the fund's 80% basket; and for the final estimate (but not the proposed
  estimate), the requirement for funds to report definitions of the terms used in their names. Our final estimate of the initial hours burden has been
  increased by a factor of 2 compared to the proposed estimate to reflect costs associated with systems and operational modifications that may be
  required for compliance with these requirements. Our final estimate of the annual hours burden also reflects these increased costs compared to the
  proposed estimate; however it has been reduced in order to reflect the modified reporting timeframe under the final amendments (i.e., quarterly as
  opposed to monthly), resulting in an overall estimate for the annual hours burden that is lower that the proposed estimate. Specifically, the
  adjustment from the proposed annual hours burden estimate to the final estimate reflects the following calculation: 10 hours x 2 = 20 hours/3 = 6.67
  (rounded to 7 hours).
\3\ The currently-approved PRA burden for rule 35d-1 was based on the Commission's estimate that 83% of funds were covered by rule 35d-1. The Commission
  estimated that 75% of funds would be covered by our proposed rule amendments. The prior PRA burden was based on an estimate using a different
  analytical approach than we are now employing. The Commission estimated that 62% of funds are currently subject to rule 35d-1 and that the proposed
  rule amendments would increase this estimate to 75% of funds. The Commission estimated, across approximately 14,001 open-end and closed-end funds
  registered with the Commission, not including money market funds, that there would have been approximately 10,394 funds that have names that would be
  covered by the proposed rule amendments, or 75% of funds covered by the rule amendments (10,223 mutual funds (other than money market funds) + 2,320
  non-UIT ETFs = 12,543 open end funds + 736 registered closed-end funds + 49 UITs = 13,328 funds x 75% = 9,996 funds).
\4\ See id.
\5\ The estimated burdens at proposal were based on the estimated wage rate of $496/hour, and at adoption are based on the estimated wage rate of $565/
  hour, for 2 hours, for outside legal services. The Commission's estimates of the relevant wage rate for external time costs, such as outside legal
  services, take into account staff experience, a variety of sources including general information websites, and adjustments for inflation.
\6\ Based on our current analysis, we estimate that that 60% of funds are currently subject to rule 35d-1, and that the final amendments will increase
  this estimate to 76% of funds. The Commission estimates, across approximately 13,061 open-end and closed-end funds registered with the Commission, not
  including money market funds, that there will be approximately 10,318 funds that have names that will be covered by the proposed rule amendments, or
  76% of the funds covered by the rule amendments (9,533 mutual funds (other than money market funds) + 2,735 non-UIT ETFs + = 12,268 open end funds +
  registered closed-end funds + 45 UITs = 13,061 funds x 76% = 10,318 funds).

E. Investment Company Interactive Data

    We are adopting amendments to Form N-2, Form N-8B-2, and Form S-6,
as well as rules 485 and 497 under the Securities Act and rule 11 and
405 of Regulation S-T, to require certain new structured data reporting
requirements for funds.\621\ The final amendments

include new structured data requirements that will require funds to tag
the information in their registration statements about their fund name
using Inline XBRL.\622\ The purpose of these information collections is
to make information regarding fund names easier for investors to
analyze and to help automate regulatory filings and business
information processing, and to improve consistency across all types of
funds with respect to the accessibility of fund name information they
provide to the market.
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    \621\ The Investment Company Interactive Data collection of
information do not impose any separate burden aside from that
described in our discussion of the burden estimates for this
collection of information. The amendments we are adopting to rules
485 and 497 under the Securities Act, as well as rules 11 and 405 to
Regulation S-T, are conforming amendments that have no associated
PRA burden. While the new names-related information that open-end
funds will be required to disclose under our final amendments to
Form N-1A also will be required to be tagged using Inline XBRL, the
final amendments to Form N-1A will create no additional PRA burden.
The final rule amends Item 4 of Form N-1A; Form N-1A registrants are
already required to submit the information that they provide in
response to Item 4 using Inline XBRL. See supra footnote 115.
Therefore, the burdens associated with tagging Item 4 disclosure are
already accounted for under the current Investment Company
Interactive Data collection of information.
    \622\ See supra section II.B; see also instruction to Item
4(a)(1) of Form N-1A; instruction to Item 9(b)(1) of Form N-1A;
instruction to Item 8(2) of Form N-2; instruction to Item 11 of Form
N-8B-2.
---------------------------------------------------------------------------

    Funds filing registration statements on Form N-2 already submit
certain information using Inline XBRL format. Based on filing data as
of December 2022, we estimate that 663 funds filing registration
statements on these forms would be subject to the proposed interactive
data amendments. UITs filing initial registration statements on Form N-
8B-2 and post-effective amendments on Form S-6 are not currently
subject to requirements to submit information in structured form.
Because these UITs have not previously been subject to Inline XBRL
requirements, we assume that these funds will experience additional
burdens related to one-time costs associated with becoming familiarized
with Inline XBRL reporting. These costs will include, for example, the
acquisition of new software or the services of consultants, and the
training of staff. Based on filing data as of December 30, 2020, we
estimate that 796 filings would be subject to these proposed
amendments. In our most recent Paperwork Reduction Act submission for
Investment Company Interactive Data, we estimated a total aggregate
annual hour burden of 323,724 hours, and a total aggregate annual
external cost burden of $16,041,450. Compliance with the interactive
data requirements is mandatory, and the responses will not be kept
confidential.
    The Commission did not receive public comment regarding the PRA
estimates for the investment company interactive data requirements. We
have adjusted the proposal's estimated annual burden hours and total
time costs, however, to reflect updated wage rates.
    The table below summarizes our PRA initial and ongoing annual
burden estimates associated with the proposed amendments to Form N-1A,
Form N-2, Form N-8B-2, and Form S-6, as well as Regulation S-T.

                                               Table 7--Investment Company Interactive Data PRA Estimates
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                  Internal initial     Internal annual burden                                                     Annual external cost
                                    burden hours             hours \1\             Wage rate \2\       Internal time costs               burden
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                    Proposed Burdens
--------------------------------------------------------------------------------------------------------------------------------------------------------
Names rule information for                        1  1 hour \4\...............  $356 (blended rate  $356.....................  $50.\5\
 current XBRL filers \3\.                                                        for compliance
                                                                                attorney and
                                                                                senior
                                                                                programmer).
Number of funds................  ..................  x 626 funds \6\..........  ..................  x 626 funds..............  x 626 funds.
Names rule information for new                    9  4 hours \8\..............  $356 (blended rate  $1,424...................  $900.\9\
 XBRL filers \7\.                                                                for compliance
                                                                                attorney and
                                                                                senior
                                                                                programmer).
Number of filings..............  ..................  x 785 filings \10\.......  ..................  x 785 filings............  x 785 filings.
Total new aggregate annual       ..................  3,766 hours \11\.........  ..................  $1,340,696 \12\..........  $737,800.\13\
 burden.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                  Total Proposed Estimated Burdens Including Amendments
--------------------------------------------------------------------------------------------------------------------------------------------------------
Current aggregate annual burden  ..................  + 252,602 hours..........  ..................  .........................  + $15,350,750.
 estimates.
Revised aggregate annual burden  ..................  256,368 hours............  ..................  .........................  $16,088,550.
 estimates.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 Final Estimated Burdens
--------------------------------------------------------------------------------------------------------------------------------------------------------
Names rule information for                        1  1 hour \4\...............  $406 (blended rate  $406.....................  $50.\5\
 current XBRL filers \3\.                                                        for compliance
                                                                                attorney and
                                                                                senior
                                                                                programmer).
Number of funds................  ..................  x 663 funds \6\..........  ..................  x 663 funds..............  x 663 funds.
Names rule information for new                    9  4 hours \8\..............  $406 (blended rate  $1,625...................  $900.\9\
 XBRL filers \7\.                                                                for compliance
                                                                                attorney and
                                                                                senior
                                                                                programmer).
Number of filings..............  ..................  x 796 filings \14\.......  ..................  x 796 filings............  x 796 filings.
Total new aggregate annual       ..................  3,847 hours \11\.........  ..................  $1,562,678 \12\..........  $749,550.\13\
 burden.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                   Total Final Estimated Burdens Including Amendments
--------------------------------------------------------------------------------------------------------------------------------------------------------
Current aggregate annual burden  ..................  + 323,724 hours..........  ..................  .........................  + $16,041,450.
 estimates.
Revised aggregate annual burden  ..................  324,571 hours............  ..................  .........................  $16,791,000
 estimates.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes:
\1\ Includes initial burden estimates annualized over a 3-year period.
\2\ See supra table 1 regarding estimated wage rates.

\3\ This estimate represents the average burden for a filer on Form N-2 that is currently subject to interactive data requirements.
\4\ This estimate included initial burden estimates annualized over a three-year period, plus 0.67 hour of ongoing annual burden hours. The estimate of
  1 hour was based on the following calculation: ((1 initial hour/3) + 0.67 hour of additional ongoing burden hours) = 1 hour.
\5\ The Commission estimated an incremental external cost for filers on Form N-2, as they already submit certain information using Inline XBRL.
\6\ Based on filing data as of December 30, 2020, the Commission estimated 626 funds, including BDCs, filing on Form N-2. Based on filing data as of
  December 2022, we have adjusted that estimate to 663 funds.
\7\ This estimate represents the average burden for a filer on Form N-8B-2 and Form S-6 that is not currently subject to interactive data requirements.
\8\ Includes initial burden estimates annualized over a three-year period, plus 1 hour of ongoing annual burden hours. The estimate of 10 hours is based
  on the following calculation: ((27 initial hours/3) + 1 hour of additional ongoing burden hours) = 10 hours.
\9\ This estimate assumes an external cost for filers on Form N-8B-2 and Form S-6 of $900 to reflect one-time compliance and initial set-up costs.
  Because these filers have not been previously been subject to Inline XBRL requirements, this estimate reflects that these funds would experience
  additional burdens related to one time-costs associated with becoming familiar with Inline XBRL reporting. These costs would include, for example, the
  acquisition of new software or the services of consultants.
\10\ The Commission estimated 49 non-separate account and non-ETF UITs registered with the Commission. However, the Commission based the proposed
  estimate on the belief that the number of filings instead of registrants would form a more accurate estimate of annual burdens. The Commission
  estimated 1,047 filings based on the average number of filings made on Form S-6 from 2018 to 2020, and therefore estimated that there are
  approximately 785 filings for funds that have names that would have been covered by the proposed rule amendments, or 75% of the filings for UITs
  covered by the rule amendments (1,047 filings x 75% = 785 filings).
\11\ With respect to the proposed estimate, 3,766 hours = (626 funds x 1 hour = 626 hours) + (785 filings x 4 hours = 3,140 hours). With respect to the
  final estimate, 3,847 hours = (663 funds x 1 hours = 663 hours) + (796 filings x 4 hours = 3,184 hours).
\12\ With respect to the proposed estimate, $1,340,696 internal time cost = (626 funds x $356 = $222,856) + (785 filings x $1,424 = $1,117,840). With
  respect to the final estimate, $1,562,678 internal time cost = (663 funds x $406 = $269,178) + (796 filings x $1,625 = $1,293,500).
\13\ With respect to the proposed estimate, $737,800 annual external cost = (626 funds x $50 = $31,300) + (785 filings x $900 = $706,500). With respect
  to the final estimate, $749,550 annual external cost = (663 funds x $50 = $33,150) + (796 filings x $900 = $716,400).
\14\ Based on our current analysis, we estimate that 76% of funds will be subject to rule 35d-1 under the final amendments, and therefore estimate that
  796 filings for funds that have names that will be covered by the final amendments (1,047 filings x 76% = 796 filings).

VI. Final Regulatory Flexibility Analysis

    The Commission has prepared the following Final Regulatory
Flexibility Analysis (``FRFA'') in accordance with section 604 of the
Regulatory Flexibility Act (``RFA'').\623\ It relates to final
amendments to rule 35d-1 and Forms N-1A, N-2, N-8B-2, S-6, and N-PORT,
as well as final conforming amendments to rules 11 and 405 of
Regulation S-T and rules 485 and 497 under the Securities Act
(collectively, ``final amendments'').
---------------------------------------------------------------------------

    \623\ 5 U.S.C. 603(a).
---------------------------------------------------------------------------

A. Need for and Objectives of the Rule and Form Amendments

    Section 35(d) of the Act prohibits a registered investment company
from adopting as part of its name or title any word or words that the
Commission finds are materially deceptive or misleading. Rule 35d-1
addresses certain broad categories of investment company names that are
likely to mislead an investor about a company's investments and risks.
We are adopting final amendments designed to increase investor
protection by improving, and broadening the scope of, the requirement
for certain funds to adopt a policy to invest at least 80% of their
assets in accordance with the investment focus that the fund's name
suggests, updating the rule's notice requirements, and establishing
recordkeeping requirements. The Commission also is adopting enhanced
prospectus disclosure requirements for terminology used in fund names
and additional requirements for funds to report information on Form N-
PORT regarding compliance with the names-related regulatory
requirements. The reasons for, and objectives of, the final amendments
are discussed in more detail in sections I and II above.

B. Significant Issues Raised by Public Comments

    In the Proposing Release, the Commission requested comment on every
aspect of the Initial Regulatory Flexibility Analysis (``IRFA''),
including the number of small entities that would be affected by the
proposed rule and form amendments, the existence or nature of the
potential impact of the proposals on small entities discussed in the
analysis, and how to quantify the impact of the proposed amendments.
The Commission also requested comment on the proposed compliance
burdens and the effect these burdens would have on small entities.
    Although the Commission did not receive comments specifically
addressing the IRFA, one commenter stated that many small or innovative
funds would be ``disproportionately'' burdened by the legal and
compliance costs of the expanded scope of fund names that would be
subject to the proposed amendments.\624\ In addition, the Commission
received comments stating that the proposed requirement that funds use
a derivatives instrument's notional amount to determine the fund's
compliance with its 80% investment policy would create costly technical
and operational challenges for small fund groups.\625\
---------------------------------------------------------------------------

    \624\ See Freeman Capital Management Comment Letter. But see
PIABA Comment Letter (stating that most instances of misleading fund
names involve small and medium funds).
    \625\ See Dechert Comment Letter; ICI Comment Letter; Center for
American Progress Comment Letter.
---------------------------------------------------------------------------

    Smaller funds may incur costs associated with the final amendments
as funds comply with all aspects of the final amendments, including the
specific aspects that commenters discussing small entities
highlighted.\626\ As discussed above, compliance costs associated with
the final amendments, particularly those that expand the current scope
of the names rule, would vary based on a fund's current practices with
respect to adopting policies to invest a particular percentage of fund
assets in investments that have, or whose issuers have, particular
characteristics. With respect to potential costs incurred to comply
with other aspects of the amendments that commenters discussing small
entities identified, we expect that funds would incur costs to review
the final amendments' requirements and modify, as necessary, their
investing practices, policies and procedures, and recordkeeping
practices to comply with these requirements, or may decide to instead
change their names.
---------------------------------------------------------------------------

    \626\ See supra sections IV.D.2 and V for a discussion of costs
associated with the final amendments.
---------------------------------------------------------------------------

C. Small Entities Subject to Rule Amendments

    For purposes of Commission rulemaking in connection with the
Regulatory Flexibility Act, an investment company is a small entity if,
together with other investment companies in the same group of related
investment companies, it has net assets of $50 million or less as of
the end of its most recent fiscal year (``small fund'').\627\
Commission staff estimates that, as of December 2022, approximately 34
registered open-end mutual funds (including one money market fund), 9
registered ETFs, 27 registered closed-end funds, 3 UITs, and

10 BDCs (collectively, 83 funds) are small entities.\628\
---------------------------------------------------------------------------

    \627\ See rule 0-10(a) under the Act [17 CFR 270.0-10(a)].
    \628\ This estimate is derived from an analysis of data obtained
from Morningstar Direct as well as data reported to the Commission
for the period ending June 2022.
---------------------------------------------------------------------------

D. Projected Reporting, Recordkeeping, and Other Compliance
Requirements

    The final amendments include reporting, recordkeeping, and other
compliance requirements. First, the final amendments expand the types
of fund names subject to the names rule's 80% investment policy
requirement, and any fund that has or adopts a newly covered name will
need to adopt an 80% investment policy.\629\ The final amendments also
include other changes to the current names rule, such as permitting a
fund to engage in temporary departures from an 80% investment
requirement for a limited period of time under other than normal
circumstances, which will also necessitate an update to funds' existing
practices regarding names rule compliance. Funds will be required to
review their portfolio investments to determine whether they continue
to be consistent with the fund's 80% investment policy at least
quarterly. The final amendments also specify that a fund's name may be
materially deceptive or misleading under section 35(d) even if the fund
adopts an 80% investment policy and otherwise complies with the rule's
requirement to adopt and implement the policy. The final amendments
further require a fund that is required to adopt an 80% investment
policy to maintain certain records documenting its compliance with the
rule, including, the fund's record of which assets are invested in
accordance with the investment focus that the fund's name suggests (or
consistent with the tax-exempt treatment its name suggests).
---------------------------------------------------------------------------

    \629\ While the final rule amendments will add BDCs to the
definition of ``fund'' under the rule, we do not anticipate that
this addition will have a significant impact on small entities. BDCs
are currently subject to the requirements of section 35(d) pursuant
to section 59 of the Act. We understand that BDCs currently comply
with the names rule because they are subject to the requirements of
section 35(d). See also supra footnote 13.
---------------------------------------------------------------------------

    The final amendments also require disclosure in the fund's
prospectus regarding the definitions of terms used in the fund's name,
including a requirement that funds must tag new information that will
be included using Inline XBRL. Under the final amendments, funds (other
than money market funds and BDCs) that are required to adopt an 80%
investment policy also newly must report certain information on Form N-
PORT regarding names rule matters. This will necessitate that certain
funds either must change their names or adjust their investment
strategies, and thus potentially their portfolio investments, to ensure
compliance. Lastly, the final amendments include exceptions for certain
UITs. We discuss the specifics of these burdens in the Economic
Analysis and Paperwork Reduction Act sections above. These sections
also discuss the professional skills that we believe compliance with
the final amendments will require.
1. 80% Investment Policy Requirements--Scope Expansion and Other
Amendments
    All funds, including small funds, that have names that include
terms suggesting that the fund focuses its investments in investments
that have, or whose issuers have, particular characteristics will be
required to adopt an 80% investment policy under the final
amendments.\630\ Further, in order to comply with this element of the
final amendments, a fund may have to engage in a name change or change
its portfolio investments so that the fund's name reflects its 80%
basket or vice-versa. Funds that have an existing 80% investment policy
will need to change their practices to comply with the names rule to
address other aspects of the final amendments: (1) changes to how the
rule addresses temporary departures from the 80% investment
requirement, (2) changes to address derivatives in calculating
compliance with the 80% investment policy requirement, (3) the plain
English/established industry use requirement, and (4) updates to the
rule's notice requirement. Lastly, a fund that is an unlisted
registered closed-end fund or BDC may be required to amend its existing
80% investment policy so that it is a fundamental policy and, on a
going-forward basis, engage in shareholder votes to change its 80%
investment policy.\631\
---------------------------------------------------------------------------

    \630\ See supra section VI.C for a discussion of the number of
small entities subject to the amendments.
    \631\ As discussed above, under the final amendments such funds
will be permitted to make changes to their 80% policies without this
vote if the fund conducts a tender or repurchase offer in advance of
the change, the fund provides at least 60 days' prior notice of any
change in the policy in advance of that offer, and that offer is not
oversubscribed, and in the event of a tender offer, the fund
purchases shares at their net asset value.
---------------------------------------------------------------------------

    These requirements are designed to help ensure that a fund's
investment activity is consistent with the investment focus its name
communicates and, thus, the investor expectations the name creates.
These requirements will impose burdens on all funds, including those
that are small entities.
    While we expect larger funds or funds that are part of a large fund
complex to incur higher costs related to these requirements in absolute
terms relative to a smaller fund or a fund that is part of a smaller
fund complex, we generally expect a smaller fund to find it more
costly, per dollar managed, to comply with the final requirements
because it will not be able to benefit from a larger fund complex's
economies of scale. Smaller funds may be more likely than larger funds
with significant in-house resources to hire outside assistance in
connection with understanding and assisting in compliance with the
final amendments--for example, retaining outside counsel to analyze the
implications of the final amendments' scope expansion on existing fund
names. And a larger fund complex may be able to develop a process with
in-house or outside counsel or utilize existing systems to make these
changes more efficiently across all of their funds that a smaller fund
with less resources may find too costly. For example, a larger unlisted
BDC or closed-end fund may be able to use existing procedures to
develop a method of soliciting shareholder votes regarding name changes
that smaller unlisted BDCs or closed-end funds do not have.\632\
Notwithstanding the economies of scale experienced by larger versus
smaller funds, we generally do not expect the costs of compliance
associated with the new requirements to be meaningfully different for
smaller versus larger funds. The costs of compliance will vary only
based on fund characteristics tied to their name. That is, whether a
fund would now need to adopt, or change, its 80% investment policy, or
its practices to comply with the names rule, will be as a consequence
of that fund having a name that suggests an investment focus under the
final amendments, not based upon the size of the fund.
---------------------------------------------------------------------------

    \632\ The final amendments' approach that permits unlisted
registered closed-end funds and BDCs to make changes to their 80%
investment policies without a shareholder vote under certain
circumstances could, however, result in fewer costs to smaller
unlisted registered closed-end funds and BDCs, to the extent that
this additional permissible approach to changing their 80%
investment policies is less costly than obtaining a shareholder
vote. See supra sections II.A.4; IV.D.2.
---------------------------------------------------------------------------

2. Effect of Compliance With an 80% Investment Policy
    We are adopting a new provision in the names rule providing that a
fund's name may be materially deceptive or misleading under section
35(d) even if the fund adopts an 80% investment

policy and otherwise complies with the rule's requirement to adopt and
implement the policy. The final provision makes clear that a fund name
may be materially deceptive or misleading even where the fund complies
with its 80% investment policy, for example, potentially where a fund
complies with its 80% investment policy but invests in a way such that
the source of a substantial portion of the fund's risks or returns is
materially different from that which an investor reasonably would
expect based on the fund's name. This new provision is consistent with
prior Commission statements that the 80% investment requirement under
the names rule is not intended to create a safe harbor from liability
under section 35(d) for materially deceptive or misleading fund names.
    This provision applies to all funds subject to the names rule's 80%
investment policy requirement, including those that are small entities.
However, because this provision restates section 35(d), we believe that
it will not result in any additional costs beyond those already
attendant on compliance with the Act itself.
3. Recordkeeping Requirements
    The recordkeeping requirements are designed to help ensure
compliance with the rule's requirements and aid in oversight. A fund
that will be required to adopt an 80% investment policy under the final
amendments will be required to maintain a written record documenting
its compliance under the 80% investment policy provisions of the rule.
Specifically, the written records documenting the fund's compliance
that these funds will be required to maintain include: (1) the fund's
record of which assets are invested in accordance with the investment
focus the fund's name suggests (or, as applicable, consistent with the
tax treatment suggested by a tax-exempt fund's name) and the basis for
including each such asset in the 80% basket; (2) the value of the
fund's 80% basket, as a percentage of the value of the fund's assets;
(3) the reasons for any departures from the 80% investment policy; (4)
the dates that the fund identifies any departures from the 80%
investment policy; and (5) any notice sent to the fund's shareholders
pursuant to the rule. The records under this requirement must be
maintained for at least six years following the creation of each
required record (or, in the case of notices, following the date the
notice was sent), the first two years in an easily accessible place.
    These requirements impose burdens on all funds, including those
that are small entities. We expect that smaller funds--and more
specifically, smaller funds that are not part of a fund complex--may
not have recordkeeping systems that will meet all the elements that
will be required under the final amendments. Also, while we expect
larger funds or funds that are part of a large fund complex to incur
higher costs related to the requirements in absolute terms relative to
a smaller fund or a fund that is part of a smaller fund complex, we
expect a smaller fund to find it more costly, per dollar managed, to
comply with the requirements because it will not be able to benefit
from a larger fund complex's economies of scale.
4. Disclosure and Reporting Requirements
    The requirement for a fund that is subject to the 80% investment
policy requirement to define the terms used in the fund's name,
including the specific criteria the fund uses to select the investments
the term describes, if any, in the fund's prospectus is designed to
help investors better understand how the fund's investment strategies
correspond with the investment focus that the fund's name suggests as
well as to provide additional information about how the fund's
management seeks to achieve the fund's objective. The final amendments
require funds to tag this disclosure in Inline XBRL.
    The final amendments also require funds (other than money market
funds and BDCs) that will be required to adopt an 80% investment policy
to report certain new information on Form N-PORT: (1) the percentage of
the value of the fund's assets that are invested in accordance with the
investment focus that the fund's name suggests (or consistent with the
tax treatment suggested by a taxexempt fund's name); (2) with respect
to each portfolio investment, whether the investment is included in the
fund's calculation of assets in the fund's 80% basket; and (3) the
definitions of the terms used in the fund's name, including the
specific criteria the fund uses to select the investments that the term
describes, if any. These Form N-PORT reporting requirements are
designed to provide investors with information that may allow them to
make better investment choices consistent with their investment
preferences, as well as to increase the effectiveness of the
Commission's oversight of a fund's compliance with the names rule.
    These requirements will impose burdens on all funds, including
those that are small entities. While we expect larger funds or funds
that are part of a large fund complex to incur higher costs related to
these requirements in absolute terms relative to a smaller fund or a
fund that is part of a smaller fund complex, we expect a smaller fund
to find it more costly, per dollar managed, to comply with these
requirements because it would not be able to benefit from a larger fund
complex's economies of scale. Notwithstanding the economies of scale
experienced by larger versus smaller funds, we do not expect the costs
of compliance associated with the new Form N-PORT requirements to be
meaningfully different for smaller versus larger funds. The costs of
compliance vary only based on fund characteristics tied to their name.
For example, a fund whose investments move relatively more frequently
in and out of the fund's 80% basket may incur a higher burden to comply
with the requirement to report whether each portfolio investment is
included in the fund's 80% basket, than a fund whose investments'
inclusion in the 80% basket is relatively more stable. Furthermore,
based on our experience implementing tagging requirements that use the
XBRL, we recognize that some funds that will be affected by the
requirement, particularly filers with no Inline XBRL tagging
experience, likely will incur initial costs to acquire the necessary
expertise and/or software as well as ongoing costs of tagging required
information in Inline XBRL. The incremental effect of any fixed costs,
including ongoing fixed costs, of complying with the Inline XBRL
requirement may be greater for smaller filers. However, we believe that
smaller funds in particular may benefit more from any enhanced exposure
to investors that could result from these requirements. If reporting
the disclosures in structured data language increases the availability
of, or reduces the cost of collecting and analyzing, key information
about funds, smaller funds may benefit from improved coverage by third-
party information providers and data aggregators.
5. Treatment of UITs
    The final rule amendments provide that the 80% investment policy
and recordkeeping requirements will apply to UITs only at the time of
initial deposit. This modification is designed to accommodate the
practical realities that UITs would encounter if required to comply
with the new provisions in the final amendments that require periodic
review and potential rebalancing of a fund's portfolio. As a result,
UITs that have names that are implicated by the final amendments and
whose initial deposit occurs after the compliance date

of the final amendments will need to adopt an appropriate 80%
investment policy, including making such a policy fundamental or
providing notice to investors in the event of a change of the policy,
if appropriate. However, such UITs will not be required to engage in
the monitoring and other requirements associated with the final
amendments' temporary departure requirements nor will they be required
to keep records under the final amendments beyond the initial deposit.
All UITs will be subject to the rule's other requirements under the
final amendments, as applicable, as well as those of the Federal
securities laws generally, including section 35(d) of the Investment
Company Act. This treatment will be available to UITs of all sizes,
including smaller UITs.

E. Agency Action To Minimize Effect on Small Entities

    The Regulatory Flexibility Act directs the Commission to consider
significant alternatives that would accomplish our stated objective,
while minimizing any significant economic impact on small entities. We
considered the following alternatives for small entities in relation to
our proposal: (1) exempting funds that are small entities from the
proposed reporting, recordkeeping, and other compliance requirements,
to account for resources available to small entities; (2) establishing
different reporting, recordkeeping, and other compliance requirements
or frequency, to account for resources available to small entities; (3)
clarifying, consolidating, or simplifying the compliance and reporting
requirements under the proposal for small entities; and (4) using
performance rather than design standards.
    We do not believe that exempting small funds from the provisions of
the final amendments will permit us to achieve our stated objectives.
Only those investment companies that have certain names, such as those
suggesting an investment focus or particular tax treatment, will be
required to comply with most of the aspects of the final amendments.
Further, consistent with the current rule, the 80% investment
requirement in the final amendments allows a fund to maintain up to 20%
of its assets in other investments. A fund seeking maximum flexibility
with respect to its investments will continue to be free to use a name
that does not require the fund to adopt an 80% investment policy.
    We estimate that 82% of funds have investment policies specifying a
minimum percentage of investments consistent with a certain investment
focus and, of these, approximately 67% have an investment policy
requiring at least 80% of fund investments be consistent with a certain
investment focus.\633\ This estimate indicates that some funds,
including some small funds, will not bear the costs of adopting a new
80% investment policy, though such funds will likely need to update
existing policies to account for elements of the final amendments.
However, for small funds that will be more significantly affected by
the final amendments, providing an exemption for them could subject
investors in small funds to a higher degree of risk than investors to
large funds that will be required to comply with the 80% investment
policy and related elements of the final amendments.
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    \633\ See supra footnotes 468 and 469.
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    We also do not believe, as a general matter, that it is appropriate
to subject small funds to different reporting, recordkeeping, and other
compliance requirements or frequency. Similar to the concerns discussed
above, if the final rules were to include different requirements for
small funds, this could raise investor protection concerns for
investors in small funds in that a small fund would not be subject to
requirements addressing materially deceptive and misleading fund names
that are as robust as those requirements on a large fund. Also, this
would result in the Commission and other market participants having
less transparency and insight with respect to those smaller funds' 80%
investment policies and related investments. However, as discussed in
detail above, we do agree that additional time for smaller entities,
which would include small funds, to come into compliance with the final
rules would be appropriate to the extent that these entities may face