may be discouraged from investing in funds that use swing pricing
because it will generally increase daily volatility and benchmark
tracking error on those days when the NAV is swung. However, if a
fund's swing thresholds and factors are properly calibrated, long-term
tracking error relative to the fund's benchmark should improve.
Additionally, as discussed above, investors might be slightly less
inclined to transact in funds that use swing pricing because of the
additional uncertainty it introduces surrounding the NAV at which their
shares will ultimately be purchased or redeemed, as this NAV now
depends on that day's net fund flows in addition to variations in the
prices of the fund's portfolio positions. Investors also may be less
inclined to invest in funds that use swing pricing if they are not
confident that the fund's swing factors and thresholds appropriately
reflect costs associated with transacting in the fund; specifically, a
fund that uses a swing pricing program which overstates trading costs
will effectively impose the equivalent of hidden purchase and
redemption fees on transacting investors, which will increase the
fund's NAV and benefit non-transacting shareholders at their expense.
Investors will not be able to directly evaluate whether a fund's swing
pricing policy is reasonably linked to its costs, and will only be able
to determine how much of a fund's performance is attributable to swing
pricing if funds voluntarily choose to publicly disclose both their
swung and unswung NAVs on a daily basis. However, the additional
restrictions in the final rule that are designed to reduce the ability
of funds to overestimate swing factors to increase observed fund
performance, should reduce such concerns and have a positive effect on
capital formation. Because we do not have the information necessary to
determine how investors will perceive swing pricing, or how they will
evaluate the relative benefits or detriments of investing in funds that
use swing pricing, we are unable to draw conclusions about the precise
effects of rule 22c-1(a)(3) on capital formation. Moreover, the
requirement for funds that use swing pricing to disclose the swing
factor upper limit will provide transparency to investors regarding the
maximum amount that a shareholder could expect the share price that he
or she receives upon purchase or redemption to be adjusted on account
of swing pricing.
    The final rule enables funds to use multiple swing thresholds, and
allows for different swing factors corresponding to each threshold,
subject to a swing factor upper limit that may not exceed two percent
of NAV per share, which increases a fund's ability to tailor swing
pricing to the specific trading costs it anticipates incurring when
facing significant net fund flows. To the extent that funds accurately
reflect these costs in their swing pricing programs, and that the
expense of operating a swing pricing program does not significantly
increase fund expenses, this should improve the efficiency of trading
cost allocation between transacting and non-transacting investors. The
final rule's increased flexibility could, at the margin, lead to an
increase in the use of swing pricing by funds that would not have
otherwise employed it under the proposed rule's provisions; to the
extent that investors perceive swing pricing as being a desirable
feature of certain funds, and the extent to which they have assets that
are not already invested in the capital markets, this could enhance
capital formation relative to the proposed rule.
2. Disclosure and Reporting Requirements Regarding Swing Pricing
a. Disclosure and Reporting Requirements
    We are adopting amendments to Form N-1A and Regulation S-X as well
as adopting a new item to Form N-CEN to enhance fund disclosure and
reporting regarding swing pricing. Specifically, amendments to Form N-
1A will require a fund to explain the fund's use of swing pricing,
including an explanation of what swing pricing is, the circumstances
under which it will use swing pricing, and the effects of using swing
pricing.\448\ A fund that uses swing pricing will also be required to
disclose the swing factor upper limit,\449\ and include a general
description of the effects of swing pricing on a fund's annual and
average total returns for the applicable periods.\450\ The GAAP NAV
reported on the balance sheet of a fund's financial statements will
include the effects of swing pricing throughout the reporting period,
but it will not explicitly reveal instances where the fund NAV was
adjusted or the magnitudes of those adjustments.\451\ A new item on
Form N-CEN will require a fund to report whether the fund engages in
swing pricing and, if so, the fund's swing factor upper limit.\452\
---------------------------------------------------------------------------

    \448\ Item 6(d) of Form N-1A.
    \449\ Id.
    \450\ Item 4(b)(2)(ii) and Item 4(b)(2)(iv)(E) of Form N-1A.
    \451\ Form N-1A as amended requires a fund to disclose both its
GAAP NAV as well as its Swung NAV (if it swings at period end) in
the financial highlights section of the fund's financial statements
and the financial highlights information in the fund's registration
statement. See Item 13(a) of Form N-1A. The financial highlights
section, which details per share operating performance (by share
class), rolls forward the GAAP NAV per share from beginning to end
of period. The roll forward will require disclosure of the per share
cumulative impact of amounts related to swing pricing (during the
period) as a separate line item below the total distributions line
in the roll forward. Funds also are required to disclose whether the
fund's net asset value per share has swung during the period in the
notes to the financial statements. Investors will not be able to
fully disentangle the effects of swing pricing on fund performance
from these figures, but Commission staff will have access to
complete records of daily NAV adjustments and could look at the
effects of swing pricing as part of the examination process. As
noted above, the Commission is not prohibiting funds from disclosing
an unadjusted NAV outside of the financial statements in other
performance information, which may be useful information in
understanding the impact of swing pricing on a fund.
    \452\ Item C.21 of Form N-CEN.
---------------------------------------------------------------------------

    The final form amendments differ from the proposal in several ways
that may have potential economic consequences. Specifically, funds that
use swing pricing will be required to disclose the swing factor upper
limit on

Form N-1A and Form N-CEN, and will be required to include a general
description of the effects of swing pricing on a fund's annual and
average total returns for the applicable periods on Form N-1A. Any
significant economic effects of these changes are discussed below.
b. Benefits
    The disclosure and reporting requirements will increase
shareholders' understanding of particular funds' swing pricing
policies, which should assist investors in making investment choices
that better match their risk tolerances. For example, disclosure of the
swing factor upper limit will inform investors as to the maximum amount
of costs they could be charged if they were to redeem or subscribe on a
day where the fund is swinging its NAV in response to redemptions or
subscriptions, respectively. Similarly, disclosures about the effects
of swing pricing on a fund's annual and average total returns should
help investors understand the extent to which fund performance may have
been impacted by the fund's use of swing pricing. However, as discussed
above, while we are not requiring disclosure in the financial
statements of the fund's total return based on the Swung NAV, we are
not prohibiting funds from disclosing this information along with the
total return based on the unswung NAV outside of the financial
statements.\453\ Finally, the presumption against disclosure of the
swing factor or threshold should help protect against harm to investors
that could potentially result from gaming of the fund's swing pricing,
although as discussed above, the likelihood of gaming is mitigated by
the lack of public availability of real-time flow data.
---------------------------------------------------------------------------

    \453\ See infra section II.A.iii.g.
---------------------------------------------------------------------------

    Because we cannot predict the extent to which the requirements will
enhance investors' awareness of funds' swing pricing and its impact on
investors, we are unable to quantify the potential benefits discussed
in this section.
c. Costs
    Funds will incur costs to comply with the disclosure and reporting
requirements regarding swing pricing. Commenters' responses to the
estimates of these costs are discussed in the PRA discussion below, and
we have updated all estimates in this section to reflect changes in the
PRA.\454\
---------------------------------------------------------------------------

    \454\ See infra section IV.
---------------------------------------------------------------------------

    We estimate that the one-time costs to comply with the amendments
to Form N-1A for funds that choose to employ swing pricing will be
approximately $648 per fund (plus printing costs).\455\ Based on this
estimate we further estimate that the total one-time costs for funds
that chose to employ swing pricing will be approximately $307,152 for
all funds.\456\ We estimate that each of these funds will incur an
ongoing cost associated with compliance with the amendments to Form N-
1A of approximately $324 each year to review and update the disclosure
regarding swing pricing.\457\ Based on these estimates we further
estimate that the total ongoing annual costs for funds that chose to
employ swing pricing will be approximately $153,576 for all funds.\458\
In addition, we expect that there will be minor costs associated with
the related amendments to Regulation S-X, which are discussed above.
---------------------------------------------------------------------------

    \455\ This estimate is based on the following calculation: 2
hours (2 hour to update registration statement to include swing
pricing-related disclosure statements) x $324 (blended rate for a
compliance attorney ($340) and a senior programmer ($308)) = $648.
This figure incorporates the costs we estimated for each fund to
update its registration statement to include the required disclosure
about the fund's use of swing pricing, including an explanation of
what swing pricing is, an explanation of the circumstances under
which it will use swing pricing, the effects of using swing pricing;
the fund's swing factor upper limit; and disclosures about the
effects of swing pricing on a fund's annual and average total
returns. The costs associated with these activities are all
paperwork-related costs and are discussed in more detail infra at
section IV.E.
    \456\ This estimate is based on the following calculation: 948
hours x $324 (blended rate for a compliance attorney ($340) and a
senior programmer ($308)) = $307,152. The costs associated with
these activities are all paperwork-related costs and are discussed
in more detail infra at section IV.E.
    \457\ This estimate is based on the following calculations: 1
hours x $324 (blended hourly rate for a compliance attorney ($340)
and a senior programmer ($308)) = $324. The costs associated with
these activities are all paperwork-related costs and are discussed
in more detail infra at section IV.E.
    \458\ This estimate is based on the following calculation: 474
hours x $324 (blended hourly rate for a compliance attorney ($340)
and a senior programmer ($308)) = $153,576. The costs associated
with these activities are all paperwork-related costs and are
discussed in more detail infra at section IV.E.
---------------------------------------------------------------------------

    We estimate compliance with the new item of Form N-CEN related to
swing pricing will involve an annual hourly burden which is discussed
in the PRA discussion below.\459\ We estimate that 10,633 funds will be
required to file responses on Form N-CEN.\460\ We estimate that 9,039
funds will be required to file responses to Item C.21 of Form N-CEN
regarding swing pricing.\461\ We estimate an average annual hourly
burden associated with providing additional responses to Form N-CEN as
a result of the additional reporting requirement will be approximately
.5 hours per fund, for a total average annual burden of 4,519.5
hours.\462\ We do not estimate any change to the external costs
associated with the proposed Form N-CEN
---------------------------------------------------------------------------

    \459\ See infra section IV.
    \460\ See 2016 ICI Fact Book, supra footnote 388, at 22, 176,
183.
    \461\ See supra footnote 388.
    \462\ This estimate is based on the following calculation: 9,039
funds x .5 hour = 4,519.5 hours.
---------------------------------------------------------------------------

d. Effects on Efficiency, Competition, and Capital Formation
    We believe the disclosure and reporting requirements on Form N-1A
and Form N-CEN could increase informational efficiency by providing
additional information about a fund's use of swing pricing. To the
extent that investors better understand a fund's swing pricing,
including the upper limit of the swing factor, they can trade off the
benefit from dilution protection with the increase in return
volatility, as discussed above, when deciding on investing in a fund
that choses to use swing pricing. To the extent that investors invest
in funds that adopt swing pricing because of these disclosure and
reporting requirements, the new disclosure and reporting requirements
will also increase capital formation. However, we do not believe that
this effect will be significant because such investors are more likely
already investing in other funds and hence any reallocation will be a
``zero-sum game.''
    Increased investor awareness of funds' swing pricing policies,
including swing factor upper limits, improve the investors' ability to
compare funds that elect to use swing pricing with each other as well
as with funds that do not elect to implement swing pricing. Such a
comparison could improve competition among funds, which could benefit
investors. While this competition could unintentionally increase
incentives for funds to overestimate the swing factors to improve and
compete on performance, the additional safeguards required by the final
rule should prevent such a negative impact.

D. Reasonable Alternatives

    The following discussion addresses significant alternatives to the
final swing pricing regulations. More detailed alternatives to the
individual elements of the swing pricing regulations are discussed in
detail above.\463\
---------------------------------------------------------------------------

    \463\ See supra sections II.A and II.B.
---------------------------------------------------------------------------

    Instead of permitting, but not requiring, funds to adopt swing
pricing policies and procedures under rule 22c-1(a)(3), the Commission
could have

adopted a rule that would require all funds, or funds with certain
strategies, to adopt swing pricing policies and procedures. This
alternative approach would have the benefit of establishing a uniform
regulatory framework to prevent potential shareholder dilution, and
might lower the per fund cost of implementing swing pricing due to
economies of scale. But because funds differ notably in terms of their
particular circumstances and risks, as well as with respect to the
tools funds use to manage risks relating to liquidity and shareholder
purchases and redemptions, we decided to adopt a rule that would permit
swing pricing as a voluntary tool for funds. The adopted approach will
allow funds to weigh the advantages of swing pricing (e.g., improved
allocation of trading costs) against potential disadvantages (e.g., the
potential for swing pricing to increase the volatility of a fund's NAV
in the short term and its operational costs). Some commenters advocated
for the Commission to require all funds to adopt swing pricing policies
and procedures,\464\ but most commenters supported the permissive (not
mandatory) approach.\465\
---------------------------------------------------------------------------

    \464\ Barnard Comment Letter; Invesco Comment Letter.
    \465\ See CFA Comment Letter; Dechert Comment Letter; ICI
Comment Letter I; IDC Comment Letter; J.P. Morgan Comment Letter;
Morningstar Comment Letter.
---------------------------------------------------------------------------

    While rule 22c-1(a)(3) enables partial swing pricing (that is, a
NAV adjustment would not be permitted unless net purchases or
redemptions exceed a positive threshold set by the fund), the
Commission instead could have adopted a rule that would permit full
swing pricing (that is, a NAV adjustment would occur any time the fund
experiences net purchases or net redemptions, or equivalently allowed
zero percent thresholds). Full swing pricing would result in any
estimated costs associated with purchases or redemptions being passed
along to the shareholders whose actions created those costs, whereas
the partial swing pricing contemplated by the rule will only allocate
costs related to purchase and redemption activity to purchasing or
redeeming shareholders when net purchases or net redemptions exceed the
fund's positive swing threshold. Most commenters supported permitting
only ``partial'' swing pricing,\466\ but some commenters did suggest
that funds should have the option to use full swing pricing.\467\
Nevertheless, we believe that the partial swing pricing policy choice
is, on balance, preferable to the full swing pricing option. We expect
that partial swing pricing, as opposed to full swing pricing, will
reduce any performance volatility potentially associated with swing
pricing and could reduce operational costs associated with swinging a
fund's NAV (e.g., record keeping requirements) when fund flows are not
significant enough to cause significant shareholder dilution. Also, the
use of partial swing pricing recognizes that purchases or redemptions
below a certain threshold are less likely to require a fund to trade
portfolio assets, and therefore a NAV adjustment might be less
appropriate if purchases or redemptions might not result in costs
associated with asset purchases or sales (in which case, a NAV
adjustment could unfairly penalize purchasing or redeeming
shareholders).
---------------------------------------------------------------------------

    \466\ Many commenters implicitly agreed with only permitting
partial swing pricing, but some explicitly agreed with only
permitting partial swing pricing. CFA Comment Letter; SIFMA Comment
Letter II.
    \467\ See Dechert Comment Letter; Federated Comment Letter; HSBC
Comment Letter; MFS Comment Letter.
---------------------------------------------------------------------------

    We considered permitting funds to use swing pricing only to adjust
their NAV downward in the event that net redemptions exceeded a
particular threshold, as there may be more significant issues regarding
potential dilution for non-transacting shareholders in connection with
shareholder redemptions, because funds are obligated to satisfy
redemption requests pursuant to section 22(e) of the Act. In this
regard, we note that unlike redemptions, funds may reserve the right to
decline purchase requests. For example, a fund may decline purchase
requests from shareholders who engaged in frequent trading, and it also
may decline large purchase requests that would negatively impact the
fund. However, the final rule contemplates that funds will use swing
pricing to adjust their NAV upward or downward because we believe that
swing pricing could be a useful tool in mitigating dilution associated
with shareholder purchase activity as well as shareholder redemption
activity.
    We considered exempting investors with small investments in a fund
from the NAV adjustments permitted under rule 22c-1(a)(3). However, we
believe that the costs of exempting those investors from the NAV
adjustment could be significant, particularly the operational costs
that could result from the relatively complex process of applying the
NAV adjustment only to some investors and not to others. Exempting
small investors from the NAV adjustment also may not be beneficial to a
fund because such exemption could lead to large investors engaging in
gaming behavior--that is, structuring their investments in funds using
multiple small accounts--in order to use the exemption. This could
contravene the purpose of the exemption and be costly for funds to
detect. In addition, while small investors' trading activity might not
incur significant costs individually, their aggregate trading in the
fund could incur costs, just as it would if they were trading directly
in, for example, the stock market, and it would not be fair to impose
those collectively generated costs on non-transacting shareholders.
    Some commenters suggested that redemption fees may have a better
combination of potential cost and benefits compared to swing
pricing.\468\ Redemption fees are already permissible under existing
rules, subject to certain conditions, so swing pricing is an
alternative tool funds can use to mitigate dilution.\469\ To the extent
they are permissible under existing rules, purchase fees allow funds to
recoup the costs associated with fund subscriptions in the same way
redemption fees recoup costs associated with fund redemptions. Both
swing pricing and purchase and redemption fees can pass on trading-
related costs to transacting shareholders, but they accomplish this in
different ways. The specific implementation of a redemption fee can
vary--funds can impose a constant fee that applies to all redemptions
or can apply it more selectively to transactions of a given size in
order to reduce dilution of the fund's outstanding shares. In theory,
purchase fees can be applied in a similar manner.
---------------------------------------------------------------------------

    \468\ ICI Comment Letter I; PIMCO Comment Letter.
    \469\ As discussed above, funds are currently permitted under
rule 22c-2 to impose redemption fees under certain circumstances.
See also Redemption Fees Adopting Release, supra footnote 24.
---------------------------------------------------------------------------

    The key characteristic of a redemption or purchase fee, relative to
swing pricing, is that it is imposed on a given investor's transaction
independent of other investors' transactions in a fund, which means,
for example, that investors may pay a fee even when their transactions
do not result in significant net flows or any corresponding dilution
for the fund's non-transacting investors. On the other hand, swing
pricing allows funds to condition when they recover costs from
transacting investors on the net flows to their fund on a given trading
date, which could allow funds to more fairly allocate the actual costs
created by investor flows and prevent shareholder dilution. As with
redemption and purchase fees, it is still possible that investors pay a
cost via the swing factor that ends up being larger

than the costs they impose on the fund--for example, if the discount at
which assets are sold to cover redemptions turn out to be smaller than
what was anticipated on the redemption date--but if funds are able to
properly calibrate their swing factors, investors should end up paying
the ex-ante expected cost associated with a given level of fund flows.
The extent to which swing pricing is able to recover the expected costs
associated with a given transaction is limited by the maximum swing
factor size of 2% of a fund's NAV, but redemption fees are subject to
the same limitation. Purchase fees and redemption fees, relative to
swing pricing, have the benefit of being simple for investors to
understand, they do not produce the same short-term volatility and
tracking error concerns as swing pricing, and they provide more
transparency to potential investors regarding the expected performance
impact of anti-dilutive measures on a fund's NAV (the proceeds from
both redemption fees and swing pricing eventually make their way into
the NAV).
    If purchase or redemption fees are made contingent on the size of a
transaction, a fund may be able to tailor these fees to transactions
that are more likely to impose costs on non-transacting investors. For
example, a large redemption may make it more likely that a fund
experiences significant net redemptions on a given day. Targeting
purchase and redemption fees in this manner could allow a fund to
achieve some of the benefits of swing pricing without its potentially
redistributive effects.\470\ For example, if a fund experiences gross
subscriptions of 10 shares and gross redemptions of 20 shares on a
given day, and recovers trading costs from redeeming investors via
swing pricing, roughly half of those proceeds will be returned to non-
transacting shareholders in the fund (the other half goes to
subscribers), and some dilution will still occur. To the extent that
fund flows on that day are driven by large redemptions, a targeted
redemption fee may allow a fund to assess estimated costs to redeeming
investors while returning all proceeds to the fund.
---------------------------------------------------------------------------

    \470\ See supra footnote 427 and related discussion on
distributional issues with swing pricing.
---------------------------------------------------------------------------

    In terms of direct costs, redemption fees may require more
coordination with a fund's service providers because these fees need to
be imposed on an investor-by-investor basis--which may be particularly
difficult with respect to omnibus accounts. While there are funds that
currently utilize redemption fees and have built systems to support
them, these redemption fees are generally constant fees that are not
tailored to the costs of a given redemption. Swing pricing, on the
other hand, will require some funds and intermediaries to create new
systems and operational procedures (discussed above), but once those
are in place swing pricing will be incorporated in the process by which
a fund strikes its NAV, and will not require any additional investor-
specific infrastructure to assess trading costs to them.
    Finally, a closely related alternative to swing pricing that the
Commission could have adopted would be to permit funds to employ dual
pricing, which has been used in certain European funds.\471\ Instead of
swinging the NAV in one direction based on net flows and establishing a
single price at which investors transact, dual pricing would allow the
fund to set a ``spread'' around the fund's true NAV: A bid price at
which the fund redeems shares and an offer price at which the fund
issues new shares. This spread could be set in a manner similar to the
rule's swing factor (e.g., based on a threshold of net flows), or on an
ad-hoc basis based on the fund's portfolio and any relevant market
conditions on the trade date. Dual pricing is an alternative that
shares many costs and benefits with the rule's swing pricing component.
The major benefit of dual pricing relative to the rule is that it does
not allow one type of fund investor to benefit at the expense of
another. For example, under swing pricing, if the NAV is adjusted
downwards when a fund experiences net redemptions, any subscribing
investors are able to purchase the fund at a discount at the expense of
some of the redeeming investors, and this reduces the proceeds that are
recovered by non-transacting shareholders in the fund. Under the same
scenario with dual pricing, subscribers do not receive a discount (if
anything, they may pay a premium which benefits non-transacting
shareholders), and all of the proceeds from redeeming investors are
returned to the fund. The primary cost of dual pricing relative to the
rule is that it may impose additional requirements and risks on fund
intermediaries, service providers, and other third parties as they now
need to handle two NAVs on each trade date. Furthermore, to the extent
that dual pricing is implemented using a constant spread around a
fund's NAV, it may not be able to reflect the costs associated with
fund redemptions or subscriptions on a given day as well as swing
pricing.
---------------------------------------------------------------------------

    \471\ See BlackRock Fund Structures Paper, supra footnote 46 for
a high level comparison of some of the differences between dual
pricing and swing pricing.
---------------------------------------------------------------------------

IV. Paperwork Reduction Act Analysis

A. Introduction

    The amendments to rule 22c-1 contain ``collections of information''
within the meaning of the Paperwork Reduction Act of 1995
(``PRA'').\472\ In addition, the amendments to rule 31a-2, Regulation
S-X and Form N-1A will impact the collections of information burden
under those rules and form.\473\ The new reporting requirements on Form
N-CEN will impact the collections of information burden associated with
the form described in the Investment Company Reporting Modernization
Adopting Release.\474\
---------------------------------------------------------------------------

    \472\ 44 U.S.C. 3501 through 3521.
    \473\ The paperwork burden from Regulation S-X is imposed by the
rules and forms that relate to Regulation S-X and, thus, is
reflected in the analysis of those rules and forms. To avoid a PRA
inventory reflecting duplicative burdens and for administrative
convenience, we have previously assigned a one-hour burden to
Regulation S-X.
    \474\ See Investment Company Reporting Modernization Adopting
Release, supra footnote 11, at section IV.A.
---------------------------------------------------------------------------

    The titles for the existing collections of information are: ``Rule
31a-2 Records to be preserved by registered investment companies,
certain majority-owned subsidiaries thereof, and other persons having
transactions with registered investment companies'' (OMB Control No.
3235-0179); and ``Form N-1A under the Securities Act of 1933 and under
the Investment Company Act of 1940, Registration Statement of Open-End
Management Investment Companies'' (OMB Control No. 3235-0307). In the
Investment Company Reporting Modernization Adopting Release, we
submitted new collections of information for Form N-CEN.\475\ The title
for the new collections of information is: ``Form N-CEN Under the
Investment Company Act, Annual Report for Registered Investment
Companies.''
---------------------------------------------------------------------------

    \475\ See id.
---------------------------------------------------------------------------

    We are submitting new collections of information for the amendments
to rule 22c-1 under the Investment Company Act of 1940. The title for
the new collections of information will be: ``Rule 22c-1 Under the
Investment Company Act of 1940, Pricing of redeemable securities for
distribution, redemption and repurchase.'' The Commission is submitting
these collections of information to the OMB for review in accordance
with 44 U.S.C. 3507(d) and 5 CFR 1320.11. An agency may not conduct or
sponsor, and a person is not

required to respond to, a collection of information unless it displays
a currently valid control number.
    The Commission is adopting amendments to rule 22c-1, rule 31a-2,
Regulation S-X, and Form N-1A. The Commission also is adopting a new
item to Form N-CEN. The amendments are designed to prevent potential
dilution of interests of fund shareholders in light of shareholder
purchase and redemption activity and enhance disclosure and Commission
oversight of funds' use of swing pricing. We discuss below the
collection of information burdens associated with these reforms. In the
Proposing Release, the Commission solicited comment on the collection
of information requirements and the accuracy of the Commission's
statements in the Proposing Release.

B. Rule 22c-1

    We are adopting, largely as proposed, amendments to rule 22c-1 that
will enable a fund (with the exception of a money market fund or ETF)
to choose to use ``swing pricing'' as a tool to mitigate shareholder
dilution.\476\ This will be a new collection of information under the
PRA. We believe that rule 22c-1 will promote investor protection by
providing funds with an additional tool to mitigate the potentially
dilutive effects of shareholder purchase or redemption activity and
provide a set of operational standards that will allow funds to gain
comfort using swing pricing as a new means of mitigating potential
dilution.\477\
---------------------------------------------------------------------------

    \476\ See supra section II.A. See also rule 22c-1(a)(3).
    \477\ See supra section II.A.
---------------------------------------------------------------------------

    In order to use swing pricing under rule 22c-1, as amended, a fund
is required to establish and implement swing pricing policies and
procedures that meet certain requirements.\478\ The policies and
procedures must specify the process for how the fund's swing
threshold(s) and swing factor(s) are determined, which must include the
establishment of an upper limit on the swing factor(s) used (which may
not exceed two percent of NAV per share).\479\ The amendments require a
fund's board of directors to approve the fund's swing pricing policies
and procedures, as well as the fund's swing threshold and swing factor
upper limit (and any changes to the swing threshold or swing factor
upper limit).\480\ The fund's board is also required to review, no less
frequently than annually, a written report prepared by the persons
responsible for administering swing pricing that describes: (i) Its
review of the adequacy of the fund's swing pricing policies and
procedures and the effectiveness of their implementation, including the
impact on mitigating dilution; (ii) any material changes to the fund's
swing pricing policies and procedures since the date of the last
report; and (iii) its review and assessment of the fund's swing
threshold(s), swing factor(s), and swing factor upper limit considering
the requirements of the rule, including the information and data
supporting these determinations.\481\ A fund is required to maintain
the fund's swing pricing policies and procedures and a written copy of
the periodic report provided to the board.\482\ The requirements that
funds adopt policies and procedures, obtain board approval and periodic
review, provide a written report to the board, and retain certain
records related to swing pricing are collections of information under
the PRA. The respondents to amended rule 22c-1 will be open-end
management investment companies (other than money market funds or ETFs)
that engage in swing pricing. Compliance with rule 22c-1(a)(3) will be
mandatory for any fund that chooses to use swing pricing to adjust its
NAV in reliance on the amendments. The information required under rule
22c-1 regarding swing pricing when provided to the Commission in
connection with staff examinations and investigations and oversight
programs will be kept confidential subject to the provisions of
applicable law.
---------------------------------------------------------------------------

    \478\ See rule 22c-1(a)(3)(i).
    \479\ See rule 22c-1(a)(3)(i)(B) and (C).
    \480\ See rule 22c-1(a)(3)(ii)(A) and (B).
    \481\ See rule 22c-1(a)(3)(ii)(D).
    \482\ See rule 22c-1(a)(3)(iii).
---------------------------------------------------------------------------

    In the Proposing Release, we estimated that 167 fund complexes
include funds that would adopt swing pricing policies and procedures
pursuant to the rule.\483\ For purposes of the PRA analysis, we
estimated that each fund complex would incur a one-time average burden
of 24 hours to document swing pricing policies and procedures. Under
the proposal, rule 22c-1 would have required fund boards initially to
approve the swing pricing policies and procedures (including the swing
threshold) and any material changes to them, and we estimated a one-
time burden of five hours per fund complex associated with the fund
board's review and approval of swing pricing policies and procedures.
Amortized over a 3-year period, we estimated that this would be an
annual burden per fund complex of about 10 hours. Accordingly, we
estimated that the total burden associated with the preparation and
approval of swing pricing policies and procedures by those fund
complexes that we believed would use swing pricing would be 4,843
hours.\484\ We also estimated that it would cost a fund complex $21,710
to document, review and initially approve these policies and
procedures, for a total cost of $3,625,570.\485\
---------------------------------------------------------------------------

    \483\ See Proposing Release, supra footnote 6, at n. 766 and
accompanying text.
    \484\ This estimate was based on the following calculation: (24
+ 5) hours x 167 fund complexes = 4,843 hours.
    \485\ These estimates were based on the following calculations:
12 hours x $198 (hourly rate for a senior accountant) = $2,376; 12
hours x $455.5 (blended hourly rate for assistant general counsel
($426) and chief compliance officer ($485)) = $5,466; 3 hours x
$4,400 (hourly rate for a board of 8 directors) = $13,200; 2 hours
(for a fund attorney's time to prepare materials for the board's
determinations) x $334 (hourly rate for a compliance attorney) =
$668; ($2,376 + $5,466 + $13,200 + $668) = $21,710; $21,710 x 167
fund complexes = $3,625,570. The hourly wages used were from SIFMA's
Management & Professional Earnings in the Securities Industry 2013,
modified to account for an 1800-hour work-year and multiplied by
5.35 to account for bonuses, firm size, employee benefits, and
overhead. See also infra footnote 492 (discussing basis for
estimated hourly rate for a board of directors).
---------------------------------------------------------------------------

    As discussed above, many commenters expressed general concerns
about the operational and technology costs associated with swing
pricing and recommended that the Commission consider the substantial
costs and technology challenges that need to be overcome to implement
swing pricing.\486\ One commenter expressed the belief that the
Commission significantly underestimated the costs associated with
developing and implementing the systems and procedures necessary to
comply with rule 22c-1 swing pricing requirements and stated that its
implementation costs for swing pricing would likely be four or five
times more costly than the Commission's estimates in the proposal.\487\
We appreciate the information provided by the commenter and, in
consideration of their comment, have extrapolated from this commenter's
estimate increased cost estimates for the amendments to rule 22c-1
adopted today.\488\
---------------------------------------------------------------------------

    \486\ See supra section II.A.2. See also e.g., Dechert Comment
Letter; Eaton Vance Comment Letter; ICI Comment Letter I; IDC
Comment Letter; Invesco Comment Letter; J.P. Morgan Comment Letter;
Charles Schwab Comment Letter; T. Rowe Comment Letter.
    \487\ See Charles Schwab Comment Letter (stating that the
Commission based its estimated costs to establish and implement
swing pricing policies and procedures in part on the costs
associated with implementing the fees and gates provisions of the
2014 money market fund reform rule and that, in the commenter's
experience, the implementation costs for the money market fund
reform rule were severely understated).
    \488\ See supra section III.C.1.b.

---------------------------------------------------------------------------

    The Commission has modified the estimated increase in burden hours
associated with a fund documenting its swing pricing policies and
procedures in consideration of commenters' concerns that such burdens
were underestimated as well as modifications made to the proposal and
updates to data figures that were utilized in the Proposing Release. We
estimate that 84 fund complexes, rather than 167 fund complexes (half
as many fund complexes as estimated in the proposal), include funds
that will adopt swing pricing policies and procedures pursuant to the
rule.\489\ While one commenter suggested that the burden to comply with
the amendments to rule 22c-1 would be four or five times more costly
than in the proposal, we believe that with respect to the PRA analysis,
the estimated burdens for documenting swing pricing procedures will not
be as high as the commenter's estimate of the costs associated with the
entire implementation of swing pricing policies and procedures. Based
on our review of the adopted requirements, we estimate that each fund
complex will incur a one-time average burden of 48 hours, rather than
24 hours, to document swing pricing policies and procedures. We further
estimate that each fund complex will spend 2 hours, on average,
preparing the required written report to the board. Since a fund board
will approve the fund's swing pricing policies and procedures, swing
threshold, and swing factor upper limit as well as review, no less
frequently than annually, a written report that includes certain
required information, we estimate a one-time burden of 7 hours, rather
than 5 hours per fund complex associated with the fund board's review
and approval of swing pricing policies and procedures.
---------------------------------------------------------------------------

    \489\ See supra section III.C.1.b. As we discussed in section
III.C.1.b, commenters noted a variety of challenges associated with
the immediate implementation of swing pricing. Accordingly, we have
revised our estimated number of fund complexes that will implement
swing pricing within the three-year period discussed below.
Additionally, the two-year extended effective date means that no
fund may implement swing pricing until the third year, which will
likely further reduce the number of funds for purposes of this
estimate.
---------------------------------------------------------------------------

    Amortized over a 3-year period, we estimate that this will be an
annual burden per fund complex of about 19 hours, rather than 10
hours.\490\ Accordingly, we estimate that the total burden associated
with the preparation and approval of swing pricing policies and
procedures by those fund complexes that we believe will use swing
pricing will be 4,788 hours, rather than 4,843 hours.\491\ We also
estimate that it will cost a fund complex $35,496, rather than $21,710,
to document, review and initially approve these policies and
procedures, for a total cost of $2,981,664, rather than
$3,625,570.\492\
---------------------------------------------------------------------------

    \490\ This estimate is based on the following calculations: 48
hours + 2 hours + 7 hours / 3 = 19 hours.
    \491\ This estimate is based on the following calculation: (48 +
2 + 7) hours x 84 fund complexes = 4,788 hours.
    \492\ These estimates are based on the following calculations:
24 hours x $201 (hourly rate for a senior accountant) = $4,824; 24
hours x $463 (blended hourly rate for assistant general counsel
($433) and chief compliance officer ($493)) = $11,112; 4 hours x
$4,465 (hourly rate for a board of 8 directors) = $17,860; 5 hours
(for a fund attorney's time to prepare materials for the board's
determinations) x $340 (hourly rate for a compliance attorney) =
$1,700; ($4,824 + $11,112 + $17,860 + $1,700) = $35,496; $35,496 x
84 fund complexes = $2,981,664. The hourly wages used are from
SIFMA's Management & Professional Earnings in the Securities
Industry 2013, modified by Commission staff to account for an 1800-
hour work-year and inflation, and multiplied by 5.35 to account for
bonuses, firm size, employee benefits, and overhead. The staff
previously estimated in 2009 that the average cost of board of
director time was $4,000 per hour for the board as a whole, based on
information received from funds and their counsel. Adjusting for
inflation, the staff estimates that the current average cost of
board of director time is approximately $4,465.
---------------------------------------------------------------------------

    We are adopting, as proposed, amendments to rule 22c-1 to require a
fund that uses swing pricing to maintain the fund's swing policies and
procedures that are in effect, or at any time within the past six years
were in effect, in an easily accessible place.\493\ In a modification
to the proposal, we also are requiring a fund to retain a written copy
of the periodic report provided to the board prepared by the swing
pricing administrator that describes, among other things, the swing
pricing administrator's review of the adequacy of the fund's swing
pricing policies and procedures and the effectiveness of their
implementation, including the impact on mitigating dilution and any
back-testing performed.\494\ The retention of these records is
necessary to allow the staff during examinations of funds to determine
whether a fund is in compliance with its swing pricing policies and
procedures and with rule 22c-1, as amended.
---------------------------------------------------------------------------

    \493\ See rule 22c-1(a)(3)(iii).
    \494\ See id.
---------------------------------------------------------------------------

    In the Proposing Release, we estimated that the burden would be
three hours per fund complex to retain the proposed swing pricing
records, with 1.5 hours spent by a general clerk and 1.5 hours spent by
a senior computer operator. We estimated a time cost per fund complex
of $216.\495\ We estimated that the total for recordkeeping related to
swing pricing would be 501 hours, at an aggregate cost of $36,072 for
all fund complexes that we believe include funds that would adopt swing
pricing policies and procedures.\496\ Amortized over a three-year
period, we believed that the hour burdens and time costs associated
with the proposed amendments to rule 22c-1, including the burden
associated with the requirements that funds adopt policies and
procedures, obtain board approval and retain certain records related to
swing pricing, would result in an average aggregate annual burden of
2,115 hours and average aggregate time costs of $1,244,595.\497\ We
estimated that there were no external costs associated with this
collection of information.
---------------------------------------------------------------------------

    \495\ This estimate was based on the following calculations: 1.5
hours x $57 (hourly rate for a general clerk) = $85.5; 1.5 hours x
$87 (hourly rate for a senior computer operator) = $130.5. $85.5 +
$130.5 = $216.
    \496\ These estimates were based on the following calculations:
3 hours x 167 fund complexes = 501 hours. 167 fund complexes x $216
= $36,072.
    \497\ These estimates were based on the following calculations:
4,843 hours (year 1) + (3 x 501 hours) (years 1, 2 and 3) / 3 =
2,115 hours; $3,625,570 (year 1) + (3 x $36,072) (years 1, 2 and 3)
/ 3 = $1,244,595.
---------------------------------------------------------------------------

    We did not receive any comments on the estimated hour and cost
burdens for this record retention requirement. The Commission has
modified the estimated increase in annual burden hours and total time
costs that will result from the amendments based on the modification to
the proposal to require funds to retain a written copy of the annual
report provided to the board from the swing pricing administrator. We
have also modified the estimated increase in annual burden hours and
total time costs in light of updated data concerning funds and fund
personnel salaries. We estimate that the burden will be four hours,
rather than three hours, per fund complex to retain these records, with
2 hours, rather than 1.5 hours, spent by a general clerk and 2 hours,
rather than 1.5 hours, spent by a senior computer operator. Based on
updates to the industry data figures that were utilized in the
Proposing Release, we estimate a time cost per fund complex of $292,
rather than $216.\498\ We estimate that the total for recordkeeping
related to swing pricing will be 336 hours, rather than 501 hours, at
an aggregate cost of $24,528, rather than $36,072, for all fund
complexes that we believe include

funds that would adopt swing pricing policies and procedures.\499\
---------------------------------------------------------------------------

    \498\ This estimate is based on the following calculations: 2
hours x $58 (hourly rate for a general clerk) = $116; 2 hours x $88
(hourly rate for a senior computer operator) = $176. $116 + $176 =
$292.
    \499\ These estimates are based on the following calculations: 4
hours x 84 fund complexes = 336 hours. 84 fund complexes x $292 =
$24,528.
---------------------------------------------------------------------------

    Amortized over a three-year period, we believe that the hour
burdens and time costs associated with the amendments to rule 22c-1,
including the burden associated with the requirements that funds adopt
policies and procedures, obtain board approval, and periodic review of
an annual written report from the swing pricing administrator, and
retain certain records and written reports related to swing pricing,
will result in an average aggregate annual burden of 1,932 hours,
rather than 2,115 hours, and average aggregate time costs of
$1,018,416, rather than $1,244,595.\500\ We continue to estimate that
there are no external costs associated with this collection of
information.
---------------------------------------------------------------------------

    \500\ These estimates are based on the following calculations:
(4,788 hours (year 1) + (3 x 336 hours) (years 1, 2 and 3)) / 3 =
1,932 hours; ($2,981,664 (year 1) + (3 x $24,528) (years 1, 2 and
3)) / 3 = $1,018,416.
---------------------------------------------------------------------------

C. Rule 31a-2

    Section 31(a)(1) of the Investment Company Act requires registered
investment companies and certain of their majority-owned subsidiaries
to maintain and preserve records as prescribed by Commission rules.
Rule 31a-1 under the Act specifies the books and records that must be
maintained. Rule 31a-2 under the Act specifies the time periods that
entities must retain certain books and records, including those
required to be maintained under rule 31a-1. The retention of records,
as required by rule 31a-2, is necessary to ensure access by Commission
staff to material business and financial information about funds and
certain related entities. This information is used by the staff to
evaluate fund compliance with the Investment Company Act and
regulations thereunder. The Commission currently estimates that the
annual burden associated with rule 31a-2 is 220 hours per fund, with
110 hours spent by a general clerk at a rate of $52 per hour and 110
hours spent by a senior computer operator at a rate of $81 per
hour.\501\ The current estimate of the total annual burden for all
funds to comply with rule 31a-2 is approximately 766,480 hours at an
estimated cost of $50,970,920.\502\
---------------------------------------------------------------------------

    \501\ The estimated salary rates were derived from SIFMA's
Office Salaries in the Securities Industry 2011, modified to account
for an 1800-hour work-year and multiplied by 2.93 to account for
bonuses, firm size, employee benefits, and overhead.
    \502\ These estimates were based on the following calculations:
220 hours x 3,484 funds (the estimated number of funds the last time
the rule's information collections were submitted for PRA renewal in
2012) = 766,480 total hours; 776,480 hours / 2 = 383,240 hours;
383,240 x $52/hour for a clerk = $19,928,480; 383,240 x $81 rate per
hour for a computer operator = $31,042,440; $19,928,480 +
$31,042,440 = $50,970,920 total cost.
---------------------------------------------------------------------------

    We are adopting amendments to rule 31a-2 to require a fund that
chooses to use swing pricing to create and maintain a record of support
for each computation of an adjustment to the NAV of the fund's shares
based on the fund's swing policies and procedures.\503\ This collection
of information requirement is mandatory for any fund that chooses to
use swing pricing to adjust its NAV in reliance on the adopted
amendments to rule 22c-1. To the extent that the Commission receives
confidential information in connection with staff examinations and
investigations and oversight programs pursuant to this collection of
information, such information will be kept confidential, subject to the
provisions of applicable law.
---------------------------------------------------------------------------

    \503\ Proposed amendment to rule 31a-2(a)(2).
---------------------------------------------------------------------------

    In the proposal, we estimated that approximately 947 funds would
use swing pricing and that each fund that uses swing pricing generally
would incur an additional burden of 1 hour per year in order to comply
with the proposed amendments to rule 31a-2.\504\ Accordingly, we
estimated that the total average annual hour burden associated with the
proposed amendments to rule 31a-2 would have been an additional 947
hours at a cost of $68,169.\505\
---------------------------------------------------------------------------

    \504\ See Proposing Release, supra footnote 6, at section V.D.
    \505\ These estimates were based on the following calculations:
1 hour x 947 funds = 947 total hours; 474 hours x $57 rate per hour
for a general clerk = $27,018; 473 hours x $87 rate per hour for a
senior computer operator = $41,151; $27,018 + $41,151 = $68,169
total cost.
---------------------------------------------------------------------------

    Based on updates to industry data figures that were utilized in the
Proposing Release and the reduction in our estimate of the number of
funds in fund complexes that will choose to use swing pricing, for
purposes of the PRA analysis, we estimate that approximately 474 funds
(half as many funds as proposed) will use swing pricing.\506\ In light
of the concerns expressed by commenters that the Commission
underestimated the operational costs associated with swing pricing
discussed above,\507\ we estimate that each fund that uses swing
pricing generally will incur an additional burden of 3 hours, rather
than 1 hour per year in order to comply with the amendments to rule
31a-2. Accordingly, we estimate that the total average annual hour
burden associated with the amendments to rule 31a-2 will be an
additional 1,422 hours, rather than 947 hours, at a cost of $103,806,
rather than $68,169.\508\
---------------------------------------------------------------------------

    \506\ See also, supra footnote 489 and accompanying text.
    \507\ See, e.g., Dechert Comment Letter; Eaton Vance Comment
Letter; J.P. Morgan Comment Letter; T. Rowe Comment Letter.
    \508\ These estimates are based on the following calculations: 3
hour x 474 funds = 1,422 total hours; 711 hours x $58 rate per hour
for a general clerk = $41,238; 711 hours x $88 rate per hour for a
senior computer operator = $62,568; $41,238 + $62,568 = $103,806
total cost.
---------------------------------------------------------------------------

    The Commission currently estimates that the average external cost
of preserving books and records required by rule 31a-2 is approximately
$70,000 per fund at a total cost of approximately $243,880,000 per
year,\509\ but that funds would already spend approximately half this
amount to preserve these same books and records, as they are also
necessary to prepare financial statements, meet various state reporting
requirements, and prepare their annual federal and state income tax
returns. Therefore, the Commission estimated that the total annual cost
burden for all funds as a result of compliance with rule 31a-2 is
approximately $121,940,000.\510\ In the proposal, we estimated that the
annual external cost burden of compliance with the information
collection requirements of rule 31a-2 would increase by $300 per fund
that engages in swing pricing, for an increase in the total annual cost
burden of $284,100.\511\ We are modifying this figure in response to
commenters' general concerns that the Commission as underestimated the
operational costs associated with swing pricing and the reduction in
the number of funds we estimate will use swing pricing, as discussed
above. We estimate that the annual external cost burden of compliance
with the information collection requirements of rule 31a-2 would
increase by $600 per fund, rather than $300 per fund that engages in
swing pricing, for an increase in the total annual cost burden of
$284,400, rather than $284,100.\512\
---------------------------------------------------------------------------

    \509\ This estimate is based on the following calculation: 3,484
funds (the estimated number of funds the last time the rule's
information collections were submitted for PRA renewal in 2012) x
$70,000 = $243,880,000.
    \510\ See Submission of OMB Review; and Comment Request,
Extension: Rule 31a-2, OMB Control No. 3235-0179, Securities and
Exchange Commission, 77 FR 66885 (Nov. 7, 2012).
    \511\ This estimate was based on the following calculation: 947
funds x $300 = $284,100.
    \512\ This estimate is based on the following calculation: 474
funds x $600 = $284,400.
---------------------------------------------------------------------------

D. Form N-CEN

    On May 20, 2015, we proposed to amend rule 30a-1 to require all
funds to file reports with certain census-type

information on proposed Form N-CEN with the Commission on an annual
basis. Proposed Form N-CEN would have been a collection of information
under the PRA, and was designed to facilitate the Commission's
oversight of funds and its ability to monitor trends and risks. The
collection of information under Form N-CEN would be mandatory for all
funds, and responses would not be kept confidential.
    In the Investment Company Reporting Modernization Proposing
Release, we estimated that the average annual hour burden per response
for proposed Form N-CEN for the first year would be 32.37 hours and
12.37 hours in subsequent years.\513\ Amortizing the burden over three
years, we estimated that the average annual hour burden per fund per
year would be 19.04 and the total average annual hour burden would be
59,900 hours.\514\ We also estimated that all applicable funds would
incur, in the aggregate, external annual costs of $1,748,637, which
would include the costs of registering and maintaining LEIs for
funds.\515\
---------------------------------------------------------------------------

    \513\ Investment Company Reporting Modernization Proposing
Release, supra footnote 11, at n.762 and accompanying text.
    \514\ Id. at n.765 and accompanying text.
    \515\ In the Investment Company Reporting Modernization Adopting
Release, we continue to estimate that the average annual hour burden
per response for Form N-CEN for the first year will be 32.37 hours
and 12.37 hours in subsequent years. Amortizing the burden over
three years, we continue to estimate that the average annual burden
per fund year will be 19.04 hours but that the total aggregate
annual hour burden will be 59,272 hours, rather than 59,900 in light
of updates to the industry data figures that were utilized in the
Investment Company Reporting Modernization Proposing Release. See
Investment Company Reporting Modernization Adopting Release, supra
footnote 11, at section IV.B.1.
---------------------------------------------------------------------------

    We are adopting, substantially as proposed, a new reporting item on
Form N-CEN to require funds to report information regarding swing
pricing.\516\ Specifically, the new item on Form N-CEN will require
funds (other than money market funds and ETFs) to report whether they
used swing pricing during the reporting period and, if so, the fund's
swing factor upper limit.\517\
---------------------------------------------------------------------------

    \516\ In the Proposing Release, we also proposed to add to Form
N-CEN a requirement for funds to report information concerning lines
of credit, interfund lending, and interfund borrowing. We are
adopting those reporting requirements and discuss related PRA
burdens and costs in the Liquidity Risk Management Programs Adopting
Release. See supra footnote 8, at section V.G.
    \517\ See Item C.21 of Form N-CEN.
---------------------------------------------------------------------------

    In the Proposing Release, we estimated that 8,734 funds would be
required to file responses on Form N-CEN. We estimated that the average
annual hour burden per additional response to Form N-CEN as a result of
the proposed new reporting requirements would be 0.5 hour per fund per
year for a total average annual hour burden of 4,367 hours.\518\ We did
not estimate any change to the external costs associated with proposed
Form N-CEN.
---------------------------------------------------------------------------

    \518\ This estimate was based on the following calculation:
8,734 funds x 0.5 hours = 4,367 hours.
---------------------------------------------------------------------------

    We did not receive any comments on these estimated hour and cost
burdens. The Commission has modified the estimated increase in annual
burden hours and total time costs based on the modification to the
proposal to address separately in this Release the requirement to
report whether a fund used swing pricing during the reporting period
and require funds report the swing factor upper limit if swing pricing
was used during the reporting period. The estimated increase in annual
burden hours and total time costs also has been modified in light of
updated data concerning funds and fund personnel salaries. We estimate
that 9,039 funds will be required to file responses to Item C.21 of
Form N-CEN regarding swing pricing.\519\ For these funds, we estimate
that the average annual hour burden per additional response to Form N-
CEN as a result of the adopted swing pricing-related additions to Form
N-CEN will be 0.5 hour per fund per year for a total average annual
hour burden of 4,519.5 hours.\520\ We do not estimate any change to the
external costs associated with proposed Form N-CEN.
---------------------------------------------------------------------------

    \519\ See supra footnote 388.
    \520\ This estimate is based on the following calculation: 9,039
funds x .5 hour = 4,519.5 hours.
---------------------------------------------------------------------------

E. Form N-1A

    Form N-1A is the registration form used by open-end investment
companies. The respondents to the amendments to Form N-1A adopted today
are open-end management investment companies registered or registering
with the Commission. Compliance with the disclosure requirements of
Form N-1A is mandatory, and the responses to the disclosure
requirements are not confidential. We currently estimate for Form N-1A
a total hour burden of 1,579,974 hours, and the total annual external
cost burden is $124,820,197.\521\
---------------------------------------------------------------------------

    \521\ These estimates are based on the last time the rule's
information collections were submitted for PRA renewal in 2014.
---------------------------------------------------------------------------

    We are adopting amendments to Form N-1A that require funds that use
swing pricing to disclose that they use swing pricing, and, if
applicable, an explanation of what swing pricing is, the circumstances
under which swing pricing is used, and the effects of using swing
pricing.\522\ Funds that use swing pricing will also be required to
disclose the swing factor upper limit.\523\ We also are adopting
amendments to Form N-1A that require funds to include, if applicable, a
footnote that describes the effects of swing pricing on the fund's
annual total return bar chart and average annual total returns table,
and additional disclosures in the prospectus financial highlights with
respect to the per share impact of amounts related to swing pricing in
the NAV per-share roll-forward, as well as the Swung NAV per
share.524 525
---------------------------------------------------------------------------

    \522\ See Item 6(d) of Form N-1A.
    \523\ See id.
    \524\ See supra section II.B. See also Item 4(b)(2)(ii); Item
4(b)(2)(iv)(E); Item 13(a); and Instructions 2(d) and (e) of Item
13(a).
    \525\ See supra section II.B. In the Proposing Release, we also
proposed to amend Form N-1A to require funds to disclose additional
information concerning the procedures for redeeming a fund's shares.
We are adopting those disclosure requirements and discuss related
PRA burdens and costs in the Liquidity Risk Management Programs
Adopting Release. See supra footnote 8, at section V.H.
---------------------------------------------------------------------------

    We believe that requiring funds to provide this additional
disclosure regarding swing pricing will provide Commission staff,
investors, and market participants with improved information about the
conditions under which swing pricing procedures will be used to
mitigate the effects of dilution as a result of shareholder purchase or
redemption activity.
    Form N-1A generally imposes two types of reporting burdens on
investment companies: (i) The burden of preparing and filing the
initial registration statement; and (ii) the burden of preparing and
filing post-effective amendments to a previously effective registration
statement (including post-effective amendments filed pursuant to rule
485(a) or 485(b) under the Securities Act, as applicable). In the
Proposing Release, we estimated that each fund would incur a one-time
burden of an additional 2 hours,\526\ at a time cost of an additional
$637,\527\ to draft and finalize the required disclosure and amend its
registration statement in response to the proposed Form N-1A disclosure
requirements. In aggregate, we estimated that funds would incur a one-
time burden of an

additional 17,468 hours,\528\ at a time cost of an additional
$5,563,558,\529\ to comply with the Form N-1A disclosure requirements
originally proposed. We estimated that amortizing the one-time burden
over a three-year period would result in an average annual burden of an
additional 5,823 hours at a time cost of an additional $1,854,519.\530\
---------------------------------------------------------------------------

    \526\ This estimate was based on the following calculation: 1
hour to update registration statement to include swing pricing-
related disclosure statements + 1 hour to update registration
statement disclosure about redemption procedures = 2 hours.
    \527\ This estimate was based on the following calculation: 2
hours x $318.5 (blended rate for a compliance attorney ($334) and a
senior programmer ($303)) = $637.
    \528\ This estimate was based on the following calculations: 2
hours x 8,734 funds = 17,468 hours.
    \529\ This estimate was based on the following calculation:
17,468 hours x $318.50 (blended rate for a compliance attorney
($334) and a senior programmer ($303)) = $5,563,558.
    \530\ This estimate was based on the following calculation:
17,468 hours / 3 = 5,823 average annual burden hours; $5,563,558
burden costs / 3 = $1,854,519 average annual burden cost.
---------------------------------------------------------------------------

    In the Proposing Release, we also estimated that each fund would
incur an ongoing burden of an additional 0.25 hours, at a time cost of
an additional $80,\531\ each year to review and update the proposed
disclosure in response to Item 11 and Item 28 of Form N-1A regarding
the pricing and redemption of fund shares and the inclusion of credit
agreements as exhibits, respectively. In aggregate, we estimated that
funds would incur an annual burden of an additional 2,184 hours,\532\
at a time cost of an additional $695,604,\533\ to comply with the
proposed Form N-1A disclosure requirements.
---------------------------------------------------------------------------

    \531\ This estimate was based on the following calculations:
0.25 hours x $318.50 (blended hourly rate for a compliance attorney
($334) and a senior programmer ($303)) = $79.63.
    \532\ This estimate was based on the following calculation: 0.25
hours x 8,734 funds = 2,183.5 hours.
    \533\ This estimate was based on the following calculation:
2,184 hours x $318.50 (blended hourly rate for a compliance attorney
($334) and a senior programmer ($303)) = $695,604.
---------------------------------------------------------------------------

    In the Proposing Release, we further estimated that amortizing
these one-time and ongoing hour and cost burdens over three years would
result in an average annual increased burden of approximately 0.50
hours per fund,\534\ at a time cost of $265.42 per fund.\535\
---------------------------------------------------------------------------

    \534\ This estimate was based on the following calculation: 1
burden hour (year 1) + 0.25 burden hour (year 2) + 0.25 burden hour
(year 3) / 3 = 0.50 hours.
    \535\ This estimate was based on the following calculation: $637
(year 1 monetized burden hours) + $79.63 (year 2 monetized burden
hours) + $79.63 (year 3 monetized burden hours) / 3 = $265.42.
---------------------------------------------------------------------------

    In total, we estimated in the Proposing Release that funds would
incur an average annual increased burden of approximately 8,007
hours,\536\ at a time cost of approximately $2,550,123,\537\ to comply
with the proposed Form N-1A disclosure requirements. We did not
estimate any change to the external costs associated with the proposed
amendments to Form N-1A.
---------------------------------------------------------------------------

    \536\ This estimate was based on the following calculation:
5,823 hours + 2,184 hours = 8,007 hours.
    \537\ This estimate was based on the following calculation:
$1,854,519 + $695,604 = $2,550,123.
---------------------------------------------------------------------------

    One commenter stated that the cost estimates under the proposal
were overly optimistic, including as an example our estimated $637 cost
per fund to implement the proposed Form N-1A disclosure
requirements.\538\ As discussed above, the amendments to Form N-1A,
discussed in this Release, concern disclosure requirements related to
swing pricing only. We recognize that certain disclosure requirements
related to swing pricing have been modified from the proposal and that
these disclosure requirements were not contemplated in the burden hours
and costs we estimated in the Proposing Release. For example, we are
adopting a requirement that a fund include in its financial highlights
presentation in Form N-1A two NAV calculations (i.e., the Net Asset
Value adjusted for GAAP and the Net Asset Value adjusted pursuant to
Swing Pricing, End of Period) rather than a single Swung NAV as
proposed.\539\ We are also adopting a requirement that funds include a
general description of the effects of swing pricing on the fund's
annual total returns bar chart and average annual total returns table
if swing pricing policies and procedures were applied during any of the
periods represented.\540\ We are also requiring funds that use swing
pricing to disclose the swing factor upper limit.\541\ In addition, we
recognize that one commenter suggested that we had understated the cost
estimates associated with amendments to Form N-1A although they did not
provide alternative quantitative estimates.\542\
---------------------------------------------------------------------------

    \538\ See FSR Comment Letter (noting that changes to a fund's
disclosure typically involve a number of stakeholders and several
rounds of drafting and review, such that costs associated with even
modest changes to fund disclosure can have a serious cost
component). With the exception of this comment, we did not receive
comments on the estimated hour and costs burdens associated with the
disclosure amendments to Form N-1A under the proposal.
    \539\ See Item 13 of Form N-1A. See also supra section II.B.
    \540\ See Item 4(b)(2)(ii) and Item 4(b)(2)(iv)(E) of Form N-1A.
    \541\ See Item 6(d) of Form N-1A.
    \542\ See FSR Comment Letter.
---------------------------------------------------------------------------

    The Commission has modified the estimated increase in annual burden
hours and total time costs that will result from the amendments to Form
N-1A based on the modifications to the proposal discussed in this
Release. Furthermore, we have considered the concern expressed by one
commenter that the burdens and costs estimated in the proposal were
overly optimistic. We also have estimated an increase in the aggregate
annual burden hours that will result from the amendments to Form N-1A
in light of updated data regarding the number of funds subject to the
disclosure requirements.
    In the Proposing Release, we estimated that approximately 947 funds
would use swing pricing.\543\ Based on updates to industry data figures
that were utilized in the Proposing Release and the reduction in our
estimate of the number of funds in fund complexes that will choose to
use swing pricing, for purposes of the PRA analysis, we estimate that
approximately 474 funds (half as many funds as proposed) will use swing
pricing.\544\ We estimate that each fund will incur a one-time burden
of an additional 2 hours, rather than 1 hour, to draft and finalize the
required swing pricing-related disclosures and amend its registration
statement accordingly,\545\ but at a time cost of an additional $648,
rather than $637,\546\ based on updated data concerning funds and fund
personnel salaries. In aggregate, we estimate that funds will incur a
one-time burden of an additional 948 hours,\547\ rather than 17,468
hours, at a time cost of an additional $307,152,\548\ rather than
$5,563,558, to comply with the Form N-1A disclosure requirements as
adopted. We estimate that amortizing the one-time burden over a three-
year period will result in an average annual burden of an additional
316 hours, rather than 5,823 hours at a time cost of an additional
$102,384, rather than $1,854,519.\549\
---------------------------------------------------------------------------

    \543\ See Proposing Release, supra footnote 6, at section V.D.
    \544\ See supra footnote 489.
    \545\ This estimate is based on the following calculation: 2
hours to update registration statement to include swing pricing-
related disclosure statements.
    \546\ This estimate is based on the following calculation: 2
hours x $324 (blended rate for a compliance attorney ($340) and a
senior programmer ($308)) = $648.
    \547\ This estimate was based on the following calculations: 2
hours x 474 funds) = 948 hours.
    \548\ This estimate is based on the following calculation: 948
hours x $324 (blended rate for a compliance attorney ($340) and a
senior programmer ($308)) = $307,152.
    \549\ This estimate is based on the following calculation: 948
hours / 3 = 316 average annual burden hours; $307,152 burden costs /
3 = $102,384 average annual burden cost.
---------------------------------------------------------------------------

    In addition, we estimate that each fund will incur an ongoing
burden of an additional one hour, but at a time cost of an additional
$324,\550\ each year to review and update disclosures required in
response to the amendments to Form N-1A related to swing pricing. In

aggregate, we estimate that funds will incur an annual burden of an
additional 474 hours,\551\ at a time cost of an additional
$153,576,\552\ to comply with the Form N-1A disclosure requirements
related to swing pricing adopted today.
---------------------------------------------------------------------------

    \550\ This estimate is based on the following calculations: 1
hour x $324 (blended hourly rate for a compliance attorney ($340)
and a senior programmer ($308)) = $324.
    \551\ This estimate is based on the following calculation: 1
hour x 474 funds = 474 hours.
    \552\ This estimate is based on the following calculation: 474
hours x $324 (blended hourly rate for a compliance attorney ($340)
and a senior programmer ($308)) = $153,576.
---------------------------------------------------------------------------

    Furthermore, we estimate that amortizing these one-time and ongoing
hour and cost burdens over three years will result in an average annual
increased burden of approximately 1.33 hours per fund,\553\ but at a
time cost of $432 per fund.\554\
---------------------------------------------------------------------------

    \553\ This estimate is based on the following calculation: 2
burden hours (year 1) + 1 burden hour (year 2) + 1 burden hour (year
3) / 3 = 1.33 hours.
    \554\ This estimate is based on the following calculation: $648
(year 1 monetized burden hours) + $324 (year 2 monetized burden
hours) + $324 (year 3 monetized burden hours) / 3 = $432.
---------------------------------------------------------------------------

    In total, we estimate that funds will incur an average annual
increased burden of approximately 790 hours,\555\ at a time cost of
approximately $255,960,\556\ to comply with the Form N-1A disclosure
requirements related to swing pricing adopted today. We do not estimate
any change to the external costs associated with these amendments to
Form N-1A.
---------------------------------------------------------------------------

    \555\ This estimate is based on the following calculation: 316
hours + 474 hours = 790 hours.
    \556\ This estimate is based on the following calculation:
$102,384 + $153,576= $255,960.
---------------------------------------------------------------------------

V. Final Regulatory Flexibility Act Analysis

    This Final Regulatory Flexibility Analysis has been prepared in
accordance with section 3 of the Regulatory Flexibility Act
(``RFA'').\557\ It relates to amendments to rule 22c-1, rule 31a-2,
Form N-1A, and Form N-CEN. We prepared an Initial Regulatory
Flexibility Analysis (``IRFA'') in conjunction with the Proposing
Release in September 2015.\558\ The Proposing Release included, and
solicited comment, on the IRFA.
---------------------------------------------------------------------------

    \557\ 5 U.S.C. 604.
    \558\ See Proposing Release, supra footnote 6, at section VI.
---------------------------------------------------------------------------

A. Need for the Rule

    Under current pricing methods, shareholder purchase and redemption
activity could dilute the value of non-transacting shareholders'
interests in some funds. The Commission is adopting amendments to rule
22c-1 to permit a fund to use ``swing pricing,'' the process of
adjusting a fund's NAV to effectively pass on to purchasing and
redeeming shareholders more of the costs stemming from their trading
activity. We believe that rule 22c-1 will promote investor protection
by providing funds with an additional tool to mitigate the potentially
dilutive effects of shareholder purchase or redemption activity and
provide a set of operational standards that will allow funds to gain
comfort using swing pricing as a new means of mitigating potential
dilution. Swing pricing may also provide funds with an additional tool
to manage liquidity risks. In addition, the Commission is adopting
related recordkeeping and disclosure requirements to enhance disclosure
and Commission oversight of funds' use of swing pricing. Each of these
objectives is discussed in detail in section III above.

B. Significant Issues Raised by Public Comment

    In the Proposing Release, we requested comment on the IRFA,
requesting in particular comment on the number of small entities that
would be subject to the proposed swing pricing rules and whether the
proposed swing pricing rules would have any effects that have not been
discussed. We requested that commenters describe the nature of any
effects on small entities subject to the proposed swing pricing rules
and provide empirical data to support the nature and extent of such
effects. We also requested comment on the estimated compliance burdens
of the proposed swing pricing rules and how they would affect small
entities. We received a number of comments related to the impact of our
proposal on small entities, with some commenters expressing concern
that certain large fund complexes with more influence over their
distribution partners (or with more resources/internal processes in
place to support swing pricing) would be more successful than small
fund complexes in obtaining intraday flow information and implementing
swing pricing.\559\ We believe this effect on small fund complexes may
be mitigated if fund service providers implement the operational
changes necessary to support swing pricing for all funds that they
service. Based on staff outreach, we understand that fund service
providers are more likely to implement operational changes in this
manner than they are to implement operational changes selectively for
certain funds. We also note that funds will be permitted, but will not
be required, to implement swing pricing.
---------------------------------------------------------------------------

    \559\ See CRMC Comment Letter; Dechert Comment Letter; ICI
Comment Letter I; IDC Comment Letter.
---------------------------------------------------------------------------

C. Small Entities Subject to the Rule

    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.\560\ Commission staff estimates that, as of
December 31, 2015, there were 78 small open-end investment companies
(within 76 fund complexes) that would be considered small entities;
this number includes open-end ETFs.
---------------------------------------------------------------------------

    \560\ See rule 0-10(a) under the Act.
---------------------------------------------------------------------------

D. Projected Reporting, Recordkeeping, and Other Compliance
Requirements

1. Swing Pricing
    Amendments to rule 22c-1 permit, but do not require, all registered
open-end funds (except money market funds and ETFs), including small
entities, to use swing pricing, provided that it adopts policies and
procedures that include certain elements and are approved by the fund's
board.\561\ A fund's swing pricing policies and procedures must provide
that the fund is required to adjust its NAV per share by an amount
known as the ``swing factor'' once the level of net purchases or net
redemptions has exceeded a set, specified percentage of the fund's NAV
known as the ``swing threshold.'' \562\ A fund is required to consider
certain factors in determining its swing threshold,\563\ and to take
into account certain considerations in determining the swing
factor.\564\ In addition, a fund is required to establish an upper
limit on the swing factor(s) used, which may not exceed two percent of
NAV per share. The fund's board is required to approve the fund's swing
pricing policies and procedures, as well as the fund's swing factor
upper limit and swing threshold(s) and any changes to the upper limit
or threshold(s). The fund's board is also required to periodically
review a written report prepared by the persons responsible for
administering swing pricing that includes certain required
information.\565\ A fund that adopts swing pricing policies and
procedures also would be subject to certain recordkeeping requirements
under proposed amendments to each of rule 22c-1 and rule 31a-2. We
estimate that the annual external cost burden of

compliance with these recordkeeping requirements would increase by $600
per fund that engages in swing pricing.\566\ Because the amendments
permit, but do not require a fund to adopt swing pricing policies and
procedures, there is no compliance date associated with this rule. We
are providing a two-year effective date for the new swing pricing
amendments, however, to provide time for funds, their intermediaries
and service providers to make any operational changes necessary to
implement swing pricing.\567\ By providing a uniform extended effective
date, all eligible funds will have time to develop swing pricing
capabilities (should they choose to do so) and competitive advantages
among funds may be mitigated.
---------------------------------------------------------------------------

    \561\ See supra section II.A.
    \562\ A fund may have multiple, escalating swing factors, with
each factor associated with a different swing threshold, subject to
the two percent upper limit. See supra section II.A.3.c.
    \563\ Id.
    \564\ See supra section II.A.3.e.
    \565\ See supra section II.A.3.f.
    \566\ See supra footnote 512 and accompanying text.
    \567\ See supra section II.A.1.
---------------------------------------------------------------------------

    As discussed above, we estimate that, on average, a fund complex
would incur one-time costs ranging from $2.4 million to $48.5 million,
depending on the fund complex's particular circumstances, to adopt
swing pricing policies and procedures and comply with related record
retention requirements, as well as ongoing annual costs ranging from
$120,000 to $15.8 million per year associated with the new swing
pricing (and related recordkeeping) regulations.\568\ We estimate that
12 small fund complexes, rather than 24 small fund complexes (half as
many small fund complexes as estimated in the proposal), include funds
that will adopt swing pricing policies and procedures pursuant to the
rule.\569\ We further estimate that these small fund complexes would
incur one-time and ongoing costs on the low end of the estimated range
as compared to the high end of the estimated range (one-time costs of
approximately $2.4 million and ongoing costs of approximately $120,000
per year for each small fund complex).
---------------------------------------------------------------------------

    \568\ See supra footnote 439 and accompanying paragraph.
    \569\ See supra footnote 489 and accompanying text.
---------------------------------------------------------------------------

2. Disclosure and Reporting Requirements Regarding Swing Pricing
    The swing pricing rules include amendments to Form N-1A and
additions to Form N-CEN that are intended to enhance fund disclosure
and reporting regarding a fund's use of swing pricing. In particular,
the amendments to Form N-1A require funds that use swing pricing to
disclose that they use swing pricing, and, if applicable, an
explanation of what swing pricing is, the circumstances under which
swing pricing is used, the effects of using swing pricing, and the
upper limit the fund has set on the swing factor.\570\ The amendments
to Form N-1A also require funds to disclose on their balance sheet the
NAV as adjusted pursuant to swing pricing policies and procedures.\571\
The amendments to Regulation S-X requires a fund to disclose both its
GAAP NAV per share and the Swung NAV per share as adjusted pursuant to
the fund's swing pricing policies and procedures (if applicable). The
new item in Form N-CEN requires disclosure regarding whether a fund
engaged in swing pricing during the reporting period and, if so, the
fund's swing factor upper limit. We estimate that 78 funds are small
entities that would be required to comply with the proposed disclosure
and reporting requirements.\572\
---------------------------------------------------------------------------

    \570\ See supra section II.B.
    \571\ Id.
    \572\ Commission staff estimate as of December 31, 2015.
---------------------------------------------------------------------------

    As discussed above, we estimate that each fund, including funds
that are small entities, will incur a one-time burden of an additional
2 hours,\573\ at a time cost of an additional $648 (plus printing
costs), to comply with the amendments to Form N-1A.\574\ We also
estimate that each fund, including small entities, will incur an
ongoing burden of an additional 1 hour, at a time cost of approximately
an additional $324 each year associated with compliance with the
amendments to Form N-1A.\575\ We do not estimate any change to the
external costs associated with the amendments to Form N-1A.
---------------------------------------------------------------------------

    \573\ See supra footnote 526 and accompanying text.
    \574\ See supra footnote 527 and accompanying text.
    \575\ See supra footnote 531 and accompanying text.
---------------------------------------------------------------------------

    As discussed above, we also estimate that the average annual hour
burden per additional response to Form N-CEN as a result of the adopted
swing pricing additions to Form N-CEN will be 0.5 hour per fund per
year.\576\ We do not estimate any change to the external costs
associated with Form N-CEN.\577\
---------------------------------------------------------------------------

    \576\ See supra footnote 520 and accompanying paragraph.
    \577\ Id.
---------------------------------------------------------------------------

E. Agency Action To Minimize Effect on Small Entities

    The Regulatory Flexibility Act directs the Commission to consider
significant alternatives that would accomplish the stated objective,
while minimizing any significant impact on small entities. Alternatives
in this category would include: (i) Establishing different compliance
or reporting standards that take into account the resources available
to small entities; (ii) clarifying, consolidating, or simplifying the
compliance requirements under the rules and amendments for small
entities; (iii) using performance rather than design standards; and
(iv) exempting small entities from coverage of the rules and
amendments, or any part of the rules and amendments.
    The Commission does not presently believe that the swing pricing
rules would require the establishment of special compliance
requirements or timetables for small entities. The swing pricing rules
are specifically designed to reduce any unnecessary burdens on all
funds (including small funds). To establish special compliance
requirements or timetables for small entities may in fact disadvantage
small entities by encouraging larger market participants to focus
primarily on the needs of larger entities when making the operational
changes envisioned by the swing pricing rules, and possibly ignoring
the needs of smaller funds.
    With respect to further clarifying, consolidating, or simplifying
the compliance requirements of the swing pricing rules, using
performance rather than design standards, and exempting small entities
from coverage of the swing pricing rules or any part of the swing
pricing rules, we believe additional such changes would be
impracticable. Small entities are as vulnerable to the risk of dilution
of the interests of fund shareholders as larger funds. We believe that
the swing pricing rules are necessary to help mitigate these risks.
Exempting small funds from coverage under the swing pricing rules or
any part of the swing pricing rules could compromise the effectiveness
of the swing pricing rules or any part of the swing pricing rules.

VI. Statutory Authority and Text of Amendments

    The Commission is adopting amendments to rule 22c-1 under the
authority set forth in sections 22(c) and 38(a) of the Investment
Company Act [15 U.S.C. 80a-22(c) and 80a-37(a)]. The Commission is
adopting amendments to rule 31a-2 under the authority set forth in
section 31(a) of the Investment Company Act [15 U.S.C. 80a-31(a)]. The
Commission is adopting amendments to Form N-1A, Regulation S-X, and
proposed Form N-CEN under the authority set forth in the Securities
Act, particularly section 19 thereof [15 U.S.C. 77a et seq.], the Trust
Indenture Act, particularly, section 19 thereof [15 U.S.C. 77aaa et
seq.], the Exchange Act, particularly sections 10, 13, 15, and 23, and
35A thereof [15 U.S.C. 78a et seq.],

and the Investment Company Act, particularly, sections 8, 30, and 38
thereof [15 U.S.C. 80a et seq.].

Text of Rules and Forms

List of Subjects

17 CFR Part 210

    Accounting, Investment companies, Reporting and recordkeeping
requirements, Securities.

17 CFR Parts 270 and 274

    Investment companies, Reporting and recordkeeping requirements,
Securities.

    For the reasons set out in the preamble, title 17, chapter II of
the Code of Federal Regulations is amended as follows:

PART 210--FORM AND CONTENT OF AND REQUIREMENTS FOR FINANCIAL
STATEMENTS, SECURITIES ACT OF 1933, SECURITIES EXCHANGE ACT OF
1934, INVESTMENT COMPANY ACT OF 1940, INVESTMENT ADVISERS ACT OF
1940, AND ENERGY POLICY AND CONSERVATION ACT OF 1975

0
1. The authority citation for part 210 continues to read as follows:

    Authority:  15 U.S.C. 77f, 77g, 77h, 77j, 77s, 77z-2, 77z-3,
77aa(25), 77aa(26), 77nn(25), 77nn(26), 78c, 78j-1, 78l, 78m, 78n,
78o(d), 78q, 78u-5, 78w, 78ll, 78mm, 80a-8, 80a-20, 80a-29, 80a-30,
80a-31, 80a-37(a), 80b-3, 80b-11, 7202 and 7262, unless otherwise
noted.

0
2. Amend Sec.  210.6-02 by adding paragraph (e) to read as follows:

Sec.  210.6-02  Definition of certain terms.

* * * * *
    (e) Swing pricing. The term swing pricing shall have the meaning
given in Sec.  270.22c-1(a)(3)(v)(C) of this chapter.

0
3. Section 210.6-03, as revised elsewhere in this issue of the Federal
Register, is further amended by adding paragraph (m) to read as
follows:

Sec.  210.6-03  Special rules of general application to registered
investment companies and business development companies.

* * * * *
    (m) Swing pricing. For a registered investment company that has
adopted swing pricing policies and procedures, state in a note to the
company's financial statements:
    (1) The general methods used in determining whether the company's
net asset value per share will swing;
    (2) Whether the company's net asset value per share has swung
during the year; and
    (3) A general description of the effects of swing pricing.

PART 270--RULES AND REGULATIONS, INVESTMENT COMPANY ACT OF 1940

0
4. The authority citation for part 270 continues to read, in part, as
follows:

    Authority:  15 U.S.C. 80a-1 et seq., 80a-34(d), 80a-37, 80a-39,
and Pub. L. 111-203, sec. 939A, 124 Stat. 1376 (2010), unless
otherwise noted.
* * * * *

0
5. Amend Sec.  270.22c-1 by adding paragraph (a)(3) to read as follows:

Sec.  270.22c-1  Pricing of redeemable securities for distribution,
redemption and repurchase.

    (a) * * *
    (3) Notwithstanding this paragraph (a), a registered open-end
management investment company (but not a registered open-end management
investment company that is regulated as a money market fund under Sec.
270.2a-7 or an exchange-traded fund as defined in paragraph
(a)(3)(v)(A) of this section) (a ``fund'') may use swing pricing to
adjust its current net asset value per share to mitigate dilution of
the value of its outstanding redeemable securities as a result of
shareholder purchase or redemption activity, provided that it has
established and implemented swing pricing policies and procedures in
compliance with the paragraphs (a)(3)(i) through (v) of this section.
    (i) The fund's swing pricing policies and procedures must:
    (A) Provide that the fund must adjust its net asset value per share
by a single swing factor or multiple factors that may vary based on the
swing threshold(s) crossed once the level of net purchases into or net
redemptions from such fund has exceeded the applicable swing threshold
for the fund. In determining whether the fund's level of net purchases
or net redemptions has exceeded the applicable swing threshold(s), the
person(s) responsible for administering swing pricing shall be
permitted to make such determination based on receipt of sufficient
information about the fund investors' daily purchase and redemption
activity (``investor flow'') to allow the fund to reasonably estimate
whether it has crossed the swing threshold(s) with high confidence, and
shall exclude any purchases or redemptions that are made in kind and
not in cash. This investor flow information may consist of individual,
aggregated, or netted orders, and may include reasonable estimates
where necessary.
    (B) Specify the process for how the fund's swing threshold(s) shall
be determined, considering:
    (1) The size, frequency, and volatility of historical net purchases
or net redemptions of fund shares during normal and stressed periods;
    (2) The fund's investment strategy and the liquidity of the fund's
portfolio investments;
    (3) The fund's holdings of cash and cash equivalents, and borrowing
arrangements and other funding sources; and
    (4) The costs associated with transactions in the markets in which
the fund invests.
    (C) Specify the process for how the swing factor(s) shall be
determined, which must include: The establishment of an upper limit on
the swing factor(s) used, which may not exceed two percent of net asset
value per share; and the determination that the factor(s) used are
reasonable in relationship to the costs discussed in this paragraph. In
determining the swing factor(s) and the upper limit, the person(s)
responsible for administering swing pricing may take into account only
the near-term costs expected to be incurred by the fund as a result of
net purchases or net redemptions that occur on the day the swing
factor(s) is used, including spread costs, transaction fees and charges
arising from asset purchases or asset sales resulting from those
purchases or redemptions, and borrowing-related costs associated with
satisfying redemptions.
    (ii) The fund's board of directors, including a majority of
directors who are not interested persons of the fund must:
    (A) Approve the fund's swing pricing policies and procedures;
    (B) Approve the fund's swing threshold(s) and the upper limit on
the swing factor(s) used, and any changes to the swing threshold(s) or
the upper limit on the swing factor(s) used;
    (C) Designate the fund's investment adviser, officer, or officers
responsible for administering the swing pricing policies and procedures
(``person(s) responsible for administering swing pricing''). The
administration of swing pricing must be reasonably segregated from
portfolio management of the fund and may not include portfolio
managers; and
    (D) Review, no less frequently than annually, a written report
prepared by the person(s) responsible for administering swing pricing
that describes:
    (1) Its review of the adequacy of the fund's swing pricing policies
and procedures and the effectiveness of their implementation, including
the impact on mitigating dilution;

    (2) Any material changes to the fund's swing pricing policies and
procedures since the date of the last report; and
    (3) Its review and assessment of the fund's swing threshold(s),
swing factor(s), and swing factor upper limit considering the
requirements of paragraphs (a)(3)(i)(B) and (C) of this section,
including the information and data supporting the determination of the
swing threshold(s), swing factor(s), and swing factor upper limit.
    (iii) The fund shall maintain the policies and procedures adopted
by the fund under this paragraph (a)(3) that are in effect, or at any
time within the past six years were in effect, in an easily accessible
place, and shall maintain a written copy of the report provided to the
board under paragraph (a)(3)(ii)(C) of this section for six years, the
first two in an easily accessible place.
    (iv) Any fund (a ``feeder fund'') that invests, pursuant to section
12(d)(1)(E) of the Act (15 U.S.C. 80a-12(d)(1)(E)), in another fund (a
``master fund'') may not use swing pricing to adjust the feeder fund's
net asset value per share; however, a master fund may use swing pricing
to adjust the master fund's net asset value per share, pursuant to the
requirements set forth in this paragraph (a)(3).
    (v) For purposes of this paragraph (a)(3):
    (A) Exchange-traded fund means an open-end management investment
company (or series or class thereof), the shares of which are listed
and traded on a national securities exchange, and that has formed and
operates under an exemptive order under the Act granted by the
Commission or in reliance on an exemptive rule adopted by the
Commission.
    (B) Swing factor means the amount, expressed as a percentage of the
fund's net asset value and determined pursuant to the fund's swing
pricing policies and procedures, by which a fund adjusts its net asset
value per share once a fund's applicable swing threshold has been
exceeded.
    (C) Swing pricing means the process of adjusting a fund's current
net asset value per share to mitigate dilution of the value of its
outstanding redeemable securities as a result of shareholder purchase
and redemption activity, pursuant to the requirements set forth in this
paragraph (a)(3).
    (D) Swing threshold means an amount of net purchases or net
redemptions, expressed as a percentage of the fund's net asset value,
that triggers the application of swing pricing.
    (E) Transaction fees and charges means brokerage commissions,
custody fees, and any other charges, fees, and taxes associated with
portfolio asset purchases and sales.
* * * * *

0
6. Section 270.31a-2 is amended by revising paragraph (a)(2) to read as
follows:

Sec.  270.31a-2  Records to be preserved by registered investment
companies, certain majority-owned subsidiaries thereof, and other
persons having transactions with registered investment companies.

    (a) * * *
    (2) Preserve for a period not less than six years from the end of
the fiscal year in which any transactions occurred, the first two years
in an easily accessible place, all books and records required to be
made pursuant to paragraphs (b)(5) through (12) of Sec.  270.31a-1 and
all vouchers, memoranda, correspondence, checkbooks, bank statements,
cancelled checks, cash reconciliations, cancelled stock certificates,
and all schedules evidencing and supporting each computation of net
asset value of the investment company shares, including schedules
evidencing and supporting each computation of an adjustment to net
asset value of the investment company shares based on swing pricing
policies and procedures established and implemented pursuant to Sec.
270.22c-1(a)(3), and other documents required to be maintained by Sec.
270.31a-1(a) and not enumerated in Sec.  270.31a-1(b).
* * * * *

PART 274--FORMS PRESCRIBED UNDER THE INVESTMENT COMPANY ACT OF 1940

0
7. The general authority citation for part 274 continues to read, in
part, as follows, and the sectional authorities for Sec. Sec.  274.101
and 274.130 are removed:

    Authority:  15 U.S.C. 77f, 77g, 77h, 77j, 77s, 78c(b), 78l, 78m,
78n, 78o(d), 80a-8, 80a-24, 80a-26, 80a-29, and Pub. L. 111-203,
sec. 939A, 124 Stat. 1376 (2010), unless otherwise noted.
* * * * *

Sec.  274.11A   [Amended]

0
8. Amend Form N-1A (referenced in Sec.  274.11A) by:
0
a. In Item 4(b)(2)(ii) adding a sentence regarding the effects of swing
pricing and in Item 4(b)(2)(iv) adding paragraph (E)
0
b. In Item 6 adding paragraph (d);
0
c. In Item 13, adding ``Capital Adjustments Due to Swing Pricing''
after ``Total Distributions'' to the list in paragraph (a);
0
d. In Item 13, adding ``Net Asset Value, adjusted pursuant to swing
pricing, End of Period'' after ``Net Asset Value, End of Period''.
0
e. In Item 13, Instruction 2., adding paragraphs (d) and (e).
    The additions read as follows:

    Note: The text of Form N-1A does not, and this amendment will
not, appear in the Code of Federal Regulations.

Form N-1A

* * * * *

Item 4. Risk/Return Summary: Investments, Risks, and Performance

* * * * *
    (b) * * *
    (2) * * *
    (ii) If swing pricing policies and procedures were applied during
any of the periods, include a general description of the effects of
swing pricing on the Fund's annual total returns for the applicable
period(s) presented in a footnote to the bar chart.
* * * * *
    (b) * * *
    (2) * * *
    (iv) * * *
    (E) If swing pricing policies and procedures were applied during
any of the periods, include a general description of the effects of
swing pricing on the Fund's average annual total returns for the
applicable period(s) presented.

Item 6. Purchase and Sale of Fund Shares

* * * * *
    (d) If the Fund uses swing pricing, explain the Fund's use of swing
pricing; including what swing pricing is, the circumstances under which
the Fund will use it, the effects of swing pricing on the Fund and
investors, and provide the upper limit it has set on the swing factor.
With respect to any portion of a Fund's assets that is invested in one
or more open-end management investment companies that are registered
under the Investment Company Act, the Fund shall include a statement
that the Fund's net asset value is calculated based upon the net asset
values of the registered open-end management investment companies in
which the Fund invests, and, if applicable, state that the prospectuses
for those companies explain the circumstances under which they will use
swing pricing and the effects of using swing pricing.
* * * * *

Item 13. Financial Highlights Information

* * * * *
    Instructions * * *
    2. Per Share Operating Performance. * * *
* * * * *

    (d) The amount shown at the Capital Adjustments Due to Swing
Pricing caption should include the per share impact of any amounts
retained by the Fund pursuant to its swing pricing policies and
procedures, if applicable.
    (e) The amounts shown at the Net Asset Value, as adjusted pursuant
to swing pricing, End of Period caption should be the Fund's net asset
value per share as adjusted pursuant to its swing pricing policies and
procedures on the last day of the reporting period, if applicable.
* * * * *

Sec.  274.101   [Amended]

0
9. Form N-CEN (referenced in Sec.  274.101), as revised elsewhere in
this issue of the Federal Register, is further amended by:
0
a. In Part C, adding Item C.21.
    The addition read as follows:
Form N-CEN
Annual Report for Registered Investment Companies
* * * * *

Part C. Additional Questions for Management Investment Companies

* * * * *
    Item C.21. Swing pricing. For open-end management investment
companies, respond to the following:
    d. Did the Fund (if not a Money Market Fund, Exchange-Traded Fund,
or Exchange-Traded Managed Fund) engage in swing pricing? [Yes/No]
    i. If so, what was the swing factor upper limit?
* * * * *

    By the Commission.

    Dated: October 13, 2016.
Brent J. Fields,
Secretary.
[FR Doc. 2016-25347 Filed 11-17-16; 8:45 am]
 BILLING CODE 8011-01-P