SUPPORTING STATEMENT_Rule 7d-1 (2025) (revised)

SUPPORTING STATEMENT
For the Paperwork Reduction Act Information Collection Submission for
Rule 7d-1
A.

JUSTIFICATION
1.

Necessity for the Information Collection

Section 7(d) of the Investment Company Act of 1940 (15 U.S.C. 80a-7(d)) (the
“Act” or “Investment Company Act”) requires an investment company (“fund”)
organized outside the United States (“foreign fund”) to obtain an order from the
Commission allowing the fund to register under the Act before making a public offering
of its securities through the United States mail or any means of interstate commerce. The
Commission may issue an order only if it finds that it is both legally and practically
feasible effectively to enforce the provisions of the Act against the foreign fund, and that
the registration of the fund is consistent with the public interest and protection of
investors.
Rule 7d-1 (17 CFR 270.7d-1) under the Act, which was adopted in 1954, specifies
the conditions under which a Canadian management investment company (“Canadian
fund”) may request an order from the Commission permitting it to register under the Act.
Although rule 7d-1 by its terms applies only to Canadian funds, funds in other
jurisdictions generally have agreed to comply with the requirements of rule 7d-1 as a
prerequisite to receiving an order permitting the fund’s registration under the Act.
The rule requires Canadian funds that propose to register under the Act to file an
application with the Commission that contains various undertakings and agreements by
the fund. The requirement of the Canadian fund to file an application is a collection of

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information under the Paperwork Reduction Act. Certain of the undertakings and
agreements, in turn, impose the following additional information collection requirements:
(1)

the fund must file with the Commission agreements between the fund and
its directors, officers, and service providers requiring them to comply with
the fund’s charter and bylaws, the Act, and certain other obligations
relating to the undertakings and agreements in the application;

(2)

the fund and each of its directors, officers, and investment advisers that is
not a U.S. resident, must file with the Commission an irrevocable
designation of the fund’s custodian in the United States as agent for
service of process;

(3)

the fund’s charter and bylaws must provide that (a) the fund will comply
with certain provisions of the Act applicable to all funds, (b) the fund will
maintain originals or copies of its books and records in the United States,
and (c) the fund’s contracts with its custodian, investment adviser, and
principal underwriter, will contain certain terms, including a requirement
that the adviser maintain originals or copies of pertinent records in the
United States;

(4)

the fund’s contracts with service providers will require that the provider
perform the contract in accordance with the Act, the Securities Act of
1933 (15 U.S.C. 77a), and the Securities Exchange Act of 1934 (15 U.S.C.
78a), as applicable; and

(5)

the fund must file, and periodically revise, a list of persons affiliated with
the fund, its investment adviser, and principal underwriter.
As noted above, under section 7(d) of the Act, the Commission may issue an

order permitting a foreign fund’s registration only if the Commission finds that “by
reason of special circumstances or arrangements, it is both legally and practically feasible
effectively to enforce the provisions of the (Act).” The information collection
requirements are necessary to ensure that the substantive provisions of the Act may be
enforced as a matter of contract right in the United States or Canada by the fund's
shareholders or by the Commission.

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Rule 7d-1 also contains certain information collection requirements that are
associated with other provisions of the Act. These requirements are applicable to all
registered funds and are outside the scope of this Supporting Statement.
2.

Purposes and Use of the Information Collection

The collection of information requirements (as well as other requirements) of rule
7d-1 are designed to ensure that appropriate arrangements are in place to confirm the
enforceability of the Act against the Canadian fund. Under international law, for
example, it is uncertain whether the Commission or a fund's shareholders could enforce
the Act’s provisions against the Canadian fund and associated persons (that is, those
persons in addition to the fund, such as the Canadian fund’s service providers, that must
meet the requirements of rule 7d-1) solely on the basis of the Canadian fund’s registration
under the Act. Thus, rule 7d-1 requires foreign funds to file an application containing
certain undertakings and agreements that confirm that the Commission and the fund’s
shareholders will be able to enforce the provisions of the Act as a matter of contract right
in the United States or Canada. The application itself allows Commission staff to
determine whether to permit the applicant to register under the Act.
In addition, the rule’s requirement to maintain records in the United States
(which, without the requirement, might be maintained in Canada or another foreign
jurisdiction) facilitates routine inspections and any special investigations of the fund by
Commission staff. The requirement to update the list of affiliated persons also assists the
staff in monitoring the fund's relationships with affiliates.
3.

Consideration Given to Information Technology

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Rule 31a-2(f) under the Investment Company Act permits funds to maintain many
types of records (and produce them for the Commission's examination as necessary) on
micrographic media, including microfilm, microfiche, or similar medium, or any
electronic storage media, including any digital storage medium or system. Canadian
funds and their advisers generally may keep records in the United States as required by
rule 7d-1 in these forms.
The Commission’s Electronic Data Gathering, Analysis, and Retrieval system
(“EDGAR”) is designed to automate the filing, processing, and dissemination of full
disclosure filings. The system permits investment companies to transmit many filings to
the Commission electronically, including applications for orders under the Investment
Company Act, such as those submitted by Canadian or other foreign funds.
4.

Duplication

The requirement under rule 7d-1 to maintain original or duplicate books and
records in the United States is intended to ensure that the provisions of the Act can be
enforced against a Canadian (or foreign) fund. Without the requirement, records could be
maintained only in Canada. The Commission’s ability to examine those records would
depend upon Canadian law. The inconvenience and expense of travel to Canada also
could adversely affect enforcement of the Act.
5.

Effect on Small Entities

The Commission does not believe that compliance with rule 7d-1 is unduly
burdensome for large or small entities. The information collection requirements of the
rule apply to all Canadian funds that seek the benefit of registration under the Act,
whether or not they are small entities. The requirements establish the enforceability of

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the Act for all funds regardless of size, and in so doing, enable the Commission to fulfill
its statutory mandate.
6.

Consequences of Not Conducting Collection

Rule 7d-1’s requirement that Canadian funds file an application that contains
certain undertakings and agreements as a prerequisite to the fund’s registration under the
Act is not a recurring obligation. The rule also imposes requirements to maintain records
in the United States, and to update certain fund agreements, designations of the fund’s
custodian as service agent, and lists of affiliated persons as changes occur. Without the
rule’s information collection requirements, the Commission could not determine whether
the substantive provisions of the Act would be enforceable as a matter of contract right in
the United States by the fund’s shareholders or by the Commission.
On occasion, after a Canadian (or other foreign fund) has registered, it may file a
supplemental application seeking special exemptive relief from provisions of the Act
based on the fund’s particular circumstances. Rule 7d-1 does not mandate these
applications, which are submitted at a fund’s discretion.
7.

Inconsistencies with Guidelines in 5 CFR 1320.5(d)(2)

By requiring funds to maintain records in the United States, rule 7d-1 effectively
requires the fund to preserve these records either permanently or for six years after
pertinent transactions, depending on the record. This requirement applies to the records
of all registered funds, including any records maintained in Canada. 1
The Commission believes that the long-term retention of records in the United
States is necessary to carry out its examination and enforcement responsibilities, and its

1

17 CFR 270.7d-1(b)(8)(iii); 17 CFR 270.31a-2.

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mandate to ensure that the Act’s provisions are legally enforceable. The Commission
periodically inspects the operations of registered funds to ensure compliance with the
rules and regulations under the Act; however, each fund may be inspected only at
intervals of several years due to limits on the Commission’s resources. Furthermore,
Congress has placed no time limit on the prosecution of persons engaged in certain types
of conduct that violate the securities laws. For these reasons, the Commission often
needs information relating to events or transactions that occurred years ago. In section
31(a) of the Act (15 U.S.C. 80a-30(a)), Congress specifically authorized the Commission
to require funds to “maintain and preserve” books and records “for such period or periods
as the Commission, by rules and regulations, may prescribe as necessary or appropriate in
the public interest or for the protection of investors.” Computerized record storage has
made long-term retention of records less burdensome.
8.

Consultation Outside the Agency

The Commission proposed rule 7d-1 for public comment before it was adopted on
April 27, 1954. The requirements of the rule were formulated after extended discussions
with Canadian funds that had applied for orders permitting registration before the rule
was adopted. The Commission considered all comments and suggestions and determined
to adopt the rule’s information collection requirements substantially as proposed.
Subsequent amendments have not significantly altered the rule’s information collection
requirements. The Commission requested public comment on the collection of
information requirements in rule 7d-1 before it submitted this request for extension and
approval to the Office of Management and Budget. The Commission received no
comments.

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9.

Payment or Gift

Not applicable.
10.

Confidentiality

Not applicable.
11.

Sensitive Questions

No information of a sensitive nature, including social security numbers, will be
required under this collection of information. The agency has determined that the
information collection does not constitute a system of records for purposes of the Privacy
Act. Information is not retrieved by a personal identifier. In accordance with Section 208
of the E-Government Act of 2002, the agency has conducted a Privacy Impact
Assessment (PIA) of the EDGAR system. The EDGAR PIA, published on 03/06/2025, is
provided as a supplemental document and is also available at
https://www.sec.gov/privacy.
12.

Burden of Information Collection

The Commission staff estimates that one foreign fund is registered under the Act
pursuant to rule 7d-1 and is currently active. The burden hours under the rule associated
with the fund’s compliance with the Act’s requirements are reflected in the information
collection burdens applicable to those requirements for all registered funds. If a fund
were to file an application under rule 7d-1 to register under the Act, the Commission
estimates that the rule would impose initial information collection burdens (for example,
for filing an application, preparing the specified charter, bylaw, and contract provisions,
designations of agents for service of process, and an initial list of affiliated persons, and
establishing a means of keeping records in the United States) of approximately 90 hours

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for the fund and its associated persons. As noted above, after registration, a Canadian
fund may file a supplemental application seeking special relief designed for the fund's
particular circumstances. Rule 7d-1 does not mandate these applications. The
Commission is not including these applications in its calculation of the annual burden
because no fund has applied to register under the Act pursuant to rule 7d-1 in the last
three years.
These estimates of average burden hours are made solely for the purposes of the
Paperwork Reduction Act. These estimates are not derived from a comprehensive or
even a representative survey or study of Commission rules. Commission staff estimates
the burden of the rule as set forth in Table 1 below:

R u le 7 d -1

T OT AL
ANNUAL
B URDE N

Number
of
a f f ected
f unds

Interna l
a nnua l
burden
ho urs

Wa g e
ra te 1

Interna l ti me
co sts

Annua l externa l
co st burden 2

1

5 hours

$ 1 ,9 10

$ 9 ,5 5 0

$ 5 ,2 5 6

$ 9 ,5 5 0

$ 5 ,2 5 6

5 hours

This estimated burden is from Securities Industry and Financial Markets Association’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 (“SIFMA Wage Report”). The wage rate reflects current estimates from the SIFMA
Wage Report of the blended hourly rate for a compliance attorney ($449), an attorney ($511), and Board of
Directors as a whole ($4,770). ($449 + $511 + $4,770) / 3 = $1,910. The Board of Directors wage rate is
not from the SIFMA Wage Report but is a staff estimate. It is a combined cost for the entire board (not a
per board member cost). This estimate assumes an average of 9 board members per board.
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This estimated burden is based on the estimated wage rate of $584 per hour for 9 hours outside legal
services. The Commission’s estimates of the relevant wage rates for external time costs, such as outside
legal services, take into account staff experience, a variety of sources including general information
websites, and adjustments for inflation.

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13.

Cost to Respondents

Cost burden is the cost of goods and services purchased to comply with rule 7d-1,
such as legal and accounting services. The cost burden does not include the hour burden
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discussed in Item 12 above. As outlined in the table above, we estimate the total external
cost burden to comply with rule 7d-1 to be $5,256.
If a Canadian or other foreign fund in the future applied to register under the Act
under rule 7d-1, the fund initially might have capital and start-up costs (not including
hourly burdens) of an estimated $20,000 to comply with the rule’s initial information
collection requirements. These costs include legal and processing-related fees for
preparing the required documentation (such as the application, charter, bylaw, and
contract provisions, designations for service of process, and the list of affiliated persons).
Other related costs would include fees for establishing arrangements with a custodian or
other agent for maintaining records in the United States, copying and transportation costs
for records, and the costs of purchasing or leasing computer equipment, software, or other
record storage equipment for records maintained in electronic or photographic form.
The Commission expects that the fund and its sponsors would incur these costs
immediately, and that the annualized cost of the expenditures would be $20,000 in the
first year. Some expenditures might involve capital improvements, such as computer
equipment, having expected useful lives for which annualized figures beyond the first
year would be meaningful. These annualized figures are not provided, however, because,
in most cases, the expenses would be incurred immediately rather than on an annual
basis. As indicated above, a Canadian or foreign fund may file a supplemental
application seeking special relief designed for the fund’s particular circumstances. Rule
7d-1 does not mandate these applications. The Commission is not including these costs
because no fund has made an application under rule 7d-1 in the last three years.
14.

Cost to the Federal Government

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Rule 7d-1 has imposed minimal costs on the federal government for reviewing the
small number of applications and supporting documents filed with the Commission under
the rule since 1954. No new fund has applied under rule 7d-1 to register under the Act in
the last three years. The Commission staff in the Division of Investment Management
processes these and other exemptive applications. The annual cost of reviewing and
processing all applications under the Investment Company Act for orders from the
Commission for exemptive relief amounted to approximately $11.0 million in fiscal year
2023 based on the Commission’s computation for the value of staff time devoted to these
activities and related overhead. The Commission receives occasional reports updating
lists of affiliated persons as required by the rule.
15.

Changes in Burden

The estimated burden has increased as follows.
Table 2: CHANGE IN BURDEN ESTIMATES
Rule
7d-1

Annual No. of Responses

Annual Time Burden (Hrs.)

Burden Cost Burden ($)

Previously Requested Change Previously Requested Change Previously Requested Change
approved
approved
approved

Rule
7d-1

1

1

0

4.42

5

0.58

$5,130

$5,256

$126

We have revised the estimates to reflect changes in the number of affected entities
and in the external cost associated with the information collection requirements. These
changes reflect revised estimates and burdens attributable to requirements under the rule.
16.

Information Collection Planned for Statistical Purposes

Not applicable.
17.

Approval to Omit OMB Expiration Date

Not applicable.
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18.

Exceptions to Certification Statement for Paperwork Reduction Act
Submissions

Not applicable.
B.

COLLECTIONS OF INFORMATION EMPLOYING STATISTICAL
METHODS
Not applicable.

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