PRA Supporting Statement Short-Term Borrowings version 4-8-2011

SUPPORTING STATEMENT FOR PROPOSED SHORT-TERM BORROWINGS
DISCLOSURE RULES
This supporting statement is part of a submission under the Paperwork Reduction
Act of 1995, 44 U.S.C. §3501 et seq., and consists of this supporting statement and
Release No. 33-9143 (September 17, 2010).
A. JUSTIFICATION
1.

CIRCUMSTANCES MAKING THE COLLECTION OF INFORMATION
NECESSARY

In Securities Act Release 33-9143,1 the Securities and Exchange Commission (the
―Commission‖) proposed amendments to the Item 3032 of Regulation S-K,3 and Forms 8K,4 and 20-F5 under the Securities Exchange Act of 1934 (the ―Exchange Act‖)6 to
enhance the disclosure that companies provide about short-term borrowings in order to
provide more useful disclosure to investors about liquidity and short-term financings and
to enhance investor understanding of issuers’ liquidity.
Securities Act Release 33-9143 proposes amendments that would affect certain
regulations, schedules and forms adopted under the Securities Act of 1933 (the
―Securities Act‖),7 the Exchange Act and the Investment Company Act of 1940 (the
―Investment Company Act‖) that contain ―collection of information‖ requirements within
the meaning of the Paperwork Reduction Act of 1995. These regulations, schedules and
forms set forth the disclosure requirements for periodic and current reports, registration
statements, and proxy and information statements filed with the Commission by
companies to help investors make informed investment decisions in registered offerings
and secondary market transactions and informed decisions in voting their securities.
Thus, these collections of information are necessary for the Commission to carry out the
provisions of the Securities Act, Exchange Act and Investment Company Act. The titles
for the collection of information are:
(1)

―Regulation S-K‖ (OMB Control No. 3235-0071);8

1

Release No. 33-9143 (Sept. 17, 2010) [75 FR 59866](―Proposing Release‖)

2

17 CFR 229.303.

3

17 CFR 229.10 et al.

4

17 CFR 249.308.

5

17 CFR 249.220f.

6

15 U.S.C. §78a et seq.

7

15 U.S.C. §77a – 77mm.

8

The paperwork burden from Regulation S-K and the Industry Guides is imposed through the
forms that are subject to the disclosures in Regulation S-K and the Industry Guides and is reflected
in the analysis of those forms. To avoid a Paperwork Reduction Act inventory reflecting
duplicative burdens, for administrative convenience, we estimate the burdens imposed by each of

(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
2.

―Form 10-K‖ (OMB Control No. 3235-0063);
―Form 10-Q‖ (OMB Control No. 3235-0070);
―Form 8-K‖ (OMB Control No. 3235-0060);(8)
―Form 20-F‖ (OMB Control No. 3235-0288);
―Form 10‖ (OMB Control No. 3235-0064);
―Form S-1‖ (OMB Control No. 3235-0065);
―Form F-1‖ (OMB Control No. 3235-0258);
―Form S-4‖ (OMB Control No. 3235-0324);
―Form F-4‖ (OMB Control No. 3235-0325);
―Proxy Statements – Regulation 14A (Commission Rules 14a-1 through
14a-15) and Schedule 14A‖ (OMB Control No. 3235-0059);
―Information Statements – Regulation 14C (Commission Rules 14c-1
through 14c-7) and Schedule 14C‖ (OMB Control No. 3235-0057); and
―Form N-2‖ (OMB Control No. 3235-0026).

PURPOSE AND USE OF THE INFORMATION COLLECTION

The purpose of the information collection in the proposed amendments is to
enhance the disclosure that companies provide about short-term borrowings in order to
provide more useful disclosure to investors about liquidity and short-term financings and
to enhance investor understanding of a company’s liquidity profile. Specifically, the
amendments would require a public company that is required to provide disclosure under
Item 303 of Regulation S-K to provide a comprehensive explanation of its short-term
borrowings, including quantitative and qualitative information. This would codify the
substantive disclosures called for by Item VII of Industry Guide 3,9 which is currently
only applicable to bank holding companies. The proposed amendments are intended to
enhance disclosure in MD&A relating to registrants’ liquidity profile by highlighting and
expanding disclosure requirements for short-term borrowings. The proposed
amendments to Form 8-K, which would conform the disclosure requirements in the Form
to refer to the proposed amendments to Regulation S-K, are intended to continue to
provide real-time disclosure in connection with these topics. These amendments are
being proposed to increase transparency in the presentation of registrants’ borrowing and
funding activities and exposure to liquidity risks in connection with that activity. This
increased transparency in areas of increasing importance to investors is intended to
maintain investor confidence in the full and fair disclosure required of all registrants.

Regulation S-K and the Industry Guides to be a total of one hour. The proposed amendments to
Form 8-K will not result in an increase in burden hours nor an increase in the cost burden for
services of outside professionals for filings of Form 8-K.
9

17 CFR 229.801, Item VII.

2

3.

CONSIDERATION GIVEN TO INFORMATION TECHNOLOGY

All of the above forms are filed electronically with the Commission using the
Commission’s Electronic Data Gathering and Retrieval (EDGAR) system.
4.

DUPLICATION OF INFORMATION

We are not aware of any rules that conflict with or substantially duplicate the
proposed rules.
The proposed new requirements for short-term borrowings disclosures would
provide specific, additional information that would be complementary to existing MD&A
disclosure requirements. As noted above, bank holding companies are subject to the
provisions of Item VII of Guide 3, which call for disclosure on an annual basis of some of
the information covered by the new requirements. As discussed in the Proposing
Release, if the proposed rule is adopted, the Commission would authorize its staff to
amend Guide 3 to eliminate Item VII in its entirety.10
5.

REDUCING THE BURDEN ON SMALL ENTITIES

The proposed amendments would apply to all companies, including small entities,
that are required to provide MD&A disclosure or disclosure pursuant to Items 2.03 and
2.04 of Form 8-K. The disclosure standards do not vary based on the size of the issuer,
except that smaller reporting companies would benefit from the proposed exclusion from
expanded interim reporting of short-term borrowings and would provide two years of
annual data rather than three.
The data underlying the proposed short-term borrowings disclosure should be
available from a company’s books and records and tracked with existing internal controls
without a significant incremental burden imposed on small entities, except to the extent
that it doesn’t track the data on a monthly basis, as proposed in the rule. Thus, the
collection and calculation of short-term borrowing data in the form proposed may have a
cost impact on registrants (including small entities) that do not currently maintain
information technology systems for the collection of the required data.
6.

CONSEQUENCES OF NOT CONDUCTING COLLECTION

The regulations, forms and schedules set forth the disclosure requirements for
periodic and current reports, registration statements, and proxy and information
statements filed by companies to help investors make informed investment and voting
decisions. Less frequent collection would deprive investors of access to information that
is important to their investment and voting decisions.

10

See Proposing Release, supra note 1, at 59868 n.21.

3

7.

SPECIAL CIRCUMSTANCES
Not applicable.

8.

CONSULTATIONS WITH PERSONS OUTSIDE THE AGENCY
The Commission has issued a proposing release soliciting comment on the
new ―collection of information‖ requirements and associated paperwork burdens.
A copy of the proposing release is attached. In response to the solicitation for
comment in the proposing release, registrants, investors, and other market
participants provide comments. In addition, the Commission and staff participate
in ongoing dialogue with representatives of various market participants through
public conferences, roundtables and meetings. The Commission will consider all
comments received prior to publishing the final rule as required by 1320.11(f).
The public can review comments at http://www.sec.gov/comments/s7-2210/s72210.shtml.

9.

PAYMENT OR GIFT TO RESPONDENTS
Not applicable.

10.

CONFIDENTIALITY

The information in each of the collections of information discussed above is made
publicly available.
11.

SENSITIVE QUESTIONS
Not applicable.

12/13. ESTIMATES OF HOUR AND COST BURDEN
The paperwork burden estimates associated with the proposal include the burdens
attributable to preparing and reporting information to the Commission and retaining
records, but do not include the burden associated with using such information for other
purposes. These estimates represent the average burden for all companies, both large and
small. As discussed in the Proposing Release, the time required to prepare the proposed
disclosures could vary significantly depending on, among other factors, the nature of the
registrant’s business, its capital structure, its existing internal controls and disclosure
controls systems and its existing risk management systems.11 In addition, the estimates
do not distinguish between registrants that are bank holding companies and other
registrants. Although bank holding companies and other companies that currently
provide Guide 3 disclosure would already collect and disclose on an annual basis some of
the information covered by the new requirements, the new requirements are not identical
11

See Proposing Release supra note 1, at 59880 and 59884-59885.

4

to the provisions of Guide 3. Accordingly, for purposes of the estimates, we assume that
bank holding companies would have the same burden as other registrants, although they
might not actually incur additional expenses for those portions of the new requirements
that are the same as the existing provisions of Guide 3.
We derived the estimates by estimating the total amount of time it would take a
company to implement systems to capture the data, implement related disclosure controls
and procedures, prepare and review the disclosure pursuant to the proposed short-term
borrowings requirements. As discussed in the Proposing Release, we first estimated the
total amount of time it would take a company to prepare and review the proposed
disclosure for each form, using the estimates for comparable disclosure requirements as a
starting point. Because we believe that the proposed rules would impose an increased
burden on companies in connection with the implementation of data gathering systems
and the implementation of related disclosure controls and procedures as compared to
those comparable disclosure requirements, we added hours to those estimates, to reflect
our best estimate of the additional time needed to implement the new systems. The
burdens have been calculated by multiplying the estimated number of annual responses
we believe will be generated by the estimated average number of hours each entity will
spend complying with the requirements of the rules.
For each estimate, we calculate that a portion of the burden will be carried by the
company internally, and the other portion will be carried by outside professionals
retained by the company. The portion of the burden carried by the company internally is
reflected in hours, while the portion of the burden carried by outside professionals
retained by the company is reflected as a cost. For Exchange Act reports (other than
Form 20-F) and proxy and information statements, we estimate that 75% of the burden of
preparation is carried by the company internally and that 25% of the burden of
preparation is carried by outside professionals retained by the company at an average cost
of $400 per hour.12 For registration statements, we estimate that 25% of the burden of
preparation is carried by the company internally and that 75% of the burden of
preparation is carried by outside professionals retained by the company at an average cost
of $400 per hour.
Tables 1 and 2 below illustrate the incremental annual compliance burden of the
collection of information in hours and in cost under the proposed amendments for annual
reports, proxy and information statements, quarterly reports and current reports on Form
8-K under the Exchange Act (Table 1) and for registration statements under the Securities
Act and Exchange Act (Table 2).
There is no change to the estimated burden of the collection of information under
Regulation S-K because the burdens that Regulation S-K imposes are reflected in our
revised estimates for the forms. We also estimate that the amendments to the definition
12

For Form 20-F, we estimate that 25% of the burden is carried by the company and 75% by outside
professionals because we assume that foreign private issuers rely more heavily on outside counsel
for preparation of the Form.

5

of ―direct financial obligation‖ for purposes of disclosure requirements in Items 2.03 and
2.04 of Form 8-K would not increase existing disclosure burdens for filings of Form 8-K.
We assume that the proposed change in the definition would not substantially change the
existing scope of the disclosure requirement, and, therefore, the proposed amendments
would not increase the number of Form 8-K filings nor add incremental costs and
burdens to the existing disclosure burden under Form 8-K.
Table 1: Calculation of Incremental Burden Estimates for Annual Reports, Quarterly
reports and Proxy and Information Statements

10-K
20-F
10-Q
SCH 14A
SCH 14C

Annual
Responses

Incremental
Burden
Hours/Form(4)

75%
Company

25%
Professional

Professional
Costs

(B)

Total
Incremental
Burden
Hours
(C)=(A)*(B)

(A)

(D)=(C)*0.75

(E)=(C)*0.25

(F)=(E)*$400

13,545
942
28,842 (1)
365 (2)
34 (3)

40
30
20
30
30

541,800
28,260
574,840
10,950
1,020

406,350
7,065(5)
431,130
8,212.5
765

135,450
21,195(5)
143,710
2,737.5
255

$54,180,000
$8,478,000
$57,484,000
$1,095,000
$102,000

___________________
(1)

The proposed amendments will impact only the Forms 10-Q that are filed by registrants that are not
smaller reporting companies. Accordingly, for purposes of estimating the incremental burden and cost for
Form 10-Q, we reduced the total number of annual responses for Form 10-Q (32,462 filings) by the
number of filings that we estimate are attributable to smaller reporting companies (1,240 smaller
reporting companies times 3 Form 10-Q filings per year = 3,720) to equal our estimate of the number of
annual responses filed by all other companies (32,462 minus 3,720 = 28,842 filings).
(2)

We believe that only a minimal number of Schedules 14A will need to include the proposed
disclosure (rather than incorporating it by reference from a periodic report). Accordingly, for
purposes of estimating the incremental burden and cost for Schedule 14A, we reduced the total
number of annual responses for Schedule 14A (7,300 filings) to a number equal to 5% of the total
number of annual responses (365 filings).
(3)

We believe that only a minimal number of Schedules 14C will need to include the proposed
disclosure (rather than incorporating it by reference from a period report). Accordingly, for
purposes of estimating the incremental burden and cost for Schedule 14C, we reduced the total
number of annual responses for Schedule 14C (680 filings) to a number equal to 5% of the total
number of annual responses (34 filings).
(4)

The proposed amendments to Form 8-K will not result in an increase in burden hours nor an
increase in the cost burden for services of outside professionals for filings of Form 8-K.
Accordingly, no PRA submission is being made with respect to Form 8-K in connection with the
Proposing Release.
(5)

For purposes of Form 20-F, we have assumed that 75% of the burden is carried by outside
professionals, and 25% of the burden is carried by the company, because we assume that foreign
private issuers rely more heavily on outside counsel for preparation of the form.

6

Table 2: Calculation of Incremental Burden Estimates for Registration Statements
Annual
Responses

Incremental
Burden
Hours/Form

(A)

(B)

Total
Incremental
Burden
Hours
(C)=(A)*(B)

25%
Company

75%
Professional

Professional
Costs

(D)=(C)*0.25

(E)=(C)*0.75

(F)=(E)*$400

S-1(1)

768

35

26,880

6,720

20,160

$8,064,000

F-1

42

35

1,470

367.5

1,102.5

$441,000

S-4

619

35

21,665

5416.25

16,248.75

$6,499,500

F-4

68

35

2,380

595

1,785

$714,000

10

238

35

8,330

2,082.5

6,247.5

$2,499,000

N-2

29 (2)

35

1,015

253.75

761.25

$304,500

___________________
(1)

Due to a change in the approved estimates for Form S-1, the estimated program change has been
recalculated and differs from the amounts set forth in the Proposing Release. The approved estimate of
annual responses has been reduced from 1,168 to 768. The estimated time burden and cost burden
attributable to the program change have been adjusted accordingly. Note that the original estimate of
incremental burden hours per Form S-1 associated with the program change (35 hours) has not been
changed.
(2)
The proposed amendments will impact only the Forms N-2 that are filed by business development
companies. Accordingly, for purposes of estimating the incremental burden and cost for Form N-2, we
reduced the total number of annual responses for Form N-2 (205 filings) to equal our estimate of the
number of annual responses filed by business development companies (29 filings, which is the number of
Forms N-2 filed in 2009 by business development companies).

Tables 3A and 3B below illustrate the changes to the total annual compliance
burden of the collection of information in hours and cost per response, respectively. The
total estimated burdens were calculated by adding the incremental burdens to the existing
burdens. Then, the requested burdens and costs per response13 were calculated by
dividing the requested burden estimates by the number of annual responses. As
indicated in the tables, we do not anticipate a change in the estimated number of annual
responses as a result of the proposed amendments, and accordingly, the number of annual
responses used in the calculation equals the estimates of annual responses currently
approved by OMB.

13

As reflected in the footnotes to Tables 1 and 2, the increase in burden hours and costs for Form
10-Q, Schedules 14A and C and Form N-2 will impact only (1) Forms 10-Q that are filed by
companies that are not smaller reporting companies, (2) Schedules 14A and 14C that are filed by
companies that are required to include MD&A in that filing, and (3) Forms N-2 that are filed by
companies that are business development companies. Tables 3A and 3B below distribute the
incremental burden and cost estimates for the forms submitted by those filers across the total
number of annual responses (submitted by all companies) to estimate the hour burden and cost per
response.

7

Table 3A: Calculation of Hours Per Response
Form(1)

Existing
Annual
Responses

10-K
20-F
10-Q
14A
14C
(2)
S-1
F-1
S-4
F-4
10
N-2

13,545
942
32,462
7,300
680
768
42
619
68
238
205

Increase
(Decrease
) in
Annual
Responses

Current Burden
Hours

—
—
—
—
—
—
—
—
—
—
—

21,363,548
622,907
4,559,793
703,636
65,764
186,414
18,975
634,425
24,769
12,805
87,097

(B)

(A)

Program Change:
Increase (Decrease)
in Burden Hours

Requested Burden
Hours

Requested Burden
per Response

(C)

(D) = (B) + (C)

(E) = (D)/(A)

406,350
7,065
431,130
8,212.50
765
6,720
367.50
5416.25
595
2,082.50
253.75

21,769,898.00
629,972.00
4,990,923.00
711,848.50
66,529.00
193,134.00
19,342.50
639,841.25
25,364.00
14,887.50
87,350.75

1607.227611
668.7600
153.746626
97.51349
97.83676
251.4765625
460.53571429
1033.6688
373
62.552521
426.101219

___________________
(1)

The proposed amendments to Form 8-K will not result in an increase in burden hours nor an increase in
the cost burden for services of outside professionals for filings of Form 8-K. Accordingly, no PRA
submission is being made with respect to Form 8-K in connection with the Proposing Release.
(2)

As discussed in Note 1 to Table 2 above, due to a change in the approved estimates for Form S-1, the
estimated program change has been recalculated and differs from the amounts set forth in the Proposing
Release. Note that the original estimate of incremental burden hours per Form S-1 associated with the
program change (35 hours) has not been changed.

Table 3B: Calculation of Cost Per Response
Form(1)

10-K
20-F
10-Q
14A
14C
(2)
S-1
F-1
S-4
F-4
10
N-2

Existing
Annual
Responses
(A)
13,545
942
32,462
7,300
680
768
42
619
68
238
205

Increase
(Decrease)
in Annual
Responses
—
—
—
—
—
—
—
—
—
—
—

Current Cost
Burden

(B)
$2,848,473,000
$743,089,980
$607,972,400

$84,204,277
$7,816,549
$223,697,200
$22,757,400
$761,311,401
$29,721,800
$15,368,000
$4,287,200

Program Change:
Increase
(Decrease) in
Cost Burden
(C)
$54,180,000
$8,478,000
$57,484,000
$1,095,000
$102,000
$8,064,000
$441,000
$6,499,500
$714,000
$2,499,000
$304,500

Requested Cost
Burden

(D) = (B) + (C)
$2,902,653,000
$751,567,980
$665,456,400
$85,299,277
$7,918,549
$231,761,200
$23,198,400
$767,810,901
$30,435,800
$17,867,000
$4,591,700

Proposed Cost per
Response

(E) = (D)/(A)
$214,297.00996
$797,842.8662
$20,499.5502433
$11,684.832465
$11,644.925
$301,772.395833
$552,342.8571
$1,240,405.33279
$447,585.294
$75,071.42857
$22,398.536585

___________________
(1)

The proposed amendments to Form 8-K will not result in an increase in burden hours nor an increase in
the cost burden for services of outside professionals for filings of Form 8-K. Accordingly, no PRA
submission is being made with respect to Form 8-K in connection with the Proposing Release.
(2)

As discussed in Note 1 to Table 2 above, due to a change in the approved estimates for Form S-1, the
estimated program change has been recalculated and differs from the amounts set forth in the Proposing
Release. Note that the original estimate of incremental burden hours per Form S-1 associated with the
program change (35 hours) has not been changed.

8

14.

COSTS TO FEDERAL GOVERNMENT
We estimate costs to the federal government will be approximately $50,000.

15.

REASON FOR CHANGE IN BURDEN

We anticipate that the proposed new requirements will increase the burdens and
costs by requiring public companies to provide annual and quarterly disclosure of the
total, average and maximum amounts of short-term borrowings outstanding during the
period, together with a narrative discussion and analysis of those short-term borrowings.
Table 4 below illustrates the changes in cost and hour burdens from the burden
estimates currently approved by OMB. Columns (A) and (B) represent the most recent
burden estimates submitted to OMB. Columns (C) and (D) represent the new burden
estimates under the proposed amendments. Columns (E) and (F) represent the program
change, which encompasses the change in the burden estimates attributable to the
proposed amendments.
Table 4: Change in Burden From Current Estimates
Current Burden
Burden
Cost
Hours
(A)
(B)
10-K
20-F
10-Q
8-K
14A
14C
(1)
S-1
F-1
S-4
F-4
10
N-2

21,363,548
622,907
4,559,793
493,436
703,636
65,764
186,414
18,975
634,425
24,769
12,805
87,097

$2,848,473,000
$743,089,980
$607,972,400
$65,791,500

$84,204,277
$7,816,549
$223,697,200
$22,757,400
$761,311,401
$29,721,800
$15,368,000
$4,287,200

Change in Burden
Burden
Costs
Hours
(C)
(D)
21,769,898.00
629,972.00
4,990,923.00
493,436.00
711,848.50
66,529.00
193,134.00
19,342.50
639,841.25
25,364.00
14,887.50
87,350.75

$2,902,653,000
$751,567,980
$665,456,400
$65,791,500
$85,299,277
$7,918,549
$231,761,200
$23,198,400
$767,810,901
$30,435,800
$17,867,000
$4,591,700

Program Change
Burden
Cost
Hours
(E)
(F)
406,350
7,065
431,130
—
8,212.50
765
6,720
367.50
5416.25
595
2,082.50
253.75

$54,180,000
$8,478,000
$57,484,000
—
$1,095,000
$102,000
$8,064,000
$441,000
$6,499,500
$714,000
$2,499,000
$304,500

___________
(1)

As discussed in Note 1 to Table 2 above, due to a change in the approved estimates for Form S-1, the
estimated program change has been recalculated and differs from the amounts set forth in the Proposing
Release. Note that the original estimate of incremental burden hours per Form S-1 associated with the
program change (35 hours) has not been changed.

16.

INFORMATION COLLECTION PLANNED FOR STATISTICAL
PURPOSES
Not applicable.

17.

DISPLAY OF OMB APPROVAL DATE
Not applicable.
9

18.

EXCEPTIONS TO CERTIFICATION FOR PAPERWORK REDUCTION
ACT SUBMISSIONS
Not applicable.

B.

STATISTICAL METHODS
Not applicable.

10