SUPPORTING STATEMENT
Form ADV-H
A. Justification
1. Necessity for the Information Collection
On September 12, 2000, the Securities and Exchange Commission (the “Commission”) approved final rules that required all SEC-registered investment advisers to file Part 1 of Form ADV electronically through the Investment Adviser Registration Depository (“IARD”).1 The IARD is an Internet-based system that investment advisers access through computers in their offices, without the need for specialized software or hardware. The information investment advisers submit to the IARD is stored in a database, and the general public has Internet-access to the data. The IARD also permits investment advisers to meet Commission and state notice filing requirements electronically.
Recognizing that technological glitches occur and certain advisers may not be able to meet the electronic filing requirements, the Commission adopted rule 203-3 (17 CFR 275.203-3), which is entitled “Hardship exemptions,” along with Form ADV-H (17 CFR 279.3), under the Investment Advisers Act of 1940 (15 U.S.C. 80b). Rule 203-3 permits investment advisers to request either a temporary or continuing hardship exemption on a hard copy filing of Form ADV‑H. An adviser requesting a temporary hardship is required to file Form ADV-H, and provide a brief explanation of the nature and extent of the temporary technical difficulties.2 Form ADV-H requires an adviser requesting a continuing hardship exemption to indicate the reasons the adviser is unable to submit electronic filings without undue burden and expense.3 A continuing hardship exemption is available only to a registered adviser that is a small entity.4
On November 19, 2010, the Commission proposed new rule 204-4 under the Advisers Act along with amendments to Form ADV-H as part of a broader rulemaking to implement provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”).5 The Commission adopted rule 204-4 on June 22, 2011.6 Rule 204-4 requires certain advisers exempt from registration with the Commission to file reports on Form ADV electronically through the IARD. 7 Like rule 203-3, rule 204-4 permits these exempt reporting advisers to request a temporary hardship exemption; although unlike rule 203-3, it does not provide for a continuing hardship exemption. Under rule 204-4, exempt reporting advisers requesting a temporary hardship exemption are required to complete and file Form ADV-H, which we have also amended for that purpose.
Form ADV-H contains “collection of information” requirements within the meaning of the Paperwork Reduction Act of 1995.8 The title of this collection is “Form ADV-H under the Investment Advisers Act of 1940.”9 This collection of information has been approved and subsequently extended by the Office of Management and Budget (“OMB”) under control number 3235-0538. This collection of information is found at 17 CFR 279.3 and is mandatory. Reponses are not kept confidential. 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.
2. Purpose of the Information Collection
The purpose of this collection of information is to permit advisers to obtain a hardship exemption to not complete an electronic filing. The temporary hardship exemption that is available to registered advisers under rule 203-3 and exempt reporting advisers under rule 204-4 permits these advisers to make late filings due to unforeseen computer or software problems. The continuing hardship exemption available to registered advisers under rule 203-3 permits advisers to submit all required electronic filings on hard copy for data entry by the operator of the IARD.
3. Role of Improved Information Technology
Currently, all SEC-registered investment advisers are required to file Part 1 of Form ADV electronically through the IARD.10 The IARD is an Internet-based system that investment advisers access through computers in their offices, without the need for specialized software or hardware. As discussed, we are also requiring exempt reporting advisers to file reports on Form ADV and to submit these reports through the IARD. The information investment advisers submit to the IARD is stored in a database, and the general public has Internet-access to the data. The IARD also permits investment advisers to meet Commission and state notice filing requirements electronically.
The information collection pursuant to the rule is for the purpose of not submitting information through the IARD or other electronic means. Accordingly, the Commission’s use of computer technology is inappropriate for Form ADV-H.
4. Efforts to Identify Duplication
The collection of information requirements of the rule and form are not duplicated elsewhere.
Effect on Small Entities
Form ADV-H was specifically designed for small entities. With respect to the temporary hardship exemption filing on Form ADV-H, all advisers are treated equally. However, the continuing hardship exemption available under rule 203-3 is only available to registered advisers that are small entities. Non small-entity advisers are not granted continuing hardship exemptions. It would defeat the purpose of the rule to exempt small entities from these requirements.
6. Consequences of Less Frequent Collection
The collection of information is necessary to notify the Commission when a filer is unable to meet a filing deadline due to unforeseen technical problems. It is also necessary to enable registered advisers that are small entities to request a continuing hardship exemption from the electronic filing requirements under the Advisers Act.
7. Inconsistencies with Guidelines in 5 CFR 1320.5(d)(2)
Not applicable.
8. Consultation Outside the Agency
In the Implementing Release, the Commission requested public comment on the effect of information collections under rule 204-4 and amendments to Form ADV-H. The Commission did not receive comment on the effect of these information collections. However, the Commission and the staff of the Division of Investment Management continue to participate in an ongoing dialogue with representatives of the investment adviser profession through public conferences, meetings, and informal exchanges. These various forums provide the Commission and the staff with a means of ascertaining and acting upon paperwork burdens facing the industry.
9. Payment or Gift to Respondents
Not applicable.
10. Assurance of Confidentiality
The information collected pursuant to the rule and form will take the form of filings with the Commission. These filings are not kept confidential.
11. Sensitive Questions
Not applicable.
Estimate of Hour Burden
Rule 203-3 currently requires that registered advisers requesting either a temporary or continuing hardship exemption submit the request on Form ADV-H. Rule 204-4 requires that exempt reporting advisers requesting a temporary hardship exemption submit the request on Form ADV-H. The current approved burden for Form ADV-H is 11 hours, based on an estimated 11 responses per year requiring one hour per response.
In the Implementing Proposing Release, we estimated that exempt reporting advisers would file approximately two responses to Form ADV-H annually.11 We also estimated that Form ADV-H would impose the same average burden per response on exempt reporting advisers as it imposes on registered advisers—one hour. Thus, we estimated that rule 204-4 would result in an increase of two hours in the total hour burden associated with Form ADV-H.12 We did not receive comments on our estimates. We continue to estimate that exempt reporting advisers will file approximately two responses to Form ADV-H annually, with each response requiring an average of one hour, for an estimated annual burden of two hours.13 However, the number of registered advisers will decrease due to the Dodd-Frank Act’s amendments to sections 203A and 203(b)(3) from 11,500 to 9,750.14 Given the reduction in registered advisers, we estimate that Form ADV-H will receive 10 annual responses from registered advisers.15 We continue to estimate that Form ADV-H will require an average of one hour to complete, and thus we estimate that the total annual burden for registered advisers to be 10 hours.16 Thus, the total burden associated with Form ADV-H will increase by one hour to 12 hours.17
Both professional staff time and clerical staff time is required to complete Form ADV-H. It is estimated that for each hour required by the form, professional staff time will comprise 0.625 hours with the remaining 0.375 hours performed by clerical staff. The Commission staff estimates the hourly wage for a compliance manager to be $273 per hour,18 and the hourly wage for general clerks to be $50 per hour.19 Accordingly, we estimate the average cost per response imposed on exempt reporting advisers by rule 204-4 and amended Form ADV-H will be $189,20 for a total annual cost of $378.21 This represents a decrease of $28 from the Implementing Proposing Release estimate, which is attributable to updated wage and salary information.
13. Estimate of Total Annual Cost Burden
There is no cost burden other than the cost of the hour burden described above.
Estimate of Cost to the Federal Government
There are no additional costs to the federal government.
15. Explanation of Changes in Burden
We estimate that the burden associated with Form ADV-H will increase from 11 to 12 hours due to the Dodd-Frank Act’s amendments to the Advisers Act and to the fact that exempt reporting advisers, in addition to registered advisers, will now file the Form.
16. Information Collection Planned for Statistical Purposes
Not applicable.
17. Approval to not Display Expiration Date
Not applicable.
18. Exception to Certification Statement
Not applicable.
B. Collection of Information Employing Statistical Methods
Not applicable.
1 Electronic Filing by Investment Advisers; Amendments to Form ADV, Investment Advisers Act Release No. 1897 (Sept. 12, 2000) [65 FR 57438 (Sept. 22, 2000)].
2 Similarly, issuers that submit electronic filings on EDGAR apply for a temporary hardship exemption on Form TH. 17 CFR 232.201. Form ADV-H is based on Form TH, which is filed by issuers relying on the temporary hardship exemption. The adviser applying for a temporary hardship exemption also is required to describe the extent to which the adviser previously submitted documents in electronic format with the same hardware and software, the burden and expense of using alternative means to submit the filing in electronic format, and any other reasons why a temporary hardship exemption is warranted.
3 See Form ADV-H. The adviser applying for a continuing hardship exemption is required to indicate the reasons that the necessary hardware and software are unavailable, describe the burden and expense of using alternative means to submit the filing in electronic format, propose a time period for which the exemption would be in effect, and provide any other reasons why a continuing hardship exemption is warranted.
4 For purposes of the Advisers Act, an investment adviser generally is a small entity if (a) it manages assets of less than $25 million reported on its most recent Form ADV, (b) it does not have total assets of $5 million or more on the last day of the most recent fiscal year end, and (c) it is not in a control relationship with another investment adviser that is not a small entity. 17 CFR 275.0-7.
5 See Rules Implementing Amendments to the Investment Advisers Act of 1940, Investment Advisers Act Release No. 3110 (Nov. 19, 2010) [75 FR 77052 (Dec. 10, 2010)] (“Implementing Proposing Release”); Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, 124 Stat. 1376 (2010).
6 See Rules Implementing Amendments to the Investment Advisers Act of 1940, Investment Advisers Act Release No. 3221 (June 22, 2011) (“Implementing Adopting Release”).
7 See rule 204-4(a),(b). Both section 203(l) of the Advisers Act [15 U.S.C. 80b-3(l)] (which provides an exemption for an adviser that advises solely one or more “venture capital funds”) and section 203(m) of the Advisers Act [15 U.S.C. 80b-3(m) (which instructs the Commission to exempt any adviser that acts solely as an adviser to private funds and has assets under management in the United States of less than $150 million) provide that the Commission shall require such advisers to maintain such records, which we have the authority to examine, and to submit reports “as the Commission determines necessary or appropriate in the public interest.” We adopted rule 204-4 to require these “exempt reporting advisers” to file reports with the Commission on Form ADV and to submit these reports through the Investment Adviser Registration Depository (“IARD”) using the same process as registered investment advisers.
8 44 U.S.C. 3501 to 3520.
9 We are changing the name of the information collection from “Rule 203-3 and Form ADV-H under the Investment Advisers Act of 1940” to simply “Form ADV-H” to account for the fact that rule 204-4, along with rule 203-3, requires advisers seeking a hardship exemption to complete and file Form ADV-H.
10 Electronic Filing by Investment Advisers; Amendments to Form ADV, Investment Advisers Act Release No. 1897 (Sept. 12, 2000) [65 FR 57438 (Sept. 22, 2000)].
11 See Proposing Implementing Release at section V.F.
12 See id.
13 To estimate the currently approved total burden associated with Form ADV-H, we estimated that registered advisers file approximately 11 responses to Form ADV-H per year, which, given the then-estimated 11,850 advisers registered with the Commission, meant that approximately 1 response is filed per 1,000 advisers (11,850 registered advisers / 11 responses = approximately 1 response per 1,000 registered advisers). We estimate that approximately 2,000 exempt reporting advisers will file reports on Form ADV in accordance with rule 204-4. Thus, we estimate two responses to Form ADV-H in accordance with rule 204-4 (2,000 exempt reporting advisers x 1 response per 1000 advisers = 2 responses).
14 11,500 (total SEC advisers) – 3,200 (SEC advisers withdrawing) + 750 (private advisers registering with the SEC) + 700 (new SEC advisers each year) = 9,450. Section 410 of the Dodd-Frank Act has amended section 203A of the Advisers Act [15 U.S.C. 80b-3A] to create a new group of “mid-sized advisers” and shift primary responsibility for their regulatory oversight to the state securities authorities. It has accomplished this by prohibiting from registering with the Commission an investment adviser that is registered as an investment adviser in the state in which it maintains its principal office and place of business and that has assets under management between $25 million and $100 million. In addition, section 403 of the Dodd-Frank Act eliminates the “private adviser” exemption in section 203(b)(3) of the Advisers Act.
15 9,750 registered advisers x 1 response per 1,000 advisers = 9.75 responses.
16 10 responses x 1 hour = 10 hours.
17 The current approved burden is 11 hours. Our new estimate is 10 hours for registered advisers + 2 hours for exempt reporting advisers = 12 hours.
18 Data from the SIFMA Management and Earnings Report, modified to account for an 1,800-hour work-year and multiplied by 5.35 to account for bonuses, firm size, employee benefits and overhead, suggest that the cost for a compliance manager is approximately $273 per hour.
19 Data from the SIFMA Office Salaries Report, modified to account for an 1,800-hour work-year and multiplied by 2.93 to account for bonuses, firm size, employee benefits and overhead, suggest that the cost for a General Clerk is approximately $50 per hour.
20 (0.625 hours x $273) + (0.375 hours x $50) = approximately $189.
21 $189 per response x 2 responses annually = $378.
| File Type | application/vnd.openxmlformats-officedocument.wordprocessingml.document |
| File Title | SUPPORTING STATEMENT FOR PAPERWORK REDUCTION ACT SUBMISSION |
| File Modified | 0000-00-00 |
| File Created | 2021-01-31 |