Form_N-14_Supporting_Statement_-_01_-_2013-02-22[1]

SUPPORTING STATEMENT
for the Paperwork Reduction Act
Information Collection submission
Form N-14
A.

JUSTIFICATION
1.

Information Collection Necessity

Section 5(c) of the Securities Act of 1933 (“Securities Act”) 1 requires a company to have
filed a registration statement with the Commission before it offers securities to the public by use
of the mails or other channels of interstate commerce. 2 Section 5(b) requires that a prospectus
containing the pertinent information set forth in the registration statement be furnished to the
purchaser of a security prior to or with the confirmation of sale or delivery of the security after
sale, whichever comes first. 3 Investment companies are required to register under Section 8(a) of
the Investment Company Act of 1940 (“Investment Company Act”) 4 and to file a registration
statement under Section 8(b) of the Investment Company Act containing such information as the
Commission has determined to be necessary or appropriate in the public interest or for the
protection of investors. 5
Form N-14 6 is the form for registration under the Securities Act of securities to be issued
by management investment companies registered under the Investment Company Act and
business development companies as defined by Section 2(a)(48) of the Investment Company Act
1

15 U.S.C. 77a et seq.

2

15 U.S.C. 77e(c).

3

See Securities Act Release No. 8591 (July 19, 2005) (70 FR 44722, 44782 (Aug. 3, 2005)).

4

15 U.S.C. 80a-1 et seq.

5

15 U.S.C. 80a-8.

6

17 CFR 239.23.

in: (1) a transaction of the type specified in rule 145(a) under the Securities Act; 7 (2) a merger in
which a vote or consent of the security holders of the company being acquired is not required
pursuant to applicable state law; (3) an exchange offer for securities of the issuer or another
person; (4) a public reoffering or resale of any securities acquired in an offering registered on
Form N-14; or (5) two or more of the transactions listed in (1) through (4) registered on one
registration statement. Rule 145(a) provides that submitting a proposal for certain
reclassification of securities, mergers, consolidations, or transfers of assets for the vote or
consent of security holders, is deemed to involve an “offer,” “offer to sell,” “offer for sale,” or
“sale” of the securities to be issued in the transaction. The effect of the rule is to require
registration of the securities to be issued in connection with such transactions, unless an
exemption from registration is available.
2.

Information Collection Purpose

The principal purpose of Form N-14 is to make material information regarding securities
to be issued in connection with business combination transactions available to investors. The
information required to be filed with the Commission permits verification of compliance with
securities law requirements and assures the public availability and dissemination of such
information. Without the registration statement requirement, material information may not
necessarily be available to investors.
3.

Consideration Given to Information Technology

The Commission’s Electronic Data Gathering, Analysis and Retrieval System
(“EDGAR”) automates the filing, processing, and dissemination of full disclosure filings. This
7

17 CFR 230.145(a).

2

automation has increased the speed, accuracy, and availability of information, generating benefits
to investors and financial markets. Registration statements on Form N-14 are required to be filed
electronically on EDGAR. 8 The public may access filings on EDGAR through the
Commission’s website (http://www.sec.gov) or at EDGAR terminals located at the
Commission’s public reference rooms. Prospectuses may be sent to investors by electronic
means so long as certain requirements are met. 9 The Commission has no information concerning
the percentage of such documents sent electronically, but believes it is a small percentage.
4.

Duplication

The Commission periodically evaluates rule-based reporting and recordkeeping
requirements for duplication and reevaluates them whenever it proposes a rule or a change in a
rule. The information in Form N-14 is not generally duplicated elsewhere.
5.

Effect on Small Entities

With respect to registering securities to be offered in a merger or other business
combination, Form N-14 applies equally to all registrants, regardless of size. The burden on
smaller investment companies may be greater than for larger investment companies. This burden
includes the cost of producing, printing, filing, and disseminating prospectuses. The
Commission believes, however, that imposing different requirements on smaller investment
companies would not be consistent with investor protection and the purposes of the registration
statements. The Commission reviews all rules periodically, as required by the Regulatory

8

See 17 CFR 232.101(a)(1)(i).

9

See Use of Electronic Media for Delivery Purposes, Securities Act Release No. 7233 (Oct. 6,
1995) [60 FR 53458 (Oct. 13, 1995)].

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Flexibility Act, to identify methods to minimize recordkeeping or reporting requirements
affecting small businesses.
6.

Consequences of Less Frequent Collection

The purpose of Form N-14 is to meet the filing and disclosure requirements of the
Securities Act and the Investment Company Act and to enable filers to provide investors with
information necessary to evaluate an investment in the security. Less frequent filing would be
inconsistent with the filing and disclosure requirements of the Securities Act and the Investment
Company Act. In addition, if the form were to be filed less frequently, investors may not be
provided with the information necessary to evaluate an investment in the security.
7.

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

This collection is not inconsistent with 5 CFR 1320.5(d)(2).
8.

Consultation Outside the Agency

The Commission and the staff of the Division of Investment Management participate in
an ongoing dialogue with representatives of the investment company industry 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 confronting the
industry. The Commission requested public comment on the collection of information
requirements of Form N-14 before it submitted this request for extension and approval to the
Office of Management and Budget. The Commission received no comments in response to its
request.
9.

Payment or Gift

No payment or gift to respondents was provided.
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10.

Confidentiality

No assurance of confidentiality was provided.
11.

Sensitive Questions

No questions of a sensitive nature are involved.
12.

Time Burden Estimate

The following estimates of average burden hours and costs are made solely for purposes
of the Paperwork Reduction Act of 1995 10 and are not derived from a comprehensive or even
representative survey or study of the cost of Commission rules and forms. Compliance with the
disclosure requirements of Form N-14 is mandatory. Responses to the disclosure requirements
will not be kept confidential.
We estimate that approximately 139 funds each file one new registration statement on
Form N-14 annually, and that 58 funds each file one amendment to a registration statement on
Form N-14 annually. Based on conversations with fund representatives and the Commission’s
experience with the filing and amending of Form N-14 and with disclosure documents generally,
we estimate that the reporting burden of compliance with Form N-14 is approximately 620 hours
per respondent for a new Form N-14 registration statement, and 300 hours per respondent for
amending the Form N-14 registration statement. This time is spent, for example, preparing and
reviewing the registration statements. Accordingly, we calculate the total estimated annual

10

44 U.S.C. 3501 et seq.

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internal burden of responding to Form N-14 to be approximately 103,580 hours. 11 The average
burden per response is 525.79 hours (103,580 burden hours ÷ 197 responses).
Of the 103,580 hours spent annually to comply with Form N-14, the Commission
estimates that:
•

Fifty percent (51,790 hours) are spent by in-house attorneys at an estimated hourly wage
of $378, 12 for a total of approximately $19,576,620 per year; 13

•

Forty percent (41,432 hours) are spent by senior accountants at an estimated hourly wage
of $192, for a total of approximately $7,954,944 per year; 14 and

•

Ten percent (10,358 hours) are spent by in-house paralegals at an estimated hourly wage
of $174, for a total of approximately $1,802,292 per year. 15
Based on these estimated wage rates, the total cost to the industry of the hour burden for

complying with Form N-14 filings is approximately $29,333,856. 16

11

(139 new Form N-14 registration statements x 620 hours per new N-14 registration statement) +
(58 amendments to Form N-14 registration statements x 300 hours per amendment) = 103,580
hours.

12

The Commission’s estimates concerning the allocation of burden hours and the relevant wage
rates are based on consultations with industry representatives and on salary information for the
securities industry compiled by the Securities Industry and Financial Markets Association. The
estimated wage figures are also based on published rates for in-house attorneys, senior
accountants, and in-house paralegals, modified to account for an 1800-hour work-year and
multiplied by 5.35 to account for bonuses, firm size, employee benefits, and overhead, yielding
effective hourly rates of $378, $192, and $174, respectively. See Securities Industry and
Financial Markets Association, Report on Management & Professional Earnings in the Securities
Industry 2011.

13

51,790 hours x $378 per hour = $19,576,620.

14

41,432 hours x $192 per hour = $7,954,944.

15

10,358 hours x $174 per hour = $1,802,292.

16

$19,576,620 + $7,954,944 + $1,802,292 = $29,333,856.

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13.

Annual Cost Burden Estimate

The cost of compliance will vary considerably depending on factors such as whether a
filing is a new registration statement or an amendment to a previously filed Form N-14; whether
the contemplated merger or business combination presents novel or complex legal issues or is
similar to other mergers; and whether amendments are required in response to staff comments.
Based on conversations with fund representatives, we estimate that the total cost burden
of compliance with the information collection requirements of Form N-14 is approximately
$27,500 for preparing and filing an initial registration statement on Form N-14 and
approximately $16,000 for preparing and filing an amendment to a registration statement on
Form N-14. This includes, for example, the cost of goods and services purchased to prepare and
update registration statements on Form N-14, such as for the services of outside counsel.
Accordingly, we calculate the total estimated annual cost burden of responding to Form N-14 to
be approximately $4,750,500. 17 The cost burden does not include the cost of the hour burden
discussed in Item 12 above.
14.

Federal Government Cost Estimate

The annual cost of reviewing and processing registration statements, post-effective
amendments, proxy statements, shareholder reports, and other filings of investment companies
amounted to approximately $20.5 million in fiscal year 2011, based on the Commission’s
computation of the value of staff time devoted to these activities and related overhead.

17

(139 new Form N-14 registration statements x $27,500 per new N-14 registration statement) +
(58 amendments to Form N-14 registration statements x $16,000 per amendment) = $4,750,500.

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15.

Changes in Burden

The estimates represent a decrease of 68,340 hours in internal burden and a decrease of
$2,874,500 in external costs per year. These changes are due to a reduction is the estimated
number of annual responses on Form N-14 and a reduction in the estimated average hourly
burden per response, partially offset by an increase in the estimated average cost burden per
response.
16.

Information Collection Planned for Statistical Purposes

The results of any information collected will not be published.
17.

Approval to Omit OMB Expiration Date

We request authorization to omit the expiration date on the electronic version of Form N14, although the OMB control number will be displayed. Including the expiration date on the
electronic version of the form will result in increased costs, because the need to make changes to
the form may not follow the application’s scheduled version release dates.
18.

Certification Statement Exceptions

The Commission is not seeking an exception to the certification statement.
B.

COLLECTION OF INFORMATION EMPLOYING STATISTICAL METHODS
The collection of information will not employ statistical methods.

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