PRA Form 54A - Supporting Statement (NEW)

SUPPORTING STATEMENT
For the Paperwork Reduction Act Information Collection Submission for
FORM N-54A

A.

JUSTIFICATION
1.

Necessity for the Information Collection

Certain investment companies can elect to be regulated as business development
companies, as defined in Section 2(a)(48) of the Investment Company Act of 1940 (“Investment
Company Act”), under Sections 55 through 65 of the Investment Company Act. Under Section
54(a) of the Investment Company Act, 1 any company defined in Section 2(a)(48)(A) and (B) may
elect to be subject to the provisions of Sections 55 through 65 by filing with the Commission a
notification of election, if such company has: (1) a class of equity securities registered under
Section 12 of the Securities Exchange Act of 1934 (“Exchange Act); or (2) filed a registration
statement pursuant to Section 12 of the Exchange Act for a class of equity securities. The
Commission has adopted Form N-54A as the form for notification of election to be regulated as
business development companies.
2.

Purposes and use of the Information Collection

The purpose of Form N-54A is to notify the Commission that the investment company
making the notification elects to be subject to Sections 55 through 65 of the Investment Company
Act, enabling the Commission to administer those provisions of the Investment Company Act to
such companies.
3.

Consideration Given to Information Technology

The Commission’s electronic filing system (Electronic Data Gathering, Analysis and
Retrieval or “EDGAR”) automates the filing, processing and dissemination of full disclosure
filings. The system permits public companies to transmit their filings to the Commission

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15 U.S.C. 80a-53(a).

electronically. This automation has increased the speed, accuracy and availability of information,
generating benefits to investors and financial markets.
4.

Duplication

The Commission periodically evaluates reporting and recordkeeping requirements for
duplication and reevaluates them whenever it proposes a rule or form or a change in a rule or
form. The information required by Form N-54A is not generally duplicated elsewhere.
5.

Effect on Small Entities

The Commission reviews all rules periodically, as required by the Regulatory Flexibility
Act, to identify methods to minimize recordkeeping or reporting requirements affecting small
businesses. The current disclosure requirements for Form N-54A do not distinguish between
small entities and other business development companies. Although the burden on small business
development companies may be greater than those of larger ones, the Commission believes the
burden imposed on any business development company is small due to the extent and type of
information required by the form.
6.

Consequences on Not Conducting Collection

Investment companies electing to be regulated as business development companies are
required to file the notification of election on Form N-54A only once, and therefore the filing of
Form N-54A is not a recurring event requiring periodic collection.
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

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The Commission and the Division of Investment Management staff 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 that may confront
the industry. The Commission requested public comment on the collection of information
requirements in Form N-54A 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 to Respondents

No payment or gift to respondents was provided.
10.

Assurance of Confidentiality

No assurance of confidentiality was provided.
11.

Sensitive Questions

No questions of a sensitive nature are involved. The information collection does not
include personally identifiable information. The information collection is covered under the
following System of Records Notices (SORN) (SEC-6)
http://www.sec.gov/about/privacy/sorn/secsorn6.pdf

12.

Estimate of Respondent Reporting Burden

The following estimates of average burden hours and costs are made solely for purposes
of the Paperwork Reduction Act of 1995 (“PRA”) 2 and are not derived from a comprehensive or
even representative survey or study of the cost of Commission rules and forms. Compliance with
Form N-54A is mandatory for companies electing to be regulated as business development
companies. Responses to the disclosure requirements will not be kept confidential.
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44 U.S.C. 3501 et seq.

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The Commission estimates that on average approximately 14 companies file notifications
on Form N-54A each year. Each of those business development companies need only make a
single filing of Form N-54A. The Commission further estimates that this information collection
imposes burden of 0.5 hours, resulting in a total annual PRA burden of 7 hours. Based on the
estimated wage rate, the total cost to the business development company industry of the hour
burden for complying with Form N-54A would be approximately $2,338. 3
13.

Cost to Respondents

Cost burden is the cost of services purchased to prepare and update Form N-54A, such as
for the services of outside counsel. The Commission estimates that 14 investment companies
elect each year to be regulated as business development companies and must file Form N-54A.
The form must be filed only once. As a result, the total annualized cost burden for Form N-54A,
other than the cost burden outlined in Item 12 above, is minimal.
14.

Estimate of Cost to the Federal Government

The annual cost of reviewing and processing disclosure documents, including new
registration statements, post-effective amendments, proxy statements, and shareholder reports of
investment companies amounted to approximately $18.6 million in fiscal year 2013, based on the
Commission’s computation of the value of staff time devoted to this activity and related
overhead.
15.

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Explanation of Changes in Burden

The industry burden is calculated by multiplying the total annual hour burden to prepare
Form N-54A (7) by the estimated hourly wage rate of $334. The estimated wage figure
is based on published rates for compliance attorneys from the Securities Industry and
Financial Markets Association’s Report on Management & Professional Earnings in the
Securities Industry 2013, modified by Commission staff to account for an 1800 hour
work-year and multiplied by 5.35 to account for bonuses, firm size, employee benefits
and overhead, yielding an effective hourly rate of $334.

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The increase in burden hours for Form N-54A is attributable to an increase in the number
of respondents from 7 to 14, resulting in an increase of 3.5 hours. There are no changes to the
total annual cost burden which the Commission estimates to be minimal.
16.

Information Collection Planned for Statistical Purposes

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

Approval to not Display Expiration Date

We request authorization to omit the expiration date on the electronic version of the form.
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. The OMB control number will be displayed.
18.

Exceptions to Certification Statement

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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