Supporting Statement N-PX

SUPPORTING STATEMENT
For the Paperwork Reduction Act Information Collection Submission for
Form N-PX
A.

JUSTIFICATION
1.

Necessity for the Information Collection

Form N-PX is used for reports pursuant to Section 30 of the Investment
Company Act of 1940 (the “Investment Company Act”) 1 and rule 30b1-4 under the
Investment Company Act by all registered management investment companies, other
than small business investment companies registered on Form N-5 (“funds”), to file
their complete proxy voting records not later than August 31 of each year for the
most recent twelve-month period ended June 30. 2
Funds are required to disclose the following information on Form N-PX for each
matter relating to a portfolio security considered at any shareholder meeting held
during the period covered by the report and with respect to which the fund was
entitled to vote: (i) the name of the issuer of the portfolio security; (ii) the exchange
ticker symbol of the portfolio security; (iii) the Council on Uniform Securities
Identification Procedures (“CUSIP”) number for the portfolio security; (iv) the
shareholder meeting date; (v) a brief identification of the matter voted on; (vi)
whether the matter was proposed by the issuer or by a security holder; (vii) whether
the fund cast its vote on the matter; (viii) how the fund cast its vote (e.g., for or
against proposal, or abstain; for or withhold regarding election of directors); and (ix)
whether the fund cast its vote for or against management. 3
2.

Purpose and Use of the Information Collection

The purpose of Form N-PX is to meet the filing and disclosure requirements of
rules under the Investment Company Act and also to enable funds to provide
investors with information necessary to evaluate an investment in the fund. This
information collection is primarily for the use and benefit of investors. The
information filed with the Commission also permits the verification of compliance
with securities law requirements and assures the public availability and dissemination
of the information.

1

15 U.S.C. 80a-29.

2

Rule 30b1-4 under the Investment Company Act; General Instruction A of Form N-PX.

3

Item 1 of Form N-PX.

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 automation has increased the speed, accuracy, and availability of
information, generating benefits to investors and financial markets. Reports on Form
N-PX are required to be filed electronically on EDGAR. 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.
4.

Duplication

The Commission periodically evaluates rule-based 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-PX is not
generally duplicated elsewhere.
5.

Effect on Small Entities

The Commission reviews all rules periodically, as required by the Regulatory
Flexibility Act, 4 to identify methods to minimize recordkeeping or reporting
requirements affecting small businesses. The current disclosure requirements for
Form N-PX do not distinguish between small entities and other funds. Although the
burden on smaller funds may be greater than those of larger funds, the Commission
believes that imposing different requirements on small entities would not be
consistent with investor protection.
6.

Consequences of Not Conducting Collection

Rule 30b1-4 under the Investment Company Act requires that reports of funds’
proxy voting records on Form N-PX be filed with the Commission annually. Less
frequent collection would mean that current information might not be available to
fund investors.
7.

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

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

4

5 U.S.C. 601 et seq.

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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 the paperwork burdens confronting the industry. The Commission
requested public comment on the collection of information requirements in Form
N-PX 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.
10.

Assurance of Confidentiality

No assurance of confidentiality was provided.
11.

Sensitive Questions

No information of a sensitive nature will be required under these collections of
information. These information collections collect basic Personally Identifiable
Information (PII) that may include name, business address, and residential address
(for sole proprietor only), telephone/cellular/facsimile numbers, and email address.
The information collection is covered under the following System of Records Notices
(SORN). http://www.sec.gov/about/privacy/sorn/secsorn8.pdf
12.

Burden of Information Collection

The following estimates of average burden hours and costs are made solely for
purposes of the Paperwork Reduction Act of 1995 (“PRA”) 5 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-PX is mandatory for funds.
Responses to the collection of information requirements will not be kept
confidential.
The Commission estimates that there are approximately 2,431 funds registered
with the Commission, representing approximately 9,794 fund portfolios that are
required to file Form N-PX reports. The 9,794 portfolios are comprised of
5

44 U.S.C. 3501 et seq.

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approximately 6,574 portfolios holding equity securities and 3,220 portfolios holding
no equity securities. 6 The currently approved burden of Form N-PX for portfolios
holding equity securities is 7.2 hours per response, and the current burden estimate
for funds holding no equity securities is 0.17 hours (10 minutes) per response.
Therefore, the number of currently approved aggregate burden hours, when
calculated using the current number of portfolios, is approximately 47,880 hours. 7
We continue to believe that these estimates for Form N-PX’s current burden are
appropriate. Based on the Commission’s estimate of 47,880 burden hours and an
estimated wage rate of approximately $334 per hour, 8 the total cost to reporting
persons of the hour burden for filing Form N-PX is approximately $16.0 million. 9
13.

Costs to Respondents

Cost burden is the cost of services purchased to prepare and update Form N-PX,
such as for the services of outside counsel. The cost burden does not include the cost
of the hour burden discussed in Item 12 above. The currently approved cost burden
of Form N-PX is $1,000 in external costs per portfolio holding equity securities that
is paid to third-party service providers. External costs for portfolios holding no equity
securities have previously been estimated to be zero because portfolios holding no
equity securities generally have no proxy votes to report and therefore do not require

6

The estimate of 2,431 funds is based on the number of management investment
companies currently registered with the Commission. The Commission staff estimates
that there are approximately 5,917 portfolios that invest primarily in equity securities,
657 “hybrid” or bond portfolios that may hold some equity securities, 2,672 bond
portfolios that hold no equity securities, and 548 money market fund portfolios, for a
total of 9,794 portfolios required to file Form N-PX reports. The staff has based its
portfolio estimates on a number of publications. See Investment Company Institute,
Trends in Mutual Fund Investing (June 2014); Investment Company Institute,
Closed-End Fund Assets (Second Quarter 2014); Investment Company Institute,
Exchange Traded Fund Assets (June 2014).

7

(6,557 portfolios that hold equity securities × 7.2 hours per year) + (3,220 portfolios
holding no equity securities × 0.17 hours per year) = 47,880 hours.

8

The Commission’s estimate concerning the wage rate is based on salary information for
the securities industry compiled by the Securities Industry and Financial Markets
Association. The estimated wage figure is based on published rates for compliance
attorneys, 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, yielding an effective
hourly rate of $334. See Securities Industry and Financial Markets Association, Report
on Management & Professional Earnings in the Securities Industry 2013.

9

47,880 hours × $334 per hour = $15,991,920.

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third-party service providers to assist with proxy voting and preparing reports on
Form N-PX. Therefore, the amount of currently approved aggregate cost burden,
when calculated using the current number of portfolios, is approximately $6.6
million in external costs. 10 We continue to believe that these estimates for Form
N-PX’s current cost burden are appropriate.
14.

Costs to Federal Government

The annual cost of reviewing and processing disclosure documents, including
new registration statements, post-effective amendments, proxy statements,
shareholder reports, and other filings of investment companies amounted to
approximately $19.8 million in fiscal year 2012, based on the Commission’s
computation of the value of staff time devoted to this activity and related overhead.
15.

Changes in Burden

Previously, the Commission had estimated an annual total hour burden of
approximately 45,300 hours for Form N-PX. This number was based on a yearly
estimate of approximately 6,200 portfolios holding equity securities and 3,800
portfolios holding no equity securities with an estimated burden of 7.2 hours per
response for portfolios holding equity securities and 0.17 hours per response for
portfolios holding no equity securities. In addition, the Commission previously
estimated total annual cost burden of $6.2 million.
The Commission estimates a net increase of 2,580 burden hours per year for
Form N-PX from the previous submission under the Paperwork Reduction Act. 11
The change in the estimated hour burden is due to the increase in the number of
portfolios holding equity securities from 6,200 to 6,574, partially offset by the
decrease in the number of portfolios holding no equity securities from 3,800 to 3,220.
The Commission also estimates a net increase of $374,000 in external costs per
year for Form N-PX from the previous submission. 12 The change in the estimated
cost burden is due to the increase in the number of portfolios holding equity
securities from 6,200 to 6,574.

10

(6,574 portfolios holding equity securities × $1,000 per year) + (3,220 portfolios holding
no equity securities × $0 per year) = $6,574,000.

11

47,880 hours under current estimate – 45,300 hours under previous estimate = 2,580
hours.

12

$6,574,000 under current estimate - $6,200,000 under previous estimate = $374,000.

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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
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 for Paperwork Reduction Act Submissions

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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