N-Q 2015 supporting statement v2

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

JUSTIFICATION
1.

Necessity for the Information Collection

Form N-Q (17 CFR 249.332 and 274.130) is a reporting form used by registered
management investment companies, other than small business investment companies registered
on Form N-5 (“funds”), under Section 30(b) of the Investment Company Act of 1940 (15 U.S.C.
80a-1 et seq.) (“Investment Company Act”) and Sections 13(a) or 15(d) of the Securities
Exchange Act of 1934 (15 U.S.C. 78a et seq.) (“Exchange Act”). Pursuant to Rule 30b1-5 under
the Investment Company Act, 1 funds are required to file quarterly reports with the Commission
on Form N-Q not more than 60 days after the close of the first and third quarters of each fiscal
year containing their complete portfolio holdings. Additionally, fund management is required to
evaluate the effectiveness of the fund’s disclosure controls and procedures within the 90-day
period prior to the filing of a report on Form N-Q, 2 and such report must also be signed and
certified by the fund’s principal executive and financial officers. 3
2.

Purpose of the Information Collection

The purpose of Form N-Q is to require funds to report their complete portfolio schedules
as of the end of their first and third fiscal quarters. The required certification of the financial
information in Form N-Q is consistent with the intent of the certification requirement of Section
302 of the Sarbanes-Oxley Act, 4 which is to improve the quality of the disclosure that a
company provides about its financial condition in its periodic reports to investors. Failure to

1

17 CFR 270.30b1-5.

2

17 CFR 270.30a-3(b).

3

17 CFR 270.30a-2(a).

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collect this information would impede the Commission’s regulatory program and investors’
access to portfolio holdings information on a more frequent basis than semi-annually. The
information required to be filed with the Commission permits verification of compliance with
securities law requirements and assures public availability of the information.
3.

Consideration Given to Information Technology

The Commission’s electronic filing system (Electronic Data Gathering, Analysis and
Retrieval or “EDGAR”) is designed to automate the filing, processing, and dissemination of
disclosure filings. The system permits publicly held companies to transmit filings to the
Commission electronically. This automation has increased the speed, accuracy, and availability
of information, generating benefits to investors and financial markets. Reports on Form N-Q are
required to be filed with the Commission electronically on EDGAR. (17 CFR 232.101(a)(1)(iii)
and (iv)). The public may access filings on EDGAR through the Commission’s Internet 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 a change in a
rule. The requirements of Form N-Q are not generally duplicated elsewhere.
5.

Effect on Small Entities

Form N-Q does not distinguish between small entities and other funds. The burden on
smaller funds, however, to prepare and file reports on the form may be greater than for larger
funds. This burden includes the cost of producing and filing the reports. The Commission

4

15 U.S.C. 7241.

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believes, however, that imposing different requirements on smaller investment companies would
not be consistent with investor protection. 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.
6.

Consequences of Not Conducting Collection

Funds are required to file their portfolio schedules for the first and third fiscal quarters on
Form N-Q. Funds are also required to file their portfolio holdings schedules with the
Commission for the second and fourth fiscal quarters as part of their shareholder reports.
Reports on Form N-Q provide investors with current information necessary to evaluate an
investment in the fund. 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)

Not applicable.
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 in Form N-Q 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.

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9.

Payment or Gift

Not applicable.
10.

Confidentiality

Not applicable.
11.

Sensitive Questions

No information of a sensitive nature will be required in the information collection. The
(these) information collection(s) 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 Notice (SORN).
http://www.sec.gov/about/privacy/sorn/secsorn6.pdf
12.

Burden of Information Collection

The hour burden estimates for preparing and filing reports on Form N-Q are based on the
Commission’s experience with the contents of the form. The number of burden hours may vary
depending on, among other things, the complexity of the filing and whether preparation of the
form is performed by internal staff or outside counsel. The estimated average burden hours are
made solely for purposes of the Paperwork Reduction Act and are not derived from a
quantitative, comprehensive, or even representative survey or study of the burdens associated
with Commission rules and forms.
We estimate that there are 11,348 funds required to file reports on Form N-Q. Based on
staff experience and conversations with industry representatives, we estimate that it takes
approximately 26 hours per fund to prepare reports on Form N-Q annually. 5 Accordingly, we

5

This represents an increase from the current estimate of 21 hours per fund.

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estimate that the total annual burden associated with Form N-Q is 295,048 hours (26 hours per
fund x 11,348 funds) per year.
The Commission estimates that the appropriate compensation rate for professionals
commonly used in the preparation of Form N-Q reports is $334 per hour. 6 Based on this
estimate, the total cost to the fund industry of the hour burden is approximately $98,546,032. 7
13.

Costs to Respondents

The Commission estimates that there are no external costs associated with reports on
Form N-Q.
14.

Costs to the Federal Government

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 $19.2 million in fiscal year 2014, based on the Commission’s
computation of the value of staff time devoted to this activity and related overhead. A portion of
those costs relate to processing and reviewing Form N-Q reports filed with the Commission.
15.

Changes in Burden

The total annual hour burden of 295,048 hours represents an increase 75,535 hours over
the previous burden hour estimate of 219,513 hours. This increase is primarily due to an increase
in the estimated number of funds filing Form N-Q reports per year and an increase in the
estimated annual hour burden per fund.
16.

Information Collection Planned for Statistical Purposes

6

The estimated wage figure is based on published rates for Compliance Attorneys ($334) in
SIFMA’s 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.

7

This estimate is based on the following calculation: $334 per hour x 295,048 hours =
$98,546,032.

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Not applicable.

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 Statement
Not applicable

B.

COLLECTION OF INFORMATION EMPLOYING STATISTICAL METHODS
Not applicable.