Form N-8F - Supporting Statement - 2016 Final

SUPPORTING STATEMENT
For the Paperwork Reduction Act Information Collection Submission for
Form N-8F

A.

JUSTIFICATION
1.

Necessity for the Information Collection

Section 8(f) of the Investment Company Act of 1940 (the “Act”) provides, in part,
that “[w]henever the Commission, on its own motion or upon application, finds that a
registered investment company has ceased to be an investment company, it shall so
declare by order and upon the taking effect of such order the registration of such
company shall cease to be in effect.” 1 In order to expedite the deregistration process and
assist funds in preparing their applications, the Commission adopted rule 8f-1 under the
Act, 2 allowing an investment company to file an application seeking a deregistration
order (“Deregistration Order”) with the Commission on Form N-8F if the investment
company: (1) has sold substantially all of its assets to, merged into, or consolidated with
another registered investment company; (2) has distributed substantially all of its assets to
its shareholders and has completed, or is in the process of, winding up its affairs; (3)
qualifies for an exclusion from the definition of “investment company” under section
3(c)(1) or section 3(c)(7) of the Act; 3 or (4) has become a business development
company.

1

15 U.S.C. 80a-8(f).

2

17 CFR 270.8f-1.

3

15 U.S.C. §§ 80a-3(c)(1) or 80a-3(c)(7). Sections 3(c)(1) and (c)(7) apply to issuers: (a)
which are not making and do not propose to make a public offering and (b) the
outstanding securities of which are either beneficially owned by not more than one
hundred people or were acquired exclusively by qualified purchasers.

Form N-8F is the form prescribed for use by registered investment companies in
certain circumstances to request a Deregistration Order. 4 The form requests information
about: (1) the investment company’s identity, (2) the investment company’s distributions,
(3) the investment company’s assets and liabilities, (4) the events leading to the request to
deregister, and (5) the conclusion of the investment company’s business. The
information is needed by the Commission to determine whether a Deregistration Order is
appropriate.
Form N-8F has been in use by the Commission since 1999. This form solicits, in
a standardized format, the information that the Commission needs to make an appropriate
decision on an investment company’s request for a Deregistration Order. Form N-8F
assists the application process for both the applicants and the Commission, and therefore
use of the form continues to be necessary.
2.

Purpose of the Information Collection

Form N-8F streamlines applications for Deregistration Orders provided for under
section 8(f) of the Act. The form solicits the information the Commission needs to make
an appropriate determination about whether to issue a Deregistration Order, and provides
this information to the Commission in a standardized and readily-accessible format.
Without Form N-8F, the process to apply for a Deregistration Order would be more
difficult and slower.
3.

Role of Improved Information Technology

The Commission’s electronic filing system (Electronic Data Gathering, Analysis
and Retrieval, or “EDGAR”) is designed to automate the filing, processing, and

4

17 CFR 274.218.

dissemination of full 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. All applications on Form N-8F are required to be filed electronically
on EDGAR. 5 The public may access filings on EDGAR through the Commission’s
Internet Web site (http://www.sec.gov) or at EDGAR terminals located at the
Commission’s public reference rooms.
4.

Efforts to Identify Duplication

The requests for data in Form N-8F are not duplicated elsewhere, and the
information is not available from other sources.
5.

Effect on Small Entities

Form N-8F is available for use by any investment company seeking deregistration
under the circumstances addressed by rule 8f-1, including investment companies that are
small entities. Form N-8F simplifies, to the particular benefit of small entities, the
deregistration process by providing an efficient and streamlined means to relay necessary
information. Therefore, alternative methods to minimize burdens on small entities are
not needed. 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 Less Frequent Collection

Deregistration is not a recurring event. Investment companies seeking
deregistration need to file Form N-8F only once.

5

17 CFR 232.101(a)(1)(i) and (iv).

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 and 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-8F 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

Not applicable.
10.

Assurance of Confidentiality

Not applicable.
11.

Sensitive Questions

Form N-8F collects personally identifiable information such as the name, address
and telephone number of an individual that may be contacted about the form. Form N-8F
does not request Social Security Numbers. A System of Records Notice for applications
under the Investment Company Act of 1940 is available at
https://www.sec.gov/about/privacy/sorn/secsorn2.pdf.

12.

Estimate of Hour Burden

The following estimates of average burden hours and costs are made solely for
purposes of the Paperwork Reduction Act of 1995 and are not derived from a
comprehensive or even representative survey or study of the costs of Commission rules.
The information requested by Form N-8F is generally readily available to
investment companies. Indeed, applicants undergoing a liquidation or a merger will
generally have already assembled at least some of the requested information as required
under their respective state laws governing such transactions. Approximately 150
investment companies file a Form N-8F annually. 6 Commission staff estimates that the
average hour burden for an investment company to complete and file Form N-8F is 5.2
hours: in-house attorneys or outside legal counsel, at an hourly rate of $380, perform an
estimated 2 burden hours; legal or compliance officers, at an estimated hourly rate of
$516, perform an estimated 2.2 hours; and paralegals, at an hourly rate of $199, perform
the remaining 1 hour. 7 Assuming that 150 investment companies file a Form N-8F each
year, the staff estimates that the aggregate annual hour burden associated with completing
and filing Form N-8F is 780 hours, 8 and the aggregate annual cost of the burden hours
associated with completing and filing Form N-8F is $314,130. 9

6

This estimate is based on the number of applications filed with the Commission from
October 1, 2014 – September 30, 2015.

7

These rates are derived from the SIFMA Report on Management & Professional Earnings
in the Securities Industry 2013, and are modified to account for an 1800-hour work-year
and multiplied by 5.35 to account for bonuses, firm size, employee benefits, and
overhead. The estimated hourly rate for a legal or compliance officer is the blended
hourly rate of a Chief Compliance Officer ($485) and a Deputy General Counsel ($546).

8

This estimate is based on the following calculation: 150 investment companies x 5.2
hours = 780 hours.

9

This estimate is based on the following calculation: (150 funds x 2 hours by in-house
attorneys or outside legal counsel x $380 per hour = $114,000) + (150 funds x 2.2 hours

13.

Estimate of Total Annual Cost Burden

The Commission staff estimates that there is no cost burden of Form N-8F
excluding that identified in section 12 of this Supporting Statement.
14.

Estimate of Cost to the Federal Government

The Division of Investment Management processes filings on Form N-8F. The
annual operating cost to the Commission of processing all applications for orders
(including exemptive relief requests) was approximately $9.0 million in fiscal year 2014,
based on our computation of the value of staff time devoted to this activity and related
overhead. The costs associated with processing Form N-8F are likely to be a relatively
small portion of the total cost.
15.

Explanation of Changes in Burden

As noted in section 12 above, the new estimated annual hour burden for Form N8F represents a decrease of 1 hour for all applicants. The current approved annual hour
burden for completing and filing Form N-8F is 781 hours. The decrease in estimated
annual burden hours for all applicants from 781 hours to 780 hours (a net decrease of 1
hour) is based on both an increase in the annual number of applicants from 142 to 150
and a decrease in the average hour burden per applicant from 5.5 to 5.2, based on updated
information from fund representatives.
Commission staff continues to believe that there is no cost burden for completing
and filing Form N-8F excluding that identified in section 12 above.
16.

Information Collection Planned for Statistical Purposes

Not applicable.
by a legal or compliance officer x $516 per hour = $170,280) + (150 funds x 1 hour by
paralegals x $199 = $29,850) = $314,130.

17.

Approval to not Display Expiration Date

We request authorization to omit the expiration date on the electronic version of
the form, although the OMB control number will be displayed. Including the expiration
date on the electronic version of this 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.

Exceptions to Certification Statement

Not applicable.
B.

COLLECTIONS OF INFORMATION EMPLOYING STATISTICAL
METHODS
Not applicable.